AGREEMENT AND PLAN OF MERGER
between
VIACOM INC.
and
BLOCKBUSTER ENTERTAINMENT CORPORATION
Dated as of January 7, 1994
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TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
1.01 The Merger.................................... 2
1.02 Closing....................................... 2
1.03 Effective Time................................ 2
1.04 Effect of the Merger.......................... 2
1.05 Certificate of Incorporation; By-Laws......... 3
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
2.01 Conversion of Securities...................... 3
2.02 Exchange of Certificates and Cash............. 4
2.03 Stock Transfer Books.......................... 7
2.04 Stock Options................................. 7
2.05 Dissenting Shares............................. 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BLOCKBUSTER
3.01 Organization and Qualification;
Subsidiaries................................ 9
3.02 Certificate of Incorporation and By-Laws...... 10
3.03 Capitalization................................ 10
3.04 Authority Relative to this Agreement.......... 11
3.05 No Conflict; Required Filings and Consents.... 12
3.06 Compliance.................................... 13
3.07 SEC Filings; Financial Statements............. 14
3.08 Absence of Certain Changes or Events.......... 15
3.09 Absence of Litigation......................... 16
3.10 Employee Benefit Plans........................ 17
3.11 Trademarks, Patents and Copyrights............ 17
3.12 Taxes......................................... 18
3.13 Opinion of Financial Advisor.................. 19
(i)
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3.14 Vote Required................................. 19
3.15 Brokers....................................... 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VIACOM
4.01 Organization and Qualification;
Subsidiaries................................ 20
4.02 Certificate of Incorporation and By-Laws...... 20
4.03 Capitalization................................ 21
4.04 Authority Relative to this Agreement.......... 22
4.05 No Conflict; Required Filings and Consents.... 23
4.06 Compliance.................................... 24
4.07 SEC Filings; Financial Statements............. 25
4.08 Absence of Certain Changes or Events.......... 26
4.09 Absence of Litigation......................... 27
4.10 Employee Benefit Plans........................ 27
4.11 Trademarks, Patents and Copyrights............ 28
4.12 Taxes......................................... 29
4.13 Opinion of Financial Advisor.................. 30
4.14 Vote Required................................. 30
4.15 Brokers....................................... 30
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
5.01 Conduct of Respective Businesses by
Blockbuster and Viacom Pending the Merger.... 30
ARTICLE VI
ADDITIONAL COVENANTS
6.01 Access to Information; Confidentiality........ 33
6.02 Directors' and Officers' Indemnification
and Insurance............................... 34
(ii)
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6.03 Notification of Certain Matters............... 36
6.04 Tax Treatment................................. 36
6.05 Registration Statement; Joint Proxy
Statement................................... 36
6.06 Stockholders' Meetings........................ 38
6.07 Letters of Accountants........................ 39
6.08 [Intentionally Deleted]....................... 39
6.09 Further Action; Reasonable Best Efforts....... 39
6.10 Debt Instruments.............................. 40
6.11 Public Announcements.......................... 40
6.12 Listing of Shares of Viacom
Common Stock and VCRs....................... 40
6.13 Affiliates of Blockbuster..................... 40
6.14 Conveyance Taxes.............................. 40
6.15 Assumption of Debt and Leases................. 42
6.16 Transactions with Significant Stockholder
After the Effective Time.................... 42
ARTICLE VII
CLOSING CONDITIONS
7.01 Conditions to Obligations of Each
Party to Effect the Merger.................. 43
7.02 Additional Conditions to Obligations
of Viacom.................................. 44
7.03 Additional Conditions to Obligations
of Blockbuster............................. 45
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination................................... 46
8.02 Effect of Termination......................... 49
8.03 Amendment..................................... 49
8.04 Waiver........................................ 49
8.05 Fees, Expenses and Other Payments............. 49
ARTICLE IX
GENERAL PROVISIONS
9.01 Effectiveness of Representations,
Warranties and Agreements................... 50
9.02 Notices....................................... 51
(iii)
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9.03 Certain Definitions........................... 52
9.04 Headings...................................... 53
9.05 Severability.................................. 53
9.06 Entire Agreement.............................. 54
9.07 Assignment.................................... 54
9.08 Parties in Interest........................... 54
9.09 Governing Law................................. 54
9.10 Counterparts.................................. 54
ANNEX A VCRs Term Sheet
EXHIBIT 6.13 Form of Affiliate Letter
(iv)
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AGREEMENT AND PLAN OF MERGER, dated as of January 7,
1994 (this "Agreement"), between VIACOM INC., a Delaware
corporation ("Viacom"), and BLOCKBUSTER ENTERTAINMENT
CORPORATION, a Delaware corporation ("Blockbuster").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions
of this Agreement and in accordance with the General
Corporation Law of the State of Delaware ("Delaware Law"),
Blockbuster and Viacom will enter into a business combination
transaction pursuant to which Blockbuster will merge with and
into Viacom (the "Merger");
WHEREAS, the Board of Directors of Blockbuster has
determined that the Merger is consistent with and in
furtherance of the long-term business strategy of Blockbuster
and is fair to, and in the best interests of, Blockbuster and
the holders of Blockbuster Common Stock (as defined in Section
2.01(a)) and has approved and adopted this Agreement and has
approved the Merger and the other transactions contemplated
hereby and recommended approval and adoption of this Agreement
and approval of the Merger by the stockholders of Blockbuster;
WHEREAS, the Board of Directors of Viacom has
determined that the Merger is consistent with and in
furtherance of the long-term business strategy of Viacom and is
fair to, and in the best interests of, Viacom and its
stockholders and has approved and adopted this Agreement and
has approved the Merger and the other transactions contemplated
hereby and recommended approval and adoption of this Agreement
and approval of the Merger by the holders of the Class A Common
Stock, par value $.01 per share, of Viacom (the "Viacom Class A
Common Stock");
WHEREAS, for federal income tax purposes, it is
intended that the Merger qualify as a reorganization under the
provisions of Section 368(a) of the United States Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, concurrently with the execution of this
Agreement and as an inducement to Blockbuster to enter into
this Agreement, National Amusements, Inc., a Maryland
corporation and the majority stockholder of Viacom ("Parent"),
and Blockbuster have entered into a Voting Agreement (the
"Parent Voting Agreement") pursuant to which Parent shall,
among other things, vote its shares of Viacom Class A Common
Stock (as defined in Section 2.01(a)) in favor of the Merger
and the other transactions contemplated by this Agreement;
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NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements set forth in this Agreement, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject
to the conditions set forth in this Agreement, and in
accordance with Delaware Law, at the Effective Time (as defined
in Section 1.03), Blockbuster shall be merged with and into
Viacom. As a result of the Merger, the separate corporate
existence of Blockbuster shall cease and Viacom shall continue
as the surviving corporation of the Merger (the "Surviving
Corporation").
SECTION 1.02. Closing. Unless this Agreement shall
have been terminated and the transactions herein contemplated
shall have been abandoned pursuant to Section 8.01 and subject
to the satisfaction or waiver of the conditions set forth in
Article VII, the consummation of the Merger will take place as
promptly as practicable (and in any event within two business
days) after satisfaction or waiver of the conditions set forth
in Article VII at the offices of Shearman & Sterling, 599
Lexington Avenue, New York, New York, unless another date, time
or place is agreed to in writing by the parties hereto.
SECTION 1.03. Effective Time. As promptly as
practicable after the satisfaction or, if permissible, waiver
of the conditions set forth in Article VII, the parties hereto
shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware in such form as
required by, and executed in accordance with the relevant
provisions of, Delaware Law (the date and time of such filing,
or such later date or time as set forth therein, being the
"Effective Time").
SECTION 1.04. Effect of the Merger. At the Effective
Time, the effect of the Merger shall be as provided in the
applicable provisions of Delaware Law. Without limiting the
generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of Viacom
and Blockbuster shall vest in the Surviving Corporation, and
all debts, liabilities and duties
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of Viacom and Blockbuster shall become the debts, liabilities
and duties of the Surviving Corporation.
SECTION 1.05. Certificate of Incorporation; By-Laws.
At the Effective Time the Certificate of Incorporation and the
By-Laws of Viacom, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation and
the By-Laws of the Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. At the
Effective Time, by virtue of the Merger and without any action
on the part of Viacom, Blockbuster or the holders of any of the
following securities:
(a) Each share of common stock, par value $.10 per
share, of Blockbuster ("Blockbuster Common Stock"), issued
and outstanding immediately prior to the Effective Time
(other than any shares of Blockbuster Common Stock to be
canceled pursuant to Section 2.01(b) and any Dissenting
Shares (if applicable and as defined in Section 2.05)),
shall be converted, subject to Section 2.02(d), into the
right to receive (x) .08 of one share of Viacom Class A
Common Stock (the "Class A Exchange Ratio"), (y) .60615 of
one share of Class B Common Stock, par value $.01 per share
("Viacom Class B Common Stock", and together with the
Viacom Class A Common Stock, the "Viacom Common Stock"), of
Viacom (the "Class B Exchange Ratio") and (z) up to an
additional .13829 of one share of Viacom Class B Common
Stock, with such amount to be determined in accordance
with, and the right to receive such shares to be evidenced
by, one variable common right (a "VCR") issued by
Viacom having the principal terms described in Annex A (the
"VCR Exchange Ratio"; together with the Class A and Class B
Exchange Ratios, the "Exchange Ratios"); provided, however,
that, in any event, if between the date of this Agreement
and the Effective Time the outstanding shares of Viacom
Common Stock or Blockbuster Common Stock shall have been
changed into a different number of shares or a different
class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or
exchange of shares, the Exchange Ratios shall be
correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split,
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combination or exchange of shares. All such shares of
Blockbuster Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease
to exist, and each certificate previously evidencing any
such shares shall thereafter represent the right to
receive, upon the surrender of such certificate in
accordance with the provisions of Section 2.02,
certificates evidencing (i) such number of whole shares of
Viacom Common Stock into which such Blockbuster Common
Stock was converted in accordance with the Class A and
Class B Exchange Ratios and (ii) such number of VCRs into
which such Blockbuster Common Stock was converted in
accordance with the VCR Exchange Ratio. The holders of
such certificates previously evidencing such shares of
Blockbuster Common Stock outstanding immediately prior to
the Effective Time shall cease to have any rights with
respect to such shares of Blockbuster Common Stock except
as otherwise provided herein or by law. No fractional
share of Viacom Common Stock shall be issued; and, in lieu
thereof, a cash payment shall be made pursuant to Section
2.02(d).
(b) Each share of Blockbuster Common Stock held in
the treasury of Blockbuster and each share of Blockbuster
Common Stock owned by Viacom or any direct or indirect
wholly owned subsidiary of Viacom or of Blockbuster
immediately prior to the Effective Time shall automatically
be canceled and extinguished without any conversion thereof
and no payment shall be made with respect thereto.
SECTION 2.02. Exchange of Certificates and Cash. (a)
Exchange Agent. Viacom shall deposit, or shall cause to be
deposited, with or for the account of a bank or trust company
designated by Viacom, which shall be reasonably satisfactory to
Blockbuster (the "Exchange Agent"), for the benefit of the
holders of shares of Blockbuster Common Stock (other than
Dissenting Shares, if applicable), for exchange in accordance
with this Article II, through the Exchange Agent, at the
Effective Time, (i) certificates evidencing the shares of
Viacom Common Stock and the VCRs issuable pursuant to
Section 2.01 in exchange for outstanding shares of Blockbuster
Common Stock and (ii) upon the request of the Exchange Agent,
cash in an amount sufficient to make any cash payment due under
Section 2.02(d) (such certificates for shares of Viacom Common
Stock, together with any dividends or distributions with
respect thereto, the VCRs and cash being hereafter collectively
referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the Viacom Common
Stock and VCRs
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contemplated to be issued pursuant to Section 2.01 out of the
Exchange Fund to holders of shares of Blockbuster Common Stock.
Except as contemplated by Section 2.02(d) hereof, the Exchange
Fund shall not be used for any other purpose. Any interest,
dividends or other income earned on the investment of cash or
other property held in the Exchange Fund shall be for the
account of Viacom.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, Viacom will instruct the
Exchange Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of Blockbuster
Common Stock (other than Dissenting Shares, if applicable) (the
"Certificates") (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Viacom may reasonably
specify) and (ii) instructions to effect the surrender of the
Certificates in exchange for the certificates evidencing shares
of Viacom Common Stock and the VCRs and cash (if any). Upon
surrender of a Certificate for cancellation to the Exchange
Agent together with such letter of transmittal, duly executed,
and such other customary documents as may be required pursuant
to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor (A) certificates
evidencing that number of whole shares of Viacom Common Stock
and VCRs that such holder has the right to receive in
accordance with the Exchange Ratios in respect of the shares of
Blockbuster Common Stock formerly evidenced by such
Certificate, (B) any dividends or other distributions to which
such holder is entitled pursuant to Section 2.02(c) and (C)
cash in lieu of fractional shares of Viacom Common Stock to
which such holder is entitled pursuant to Section 2.02(d) (the
shares of Viacom Common Stock, the VCRs and the dividends,
distributions and cash described in clauses (A), (B) and (C)
being, collectively, the "Merger Consideration"), and the
Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of shares of Blockbuster
Common Stock that is not registered in the transfer records of
Blockbuster, shares of Viacom Common Stock and VCRs may be
issued and paid in accordance with this Article II to a
transferee if the Certificate evidencing such shares of
Blockbuster Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.02, each Certificate shall be
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deemed at any time after the Effective Time to evidence only
the right to receive upon such surrender the Merger
Consideration.
(c) Distributions with Respect to Unexchanged Shares
of Viacom Common Stock. No dividends or other distributions
declared or made after the Effective Time with respect to
Viacom Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Viacom Common Stock they are
entitled to receive until the holder of such Certificate shall
surrender such Certificate.
(d) Fractional Shares. No fraction of a share of
Viacom Common Stock shall be issued in the Merger. In lieu of
any such fractional shares, each holder of Blockbuster Common
Stock upon surrender of a Certificate for exchange pursuant to
this Section 2.02 shall be paid an amount in cash (without
interest), rounded to the nearest cent, determined by
multiplying (i) the per share closing price on the American
Stock Exchange ("AMEX") of Viacom Class A Common Stock or
Viacom Class B Common Stock, as the case may be, on the date of
the Effective Time (or, if shares of Viacom Class A Common
Stock or Viacom Class B Common Stock, as the case may be, do
not trade on the AMEX on such date, the first date of trading
of such Viacom Common Stock on the AMEX after the Effective
Time) by (ii) the fractional interest to which such holder
would otherwise be entitled (after taking into account all
shares of Blockbuster Common Stock then held of record by such
holder).
(e) Termination of Exchange Fund. Any portion of the
Exchange Fund that remains undistributed to the holders of
Blockbuster Common Stock for six months after the Effective
Time shall be delivered to Viacom, upon demand, and any holders
of Blockbuster Common Stock who have not theretofore complied
with this Article II shall thereafter look only to Viacom for
the Merger Consideration to which they are entitled pursuant to
this Article II.
(f) No Liability. Neither Viacom nor Blockbuster
shall be liable to any holder of shares of Blockbuster Common
Stock for any such shares of Viacom Common Stock (or dividends
or distributions with respect thereto) or VCRs from the
Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(g) Withholding Rights. Viacom or the Exchange Agent
shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to
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any holder of shares of Blockbuster Common Stock such amounts
as Viacom or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the
Code, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Viacom or the
Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of
the shares of Blockbuster Common Stock in respect of which such
deduction and withholding was made by Viacom or the Exchange
Agent.
SECTION 2.03. Stock Transfer Books. At the Effective
Time, the stock transfer books of Blockbuster shall be closed,
and there shall be no further registration of transfers of
shares of Blockbuster Common Stock thereafter on the records of
Blockbuster. On or after the Effective Time, any Certificates
presented to the Exchange Agent or Viacom for any reason shall
be converted into the Merger Consideration.
SECTION 2.04. Stock Options. At the Effective Time,
Blockbuster's obligations with respect to each outstanding
Blockbuster Stock Option (as defined in Section 3.03) to
purchase shares of Blockbuster Common Stock, as amended in the
manner described in the following sentence, shall be assumed by
Viacom. The Blockbuster Stock Options so assumed by Viacom
shall continue to have, and be subject to, the same terms and
conditions as set forth in the stock option plans and
agreements pursuant to which such Blockbuster Stock Options
were issued as in effect immediately prior to the Effective
Time, except that each such Blockbuster Stock Option shall be
exercisable for (A) that number of whole shares of (i) Viacom
Class A Common Stock equal to the product of the number of
shares of Blockbuster Common Stock covered by such Blockbuster
Stock Option immediately prior to the Effective Time multiplied
by the Class A Exchange Ratio and rounded up to the nearest
whole number of shares of Viacom Class A Common Stock and (ii)
Viacom Class B Common Stock equal to the product of the number
of shares of Blockbuster Common Stock covered by such
Blockbuster Stock Option immediately prior to the Effective
Time multiplied by the Class B Exchange Ratio and rounded up to
the nearest whole number of shares of Viacom Class B Common
Stock and (B) that number of VCRs equal to the product of the
number of shares of Blockbuster Common Stock covered by such
Blockbuster Stock Option immediately prior to the Effective
Time multiplied by the VCR Exchange Ratio. Each warrant held by
employees or directors of Blockbuster shall be converted into a
Viacom warrant on the same terms and conditions except that each
such warrant shall be exercisable for (A) that number of whole
shares of (i) Viacom Class A Common Stock equal to the product
of the number of shares of Blockbuster Common Stock covered by
such warrant immediately prior to the Effective Time multiplied by
the Class A Exchange Ratio and rounded up to the nearest whole
number of shares of Viacom Class A Common Stock and (ii) Viacom
Class B Common Stock equal to the product of the number of shares
of Blockbuster Common Stock covered by such warrant immediately prior
to the Effective Time multiplied by the Class B Exchange Ratio and
rounded up to the nearest whole number of shares of Viacom Class B
Common Stock and (B) that number of VCRs equal to the product of the
number of shares of Blockbuster Common Stock covered by such warrant
immediately prior to the Effective Time multiplied by the VCR Exchange
Ratio. Viacom shall (i) reserve for issuance the number of shares
of Viacom Common Stock that will become issuable upon the exercise
of such Blockbuster Stock Options pursuant to this Section 2.04
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and (ii) promptly after the Effective Time issue to each holder
of an outstanding Blockbuster Stock Option a document
evidencing the assumption by Viacom of Blockbuster's
obligations with respect thereto under this Section 2.04.
Nothing in this Section 2.04 shall affect the schedule of
vesting with respect to the Blockbuster Stock Options to be
assumed by Viacom as provided in this Section 2.04; provided,
however, that Blockbuster and Viacom shall use their best
efforts to secure from each of the executives previously
identified by mutual agreement of Blockbuster and Viacom (the
"Designated Executives"), as promptly as practicable following
the execution of this Agreement, a waiver of (i) the
accelerated vesting of Blockbuster Stock Options held by such
Designated Executive (such waiver to lapse (and vesting of such
Blockbuster Stock Option to occur if such option has not
already vested in accordance with the applicable vesting
schedule) upon the termination of such Designated Executive's
employment with Blockbuster or Viacom for any reason) and (ii)
the triggering of the right of such Designated Executive to
cause Blockbuster to acquire his Blockbuster Stock Options for
cash, in each case resulting from the execution of this
Agreement and the transactions contemplated hereby, in
consideration for Blockbuster entering into an employment
agreement acceptable to Blockbuster and Viacom with such
Designated Executive. In addition to the adjustment provided
by Section 2.04, effective as of the Effective Time, the
terms of each Blockbuster Stock Option held by a Blockbuster
employee who as of the date hereof is not subject to the
reporting requirements of Section 16(a) of the Exchange Act,
and, subject, at Blockbuster's discretion, to any stockholder
approvals it determines are necessary, any non employee director,
shall be amended to provide that, if such Blockbuster
employee's employment is terminated without cause, or such
directorship shall cease, such Blockbuster Stock Option shall not
expire prior to the second anniversary of the Effective Time;
provided, however, that in no event shall the maximum term of such
Blockbuster Stock Option be extended.
SECTION 2.05. Dissenting Shares. (a) If provided
for under Delaware Law, notwithstanding any other provision of
this Agreement to the contrary, shares of Blockbuster Common
Stock that are outstanding immediately prior to the Effective
Time and which are held by stockholders who shall have not
voted in favor of the Merger or consented thereto in writing
and who shall have demanded properly in writing appraisal for
such shares in accordance with Section 262 of Delaware Law and
who shall not have withdrawn such demand or otherwise have
forfeited appraisal rights (collectively, the "Dissenting
Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders shall be
entitled to receive payment of the appraised value of such
shares of Blockbuster Common Stock held by them in accordance
with the provisions of such
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Section 262, except that all Dissenting Shares held by
stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to
appraisal of such shares of Blockbuster Common Stock under such
Section 262 shall thereupon be deemed to have been converted
into and to have become exchangeable, as of the Effective Time,
for the right to receive, without any interest thereon, the
Merger Consideration, upon surrender, in the manner provided in
Section 2.02, of the certificate or certificates that formerly
evidenced such shares of Blockbuster Common Stock.
(b) Blockbuster shall give Viacom (i) prompt notice
of any demands for appraisal received by Blockbuster,
withdrawals of such demands, and any other instruments served
pursuant to Delaware Law and received by Blockbuster and (ii)
the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under Delaware Law.
Blockbuster shall not, except with the prior written consent of
Viacom, make any payment with respect to any demands for
appraisal, or offer to settle, or settle, any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BLOCKBUSTER
Blockbuster hereby represents and warrants to Viacom
that:
SECTION 3.01. Organization and Qualification;
Subsidiaries. (a) Each of Blockbuster and each Material
Blockbuster 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 Blockbuster
Material Adverse Effect (as defined below). Blockbuster and
each Material Blockbuster Subsidiary are duly qualified or
licensed as foreign corporations to do business, and are in
good standing, in each jurisdiction where the character of the
properties owned, leased or operated by them or the nature of
their business makes such qualification or licensing necessary,
except for such failures to be so qualified or licensed and in
good standing that would not,
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individually or in the aggregate, have a Blockbuster Material
Adverse Effect. The term "Blockbuster 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 Blockbuster and the Blockbuster Subsidiaries,
taken as a whole; provided that from and after the date on
which the issuance and sale of shares of Viacom Class B Common
Stock contemplated by the Subscription Agreement (the
"Subscription Agreement") dated as of the date of this
Agreement between Viacom and Blockbuster is consummated (the
"Subscription Date"), the term "Blockbuster Material Adverse
Effect", for purposes of Article III and Section 7.02(a) only,
shall be changed to mean any change or effect that is or would
be materially adverse to the financial condition of Blockbuster
and the Blockbuster Subsidiaries, taken as a whole, excluding
any changes or effects caused by changes in general economic
conditions or changes generally affecting Blockbuster's
industry..
(b) Each subsidiary of Blockbuster (a "Blockbuster
Subsidiary") that constitutes a Significant Subsidiary of
Blockbuster within the meaning of Rule 1-02 of Regulation S-X
of the Securities and Exchange Commission (the "SEC") is
referred to herein as a "Material Blockbuster Subsidiary".
SECTION 3.02. Certificate of Incorporation and
By-Laws. Blockbuster has heretofore made available to Viacom a
complete and correct copy of the Certificate of Incorporation
and the By-Laws or equivalent organizational documents, each as
amended to date, of Blockbuster and each Material Blockbuster
Subsidiary. Such Certificates of Incorporation, By-Laws and
equivalent organizational documents are in full force and
effect. Neither Blockbuster nor any Material Blockbuster
Subsidiary is in violation of any provision of its Certificate
of Incorporation, By-Laws or equivalent organizational
documents, except for such violations that would not,
individually or in the aggregate, have a Blockbuster Material
Adverse Effect.
SECTION 3.03. Capitalization. The authorized capital
stock of Blockbuster consists of 300,000,000 shares of
Blockbuster Common Stock and 500,000 shares of Preferred Stock,
par value $1.00 per share ("Blockbuster Preferred Stock"). As
of December 31, 1993, (i) 247,487,375 shares of Blockbuster
Common Stock were issued and outstanding, all of which were
validly issued, fully paid and nonassessable, (ii) no shares
were held in the treasury of Blockbuster, (iii) 11,425,584
shares were reserved for future issuance pursuant to
outstanding employee stock options granted pursuant to
Blockbuster's 1987 Stock Option Plan, as amended, 1989
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Stock Option Plan, as amended, 1990 Stock Option Plan, as
amended, 1991 Employee Director Stock Option Plan, 1991
Non-Employee Director Stock Option Plan and any other employee
stock option plan or program (any employee or director stock
option issued under any such plan being a "Blockbuster Stock
Option") and (iv) 7,138,859 shares were reserved for future
issuance pursuant to the terms of outstanding warrants to
purchase shares of Blockbuster Common Stock. As of the date
hereof, no shares of Blockbuster Preferred Stock are issued
and outstanding. Except as set forth in Section 3.03
of the Disclosure Schedule previously delivered by
Blockbuster to Viacom (the "Blockbuster Disclosure
Schedule"), or except as set forth in this Section 3.03, there
are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the
issued or unissued capital stock of Blockbuster or any Material
Blockbuster Subsidiary or obligating Blockbuster or any
Material Blockbuster Subsidiary to issue or sell any shares of
capital stock of, or other equity interests in, Blockbuster or
any Material Blockbuster Subsidiary. All shares of Blockbuster
Common Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly
issued, fully paid and nonassessable. Except as set forth in
Section 3.03 of the Blockbuster Disclosure Schedule, there are
no material outstanding contractual obligations of Blockbuster
or any Blockbuster Subsidiary to repurchase, redeem or
otherwise acquire any shares of Blockbuster Common Stock or any
capital stock of any Material Blockbuster Subsidiary, or make
any material investment (in the form of a loan, capital
contribution or otherwise) in, any Blockbuster Subsidiary or
any other person. Each outstanding share of capital stock of
each Material Blockbuster Subsidiary is duly authorized,
validly issued, fully paid and nonassessable and each such
share owned by Blockbuster or another Blockbuster Subsidiary is
free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements,
limitations on Blockbuster's or such other Blockbuster
Subsidiary's voting rights, charges and other encumbrances of
any nature whatsoever.
SECTION 3.04. Authority Relative to this Agreement.
Blockbuster has all necessary power and authority to execute
and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions
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contemplated hereby. The execution and delivery of this
Agreement by Blockbuster and the consummation by Blockbuster of
the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no other
corporate proceedings on the part of Blockbuster are necessary
to authorize this Agreement or to consummate the transactions
contemplated herein (other than, with respect to the Merger,
the approval and adoption of this Agreement by the holders of a
majority of the then outstanding shares of Blockbuster Common
Stock and the filing and recordation of appropriate merger
documents as required by Delaware Law). This Agreement has
been duly and validly executed and delivered by Blockbuster
and, assuming the due authorization, execution and delivery by
Viacom, constitutes a legal, valid and binding obligation of
Blockbuster, enforceable against Blockbuster in accordance with
its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law). Blockbuster has taken all
appropriate actions so that the restrictions on business
combinations contained in Section 203 of Delaware Law and
Article 6 of Blockbuster's Certificate of Incorporation will
not apply with respect to or as a result of the transactions
contemplated herein or related hereto.
SECTION 3.05. No Conflict; Required Filings and
Consents. (a) Except as set forth in Section 3.05 of the
Blockbuster Disclosure Schedule, the execution and delivery of
this Agreement by Blockbuster do not, and the performance of
the transactions contemplated herein by Blockbuster will not,
(i) conflict with or violate the Certificate of Incorporation
or By-Laws or equivalent organizational documents of
Blockbuster or any Material Blockbuster Subsidiary, (ii)
conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Blockbuster or any Blockbuster
Subsidiary or by which any property or asset of Blockbuster or
any Blockbuster Subsidiary is bound or affected, or (iii)
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, result in the loss of a material benefit under,
or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a
lien or other encumbrance on any property or asset of
Blockbuster or any Blockbuster Subsidiary pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation
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to which Blockbuster or any Blockbuster Subsidiary is a party
or by which Blockbuster or any Blockbuster Subsidiary or any
property or asset of Blockbuster or any Blockbuster Subsidiary
is bound or affected, except, in the case of clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults
or other occurrences which would not prevent or delay
consummation of the Merger in any material respect, or
otherwise prevent Blockbuster from performing its obligations
under this Agreement in any material respect, and would not,
individually or in the aggregate, have a Blockbuster Material
Adverse Effect.
(b) The execution and delivery of this Agreement by
Blockbuster do not, and the performance of this Agreement by
Blockbuster will not, require any consent, approval,
authorization or permit of, or filing with or notification to,
any governmental or regulatory authority, domestic or foreign
(each a "Governmental Entity"), except (i) for (A) applicable
requirements, if any, of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Securities Act of 1933, as
amended (the "Securities Act"), state securities or "blue sky"
laws ("Blue Sky Laws") and state takeover laws, (B) the
pre-merger notification requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), (C) applicable
requirements of the Investment Canada Act of 1985 and the
Competition Act (Canada), (D) filing and recordation of
appropriate merger documents as required by Delaware Law and
(E) any non-United States competition, antitrust and investment
laws and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the
Merger in any material respect, or otherwise prevent
Blockbuster from performing its obligations under this
Agreement in any material respect, and would not, individually
or in the aggregate, have a Blockbuster Material Adverse
Effect.
SECTION 3.06. Compliance. Except as set forth in
Section 3.06 of the Blockbuster Disclosure Schedule, neither
Blockbuster nor any Blockbuster Subsidiary is in conflict with,
or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree (including, without limitation, laws,
rules and regulations relating to franchises) applicable to
Blockbuster or any Blockbuster Subsidiary or by which any
property or asset of Blockbuster or any Blockbuster Subsidiary
is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit,
franchise or other instrument or
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obligation to which Blockbuster or any Blockbuster Subsidiary
is a party or by which Blockbuster or any Blockbuster
Subsidiary or any property or asset of Blockbuster or any
Blockbuster Subsidiary is bound or affected, except for any
such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Blockbuster Material
Adverse Effect.
SECTION 3.07. SEC Filings; Financial Statements. (a)
Blockbuster has filed all forms, reports and documents required
to be filed by it with the SEC since December 31, 1990 and has
heretofore made available to Viacom, in the form filed with the
SEC (excluding any exhibits thereto), (i) its Annual Reports on
Form 10-K for the years ended December 31, 1990, 1991 and 1992,
respectively, (ii) its Quarterly Reports on Form 10-Q for the
periods ended March 30, 1993, June 30, 1993 and September 30,
1993, (iii) all proxy statements relating to Blockbuster's
meetings of stockholders (whether annual or special) held since
January 1, 1991 and (iv) all other forms, reports and other
registration statements (other than Quarterly Reports on Form
10-Q not referred to in clause (ii) above and preliminary
materials) filed by Blockbuster with the SEC since December 31,
1990 (the forms, reports and other documents referred to in
clauses (i), (ii), (iii) and (iv) above being referred to
herein, collectively, as the "Blockbuster SEC Reports"). The
Blockbuster SEC Reports and any forms, reports and other
documents filed by Blockbuster with the SEC after the date of
this Agreement (x) were or will be prepared in accordance with
the requirements of the Securities Act and the Exchange Act, as
the case may be, and the rules and regulations thereunder and
(y) 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 circumstances under which they were
made, not misleading. No Material Blockbuster Subsidiary,
except for Spelling Entertainment Group Inc., a Florida
corporation ("Spelling"), is required to file any form, report
or other document with the SEC.
(b) Spelling has filed all forms, reports and
documents required to be filed by it with the SEC since
June 30, 1992 and Blockbuster has heretofore made available to
Viacom, in the form filed with the SEC (excluding any exhibits
thereto), (i) Spelling's Quarterly Reports on Form 10-Q for the
periods ended June 30, 1993 and September 30, 1993,
(ii) all proxy statements relating to Spelling's meetings of
stockholders (whether annual or special) held since May 1, 1993
and (iii) all other forms, reports and
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other registration statements (other than Quarterly Reports on
Form 10-Q not referred to in clause (ii) above and preliminary
materials) filed by Spelling with the SEC since May 1, 1992
(the forms, reports and other documents referred to in clauses
(i), (ii) and (iii) above being referred to herein,
collectively, as the "Spelling SEC Reports"). The Spelling SEC
Reports and any forms, reports and other documents filed by
Spelling with the SEC after the date of this Agreement (x) were
or will be prepared in accordance with the requirements of the
Securities Act and the Exchange Act, as the case may be, and
the rules and regulations thereunder and (y) 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
light of the circumstances under which they were made, not
misleading.
(c) Each of the consolidated financial statements
(including, in each case, any notes thereto) contained in the
Blockbuster SEC Reports and Spelling SEC Reports was 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 financial position, results of operations
and cash flows of Blockbuster and the consolidated Blockbuster
Subsidiaries or Spelling and its subsidiaries, as the case may
be, 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).
(d) Except as set forth in Section 3.07 of the
Blockbuster Disclosure Schedule or except as and to the extent
set forth in the Blockbuster SEC Reports filed with the SEC
prior to the date of this Agreement, Blockbuster and the
Blockbuster Subsidiaries do not have any liability or
obligation of any nature (whether accrued, absolute, contingent
or otherwise) other than liabilities and obligations which
would not, individually or in the aggregate, have a Blockbuster
Material Adverse Effect.
SECTION 3.08. Absence of Certain Changes or Events.
Since December 31, 1992, except as set forth in Section 3.08 of
the Blockbuster Disclosure Schedule, contemplated by this
Agreement or disclosed in any Blockbuster SEC Report filed
since December 31, 1992 and prior to the date of this
Agreement, Blockbuster and the Blockbuster Subsidiaries have
conducted their businesses only
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in the ordinary course and in a manner consistent with past
practice and, since December 31, 1992, there has not been (i)
any Blockbuster Material Adverse Effect, (ii) any damage,
destruction or loss (whether or not covered by insurance) with
respect to any property or asset of Blockbuster or any
Blockbuster Subsidiary and having, individually or in the
aggregate, a Blockbuster Material Adverse Effect, (iii) any
change by Blockbuster in its accounting methods, principles or
practices, (iv) any declaration, setting aside or payment of
any dividend or distribution in respect of any capital stock of
Blockbuster or any Blockbuster Subsidiary or any redemption,
purchase or other acquisition of any of their respective
securities other than (A) regular quarterly dividends on the
shares of Blockbuster Common Stock not in excess of $0.025 per
share, (B) regular quarterly dividends on the shares of the
common stock of Spelling not in excess of $.020 per share, (C)
dividends by a Blockbuster Subsidiary to Blockbuster and (D) to
fund pre-established dividend reinvestment plans or (v) other
than as set forth in Section 3.03 and pursuant to the plans,
programs or arrangements referred to in Section 3.10 and other
than in the ordinary course of business consistent with past
practice, any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation
rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase
in the compensation payable or to become payable to any
officers or key employees of Blockbuster or any Blockbuster
Subsidiary.
SECTION 3.09. Absence of Litigation. Except as set
forth in Section 3.09 of the Blockbuster Disclosure Schedule or
except as disclosed in the Blockbuster SEC Reports filed with
the SEC prior to the date of this Agreement, there is no claim,
action, proceeding or investigation pending or, to the best
knowledge of Blockbuster, threatened against Blockbuster or any
Blockbuster Subsidiary, or any property or asset of Blockbuster
or any Blockbuster Subsidiary, before any court, arbitrator or
administrative, governmental or regulatory authority or body,
domestic or foreign, which, individually or in the aggregate,
would have a Blockbuster Material Adverse Effect. Except as
disclosed in the Blockbuster SEC Reports filed with the SEC
prior to the date of this Agreement, neither Blockbuster nor
any Blockbuster Subsidiary nor any property or asset of
Blockbuster or any Blockbuster Subsidiary is subject to any
order, writ, judgment, injunction, decree, determination or
award which would have, individually or in the aggregate, a
Blockbuster Material Adverse Effect.
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SECTION 3.10. Employee Benefit Plans. With respect
to all the employee benefit plans, programs and arrangements
maintained or contributed to by Blockbuster or any Blockbuster
Subsidiary for the benefit of any current or former employee,
officer or director of Blockbuster or any Blockbuster
Subsidiary (the "Blockbuster Plans"), except as set forth in
Section 3.10 of the Blockbuster Disclosure Schedule or the
Blockbuster SEC Reports and except as would not, individually
or in the aggregate, have a Blockbuster Material Adverse
Effect: (i) each Blockbuster Plan intended to be qualified
under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service (the
"IRS") that it is so qualified and nothing has occurred since
the date of such letter that could reasonably be expected to
affect the qualified status of such Blockbuster Plan; (ii) each
Blockbuster Plan has been operated in all material respects in
accordance with its terms and the requirements of applicable
law; (iii) neither Blockbuster nor any Blockbuster Subsidiary
has incurred any direct or indirect liability under, arising
out of or by operation of Title IV of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), in
connection with the termination of, or withdrawal from, any
Blockbuster Plan or other retirement plan or arrangement, and
no fact or event exists that could reasonably be expected to
give rise to any such liability; and (iv) Blockbuster and the
Blockbuster Subsidiaries have not incurred any liability under,
and have complied in all material respects with, the Worker
Adjustment Retraining Notification Act ("WARN"), and no fact or
event exists that could give rise to liability under such act.
Except as set forth in Section 3.10 of the Blockbuster
Disclosure Schedule, none of the Blockbuster Plans currently
maintained by or contributed to by Blockbuster nor any Plan
maintained by any entity that together with Blockbuster or the
Blockbuster Subsidiaries would be deemed a "single employer"
within the meaning of Section 4001(b) of ERISA (a "Blockbuster
Affiliate Plan") is subject to Title IV of ERISA. No
Blockbuster Plan or Blockbuster Affiliate Plan has incurred any
"accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived as of
the most recently completed plan year of such plan.
SECTION 3.11. Trademarks, Patents and Copyrights.
Blockbuster and the Blockbuster Subsidiaries own, or possess
adequate licenses or other valid rights to use, all material
patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, service marks, service
mark rights, trade secrets, applications to register, and
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registrations for, the foregoing trademarks, service marks,
know-how and other proprietary rights and information used in
connection with the business of Blockbuster and the Blockbuster
Subsidiaries as currently conducted, and no assertion or claim
has been made in writing challenging the validity of any of the
foregoing which, individually or in the aggregate, would have a
Blockbuster Material Adverse Effect. To the best knowledge of
Blockbuster, the conduct of the business of Blockbuster and the
Blockbuster Subsidiaries as currently conducted does not
conflict in any way with any patent, patent right, license,
trademark, trademark right, trade name, trade name right,
service mark or copyright of any third party that, individually
or in the aggregate, would have a Blockbuster Material Adverse
Effect.
SECTION 3.12. Taxes. Except as set forth in Section
3.12 of the Disclosure Schedule, Blockbuster and the
Blockbuster Subsidiaries have timely filed all federal, state,
local and foreign tax returns and reports required to be filed
by them through the date hereof and shall timely file all
returns and reports required on or before the Effective Time,
except for such returns and reports the failure of which to
file timely would not, individually or in the aggregate, have a
Blockbuster Material Adverse Effect. Such reports and returns
are and will be true, correct and complete, except for such
failures to be true, correct and complete as would not,
individually or in the aggregate, have a Blockbuster Material
Adverse Effect. Blockbuster and the Blockbuster Subsidiaries
have paid and discharged all federal, state, local and foreign
taxes due from them, other than such taxes that are being
contested in good faith by appropriate proceedings and are
adequately reserved as shown in the audited consolidated
balance sheet of Blockbuster dated December 31, 1992 (the
"Blockbuster 1992 Balance Sheet") and its most recent quarterly
financial statements, except for such failures to so pay and
discharge which would not, individually or in the aggregate,
have a Blockbuster Material Adverse Effect. Neither the IRS
nor any other taxing authority or agency, domestic or foreign,
is now asserting or, to the best knowledge of Blockbuster,
threatening to assert against Blockbuster or any Blockbuster
Subsidiary any deficiency or material claim for additional
taxes or interest thereon or penalties in connection therewith
which, if such deficiencies or claims were finally resolved
against Blockbuster and the Blockbuster Subsidiaries would,
individually or in the aggregate, have a Blockbuster Material
Adverse Effect. The accruals and reserves for taxes (including
interest and penalties, if any, thereon) reflected in the
Blockbuster 1992 Balance Sheet and the most recent quarterly
financial statements are adequate in accordance
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with generally accepted accounting principles, except where the
failure to be adequate would not have a Blockbuster Material
Adverse Effect. Blockbuster and the Blockbuster Subsidiaries
have withheld or collected and paid over to the appropriate
governmental authorities or are properly holding for such
payment all taxes required by law to be withheld or collected,
except for such failures to have so withheld or collected and
paid over or to be so holding for payment which would not,
individually or in the aggregate, have a Blockbuster Material
Adverse Effect. There are no material liens for taxes upon the
assets of Blockbuster or the Blockbuster Subsidiaries, other
than liens for current taxes not yet due and payable and liens
for taxes that are being contested in good faith by appropriate
proceedings. Neither Blockbuster nor any Blockbuster
Subsidiary has agreed to or is required to make any adjustment
under Section 481(a) of the Code. Neither Blockbuster nor any
Blockbuster Subsidiary has made an election under Section
341(f) of the Code. For purposes of this Section 3.12, where a
determination of whether a failure by Blockbuster or a
Blockbuster Subsidiary to comply with the representations
herein has a Blockbuster Material Adverse Effect is necessary,
such determination shall be made on an aggregate basis with all
other failures within this Section 3.12.
SECTION 3.13. Opinion of Financial Advisor.
Blockbuster has received the opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), dated January 7,
1994, to the effect that, as of such date, the Exhange Ratios,
taken as a whole, are fair to the stockholders of Blockbuster
from a financial point of view, a copy of which opinion has
been delivered to Viacom.
SECTION 3.14. Vote Required. The affirmative vote of
the holders of a majority of the outstanding shares of
Blockbuster Common Stock is the only vote of the holders of any
class or series of Blockbuster capital stock necessary to
approve the Merger.
SECTION 3.15. Brokers. No broker, finder or
investment banker (other than Merrill Lynch) is entitled to any
brokerage, finder's or other fee or commission in connection
with the transactions contemplated herein based upon
arrangements made by or on behalf of Blockbuster. Blockbuster
has heretofore furnished to Viacom a complete and correct copy
of all agreements between Blockbuster and Merrill Lynch
pursuant to which such firm would be entitled to any payment
relating to the transactions contemplated herein.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VIACOM
Viacom hereby represents and warrants to Blockbuster
that:
SECTION 4.01. Organization and Qualification;
Subsidiaries. (a) Each of Viacom and each Material Viacom
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 Viacom Material Adverse Effect (as
defined below). Viacom and each Material Viacom Subsidiary is
duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it
or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Viacom Material
Adverse Effect. The term "Viacom 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 Viacom and the Viacom Subsidiaries, taken as a
whole; provided that from and after the Subscription Date, the
term "Viacom Material Adverse Effect", for purposes of Article
IV and Section 7.03(a) only, shall be changed to mean any
change or effect that is or would be materially adverse to the
financial condition of Viacom and the Viacom Subsidiaries,
taken as a whole, excluding any changes or effects caused by
changes in general economic conditions or changes generally
affecting Viacom's industry.
(b) Each subsidiary of Viacom (a "Viacom Subsidiary")
that constitutes a Significant Subsidiary of Viacom within the
meaning of Rule 1-02 of Regulation S-X of the SEC is referred
to herein as a "Material Viacom Subsidiary".
SECTION 4.02. Certificate of Incorporation and
By-Laws. Viacom has heretofore made available to Blockbuster
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a complete and correct copy of the Certificate of Incorporation
and the By-Laws or equivalent organizational documents, each as
amended to date, of Viacom and each Material Viacom Subsidiary.
Such Certificates of Incorporation, By-Laws and equivalent
organizational documents are in full force and effect. Neither
Viacom nor any Material Viacom Subsidiary is in violation of
any provision of its Certificate of Incorporation, By-Laws or
equivalent organizational documents, except for such violations
that would not, individually or in the aggregate, have a Viacom
Material Adverse Effect.
SECTION 4.03. Capitalization. The authorized capital
stock of Viacom consists of 100,000,000 shares of Viacom
Class A Common Stock, 150,000,000 shares of Viacom Class B
Common Stock and 100,000,000 shares of Preferred Stock, par
value $.01 per share ("Viacom Preferred Stock"), of which
24,000,000 shares have been designated Series A Preferred Stock
(the "Series A Preferred Stock") and 24,000,000 shares have
been designated Series B Preferred Stock (the "Series B
Preferred Stock"). As of November 30, 1993, (i) 53,449,125
shares of Viacom Class A Common Stock and 67,345,982 shares of
Viacom Class B Common Stock were issued and outstanding, all of
which were validly issued, fully paid and nonassessable, (ii)
no shares were held in the treasury of Viacom, (iii) no shares
were held by the Viacom Subsidiaries, and (iv) 224,610 shares
of Viacom Class A Common Stock and 3,760,297 shares of Viacom
Class B Common Stock were reserved for future issuance pursuant
to outstanding employee stock options or stock incentive rights
granted pursuant to Viacom's 1989 Long-Term Management
Incentive Plan, the Viacom Inc. Stock Option Plan for Outside
Directors and any other employee stock option plan or program.
Since December 1, 1993 to the date of this Agreement, stock
options were granted pursuant to which no shares of Viacom Class
A Common Stock and no shares of Viacom Class B Common Stock are
subject to issuance. As of the date hereof, 24,000,000 shares
of Viacom Series A Preferred Stock and 24,000,000 shares of
Viacom Series B Preferred Stock are issued and outstanding.
Except as set forth in this Section 4.03 and as contemplated by
this Agreement, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of Viacom or
any Material Viacom Subsidiary or obligating Viacom or any
Material Viacom Subsidiary to issue or sell any shares of
capital stock of, or other equity interests in, Viacom or any
Material Viacom Subsidiary, except for (i) options granted
since November 30, 1993 in the ordinary course consistent with
past practice, (ii) the reservation of 8,570,400 shares of
Class B Common
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Stock for issuance upon conversion of shares of Viacom Series A
Preferred Stock and (iii) the reservation of 17,140,800 shares
of Class B Common Stock for issuance upon conversion of shares
of Series B Preferred Stock. All shares of Viacom Common Stock
subject to issuance as aforesaid, upon issuance on the terms
and conditions specified in the instruments pursuant to which
they are issuable, will be duly authorized, validly issued,
fully paid and nonassessable. Except as set forth in Section
4.03 of the Disclosure Schedule previously delivered by Viacom
to Blockbuster (the "Viacom Disclosure Schedule"), there are no
material outstanding contractual obligations of Viacom or any
Viacom Subsidiary to repurchase, redeem or otherwise acquire
any shares of Viacom Common Stock or any capital stock of any
Material Viacom Subsidiary, or make any material investment (in
the form of a loan, capital contribution or otherwise) in, any
Viacom Subsidiary or any other person. Each outstanding share
of capital stock of each Material Viacom Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and
each such share owned by Viacom or another Viacom Subsidiary is
free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements,
limitations on Viacom's or such other Viacom Subsidiary's
voting rights, charges and other encumbrances of any nature
whatsoever. The VCRs to be issued pursuant to the Merger will
be duly and validly authorized by Viacom and, when issued and
delivered pursuant to the terms of this Agreement, will be duly
and validly issued, fully paid and nonassessable. The shares
of Viacom Class B Common Stock (if any) issuable pursuant to
the terms of the VCRs will be duly authorized, validly issued,
fully paid and nonassessable. The VCRs constitute legal, valid
and binding obligations of Viacom, enforceable against Viacom
in accordance with their terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium
or similar laws affecting creditors' rights generally and
subject, as to enforceability, to the effect of general
principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
SECTION 4.04. Authority Relative to this Agreement.
Viacom has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated herein. The
execution and delivery of this Agreement by Viacom and the
consummation by Viacom of the transactions contemplated herein
have been duly and validly authorized by all necessary
corporate action and the Parent Voting Agreement has been
approved by the Viacom Board of
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Directors for purposes of Section 203 of Delaware Law and no
other corporate proceedings on the part of Viacom are necessary
to authorize this Agreement or to consummate the transactions
contemplated herein (other than, with respect to the Merger,
the approval by the holders of a majority of the then
outstanding shares of Viacom Class A Common Stock of (i) this
Agreement and the Merger and (ii) to the extent necessary, the
amendment to Viacom's Certificate of Incorporation necessary to
increase (x) the shares of authorized Viacom Class B Common
Stock to a number not less than the number sufficient to
consummate the issuance of Shares of Viacom Class B Common
Stock contemplated under this Agreement and (y) the size of the
Board of Directors of Viacom to a number not less than 12
(collectively, the "Viacom Vote Matter"; and the amendments to
Viacom's Certificate of Incorporation described in clauses (x)
and (y) being, collectively, the "Viacom Certificate
Amendments"), and the filing and recordation of the foregoing
amendment to Viacom's Certificate of Incorporation and
appropriate merger documents as required by Delaware Law).
This Agreement has been duly and validly executed and delivered
by Viacom and, assuming the due authorization, execution and
delivery by Blockbuster, constitutes a legal, valid and binding
obligation of Viacom, enforceable against Viacom in accordance
with its terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
SECTION 4.05. No Conflict; Required Filings and
Consents. (a) Except as set forth in Section 4.05 of the
Viacom Disclosure Schedule, the execution and delivery of this
Agreement by Viacom do not, and the performance of the
transactions contemplated herein by Viacom will not,
(i) conflict with or violate the Certificate of Incorporation
or By-Laws or equivalent organizational documents of Viacom or
any Material Viacom Subsidiary, (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable
to Viacom or any Viacom Subsidiary or by which any property or
asset of Viacom or any Viacom Subsidiary is bound or affected,
or (iii) 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, result in the loss of a material benefit under
or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a
lien or other encumbrance on any property or asset of Viacom or
any Viacom Subsidiary pursuant
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to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or
obligation to which Viacom or any Viacom Subsidiary is a party
or by which Viacom or any Viacom Subsidiary or any property or
asset of Viacom or any Viacom Subsidiary is bound or affected,
except in the case of clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences
which would not prevent or delay consummation of the Merger in
any material respect, or otherwise prevent Viacom from
performing its obligations under this Agreement in any material
respect, and would not, individually or in the aggregate, have a
Viacom Material Adverse Effect.
(b) The execution and delivery of this Agreement by
Viacom do not, and the performance of this Agreement by Viacom
will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental
Entity, except (i) for (A) applicable requirements, if any, of
the Exchange Act, Securities Act, state securities or Blue Sky
Laws and state takeover laws, (B) the pre-merger notification
requirements of the HSR Act, (C) applicable requirements, if
any, of the Communications Act, and of state and local
governmental authorities, including state and local authorities
granting franchises to operate cable systems, (D) applicable
requirements of the Investment Canada Act of 1985 and the
Competition Act (Canada), (E) filing and recordation of
appropriate merger documents and the Viacom Certificate
Amendments as required by Delaware Law and (F) any non-United
States competition, antitrust and investment laws and (ii)
where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the
Merger in any material respect, or otherwise prevent Viacom
from performing its obligations under this Agreement in any
material respect, and would not, individually or in the
aggregate, have a Viacom Material Adverse Effect.
SECTION 4.06. Compliance. Neither Viacom nor any
Viacom Subsidiary is in conflict with, or in default or
violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to Viacom or any Viacom Subsidiary or by
which any property or asset of Viacom or any Viacom Subsidiary
is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Viacom or
any Viacom Subsidiary is a party or by which Viacom or any
Viacom Subsidiary or any property or asset of Viacom or any
Viacom Subsidiary is bound or affected, except for any
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such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Viacom Material
Adverse Effect.
SECTION 4.07. SEC Filings; Financial Statements. (a)
Viacom has filed all forms, reports and documents required to
be filed by it with the SEC since December 31, 1990, and has
heretofore made available to Blockbuster, in the form filed
with the SEC (excluding any exhibits thereto), (i) its Annual
Reports on Form 10-K for the fiscal years ended December 31,
1990, 1991 and 1992, respectively, (ii) its Quarterly Reports
on Form 10-Q for the periods ended March 31, 1993, June 30,
1993 and September 30, 1993, (iii) all proxy statements
relating to Viacom's meetings of stockholders (whether annual
or special) held since January 1, 1991 and (iv) all other
forms, reports and other registration statements (other than
Quarterly Reports on Form 10-Q not referred to in clause (ii)
above and preliminary materials) filed by Viacom with the SEC
since December 31, 1990 (the forms, reports and other documents
referred to in clauses (i), (ii), (iii), and (iv) above being
referred to herein, collectively, as the "Viacom SEC Reports").
The Viacom SEC Reports and any other forms, reports and other
documents filed by Viacom with the SEC after the date of this
Agreement (x) were or will be prepared in accordance with the
requirements of the Securities Act and the Exchange Act, as the
case may be, and the rules and regulations thereunder and (y)
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. No Material Viacom Subsidiary (other than Viacom
International Inc., a Delaware corporation
("Viacom International")) is required to file any form, report
or other document with the SEC.
(b) Viacom International has filed all forms, reports
and documents required to be filed by it with the SEC since
December 31, 1992 and Viacom has heretofore made available to
Blockbuster, in the form filed with the SEC (excluding any
exhibits thereto), (i) Viacom International's Annual Report on
Form 10-K for the year ended December 31, 1992, (ii) Viacom
International's Quarterly Reports on Form 10-Q for the periods
ended March 31, 1993, June 30, 1993 and September 30, 1993,
(iii) all proxy statements relating to Viacom International's
meetings of stockholders (whether annual or special) held since
January 1, 1993 and (iv) all other forms, reports and other
registration statements (other than Quarterly Reports on Form
10-Q not referred to in clause
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(ii) above and preliminary materials) filed by Viacom
International with the SEC since December 31, 1992 (the forms,
reports and other documents referred to in clauses (i), (ii),
(iii) and (iv) above being referred to herein, collectively, as
the "Viacom International SEC Reports"). The Viacom
International SEC Reports and any forms, reports and other
documents filed by Viacom International with the SEC after the
date of this Agreement (x) were or will be prepared in
accordance with the requirements of the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations
thereunder and (y) 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.
(c) Each of the consolidated financial statements
(including, in each case, any notes thereto) contained in the
Viacom SEC Reports and the Viacom International SEC Reports was
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 Viacom and the
consolidated Viacom Subsidiaries or Viacom International or the
subsidiaries of Viacom International, as the case may be, 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).
(d) Except as and to the extent set forth in the
Viacom SEC Reports filed with the SEC prior to the date of this
Agreement, Viacom and the Viacom Subsidiaries do not have any
liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise) other than liabilities and
obligations which would not, individually or in the aggregate,
have a Viacom Material Adverse Effect.
SECTION 4.08. Absence of Certain Changes or Events.
Since December 31, 1992, except as contemplated by this
Agreement, as set forth in Section 4.08 of the Disclosure
Schedule or disclosed in any Viacom SEC Report filed since
December 31, 1992 and prior to the date of this Agreement,
Viacom and the Viacom Subsidiaries have conducted their
businesses only in the ordinary course and in a manner
consistent with past practice and, since December 31, 1992
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there has not been (i) any Viacom Material Adverse Effect, (ii)
any damage, destruction or loss (whether or not covered by
insurance) with respect to any property or asset of Viacom or
any Viacom Subsidiary and having, individually or in the
aggregate, a Viacom Material Adverse Effect, (iii) any change
by Viacom in its accounting methods, principles or practices,
(iv) any declaration, setting aside or payment of any dividend
or distribution in respect of any capital stock of Viacom or
any Viacom Subsidiary or any redemption, purchase or other
acquisition of any of their respective securities other than
dividends by a Viacom Subsidiary to Viacom or (v) other than as
set forth in Section 4.03 and pursuant to the plans, programs
or arrangements referred to in Section 4.10, other than in the
ordinary course of business consistent with past practice, any
increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the
granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase
or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or
key employees of Viacom or any Viacom Subsidiary, except for
the establishment of the Viacom Inc. Stock Option Plan for
Outside Directors and the grant of options to purchase an
aggregate of 25,000 shares thereunder.
SECTION 4.09. Absence of Litigation. Except as
disclosed in the Viacom SEC Reports filed with the SEC prior to
the date of this Agreement, there is no claim, action,
proceeding or investigation pending or, to the best knowledge
of Viacom, threatened against Viacom or any Viacom Subsidiary,
or any property or asset of Viacom or any Viacom Subsidiary,
before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, which,
individually or in the aggregate, would have a Viacom Material
Adverse Effect. Except as disclosed in the Viacom SEC Reports
filed with the SEC prior to the date of this Agreement, neither
Viacom nor any Viacom Subsidiary nor any property or asset of
Viacom or any Viacom Subsidiary is subject to any order, writ,
judgment, injunction, decree, determination or award which
would have, individually or in the aggregate, a Viacom Material
Adverse Effect.
SECTION 4.10. Employee Benefit Plans. With respect
to all the employee benefit plans, programs and arrangements
maintained or contributed to by Viacom or any Viacom Subsidiary
for the benefit of any current or former employee, officer or
director of Viacom or any Viacom Subsidiary (the "Viacom
Plans"), except as set forth in Section 4.10 of the
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Viacom Disclosure Schedule or the Viacom SEC Reports and except
as would not, individually or in the aggregate, have a Viacom
Material Adverse Effect: (i) none of the Viacom Plans is a
multiemployer plan within the meaning of ERISA; (ii) none of
the Viacom Plans promises or provides retiree medical or life
insurance benefits to any person; (iii) each Viacom Plan
intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the IRS that it
is so qualified and nothing has occurred since the date of such
letter that could reasonably be expected to affect the
qualified status of such Viacom Plan; (iv) each Viacom Plan has
been operated in all material respects in accordance with its
terms and the requirements of applicable law; (v) neither
Viacom nor any Viacom Subsidiary has incurred any direct or
indirect liability under, arising out of or by operation of
Title IV of ERISA in connection with the termination of, or
withdrawal from, any Viacom Plan or other retirement plan or
arrangement, and no fact or event exists that could reasonably
be expected to give rise to any such liability; and (vi) Viacom
and the Viacom Subsidiaries have not incurred any liability
under, and have complied in all respects with, WARN, and no
fact or event exists that could give rise to liability under
such act. Except as set forth in Section 4.10 of the Viacom
Disclosure Schedule or the Viacom SEC Reports, the aggregate
accumulated benefit obligations of each Viacom Plan subject to
Title IV of ERISA (as of the date of the most recent actuarial
valuation prepared for such Viacom Plan) do not exceed the fair
market value of the assets of such Viacom Plan (as of the date
of such valuation).
SECTION 4.11. Trademarks, Patents and Copyrights.
Viacom and the Viacom Subsidiaries own, or possess adequate
licenses or other valid rights to use, all material patents,
patent rights, trademarks, trademark rights, trade names, trade
name rights, copyrights, service marks, service mark rights,
trade secrets, applications to register, and registrations for,
the foregoing trademarks, service marks, know-how and other
proprietary rights and information used in connection with the
business of Viacom and the Viacom Subsidiaries as currently
conducted, and no assertion or claim has been made in writing
challenging the validity of any of the foregoing which,
individually or in the aggregate, would have a Viacom Material
Adverse Effect. To the best knowledge of Viacom, the conduct
of the business of Viacom and the Viacom Subsidiaries as
currently conducted does not conflict in any way with any
patent, patent right, license, trademark, trademark right,
trade name, trade name right, service mark or copyright of any
third party that,
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individually or in the aggregate, would have a Viacom Material
Adverse Effect.
SECTION 4.12. Taxes. Viacom and the Viacom
Subsidiaries have timely filed all federal, state, local and
foreign tax returns and reports required to be filed by them
through the date hereof and shall timely file all returns and
reports required on or before the Effective Time, except for
such returns and reports the failure of which to file timely
would not, individually or in the aggregate, have a Viacom
Material Adverse Effect. Such reports and returns are and will
be true, correct and complete, except for such failures to be
true, correct and complete as would not, individually or in the
aggregate, have a Viacom Material Adverse Effect. Viacom and
the Viacom Subsidiaries have paid and discharged all federal,
state, local and foreign taxes due from them, other than such
taxes that are being contested in good faith by appropriate
proceedings and are adequately reserved as shown in the audited
consolidated balance sheet of Viacom dated December 31, 1992
(the "Viacom 1992 Balance Sheet") and its most recent quarterly
financial statements, except for such failures to so pay and
discharge which would not, individually or in the aggregate,
have a Viacom Material Adverse Effect. Neither the IRS nor any
other taxing authority or agency, domestic or foreign, is now
asserting or, to the best knowledge of Viacom, threatening to
assert against Viacom or any Viacom Subsidiary any deficiency
or material claim for additional taxes or interest thereon or
penalties in connection therewith which, if such deficiencies
or claims were finally resolved against Viacom and the Viacom
Subsidiaries, would, individually or in the aggregate, have a
Viacom Material Adverse Effect. The accruals and reserves for
taxes (including interest and penalties, if any, thereon)
reflected in the Viacom 1992 Balance Sheet and the most recent
quarterly financial statements are adequate in accordance with
generally accepted accounting principles, except where the
failure to be adequate would not have a Viacom Material Adverse
Effect. Viacom and the Viacom Subsidiaries have withheld or
collected and paid over to the appropriate governmental
authorities or are properly holding for such payment all taxes
required by law to be withheld or collected, except for such
failures to have so withheld or collected and paid over or to
be so holding for payment which would not, individually or in
the aggregate, have a Viacom Material Adverse Effect. There
are no material liens for taxes upon the assets of Viacom or
the Viacom Subsidiaries, other than liens for current taxes not
yet due and payable and liens for taxes that are being
contested in good faith by appropriate proceedings. Neither
Viacom nor any Viacom Subsidiary has agreed to or is required
to make any
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adjustment under Section 481(a) of the Code. Neither Viacom
nor any Viacom Subsidiary has made an election under Section
341(f) of the Code. For purposes of this Section 4.12, where a
determination of whether a failure by Viacom or a Viacom
Subsidiary to comply with the representations herein has a
Viacom Material Adverse Effect is necessary, such determination
shall be made on an aggregate basis with all other failures
within this Section 4.12.
SECTION 4.13. Opinion of Financial Advisor. Viacom
has received the opinion of Smith Barney Shearson Inc. ("Smith
Barney"), dated January 6, 1994, to the effect that, as of such
date, the Merger is fair to the stockholders of Viacom from a
financial point of view, a copy of which opinion has been
delivered to Blockbuster.
SECTION 4.14. Vote Required. The affirmative vote of
the holders of a majority of the outstanding shares of Viacom
Class A Common Stock is the only vote of the holders of any
class or series of Viacom capital stock necessary to approve
the Viacom Vote Matter.
SECTION 4.15. Brokers. No broker, finder or
investment banker (other than Smith Barney) is entitled to any
brokerage, finder's or other fee or commission in connection
with the transactions contemplated herein based upon
arrangements made by or on behalf of Viacom. Viacom has
heretofore furnished to Blockbuster a complete and correct copy
of all agreements between Viacom and Smith Barney pursuant to
which such firm would be entitled to any payment relating to
the transactions contemplated herein.
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
SECTION 5.01. Conduct of Respective Businesses by
Blockbuster and Viacom Pending the Merger. Each of Blockbuster
and Viacom covenants and agrees that, between the date of this
Agreement and the Effective Time, unless the other party shall
have consented in writing (such consent not to be unreasonably
withheld), the businesses of each of Blockbuster and Viacom and
their respective subsidiaries shall, in all material respects,
be conducted in, and each of Blockbuster and Viacom and their
respective subsidiaries shall not take any material action
except in, the ordinary course of business, consistent with
past practice; and each of Blockbuster and Viacom shall use its
reasonable best efforts to preserve substantially intact its
business
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organization, to keep available the services of its and its
subsidiaries' current officers, employees and consultants and
to preserve its and its subsidiaries' relationships with
customers, suppliers and other persons with which it or any of
its subsidiaries has significant business relations. By way of
amplification and not limitation, except (i) as contemplated by
this Agreement, (ii) for any actions taken by Viacom relating
to the proposed acquisition by Viacom of Paramount
Communications Inc., a Delaware corporation ("Paramount"),
(iii) for any actions taken by Blockbuster in its capacity as
the controlling stockholder of Spelling that are necessary due
to the applicable fiduciary duties to Spelling and the other
stockholders of Spelling, as determined by Blockbuster in good
faith after consultation with and based upon the advice of
independent legal counsel (who may be Blockbuster's regularly
engaged independent legal counsel) or (iv) as set forth on
Section 5.01 of the Blockbuster Disclosure Schedule or Section
5.01 of the Viacom Disclosure Schedule, neither Viacom nor
Blockbuster nor any of their respective subsidiaries shall,
between the date of this Agreement and the Effective Time,
directly or indirectly do, or propose or agree to do, any of
the following without the prior written consent of the other
(provided that the following restrictions shall not apply to
any subsidiaries which Blockbuster or Viacom, as the case may
be, do not control):
(a) amend or otherwise change the Certificate of
Incorporation or By-Laws of Viacom or Blockbuster (except,
with respect to Viacom, the Viacom Certificate Amendments);
(b) issue, sell, pledge, dispose of, grant, encumber,
or authorize the issuance, sale, pledge, disposition, grant
or encumbrance of, (i) any shares of capital stock of any class
of it or any of its subsidiaries, or any options (other than
the grant of options in the ordinary course of business
consistent with past practice to employees who are not
executive officers of Blockbuster or Viacom or the grant of
options previously disclosed by Blockbuster to Viacom prior
to the date of this Agreement), warrants, convertible
securities or other rights of any kind to acquire any shares
of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of it
or any of its subsidiaries (other than the issuance of
shares of capital stock in connection with (A) any dividend
reinvestment plan or by any Blockbuster Plan with an employee
stock fund or employee stock ownership plan feature,
consistent with applicable
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securities laws, (B) the exercise of options, warrants or
other similar rights outstanding as of the date of this
Agreement and in accordance with the terms of such options,
warrants or rights in effect on the date of this Agreement,
(C) otherwise permitted to be granted pursuant to this
Agreement or (D) any acquisition by Blockbuster permitted
by paragraph (e)(i) of this Section 5.01) or (ii) any
assets of it or any of its subsidiaries, except for sales
in the ordinary course of business or which, individually,
do not exceed $10,000,000 or which, in the aggregate, do
not exceed $25,000,000;
(c) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock except,
(i) in the case of Blockbuster, the regular quarterly
dividend payable on or about April 1, 1994 in an amount not
to exceed $.025 per share of Blockbuster Common Stock, (ii)
in the case of Blockbuster, other regular quarterly
dividends in amounts not in excess of $.025 per share per
quarter and payable consistent with past practice, (iii) in
the case of Spelling, regular quarterly dividends of $.020
per share per quarter and payable consistent with past
practice and (iv) dividends declared and paid by a
subsidiary of either Blockbuster (other than Spelling) or
Viacom (each such dividend to be declared and paid in the
ordinary course of business consistent with past practice);
(d) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any
of its capital stock other than acquisitions by a dividend
reinvestment plan or by any Blockbuster Plan with an
employee stock fund or employee stock ownership plan
feature, consistent with applicable securities laws;
(e) (i) acquire (for cash or shares of stock)
(including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any corporation,
partnership, other business organization or any division
thereof or any assets, except for such acquisitions which,
individually, do not exceed $10,000,000 or which, in the
aggregate, do not exceed $25,000,000; (ii) incur any
indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as
an accommodation become responsible for, the obligations of
any person, or make any loans or advances, except (A)
indebtedness incurred by Viacom in connection with the
proposed acquisition by Viacom of Paramount and
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in connection with this Agreement and the transactions
contemplated hereby, (B) indebtedness incurred by
Blockbuster in connection with the performance of its
obligations under the Subscription Agreement, (C) the
refinancing of existing indebtedness, (D) in connection
with this Agreement and the transactions contemplated
hereby, borrowings under commercial paper programs in the
ordinary course of business, (E) borrowings under existing
bank lines of credit in the ordinary course of business,
(F) in the case of Blockbuster, indebtedness resulting from
the issuance of debt securities registered pursuant to the
Registration Statement on Form S-3, registration number
33-56154, or (G) indebtedness which, in the aggregate, does
not exceed $25,000,000; or (iii) enter into or amend any
contract, agreement, commitment or arrangement with respect
to any matter set forth in this Section 5.01(e);
(f) increase the compensation payable or to become
payable to its executive officers or employees, except for
increases in the ordinary course of business in accordance
with past practice, or grant any severance or termination
pay to, or enter into any employment or severance agreement
with any director or executive officer of it or any of its
subsidiaries, or establish, adopt, enter into or amend in
any material respect or take action to accelerate any
rights or benefits under any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, executive
officer or employee; or
(g) take any action, other than reasonable and usual
actions in the ordinary course of business and consistent
with past practice, with respect to accounting policies or
procedures.
ARTICLE VI
ADDITIONAL COVENANTS
SECTION 6.01. Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, each of
Blockbuster and Viacom shall (and shall cause its subsidiaries
and officers, directors, employees, auditors and agents to)
afford the officers, employees and agents of
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the other party (the "Respective Representatives") reasonable
access at all reasonable times to its officers, employees,
agents, properties, offices, plants and other facilities, books
and records, and shall furnish such Respective Representatives
with all financial, operating and other data and information as
may be reasonably requested.
(b) All information obtained by Blockbuster or Viacom
pursuant to this Section 6.01 shall be kept confidential in
accordance with the confidentiality agreement, dated July 1,
1993 (the "Confidentiality Agreement"), between Blockbuster and
Viacom.
(c) No investigation pursuant to this Section 6.01
shall affect any representation or warranty in this Agreement
of any party hereto or any condition to the obligations of the
parties hereto.
SECTION 6.02. Directors' and Officers'
Indemnification and Insurance. (a) The Certificate of
Incorporation and By-Laws of the Surviving Corporation shall
contain the provisions with respect to indemnification set
forth in the Certificate of Incorporation and By-Laws of Viacom
on the date of this Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of six
years after the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who at
any time prior to the Effective Time were directors or officers
of Blockbuster in respect of actions or omissions occurring at
or prior to the Effective Time (including, without limitation,
the transactions contemplated by this Agreement), unless such
modification is required by law.
(b) From and after the Effective Time, the Surviving
Corporation shall indemnify, defend and hold harmless the
present and former officers and directors of Blockbuster
(collectively, the "Indemnified Parties") against all losses,
expenses, claims, damages, liabilities or amounts that are paid
in settlement of, with the approval of the Surviving
Corporation (which approval shall not unreasonably be
withheld), or otherwise in connection with any claim, action,
suit, proceeding or investigation (a "Claim"), based in whole
or in part on the fact that such person is or was a director or
officer of Blockbuster and arising out of actions or omissions
occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement),
in each case to the full extent permitted under Delaware Law
(and shall pay expenses in advance of the final disposition of
any such action or proceeding to each Indemnified Party to the
fullest extent permitted under
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Delaware Law, upon receipt from the Indemnified Party to whom
expenses are advanced of the undertaking to repay such advances
contemplated by Section 145(e) of Delaware Law).
(c) Without limiting the foregoing, in the event any
Claim is brought against any Indemnified Party (whether arising
before or after the Effective Time) after the Effective Time
(i) the Indemnified Parties may retain Blockbuster's regularly
engaged independent legal counsel or other independent legal
counsel satisfactory to them, provided that such other counsel
shall be reasonably acceptable to the Surviving Corporation,
(ii) the Surviving Corporation shall pay all reasonable fees
and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received and (iii) the
Surviving Corporation will use its reasonable best efforts to
assist in the vigorous defense of any such matter, provided
that the Surviving Corporation shall not be liable for any
settlement of any Claim effected without its written consent,
which consent shall not be unreasonably withheld. Any
Indemnified Party wishing to claim indemnification under this
Section 6.02 upon learning of any such Claim shall notify the
Surviving Corporation (although the failure so to notify the
Surviving Corporation shall not relieve the Surviving
Corporation from any liability which the Surviving Corporation
may have under this Section 6.02, except to the extent such
failure materially prejudices the Surviving Corporation's
position with respect to such claim), and shall deliver to the
Surviving Corporation the undertaking contemplated by Section
145(e) of Delaware Law. The Indemnified Parties as a group may
retain no more than one law firm (in addition to local counsel)
to represent them with respect to each such matter unless there
is, under applicable standards of professional conduct (as
determined by counsel to the Indemnified Parties), a conflict
on any significant issue between the positions of any two or
more Indemnified Parties, in which event such additional
counsel as may be required may be retained by the Indemnified
Parties.
(d) For a period of three years after the Effective
Time, the Surviving Corporation shall cause to be maintained in
effect the current policies of directors' and officers'
liability insurance maintained by Blockbuster (provided that
the Surviving Corporation may substitute therefor policies of
at least the same coverage and amounts containing terms and
conditions which are no less advantageous to former officers
and directors of Blockbuster) with respect to claims arising
from facts or events which occurred before the Effective Time;
provided, however, that in no event shall the Surviving
Corporation be required to expend pursuant to this Section
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6.02(d) more than an amount equal to 200% of current annual
premiums paid by Blockbuster for such insurance (which premiums
Blockbuster represents and warrants to be $756,000 in the
aggregate).
(e) This Section 6.02 is intended to be for the
benefit of, and shall be enforceable by, the Indemnified
Parties, their heirs and personal representatives and shall be
binding on the Surviving Corporation and its respective
successors and assigns.
SECTION 6.03. Notification of Certain Matters.
Blockbuster shall give prompt notice to Viacom, and Viacom
shall give prompt notice to Blockbuster, of (i) the occurrence,
or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause (x) any
representation or warranty contained in this Agreement to be
untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with
or satisfied and (ii) any failure of Blockbuster or Viacom, as
the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice
pursuant to this Section 6.03 shall not limit or otherwise
affect the remedies available hereunder to the party receiving
such notice.
SECTION 6.04. Tax Treatment. Each of Blockbuster and
Viacom will use its reasonable best efforts to cause the Merger
to qualify as a reorganization under the provisions of Section
368(a) of the Code and to obtain the opinions of counsel
referred to in Sections 7.02(c) and 7.03(c).
SECTION 6.05. Registration Statement; Joint Proxy
Statement. (a) As promptly as practicable after the execution
of this Agreement, (i) Viacom and Blockbuster shall prepare and
file with the SEC a joint proxy statement relating to the
meetings of Blockbuster's stockholders and holders of Viacom
Class A Common Stock to be held in connection with the Merger
(together with any amendments thereof or supplements thereto,
the "Proxy Statement") and (ii) Viacom shall prepare and file
with the SEC a registration statement on Form S-4 (together
with all amendments thereto, the "Registration Statement") in
which the Proxy Statement shall be included as a prospectus, in
connection with the registration under the Securities Act of
the shares of Viacom Common Stock and the VCRs to be issued to
the stockholders of Blockbuster pursuant to the Merger. Each
of Blockbuster and Viacom shall use all reasonable efforts to
have or cause the Registration Statement to become
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effective as promptly as practicable, and shall take all or any
action required under any applicable federal or state
securities laws in connection with the issuance of shares of
Viacom Common Stock and VCRs pursuant to the Merger. Each of
Blockbuster and Viacom shall furnish all information concerning
itself to the other as the other may reasonably request in
connection with such actions and the preparation of the
Registration Statement and Proxy Statement. As promptly as
practicable after the Registration Statement shall have become
effective, each of Viacom and Blockbuster shall mail the Proxy
Statement to its respective stockholders. The Proxy Statement
shall include the recommendation of the Board of Directors of
each of Viacom and Blockbuster in favor of the Merger, unless
otherwise necessary due to the applicable fiduciary duties of
the respective directors of Viacom and Blockbuster, as
determined by such directors in good faith after consultation
with and based upon the advice of independent legal counsel
(who may be such party's regularly engaged independent legal
counsel).
(b) The information supplied by Viacom for inclusion
in the Registration Statement and the Proxy Statement shall
not, at (i) the time the Registration Statement is declared
effective, (ii) the time the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to the
stockholders of Viacom and Blockbuster, (iii) the time of each
of the Stockholders' Meetings (as defined in Section 6.06), and
(iv) the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein not misleading. If at any time prior to the Effective
Time any event or circumstance relating to Viacom or any of the
Viacom Subsidiaries, or their respective officers or directors,
should be discovered by Viacom which should be set forth in an
amendment or a supplement to the Registration Statement or
Proxy Statement, Viacom shall promptly inform Blockbuster.
(c) The information supplied by Blockbuster for
inclusion in the Registration Statement and the Proxy Statement
shall not, at (i) the time the Registration Statement is
declared effective, (ii) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the
stockholders of Blockbuster and Viacom, (iii) the time of each
of the Stockholders' Meetings, and (iv) the Effective Time,
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein not
misleading. If at any time prior to the Effective Time any
event or circumstance relating to
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Blockbuster or any of the Blockbuster Subsidiaries, or their
respective officers or directors, should be discovered by
Blockbuster which should be set forth in an amendment or a
supplement to the Registration Statement or Proxy Statement,
Blockbuster shall promptly inform Viacom.
(d) Viacom represents and warrants to Blockbuster
that the information supplied by and relating to Viacom for
inclusion in the Paramount Offer Documents (as defined below)
will not, at the time the Paramount Offer Documents are filed
with the SEC or are first published, sent or given to
stockholders of Paramount, as the case may be, contain any
untrue statement of a material fact or omit to state any
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 are made, not misleading. The
Paramount Offer Documents shall comply in all material respects
as to form with the requirements of the Exchange Act and the
rules and regulations thereunder.
(e) Blockbuster represents and warrants to Viacom
that the information supplied by and relating to Blockbuster
for inclusion in the Paramount Offer Documents will not, at the
time the Paramount Offer Documents are filed with the SEC or
are first published, sent or given to stockholders of
Paramount, as the case may be, contain any untrue statement of a
material fact or omit to state any 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 are made, not misleading.
(f) For the purposes of this Section 6.05, the term
"Paramount Offer Documents" shall mean the Tender Offer
Statement on Schedule 14D-1 relating to the tender offer by
Viacom for shares of common stock of Paramount, the offer to
purchase incorporated by reference therein and forms of the
related letter of transmittal and any related summary
advertisement, together with all supplements and amendments to
the foregoing.
SECTION 6.06. Stockholders' Meetings. Blockbuster
shall call and hold a meeting of its stockholders and Viacom
shall call and hold a meeting of the holders of the Viacom
Class A Common Stock (collectively, the "Stockholders'
Meetings") as promptly as practicable for the purpose of voting
upon the approval, in the case of Blockbuster, of the Merger
and, in the case of Viacom, of the Viacom Vote Matter, and
Viacom and Blockbuster shall use their reasonable best efforts
to hold the Stockholders' Meetings on the same day and as soon
as practicable after the date on which the
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Registration Statement becomes effective. Blockbuster shall
use its reasonable best efforts to solicit from its
stockholders proxies in favor of the approval of the Merger,
and shall take all other action necessary or advisable to
secure the vote or consent of stockholders required by Delaware
Law to obtain such approvals, unless otherwise necessary under
the applicable fiduciary duties of the respective directors of
Blockbuster, as determined by such directors in good faith
after consultation with and based upon the advice of
independent legal counsel (who may be such party's regularly
engaged independent legal counsel).
SECTION 6.07. Letters of Accountants. (a)
Blockbuster shall use its reasonable best efforts to cause to
be delivered to Viacom "comfort" letters of Arthur Andersen,
Blockbuster's independent public accountants, dated and
delivered the date on which the Registration Statement shall
become effective and as of the Effective Time, and addressed to
Viacom, in form and substance reasonably satisfactory to Viacom
and reasonably customary in scope and substance for letters
delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
(b) Viacom shall use its reasonable best efforts to
cause to be delivered to Blockbuster "comfort" letters of Price
Waterhouse, Viacom's independent public accountants, dated the
date on which the Registration Statement shall become effective
and as of the Effective Time, and addressed to Blockbuster, in
form and substance reasonably satisfactory to Blockbuster and
reasonably customary in scope and substance for letters
delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
SECTION 6.08. [Intentionally Deleted]
SECTION 6.09. Further Action; Reasonable Best
Efforts. (a) Upon the terms and subject to the conditions
hereof, each of the parties hereto shall (i) make promptly its
respective filings, and thereafter make any other required
submissions under the HSR Act with respect to the transactions
contemplated herein, (ii) make promptly filings with or
applications to the Federal Communications Commission (the
"FCC") with respect to the transactions contemplated herein, if
required and (iii) use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause
to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make
effective the transactions contemplated herein,
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including, without limitation, using its reasonable best
efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental
Entities and parties to contracts with Viacom and Blockbuster
and their respective subsidiaries as are necessary for the
consummation of the transactions contemplated herein. In case
at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to
this Agreement shall use their reasonable best efforts to take
all such action.
(b) Each party shall use its best efforts not to take
any action, or enter into any transaction, which would cause
any of its representations or warranties contained in this
Agreement to be untrue or result in a breach of any covenant
made by it in this Agreement.
SECTION 6.10. Debt Instruments. Prior to or at the
Effective Time, Blockbuster and each Blockbuster Subsidiary
shall use its reasonable best efforts to prevent the
occurrence, as a result of the Merger and the other
transactions contemplated by this Agreement, of a change in
control or any event which constitutes a default (or an event
which with notice or lapse of time or both would become a
default) under any debt instrument of Blockbuster or any
Blockbuster Subsidiary, including, without limitation, debt
securities registered under the Securities Act.
SECTION 6.11. Public Announcements. Viacom and
Blockbuster shall consult with each other before issuing any
press release or otherwise making any public statements with
respect to this Agreement or any transaction contemplated
herein and shall not issue any such press release or make any
such public statement without the prior consent of the other
party, which shall not be unreasonably withheld; provided,
however, that a party may, without the prior consent of the
other party, issue such press release or make such public
statement as may be required by law or any listing agreement
with a national securities exchange to which Viacom or
Blockbuster is a party if it has used all reasonable efforts to
consult with the other party and to obtain such party's consent
but has been unable to do so in a timely manner.
SECTION 6.12. Listing of Shares of Viacom Common
Stock and VCRs. Viacom shall use its reasonable best efforts
to cause the shares of Viacom Common Stock and the VCRs to be
issued in the Merger to be approved for listing on the AMEX
prior to the Effective Time.
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SECTION 6.13. Affiliates of Blockbuster.
(a) Within 30 days after the date of this Agreement, (a)
Blockbuster shall deliver to Viacom a letter identifying all
persons who may be deemed affiliates of Blockbuster under Rule
145 of the Securities Act ("Rule 145"), including, without
limitation, all directors and executive officers of Blockbuster
and (b) Blockbuster shall advise the persons identified in such
letter of the resale restrictions imposed by applicable
securities laws. Blockbuster shall use its reasonable best
efforts to obtain as soon as practicable from any person who
may be deemed to have become an affiliate of Blockbuster after
Blockbuster's delivery of the letter referred to above and
prior to the Effective Time, a written agreement substantially
in the form of Exhibit 6.13.
(b) If any stockholder of Blockbuster who is identified by
Blockbuster as an affiliate of Blockbuster in accordance with
paragraph (a) of this Section 6.13 reasonably determines that
such stockholder will not be eligible to sell all of the shares
(the "Stockholder Shares") of Viacom Common Stock received by
such stockholder in the Merger pursuant to Rule 145(d)(1) in
the three month period immediately following the Effective
Time, Viacom agrees, if requested by such stockholder, to
either, at Viacom's option, (i) take such actions reasonably
necessary to register the Stockholder Shares for resale
pursuant to the Registration Statement or (ii) promptly after
the Effective Time, register the Stockholder Shares pursuant to
a registration statement on Form S-3. Viacom shall maintain
the effectiveness of any such registration statement (subject
to Viacom's right to convert to a Form S-3 registration from
the Registrtion Statement at any time) until such time as
Viacom reasonably determines that such stockholder will be
eligible to sell all of the Stockholder Shares then owned by
the Stockholder pursuant to Rule 145(d)(1) in the three month
period immediately following the termination of the
effectiveness of the applicable registration statement.
Viacom's obligations contained in this paragraph (b) shall
terminate on the second anniversary of the Effective Time.
SECTION 6.14. Conveyance Taxes. Viacom and
Blockbuster shall cooperate in the preparation, execution and
filing of all returns, questionnaires, applications, or other
documents regarding any real property transfer or gains, sales,
use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any
similar taxes which become payable in connection with the
transactions contemplated hereby that are required or permitted
to be filed on or before the Effective Time.
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SECTION 6.15. Assumption of Debt and Leases. With
respect to debt issued by Blockbuster under indentures
qualified under the Trust Indenture Act of 1939 ("Indentures"),
Viacom shall execute and deliver to the trustees, under the
respective Indentures, Supplemental Indentures, in form
satisfactory to the respective trustees, expressly assuming the
obligations of Blockbuster with respect to the due and punctual
payment of the principal of (and premium, if any) and interest,
if any, on all debt securities issued by Blockbuster under the
respective Indentures and the due and punctual performance of
all the terms, covenants and conditions of the respective
Indentures to be kept or performed by Blockbuster, and shall
deliver such Supplemental Indentures to the respective trustees
under the Indenture. Viacom shall similarly deliver
instruments of assumption to the holders of any debt
obligations of, holders of warrants of, and the lessors of any
real property to, Blockbuster, which debt obligations, warrants
or leases expressly require such assumption in order for the
Merger to comply with the debt instrument, warrant or lease.
SECTION 6.16. Transactions with Significant
Stockholder After the Effective Time. From and after the
Effective Time and until the tenth anniversary of the Effective
Time, the Surviving Corporation shall not enter into any
agreement with any stockholder (the "Significant Stockholder")
who beneficially owns more than 35% of the then outstanding
securities entitled to vote at a meeting of the stockholders of
Viacom that would constitute a Rule 13e-3 (as such rule is in
effect today) transaction under the Exchange Act with respect
to any class of common stock of Viacom (any such transaction
being a "Going Private Transaction"), unless Viacom provides in
any agreement pursuant to which such Going Private Transaction
shall be effected that, as a condition to the consummation of
such Going Private Transaction, (a) the holders of a majority
of the shares not beneficially owned by the Significant
Stockholder that are voted and present (whether in person or by
proxy) at the meeting of stockholders called to vote on such
Going Private Transaction shall have voted in favor thereof and
(b) a special committee (the "Special Committee") of the Board
of Directors of Viacom comprised solely of the independent
directors of Viacom shall have (i) approved the terms and
conditions of the Going Private Transaction and shall have
recommended that the stockholders vote in favor thereof and
(ii) received from its financial advisor a written opinion
addressed to the Special Committee, for inclusion in the proxy
statement to be delivered to the stockholders, and dated the
date thereof, substantially to the effect that the
consideration to be received by the stockholders (other than
the majority
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stockholder) in the Going Private Transaction is fair to them
from a financial point of view. Notwithstanding anything to
the contrary in this Section 6.16, the restrictions contained
in this Section 6.16 shall not apply to any Significant
Stockholder if there exists another stockholder who
beneficially owns a greater percentage of outstanding
securities entitled to vote at the meeting than the Significant
Stockholder.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party
to Effect the Merger. The respective obligations of each party
to effect the Merger and the other transactions contemplated
herein shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions, any or all of which
may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) Effectiveness of the Registration Statement. The
Registration Statement shall have been declared effective
by the SEC under the Securities Act. No stop order
suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for
that purpose shall have been initiated or, to the knowledge
of Viacom or Blockbuster, threatened by the SEC.
(b) Stockholder Approval. This Agreement and the
Merger shall have been approved and adopted by the
requisite vote of the stockholders of Blockbuster and the
Viacom Vote Matter shall have been approved and adopted by
the requisite vote of the holders of Viacom Class A Common
Stock.
(c) No Order. No Governmental Entity or federal or
state court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which
is in effect and which materially restricts, prevents or
prohibits consummation of the Merger or any transaction
contemplated by this Agreement; provided, however, that the
parties shall use their reasonable best efforts to cause
any such decree, judgment, injunction or other order to be
vacated or lifted.
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(d) HSR Act. The applicable waiting period under the
HSR Act shall have expired or been terminated.
(e) Approvals. Other than the filing of merger
documents in accordance with Delaware Law, all
authorizations, consents, waivers, orders or approvals
required to be obtained, and all filings, notices or
declarations required to be made, by Viacom and Blockbuster
prior to the consummation of the Merger and the
transactions contemplated hereunder shall have been
obtained from, and made with, all required Governmental
Entities except for such authorizations, consents, waivers,
orders, approvals, filings, notices or declarations the
failure to obtain or make which would not have a material
adverse effect, at or after the Effective Time, on the
financial condition (as existing immediately prior to the
consummation of the Merger) of (i) Blockbuster and the
Blockbuster Subsidiaries, taken as a whole, or (ii) Viacom
and the Viacom Subsidiaries, taken as a whole.
SECTION 7.02. Additional Conditions to Obligations of
Viacom. The obligations of Viacom to effect the Merger and the
transactions contemplated herein are also subject to the
following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Blockbuster contained in
this Agreement (including, without limitation,
Section 6.05), without giving effect to any notification to
Viacom delivered pursuant to Section 6.03, shall be true
and correct as of the Effective Time as though made on and
as of the Effective Time, except (i) for changes
specifically permitted by this Agreement and (ii) that
those representations and warranties which address matters
only as of a particular date shall remain true and correct
as of such date, except in any case for such failures to be
true and correct which would not, individually or in the
aggregate, have a Blockbuster Material Adverse Effect.
Viacom shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of
Blockbuster to such effect.
(b) Agreement and Covenants. Blockbuster shall have
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the
Effective Time. Viacom shall have received a certificate
of the Chief Executive Officer and Chief Financial Officer
of Blockbuster to that effect.
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(c) Tax Opinion. Viacom shall have received the
opinion of Shearman & Sterling, dated on or about the date
that is two business days prior to the date the Proxy
Statement is first mailed to stockholders of Viacom and
Blockbuster, to the effect that the Merger will be treated
for federal income tax purposes as a reorganization
qualifying under the provisions of Section 368(a) of the
Code, which opinion shall not have been withdrawn or
modified in any material respect. The issuance of such
opinion shall be conditioned on the receipt of
representation letters from each of Viacom, Blockbuster,
and certain stockholders of Blockbuster. The specific
provisions of each such representation letter shall be in
form and substance satisfactory to each of Shearman & Sterling and Skadden, Arps, Slate, Meagher & Flom, and each
such representation letter shall be dated on or before the
date of such opinion and shall not have been withdrawn or
modified in any material respect.
SECTION 7.03. Additional Conditions to Obligations of
Blockbuster. The obligation of Blockbuster to effect the
Merger and the other transactions contemplated in this
Agreement are also subject to the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Viacom contained in this
Agreement (including, without limitation, Section 6.05),
without giving effect to any notification made by Viacom to
Blockbuster pursuant to Section 6.03, shall be true and
correct as of the Effective Time, as though made on and as
of the Effective Time, except (i) for changes specifically
permitted by this Agreement and (ii) that those
representations and warranties which address matters only
as of a particular date shall remain true and correct as of
such date, except in any case for such failures to be true
and correct that would not, individually or in the
aggregate, have a Viacom Material Adverse Effect.
Blockbuster shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of Viacom to
such effect.
(b) Agreements and Covenants. Viacom shall have
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the
Effective Time. Blockbuster shall have received a
certificate of the Chief Executive Officer and Chief
Financial Officer of Viacom to that effect.
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(c) Tax Opinion. Blockbuster shall have received the
opinion of Skadden, Arps, Slate, Meagher & Flom, dated on
or about the date that is two business days prior to the
date the Proxy Statement is first mailed to stockholders of
Viacom and Blockbuster, to the effect that the Merger will
be treated for federal income tax purposes as a
reorganization qualifying under the provisions of
Section 368(a) of the Code, which opinion shall not have
been withdrawn or modified in any material respect. The
issuance of such opinion shall be conditioned on the
receipt of representation letters from each of Viacom,
Blockbuster, and certain stockholders of Blockbuster. The
specific provisions of each such representation letter
shall be in form and substance satisfactory to each of
Shearman & Sterling and Skadden, Arps, Slate, Meagher & Flom, and each such representation letter shall be dated on
or before the date of such opinion and shall not have been
withdrawn or modified in any material respect.
(d) Amendments to Viacom's Certificate of
Incorporation. Viacom shall have filed with the Secretary
of State of the State of Delaware a Certificate of
Amendment to Viacom's Certificate of Incorporation pursuant
to which the Viacom Certificate Amendments shall have
become effective.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether
before or after approval of this Agreement and the Merger by
the stockholders of Blockbuster or the approval by the
stockholders of Viacom of the issuance of the shares of Viacom
Common Stock in accordance with Article II:
(a) by mutual consent of Blockbuster and Viacom;
(b) by Viacom, upon a breach of any representation,
warranty, covenant or agreement on the part of Blockbuster
set forth in this Agreement, or if any representation or
warranty of Blockbuster shall have become untrue, in either
case such that the conditions set forth in Section 7.02(a)
or Section 7.02(b), as the case may be, would be incapable
of being satisfied by September 30, 1994 (or as otherwise
extended); provided
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that, in any case, a wilful breach shall be deemed to cause
such conditions to be incapable of being satisfied for
purposes of this Section 8.01(b);
(c) by Blockbuster, upon a breach of any
representation, warranty, covenant or agreement on the part
of Viacom set forth in this Agreement, or if any
representation or warranty of Viacom shall have become
untrue, in either case such that the conditions set forth
in Section 7.03(a) or Section 7.03(b), as the case may be,
would be incapable of being satisfied by September 30, 1994
(or as otherwise extended); provided that, in any case, a
wilful breach shall be deemed to cause such conditions to
be incapable of being satisfied for purposes of this
Section 8.01(c);
(d) by either Viacom or Blockbuster, if any permanent
injunction or action by any Governmental Entity preventing
the consummation of the Merger shall have become final and
nonappealable;
(e) by either Viacom or Blockbuster, if the Merger
shall not have been consummated before September 30, 1994;
provided, however, that this Agreement may be extended by
written notice of either Viacom or Blockbuster to a date
not later than November 30, 1994, if the Merger shall not
have been consummated as a direct result of Viacom or
Blockbuster having failed, by September 30, 1994, to
receive all required regulatory approvals or consents with
respect to the Merger;
(f) by either Viacom or Blockbuster, if this
Agreement and the Merger shall fail to receive the
requisite vote for approval and adoption by the
stockholders of Blockbuster or, with respect to Blockbuster
only, Viacom at the Stockholders' Meetings;
(g) by Viacom, if (i) the Board of Directors of
Blockbuster shall withdraw, modify or change its
recommendation of this Agreement or the Merger in a manner
adverse to Viacom or shall have resolved to do any of the
foregoing; (ii) the Board of Directors of Blockbuster shall
have recommended to the shareholders of Blockbuster a
Competing Transaction (as defined below); (iii) a tender
offer or exchange offer for 25% or more of the outstanding
shares of capital stock of Blockbuster is commenced, and
the Board of Directors of Blockbuster recommends that the
stockholders of Blockbuster tender their shares in such
tender or exchange offer; or (iv) any person shall have
acquired beneficial ownership
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or the right to acquire beneficial ownership of or any
"group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations promulgated
thereunder) shall have been formed which beneficially owns,
or has the right to acquire beneficial ownership of, more
than 25% of the then outstanding shares of capital stock of
Blockbuster; and
(h) by Blockbuster, if the Board of Directors of
Blockbuster (x) fails to make or withdraws or modifies its
recommendation referred to in Section 6.05(a) if there
exists at such time a tender offer or exchange offer or a
proposal by a third party to acquire Blockbuster pursuant
to a merger, consolidation, share exchange, business
combination, tender or exchange offer or other similar
transaction or (y) recommends to Blockbuster's stockholders
approval or acceptance of any of the foregoing, in each
case only if the Board of Directors of Blockbuster, after
consultation with and based upon the advice of independent
legal counsel (who may be such party's regularly engaged
independent legal counsel), determines in good faith that
such action is necessary for the Board of Directors of
Blockbuster to comply with its fiduciary duties to
stockholders under applicable law.
The right of any party hereto to terminate this
Agreement pursuant to this Section 8.01 shall remain operative
and in full force and effect regardless of any investigation
made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers
or directors, whether prior to or after the execution of this
Agreement. For purposes of this Agreement, "Competing
Transaction" shall mean any of the following (other than the
transactions contemplated under the Agreement) involving a
party hereto or any of its subsidiaries: (i) any merger,
consolidation, share exchange, business combination, or other
similar transaction; (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 25% or more of the
assets of such party and its subsidiaries, taken as a whole, in
a single transaction or series of transactions; (iii) any
tender offer or exchange offer for 25% or more of the
outstanding shares of capital stock of such party or the filing
of a registration statement under the Securities Act in
connection therewith; (iv) any person having acquired
beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) having been formed which beneficially
owns or has the right to acquire
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beneficial ownership of, 25% or more of the then outstanding
shares of capital stock of such party; or (v) any public
announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
SECTION 8.02. Effect of Termination. Except as
provided in Section 8.05 or Section 9.01, in the event of the
termination of this Agreement pursuant to Section 8.01, this
Agreement shall forthwith become void, there shall be no
liability on the part of Blockbuster or Viacom or any of their
respective officers or directors to the other and all rights
and obligations of any party hereto shall cease; provided,
however, that nothing herein shall relieve any party from
liability for the wilful breach of any of its representations,
warranties, covenants or agreements set forth in this
Agreement.
SECTION 8.03. Amendment. This Agreement may be
amended by the parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to
the Effective Time; provided, however, that, after approval of
the Merger by the stockholders of Blockbuster or Viacom, no
amendment, which under applicable law may not be made without
the approval of the stockholders of Blockbuster or Viacom, may
be made without such approval. This Agreement may not be
amended except by an instrument in writing signed by the
parties hereto.
SECTION 8.04. Waiver. At any time prior to the
Effective Time, either party hereto may (a) extend the time for
the performance of any of the obligations or other acts of the
other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and
(c) waive compliance by the other party with any of the
agreements or conditions contained herein. Any such extension
or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
SECTION 8.05. Fees, Expenses and Other Payments. (a)
Subject to paragraph (b) of this Section 8.05, all
out-of-pocket costs and expenses, including, without
limitation, fees and disbursements of counsel, financial
advisors and accountants, incurred by the parties hereto shall
be borne solely and entirely by the party which has incurred
such costs and expenses (with respect to such party, its
"Expenses"); provided, however, that all costs and expenses
related to printing, filing and mailing the
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55
Registration Statement and the Proxy Statement and all SEC and
other regulatory filing fees incurred in connection with the
Registration Statement and the Proxy Statement shall be borne
equally by Blockbuster and Viacom.
(b) Blockbuster agrees that if this Agreement shall
be terminated pursuant to (i) Section 8.01(b); (ii)
Section 8.01(f) because this Agreement and the Merger shall
fail to receive the requisite vote for approval and adoption by
the stockholders of Blockbuster at the meeting of stockholders
of Blockbuster called to vote thereon and at the time of such
meeting there shall exist a Competing Transaction; or (iii)
Section 8.01(g)(i), (ii) or (iii) or Section 8.01(h) and at the
time of such termination there shall exist a Competing
Transaction and the terms of such Competing Transaction provide
that Blockbuster's stockholders shall receive consideration
having a higher per share value than the consideration per
share payable to Blockbuster's stockholders under this
Agreement then in any such event Blockbuster shall pay to
Viacom an amount equal to Viacom's Expenses; provided, however,
that in no event shall Blockbuster be obligated to pay any of
Viacom's Expenses exceeding $50,000,000. For purposes of this
Section 8.05(b), the per share value of the consideration
payable to the Blockbuster stockholders under this Agreement
and under the terms of the Competing Transaction shall be the
blended weighted average price per share determined as of the
close of business on the business day prior to the date this
Agreement is terminated.
(c) Any payment required to be made pursuant to
Section 8.05(b) shall be made as promptly as practicable but
not later than five business days after the delivery by Viacom
to Blockbuster of a statement setting forth any of Viacom's
Expenses in reasonable detail and shall be made by wire
transfer of immediately available funds to an account
designated by Viacom.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations,
Warranties and Agreements. (a) Except as set forth in
Section 9.01(b), the representations, warranties and agreements
of each party hereto shall remain operative and in full force
and effect, regardless of any investigation made by or on
behalf of any other party hereto, any person controlling any
such party or any of their officers or
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56
directors, whether prior to or after the execution of this
Agreement.
(b) The representations, warranties and agreements in
this Agreement shall terminate at the Effective Time or upon
the termination of this Agreement pursuant to Article VIII;
except that the agreements set forth in Articles I, II and IX
and Sections 6.02 and 6.16 shall survive the Effective Time and
those set forth in Sections 6.01(b), 8.02 and 8.05 and Article
IX hereof shall survive termination.
(c) Notwithstanding anything to the contrary in this
Agreement, no action taken by Viacom in connection with the
acquisition of Paramount, or effect thereof, shall cause any
breach of a representation, warranty or covenant under this
Agreement.
SECTION 9.02. Notices. All notices and other
communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made as
of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by
registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the
facsimile numbers specified below:
(a) If to Viacom:
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, NY 10022
Attention: Stephen R. Volk, Esq.
Facsimile No.: (212) 848-7179
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(b) If to Blockbuster:
Blockbuster Entertainment
Corporation
One Blockbuster Plaza
Fort Lauderdale, Florida 33301-1860
Attention: Vice President,
General Counsel and Secretary
Facsimile No.: (305) 852-3939
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Roger S. Aaron, Esq.
Facsimile No.: (212) 735-2001
SECTION 9.03. Certain Definitions. For purposes of
this Agreement, the term:
(a) "affiliate" means a person that, directly or
indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, the
first mentioned person;
(b) "beneficial owner", with respect to any shares of
Blockbuster Common Stock, means, unless otherwise defined
herein, a person who shall be deemed to be the beneficial
owner of such shares (i) which such person or any of its
affiliates or associates (as such term is defined in Rule
12b-2 promulgated under the Exchange Act) beneficially
owns, directly or indirectly, (ii) which such person or any
of its affiliates or associates has, directly or
indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or
understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise or (B)
the right to vote pursuant to any agreement, arrangement or
understanding or (iii) which are beneficially owned,
directly or indirectly, by any other persons with whom such
person or any of its
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58
affiliates or associates, or any person with whom such
person or any of its affiliates or associates has any
agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares;
(c) "business day" means any day other than a day on
which (i) banks in the State of New York are authorized or
obligated to be closed or (ii) the New York Stock Exchange
is closed;
(d) "control" (including the terms "controlled",
"controlled by" and "under common control with") means the
possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of
the management or policies of a person, whether through the
ownership of stock or as trustee or executor, by contract
or credit arrangement or otherwise; and
(e) "subsidiary" or "subsidiaries" of Blockbuster,
Viacom, the Surviving Corporation or any other person means
any corporation, partnership, joint venture or other legal
entity of which Blockbuster, Viacom, the Surviving
Corporation or such other person, as the case may be
(either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of
the stock or other equity interests, the holders of which
are generally entitled to vote for the election of the
board of directors or other governing body of such
corporation or other legal entity.
SECTION 9.04. Headings. The headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
SECTION 9.05. Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in
an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
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SECTION 9.06. Entire Agreement. This Agreement
(together with the Exhibit, the Blockbuster Disclosure
Schedule, the Viacom Disclosure Schedule and the other
documents delivered pursuant hereto) and the Confidentiality
Agreement constitute the entire agreement of the parties and
supersede all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to
the subject matter hereof.
SECTION 9.07. Assignment. This Agreement shall not
be assigned by operation of law or otherwise.
SECTION 9.08. Parties in Interest. This Agreement
shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied
(other than the provisions of Section 6.02 and 6.16), is
intended to or shall confer upon any person any right, benefit
or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 9.09. Governing Law. Except to the extent
that Delaware Law is mandatorily applicable to the Merger and
the rights of the stockholders of Blockbuster and Viacom, this
Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, regardless of the laws
that might otherwise govern under applicable principles of
conflicts of law.
SECTION 9.10. Counterparts. This Agreement may be
executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
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60
IN WITNESS WHEREOF, Viacom and Blockbuster have caused
this Agreement to be executed as of the date first written
above by their respective officers thereunto duly authorized.
ATTEST: VIACOM INC.
By By
Name: Name:
Title: Title:
ATTEST: BLOCKBUSTER ENTERTAINMENT
CORPORATION
By By
Name: Name:
Title: Title:
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61
ANNEX A
VARIABLE COMMON RIGHTS ("VCRs")
Term Sheet
Issuer: Viacom, Inc.
No. of VCRs to
be issued: One VCR per Blockbuster Share
issued and outstanding at the time
of the Merger, including
Blockbuster Shares subject to
outstanding employee stock
options.
Maturity: First anniversary of Merger.
Trading/Listing: VCRs will be certificated and
trade separately from Viacom
Common Shares. Viacom will use
best efforts to list VCRs on AMEX
or such other exchange on which
its shares are then listed.
Payout: In the ninety trading day period
immediately preceding Maturity
(the "Valuation Period"), a value
for Viacom B Common Shares ("B
Share Value") will be determined.
The B Share Value will equal the
average closing price on the AMEX
(or such other exchange on which
such shares are then listed) for a
Viacom B Common Share during any
30 consecutive trading days in the
Valuation Period which yield the
highest such average closing
price.
Subject to the dilution protection
mentioned below, each VCR will
represent a fraction of one Viacom
B Common Share, such fraction to
be determined based upon the B
Share Value, as set forth below:
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B Share Value Value of VCR*
$0 to $35.99 .13829
$36 to $40 30 - .32 - .08 - .60615
B Share Value
$40.01 to $47.99 .05929
$48 to $52 36 - .32 - .08 - .60615
B Share Value
$52.01 and above 0
Maximum Payout: .13829 of one Viacom B Common Share.
Minimum Payout: 0
General Market Adjustment: The dollar amounts set forth in the
table above under "B Share Value" will
be reduced by a percentage equal to any
percentage decline in excess of 25% in
the S&P 400 Index from the Merger to
Maturity.
Limitation on Payout: Notwithstanding the table above, if at
any time during the period from the
Merger to Maturity the average closing
price for a Viacom B Common Share on
AMEX (or such other exchange on which
such shares are then listed) for any 30
consecutive trading days is:
(a) above $40, then the maximum payout,
if any, for each VCR will equal .05929
of one Viacom B Common Share; or
(b) above $52, then the VCRs will have
no value and will automatically
terminate.
* Expressed as a fraction of one Viacom B Common Share
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Dilution Protection The number of Viacom B Shares
represented by each VCR will be
adjusted to appropriately reflect
any distribution or dividend paid
in Viacom B Shares and any
combination, split or
reclassification of Viacom B
Shares.
Determination of For purposes of determining any
Trading Period period of consecutive trading
days, trading days shall not be
included if, (i) during the
first month following the
Effective Time, fewer than
400,000 shares of Viacom B
Shares trade, (ii) during the
second month following the
Effective Time, fewer than
300,000 shares of Viacom B
Shares trade, (iii) during the
third month following the
Effective Time, fewer than
250,000 shares of Viacom B
Shares trade and (iv) from and
after the first day of the
fourth month following the
Effective Time, fewer than
200,000 shares of Viacom B
Shares trade.
Neither Viacom Inc., National
Amusements Inc. nor any of
their affiliates shall trade
in Viacom B Shares during
the period from the
Merger to Maturity, except for
benefit plan purposes.
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EXHIBIT 6.13
FORM OF AFFILIATE LETTER
Viacom Inc.
1515 Broadway
New York, New York 10036
Gentlemen:
I have been advised that as of the date of this letter
I may be deemed to be an "affiliate" of Blockbuster
Entertainment Corporation, a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933,
as amended (the "Act"). Pursuant to the terms of the Agreement
and Plan of Merger dated as of January 7, 1994 (the
"Agreement"), between Viacom Inc., a Delaware corporation
("Viacom"), and the Company, the Company will be merged with
and into Viacom (the "Merger").
As a result of the Merger, I may receive (A) shares of
(i) Class A Common Stock, par value $.01 per share, of Viacom
(the "Viacom Class A Common Stock") and (ii) Class B Common
Stock, par value $.01 per share, of Viacom (the "Viacom Class B
Common Stock"; and, together with the Viacom Class A Common
Stock, the "Viacom Common Stock") and (B) VCRs (as defined in
the Agreement) (the VCRs, together with the Viacom Common
Stock, being the "Viacom Securities"). I would receive such
Viacom Securities in exchange for, respectively, shares (or
options for shares) owned by me of common stock, par value $.10
per share, of the Company (the "Company Common Stock").
I represent, warrant and covenant to Viacom that in
the event I receive any Viacom Securities as a result of the
Merger:
A. I shall not make any sale, transfer or other
disposition of the Viacom Securities in violation of the
Act or the Rules and Regulations.
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2
B. I have carefully read this letter and the
Agreement and discussed the requirements of such documents
and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of Viacom Common Stock to the
extent I felt necessary, with my counsel or counsel for the
Company.
C. I have been advised that the issuance of Viacom
Securities to me pursuant to the Merger has been registered
with the Commission under the Act on a Registration
Statement Form S-4. However, I have also been advised
that, because at the time the Merger is submitted for a
vote of the stockholders of the Company, (a) I may be
deemed to be an affiliate of the Company and (b) the
distribution by me of the Viacom Securities has not been
registered under the Act, I may not sell, transfer or
otherwise dispose of Viacom Securities issued to me in the
Merger unless (i) such sale, transfer or other disposition
is made in conformity with the volume and other limitations
of Rule 145 promulgated by the Commission under the Act,
(ii) such sale, transfer or other disposition has been
registered under the Act or (iii) in the opinion of counsel
reasonably acceptable to Viacom, such sale, transfer or
other disposition is otherwise exempt from registration
under the Act.
D. I understand that Viacom is under no obligation to
register the sale, transfer or other disposition of the
Viacom Securities by me or on my behalf under the Act or to
take any other action necessary in order to make compliance
with an exemption from such registration available solely
as a result of the Merger.
E. I also understand that there will be placed on the
certificates for the Viacom Securities issued to me, or any
substitutions therefor, a legend stating in substance:
"THE [SHARES] [RIGHTS] REPRESENTED BY THIS CERTIFICATE
WERE ISSUED IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE [SHARES] [RIGHTS] REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS
OF AN AGREEMENT
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66
3
DATED , 1994 BETWEEN THE REGISTERED HOLDER HEREOF
AND VIACOM INC., A COPY OF WHICH AGREEMENT IS ON FILE AT
THE PRINCIPAL OFFICES OF VIACOM INC."
F. I also understand that unless a sale or transfer
is made in conformity with the provisions of Rule 145, or
pursuant to a registration statement, Viacom reserves the
right to put the following legend on the certificates
issued to my transferee:
"THE [SHARES] [RIGHTS] REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH
SHARES IN A TRANSACTIONTO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
[SHARES] [RIGHTS] HAVE BEEN ACQUIRED BY THE HOLDER NOT
WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth
in paragraphs E and F above shall be removed by delivery of
substitute certificates without such legend if the undersigned
shall have delivered to Viacom a copy of a letter from the
staff of the Commission, or an opinion of counsel reasonably
satisfactory to Viacom, in form and substance reasonably
satisfactory to Viacom, to the effect that such legend is not
required for purposes of the Act.
Execution of this letter should not be considered an
admission on my part that I am an "affiliate" of the Company as
described in the first paragraph of this letter, nor as a
waiver of any rights I may have to object to any claim that I
am such an affiliate on or after the date of this letter.
Very truly yours,
Name:
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67
4
Accepted this day of
, 1994, by
VIACOM INC.
By
Name:
Title:
68
Index of Defined Terms
Section
affiliate SECTION 9.03
Agreement PREAMBLE
AMEX SECTION 2.02
beneficial owner SECTION 9.03
Blockbuster PREAMBLE
Blockbuster Common Stock SECTION 2.01
Blockbuster Disclosure Schedule SECTION 3.03
Blockbuster Material Adverse Effect SECTION 3.01
Blockbuster 1992 Balance Sheet SECTION 3.12
Blockbuster Plans SECTION 3.10
Blockbuster Preferred Stock SECTION 3.03
Blockbuster SEC Reports SECTION 3.07
Blue Sky Laws SECTION 3.05
Blockbuster Stock Option SECTION 3.03
Blockbuster Subsidiary SECTION 3.01
business day SECTION 9.03
Certificate of Merger SECTION 1.03
Certificates SECTION 2.02
Class A Exchange Ratio SECTION 2.01
Class B Exchange Ratio SECTION 2.01
Code RECITALS
Communications Act SECTION 3.05
Competing Transaction SECTION 8.01
Confidentiality Agreements SECTION 6.01
control SECTION 9.03
Delaware Law RECITALS
Dissenting Shares SECTION 2.05
Effective Time SECTION 1.03
ERISA SECTION 3.10
Exchange Act SECTION 3.05
Exchange Agent SECTION 2.02
Exchange Fund SECTION 2.02
Exchange Ratios SECTION 2.01
FCC SECTION 6.09
Governmental Entity SECTION 3.05
HSR Act SECTION 3.05
IRS SECTION 3.10
Material Blockbuster Subsidiary SECTION 3.01
Material Viacom Subsidiary SECTION 4.01
Merger RECITALS
Merger Consideration SECTION 2.02
69
Index of Defined Terms (cont'd)
Section
Merrill Lynch SECTION 3.13
Parent Voting Agreement RECITALS
Paramount SECTION 5.01
Paramount Offer Documents SECTION 6.05
Proxy Statement SECTION 6.05
Registration Statement SECTION 6.05
Respective Representatives SECTION 6.01
SEC SECTION 3.01
Securities Act SECTION 3.05
Smith Barney SECTION 4.13
Spelling SECTION 3.07
Stockholders' Meetings SECTION 6.06
subsidiary SECTION 9.03
Surviving Corporation SECTION 1.01
VCRs SECTION 2.01
VCR Exchange Ratio SECTION 2.01
Viacom PREAMBLE
Viacom Certificate Amendments SECTION 4.04
Viacom Class A Common Stock RECITALS
Viacom Class B Common Stock SECTION 2.01
Viacom Common Stock SECTION 2.01
Viacom Disclosure Schedule SECTION 4.03
Viacom International SECTION 4.07
Viacom Material Adverse Effect SECTION 4.01
Viacom 1992 Balance Sheet SECTION 4.12
Viacom Plans SECTION 4.10
Viacom Preferred Stock SECTION 4.03
Viacom SEC Reports SECTION 4.07
Viacom Subsidiary SECTION 4.01
Viacom Vote Matter SECTION 4.04
WARN SECTION 3.10
Agreement and Plan of Merger - Viacom Inc. and Blockbuster Entertainment Corp.
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