VIACOM INC.
1515 Broadway
New York, New York 10036
January 7, 1994
Blockbuster Entertainment Corporation
One Blockbuster Plaza
Fort Lauderdale, Florida 33301
Dear Sirs:
1. Subject to the terms and conditions set forth
herein, Blockbuster Entertainment Corporation, a Delaware
corporation (the "Purchaser"), hereby subscribes for, and
agrees to purchase, and Viacom Inc., a Delaware corporation
(the "Company"), agrees to issue and sell, 22,727,273 shares
(the "Shares") of Class B Common Stock, par value $0.01 per
share, of the Company ("Class B Common Stock"), for an
aggregate purchase price of $1,250,000,015, representing a
purchase price of $55.00 per Share.
2. (a) The closing (the "Closing") of the purchase
provided for in paragraph 1 shall take place at a date and time
specified by the Company by written notice delivered to the
Purchaser no less than two Business Days (as defined below)
prior to such date, and following satisfaction of the
conditions specified in paragraph 5, at the offices of Shearman
& Sterling, 599 Lexington Avenue, New York, New York. The date
and time of the Closing are referred to herein as the "Closing
Date".
(b) At the Closing, the Purchaser shall deliver to
the Company $1,250,000,015 in cash by wire transfer in
immediately available funds to an account of the Company
designated by the Company, by notice to the Purchaser prior to
the Closing Date, and the Company shall deliver to the
Purchaser certificates representing the Shares, registered in
the name of the Purchaser.
3. (a) The Purchaser represents and warrants to the
Company that: (i) the execution and delivery of this Agreement
by the Purchaser and the performance of its
obligations hereunder have been duly and validly authorized by
all necessary corporate action on the part of the Purchaser;
(ii) this Agreement has been duly and validly executed and
delivered by the Purchaser and, assuming the due authorization,
execution and delivery by the Company, constitutes a legal,
valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other
similar laws relating to or affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject
to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law);
(iii) the execution, delivery and performance of this Agreement
by the Purchaser and the purchase of the Shares by the
Purchaser do not conflict with or violate or result in any
breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under
the Certificate of Incorporation or By-Laws or equivalent
organizational documents of the Purchaser; (iv) the execution,
delivery and performance of this Agreement by the Purchaser do
not, and the consummation of the transactions contemplated
hereby by the Purchaser will not, require any consent,
approval, authorization or permit of, or filing with or
notification to, any governmental authority with respect to the
Purchaser, except under the Securities Exchange Act of 1934, as
amended (the "1934 Act"); (v) the Purchaser is acquiring the
Shares for its own account for the purpose of investment and
not with a view to or for sale in connection with any
distribution thereof; and (vi) the Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities
Act of 1933, as amended (the "1933 Act").
(b) Except as set forth in this paragraph 3, the
Purchaser makes no other representation, express or implied, to
the Company.
4. (a) The Company represents and warrants to the
Purchaser that (i) each of the Company and each Subsidiary (as
defined below) is a corporation, partnership or other legal
entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or
organization and has the requisite power and authority and all
necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being
conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority
and governmental approvals would not, individually or in the
aggregate, have a Material Adverse
Effect (as defined below); (ii) the execution and delivery of
this Agreement by the Company and the issuance of the Shares in
accordance with the terms of this Agreement have been duly and
validly authorized by all necessary corporate action on the
part of the Company; (iii) this Agreement has been duly and
validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by the Purchaser,
constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a
proceeding in equity or at law); (iv) the execution, delivery
and performance of this Agreement by the Company do not, and
the issuance of the Shares and the performance of the Company's
obligations in accordance with the terms of this Agreement will
not, conflict with or violate or result in any breach of or
constitute a default (or an event which with notice or lapse of
time or both would become a default) under (A) the Certificate
of Incorporation or By-Laws or equivalent organizational
documents of the Company or any Subsidiary, (B) any law, rule,
regulation, order, judgment or decree applicable to the Company
or any Subsidiary, or (C) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Subsidiary
is a party or by which the Company or any Subsidiary or any
property or asset of the Company or any Subsidiary is bound or
affected, except in the case of subclauses (B) and (C) above,
for any such conflicts, violations, breaches, defaults or other
occurrences which would not prevent or delay the issuance of
the Shares in accordance with the terms of this Agreement in
any material respect, or otherwise prevent the Company from
performing its obligations under this Agreement in any material
respect, or which would not, individually or in the aggregate,
have a Material Adverse Effect; (v) the execution, delivery and
performance of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, require
any consent, approval, authorization or permit of, or filing
with or notification to, any governmental authority with
respect to the Company, except for (A) any filings required to
effect the registration of the Shares pursuant to paragraph 8
and any filings pursuant to federal and state securities laws
which will be timely made after the Closing hereunder and
(B) any filings required under the 1934 Act; (vi) the Shares
have been duly authorized and, upon issuance
at the Closing, will be validly issued, fully paid and
nonassessable, and free and clear of all security interests,
liens, claims, encumbrances, pledges, options and charges of
any nature whatsoever, and the issuance of the Shares will not
be subject to preemptive rights of any other stockholder of the
Company; (vii) the authorized capital stock of the Company
consists of 100,000,000 shares of Class A Common Stock, par
value $0.01 per share ("Class A Common Stock"), 150,000,000
shares of Class B Common Stock and 100,000,000 shares of
Preferred Stock, par value $0.01 per share ("Company Preferred
Stock"); (viii) as of November 30, 1993, (A) 53,449,125 shares
of Class A Common Stock and 67,345,982 shares of Class B Common
Stock were issued and outstanding, all of which were validly
issued, fully paid and nonassessable, (B) no shares were held
in the treasury of the Company, (C) no shares were held by the
Subsidiaries, (D) 224,610 shares of Class A Common Stock and
3,760,297 shares of Class B Common Stock were reserved for
future issuance pursuant to employee stock options or stock
incentive rights granted pursuant to the Company's 1989
Long-Term Management Incentive Plan and the Company's Stock
Option Plan for Outside Directors, and (E) 25,711,200 shares of
Class B Common Stock were reserved for future issuance upon
conversion of the Company's Series A Convertible Preferred
Stock, par value $0.01 per share ("Series A Preferred Stock"),
and the Company's Series B Convertible Preferred Stock, par
value $0.01 per share ("Series B Preferred Stock"); (ix) as of
the date hereof, 48,000,000 shares of Company Preferred Stock
are issued and outstanding, consisting of 24,000,000 shares of
Series A Preferred Stock and 24,000,000 shares of Series B
Preferred Stock, and there are no agreements, arrangements or
understandings with respect to the issuance of any other shares
of Company Preferred Stock, except for Preferred Stock proposed
to be issued in the Paramount Transaction (as defined below);
(x) the Company has filed all forms, reports and documents
required to be filed by it with the Securities and Exchange
Commission (the "Commission") since December 31, 1990, and has
heretofore made available to the Purchaser, in the form filed
with the Commission (excluding any exhibits thereto), (A) its
Annual Reports on Form 10-K for the fiscal years ended December
31, 1990, 1991 and 1992, respectively, (B) its Quarterly
Reports on Form 10-Q for the periods ended March 31, 1993,
June 30, 1993 and September 30, 1993, (C) all proxy statements
relating to the Company's meetings of stockholders (whether
annual or special) held since January 1, 1991 and (D) all other
forms, reports and other registration statements (other than
Quarterly Reports on Form 10-Q not referred to in clause (B)
above and preliminary materials) filed by the Company with the
Commission since
December 31, 1990 (the forms, reports and other documents
referred to in clauses (A), (B), (C) and (D) above being
referred to herein, collectively, as the "SEC Reports"); (xi)
the SEC Reports and any other forms, reports and other
documents filed by the Company with the Commission after the
date of this Agreement (A) were or will be prepared in
accordance with the requirements of the 1933 Act and the 1934
Act, as the case may be, and the rules and regulations
thereunder and (B) did not at the time they were filed, or will
not at the time they are filed, contain any untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which
they were made, not misleading; (xii) the consolidated
financial statements (including, in each case, any notes
thereto) contained in the SEC Reports were prepared in
accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto) and each
fairly presented the consolidated financial position, results
of operations and cash flows of the Company and its
consolidated subsidiaries as at the respective dates thereof
and for the respective periods indicated therein (subject, in
the case of unaudited statements, to normal and recurring
year-end adjustments which were not and are not expected,
individually or in the aggregate, to be material in amount);
(xiii) since December 31, 1992 there has not been any change,
occurrence or circumstance in the business, results of
operations or financial condition of the Company or any
Subsidiary having, individually or in the aggregate, a Material
Adverse Effect, other than changes, occurrences and
circumstances referred to in any SEC Reports filed prior to the
date of this Agreement; (xiv) there is no claim, action,
proceeding or investigation pending or, to the best knowledge
of the Company, threatened by any public official or
governmental authority, against the Company or any Subsidiary,
or any of their respective property or assets before any court,
arbitrator or administrative, governmental or regulatory
authority or body, which challenges the validity of this
Agreement or the Shares or any action taken or to be taken
pursuant hereto or, except as set forth in the SEC Reports,
which is reasonably likely to have a Material Adverse Effect;
and (xv) neither the Company nor any Subsidiary is in conflict
with, or in default or violation of, (A) any law, rule,
regulation, order, judgment or decree applicable to the Company
or any Subsidiary or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (B) any
note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation
to which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary or any property or asset of the
Company or any Subsidiary is bound or affected, except for any
such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Material Adverse
Effect.
(b) Except as set forth in this paragraph 4, the
Company makes no representation, express or implied, to the
Purchaser.
(c) "Subsidiary" means a "significant subsidiary" of
the Company, as such term is defined in Regulation S-X
promulgated under the 1933 Act.
(d) The term "Material Adverse Effect" means any
change or effect that is or would be materially adverse to the
business, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole.
(e) Notwithstanding anything to the contrary in this
paragraph 4, any change to or effect on the business, results
of operations or financial condition of the Company and its
Subsidiaries that results, directly or indirectly, from the
Company's tender offer for shares of common stock of and
proposed merger with Paramount Communications Inc. (the
"Paramount Transaction"), shall not be considered for purposes
of determining whether a breach has occurred of any
representation or warranty, covenant or agreement of the
Company contained herein.
5. (a) The obligation of the Purchaser to
consummate the Closing is subject to the satisfaction (or
waiver by the Purchaser, at its sole discretion) of the
following conditions:
(i) (A) the Company shall have performed in all
material respects all of its obligations hereunder required
to be performed by it at or prior to the Closing Date, (B)
the representations and warranties of the Company contained
in this Agreement and in the Agreement and Plan of Merger
dated as of the date hereof between the Purchaser and the
Company (the "Merger Agreement") shall be true in all
material respects (other than those contained in Paragraph
4(a)(xiii) of this Agreement, which shall be true in all
respects) as of the Closing Date, as if made at and as of
such date (except for any such representations and
warranties that are expressly stated to be as of a
different date), (C) the Company shall not be in material
breach of any of its material
obligations under the Merger Agreement as of the Closing
Date and (D) the Purchaser shall have received a
certificate signed by an executive officer of the Company
to the foregoing effect;
(ii) no judgment, injunction, order or decree shall
materially restrict, prevent or prohibit the consummation
of the Closing;
(iii) the Purchaser shall have received an opinion of
Shearman & Sterling, dated the Closing Date, substantially
in the form of Exhibit A hereto; and
(iv) the Company shall have accepted for payment at
least 50.1% of the outstanding shares of common stock of
Paramount Communications Inc. pursuant to its tender offer
therefor.
(b) The obligation of the Company to consummate the
Closing is subject to the satisfaction (or waiver by the
Company, at its sole discretion) of the following conditions:
(i) (A) the Purchaser shall have performed in all
material respects all of its obligations hereunder required
to be performed by it at or prior to the Closing Date, (B)
the representations and warranties of the Purchaser
contained in this Agreement shall be true in all material
respects at and as of the Closing Date, as if made at and
as of such date (except for any such representations and
warranties that are expressly stated to be as of a
different date) and (C) the Company shall have received a
certificate signed by an executive officer of the Purchaser
to the foregoing effect;
(ii) no judgment, injunction, order or decree shall
materially restrict, prevent or prohibit the consummation
of the Closing;
(iii) the Company shall have received an opinion of
Thomas W. Hawkins, General Counsel of the Purchaser, dated
the Closing Date, substantially in the form of Exhibit B
hereto;
(iv) the Company shall have received an opinion of
Skadden, Arps, Slate, Meagher & Flom, dated the Closing
Date, substantially in the form of Exhibit C hereto; and
(v) the Company shall have accepted for payment at
least 50.1% of the outstanding shares of common stock of
Paramount Communications Inc. pursuant to its tender offer
therefor.
(c) Notwithstanding any other provision of this
Agreement, if the Company shall accept shares of common stock
of Paramount Communications Inc. for payment pursuant to its
tender offer therefor but following the Closing shall not
purchase such shares in accordance with the terms of such
offer, then the Purchaser may return the Shares to the Company,
by delivering to the Company the certificates representing the
Shares, duly endorsed in blank, or accompanied by stock powers
duly executed in blank, whereupon the Company shall return the
purchase price therefor, by wire transfer in immediately
available funds to an account of the Purchaser designated by
the Purchaser by notice to the Company.
6. (a) The Purchaser acknowledges that the Shares
have not been registered under the 1933 Act or any state
securities law, and hereby agrees not to offer, sell or
otherwise transfer, pledge or hypothecate such Shares unless
and until registered under the 1933 Act and any applicable
state securities law or unless, in the opinion of counsel
reasonably satisfactory to the Company, such offer, sale,
transfer, pledge or hypothecation is exempt from registration
or is otherwise in compliance with the 1933 Act and such laws.
(b) Upon issuance of the Shares, and until such time
as the same is no longer required under the applicable
requirements of the 1933 Act, the certificates evidencing the
Shares (and all securities issued in exchange therefor or
substitution thereof) shall bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE
ISSUER, SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION
IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE
WITH THE ACT AND SUCH LAWS.
7. In addition to the provisions of paragraph 6, the
Purchaser agrees that prior to the earlier of the termination
of the Merger Agreement and September 30, 1994 it shall not
offer, sell, transfer, pledge or hypothecate any of the Shares,
except that the Shares may be pledged in connection with the
financing of the purchase price specified in paragraph 2,
subject to the same restrictions on alienation applicable to
the Purchaser hereunder.
8. Following the Closing, the Purchaser shall have
the registration rights, and the Company shall have the
obligations, set forth in Annex I. Such registration rights
shall be assignable by the Purchaser to any party purchasing
Shares directly from the Purchaser, but shall not be further
assignable by such subsequent purchaser or purchasers.
9. (a) The representations and warranties contained
in this Agreement shall survive the Closing until the first
anniversary of the Closing Date.
(b) The Purchaser and its Affiliates, officers,
directors, employees, agents, successors and assigns shall be
indemnified and held harmless by the Company for any and all
liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments and penalties (including, without
limitation, reasonable attorneys' fees and expenses) (a "Loss")
actually suffered or incurred by them, arising out of or
resulting from the breach of any representation or warranty or
covenant of the Company contained in this Agreement.
(c) The Company and its Affiliates, officers,
directors, employees, agents, successors and assigns shall be
indemnified and held harmless by the Purchaser for any and all
Losses actually suffered or incurred by them, arising out of or
resulting from the breach of any representation or warranty or
covenant of the Purchaser contained in this Agreement.
10. (a) The Purchaser agrees that neither the
Purchaser nor any of its Affiliates shall participate in any
transaction that, directly or indirectly, would have the effect
of precluding or competing with the Paramount Transaction.
(b) The Company agrees that it shall not make any
material change in the aggregate amount or forms of
consideration to be paid in, or in any other material terms and
conditions of, the Paramount Transaction from the aggregate
amount and forms of consideration described in the amendment to
be filed on the date hereof to the Company's Tender Offer
Statement on Schedule 14D-1, without the prior consent of the
Purchaser, which consent shall not be unreasonably withheld.
(c) The Company agrees that prior to consummation of
the Paramount Transaction, the Company shall receive an opinion
from Smith Barney Shearson Inc. that the consideration actually
to be paid by the Company in such
transaction is fair, from a financial point of view, to the
Company and the stockholders of the Company, which opinion
shall not have been withdrawn at the time the Company accepts
shares of common stock of Paramount Communications Inc. for
payment pursuant to its tender offer therefor.
11. The Purchaser, on the one hand, and the Company,
on the other, acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to equitable relief
(including injunction and specific performance) in any action
instituted in any court of the United States or any state
thereof having subject matter jurisdiction, as a remedy for any
such breach or to prevent any breach of this Agreement. Such
remedies shall not be deemed to be the exclusive remedies for a
breach or anticipatory breach of this Agreement, but shall be
in addition to all other remedies available at law or equity to
the parties hereto. To the extent permitted by applicable law,
the parties hereto irrevocably submit to the exclusive
jurisdiction of the courts of the State of New York and the
United States of America located in the State of New York for
any suits, actions or proceedings arising out of or relating to
this Agreement.
12. This Agreement, its Annexes and Exhibits contain
the entire understandings of the parties with respect to the
subject matter hereof, thereby superseding all prior agreements
of the parties relating to the subject matter hereof (other
than the Confidentiality Agreement entered into between the
Purchaser and Viacom International Inc. dated July 1, 1993),
and may not be amended except by a writing signed by the
parties. Except as otherwise provided herein, this Agreement
is not assignable by any of the parties; provided that the
Purchaser may assign its rights and obligations under this
Agreement to a wholly owned subsidiary of the Purchaser, so
long as the Purchaser shall remain liable for all financial and
performance obligations of the Purchaser hereunder. This
Agreement shall be binding upon, and inure to the benefit of,
the respective successors of the parties. This Agreement may
be executed in counterparts, each of which shall be deemed an
original, but all of which together will constitute one and the
same instrument.
13. Any notices and other communications required to
be given pursuant to this Agreement shall be in writing and
shall be given by delivery by hand, by mail (registered or
certified mail, postage prepaid, return receipt requested) or
by facsimile transmission or telex, as follows:
If to the Company:
Viacom Inc.
1515 Broadway
New York, New York 10036
Attention: Senior Vice President,
General Counsel and
Secretary
Facsimile No.: 212-258-6134
With a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Stephen R. Volk
Facsimile No.: 212-848-7179
If to the Purchaser:
Blockbuster Entertainment Corporation
One Blockbuster Plaza
Fort Lauderdale, Florida 33301
Attention: Vice President, General
Counsel and Secretary
Facsimile No.: 305-832-3929
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Roger S. Aaron
Facsimile No.: 212-735-2000
or to such other addresses as either the Company or the
Purchaser shall designate to the other by notice in writing.
14. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Affiliate" shall mean any Person that (i)
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with,
the Person specified or (ii) is (A) the specified Person's
spouse, parent, child, brother or sister or any issue of the
foregoing (for purposes of the definition of Affiliate, issue
shall include Persons legally adopted into the line of
descent), (B) any corporation or organization of which the
Person specified or such specified Person's spouse,
parent, child, brother or sister or any issue of the foregoing
is an officer or partner or is, directly or indirectly, the
beneficial owner of ten percent or more of any class of voting
stock, and (C) any trust or other estate in which the specified
Person or such specified Person's spouse, parent, child,
brother or sister or any issue of the foregoing serves as
trustee or in a similar fiduciary capacity and (D) the heirs or
legatees of the specified Person by will or under the laws of
descent and distribution.
(b) "Business Day" shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law or
executive order to close.
(c) "Person" shall mean any individual, partnership,
joint venture, corporation, trust, incorporated organization,
government or department or agency of a government, or any
entity that would be deemed to be a "person" under Section
13(d)(3) of the 1934 Act.
15. Subject to the terms and conditions of this
Agreement, each of the parties hereby agrees to use all
reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws, rules and regulations to
consummate and make effective the transactions contemplated by
this Agreement, including using its best efforts to make all
necessary filings and to obtain all necessary waivers, consents
and approvals. In case at any time after the execution of this
Agreement, further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and
directors of each of the parties shall take all such necessary
action.
16. The parties agree to consult with each other
before taking any action that would require the issuance of, or
issuing, any press release or making any public statement with
respect to this Agreement or the transactions contemplated
hereby and, except as may be required by applicable law or any
listing agreement with any securities exchange, will not take
any such action, issue any such press release or make any such
public statement prior to such consultation.
17. (a) In the event that the Merger Agreement is
terminated, other than pursuant to Section 8.01(b) thereof, the
Company shall satisfy, upon the written request of the
Purchaser and as provided in paragraph 17(c), any Make-Whole
Amount (as defined below) within 20 Business Days (or with
respect to the Asset Purchase Transaction, such period of time
as is consistent with the terms of Annex II) following the
first anniversary (the "First Anniversary") of the date of
termination (the "Termination Date") of the Merger Agreement.
(b) For the purposes of this paragraph 17, the
following terms shall have the following meanings:
(i) "Measurement Period" shall mean the period commencing
on the first day after the Termination Date and ending on
the First Anniversary; provided that such period shall be
extended by the number of days occurring after the
Termination Date and prior to the First Anniversary during
which Shares both (a) are registered under the 1933 Act
pursuant to the rights granted in Annex I and (b) are
unsold.
(ii) "Class B Trading Price" shall mean the highest Class B
Trading Average that occurs within the Measurement Period
for any consecutive 30 trading day period occurring within
the Measurement Period.
(iii) "Class B Trading Average" shall mean with respect to
any consecutive 30 trading day period the average of the
closing prices for the Class B Common Stock for the trading
days in such period on the American Stock Exchange, or if
the American Stock Exchange is not the exchange on which
the Class B Common Stock is then principally traded.
(iv) "Make-Whole Amount" shall mean the amount, if any,
that is the sum of (A) 50% of the aggregate of (1) the
number of Shares Beneficially Owned by the Purchaser (and
not subject to contracts of sale) on the First Anniversary
and (2) the Sold Shares multiplied by the difference between
$55 and the Class B Trading Price, up to, but in no event
exceeding for the purpose of such calculation, a difference
of $4.40 and (B) 50% of the aggregate of (1) the number of
Shares Beneficially Owned by the Purchaser (and not subject
to contracts of sale) on the First Anniversary and (2) the
Sold Shares multiplied by the difference between $55 and
the Class B Trading Price, up to, but in no event exceeding
for the purpose of such calculation, a difference of
$19.80.
(v) "Marketable Security" shall mean any debt or equity
security, or a combination of debt and equity securities,
issued by the Company with such terms, as agreed by
SmithBarney Shearson Inc. on behalf of the Company and by
Merrill Lynch & Co. on behalf of the Purchaser, as would
cause such security to trade on a fully distributed basis
after the date of its issuance at the value attributed to
such security in satisfying the Make-Whole Amount as
provided in paragraph 17(c) below. If Smith Barney
Shearson Inc. and Merrill Lynch & Co. are unable to agree
on such terms within 10 Business Days after the First
Anniversary, the Purchaser shall select one investment bank
from a list of at least five investment banks of national
standing supplied to the Purchaser by the Company, which
investment bank shall, not later than 5 Business Days after
its selection resolve, in its sole judgment, any such
disagreements with respect to such terms. The
determination by such investment bank shall be final,
binding and conclusive on the Company and the Purchaser,
and the fees and expenses of such investment bank shall be
borne equally by the Company and the Purchaser.
(v) "Sold Shares" shall mean up to the first 4,547,454
Shares, and only up to the first 4,547,454 Shares, of any
Shares sold by the Purchaser after the Termination Date and
prior to the First Anniversary; provided that Sold Shares
shall not include any of such Shares sold by the Purchaser
for gross proceeds equal to or greater than $55 per Share.
(vi) "Asset Purchase Transaction" shall mean the
transaction with the material terms described in Annex II.
(c) The Company shall be entitled to satisfy its
obligation with respect to the Make-Whole Amount, at the option
of the Company through written notice to the Purchaser no later
than 5 Business Days following the First Anniversary, by any
of the following means:
(i) Delivery to the Purchaser of cash in an amount equal
to the Make-Whole Amount by wire transfer of immediately
available funds to an account specified by the Purchaser;
or
(ii) Delivery to the Purchaser of Marketable Securities
with an aggregate value (determined as specified above)
equal to the Make-Whole Amount; or
(iii) Delivery to the Purchaser of a combination of cash
and Marketable Securities with an aggregate value equal to
the Make-Whole Amount; or
(iv) Consummation of the Asset Purchase Transaction;
provided that in the event the Company has given notice to the
Purchaser as provided above of its intent to satisfy all or a
portion of the Make-Whole Amount with Marketable Securities and
the Company determines, in its sole discretion, that the terms
of the Marketable Securities are unacceptable to the Company,
the Company shall be entitled to satisfy the Make-Whole Amount
through any of the other means specified above in lieu of using
Marketable Securities.
18. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable
to contracts executed in and to be performed entirely within
that state.
Very truly yours,
VIACOM INC.
By: /s/ Sumner M. Redstone
------------------------
Accepted and agreed on
the date written above:
BLOCKBUSTER ENTERTAINMENT CORPORATION
By: /s/ H. Wayne Huizenga
-----------------------
ANNEX I
Registration Rights
(a) From time to time after the earlier of the
termination of the Merger Agreement and September 30, 1994, the
Purchaser shall have the right to make six requests of the
Company in writing: with respect to the first such request to
register under the 1933 Act at least $100 million in market
value of the Shares beneficially owned by the Purchaser (the
Shares subject to any such request hereunder being referred to
as the "Subject Stock"), and with each subsequent such request
being at least 6 months following such prior request which
resulted in a registration statement with respect to the
Subject Stock which was effective until the earlier of the
completion of the offering of such Subject Stock or three
months. The Company shall use all reasonable efforts to cause
the Subject Stock to be registered under the 1933 Act as soon
as reasonably practicable after receipt of a request so as to
permit promptly the sale thereof, and in connection therewith,
the Company shall prepare and file, on such appropriate form as
the Company in its discretion shall determine, a registration
statement under the 1933 Act to effect such registration. The
Company shall use all reasonable efforts to list all Subject
Stock covered by such registration statement on any national
securities exchange on which the Class B Common Stock is then
listed or, if such listing cannot be made, to list such Subject
Stock on the National Association of Securities Dealers
Automated Quotation System or National Market System. The
Purchaser hereby undertakes to provide all such information and
materials and take all such action as may be required in order
to permit the Company to comply with all applicable
requirements of the Commission and to obtain any desired
acceleration of the effective date of such registration
statement. Any registration statement filed at the Purchaser's
request hereunder will not count as a requested registration
(i) unless effectiveness is maintained until the earlier of
completion of the offering and three months or (ii) if the
Purchaser is required to reduce the number of Shares as to
which registration was requested hereunder as a result of the
inclusion in such registration of securities of a third party
without the consent of the Purchaser. Notwithstanding the
foregoing, the Company (i) shall not be obligated to cause any
special audit to be undertaken in connection with any such
registration (provided that this provision shall not relieve
the Company of its obligation to obtain any required consents
with respect to financial statements in prior periods) and
(ii) shall be entitled to postpone for a reasonable period of
time (not to exceed 180 days) the filing of any registration
statement otherwise
2
required to be prepared and filed by the Company if the Company
is, at such time, either (A) conducting or in active
preparation to conduct an underwritten public offering of
equity securities (or securities convertible into equity
securities) or is subject to a contractual obligation not to
engage in a public offering and is advised in writing by its
managing underwriter or underwriters (with a copy to the
Purchaser) that such offering would in its or their opinion be
adversely affected by the registration so requested or (B)
subject to an existing contractual obligation to its
underwriters not to engage in a public offering; provided,
however, that the Company may not exercise such right to
postpone the filing of a registration statement for more than
180 days in any 365-day period.
The Purchaser may use one or more of the registration
requests to which it is entitled pursuant to the preceding
paragraph to require the Company to register Shares on a
registration statement also covering securities of the
Purchaser convertible into or exchangeable for Shares and may
assume primary responsibility for the preparation of such
registration statement. In such event, in which each of the
Company and the Purchaser shall be registrants of securities
registered, in addition to the indemnification provided herein,
the Company shall be entitled to receive indemnifications from
the Purchaser consistent with the indemnifications provided
herein to be granted by the Company to the Purchaser and the
Purchaser shall reimburse the Company for one half of any fees,
expenses and disbursements referred to in the second sentence
of paragraph (c) below for which the Company is otherwise
responsible.
At any time after the earlier of the termination of
the Merger Agreement and September 30, 1994, if the Company
proposes to file a registration statement under the 1933 Act
with respect to an offering of shares of its equity securities
(i) for its own account (other than a registration statement on
Form S-4 or S-8 (or any substitute form that may be adopted by
the Commission)) or (ii) for the account of any holders of its
securities (including any pursuant to a demand registration),
then the Company shall give written notice of such proposed
filing to the Purchaser as soon as practicable (but in any
event not less than 5 Business Days before the anticipated
filing date), and such notice shall offer the Purchaser the
opportunity to register such number of Shares as the Purchaser
requests. If the Purchaser wishes to register Shares, such
registration shall be on the same terms and conditions as the
registration of the Company's or such holders' shares of Class B
Common Stock (a "Piggyback Registration"). Notwithstanding
anything contained herein,
3
if the lead underwriter of an offering involving a Piggyback
Registration delivers a written opinion to the Company that the
success of such offering would be materially and adversely
affected by inclusion of all the securities requested to be
included, then the number of securities to be registered by
each party requesting registration rights shall be reduced in
proportion to the number of securities originally requested to
be registered by each of them. Nothing contained herein shall
require the Company to reduce the number of shares proposed to
be issued by the Company.
Other than as required by contractual obligations of
the Company existing on the date of this Agreement, no
securities may be registered on a registration statement
requested by the Purchaser under this Agreement without the
Purchaser's express written consent. The Company agrees that
following the date of this Agreement it shall not grant to any
person any rights to compel inclusion of securities in any
registration statement requested by the Purchaser under this
Agreement without the Purchaser's express written consent.
(b) In connection with any offering of shares of
Subject Stock registered pursuant to this Annex I, the Company
(i) shall furnish to the Purchaser such number of copies of any
prospectus (including any preliminary prospectus) as it may
reasonably request in order to effect the offering and sale of
the Subject Stock to be offered and sold, but only while the
Company shall be required under the provisions hereof to cause
the registration statement to remain current and (ii) take such
action as shall be necessary to qualify the shares covered by
such registration statement under such "blue sky" or other
state securities laws for offer and sale as the Purchaser shall
request; provided, however, that the Company shall not be
obligated to qualify as a foreign corporation to do business
under the laws of any jurisdiction in which it shall not then
be qualified or to file any general consent to service of
process in any jurisdiction in which such a consent has not
been previously filed. If applicable, the Company shall enter
into an underwriting agreement with a managing underwriter or
underwriters selected by the Purchaser (reasonably satisfactory
to the Company) containing representations, warranties,
indemnities and agreements then customarily included by an
issuer in underwriting agreements with respect to secondary
distributions; provided, however, that such underwriter or
underwriters shall agree to use their best efforts to ensure
that the offering results in a distribution of the Subject
Stock sold in accordance with the terms of the agreement. In
connection with any offering of
4
Subject Stock registered pursuant to this Annex I, the Company
shall (x) furnish to the underwriter, at the Company's expense,
unlegended certificates representing ownership of the Subject
Stock being sold in such denominations as requested and (y)
instruct any transfer agent and registrar of the Subject Stock
to release any stop transfer orders with respect to such
Subject Stock. Upon any registration becoming effective
pursuant to this Annex I, the Company shall use all reasonable
efforts to keep such registration statement current for such
period as shall be required for the disposition of all of said
Subject Stock; provided, however, that such period need not
exceed three months.
(c) The Purchaser shall pay all underwriting
discounts and commissions related to shares of Subject Stock
being sold by the Purchaser. The Company shall pay all other
fees and expenses in connection with any registration
statement, including, without limitation, all registration and
filing fees, all fees and expenses of complying with securities
or "blue sky" laws, fees and disbursements of the Company's
counsel, the counsel of the Purchaser, accountants (including
the expenses of "cold comfort" letters required by or incident
to such performance and compliance) and any fees and
disbursements of underwriters customarily paid by issuers in
secondary offerings.
(d) In the case of any offering registered pursuant
to this Annex I, the Company agrees to indemnify and hold the
Purchaser, each underwriter of Shares under such registration
and each person who controls any of the foregoing within the
meaning of Section 15 of the 1933 Act and the directors and
officers of the Purchaser, harmless against any and all losses,
claims, damages, liabilities or actions to which they or any of
them may become subject under the 1933 Act or any other statute
or common law or otherwise, and to reimburse them for any legal
or other expenses reasonably incurred by them in connection
with investigating any claims and defending any actions,
insofar as any such losses, claims, damages, liabilities or
actions shall arise out of or shall be based upon (i) any
untrue statement or alleged untrue statement of a material fact
contained in the registration statement relating to the sale of
such Subject Stock, or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or
(ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus (as
amended or supplemented if the Company shall have filed with
the Commission any amendment
5
thereof or supplement thereto), if used prior to the effective
date of such registration statement, or contained in the
prospectus (as amended or supplemented if the Company shall
have filed with the Commission any amendment thereof or
supplement thereto), or the omission or alleged omission to
state therein a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the
indemnification agreement contained in this paragraph (d) shall
not apply to such losses, claims, damages, liabilities or
actions which shall arise from the sale of Subject Stock by the
Purchaser if such losses, claims, damages, liabilities or
actions shall arise out of or shall be based upon any such
untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission
shall have been (x) made in reliance upon and in conformity
with information furnished in writing to the Company by the
Purchaser or any such underwriter specifically for use in
connection with the preparation of the registration statement
or any preliminary prospectus or prospectus contained in the
registration statement or any such amendment thereof or
supplement thereto or (y) made in any preliminary prospectus,
and the prospectus contained in the registration statement in
the form filed by the Company with the Commission pursuant to
Rule 424(b) under the 1933 Act shall have corrected such
statement or omission and a copy of such prospectus shall not
have been sent or given to such person at or prior to the
confirmation of such sale to him.
(e) In the case of each offering registered pursuant
to this Annex I, the Purchaser and each underwriter
participating therein shall agree, in the same manner and to
the same extent as set forth in paragraph (d) of this Annex I
severally to indemnify and hold harmless the Company and each
person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act, and the directors and officers of
the Company, and in the case of each such underwriter, the
Purchaser, each person, if any, who controls the Purchaser
within the meaning of Section 15 of the 1933 Act and the
directors, officers and partners of the Purchaser, with respect
to any statement in or omission from such registration
statement or any preliminary prospectus (as amended or as
supplemented, if amended or supplemented as aforesaid) or
prospectus contained in such registration statement (as amended
or as supplemented, if amended or supplemented as aforesaid),
if such statement or omission shall have been made in reliance
upon and in conformity with information furnished in writing to
the Company by the Purchaser or such underwriter specifically
for use in connection with the preparation of such registration
6
statement or any preliminary prospectus or prospectus contained
in such registration statement or any such amendment thereof or
supplement thereto.
(f) Each party indemnified under paragraph (d) or (e)
of this Annex I shall, promptly after receipt of notice of the
commencement of any action against such indemnified party in
respect of which indemnity may be sought hereunder, notify the
indemnifying party in writing of the commencement thereof. The
omission of any indemnified party to so notify an indemnifying
party of any such action shall not relieve the indemnifying
party from any liability in respect of such action which it may
have to such indemnified party on account of the indemnity
agreement contained in paragraph (d) or (e) of this Annex I,
unless the indemnifying party was prejudiced by such omission,
and in no event shall relieve the indemnifying party from any
other liability which it may have to such indemnified party.
In case any such action shall be brought against any
indemnified party and it shall notify an indemnifying party of
the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it may
desire, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, and after notice from
the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under
paragraph (d) or (e) of this Annex I for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable
costs of investigation.
(g) If the indemnification provided for under
paragraph (d) or (e) shall for any reason be held by a court to
be unavailable to an indemnified party under paragraph (d) or
(e) hereof in respect of any loss, claim, damage or liability,
or any action in respect thereof, then, in lieu of the amount
paid or payable under paragraph (d) or (e) hereof, the
indemnified party and the indemnifying party under paragraph
(d) or (e) hereof shall contribute to the aggregate losses,
claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating
the same), (i) in such proportion as is appropriate to reflect
the relative fault of the Company and the prospective seller of
Securities covered by the registration statement which resulted
in such loss, claim, damage or liability, or action in respect
thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause
7
(i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative
benefits received by the Company and such prospective seller
from the offering of the securities covered by such
registration statement. 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. In
addition, no Person shall be obligated to contribute hereunder
any amounts in payment for any settlement of any action or
claim effected without such Person's consent, which consent
shall not be unreasonably withheld.
ANNEX II
ASSET PURCHASE TRANSACTION**
Asset to be Acquired by the Purchaser
Asset Purchased 100% of the Parks
Business of Paramount
Communications Inc
("Paramount")
"Parks Business" means
all of the rights,
obligations, assets
(including interests in
other legal entities),
liabilities (whether
known, unknown,
contingent or otherwise)
and business, including
all capital stock of
Paramount Parks Inc., a
Delaware corporation,
primarily related to the
following theme parks
operated by Paramount
:Kings Island, Cincinnati,
Ohio; Kings Dominion,
Richmond, Virginia;
Great America,
Santa Clara, California;
Carowinds, Charlotte,
North Carolina; and
Wonderland, Toronto,
Canada.
Purchase Price $750 million, plus the
amount of capital
expenditures made on the
Parks Business after the
date of the merger of
the Company and Paramount
net of indebtedness
related thereto incurred
by the Parks Business
(the "Parks Purchase
Price").
Consideration Class B Common Stock
valued at $55 per share.
**See page 3 of this Annex II.
2
Conditions (a) The merger between
the Company and Paramount
shall have become
effective.
(b) All governmental and
material third party
approvals shall have
been obtained.
(c) The Parks Business
shall have continued to
be operated in the
ordinary course.
(d) No injunction or
litigation shall be in
effect or pending the
effect of which would
materially and adversely
affect the transaction.
Option to be Acquired by the Company
Option Simultaneous with the
closing of the purchase
of the Parks Business by
the Purchaser, the
Purchaser shall grant an
option (the "Option") to
the Company, exercisable
by the Company by
written notice to the
Purchaser at any time on
or prior to the second
anniversary of the
closing of the purchase
by the Purchaser of the
Parks Business,
entitling the Company to
purchase a 50% equity
interest in the Parks
Business.
3
Exercise Price 50% of the Parks
Purchase Price, plus 50%
of the amount of capital
expenditures made on the
Parks Business after the
closing of the purchase
by the Purchaser of the
Parks Business net of
indebtedness related
thereto incurred by the
Parks Business (the
"Option Price").
Consideration Cash
Management Following exercise of
the Option and the
acquisition of a 50%
equity interest by the
Company, the Purchaser
shall be entitled to
elect a simple majority
of the board of
directors or other
governing body of the
Parks Business and to
control the management
of the Parks Business.
Other Terms If the Option is
exercised, the Company
and the Purchaser shall
enter into a
stockholders' or other
similar agreement
containing such terms as
are customary for joint
ventures in which the
equity is equally owned
by two parties where one
party has primary
management authority.
4
General
1. In the event that the Company elects to enter into the
Asset Purchase Transaction pursuant to paragraph 17, each of
the Company and the Purchaser agrees to act in good faith and
use all reasonable best efforts to take all steps necessary and
advisable to effect the transaction consistent with the terms
set forth in this Annex II as soon as practicable after such
election is made.
2. Unless the parties otherwise agree and so long as such
structure would be consistent with the intent of the
transaction as expressed in this Annex II, the acquisition of
the Parks Business by the Purchaser shall be effected through
the acquisition of all of the capital stock of Patriot Parks
Inc. and the Option of the Company to acquire a 50% equity
interest in the Parks Business, if exercised, shall be effected
through the acquisition of 50% of the capital stock of Patriot
Parks Inc.
* * *
**In the event that the Company elects to enter into the
Asset Purchase Transaction pursuant to paragraph 17 and the
Purchaser does not Beneficially Own sufficient shares of Class B
Common Stock to pay the full Parks Purchase Price with such
shares, the Purchaser shall have the right, at its option,
either (a) to pay in cash such amount of the Parks Purchase
Price not paid in Class B Common Stock and thereby still
purchase 100% of the Parks Business or (b) to purchase only
such percentage of the equity of the Parks Business as equals
the percentage of the Parks Purchase Price that the Purchaser
pays with all of the shares of Class B Common Stock
Beneficially Owned by the Purchaser.
In the event that the Purchaser elects to purchase less
than 100% of the Parks Business as provided immediately above,
the following adjustments to the Asset Purchase Transaction
shall be made:
(A) The Company and the Purchaser shall enter into a
stockholders' or other similar agreement containing such
terms as are customary for joint ventures in which the
equity is owned by two parties in the proportions in which
the Company and the Purchaser would own the Parks Business;
provided that in the event the Purchaser acquires less than
a 50% equity interest in the Parks Business, the Company
shall retain the right to elect a majority of the board of
directors or other governing body of the Parks Business and
to control the management of the Parks Business.
5
(B) The Purchaser shall grant the Option to the Company
only in the event that the Purchaser acquires an equity
interest in the Parks Business of greater than 50% and the
equity interest for which the Option may be exercised by
the Company shall be equal only to such percentage as would
result in the Purchaser, after exercise of the Option by
the Company, owning a 50% equity interest in the Parks
Business. In such event, the Option Price shall be
decreased in proportion to the percentage decrease from a
50% equity interest to the percentage interest for which
the Option shall be exercisable.
Exhibit A
1. The execution and delivery of the Agreement by
the Company and the performance of its obligations thereunder
have been duly and validly authorized by all necessary
corporate action on the part of the Company.
2. The Agreement has been duly and validly executed
and delivered by the Company and, assuming the due
authorization, execution and delivery by the Purchaser,
constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance
or other similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject
to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
3. The Shares have been validly issued, are fully
paid and nonassessable, have not been issued in violation of or
subject to any preemptive rights and have the rights set forth
in the Company's Restated Certificate of Incorporation, as
amended through the date hereof.
Exhibit B
1. The execution and delivery of the Agreement by
the Purchaser and the performance of its obligations thereunder
have been duly and validly authorized by all necessary
corporate action on the part of the Purchaser.
2. The Agreement has been duly and validly executed
and delivered by the Purchaser and, assuming the due
authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with
its terms, except (i) as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance
or other similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject
to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law),
and (ii) that I express no opinion as to the enforceability of
any right to indemnity or contribution under the Agreement
which are violative of the public policy underlying any law,
rule or regulation (including any state and federal securities
law, rule or regulation).
Exhibit C
Assuming the due authorization, execution and delivery
by the Purchaser and the Company, the Agreement constitutes the
valid and binding obligation of the Company, enforceable
against the Company, in accordance with its terms, provided
that (i) the enforceability of the Agreement may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting enforcement of
creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law); and (ii) we express no opinion
as to the enforceability of any right to indemnity or
contribution under the Agreement which are violative of the
public policy underlying any law, rule or regulation (including
any state and Federal securities law, rule or regulation).