Exhibit 99.(c)
BLOCKBUSTER ENTERTAINMENT LOGO
VIA TELECOPIER
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(000) 000-0000
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April 17, 1995
Discovery Zone, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
Gentlemen:
This letter sets forth our agreement with respect to the purchase
from Blockbuster Family Fun, Inc., a Delaware corporation (the "Seller"),
of certain assets, properties and businesses of the Seller by Discovery
Zone, Inc., a Delaware corporation (the "Purchaser"), for the consideration
set forth herein. Such assets, properties and businesses (the "Center
Assets") pertain to the ownership and operation of two (2) family
entertainment centers operating under the name and mark "Block Party" (the
"Centers"), the addresses of which are set forth on Exhibit A attached
hereto. The parties hereto agree and acknowledge that subject to
satisfaction or waiver of the conditions to closing specified in Paragraph
3 below, this letter constitutes an obligation binding on the parties
hereto.
1. Purchase Price. The purchase price for the Center Assets
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will be an amount equal to the lesser of (i) out-of-pocket expenses
incurred in the development and operation of the Centers and
(ii) $15,000,000.00 (the "Original Principal Balance")
payable by the delivery of a promissory note (the "Note") of the
Purchaser dated the date upon which the transactions contemplated
hereby are consummated. The Note will have a term of ten (10) years
and will accrue interest at a variable rate equal to LIBOR plus .75%.
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For purposes of this letter, "LIBOR" means the rate per annum (rounded
upwards, if necessary to the next higher one hundred-thousandth of a
percentage point) for deposits in United States dollars for a one-
month period, which appears on the display designated at Page 3570 on
the Telerate Service (or such other page as may replace Page 3750 on
that service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purposes of
displaying British Bankers' Association Interest Settlement Rates for
United States dollar deposits) and as adjusted on the first day of
each calendar month following the Closing Date (as hereinafter
defined)
Discovery Zone, Inc.
April 17, 1995
Page 2
(or if such day is not a day on which such rate is quoted, the next
succeeding day on which such rate is quoted). Interest accruing on the
then-outstanding principal balance of the Note will be due and payable
in arrears on the first day of each August, November, February and May
following the Closing Date (each, an "Interest Payment Date").
Commencing on the third anniversary of the Closing Date, the Purchaser
shall pay to the Seller on each Interest Payment Date an amount equal
to the interest accruing on the Note plus the following amounts,
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which amounts will be payable in four (4) equal installments on each
Interest Payment Date during any such year:
(a) During Year 4, the result obtained by multiplying the
Original Principal Balance by a fraction, the numerator of which
is 7 and the denominator of which is 28;
(b) During Year 5, the result obtained by multiplying the
Original Principal Balance by a fraction, the numerator of which
is 6 and the denominator of which is 28;
(c) During Year 6, the result obtained by multiplying the
Original Principal Balance by a fraction, the numerator of which
is 5 and the denominator of which is 28;
(d) During Year 7, the result obtained by multiplying the
Original Principal Balance by a fraction, the numerator of which
is 4 and the denominator of which is 28;
(e) During Year 8, the result obtained by multiplying the
Original Principal Balance by a fraction, the numerator of which
is 3 and the denominator of which is 28;
(f) During Year 9, the result obtained by multiplying the
Original Principal Balance by a fraction, the numerator of which
is 2 and the denominator of which is 28; and
(g) During Year 10, the result obtained by multiplying the
Original Principal Balance by a fraction, the numerator of which
is 1 and the denominator of which is 28.
Discovery Zone, Inc.
April 17, 1995
Page 3
The Seller will have the right to prepay the Note in whole or in part
from time-to-time without penalty. The Purchaser will assume
liabilities of the Seller under real property and personal property
leases related to the operation of the Centers (the "Assumed
Liabilities"). Taxes (to the extent prepaid) and real estate rentals
will be prorated as of the Closing Date.
2. The Closing. The closing (the "Closing") of the purchase and
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sale of the Center Assets will occur on the third business day
following satisfaction or waiver of the conditions to closing set
forth in Paragraph 3 (such day of Closing being hereinafter referred
to as the "Closing Date").
3. Definitive Agreements. The Purchaser and the Seller will
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negotiate in good faith one or more definitive agreements concerning
the purchase and sale of the Center Assets (the "Center Definitive
Agreement(s)"). The Purchaser and Blockbuster Entertainment Group, a
division of Viacom Inc. ("Blockbuster") will cooperate with each other
in the event Blockbuster determines it shall receive certain tax
benefits by structuring the transaction as a sale of all outstanding
capital stock (the "Stock Sale") of the Seller to the Purchaser
followed by an election by the Purchaser under Section 338(h)(10) of
the Internal Revenue Code of 1986, as amended. In the event of a Stock
Sale, the transaction will be structured to the extent possible to
mirror the economics, representations, warranties, covenants and
conditions to closing of the Center Definitive Agreement(s) and
Blockbuster will indemnify the Purchaser and hold it harmless for all
liabilities other than the Assumed Liabilities. The Center Definitive
Agreement(s) will contain representations, warranties and covenants
substantially identical to those found in that certain Agreement and
Plan of Merger (the "Merger Agreement"), dated as of September 2,
1994, by and among the Purchaser, Columbus Acquisition, Inc.,
Blockbuster Entertainment Corporation and Blockbuster Children's
Amusement Corporation; provided, however, that such representations,
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warranties and covenants may be revised only to reflect the differing
transaction structures. The Center Definitive Agreement(s) will also
contain indemnification provisions substantially identical to those
contained in the Merger Agreement; provided, however, that the baskets
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set forth in Sections 11.1 and 11.2 of the Merger Agreement will be
reduced proportionally based upon the difference in consideration
between the Merger
Discovery Zone, Inc.
April 17, 1995
Page 4
Agreement and the Center Definitive Agreement(s). The Center
Definitive Agreement(s) will contain conditions to closing
substantially identical to those contained in that certain Stock
Purchase Agreement (the "Purchase Agreement"), dated as of the date
hereof, among DKB, Inc., Xxxxx X. Xxxxx June, 1992 Non-Exempt Trust,
Xxxxx X. Xxxxx June, 1992 Non-Exempt Trust, Xxxxxx X. Xxxxx, Xxxxx X.
Xxxxx, Xxxxx X. Xxxxx, Viacom Inc. and Blockbuster Discovery
Investment, Inc.; provided, however, that such conditions to closing
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may be revised only to reflect the differing transaction structures.
Notwithstanding anything to the contrary herein, the Center Definitive
Agreement(s) will also contain conditions for a limited due diligence
review by the Purchaser to be completed by the close of business on
April 21, 1995, which review will be deemed satisfactory unless it
reveals (i) a material misstatement in the balance sheets or profit
and loss statements previously delivered to the Purchaser, (ii) a
material agreement or contract entered into by the Purchaser is not
enforceable, or (iii) the Purchaser does not have good title to a
material asset which it otherwise claims to own free and clear of any
liens or encumbrances (the "Materiality Conditions"). For a
Materiality Condition to prevent Closing, the Seller must have first
been given a reasonable opportunity not longer than ten (10) business
days to cure such Materiality Condition. In the event there is a
Materiality Condition that is not cured as provided herein, the
parties agree, without prejudice to the rights of the Purchaser to
terminate this agreement, to discuss in good faith a reduction of the
Original Principal Balance. The Center Definitive Agreement(s) will
provide for a six-month royalty-free license from Blockbuster
Entertainment Inc. to the Purchaser of the mark "Block Party".
4. Access to Information. Promptly following execution of this
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agreement in principle, the Seller will provide the Purchaser, its
officers, directors, employees, agents and representatives with access
to all information concerning the Centers and all officers of the
Seller (at reasonable times and with reasonable advance notice) in
order to permit the Purchaser to perform a thorough legal, financial
and business investigation of the Centers.
5. Confidentiality. Each of the Purchaser, the Seller and FEC agrees
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that it will not, and will use its best efforts to cause its officers,
directors, employees, affiliates, agents and representatives not to,
disclose the subject matter or terms of this agreement in principle or
any confidential information exchanged in connection
Discovery Zone, Inc.
April 17, 1995
Page 5
therewith, or issue any news release or make any other public
statement with respect thereto, without the prior written consent of
the other parties hereto, except as required by law, rule, regulation
or judicial process (in which case the party required to disclose such
information shall, to the extent practicable, notify the other parties
prior to such disclosure).
6. Expenses. Whether the transactions contemplated hereby are
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consummated, each of the parties hereto will bear its own expenses
(including attorneys fees and expenses) in connection with the
negotiation and execution of the Center Definitive Agreement(s) and
the consummation of the transactions contemplated thereby.
7. Governing Law. This agreement in principle will be governed
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by and construed in accordance with the laws of the State of Delaware.
8. Termination. This agreement will terminate on the earlier to
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occur of (i) the date of closing of the transactions contemplated by
the Purchase Agreement or (ii) June 30, 1995, without liability or
obligation on the part of any party hereto other than for a breach of
the provisions of the first sentence of Paragraph 3 and Paragraphs 5
and 6; provided, however, that this agreement may be terminated by the
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mutual agreement of the parties hereto.
REMAINDER OF XXXX INTENTIONALLY LEFT BLANK
Discovery Zone, Inc.
April 17, 1995
Page 6
Please acknowledge your acceptance of and agreement with the
terms of this letter by signing and returning the enclosed copy.
Very truly yours,
BLOCKBUSTER FAMILY FUN, INC.
/s/ Xxxx X. Xxxxxxxx
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By: Xxxx X. Xxxxxxxx
Its: Vice President
BLOCKBUSTER ENTERTAINMENT INC., a
division of Viacom Inc.
/s/ Xxxx X. Xxxxxxxx
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By: Xxxx X. Xxxxxxxx
Its: Vice President
Accepted and agreed to this
_____ day of April, 1995:
DISCOVERY ZONE, INC.
/s/ Xxxxxx X. Xxxxx
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By: Xxxxxx X. Xxxxx
Its: Chairman and Chief Executive Officer
EXHIBIT A
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TO
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AGREEMENT IN PRINCIPLE
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(1) Blockbuster Block Party
0000 Xxx Xxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxx Xxxxxx
(2) Blockbuster Block Party
0000 Xxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxx
