Exhibit 99.(b)
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of this
17th day of April, 1995 by and among DKB, Inc., a Delaware corporation
("DKB"), Xxxxx X. Xxxxx June, 1992 Non-Exempt Trust (the "KFF Trust"), and
Xxxxx X. Xxxxx June, 1992 Non-Exempt Trust (the "BJF Trust"), (each of DKB,
the KFF Trust and the BJF Trust, a "Seller" and collectively, the
"Sellers") and Xxxxxx X. Xxxxx, Xxxxx X. Xxxxx and Xxxxx X. Xxxxx
(collectively, the "Guarantors"), and Viacom Inc., a Delaware corporation
("Viacom") and its indirect wholly-owned subsidiary Blockbuster Discovery
Investment, Inc., a Delaware corporation ("BDI"; for purposes hereof,
references to "Viacom" shall mean Viacom Inc. or BDI, as the context
requires).
RECITALS
DKB owns 2,556,605 shares of common stock ("Common Stock") of
Discovery Zone, Inc., a Delaware corporation ("DZI"). The KFF Trust owns
2,556,516 shares of Common Stock. The BJF Trust owns 2,556,516 shares of
Common Stock.
Viacom (as successor in interest to Blockbuster Entertainment
Corporation ("Blockbuster")) and the Sellers and the Guarantors, among
others, entered into an Option Exercise Agreement dated as of September 2,
1994 (the "Option Exercise Agreement"), pursuant to which Viacom acquired a
number of shares of Common Stock sufficient to increase its equity
ownership interest in DZI from approximately 20% to 49.9%. Viacom
currently owns 24,220,354 shares of Common Stock ("Viacom's Holdings"),
representing approximately 49% of the issued and outstanding shares of
Common Stock.
Viacom and DZI mutually agree that Blockbuster shall assume management
of the operational and administrative functions of DZI and designate a
majority of the members of the Board of Directors of DZI. Concurrently
with the execution of this Agreement, Viacom and DZI are entering into a
Management Services Agreement to effect these transactions. As part of
these transactions, Viacom desires to purchase from the Sellers the number
of shares of Common Stock as set forth herein and the Sellers desire to
sell such shares to Viacom, all as hereinafter provided and on the terms
and subject to the conditions hereinafter set forth.
COVENANTS
NOW, THEREFORE, Viacom, the Sellers and the Guarantors, in
consideration of the agreements, covenants and conditions contained herein,
hereby make the following representations and warranties, give the
following covenants and agree as follows:
ARTICLE I
Purchase and Sale of the Shares
Section 1.1 Purchase and Sale. The Sellers agree to and will sell,
transfer, assign and deliver to BDI at the Closing, free and clear of all
liens, pledges, encumbrances, security interests, claims and equities of
every kind, and BDI agrees to and will purchase and accept from the
Sellers, on the terms and subject to the conditions and limitations set
forth in this Agreement, an aggregate of 3,823,647 shares of Common Stock
(the "Shares"). Each of DKB, the KFF Trust and the BJF Trust will deliver
1,274,549 shares of Common Stock.
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ARTICLE II
Purchase Price
Section 2.1 Amount of the Purchase Price. As consideration for the
Shares (the "Purchase Price"), Viacom agrees, subject to the terms,
conditions and limitations set forth in this Agreement, to pay to or for
the account of each Seller an amount in cash equal to $6.50 per Share sold
by such Seller.
ARTICLE III
Closing
Section 3.1 Closing. The closing of the purchase of the Shares
(the "Closing") shall take place at the offices of Xxxxxxxx & Xxxxx, 000
Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx, at 10:00 a.m. (Chicago
time) on the third business day following the termination or the expiration
of the waiting period imposed by the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act") for the filings made
pursuant to Sections 7.3 and 8.3 hereof by the parties; provided that if
any of the conditions which are set forth in Articles IX and X of this
Agreement have not been satisfied (or waived) by said date, then the
Closing shall take place on a subsequent date as soon as practicable after
the satisfaction or waiver of such conditions. The date on which the
Closing occurs is referred to herein as the "Closing Date."
Section 3.2 Procedure at the Closing. At the Closing, the parties
hereto agree to take the following steps in the order listed below
(provided, however, that upon their completion all such steps shall be
deemed to have occurred simultaneously):
(a) The Sellers shall deliver to Viacom, in form and substance
reasonably satisfactory to Viacom, the certificates described in Section
9.1 hereof and all other previously undelivered
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documents required to be delivered by the Sellers to Viacom at or prior to
the Closing pursuant to the terms of this Agreement.
(b) Viacom shall deliver to the Sellers, in form and substance
reasonably satisfactory to the Sellers, the certificate described in
Section 10.1 hereof and all other previously undelivered documents required
to be delivered by Viacom to the Sellers at or prior to the Closing
pursuant to the terms of this Agreement.
(c) The Sellers shall deliver certificates for the Shares being
purchased, duly endorsed in blank or accompanied by stock powers executed
in blank, in form satisfactory to Viacom and with all required stock
transfer tax stamps affixed.
(d) Viacom shall deliver to each Seller $6.50 for each Share
delivered by such Seller, by wire transfer of immediately available funds
to an account of such Seller designated to Viacom in writing not less than
two business days prior to the Closing.
(e) Viacom and each Seller shall execute and deliver cross receipts
acknowledging, in the case of Viacom, receipt from such Seller of the
Shares purchased from such Seller and, in the case of a Seller, the portion
of the Purchase Price received by such Seller.
(f) DKB shall deliver to Viacom an incumbency certificate as to those
officers executing this Agreement on its behalf.
(g) The parties shall deliver such other documents and certificates
as may be reasonably required to close the transaction.
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ARTICLE IV
Representations and Warranties of Sellers
Concerning the Transaction
In order to induce Viacom to enter into this Agreement and to
consummate the transactions contemplated hereby, each Seller makes the
representations and warranties set forth below with respect to itself only,
each of which is independently relied upon by Viacom regardless of any
other investigation made or information obtained by Viacom, and each of
which is correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article IV).
Section 4.1 Organization, Good Standing and Power of the Seller.
If such Seller is a corporation, such Seller is a corporation duly
organized, validly existing and in good standing under the laws of its
state of incorporation. Such Seller has all requisite power and authority
to own, lease and operate its properties and to carry on its business as
now being conducted, and is duly qualified to do business and in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
other than in such jurisdictions where the failure to so qualify would not
have a material adverse effect on such Seller or delay or prevent the
Seller from performing its obligations under this Agreement. If a Seller
is a trust, such trust has been duly formed under the laws of the state of
its formation.
Section 4.2 Authorization. Such Seller has full power and
authority and legal capacity to enter into this Agreement and to perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement and all other agreements, instruments and documents contemplated
hereby to be executed by such
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Seller and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary action of such Seller. This
Agreement and all other agreements, instruments and documents contemplated
hereby to be executed by such Seller are (or upon execution and delivery
thereof by such Seller will be) valid and binding agreements of such
Seller, enforceable against such Seller in accordance with their respective
terms except (i) as the same may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws of general application relating to
or affecting creditors' rights, including the effect of statutory or other
laws regarding fraudulent conveyances and preferential transfers, and (ii)
for the limitations imposed by general principles of equity (as opposed to
those principles applicable only to trusts).
Section 4.3 No Breach. The execution and delivery of this
Agreement by such Seller do not, and the consummation of the transactions
contemplated hereby will not, (i) violate or conflict with, in the case of
a corporate Seller, the certificate or articles of incorporation of such
Seller or the bylaws or code of regulations of such Seller or, in the case
of a Seller which is a trust, such Seller's trust agreement or applicable
law with respect to the obligations of a trustee or other fiduciary, or
(ii) constitute a breach or default (or an event that with notice or lapse
of time or both would become a breach or default) of, or give rise to any
lien, third party right of termination, cancellation, material modification
or acceleration, under any material agreement, understanding or undertaking
to which such Seller or, in the case of a corporate Seller, any of its
subsidiaries or shareholders or, in the case of a trust Seller, any of its
beneficiaries or trustees is a party or by which it or any of them is bound
or violate or conflict with any law, rule, regulation, judgment, decree or
order to which it or any of them is subject. For purposes of this
Agreement, a "subsidiary" of any Seller shall mean any corporation,
partnership, joint venture, association or other entity, wherever and
however organized, in which such Seller owns directly or indirectly or has
the
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right to acquire a majority of the capital stock, equity or beneficial
interests, is a general partner, or otherwise controls management of, by
having the right or ability to designate a majority of the directors or
members of the governing body thereof, whether by agreement or otherwise.
Section 4.4 Consents and Approvals. Neither the execution and
delivery of this Agreement by each Seller nor the consummation of the
transactions contemplated hereby will require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, any court or tribunal or any other
person or entity, except (i) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay such Seller from performing its
obligations under this Agreement; (ii) the filing of any reports or forms
required by "blue sky" regulations; (iii) filings required by the HSR Act;
(iv) the filing of reports required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (v) filings required with the
National Association of Securities Dealers, Inc.; and (vi) filings required
to be made by Viacom or its affiliates.
Section 4.5 The Shares. At the Closing Date and upon the exercise
of certain warrants, each of the Sellers will own its Shares (and its
shares of Common Stock subject to Article XI (the "Additional Shares"))
free and clear of all liens, encumbrances, mortgages, pledges, security
interests, restrictions, prior assignments and claims of any kind or nature
whatsoever (collectively, "Liens"). The Shares (and Additional Shares)
owned by each Seller at Closing will have been duly and validly authorized
and issued, and will be fully paid and nonassessable and will not be
subject to any voting trust, stockholders agreement, proxies or other
agreements with respect to voting or transfer other than agreements to
which Viacom or its affiliates are a party. The KFF Trust as Seller
represents and warrants that the sole trustee and the sole beneficiary of
such Seller is Xxxxx X. Xxxxx, and Xxxxx X. Xxxxx and Xxxxxx X. Xxxxx are
the sole members of the advisory committee
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of such Seller. The BJF Trust as Seller represents and warrants that the
sole trustee and the sole beneficiary of such Seller is Xxxxx X. Xxxxx, and
Xxxxx X. Xxxxx and Xxxxxx X. Xxxxx are the sole members of the advisory
committee of such Seller. The Shares owned by each Seller at Closing will
have been approved for trading on the Nasdaq National Market.
Section 4.6 McDonald's Co-Sale Agreement. The parties acknowledge
that Xxxxxx X. Xxxxx ("Xxxxx") and XxXxxxxx'x Corporation ("McDonald's")
are parties to a Co-Sale Agreement dated as of August 30, 1994 (the "Co-
Sale Agreement") pursuant to which, among other things, Xxxxx has the
obligation to notify McDonald's not less than five business days prior to
the execution of a definitive agreement relating to the sale or transfer of
Common Stock by Xxxxx (the "Notice Provisions") and McDonald's has the
right to participate in such contemplated sale or transfer with respect to
the number of shares of Common Stock equal to the greater of (i) one-half
of the number of shares of Common Stock subject to the contemplated sale,
and (ii) the number of shares of Common Stock subject to the contemplated
sale multiplied by a fraction, the numerator of which is the aggregate
number of shares then beneficially owned by McDonald's and the denominator
of which is the sum of the aggregate number of shares then beneficially
owned by McDonald's and the aggregate number of shares then beneficially
owned by Xxxxx (which fraction as of the date of this Agreement is 67.06%).
Notwithstanding anything to the contrary elsewhere in this Agreement, the
failure by Xxxxx to comply with the Notice Provisions shall not be a breach
of any representation or warranty of the Sellers in this Agreement. Viacom
acknowledges that McDonald's may decide to exercise its rights to
participate in the transactions contemplated by this Agreement in
accordance with the terms of the Co-Sale Agreement.
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ARTICLE V
Representations and Warranties of Sellers Concerning DZI
In order to induce Viacom to enter into this Agreement and to
consummate the transactions contemplated hereby, and subject to the
disclosure schedule attached hereto and incorporated herein by reference
(the "DZI Disclosure Schedule"), each Seller makes the representations and
warranties set forth below with respect to DZI, each of which is
independently relied upon by Viacom regardless of any other investigation
made or information obtained by Viacom (except as set forth in Section
5.11), and each of which is correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Article V). As used in this Article
V, "Knowledge of the Sellers" means the actual knowledge after reasonable
investigation of any of the Sellers or the Guarantors. As used
hereinafter, the term "DZI Material Adverse Effect" shall mean a material
adverse effect on the assets, business, financial condition, or operations
of DZI and its subsidiaries considered as one enterprise.
Section 5.1 Subsidiaries of DZI. All subsidiaries of DZI are set
forth in Section 5.1 of the DZI Disclosure Schedule. DZI owns the
percentage of capital stock or equity interest of each of the subsidiaries
set forth in said Section 5.1 free and clear, except as set forth in said
Section 5.1, of all Liens. Except as set forth in Section 5.1 of the DZI
Disclosure Schedule and exclusive of the ownership of less than five
percent of the outstanding securities of any class registered under the
Exchange Act, neither DZI nor any of its subsidiaries owns, directly or
indirectly, of record or beneficially, any capital stock or equity interest
or investment in any corporation, partnership, joint venture, association
or other entity.
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Section 5.2 Organization, Good Standing and Power of DZI and its
Subsidiaries. DZI and each of its subsidiaries is a corporation or limited
partnership duly organized or formed, validly existing and in good standing
under the laws of its state of organization or formation. DZI and each of
its subsidiaries has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
and is duly qualified to do business and in good standing in each
jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, other than in
such jurisdictions where the failure to so qualify would not have a DZI
Material Adverse Effect.
Section 5.3 DZI Charter Documents, DZI Capital Structure. The
Sellers have delivered or made available to Viacom true and complete copies
of the certificate of incorporation of DZI (the "Certificate of
Incorporation") and the bylaws, as amended, of DZI (the "Bylaws"). The
authorized capital stock of DZI consists of 260,000,000 shares, of which
250,000,000 are shares of Common Stock and 10,000,000 are shares of
preferred stock, par value $.01 per share (the "DZI Preferred Stock"). As
of the date of this Agreement, 48,864,721 shares of Common Stock were
validly authorized and issued, fully paid, and nonassessable, and no shares
of DZI Preferred Stock were issued or outstanding. Except for (i) an
aggregate of 4,025,990 shares of Common Stock issuable pursuant to
outstanding options under the Discovery Zone, Inc. 1993 Employee Stock
Option Plan and 119,355 shares issuable under such Plan pursuant to options
not yet granted; (ii) an aggregate of 333,334 shares of Common Stock
issuable pursuant to outstanding options under the Discovery Zone, Inc.
1993 Stock Option Plan for Non-Employee Directors and 250,000 shares
issuable under such Plan pursuant to options not yet granted (collectively,
the Plans referred to in clauses (i) and (ii), the "DZI Option Plans"),
(iii) an aggregate of 1,165,500 shares of Common Stock issuable upon the
exercise of outstanding warrants issued to former partners of DKB
Investments, L.P. other than
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the Sellers, (iv) a maximum of 3,954,477 shares of DZI Common Stock as may
be issued by DZI upon conversion of its Liquid Yield Option Notes due 2013
(the "XXXXX"), and such other shares of Common Stock as may be issued upon
the exercise by any holder of the XXXXX of its rights to require DZI to
repurchase such XXXXX, and (v) such shares of Common Stock as may be issued
by DZI in connection with pending acquisitions as set forth on Schedule
5.3, no other shares of common stock or DZI Preferred Stock or any rights,
agreements, or commitments of any kind obligating DZI to issue or sell any
other shares of Common Stock or DZI Preferred Stock were outstanding or
were authorized by DZI. The number of the Outstanding Shares set forth in
the certificate to be delivered pursuant to Section 9.7 immediately prior
to the Closing will be correct as of the Closing.
Section 5.4 No Breach; Consents and Approvals. Neither the
execution and delivery of this Agreement by each Seller nor the execution
of the Management Services Agreement by the Company, nor the consummation
of the transactions contemplated hereby and thereby would, (i) violate or
conflict with the Certificate of Incorporation or the Bylaws of DZI or any
of its subsidiaries or (ii) except as set forth in Section 5.4 of the DZI
Disclosure Schedule, constitute a breach or default (or an event that with
notice or lapse of time or both would become a breach or default) of, or
give rise to any Lien, third party right of termination, cancellation,
material modification or acceleration, under any material agreement,
understanding or undertaking to which DZI or any of its subsidiaries is a
party or by which it or any of them is bound or violate or conflict with
any law, rule, regulation, judgment, decree or order to which it or any of
them is subject. Except as set forth in Section 5.4 of the DZI Disclosure
Schedule, neither the execution and delivery of this Agreement by each
Seller nor the consummation of the transactions contemplated hereby will
require any consent, approval, authorization or permit of, or filing with
or notification
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to, any governmental or regulatory authority, any court or tribunal or any
other person or entity with respect to DZI or any of its subsidiaries,
except (i) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent or delay such Seller from performing its obligations under this
Agreement and would not have a DZI Material Adverse Effect, and (ii) the
filings specified in clauses (ii) through (vi) of Section 4.4.
Section 5.5 SEC Documents. The Sellers have delivered or made
available to Viacom a true and complete copy of each report, schedule,
registration statement and definitive proxy statement, including exhibits
filed therewith (but excluding exhibits incorporated therein by reference
and not attached thereto), filed by DZI with the Securities and Exchange
Commission ("SEC") since June 3, 1993 (the "SEC Documents"), which, to the
Knowledge of the Sellers, are all the documents (other than preliminary
materials) that DZI was required to file with the SEC since such date.
Except to the extent information contained therein has been revised or
superseded by a later filed SEC Document, as of their respective dates and
as of the date hereof, (i) none of the SEC Documents contained or contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (ii) the financial statements of DZI included in the SEC
Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally
accepted accounting principles during the periods presented (except as may
be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited statements, to normal, recurring
audit adjustments) the financial position of DZI and its
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consolidated subsidiaries as of the date thereof and the results of their
operations and their cash flows for the periods then ended.
Section 5.6 Litigation. Except as disclosed in the SEC Documents,
there is no suit, action or proceeding pending or, to the Knowledge of the
Sellers, threatened against or affecting DZI or any of its subsidiaries
that will have a DZI Material Adverse Effect, nor is there any judgment,
decree, injunction, rule or order of any governmental authority, court of
competent jurisdiction or arbitrator outstanding against DZI or any of its
subsidiaries having, or which in the future will have, a DZI Material
Adverse Effect.
Section 5.7 Absence of Adverse Changes. Except as disclosed in the
SEC Documents, since Xxxxxxxx 00, 0000, XXX and its subsidiaries have
conducted their respective businesses only in the ordinary course, and
there has not been (i) any damage, destruction or loss, whether covered by
insurance or not, which has or will have a DZI Material Adverse Effect, or
(ii) any transaction, commitment, dispute or other event or condition of
any character (whether or not in the ordinary course of business)
individually or in the aggregate having, or which in the future will have,
a DZI Material Adverse Effect.
Section 5.8 Compliance With Laws. To the Knowledge of the Sellers,
(a) DZI and its subsidiaries are in compliance with all laws, regulations
and orders applicable to them except with respect to failures to comply
with laws, ordinances, rules or regulations which, if fully enforced, would
not have a DZI Material Adverse Effect and (b) since June 30, 1993, neither
DZI nor its subsidiaries has been cited, fined or otherwise notified of any
asserted past or present failure to comply with any laws, except with
respect to failures to comply which, if repeated, would not have a DZI
Material Adverse Effect, and, to the Knowledge of the Sellers, no
proceeding with respect to any such violation is contemplated.
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Section 5.9 Environmental Matters.
(a) Neither DZI nor any of its subsidiaries has transported, stored,
treated or disposed of, nor has any of them allowed or arranged for any
third parties to transport, store, treat or dispose of Hazardous Substances
(as hereinafter defined) or other waste to or at any location other than a
site lawfully permitted to receive such Hazardous Substances or other waste
for such purposes, nor has any of them performed, arranged for or permitted
by any method or procedure such transportation, storage, treatment or
disposal in contravention of any laws or regulations. Neither DZI nor any
of its subsidiaries has disposed, or permitted or arranged for any third
parties to dispose, of Hazardous Substances or other waste upon any of the
real property now or previously owned or leased by DZI or any of its
subsidiaries (the "Real Property"), except as permitted by law. For
purposes of this Section 5.9, the term "Hazardous Substances" shall have
the meaning given it in the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Sec.Sec. 9601, et seq.), as amended,
and the regulations promulgated pursuant thereto ("CERCLA"), or any similar
state law.
(b) With respect to any parcel of Real Property, there has not
occurred since, in the case of owned or previously owned Real Property, the
date of the acquisition thereof and in the case of leased or previously
leased Real Property, the commencement date of the lease covering such Real
Property, or, to the Knowledge of the Sellers, before such date, nor is
there presently occurring, a release of any Hazardous Substance on, into
or, to the Knowledge of the Sellers, beneath the surface of such parcel of
Real Property. For purposes of this Section 5.9, the term "release" shall
mean releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing or dumping.
(c) Neither DZI nor any of its subsidiaries has transported or
disposed, nor has any of them permitted or arranged for any third parties
to transport or dispose, any Hazardous Substances or
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other waste to or at a site which, pursuant to CERCLA or any similar state
law, (i) has been placed on the National Priorities List or its state
equivalent, or (ii) the Environmental Protection Agency or the relevant
state agency has proposed or, to the Knowledge of the Sellers, is proposing
to place on the National Priorities List or its state equivalent. Neither
DZI nor any of its subsidiaries has received notice, nor do any of them
have knowledge of any facts which could give rise to any notice, that DZI
or any of is subsidiaries is a potentially responsible party for a federal
or state environmental cleanup site or for corrective action under CERCLA
or any other applicable law or regulation. Neither DZI nor any of its
subsidiaries has submitted nor was any of them required to submit any
notice pursuant to Section 103(c) of CERCLA with respect to any of the Real
Property. Neither DZI nor any of its subsidiaries has received any written
request for information in connection with any federal or state
environmental cleanup site. Neither DZI nor any of its subsidiaries has
been required to or has not undertaken any response or remedial actions or
clean-up actions of any kind at the request of any federal state or local
governmental entity, or at the request of any other person or entity.
(d) Except as set forth on Section 5.9 of the DZI Disclosure
Schedule, neither DZI nor any subsidiary uses, or has used, any Underground
Storage Tanks, and there are not now nor, to the Knowledge of the Sellers,
have there ever been, any Underground Storage Tanks on any of the Real
Property. For purposes of this Section 5.9, the term "Underground Storage
Tanks" shall have the meaning given it in the Resource Conservation and
Recovery Act (42 U.S.C. Sec.Sec. 6901, et seq.).
(e) Except as set forth in Section 5.9 of the DZI Disclosure
Schedule, there are no laws, regulations, ordinances, licenses, permits or
orders relating to environmental or worker safety matters requiring any
work, repairs, construction or capital expenditures with respect to the
assets or properties of DZI or any of its subsidiaries.
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Section 5.10(A) Employee Benefit Plans. Except as set forth in
Section 5.10(A) of the DZI Disclosure Schedule (which Section 5.10(A) of
the DZI Disclosure Schedule the parties acknowledge that the Sellers shall
deliver within five business days from the date of this Agreement):
(a) (i) Each employee benefit plan, including but not limited to those
plans as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), maintained currently or in the past by
DZI or any of its subsidiaries, (ii) each employee benefit plan for which
DZI or any of its subsidiaries could incur liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated and (iii)
each plan in respect of which DZI or any subsidiary thereof could incur
liability under Section 4212(c) of ERISA (collectively the "Benefit Plans")
is now and always has been operated and administered in accordance with all
applicable requirements of ERISA, the Internal Revenue Code of 1986, as
amended (the "Code") and the terms of such benefit plans, in all material
respects. No legal action, suit or claim is pending or, to the Knowledge
of the Sellers, threatened with respect to any Benefit Plan and, to the
Knowledge of the Sellers, no fact or event exists that could give rise to
any such action, suit or claim. The terms and conditions of each Benefit
Plan conform in all material respects with all applicable provisions of
ERISA and the Code. Each Benefit Plan which is an employee pension benefit
plan, as defined in Section 3(2) of ERISA, and which is intended to be
"qualified" within the meaning of Section 401(a) of the Code ("Pension
Plan"), has been determined by the Internal Revenue Service to be so
qualified, and, to the Knowledge of the Sellers, no fact or event has
occurred since the date of such determination by the Internal Revenue
Service to adversely affect the qualified status of any such Benefit Plans.
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(b) There has been no prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any
Benefit Plan which would have a DZI Material Adverse Effect. Neither DZI
nor any of its subsidiaries has incurred any liability for any penalty or
tax arising under Section 4971, 4972, 4980, 4980B or 6652 of the Code or
any liability under Section 502 of ERISA, and, to the Knowledge of the
Sellers, no fact or event exists which could give rise to any such
liability. None of the Pension Plans which is subject to Title IV of ERISA
has completely or partially terminated, or been the subject of a reportable
event as defined in Section 4043 of ERISA. No liability under or arising
out of or by operation of Subtitle D of Title IV of ERISA has been incurred
by DZI or any of its subsidiaries with respect to a Pension Plan and no
fact or event exists which would give rise to such liabilities.
(c) The aggregate amount of unfunded benefit liabilities under all
Pension Plans which are defined benefit pension plans did not, as of the
latest valuation date for such plans, exceed $1,000,000. No Pension Plan
which is a defined benefit pension plan has incurred any accumulated
funding deficiency (whether or not waived) as defined in Section 412 of the
Code.
(d) There are no multi-employer plans, as defined in Section
4001(a)(3) of ERISA, to which DZI or any of its subsidiaries either
contributes or has had an obligation to contribute during the prior five
years, or under which DZI or any of its subsidiaries has any present or
future obligation or liability.
Section 5.10(B) Taxes. Except as set forth in Section 5.10(B) of the
DZI Disclosure Schedule (which Section 5.10(B) of the DZI Disclosure
Schedule the parties acknowledge that the Sellers shall deliver within five
business days from the date of this Agreement):
(a) Except for any breach or inaccuracy of the following
representations and warranties which would not have a DZI Material Adverse
Effect, (i) all returns and reports in respect of Taxes
17
required to be filed with respect to DZI and each subsidiary (including the
consolidated federal income tax return of DZI and any state Tax return that
includes DZI or any subsidiary thereof on a consolidated or combined basis)
have been timely filed; (ii) all Taxes required to be shown on such returns
and reports or otherwise due have been timely paid; (iii) all such returns
and reports (insofar as they relate to the activities or income of DZI or
any subsidiary thereof) are true, correct and complete in all material
respects; (iv) no adjustment relating to such returns has been proposed
formally or informally by any Tax authority and, to the Knowledge of
Sellers, no basis exists for any such adjustment; (v) there are no pending
or, to the Knowledge of Sellers, threatened actions or proceedings for the
assessment or collection of Taxes against DZI or any subsidiary thereof or
(insofar as either could result in liability of DZI or any subsidiary
thereof on the basis of joint and/or several liability) any corporation
that was included in the filing of a return with DZI or any subsidiary
thereof on a consolidated or combined basis; (vi) there are no outstanding
waivers or agreements extending the statutes of limitations for any period
with respect to any Tax to which DZI or any subsidiary may be subject;
(vii) no consent under Section 341(f) of the Code has been filed with
respect to DZI or any subsidiary thereof; (viii) there are no Tax liens on
any assets of DZI or any subsidiary thereof; (ix) neither DZI nor any
subsidiary thereof is a party to any agreement or arrangement that would
result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code; (x) no
acceleration of the vesting schedule for any property that is substantially
unvested within the meaning of the regulations under Section 83 of the Code
will occur in connection with the transactions contemplated by this
Agreement; (xi) each subsidiary of DZI has been and continues to be a
member of the affiliated group (within the meaning of Section 1504(a)(1) of
the Code) for which DZI files a consolidated return as the common parent,
and has not been includible in any other
18
consolidated return for any taxable period for which the statute of
limitations has not expired; (xii) neither DZI nor any subsidiary thereof
is subject to any accumulated earnings tax penalty or personal holding
company tax; (xiii) neither DZI nor any subsidiary thereof is a party to
any tax sharing or tax allocation agreement or arrangement; and (xiv)
adequate reserves are provided in the financial statements included in the
1994 Form 10-K of DZI to satisfy all liability of DZI and its subsidiaries
for Taxes for all periods through December 31, 1994.
(b) "Tax" or "Taxes" means any and all taxes, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with any
and all interest, penalties, additions to tax and additional amounts
imposed with respect thereto) imposed by any government or taxing
authority, including, without limitation: taxes or other charges on or with
respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth; taxes or
other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value added, or gains taxes; license, registration and
documentation fees; and customs duties, tariffs, and similar charges.
ARTICLE VI
Representations and Warranties of Viacom
In order to induce the Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, Viacom makes the
representations and warranties set forth below, each of which is
independently relied upon by the Sellers regardless of any other
investigation made or information obtained by the Sellers, and each of
which is correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article VI).
19
Section 6.1 Organization, Power, Authority, Authorization and
Binding Obligation. (a) Viacom is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation and has all requisite power and authority necessary to enter
into this Agreement and to carry out the transactions and agreements
contemplated hereby.
(b) The execution, delivery and performance of this Agreement and all
other agreements, instruments and documents contemplated hereby to be
executed by Viacom and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action of
Viacom. This Agreement and all other agreements and instruments
contemplated hereby to be executed by Viacom are (or upon execution and
delivery thereof by Viacom will be) valid and binding agreements of Viacom
enforceable against Viacom in accordance with their respective terms except
(i) as the same may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws of general application relating to or affecting
creditors' rights, including the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers, and (ii) for
the limitations imposed by general principles of equity.
Section 6.2 No Breach; Consents and Approvals. The execution and
delivery of this Agreement by Viacom do not, and the consummation of the
transactions contemplated hereby will not, (i) violate or conflict with the
certificate of incorporation or the bylaws of Viacom or (ii) constitute a
breach or default (or an event that with notice or lapse of time or both
would become a breach or default) of, or give rise to any lien, third party
right of termination, cancellation, material modification or acceleration,
under any material agreement, understanding or undertaking to which Viacom
or any of its subsidiaries is a party or by which Viacom or any of its
subsidiaries is bound or violate or conflict with any law, rule,
regulation, judgment, decree or order to which it or any of them is
subject, except as would not prevent or delay Viacom from performing its
20
obligations under this Agreement. Neither the execution and delivery of
this Agreement by Viacom nor the consummation of the transactions
contemplated hereby will require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or
regulatory authority, any court or tribunal or any other person or entity,
except (i) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent or delay Viacom from performing its obligations under this
Agreement, (ii) the filing of reports required under the Exchange Act,
(iii) filings required by the HSR Act, (iv) filings required to be made by
the Sellers or their affiliates, (v) filings required to be made under any
applicable blue sky laws and regulations, and (vi) filings required by the
American Stock Exchange, Inc., if any.
Section 6.3 Purchase for Investment. Viacom is acquiring the
Shares for investment and not with a view to any distribution thereof in
contravention of the Securities Act of 1933.
ARTICLE VII
Additional Covenants of the Sellers
Section 7.1 Reasonable Efforts. The Sellers will use their
reasonable efforts to cause to be satisfied as soon as practicable and
prior to the Closing Date all of the conditions set forth in Article IX to
the obligations of Viacom to consummate transactions contemplated by this
Agreement to occur on the Closing Date.
Section 7.2 No Disclosure. Without the prior written consent of
Viacom, none of the Sellers will, prior to the Closing Date, disclose any
term or condition of this Agreement to any person or entity except that
such disclosure may be made if required pursuant to the requirements of law
(in which case the Seller making disclosure shall consult with Viacom prior
to making such disclosure).
21
Section 7.3 Antitrust Law Compliance. Each of the Sellers has
caused to be prepared and filed with the Federal Trade Commission and the
United States Department of Justice the notification required to be filed
with respect to the transactions contemplated hereby under the HSR Act or
any rules and regulations promulgated thereunder. Each of the Sellers has
caused such filing, and shall cause any future filings made by it or on its
behalf, to be true and accurate in all material respects and responsive to
the requirements of the HSR Act and any such rules and regulations. Each
of the Sellers shall use its reasonable efforts to obtain an early
termination of the applicable waiting period, and shall make any further
filings pursuant thereto that may be necessary. Each of the Sellers agrees
to make available to Viacom such information relative to it or DZI as may
be required for the preparation of such notification or filings by Viacom
under the HSR Act and any rules or regulations promulgated thereunder.
Section 7.4 Conduct Prior to Closing. The Sellers will not, and
will use their reasonable efforts, consistent with their fiduciary duties
to the stockholders of DZI, to cause DZI not to, take any action, or omit
to take any action, the result of which would cause any of the
representations and warranties made by the Sellers herein to become untrue.
ARTICLE VIII
Additional Covenants of Viacom
Section 8.1 Reasonable Efforts. Viacom will use its reasonable
efforts to cause to be satisfied as soon as practicable and prior to the
Closing Date all of the conditions set forth in Article X to the
obligations of the Sellers to consummate the transactions contemplated by
this Agreement to occur on the Closing Date.
22
Section 8.2 No Disclosure. Without the prior written consent of
the Sellers, Viacom will not, prior to the Closing Date, disclose any term
or condition of this Agreement to any person or entity except that such
disclosure may be made if required pursuant to the requirements of law (in
which case Viacom shall consult with the Sellers prior to making such
disclosure).
Section 8.3 Antitrust Law Compliance. Viacom has prepared and
filed with the Federal Trade Commission and the United States Department of
Justice the notification required to be filed with respect to the
transactions contemplated hereby under the HSR Act or any rules and
regulations promulgated thereunder. Viacom has caused such filing, and
shall cause any future filing made by it or on its behalf, to be true and
accurate in all material respects and responsive to the requirements of the
HSR Act and any such rules and regulations. Viacom shall use its
reasonable efforts to obtain an early termination of the applicable waiting
period, and shall make any further filings pursuant thereto that may be
necessary. Viacom agrees to make available to the Sellers such information
relative to it as may be required for the preparation of such notification
or filings by or on behalf of the Sellers under the HSR Act and any rules
or regulations promulgated thereunder.
Section 8.4 Conduct Prior to Closing. Viacom will not, and will
cause its subsidiaries not to, take any action, or omit to take any action,
the result of which would cause any of the representations and warranties
made by it herein to become untrue.
ARTICLE IX
Conditions to the Obligations of Viacom
The obligations of Viacom to consummate the purchase of the Shares
shall be subject to the fulfillment at or prior to the Closing Date of each
of the following conditions:
23
Section 9.1 Accuracy of Representations and Warranties and
Compliance with Obligations. The representations and warranties of the
Sellers contained in this Agreement shall have been true and correct in all
material respects at and as of the date hereof, and they shall be true and
correct in all material respects at and as of the Closing Date, with the
same force and effect as though made at and as of that time. Each of the
Sellers shall have performed and complied in all material respects with all
of each of their respective obligations required by this Agreement to be
performed or complied with at or prior to the Closing Date. Each of the
Sellers shall have delivered to Viacom certificates, dated as of the
Closing Date and signed by an authorized officer of such Seller in the case
of a Seller that is a corporation, or a trustee of such Seller in the case
of a Seller that is a trust, certifying that the representations and
warranties of such Seller are thus true and correct in all material
respects and that all such obligations of such Seller have been thus
performed and complied with in all material respects.
Section 9.2 Certified Resolutions. DKB shall have delivered to
Viacom copies of the resolutions adopted by the board of directors of DKB
authorizing the transactions contemplated by this Agreement, certified in
each case as of the Closing Date, by the Secretary or an Assistant
Secretary of DKB. Each of the KFF Trust and the BJF Trust shall have
delivered to Viacom certified copies of actions taken by its advisory
committee authorizing the transactions contemplated by this Agreement.
Section 9.3 No Adverse Litigation. (a) No action, suit,
investigation or proceeding shall have been instituted by any person not
affiliated with any of the parties hereto or by any governmental agency to
restrain, prohibit, invalidate, or otherwise challenge the legality of the
purchase of the Shares or any other transaction contemplated hereby, which
action, suit, investigation or proceeding will have resulted in a temporary
restraining order, preliminary or
24
permanent injunction, or other order preventing consummation of the
purchase of the Shares or any other transaction contemplated hereby, and
which order or injunction is then in effect.
(b) No action, suit, investigation or proceeding shall have been
instituted by any person not affiliated with any of the parties hereto or
by any governmental agency to collect damages arising out of the purchase
of the Shares or any other transaction contemplated hereby, which action,
suit, investigation or proceeding is reasonably likely to succeed and is
reasonably likely to result in a material liability on the part of Viacom
or any of its respective affiliates.
Section 9.4 HSR Act Waiting Period. The waiting period and any
extension thereof, imposed by the HSR Act with respect to the transactions
contemplated by this Agreement shall have expired or been terminated.
Section 9.5 No Material Adverse Change. Since December 31, 1994,
there shall not have been any material adverse change in the assets,
business, financial condition, or operations of DZI and its subsidiaries
considered as one enterprise.
Section 9.6 Outstanding Shares. The Sellers shall have caused DZI
to deliver a certificate as of the opening of business on the Closing Date
certifying the number of shares issued by DZI between the date of this
Agreement and the Closing Date.
Section 9.7 Management Services Agreement. The Management Services
Agreement shall be in full force and effect and the parties thereto shall
be in compliance with their obligations thereunder (including compliance as
of the "Effective Date" (as defined in the Management Services Agreement)
with Sections 2(d) and 17 thereunder).
Section 9.8 Outstanding Shares. The Sellers shall have caused DZI
to deliver a certificate certifying the number of issued and outstanding
shares of Common Stock as of the opening of business on the Closing Date.
25
ARTICLE X
Conditions to Obligations of the Sellers
The obligations of the Sellers to consummate the sale of the Shares
shall be subject to the fulfillment at or prior to the Closing Date of each
of the following conditions:
Section 10.1 Accuracy of Representations and Warranties and
Compliance with Obligations. The representations and warranties of each of
Viacom contained in this Agreement shall have been true and correct in all
material respects at and as of the date hereof, and they shall be true and
correct in all material respects at and as of the Closing Date with the
same force and effect as though made at and as of that time. Viacom shall
have performed and complied in all material respects with all of its
respective obligations required by this Agreement to be performed or
complied with at or prior to the Closing Date. Viacom shall have delivered
to the Sellers a certificate, dated as of the Closing Date and signed by an
authorized officer of Viacom, certifying that the representations and
warranties of Viacom are thus true and correct in all material respects and
that all such obligations of Viacom have been thus performed and complied
with in all material respects.
Section 10.2 Certified Resolutions. Viacom shall have delivered to
the Sellers copies of the resolutions adopted by its board of directors
authorizing the transactions contemplated by this Agreement, certified as
of the Closing Date by the Secretary or an Assistant Secretary of Viacom.
Section 10.3 No Adverse Litigation. (a) No action, suit,
investigation or proceeding shall have been instituted by any person not
affiliated with any of the parties hereto or by any governmental agency to
restrain, prohibit, invalidate, or otherwise challenge the legality of the
sale of the Shares or any other transaction contemplated hereby, which
action, suit, investigation or proceeding will have resulted in a temporary
restraining order, preliminary or permanent injunction,
26
or other order preventing consummation of the sale of the Shares or any
other transaction contemplated hereby, and which order or injunction is
then in effect.
(b) No action, suit, investigation or proceeding will have been
instituted by any person not affiliated with any of the parties hereto or
by any governmental agency to collect damages arising out of the sale of
the Shares or any other transaction contemplated hereby, which action,
suit, investigation or proceeding is reasonably likely to succeed and is
reasonably likely to result in a material liability on the part of the
Sellers, DZI or any of their respective affiliates.
Section 10.4 HSR Act Waiting Period. The waiting period and any
extension thereof imposed by the HSR Act with respect to the transactions
contemplated by this Agreement shall have expired or been terminated.
Section 10.5 Management Services Agreement. The Management Services
Agreement, shall be in full force and effect and the parties thereto shall
be in compliance with their obligations thereto.
ARTICLE XI
Certain Actions After the Closing and Additional Agreements
Section 11.1 Execution of Further Documents. From and after the
Closing, upon the reasonable request of Viacom, any of the Sellers shall
execute, acknowledge and deliver all such further transfers, assignments,
conveyances, endorsements, consents and assurances as may be required to
convey and transfer to and vest in Viacom and protect its right, title and
interest in the Shares from such Seller, and as may be appropriate
otherwise to carry out the transactions contemplated by this Agreement to
which such Seller is a party.
27
Section 11.2 Holdback and Option Agreement. (a) During the
Holdback Period (as defined below), the Sellers jointly agree that the
Sellers and the Guarantors will hold and will not directly or indirectly
sell, transfer, assign, pledge or otherwise dispose of or encumber (each, a
"Transfer") an aggregate of 2,210,695 (which number shall be reduced by (a)
the product of 49.99% and the result obtained by subtracting the aggregate
number of shares of Common Stock issued by the Company in connection with
the pending acquisitions set forth in Section 5.3 of the DZI Disclosure
Schedule from 500,000; and (b) on the anniversary of the date of this
Agreement (the "Anniversary Date"), the result obtained by subtracting (i)
the difference between 49.99% of the outstanding shares of Common Stock on
the Anniversary Date and 28,044,001, from (ii) the number of shares of
Common Stock purchased by Viacom pursuant to the Top-Up Option up to and
including the Anniversary Date (the adjustments in (a) and (b) are
hereinafter collectively referred to as the "Adjustments") shares of Common
Stock (the "Holdback Shares"), other than (i) pursuant to a tender or
exchange offer for substantially all the outstanding shares of DZI Common
Stock or in a merger transaction in which substantially all the outstanding
shares of DZI Common Stock are converted into other consideration (each, a
"Stockholder Transaction"), or (ii) a transfer to any affiliate of any such
Seller or Guarantor (provided that the restrictions of this Section 11.2
will continue to be applicable to the affiliate after such Transfer and
such affiliate shall assume such Seller's obligations under this Article XI
with respect to any Holdback Shares so transferred in writing). For
purposes of this Section 11.2(a), the term "Holdback Period" shall mean the
period commencing on the date hereof and ending upon the earliest to occur
of (i) the termination of the Management Services Agreement in accordance
with its terms, (ii) the second anniversary of the date of this Agreement,
or (iii) a Transfer pursuant to a Stockholder Transaction.
28
(b) The Sellers hereby jointly and severally grant to Viacom an
irrevocable option to purchase the number of Holdback Shares (up to a
maximum of 2,210,695 (subject to the Adjustments) shares of Common Stock)
necessary to increase Viacom's ownership interest in the outstanding shares
of Common Stock of DZI up to 49.99% (the "Top-Up Option"). The exercise
price per share (the "Exercise Price") of the Top-Up Option shall be equal
to 75% of the Average Closing Price (as defined below); provided that
notwithstanding anything to the contrary elsewhere herein, the exercise
price of the Top-Up Option shall never be less than $6.50 or more than
$12.50 per share. The Top-Up Option shall be exercisable in whole or in
part at any time and from time to time during the Holdback Period, except
during a bona fide Stockholder Transaction of which Viacom has knowledge.
Upon the expiration of the Holdback Period, the Top-Up Option and all
rights and obligations relating thereto shall terminate. For purposes of
this Section 11.2(b), the term "Average Closing Price" shall mean the
average closing price of the shares of Common Stock on the Nasdaq National
Market (or, if the Common Stock is not then traded on the Nasdaq National
Market, the composite closing price of the shares of Common Stock on the
securities exchanges on which the Common Stock may then be traded), as
reported in The Wall Street Journal (Midwest Edition), on the twenty
business days ending on the second business day before the date of the
Option Closing (as defined below) of any exercise of the Top-Up Option.
(c) In the event that Viacom elects to exercise all or any portion of
the Top-Up Option, Viacom shall give written notice of exercise to the
Sellers (the "Exercise Notice"). The closing of the purchase and sale of
the Holdback Shares pursuant to an exercise of the Top-Up Option (the
"Option Closing") shall occur at such place and time and on such date as
shall be specified by Viacom in the Exercise Notice; provided, however,
that the parties acknowledge that such Closing may be conducted by
facsimile, overnight courier, wire transfer or similar means; and provided,
29
further, that in no event shall the Option Closing occur earlier than 10
days or later than 15 days after receipt of the Exercise Notice by the
Sellers. At the Option Closing (i) Viacom shall pay to the Sellers the
aggregate Exercise Price for the number of Holdback Shares being purchased
as set forth in the applicable Exercise Notice by wire transfer of
immediately available funds, and (ii) the Sellers will deliver to Viacom a
stock certificate or stock certificates representing the shares of Common
Stock being purchased pursuant to the exercise of the Top-Up Option, duly
endorsed in blank or accompanied by stock powers executed in blank, in form
satisfactory to Viacom and with all required stock transfer tax stamps
affixed.
(d) In the event of any change in the outstanding shares of Common
Stock by reason of any stock dividend, stock split, reverse stock split,
recapitalization, combination, exchange of shares, merger, consolidation,
reorganization or the like or any other change in the corporate or capital
structure of DZI that would have the effect of altering any party's rights
or obligations under this Section 11.2, the number and kind of shares of
Common Stock or other securities of DZI subject to the first sentence of
this Section 11.2(a) and the Top-Up Option and the Exercise Price shall be
adjusted appropriately so as to restore each party to its rights hereunder.
(e) The parties hereto agree that irreparable damage would occur in
the event any provision of this Article XI is not performed in accordance
with the terms hereof and that Viacom shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity.
Section 11.3 Right of First Offer. (a) During the two-year period
commencing on the date of this Agreement, the Sellers jointly agree that
the Sellers will hold and will not directly or indirectly sell or otherwise
dispose of (a "Sale") an aggregate of 1,205,156 shares of Common Stock,
plus any Holdback Shares no longer subject to the provisions of Section
11.2 hereof
30
(together, the "Held Shares"), except in compliance with this Section 11.3.
If at any time a Seller wishes to make a Sale of any of its Held Shares to
any Person, it shall deliver to Viacom by facsimile to the principal
offices of Blockbuster (Attention: General Counsel) a written notice of
its desire to make such Sale (an "Offer Notice"). The Offer Notice shall
specify such Seller's desire to make such Sale (which shall be for cash
only), the number of Held Shares such Seller wishes to sell (the "Offered
Shares") and the cash price per Held Share at which, and any other terms
upon which, such Seller proposes to sell the Offered Shares (the "Offer
Terms").
(b) The receipt of an Offer Notice by Viacom from a Seller shall
constitute an offer by such Seller to sell to Viacom (or its affiliates)
the Offered Shares at the cash price and upon the other terms set forth in
the Offer Terms. In the case of DKB during the "Restricted Period" (as
defined in the Co-Sale Agreement), such offer shall be irrevocable for five
business days after receipt of such Officer Notice by Viacom. In the case
of DKB not during the Restricted Period and in the case of the KFF Trust
and the BJF Trust, such offer shall be irrevocable for three hours (if the
market value of the Offered Shares is equal to or less than $5,000,000) or
for 24 hours (if the market value of the Offered Shares is more than
$5,000,000) after receipt of such Offer Notice by Viacom (the respective
period during which the offer shall remain irrevocable is hereinafter
referred to as the "Waiting Period"). During the Waiting Period, Viacom
(or its affiliate) shall have the right to accept such offer as to all (but
not less than all) of the Offered Shares by giving a written notice of
acceptance (the "Notice of Acceptance") to such Seller prior to the
expiration of the Waiting Period. If Viacom (or its affiliate) so accepts
a Seller's offer (an "Accepting Party"), such Person will purchase the
Offered Shares for cash from such Seller, at the cash price and upon the
other terms set forth in the Offer Terms.
31
(c) The consummation of any such purchase by and sale to the
Accepting Party shall take place on such date, not later than five business
days after receipt of the Notice of Acceptance from the Accepting Party by
a Seller, as the Accepting Party and such Seller shall select. Upon the
consummation of such purchase and sale, such Seller shall deliver to the
Accepting Party certificates evidencing the Offered Shares purchased and
sold duly endorsed in blank or accompanied by written instruments of
transfer in form reasonably satisfactory to the Accepting Party duly
executed by such Seller.
(d) In the event that (i) Viacom shall have received an Offer Notice
from a Seller but such Seller shall not have received from Viacom (or from
Viacom's affiliate) a Notice of Acceptance as to the Offered Shares prior
to the expiration of the Waiting Period following receipt of such Offer
Notice or (ii) the Accepting Party shall have given a Notice of Acceptance
to such Seller but shall have failed to consummate, other than as a result
of the fault of such Seller, a purchase of the Offered Shares with respect
to which such Notice of Acceptance was given within five business days
after receipt of the Notice of Acceptance by such Seller, then such Seller
may make a Sale of such Offered Shares so long as all the Offered Shares
are sold or otherwise disposed of (A) within 90 days after the date of
receipt of such Offer Notice by Viacom and (B) at, or in excess of, the
price and otherwise on terms no less favorable to the purchaser thereof
than the Offer Terms; provided, however, that in the case of subsection
(d)(ii) above, Viacom shall be responsible for the amount that the average
of the high and low prices of the Common Stock (as quoted in The Wall
Street Journal) on the fifth business day after receipt of the Notice of
Acceptance by such Seller is less than the bid price of the Common Stock at
the time of receipt of the Notice of Acceptance by such Seller.
32
ARTICLE XII
Indemnification
Section 12.1 Agreement by the Sellers to Indemnify.
(a) Subject to the limitations contained in this Section 12.1, each
of the Sellers, jointly and severally agrees that such Seller will defend,
indemnify and hold Viacom and its respective affiliates harmless in respect
of the aggregate of all indemnifiable damages of Viacom. For this purpose,
"indemnifiable damages" of Viacom means the aggregate of all expenses,
damages, losses, costs, deficiencies and liabilities (including related and
reasonable counsel fees and expenses, and compensatory and demonstrable
consequential damages) incurred or suffered by Viacom as a direct result of
(i) any inaccurate representation or warranty made by such Seller in or
pursuant to this Agreement, or (ii) any default in the performance of any
of the covenants or agreements made by such Seller in this Agreement;
provided, however, that any such expenses, damages, losses, costs,
deficiencies and liabilities resulting from any item or items relating to a
common set of facts or circumstances in connection with a breach of any
representation or warranty made herein shall not be considered
"indemnifiable damages" unless the amount involved is greater than $10,000;
provided, further, however that "indemnifiable damages" shall not include
any expenses, damages, losses, costs, deficiencies or liabilities incurred
as a result of any inaccuracy, breach or default of any provision of
Sections 5.10(A) or 5.10(B) hereof.
(b) Each of the representations and warranties made by the Sellers in
this Agreement shall survive until and including the first anniversary of
the Closing Date, and thereafter all such representations and warranties
shall be extinguished; provided, however, the representations and
warranties made by the Sellers in Article IV hereof shall in each case
survive forever, the representations and warranties made by the Sellers in
Section 5.8 shall survive for the applicable
33
statute of limitations period, except to the extent that other
representations and warranties in this Agreement reference compliance with
specific laws, regulations or orders, which such representations and
warranties shall survive until and including the first anniversary of the
Closing Date, the representations and warranties made by the Sellers in
Section 5.9 shall survive for a period of seven years and six months from
the Closing Date, and the representations and warranties made by the
Sellers in Sections 5.10(A) or 5.10(B) shall survive through the Closing.
No claim for the recovery of indemnifiable damages based upon the
inaccuracy of such representations and warranties may be asserted by Viacom
after such representations and warranties shall be thus extinguished;
provided, however, that claims first asserted within the applicable period
(whether or not the amount of any such claim has become ascertainable
within such period) shall not thereafter be barred.
(c) The Sellers shall only be liable for any claim for indemnifiable
damages arising out of any inaccuracy of any representation or warranty
contained in Article V hereof if the aggregate amount of all such
indemnifiable damages payable by all Sellers exceeds $500,000, in which
case the Sellers shall be liable for all indemnifiable damages arising out
of such inaccuracies, including the first $500,000. No Seller shall be
liable for any claim for indemnifiable damages arising out of the
inaccuracy of any representation and warranty or the default in the
performance of any covenant or agreement made by any other Seller as to
itself only. The aggregate amount of indemnifiable damages payable by any
Seller shall not exceed such Seller's share of the Purchase Price.
(d) The remedies provided for in this Section 12.1 shall be the sole
monetary remedy available to Viacom under this Agreement, and there shall
be no remedy (other than with respect to Section 9.1 hereof) available to
Viacom under this Agreement for any inaccuracy, breach or default of any
provisions of Sections 5.10(A) and 5.10(B) hereof.
Section 12.2 Agreement by Viacom to Indemnify.
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(a) Subject to the limitations contained in this Section 12.2, Viacom
agrees that it will defend, indemnify and hold the Sellers and their
respective affiliates harmless in respect of the aggregate of all
indemnifiable damages of the Sellers. For this purpose, "indemnifiable
damages" of the Sellers means the aggregate of all expenses, losses, costs,
deficiencies, liabilities and damages (including related and reasonable
counsel fees and expenses, and compensatory and demonstrable consequential
damages) incurred or suffered by the Sellers as a direct result of any (i)
inaccurate representation or warranty made by Viacom in or pursuant to this
Agreement, or (ii) default in the performance of any of the covenants or
agreements made by Viacom in this Agreement; provided, however, that any
such expenses, damages, losses, costs, deficiencies and liabilities
resulting from any item or items relating to a common set of facts or
circumstances in connection with a breach of any representation or warranty
made herein shall not be considered "indemnifiable damages" unless the
amount involved is greater than $10,000.
(b) Each of the representations and warranties made by Viacom in this
Agreement shall survive forever.
(c) Viacom shall be liable only for any claim for indemnifiable
damages arising out of any inaccuracy of any representation or warranty if
the aggregate amount of all such indemnifiable damages exceeds $500,000, in
which case Viacom shall be liable for all indemnifiable damages arising out
of such inaccuracies, including the first $500,000. The aggregate amount
of indemnifiable damages payable by Viacom to all Sellers shall not exceed
the Purchase Price.
(d) The remedies provided for in this Section 12.2 shall be the sole
monetary remedy available to the Sellers under this Agreement or otherwise.
Section 12.3 Indemnification Procedures for Third Party Claims. In
the event that subsequent to the Closing Date any claim is asserted by a
third party against a party hereto as to
35
which such party is entitled to indemnification hereunder, such party (the
"indemnified party") shall as promptly as possible notify the party
obligated to indemnify it (the "indemnifying party") thereof in writing.
No delay on the part of the indemnified party to notify the indemnifying
party of a claim shall relieve any obligation of the indemnifying party to
indemnify the indemnified party with respect to such claim unless (and then
solely to the extent) the indemnifying party is prejudiced in its ability
to defend against the subject claim by the delay in such notification. The
indemnifying party shall have the right, upon written notice to the
indemnified party within ten (10) days after receipt from the indemnified
party of notice of such claim, to conduct at its expense and with counsel
of its choice reasonably satisfactory to the indemnified party the defense
against such claim in its own name, or, if necessary, in the name of the
indemnified party. In the event that the indemnifying party shall fail to
give such notice, it shall be deemed to have elected not to conduct the
defense of the subject claim, and in such event the indemnified party shall
have the right to conduct such defense and to compromise and settle the
claim without prior consent of the indemnifying party, and the indemnifying
party will remain responsible for all indemnifiable damages suffered by the
indemnified party relating to the subject claim. In the event that the
indemnifying party does elect to conduct the defense of the subject claim,
the indemnified party will cooperate with and make available to the
indemnifying party such assistance and materials as may be reasonably
requested by it, all at the expense of the indemnifying party, and the
indemnified party shall have the right at its expense to participate in the
defense, provided that the indemnified party shall have the right to
compromise and settle the claim only with the prior written consent of the
indemnifying party (such consent not to be unreasonably withheld). The
indemnifying party will not consent to the entry of any judgment with
respect to a subject claim or enter into any settlement with respect
thereto which does not include a provision whereby the plaintiff or
claimant
36
releases the indemnified party from all liability with respect thereto or
in cases involving equitable relief, puts the indemnified party in the same
position as it was prior to the initiation of the claim, without the prior
written consent of the indemnified party (such consent not to be
unreasonably withheld so long as such settlement or judgment only involves
the payment of money damages).
Section 12.4 Credit Provisions. In the event that, notwithstanding
the limitations contained in this Article XII, an indemnifying party
nevertheless becomes liable to an indemnified party hereunder, the
indemnifying party shall be entitled to a credit or offset against any such
liability of an amount equal to the value of any net tax benefit realized
by the indemnified party in connection with the loss or damage suffered by
the indemnified party which forms the basis of the indemnifying party's
liability hereunder and the receipt of the indemnification payment by the
indemnified party.
ARTICLE XIII
Miscellaneous
Section 13.1 [Intentionally omitted.]
Section 13.2 Brokers' Commission. Each Seller will indemnify and
hold harmless Viacom from the commission, fee or claim of any person, firm
or corporation employed or retained or claiming to be employed or retained
by such Seller to bring about, or to represent it in, the transactions
contemplated hereby. Viacom will indemnify and hold harmless each of the
Sellers from the commission, fee or claim of any person, firm or
corporation employed or retained or claiming to be employed or retained by
Viacom to bring about, or to represent it in, the transactions contemplated
hereby.
Section 13.3 Amendment and Modification. The parties hereto may
amend, modify and supplement this Agreement in such manner as may be agreed
upon by them in writing.
37
Section 13.4 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors, assignees, heirs and legal representatives. Nothing in this
Agreement shall confer upon any person, firm or corporation not a party to
this Agreement, or the legal representatives of such person, firm or
corporation, any rights or remedies of any nature or kind whatsoever by
reason of this Agreement.
Section 13.5 Entire Agreement. This Agreement, the DZI Disclosure
Schedule and the Exhibits attached hereto contain the entire agreement of
the parties hereto with respect to the purchase of the Shares and the
Holdback Shares and the other transactions contemplated herein and
supersede all prior understandings and agreements of the parties with
respect to the subject matter hereof.
Section 13.6 Headings. The descriptive headings in this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
Section 13.7 Execution in Counterpart. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original.
Section 13.8 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given when received,
whether personally, by telegram, telex, facsimile transmission (followed by
regular mail) or registered or certified mail (return receipt requested) to
the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
If to Viacom,
addressed to:
Blockbuster Entertainment Group
Xxx Xxxxxxxxxxx Xxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Fax No.: (000) 000-0000
38
with a copy to: Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx Xxxxxx
Fax No.: (000) 000-0000
If to any of the Sellers,
addressed to:
Xxxxx Enterprises, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Fax No.: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax No.: (000) 000-0000
Section 13.9 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware applicable
to contracts made and to be performed therein, without regard to the
conflicts of laws principles thereof.
Section 13.10 Publicity. No press release or other public
announcement related to this Agreement or the transactions contemplated
hereby will be issued by any party hereto without the prior approval of the
other parties, except that any party may make such public disclosure which
it believes in good faith to be required by law (in which case such party
will consult with the other parties prior to making such disclosure).
Section 13.11 Termination. Anything to the contrary herein
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned:
39
(i) by the mutual written consent of all of the parties hereto
at any time prior to the Closing Date;
(ii) by the Sellers in the event of the material breach by Viacom
of any provision of this Agreement (it being agreed that if the breach
in question is a breach by Viacom of any representation or warranty
contained in Article VI of this Agreement, such breach will not be
considered a material breach unless it would result in Viacom being
unable to consummate the transactions contemplated hereby), which
breach is not remedied by Viacom within 30 days after receipt of
notice thereof from the Sellers;
(iii) by Viacom in the event of the material breach by any of the
Sellers of any provision of this Agreement (it being agreed that if
the breach in question is a breach by the Sellers of any
representation or warranty contained in Article V of this Agreement,
such breach will not be considered a material breach unless it would
result in the Sellers being unable to consummate the transactions
contemplated hereby or in a DZI Material Adverse Effect, which breach
is not remedied by the Sellers within 30 days after receipt of the
notice thereof from Viacom; or
(iv) by any party hereto if the Closing has not taken place by
June 30, 1995. If this Agreement is terminated pursuant to clause
(a)(i) above, no party shall have any liability for any cost, expense,
loss of anticipated profit or any further obligation for breach of
warranty or otherwise to any other party to this Agreement. Any
termination of this Agreement pursuant to clauses (a) (ii), (iii) or
(iv) above shall be without prejudice to any other rights or remedies
of the respective parties.
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Section 13.12 Expenses. Whether or not the transactions contemplated
hereby are consummated, all costs and expenses incurred in connection with
the transactions contemplated hereby shall be paid by the party incurring
such expenses.
Section 13.13 Notice of Developments. From time to time until or on
the Closing Date, Viacom, on the one hand, and the Sellers, on the other
hand, shall promptly give written notice to the other of any matter
hereafter arising of which the notifying party becomes aware which, if
existing or occurring at the date of this Agreement, would have been
required to be disclosed herein. However, no such disclosure made pursuant
to this Section 13.13 shall be deemed to supplement any disclosure schedule
or cure any breach of any representation, warranty or covenant.
Section 13.14 Guarantees. Xxxxxx X. Xxxxx hereby unconditionally
guarantees the full and prompt payment of the liabilities and the
performance of all of the obligations of, and the accuracy of the
representations and warranties made by, DKB hereunder. Xxxxx X. Xxxxx
hereby unconditionally guarantees the full and prompt payment of the
liabilities and the performance of all of the obligations of, and the
accuracy of the representations and warranties made by, the KFF Trust
hereunder. Xxxxx X. Xxxxx hereby unconditionally guarantees the full and
prompt payment of the liabilities and the performance of all of the
obligations of, and the accuracy of the representations and warranties made
by, the BJF Trust hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
SELLERS:
DKB, INC. VIACOM INC.
By: /s/ Xxxxxx Xxxxx By: /s/ Xxxxxx X. Xxxxxxx
--------------------- ------------------------
Name: Xxxxxx X. Xxxxx Name: Xxxxxx X. Xxxxxxx
------------------- ----------------------
Title: President Title: Assistant Secretary
------------------ ----------------------
Xxxxx X. Xxxxx June, 1992 Non-Exempt Trust
By: /s/ Xxxxx X. Xxxxx BLOCKBUSTER DISCOVERY
------------------------------ INVESTMENT, INC.
Trustee
Xxxxx X. Xxxxx June, 1992 Non-Exempt Trust By: /s/ Xxxx X. Xxxxxxxx
------------------------------
Name: Xxxx X. Xxxxxxxx
----------------------------
Title: Vice President
----------------------------
By: /s/ Xxxxx X. Xxxxx
----------------------------
Trustee
GUARANTORS:
/s/ Xxxxxx X. Xxxxx
- ---------------------
Xxxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxx
- ---------------------
Xxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxx
- ---------------------
Xxxxx X. Xxxxx
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