<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1999
REGISTRATION NO. 333-77899
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO THE
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BLOCKBUSTER INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7841 52-1655102
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
1201 ELM STREET
DALLAS, TEXAS 75270
(214) 854-3000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
EDWARD B. STEAD
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
BLOCKBUSTER INC.
1201 ELM STREET
DALLAS, TEXAS 75270
(214) 854-3000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copies to:
<TABLE>
<S> <C> <C>
STEPHEN T. GIOVE MICHAEL D. FRICKLAS KENNETH A. LEFKOWITZ
SHEARMAN & STERLING VIACOM INC. HUGHES HUBBARD & REED LLP
599 LEXINGTON AVENUE 1515 BROADWAY ONE BATTERY PARK PLAZA
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10036 NEW YORK, NEW YORK 10004-1482
(212) 848-4000 (212) 258-6000 (212) 837-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective. If any of the
securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: one to be used
in connection with a U.S. and Canadian offering of the registrant's class A
common stock and one to be used in connection with a concurrent international
offering of the class A common stock. The international prospectus will be
identical to the U.S. prospectus except that it will have different front and
back cover pages. The form of U.S. prospectus is included herein and is followed
by the alternate pages to be used in the international prospectus which differ
from those used in the U.S. prospectus. Each of the alternate pages for the
international prospectus included herein has been labeled "Alternate Page for
International Prospectus." Final forms of each prospectus will be filed with the
Securities and Exchange Commission under Rule 424(b) of the General Rules and
Regulations under the Securities Act of 1933.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC registration fee............................................ $ 178,393
NASD filing fee................................................. 30,500
NYSE listing fee................................................ 191,350
Blue Sky fees and expenses...................................... 5,000
Attorneys' fees and expenses.................................... 2,000,000
Accountants' fees and expenses.................................. 1,500,000
Transfer Agent's and Registrar's fees and expenses.............. 14,000
Printing and engraving fees..................................... 1,200,000
Miscellaneous................................................... 580,757
---------
Total....................................................... $5,700,000
---------
---------
</TABLE>
The amounts set forth above are estimates except for the SEC registration
fee and the NASD filing fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides, in summary,
that directors and officers of Delaware corporations are entitled, under certain
circumstances, to be indemnified against all expenses and liabilities, including
attorneys' fees, incurred by them as a result of suits brought against them in
their capacity as a director or officer, if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful; provided that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the Company,
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, they are fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Any such indemnification may be made by the Company only as authorized
in each specific case upon a determination by the shareholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct.
The Company's Amended and Restated Certificate of Incorporation provides
that to the fullest extent permitted by the laws of Delaware, as the same may be
amended from time to time, a director of the Company shall not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director.
The Company's Certificate of Incorporation and By-Laws provide for
indemnification of its directors and officers to the fullest extent permitted by
Delaware law, as the same may be amended from time to time.
Section 8 of the Underwriting Agreement (Exhibit 1.1 hereto) contains
provisions for certain indemnification rights to the directors and officers of
the Registrant.
In addition, the Company maintains liability insurance for its directors and
officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
See the index to the exhibits.
(B) FINANCIAL STATEMENT SCHEDULES.
The schedules have been omitted because of the absence of circumstances
under which they could be required.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities, other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding, is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933
shall be deemed to be part of this registration statement as of the
time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the U.S. Underwriting Agreement and the
International Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in Dallas,
Texas on , 1999.
<TABLE>
<S> <C> <C>
BLOCKBUSTER INC.
BY: /S/ EDWARD B. STEAD
-----------------------------------------
Edward B. Stead
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ ---------------------------
<C> <S>
* Chairman, President and
- ------------------------------ Chief Executive Officer
John F. Antioco
Executive Vice President,
* Chief Financial Officer
- ------------------------------ and Chief Accounting
Larry J. Zine Officer
* Director
- ------------------------------
Philippe P. Dauman
* Director
- ------------------------------
Thomas E. Dooley
* Director
- ------------------------------
Linda Griego
* Director
- ------------------------------
John L. Muething
* Director
- ------------------------------
Sumner M. Redstone
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ EDWARD B. STEAD
-------------------------
Edward B. Stead
ATTORNEY-IN-FACT
<CAPTION>
Dated: , 1999
<CAPTION>
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation of the Registrant.
3.2 Form of Bylaws of the Registrant.
**4.1 Specimen of the certificate representing the Class A Common Stock.
**5.1 Opinion of Shearman & Sterling as to the legality of the Class A Common Stock.
10.1 Form of Initial Public Offering and Split-Off Agreement among the Registrant, Viacom International
Inc. and Viacom Inc.
10.2 Form of Release and Indemnification Agreement between the Registrant and Viacom Inc.
**10.3 Form of Transition Services Agreement between the Registrant and Viacom Inc.
10.4 Form of Registration Rights Agreement between the Registrant and Viacom Inc.
**10.5 Form of Tax Matters Agreement between the Registrant and Viacom Inc.
+10.6 Revenue-Sharing Agreement, dated as of November 21, 1997, between the Registrant and Buena Vista Home
Entertainment, Inc.
+10.7 Revenue-Sharing Agreement, dated as of September 29, 1998, between the Registrant and Twentieth
Century Fox Home Entertainment, Inc.
+10.8 Revenue-Sharing Agreement, dated as of August 25, 1998, between the Registrant and Columbia TriStar
Home Video, Inc..
+10.9 Direct Revenue-Sharing Adjustable License Agreement, dated as of October 13, 1998, between the
Registrant and Universal Studios Home Video.
+10.10 Revenue-Sharing Agreement, dated as of January 20, 1999, between the Registrant and Warner Home Video,
a division of Time Warner Entertainment Company, L.P.
+10.11 Revenue-Sharing Term Sheet, dated as of July 29, 1999, between the Registrant and Paramount Home
Video.
10.12 Employment Agreement between the Registrant and John F. Antioco, dated July 15, 1999.
10.13 Employment Agreement between Blockbuster Entertainment Group, a business unit of Viacom Inc. and Jim
Notarnicola, dated June 1, 1998.
10.14 Employment Agreement between Blockbuster Entertainment Group, a business unit of Viacom Inc. and Gary
Peterson, dated June 1, 1998.
10.15 Amendment to the Employment Agreement between Blockbuster Entertainment Group, a business unit of
Viacom Inc. and Gary Peterson, dated December 1, 1998.
10.16 Employment Agreement between Blockbuster Entertainment Group, a business unit of Viacom Inc. and
Edward B. Stead, dated September 2, 1997.
10.17 Amendment to the Employment Agreement between Blockbuster Entertainment Group, a business unit of
Viacom Inc. and Edward B. Stead, dated December 1, 1998.
10.18 Employment Agreement between Blockbuster Entertainment Group, a business unit of Viacom Inc. and Nigel
Travis, dated June 1, 1998.
10.19 Amendment to the Employment Agreement between Blockbuster Entertainment Group, a business unit of
Viacom Inc. and Nigel Travis, dated December 1, 1998.
10.20 1999 Long-Term Management Incentive Plan.
10.21 Senior Executive Short-Term Incentive Plan.
**10.22 Credit Agreement, dated as of June 21, 1999, between the Registrant and the banks named therein.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
10.23 Form of Promotional Services and Customer Database Services and License Agreement between the
Registrant and MTV Networks, a division of Viacom International Inc.
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
**23.2 Consent of Shearman & Sterling (included in its opinion in Exhibit 5.1).
**24.1 Powers of Attorney with respect to John F. Antioco, Larry J. Zine, Philippe P. Dauman, Thomas E.
Dooley and Sumner M. Redstone.
**24.2 Powers of Attorney with respect to John L. Muething and Linda Griego.
**27.1 Financial Data Schedule (December 31, 1998).
**27.2 Financial Data Schedule (March 31, 1999).
</TABLE>
- ------------------------
* To be filed by amendment.
** Filed previously.
+ Exhibits for which Registrant is seeking confidential treatment for certain
portions. The confidential material in such exhibits have been redacted and
separately filed with the Securities and Exchange Commission.
<PAGE>
Exhibit 3.1
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BLOCKBUSTER INC.
Blockbuster Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"DGCL"), does hereby amend and restate the certificate of incorporation of the
corporation, which was originally filed on October 16, 1989, under the name SBQ,
Inc. and does certify that this amended and restated certificate of
incorporation has been duly adopted in accordance with Sections 242 and 245 of
the DGCL.
Article I
NAME
Section 1.01. NAME. The name of the corporation is:
Blockbuster Inc.
Article II
REGISTERED OFFICE AND AGENT
Section 2.01. ADDRESS. The address of the registered office of
the corporation in the State of Delaware is 1013 Centre Road, Wilmington, County
of New Castle, Delaware 19805-1297. The name of its registered agent at such
address is Corporation Service Company.
<PAGE>
Article III
PURPOSE
Section 3.01. PURPOSE. The purpose of the corporation is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware as the same exist or may hereafter
be amended.
Article IV
DESCRIPTION AND AUTHORIZATION OF STOCK
Section 4.01. AUTHORIZED SHARES. (a) The total number of
shares of stock that the corporation shall have authority to issue is
1,000,000,000 of which:
(i) 400,000,000 shares shall be shares of Class A Common
Stock, par value $0.01 per share (the "Class A Common Stock");
(ii) 500,000,000 shares shall be shares of Class B Common
Stock, par value $0.01 per share (the "Class B Common Stock") (the
Class A Common Stock and the Class B Common Stock being collectively
referred to herein as the "Common Stock"); and
(iii) 100,000,000 shares shall be shares of Preferred Stock,
par value $0.01 per share (the "Preferred Stock").
(b) The number of authorized shares of any class or classes of
stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of a majority of the combined voting
power of Voting Stock (as defined below) of the corporation irrespective of the
provisions of Section 242(b)(2) of the DGCL.
(c) For purposes of this amended and restated certificate of
incorporation, "Voting Stock" shall mean the shares of the then outstanding
capital stock entitled to vote generally on the election of directors or other
matters submitted to a vote of the stockholders of the corporation and shall
exclude any class or series of capital stock only entitled to vote in the event
of dividend arrearages thereon, whether or not at the time of determination
there are any such dividend arrearages.
Section 4.02. POWERS, PREFERENCES AND RIGHTS OF THE CLASS A
COMMON STOCK AND THE CLASS B COMMON STOCK. Except as otherwise required by law
or as set forth below in this Article IV, the powers, preferences and rights and
relative participating, optional or other special rights and qualifications,
limitations or restrictions of the Class A Common Stock and Class B Common Stock
shall be identical in all respects.
2
<PAGE>
(a) VOTES, RIGHTS AND POWERS. (i) At every meeting of the
stockholders of the corporation, every holder of Class A Common Stock shall be
entitled to one vote in person or by proxy for each share of Class A Common
Stock standing in his or her name on the transfer books of the corporation, and
every holder of Class B Common Stock shall be entitled to five votes in person
or by proxy for each share of Class B Common Stock standing in his or her name
on the transfer books of the corporation, in connection with the election of
directors and all other matters submitted to a vote of stockholders of the
corporation. Except as may be otherwise required by law or by this amended and
restated certificate of incorporation, the holders of Class A Common Stock and
Class B Common Stock shall vote together as a single class, and their votes
shall be counted and totaled together, subject to any voting rights that may be
granted to holders of Preferred Stock, on all matters submitted to a vote of the
stockholders of the corporation. Notwithstanding any other provision of this
amended and restated certificate of incorporation to the contrary, holders of
Class A Common Stock shall not be eligible to vote on any alteration or change
in the powers, preferences, or special rights of the Class B Common Stock that
would not adversely affect the rights of the Class A Common Stock; PROVIDED
that, for the foregoing purposes, any provision for the voluntary, mandatory or
other conversion or exchange of the Class B Common Stock into or for Class A
Common Stock on a one for one basis shall be deemed not to adversely affect the
rights of the Class A Common Stock.
(ii) Every reference in this amended and restated certificate
of incorporation to a majority or other proportion of shares, or a majority or
other proportion of the votes of shares, of Voting Stock, Common Stock, Class A
Common Stock or Class B Common Stock shall refer to such majority or other
proportion of the votes to which such shares of Voting Stock, Common Stock,
Class A Common Stock or Class B Common Stock are entitled.
(iii) No stockholder shall be entitled to exercise any right
of cumulative voting.
(b) DIVIDENDS. Subject to the rights of the holders of
Preferred Stock, and subject to any other provisions of this amended and
restated certificate of incorporation, holders of Class A Common Stock and Class
B Common Stock shall be entitled to receive such dividends and other
distributions in cash, stock of any corporation (other than Common Stock of the
corporation) or property of the corporation as may be declared thereon by the
board of directors from time to time out of assets or funds of the corporation
legally available therefor and shall share equally on a per share basis in all
such dividends and other distributions. In the case of dividends or other
distributions payable in Common Stock, including distributions pursuant to stock
splits or divisions of Common Stock of the corporation, only shares of Class A
Common Stock shall be paid or distributed with respect to Class A Common Stock
and only shares of Class B Common Stock shall be paid or distributed with
respect to Class B Common Stock. The number of shares of Class A Common Stock
and Class B Common Stock so distributed shall be equal in number on a per share
basis. Neither the shares of Class A Common Stock nor the shares of Class B
Common Stock may be reclassified, subdivided or combined unless such
reclassification, subdivision or combination occurs simultaneously and in the
same proportion for each class.
3
<PAGE>
(c) DISTRIBUTION OF ASSETS UPON LIQUIDATION. In the event of
any dissolution, liquidation or winding up of the affairs of the corporation,
whether voluntary or involuntary, after payment or provision for payment in full
of the amounts required to be paid to the holders of Preferred Stock, the
remaining assets and funds of the corporation shall be distributed pro rata to
the holders of Class A Common Stock and Class B Common Stock. For the purposes
of this paragraph (c), the voluntary sale, conveyance, lease, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all of the assets of the corporation or a consolidation or
merger of the corporation with one or more other corporations (whether or not
the corporation is the corporation surviving such consolidation or merger) shall
not be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary.
(d) CONVERSION. (i) Prior to a Tax-Free Split-Off (as defined
in subparagraph (d)(vii) below), each share of Class B Common Stock is
convertible at the option of the holder thereof into one share of Class A Common
Stock. At the time of a voluntary conversion, the holder of shares of Class B
Common Stock shall deliver to the office or agency of the corporation maintained
for the transfer of the Class B Common Stock (x) the certificate or certificates
representing the shares of Class B Common Stock to be converted, duly endorsed
in blank or accompanied by proper instruments of transfer, together with any
payment required for taxes in accordance with subparagraph (d)(iv), and (y)
written notice to the corporation stating that such holder elects to convert
such share or shares and stating the name and address in which each certificate
for shares of Class A Common Stock issued upon such conversion is to be issued.
To the extent permitted by law and subject to the taking of any necessary action
or making any filing contemplated by subparagraph (d)(v) and subject to the
requirements of this paragraph (d), such voluntary conversion shall be deemed to
have been effected at the close of business on the date when such delivery is
made to the corporation or such transfer agent of the shares to be converted.
(ii) To the extent that Viacom Inc., a Delaware corporation,
("Viacom") beneficially owns 80% or more of the economic value of the
corporation immediately prior to the Tax-Free Split-Off, each share of Class B
Common Stock shall automatically convert into one share of Class A Common Stock
immediately prior to the Tax-Free Split-Off unless, prior to such Tax-Free
Split-Off, Viacom delivers to the corporation an opinion of Viacom's counsel to
the effect that such conversion is likely to prevent or materially delay
obtaining a favorable ruling from the Internal Revenue Service that the Tax-Free
Split-Off would qualify as a tax-free transaction under the Code (as defined
below) or will otherwise create a significant risk of material adverse tax
consequences to Viacom or its stockholders.
The corporation shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock and its issued Common Stock held in its treasury for the purpose of
effecting any conversion of the Class B Common Stock pursuant to this
subparagraph (d)(ii), the full number of shares of Class A Common Stock then
deliverable upon any such conversion of all outstanding shares of Class B Common
Stock. The corporation will provide notice of any automatic conversion of shares
of Class B Common
4
<PAGE>
Stock to holders of record of the Common Stock as soon as practicable. Such
notice may be provided by issuing a press release; PROVIDED, HOWEVER, that no
failure to give such notice nor any defect therein shall affect the validity of
the automatic conversion of any shares of Class B Common Stock.
Immediately upon such conversion, the rights of the holders of shares
of Class B Common Stock as such shall cease and such holders shall be treated
for all purposes as having become the record owners of the shares of Class A
Common Stock issuable upon such conversion; PROVIDED, HOWEVER, that such persons
shall be entitled to receive when paid any dividends declared on the Class B
Common Stock as of a record date preceding the time of such conversion and
unpaid as of the time of such conversion.
(iii) Following the Tax-Free Split-Off, any outstanding shares
of Class B Common Stock shall no longer be convertible into shares of Class A
Common Stock.
(iv) The corporation will not be required to pay any
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Class A Common Stock on the conversion of shares
of Class B Common Stock pursuant to subparagraphs (d)(i) and (ii) above and no
such issue or delivery shall be made unless and until the person requesting such
issue has paid to the corporation the amount of any such tax or has established,
to the satisfaction of the corporation, that such tax has been paid.
(v) Concurrently with any conversion of Class B Common Stock
into Class A Common Stock effected pursuant to subparagraphs (d)(i) and (ii)
above, each share of Class B Common Stock that is converted (x) shall be retired
and canceled and shall not be reissued and (y) shall proportionally decrease the
number of shares of Common Stock of such class designated hereby. The secretary
of the corporation shall be, and hereby is, authorized and directed to file with
the Secretary of State of the State of Delaware one or more certificates to
record any such decrease in designated shares of Common Stock. No undesignated
shares of Common Stock shall be designated shares of Class B Common Stock
following an automatic conversion of shares of Class B Common Stock pursuant to
subparagraph (d)(ii) above.
(vi) Immediately upon the effectiveness of this amended and
restated certificate of incorporation, the shares of common stock of the
corporation, par value $0.001 per share, that are issued and outstanding
immediately prior to such effectiveness, shall be changed into and reclassified
as 144,000,000 shares of Class B Common Stock.
(vii) For purposes of this amended and restated certificate of
incorporation, the term "Tax-Free Split-Off" shall mean any transfer effected in
connection with the distribution of Class A Common Stock and/or Class B Common
Stock to security holders of Viacom (including any distribution in exchange for
shares of capital stock or securities of Viacom) intended to qualify as a
tax-free distribution under Section 355 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code").
5
<PAGE>
Section 4.03. POWERS AND RIGHTS OF THE PREFERRED STOCK. Any
unissued or treasury shares of the Preferred Stock may be issued from time to
time in one or more series for such consideration as may be fixed from time to
time by resolution of the board of directors and each share of a series shall be
identical in all respects with the other shares of such series, except that, if
the dividends thereon are cumulative, the date from which they shall be
cumulative may differ. Before any shares of Preferred Stock of any particular
series shall be issued, a certificate shall be filed with the Secretary of State
of Delaware setting forth the voting powers, if any, and the designations,
preferences and relative, participating, optional, dividend or other special
rights, and such qualifications, limitations, restrictions, conditions or other
characteristics to be attached to the Preferred Stock of such series and such
other matters as may be required, and the board of directors shall fix and
determine, and is hereby expressly empowered to fix and determine, in the manner
provided by law, the particulars of the shares of such series (so far as not
inconsistent with the provisions of this Article IV applicable to all series of
Preferred Stock), including, but not limited to, the following:
(i) the distinctive designation of such series;
(ii) the number of shares which shall constitute such series,
which number may be increased (except where otherwise provided by the board of
directors in creating such series) or decreased (but not below the number of
shares thereof then outstanding) from time to time by like action of the board
of directors;
(iii) the rate of dividends payable on shares of such series,
if any, the conditions upon which such dividends shall be payable, the
preference to or the relation to the payment of dividends payable on any other
class or classes or series of stock, and the date from which dividends shall be
cumulative in the event the board of directors determines that dividends shall
be cumulative;
(iv) whether or not the shares of such series shall be
redeemable and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(v) the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment of shares
of that series;
(vi) whether such series shall have conversion or exchange
privileges and, if so, the terms and conditions of such conversion, including,
but not limited to, provision for adjustment of the conversion rate upon such
events and in such manner as the board of directors shall determine;
6
<PAGE>
(vii) whether such series shall have restrictions on the
issuance of shares of the same series or any other series, if any;
(viii) whether such series shall have voting rights in
addition to the voting rights provided by law and, if so, the terms of such
voting rights; and
(ix) any other relative rights, preferences and limitations of
such series.
Section 4.04. NO PREEMPTIVE RIGHTS. Except as otherwise set
forth above in this amended and restated certificate of incorporation, no holder
of shares of this corporation of any class shall be entitled, as such, as a
matter of right, to subscribe for or purchase shares of any class now or
hereafter authorized, or to purchase or subscribe for securities convertible
into or exchangeable for shares of the corporation or to which there shall be
attached or appertain any warrants or rights entitling the holders thereof to
purchase or subscribe for shares.
Article V
AMENDMENT OF BYLAWS
Section 5.01. AMENDMENT OF BYLAWS BY DIRECTORS. In furtherance
and not in limitation of the powers conferred by statute, the board of directors
is expressly authorized to make, repeal, alter, amend and rescind the bylaws of
the corporation.
Section 5.02. AMENDMENT OF BYLAWS BY THE STOCKHOLDERS. The
bylaws may be altered, amended or repealed, in whole or in part, and new bylaws
may be adopted by the affirmative vote of stockholders with at least a majority
of the combined voting power of Voting Stock; PROVIDED, HOWEVER, that any
proposed alteration, amendment or repeal of, or the adoption of any bylaw
inconsistent with the provisions contained in the sections entitled "Special
Meetings" (Section 2.03), "Advance Notice of Stockholder Proposals" (Section
2.09), "No Stockholder Action by Written Consent" (Section 2.12), "Number of
Directors" (Section 3.02), "Election of Directors" (Section 3.03), "Vacancies,"
(Section 3.05), "Removal of Directors," (Section 3.06) and "Amendments" (Section
9.01) of the bylaws of the corporation dated _______, 1999 by the stockholders
shall require the affirmative vote of not less than 75% of the combined voting
power of Voting Stock; and PROVIDED FURTHER, however, that in the case of any
such stockholder action at a meeting of stockholders, notice of the proposed
alteration, amendment, repeal or adoption of the new bylaw or bylaws must be
contained in the notice of such meeting. In the event that any term or provision
of the bylaws is inconsistent, or conflicts, with the terms or provisions of
this amended and restated certificate of incorporation, this amended and
restated certificate of incorporation shall control.
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Article VI
BOARD OF DIRECTORS
Section 6.01. CLASSIFIED BOARD. (a) The business and affairs
of the corporation shall be managed by or under the direction of a board of
directors initially consisting of six directors, the exact number of directors
to be not less than three nor more than twelve (subject to any rights of the
holders of Preferred Stock to elect additional directors under specified
circumstances) as determined from time to time by resolution adopted by
affirmative vote of a majority of the whole board of directors. As used in this
amended and restated certificate of incorporation, the term "whole board" means
the total number of directors which the corporation would have if there were no
vacancies.
(b) The board of directors (exclusive of directors to be
elected by the holders of any one or more series of Preferred Stock voting
separately as a class or classes) shall be divided into three classes, Class I,
Class II, and Class III. The number of directors in each class shall be the
whole number contained in the quotient arrived at by dividing the authorized
number of directors by three, and if a fraction is also contained in such
quotient, then if such fraction is one-third, the extra director shall be a
member of Class I and if the fraction is two-thirds, one of the extra directors
shall be a member of Class I and the other shall be a member of Class II. Each
director shall serve for a term ending on the date of the third annual meeting
following the annual meeting at which such director was elected; PROVIDED,
HOWEVER, that the directors first elected to Class I shall serve for an initial
term which expires in 2000, the directors first elected to Class II shall serve
for an initial term which expires in 2001, and the directors first elected to
Class III shall serve for an initial term which expires in 2002.
(c) At each succeeding annual meeting of stockholders
beginning in 2000, successors to the class of directors whose term expires at
that annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting of the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to death, resignation or removal from office. Any vacancy on
the board of directors may be filled by a majority of the directors then in
office, even if less than a quorum, or by a sole remaining director.
(d) Any director elected to fill a vacancy not resulting from
an increase in the number of directors shall have the same remaining term as
that of his predecessor.
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Section 6.02. REMOVAL. (a) Subject to the right of the holders
of any class or series of Preferred Stock then outstanding, any director or the
whole board of directors may be removed, with or without cause, by the
affirmative vote of a majority of the combined voting power of Voting Stock;
PROVIDED, HOWEVER, that on and after the Trigger Date (as defined in paragraph
(b) below), a director may only be removed for cause, such removal to be by the
affirmative vote of a majority of the combined voting power of the Voting Stock.
To the extent permitted by the laws of Delaware, "cause" shall be determined by
the board of directors. Notwithstanding the foregoing, whenever holders of
outstanding shares of one or more series of Preferred Stock are entitled to
elect directors of the corporation pursuant to the provisions applicable in the
case of arrearages in the payment of dividends or other defaults contained in
the resolution or resolutions of the board of directors providing for the
establishment of any such series, any such director of the corporation so
elected may be removed in accordance with the provisions of such resolution or
resolutions.
(b) For purposes of this amended and restated certificate of
incorporation, "Trigger Date" shall mean the first date on which Viacom ceases
to beneficially own shares representing more than 50% of the votes entitled to
be cast by the Voting Stock.
(c) Promptly upon becoming aware of the occurrence of a
Trigger Date, the corporation shall notify stockholders of such occurrence in
any reasonably practicable manner.
Section 6.03. BALLOTS. Elections of directors at an annual or
special meeting of stockholders need not be by written ballot unless the bylaws
of the corporation shall provide otherwise.
Section 6.04. ELIMINATION OF CERTAIN PERSONAL LIABILITY OF
DIRECTORS. To the fullest extent permitted by the laws of Delaware, as the same
may exist or may hereafter be amended, a director of this corporation shall not
be personally liable to the corporation or its stockholders for monetary damages
for breach of any fiduciary duty as a director.
Section 6.05. GENERAL POWERS. (a) In addition to the powers
and authority hereinbefore or by statute expressly conferred upon them, the
directors are hereby empowered to exercise all such powers and do all such acts
and things as may be exercised or done by the corporation, subject,
nevertheless, to the laws of Delaware, this amended and restated certificate of
incorporation, and any bylaws adopted by the stockholders; PROVIDED, HOWEVER,
that no bylaws hereafter adopted by the stockholders shall invalidate any prior
act of the directors which would have been valid if such bylaws had not been
adopted.
(b) So long as Viacom beneficially owns shares representing
30% or more of the combined voting power of Voting Stock, nominations and
shareholder proposals by Viacom shall not be subject to the advance notice
procedures (including the form, content, or timing requirements contained
therein) of Section 2.09 of Article II of the bylaws.
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Article VII
CERTAIN TRANSACTIONS WITH STOCKHOLDERS
AND CORPORATE OPPORTUNITIES
Section 7.01. CERTAIN ACKNOWLEDGMENTS. (a) In recognition and
anticipation (i) that the corporation will cease to be an indirect wholly-owned
subsidiary of Viacom but that Viacom will remain, for the period of time, a
significant stockholder of the corporation, (ii) that the corporation may from
time to time enter into contractual, corporate or business relations with one or
more of its directors or officers, or one or more corporations, partnerships,
associations or other organizations in which one or more of its directors or
officers have a financial interest (collectively, "Related Entities"), (iii)
that directors, officers, and/or employees of Viacom may serve as directors of
the Corporation, (iv) that Viacom engages and is expected to continue to engage
in the same or similar lines of business as those in which the Corporation,
directly or indirectly, may engage and/or other business activities that overlap
with or compete with those in which the Corporation, directly or indirectly, may
engage, (v) that the Corporation will engage in material business transactions
with Viacom and that the Corporation is expected to benefit therefrom, and (vi)
that, as a consequence of the foregoing, it is in the best interests of the
Corporation that the respective rights and duties of the Corporation and of
Viacom, and the duties of any directors of the Corporation who are also
directors, officers or employees of Viacom, be determined and delineated in
respect of any transactions between, or opportunities that may be suitable for
both, the Corporation, on the one hand, and Viacom, on the other hand, the
provisions of this Article shall regulate and define the conduct of certain of
the business and affairs of the Corporation in relation to Viacom.
(b) For purposes of this Article VII only:
1. the term "Corporation" shall mean the corporation and all
corporations, partnerships, joint ventures, associations and other
entities in which the Corporation beneficially owns (directly or
indirectly) more than 50% of the outstanding voting stock, voting power
or similar voting interests, and
2. the term "Viacom" shall mean Viacom and all corporations,
partnerships, joint ventures, associations and other entities (other
than the Corporation, defined in accordance with clause (i) of this
Section 7.01) in which Viacom beneficially owns (directly or
indirectly) more than 50% of the outstanding voting stock, voting power
or similar voting interests.
Section 7.02. SIMILAR BUSINESS ACTIVITIES. Except as Viacom
may otherwise agree in writing, Viacom shall not have a duty to refrain from
engaging directly or indirectly in the same or similar business activities or
lines of business as the Corporation.
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Section 7.03. CONTRACTS OR TRANSACTIONS. (a) No contract or
transaction (or any amendment, modification or termination thereof) between the
Corporation and Viacom or any Related Entity or between the Corporation and one
or more of the directors or officers of the Corporation, Viacom or any Related
Entity, shall be void or voidable solely for the reason that Viacom, any Related
Entity or any one or more of the directors or officers of the Corporation,
Viacom or any Related Entity are parties thereto, or solely because any such
directors or officers are present at or participate in the meeting of the board
of directors or committee thereof that authorizes the contract, transaction,
amendment, modification or termination or solely because his or their votes are
counted for such purpose but any such contract or transaction (or any amendment,
modification or termination thereof) shall be governed by the provisions of this
amended and restated certificate of incorporation, the Corporation's bylaws, the
laws of Delaware and other applicable law.
(b) Directors of the Corporation who are also directors or
officers of Viacom or any Related Entity may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
that authorizes or approves any such contract or transaction (or amendment,
modification or termination thereof). Outstanding shares of Common Stock owned
by Viacom and any Related Entities may be counted in determining the presence of
a quorum at a meeting of stockholders that authorizes or approves any such
contract or transaction (or amendment, modification or termination thereof).
(c) For purposes of this Article VII, any contract or
transaction with any corporation, partnership, joint venture, association or
other entity in which the Corporation beneficially owns (directly or indirectly)
more than 50% of the outstanding voting stock, voting power, partnership
interest or similar voting interests, or with any officer or director thereof,
shall be deemed to be a contract or transaction with the Corporation.
Section 7.04. NOTICE. Any person or entity purchasing or
otherwise acquiring any interest in any shares of capital stock of the
Corporation shall be deemed to have notice of and to have consented to the
provisions of this Article VII.
Section 7.05. ALTERATION, AMENDMENT, CHANGE OR REPEAL.
Notwithstanding anything in this amended and restated certificate of
incorporation to the contrary, the foregoing provisions of this Article VII as
they apply to Viacom shall expire on the date that Viacom ceases to own
beneficially Common Stock representing at least 20% of the combined voting power
of the Voting Stock and no person who is a director or officer of the
Corporation is also a director or officer of Viacom; PROVIDED HOWEVER, that
nothing in the foregoing provisions of this Article VII shall contradict or
limit the provisions set forth under Section 144 of the DGCL. Neither the
alteration, amendment, change or repeal of any provision of this Article VII nor
the adoption of any provision of this amended and restated certificate of
incorporation inconsistent with any provision of this Article VII shall
eliminate or reduce the effect of this Article VII in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article VII,
would accrue or arise, prior to such alteration, amendment, repeal or adoption.
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Article VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Section 8.01. INDEMNIFICATION. (a) The corporation shall
indemnify any person (and the heirs, executors or administrators of such person)
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director or officer of
the corporation, or such director or officer is or was serving at the request of
the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding had no reasonable cause to believe the person's conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
(b) The corporation shall indemnify any person (and the heirs,
executors or administrators of such person) who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director or officer of the
corporation, or such director or officer is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) The corporation may, by action of its board of directors,
provide indemnification to such of its other employees and agents to such effect
as the board of directors
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shall determine to be appropriate and authorized by the laws of Delaware as they
may exist from time to time.
(d) To the extent that a present or former director or officer
of the corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in paragraphs (a) and (b) of this
Article VIII, or in defense of any claim, issue or matter therein, such director
or officer shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such director or officer in connection
therewith.
(e) Any indemnification under paragraphs (a), (b) and (c) of
this Article VIII (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the person is proper in the circumstances because the person
has met the applicable standard of conduct set forth in paragraphs (a), (b) and
(c) of this Article VIII. Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the stockholders.
(f) Expenses (including attorneys' fees) incurred by a
director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such director or officer is not
entitled to be indemnified by the corporation as authorized in this Article
VIII.
(g) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other sections of this Article VIII shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
(h) For purposes of this Article VIII, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article VIII with
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respect to the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had continued.
(i) For purposes of this Article VIII, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves service by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article VIII.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article VIII shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 8.02. INSURANCE. The corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under the
provisions of this Article VIII.
Section 8.03. CONTRACTUAL NATURE. Neither any repeal or
modification of this Article or, to the fullest extent permitted by the laws of
Delaware, any repeal or modification of laws, shall be prospective only and
shall not affect any rights or obligations then existing with respect to any
state of facts then or theretofore existing or any action, suit or proceeding
theretofore or thereafter brought based in whole or in part upon any such state
of facts.
Article IX
AMENDMENTS
Section 9.01. GENERAL. Neither the alteration, amendment,
change or repeal of any provision of this Article IX nor the adoption of any
provision inconsistent with any provision of this Article IX shall eliminate or
reduce the effect of this Article IX in respect of any matter occurring, or any
cause of action, suit or claim that, but for this Article IX, would accrue or
arise, prior to such alteration, amendment, change, repeal or adoption.
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Section 9.02. AMENDMENT OF CERTAIN ARTICLES. Notwithstanding
any other provision of this amended and restated certificate of incorporation to
the contrary, the provisions set forth in this Article IX and in Section 5.02 of
Article V, Sections 6.01 and 6.02 of Article VI and Article VII may not be
amended, altered, changed, or repealed in any respect unless such amendment,
alteration, change or repealing is approved by the affirmative vote of not less
than 75% of the combined voting power of the Voting Stock; PROVIDED that with
respect to any proposed amendment, alteration or change to this amended and
restated certificate of incorporation, or repealing of any provision of this
amended and restated certificate of incorporation, which would amend, alter or
change the powers, preferences or special rights of the shares of Class A Common
Stock or Class B Common Stock so as to affect them adversely, the affirmative
vote of not less than a majority of the outstanding shares affected by the
proposed amendment, voting as a separate class, shall be required in addition to
the vote otherwise required pursuant to this Article IX.
Section 9.03. AMENDMENTS GENERALLY. Subject to the provisions
of Section 9.02 of this Article IX, the corporation reserves the right to amend,
alter, change or repeal any provision contained in this amended and restated
certificate of incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred on stockholders herein are granted subject to
this reservation.
Article X
COMPROMISE AND REORGANIZATION
Section 10.01. COMPROMISE AND REORGANIZATION. Whenever a
compromise or arrangement is proposed between this corporation and its creditors
or any class of them and/or between this corporation and its stockholders or any
class of them, any court of equitable jurisdiction within the State of Delaware
may, on the application in a summary way of this corporation or of any creditor
or stockholder thereof or on the application of any receiver or receivers
appointed for this corporation under the provisions of Section 291 of the DGCL
or on the application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of Section 279 of the DGCL
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this corporation, as the
case may be, agrees to any compromise or arrangement and to any reorganization
of the corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
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IN WITNESS WHEREOF, this amended and restated certificate of
incorporation, having been duly adopted by the written consent of the sole
stockholder of the corporation in accordance with the provisions of Sections
228, 242 and 245 of the DGCL, has been executed this __th day of _______ 1999.
BLOCKBUSTER INC.
By:
-----------------------------
Name: Edward B. Stead
Title: Executive Vice President,
General Counsel and Secretary
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Exhibit 3.2
FORM OF
BYLAWS OF
BLOCKBUSTER INC.
Effective _____, 1999
Article I
OFFICES
Section 1.01. REGISTERED OFFICE. The registered office and
registered agent of the corporation shall be in the City of Wilmington, County
of New Castle, State of Delaware.
Section 1.02. OTHER OFFICES. The corporation may also have
offices at such other places both within and without the State of Delaware as
the board of directors may from time to time determine or the business of the
corporation may require.
Article II
STOCKHOLDERS
Section 2.01. PLACE OF MEETINGS. Meetings of stockholders
shall be held at such time and place, either within or without the State of
Delaware, as shall be designated from time to time by the board of directors.
Section 2.02. ANNUAL MEETING. The annual meeting of
stockholders for the purpose of electing directors and transacting such other
proper business as may come before the meeting shall be held on such date, at
such time and at such place as may be designated by the board of directors.
Section 2.03. SPECIAL MEETINGS. Unless otherwise required by
law or by the certificate of incorporation of the corporation, as amended from
time to time, special meetings of stockholders, for any purpose or purposes, may
be called by (i) any officer at the request of a majority of the board of
directors, (ii) the chairman of the board, (iii) the chief executive officer,
<PAGE>
if any, or (iv) stockholders with at least a majority of the combined voting
power of Voting Stock; PROVIDED, HOWEVER, that effective on and after the
Trigger Date (as hereinafter defined) special meetings of stockholders may only
be called by (i) any officer at the request of a majority of our board of
directors, (ii) the chairman of the board, or (iii) the chief executive officer,
if any and, effective on and after the Trigger Date, any power of stockholders
to call a special meeting of the stockholders is specifically denied.
For purposes of these bylaws:
1. "Trigger Date" shall mean the first date on which Viacom
ceases to beneficially own shares representing more than 50% of the
votes entitled to be cast by the Voting Stock;
2. "Voting Stock" shall mean the shares of the then
outstanding capital stock entitled to vote generally on the election of
directors or other matters submitted to a vote of the stockholders of
the corporation and shall exclude any class or series of capital stock
only entitled to vote in the event of dividend arrearages thereon,
whether or not at the time of determination there are any such dividend
arrearages;
3. "Viacom" shall mean Viacom Inc., a Delaware corporation,
and all its successors by way of merger, consolidation or sale of all
or substantially all of its assets; and
4. "subsidiary" shall mean, as to any person or entity, a
corporation, partnership, joint venture, association or other entity in
which such person or entity beneficially owns (directly or indirectly)
more than 50% of the outstanding Voting Stock, voting power,
partnership interests or similar voting interests.
Section 2.04. NOTICE OF MEETINGS. (a) Unless waived, a
written, printed, or typewritten notice of each annual or special meeting,
stating the date, hour and place and the purpose or purposes thereof shall be
served upon or mailed to each stockholder of record entitled to vote not more
than 60 days nor less than 10 days before any such meeting. If mailed, such
notice shall be directed to a stockholder at his or her address as the same
appears on the records of the corporation. If a meeting is adjourned to another
time or place and such adjournment is for 30 days or less and no new record date
is fixed for the adjourned meeting, no further notice as to such adjourned
meeting need be given if the time and place to which it is adjourned are fixed
and announced at such meeting. In the event of a transfer of shares after notice
has been given and prior to the holding of the meeting, it shall not be
necessary to serve notice on the transferee. If the adjournment is for more than
30 days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
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(b) The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept open at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
(c) A written waiver of any such notice signed by the person
entitled thereto, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
(d) Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 2.05. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD. In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted and which shall not be more than 60 nor less than 10 days before the
date of a stockholders meeting, nor more than 60 days prior to any other action.
Determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of such meeting; PROVIDED, HOWEVER,
that the board of directors may fix a new record date for the adjourned meeting.
Section 2.06. ORGANIZATION. At each meeting of the
stockholders, the chairman of the board, or in his absence, the chief executive
officer, or, in his absence, the president, or in his absence, any
vice-president, or, in the absence of the chairman of the board, the chief
executive officer, the president and a vice-president, a chairman chosen by a
majority in interest of the stockholders present in person or by proxy and
entitled to vote, shall act as chairman, and the secretary of the corporation,
or, if the secretary of the corporation not be present, any assistant secretary,
or if the secretary and the assistant secretary not be present, any person whom
the chairman of the meeting shall appoint, shall act as secretary of the
meeting.
Section 2.07. QUORUM. A stockholders' meeting duly called
shall not be organized for the transaction of business unless a quorum is
present. Except as otherwise
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expressly provided by law, the certificate of incorporation or these bylaws, the
presence in person or by proxy of holders of record entitling them to exercise
at least a majority of the combined voting power of the Voting Stock shall
constitute a quorum for such meeting. The stockholders present at a duly
organized meeting can continue to do business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. If a meeting
cannot be organized because a quorum has not attended, a majority in voting
interest of the stockholders present may adjourn, or, in the absence of a
decision by the majority, any officer entitled to preside at such meeting may
adjourn the meeting from time to time to such time (not more than 30 days after
the previously adjourned meeting) and place as such officer may determine,
without notice other than by announcement at the meeting of the time and place
of the adjourned meeting. At any such adjourned meeting at which a quorum is
present any business may be transacted which might have been transacted at the
meeting as originally called.
Section 2.08. ORDER OF BUSINESS AND PROCEDURE. The board of
directors of the corporation may adopt by resolution such rules and regulations
for the conduct of the meeting of the stockholders as it shall deem appropriate.
Except to the extent inconsistent with such rules and regulations as adopted by
the board of directors, the order of business at all meetings of the
stockholders and all matters relating to the manner of conducting the meeting
shall be determined by the chairman of the meeting. Meetings shall be conducted
in a manner designed to accomplish the business of the meeting in a prompt and
orderly fashion and to be fair and equitable to all stockholders, but it shall
not be necessary to follow any manual of parliamentary procedure.
Section 2.09. ADVANCE NOTICE OF STOCKHOLDER PROPOSALS. (a) In
order to properly submit any business to an annual meeting of stockholders, a
stockholder must give timely notice in writing to the secretary of the
corporation. To be considered timely, a stockholder's notice must be delivered
either in person or by United States certified mail, postage prepaid, and
received at the principal executive offices of the corporation (i) not less than
120 calendar days before the date of the corporation's proxy statement released
to shareholders in connection with the previous year's annual meeting or such
other time period as may be required or permitted by applicable law or (ii) if
no annual meeting was held in the previous year or the date of the applicable
annual meeting has been changed by more than 30 days from the date of the
previous year's annual meeting, not less than a reasonable time prior to the
date the corporation begins to print and mail its proxy materials, as determined
by the board of directors.
(b) Nomination of persons for election to the board of
directors may be made by (i) the board of directors or any committee designated
by the board of directors or (ii) by any stockholder entitled to vote for the
election of directors at the applicable meeting of stockholders. However,
nominations other than those made by the board of directors or its designated
committee must comply with the procedures set forth in this Section 2.09, and no
person shall be eligible for election as a director unless nominated in
accordance with the terms of this Section 2.09.
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Any person nominated for election as director by the board of
directors or any committee designated by the board of directors shall, upon the
request of the board of directors or such committee, furnish to the secretary of
the corporation all such information pertaining to such person that is required
to be set forth in a stockholder's notice of nomination.
(c) A stockholder may nominate a person or persons for
election to the board of directors by giving written notice to the secretary of
the corporation in accordance with the procedures set forth in subsection (a)
above.
(d) The secretary of the corporation shall deliver any
stockholder proposals and nominations received in a timely manner for review by
the board of directors or a committee designated by the board of directors.
(e) A stockholder's notice to submit business to an annual
meeting of stockholders shall set forth (i) the name and address of the
stockholder, (ii) the class and number of shares of stock beneficially owned by
such stockholder, (iii) the name in which such shares are registered on the
stock transfer books of the corporation, (iv) a representation that the
stockholder intends to appear at the meeting in person or by proxy to submit the
business specified in such notice, (v) any material interest of the stockholder
in the business to be submitted and (vi) a brief description of the business
desired to be submitted to the annual meeting, including the complete text of
any resolutions to be presented at the annual meeting, and the reasons for
conducting such business at the annual meeting. In addition, the stockholder
making such proposal shall promptly provide any other information required by
law or otherwise reasonably requested by the corporation.
(f) In addition to the information required above to be given
by a stockholder who intends to submit business to a meeting of stockholders, if
the business to be submitted is the nomination of a person or persons for
election to the board of directors then such stockholder's notice must also set
forth, as to each person whom the stockholder proposes to nominate for election
as a director, (i) the name, age, business address and, if known, residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of stock of the corporation which
are beneficially owned by such person, (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors or is otherwise required by the rules and regulations of
the Securities and Exchange Commission promulgated under the Exchange Act, as
amended, (v) the written consent of such person to be named in the proxy
statement as a nominee and to serve as a director if elected and (vi) a
description of all arrangements or understandings between such stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
stockholder.
(g)(i) A majority of the board of directors may reject
business proposed by a stockholder that is not timely made or otherwise not made
in accordance with the foregoing procedures. If a majority of the board of
directors reasonably determines that the information
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provided in a stockholder's notice does not satisfy the requirements of this
Section 2.09 in any material respect, then the secretary shall promptly notify
such stockholder of the deficiency in writing. The stockholder shall have an
opportunity to cure the deficiency by providing additional information to the
secretary within such period of time as a majority of the board of directors
shall reasonably determine, which period shall not exceed 10 days from the date
such deficiency notice is given to the stockholder. If the deficiency is not
cured within such period, or if a majority of the board of directors reasonably
determines that the additional information provided by the stockholder, together
with the information previously provided, does not satisfy the requirements of
this paragraph in any material respect, then a majority of the board of
directors may reject such stockholder's proposed business. The secretary shall
notify a stockholder in writing whether the stockholder's proposal of new
business has been made in accordance with the time and requirements of this
Section 2.09.
(ii) Once business has been properly brought before the
meeting in accordance with the foregoing procedures, nothing herein shall be
deemed to preclude discussion by any stockholder of any such business; PROVIDED
FURTHER, HOWEVER, that if the stockholder bringing such matter before the
meeting withdraws such matter, such matter shall no longer be properly before
the meeting.
(iii) The chairman of a meeting of stockholders may, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the procedures prescribed
in this Section 2.09, and if the chairman should so determine, the chairman
shall so declare to the meeting and such business shall not be transacted.
(h) So long as Viacom beneficially owns shares representing
30% or more of the combined voting power of Voting Stock, nominations and
shareholder proposals by Viacom shall not be subject to the advance notice
procedures (including the form, content, or timing requirements contained
therein) of these bylaws.
Section 2.10. VOTING. (a) (i) Each stockholder shall, at each
meeting of the stockholders, be entitled to vote in person or by proxy each
share of the stock of the corporation having voting rights on the matter in
question and which shall have been held by him and registered in his name on the
books of the corporation on the date fixed pursuant to Section 2.05 of these
bylaws as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting.
(b) Any shares of Voting Stock belonging to the corporation
and any shares of Voting Stock belonging to any entity that is controlled by the
corporation shall neither be entitled to vote nor be counted for quorum
purposes. For purposes of this subparagraph (b) "control" shall mean holding a
majority of shares entitled to vote in the election of directors.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such
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stockholder or by his attorney thereunto authorized and delivered to the
secretary of the meeting in sufficient time to permit the necessary examination
and tabulation thereof before the vote is taken; PROVIDED, HOWEVER, that no
proxy shall be valid after the expiration of three years after the date of its
execution, unless the stockholder executing it shall have specified therein the
length of time it is to continue in force. At any meeting of the stockholders
all matters, except as otherwise provided by law, the certificate of
incorporation or these bylaws, shall be decided by the vote of a majority in the
combined voting power of Voting Stock interest of the stockholders present in
person or by proxy and voting thereon, a quorum being present. The vote at any
meeting of the stockholders on any question need not be by ballot, unless so
directed by the chairman of the meeting or required by the certificate of
incorporation. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
Section 2.11. INSPECTORS. The board of directors, in advance
of any meeting of the stockholders, may appoint one or more inspectors to act at
the meeting. If inspectors are not so appointed, the person presiding at the
meeting may appoint one or more inspectors. If any person so appointed fails to
appear or act, the vacancy may be filled by appointment made by the board of
directors in advance of the meeting or at the meeting by the person presiding
thereat. Each inspector, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector at the
meeting with strict impartiality and according to the best of his ability. The
inspectors so appointed, if any, shall determine the number of shares
outstanding, the shares represented at the meeting, the existence of a quorum
and the authenticity, validity and effect of proxies and shall receive votes,
ballots, waivers, releases, or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots, waivers, releases, or consents, determine and announce the
results and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the person presiding at the meeting,
the inspectors shall make a report in writing of any challenge, question or
matter determined by them and execute a certificate of any fact found by them.
Any report or certificate made by them shall be prima facie evidence of the
facts stated and of the vote as certified by them.
Section 2.12. NO STOCKHOLDER ACTION BY WRITTEN CONSENT.
Effective on or after the Trigger Date, except as otherwise provided pursuant to
provisions of the certificate of incorporation, any action required or permitted
to be taken by the stockholders of the corporation must be effected at a duly
called annual or special meeting of such holders and may not be effected by any
consent in writing by such holders. Prior to the Trigger Date, action of the
stockholders or any class or classes, or series thereof, may be taken by written
consent as permitted by law.
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Article III
BOARD OF DIRECTORS
Section 3.01. GENERAL POWERS OF BOARD. The powers of the
corporation shall be exercised, its business and affairs conducted, and its
property controlled by or under the direction of the board of directors, except
as otherwise provided under the laws of Delaware or in the certificate of
incorporation.
Section 3.02. NUMBER OF DIRECTORS. The number of directors of
the corporation (exclusive of directors to be elected by the holders of any one
or more series of Preferred Stock voting separately as a class or classes) shall
not be less than three nor more than twelve, the exact number of directors to be
such number as may be set from time to time within the limits set forth above by
resolution adopted by affirmative vote of a majority of the whole board of
directors. As used in these bylaws, the term "whole board" means the total
number of directors which the corporation would have if there were no vacancies.
Section 3.03. ELECTION OF DIRECTORS. The directors shall be
divided into three classes, designated Class I, Class II and Class III, as
provided in the certificate of incorporation.
Section 3.04. RESIGNATIONS. Any director of the corporation
may resign at any time by giving written notice to the board of directors, the
chairman of the board or the secretary of the corporation. Such resignation
shall take effect at the time specified therein, and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 3.05. VACANCIES. In the event that any vacancy shall
occur in the board of directors, whether because of death, resignation, removal,
newly created directorships resulting from any increase in the authorized number
of directors, the failure of the stockholders to elect the whole authorized
number of directors, or any other reason, such vacancy shall be filled by the
vote of a majority of the directors then in office, although less than a quorum,
or by the sole remaining director. A director elected to fill a vacancy, other
than a newly created directorship, shall hold office for the unexpired term of
his predecessor.
Section 3.06. REMOVAL OF DIRECTORS. Directors may be removed
only as provided in the certificate of incorporation.
Section 3.07. PLACE OF MEETING, ETC. The board of directors
may hold any of its meetings at the principal office of the corporation or at
such other place or places as the board of directors (or the chairman of the
board, in the absence of a determination by the board of directors) may from
time to time designate. Directors may participate in any regular or special
meeting of the board of directors by means of conference telephone or similar
communications
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equipment pursuant to which all persons participating in the meeting of the
board of directors can hear each other and such participation shall constitute
presence in person at such meeting.
Section 3.08. ANNUAL MEETING. A regular annual meeting of the
board of directors shall be held each year at the same place as and immediately
after the annual meeting of stockholders, or at such other place and time as
shall theretofore have been determined by the board of directors and notice
thereof need not be given. At its regular annual meeting the board of directors
shall organize itself and elect the officers of the corporation for the ensuing
year, and may transact any other business.
Section 3.09. REGULAR MEETINGS. Regular meetings of the board
of directors may be held at such intervals at such time as shall from time to
time be determined by the board of directors and no notice of such regular
meetings need be given.
Section 3.10. SPECIAL MEETINGS. Special meetings of the board
of directors may be called at any time by the board of directors, by the
chairman of the board, or by the chief executive officer, if any, to be held on
such day and at such time as shall be specified by the person or persons calling
the meeting.
Section 3.11. NOTICE OF MEETINGS. Notice of each special
meeting or, where required, each regular meeting, of the board of directors
shall be given to each director either by being mailed on at least the third day
prior to the date of the meeting or by being telegraphed, faxed or given
personally or by telephone on at least 24 hours notice prior to the date of
meeting. Such notice shall specify the place, date and hour of the meeting and,
if it is for a special meeting, the purpose or purposes for which the meeting is
called. At any meeting of the board of directors at which every director shall
be present, even though without such notice, any business may be transacted. Any
acts or proceedings taken at a meeting of the board of directors not validly
called or constituted may be made valid and fully effective by ratification at a
subsequent meeting which shall be legally and validly called or constituted.
Notice of any regular meeting of the board of directors need not state the
purpose of the meeting and, at any regular meeting duly held, any business may
be transacted. If the notice of a special meeting shall state as a purpose of
the meeting the transaction of any business that may come before the meeting,
then at the meeting any business may be transacted, whether or not referred to
in the notice thereof. A written waiver of notice of a special or regular
meeting, signed by the person or persons entitled to such notice, whether before
or after the time stated therein shall be deemed the equivalent of such notice,
and attendance of a director at a meeting shall constitute a waiver of notice of
such meeting except when the director attends the meeting and prior to or at the
commencement of such meeting protests the lack of proper notice.
Section 3.12. QUORUM AND VOTING. At all meetings of the board
of directors, the presence of a majority of the directors then in office shall
constitute a quorum for the transaction of business. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
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announcement at the meeting of the time and place of the adjourned meeting,
until a quorum shall be present. Except as otherwise required by law, the
certificate of incorporation, or these bylaws, the vote of a majority of the
directors present at any meeting at which a quorum is present shall be the act
of the board of directors. At all meetings of the board of directors, each
director shall have one vote.
Section 3.13. COMMITTEES. Except as otherwise provided under
the laws of Delaware, the board of directors may appoint one or more committees
of the board of directors, to consist of one or more directors of the
corporation, and may delegate to any such committee any of the authority of the
board of directors, however conferred. Each such committee shall serve at the
pleasure of the board of directors, shall act only in the intervals between
meetings of the board of directors and shall be subject to the control and
direction of the board of directors. Any such committee may act by a majority of
its members at a meeting or by a writing or writings signed by all of its
members. Any such committee shall keep written minutes of its meetings and
report the same to the board of directors at the next regular meeting of the
board of directors.
Section 3.14. COMPENSATION. The board of directors may, by
resolution passed by a majority of those in office, fix the compensation of
directors for service in any capacity and may fix fees for attendance at
meetings and may authorize the corporation to pay the traveling and other
expenses of directors incident to their attendance at meetings, or may delegate
such authority to a committee of the board of directors. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special committees may be allowed
like compensation for attending committee meetings.
Section 3.15. ACTION BY WRITTEN CONSENT. Any action required
or permitted to be taken at any meeting of the board of directors or of any
committee thereof may be taken without a meeting if a written consent thereto is
signed by all members of the board of directors or of such committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the board of directors or such committee.
Article IV
DUTIES OF THE OFFICERS
Section 4.01. GENERAL. The officers of the corporation shall
be elected by the board of directors and shall include a chairman of the board
(who must be a director), a secretary and/or such other officers as may be from
time to time required by the General Corporation Law of the State of Delaware
(the "DGCL"). The board of directors, in its discretion, may also elect a chief
executive officer, a president, a chief financial officer, a treasurer, and one
or more vice-presidents, assistant secretaries, assistant treasurers and other
officers. Any number of offices
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may be held by the same person, unless otherwise prohibited by law or the
certificate of incorporation. Vice-presidents may be given distinctive
designations such as executive vice-president or senior vice-president. The
officers of the corporation need not be stockholders of the corporation nor,
except in the case of the chairman of the board, need such officers be directors
of the corporation.
Section 4.02. OTHER OFFICERS AND AGENTS. The board of
directors may also elect and appoint such other officers and agents as it shall
deem necessary, who shall be elected and appointed for such terms and shall
exercise such powers and perform such duties as may be determined from time to
time by the board of directors.
Section 4.03. ELECTION. The board of directors, at its first
meeting held after each annual meeting of stockholders (or action by written
consent of stockholders in lieu of the annual meeting of stockholders, if
permitted by the certificate of incorporation) shall elect the officers of the
corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
board of directors; and all officers of the corporation shall hold office until
their successors are elected and qualified, or until their earlier death,
resignation or removal. Any officer elected by the board of directors may be
removed at any time by the affirmative vote of the whole board of directors. Any
vacancy occurring in any office of the corporation may be filled by the board of
directors.
Section 4.04. VOTING SECURITIES OWNED BY THE CORPORATION.
Powers of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the corporation may be executed in
the name of and on behalf of the corporation by the chief executive officer, if
any, the president, if any, any vice-president, the secretary, or any other
officer authorized to do so by the board of directors and any such officer may,
in the name of and on behalf of the corporation, take all such action as any
such officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any corporation in which the corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities and which, as the owner
thereof, the corporation might have exercised and possessed if present. The
board of directors may, by resolution, from time to time confer like powers upon
any other person or persons.
Section 4.05. THE CHAIRMAN OF THE BOARD. The chairman of the
board shall, if present, preside at all meetings of the stockholders and of the
board of directors and shall have such other powers and perform such other
duties as may from time to time be assigned to him by the board of directors.
Except where by the law the signature of the chief executive officer or
president is required, the chairman shall possess the same power as the chief
executive officer and the president to sign all contracts, certificates and
other instruments of the corporation which may be authorized by the board of
directors. The chairman may sign, with the secretary, treasurer or any other
proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares in the corporation.
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Section 4.06. THE CHIEF EXECUTIVE OFFICER. The chief executive
officer, if any, shall have, subject to the board of directors, general and
active management of the business of the corporation and shall see that all
orders and resolutions of the board of directors are carried into effect, and
shall perform such duties as are conferred upon him by these bylaws or as may
from time to time be assigned to him by the chairman of the board or the board
of directors. The chief executive officer may sign, execute and deliver in the
name of the corporation all deeds, mortgages, bonds, leases, contracts or other
instruments either when specially authorized by the board of directors or when
required or deemed necessary or advisable by him in the ordinary conduct of the
corporation's normal business, except in cases where the signing and execution
thereof shall be expressly delegated by these bylaws to some other officer or
agent of the corporation or shall be required by law or otherwise to be signed
or executed by some other officer or agent. The chief executive officer may
cause the seal of the corporation, if any, to be affixed to any instrument
requiring the same. In the absence or disability of the chairman of the board,
the chief executive officer shall preside at all meetings of the stockholders
and the board of directors. The chief executive officer shall also perform such
other duties and may exercise such other powers as may from time to time be
assigned by the laws or the board of directors.
Section 4.07. THE PRESIDENT. The president, if any, shall
perform such duties as are conferred upon him by these bylaws or as may from
time to time be assigned to him by the chairman of the board, the chief
executive officer, if any, or the board of directors. In the absence or
disability of the chairman of the board and the chief executive officer, if any,
the president shall preside at all meetings of the stockholders and the board of
directors.
Section 4.08. VICE-PRESIDENTS. The vice-presidents, if any,
shall perform such duties as are conferred upon them by these bylaws or as may
from time to time be assigned to them by the board of directors, the chairman of
the board, the chief executive officer, if any, or the president, if any.
Section 4.09. THE SECRETARY. The secretary shall attend all
meetings of the board of directors and stockholders and shall record and keep
the minutes of all such meetings of in a book to be kept for that purpose. The
secretary shall be the custodian of, and shall make or cause to be made the
proper entries in, the minute book of the corporation and such other books and
records as the board of directors may direct. The secretary shall be the
custodian of the seal of the corporation, if any, and shall have authority to
affix the same to any instrument requiring it and shall affix such seal to such
contracts, instruments and other documents as the board of directors or any
committee thereof may direct. The secretary shall have such other powers and
shall perform such other duties as may from time to time be assigned to him by
the board of directors or the chairman of the board.
Section 4.10. THE TREASURER. The treasurer, if any, shall be
the custodian of all funds and securities of the corporation. Whenever so
directed by the board of directors, the treasurer shall render a statement of
the cash and other accounts of the corporation, and the treasurer shall cause to
be entered regularly in the books and records of the corporation, and to be
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kept for such purpose, full and accurate accounts of the corporation's receipts
and disbursements. The treasurer shall have such other powers and shall perform
such other duties as may from time to time be assigned to him by the board of
directors or the chairman of the board.
Section 4.11. ASSISTANT SECRETARIES. Assistant secretaries, if
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the board of directors, the chairman of the board, the chief
executive officer, if any, the president, if any, any vice-president, if any, or
the secretary, and in the absence of the secretary or in the event of the
secretary's disability or refusal to act, shall perform the duties of the
secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the secretary.
Section 4.12. ASSISTANT TREASURERS. Assistant treasurers, if
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the board of directors, the chairman of the board, the chief
executive officer, if any, the president, if any, any vice-president, if any, or
the treasurer, if any, and in the absence of the treasurer or in the event of
the treasurer's disability or refusal to act, shall perform the duties of the
treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the treasurer. If required by the board of directors,
an assistant treasurer shall give the corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of the office of assistant treasurer, if
any, and for the restoration to the corporation, in case of the assistant
treasurer's death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in the assistant
treasurer's possession or under the assistant treasurer's control belonging to
the corporation.
Section 4.13. OTHER OFFICERS. Such other officers as the board
of directors may choose, if any, shall perform such duties and have such powers
as from time to time may be assigned to them by the board of directors. The
board of directors may delegate to any other officer of the corporation the
power to choose such other officers and to prescribe their respective duties and
powers.
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Article V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Section 5.01. INDEMNIFICATION. (a) The corporation shall
indemnify any person (and the heirs, executors or administrators of such person)
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director or officer of
the corporation, or such director or officer is or was serving at the request of
the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding had no reasonable cause to believe the person's conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
(b) The corporation shall indemnify any person (and the heirs,
executors or administrators of such person) who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director or officer of the
corporation, or such director or officer is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) The corporation may, by action of its board of directors,
provide indemnification to such of its other employees and agents to such effect
as the board of directors shall determine to be appropriate and authorized by
the laws of Delaware as they may exist from time to time.
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(d) To the extent that a present or former director or officer
of the corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in paragraphs (a) and (b) of this
Article V, or in defense of any claim, issue or matter therein, such director or
officer shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such director or officer in connection
therewith.
(e) Any indemnification under paragraphs (a), (b) and (c) of
this Article V (unless ordered by a court) shall be made by the corporation only
as authorized in the specific case upon a determination that indemnification of
the person is proper in the circumstances because the person has met the
applicable standard of conduct set forth in paragraphs (a), (b) and (c) of this
Article V. Such determination shall be made, with respect to a person who is a
director or officer at the time of such determination, (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors designated by
majority vote of such directors, even though less than a quorum, or (3) if there
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (4) by the stockholders.
(f) Expenses (including attorneys' fees) incurred by a
director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such director or officer is not
entitled to be indemnified by the corporation as authorized in this Article V.
(g) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other sections of this Article V shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
(h) For purposes of this Article V, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article V with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
(i) For purposes of this Article V, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a
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person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves service by, such director, officer, employee or agent with respect to
any employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Article V.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article V shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 5.02. INSURANCE. The corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under the
provisions of this Article V.
Section 5.03. CONTRACTUAL NATURE. Neither any repeal or
modification of this Article or, to the fullest extent permitted by the laws of
Delaware, any repeal or modification of laws, shall be prospective only and
shall not affect any rights or obligations then existing with respect to any
state of facts then or theretofore existing or any action, suit or proceeding
theretofore or thereafter brought based in whole or in part upon any such state
of facts.
Article VI
CONTRACTS AND OTHER INSTRUMENTS
Section 6.01. CONTRACTS. Subject to any restrictions as may be
set by the board of directors, an officer of the corporation elected by the
board of directors may sign any note, bond, or mortgage of the corporation in
furtherance of the corporation's ordinary business and in order to implement any
action authorized by these bylaws.
Article VII
SHARES AND THEIR TRANSFER
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Section 7.01. CERTIFICATE FOR SHARES. Every owner of one or
more shares in the corporation shall be entitled to a certificate, which shall
be in such form as the board of directors shall prescribe, certifying the number
and class of shares in the corporation owned by him. When such certificate is
counter-signed by an incorporated transfer agent or registrar, the signature of
any of said officers may be facsimile, engraved, stamped or printed. The
certificates for the respective classes of such shares shall be numbered in the
order in which they shall be issued and shall be signed in the name of the
corporation as required by the DGCL. A record shall be kept of the name of the
person, firm, or corporation owning the shares represented by each such
certificate and the number of shares represented thereby, the date thereof, and
in case of cancellation, the date of cancellation. Every certificate surrendered
to the corporation for exchange or transfer shall be cancelled and no new
certificate or certificates shall be issued in exchange for any existing
certificates until such existing certificates shall have been so cancelled.
Section 7.02. LOST, DESTROYED AND MUTILATED CERTIFICATES. If
any certificates for shares in the corporation become worn, defaced, or
mutilated but are still substantially intact and recognizable, the directors or
authorized officers, upon production and surrender thereof, shall order the same
cancelled and shall issue a new certificate in lieu of same. The holder of any
shares in the corporation shall immediately notify the corporation if a
certificate therefor shall be lost, destroyed, or mutilated beyond recognition,
and the corporation may issue a new certificate in the place of any certificate
theretofore issued by it which is alleged to have been lost or destroyed or
mutilated beyond recognition, and the board of directors may, in its discretion,
require the owner of the certificate which has been lost, destroyed, or
mutilated beyond recognition, or his legal representative, to give the
corporation a bond in such sum as it may direct to indemnify the corporation
against any claim that may be made against it on account of the alleged loss,
destruction, or mutilation of any such certificate. The board of directors may,
however, in its discretion, refuse to issue any such new certificate except
pursuant to legal proceedings, under the laws of Delaware in such case made and
provided.
Section 7.03. TRANSFERS OF SHARES. Transfers of shares in the
corporation shall be made only on the books of the corporation by the registered
holder thereof, his legal guardian, executor, or administrator, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the secretary of the corporation or with a transfer agent appointed by the board
of directors, and on surrender of the certificate or certificates for such
shares properly endorsed or accompanied by properly executed stock powers and
evidence of the payment of all taxes imposed upon such transfer. The person in
whose name shares stand on the books of the corporation shall, to the full
extent permitted by law, be deemed the owner thereof for all purposes as regards
the corporation.
Section 7.04. REGULATIONS. The board of directors may make
such rules and regulations as it may deem expedient, not inconsistent with these
bylaws concerning the issue, transfer, and registration of certificates for
shares in the corporation. It may appoint one or more transfer agents or one or
more registrars, or both, and may require all certificates for shares to bear
the signature of either or both.
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Article VIII
GENERAL
Section 8.01. DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the requirements of the laws of Delaware and the
provisions of the certificate of incorporation, if any, may be declared by the
board of directors at any regular or special meeting of the board of directors
(or any action by written consent in lieu thereof in accordance with Section
3.15 of Article III hereof), and may be paid in cash, in property, or in shares
of the corporation's capital stock. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the board of directors from time to time, in its absolute discretion,
deems proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for any proper purpose, and the board of directors may modify or abolish any
such reserve.
Section 8.02. DISBURSEMENTS. All checks or demands for money
and notes of the corporation shall be signed by such officer or officers or such
other person or persons as the board of directors may from time to time
designate.
Section 8.03. FISCAL YEAR. The fiscal year of the corporation
shall be fixed by resolution of the board of directors.
Section 8.04. SEAL. The board of directors may provide a
corporate seal, which shall be circular and contain the name of the corporation
engraved around the margin and the words "corporate seal," the year of its
organization, and the word "Delaware."
Article IX
AMENDMENTS
Section 9.01. AMENDMENTS. These bylaws may be altered, amended
or repealed, in whole or in part, and new bylaws may be adopted (i) by the
affirmative vote of stockholders with at least a majority of the combined votes
of Voting Stock; PROVIDED, HOWEVER, that any proposed alteration, amendment or
repeal of, or the adoption of any bylaw inconsistent with, Sections 2.03, 2.09
and 2.12 of Article II, Sections 3.02, 3.03, 3.05 and 3.06 of Article III and
Section 9.01 of Article IX of these bylaws or this sentence, by the stockholders
shall require the affirmative combined vote of shares representing not less than
75% of the combined voting power of Voting Stock; and PROVIDED FURTHER, HOWEVER,
that in the case of any such stockholder action at a meeting of stockholders,
notice of the proposed alteration, amendment, repeal or
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adoption of the new bylaw or bylaws must be contained in the notice of such
meeting, or (ii) by action of the board of directors.
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Exhibit 10.1
FORM OF INITIAL PUBLIC OFFERING AND SPLIT-OFF AGREEMENT
DATED AS OF , 1999
AMONG
VIACOM INC.
VIACOM INTERNATIONAL INC.
AND
BLOCKBUSTER INC.
<PAGE>
INITIAL PUBLIC OFFERING AND SPLIT-OFF AGREEMENT
INITIAL PUBLIC OFFERING AND SPLIT-OFF AGREEMENT (this
"AGREEMENT") dated as of , 1999, among Viacom Inc., a Delaware corporation
("VIACOM"), Viacom International Inc., a Delaware corporation and a wholly owned
subsidiary of Viacom ("VIACOM INTERNATIONAL"), and Blockbuster Inc., a Delaware
corporation and an indirect, wholly owned subsidiary of Viacom ("BLOCKBUSTER").
Certain capitalized terms used herein are defined in Article I of this
Agreement.
RECITALS
WHEREAS, since September 29, 1994, Viacom has owned and operated
the businesses and operations related to Blockbuster;
WHEREAS, Viacom presently intends to split off Blockbuster in a
tax-free transaction;
WHEREAS, prior to such split-off, Blockbuster proposes to issue
shares of its common stock in an initial public offering registered under the
Securities Act of 1933, as amended; and
WHEREAS, the parties intend in this Agreement, including the
Exhibits attached hereto, to set forth the principal arrangements between them
regarding such initial public offering and such split-off.
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. As used in this Agreement, the
following terms will have the following meanings, applicable both to the
singular and the plural forms of the terms described:
"AFFILIATES" means, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such specified
Person; PROVIDED, HOWEVER, that prior to the Split-Off, Affiliates of
Blockbuster or Viacom shall only include Persons who would be affiliates of
Blockbuster or Viacom, respectively, assuming that the Split-Off had occurred
immediately prior to the determination as to whether such Person was an
affiliate of Blockbuster or Viacom, respectively.
<PAGE>
"AGREEMENT" has the meaning ascribed thereto in the Preamble.
"ANCILLARY AGREEMENTS" means the Registration Rights Agreement,
Transition Services Agreement, the Release and Indemnification Agreement and the
Tax Matters Agreement.
"ANNUAL FINANCIAL STATEMENTS" has the meaning ascribed thereto in
Section 5.01(v).
"APPLICABLE STOCK" means at any time the (i) shares of
Blockbuster Common Stock owned by Viacom and its Affiliates that were owned on
the date hereof, PLUS (ii) shares of Blockbuster Class B Common Stock purchased
by Viacom and its Affiliates pursuant to Article VII, PLUS (iii) shares of
Blockbuster Common Stock that were issued to Viacom and its Affiliates in
respect of shares described in either clause (i) or clause (ii) in any
reclassification, share combination, share subdivision, share dividend, share
exchange, merger, consolidation or similar transaction or event.
"BLOCKBUSTER" has the meaning ascribed thereto in the Preamble.
"BLOCKBUSTER BUSINESS" has the meaning ascribed thereto in
Section 2.01(a)(i) of the Release and Indemnification Agreement.
"BLOCKBUSTER CLASS A COMMON STOCK" means the class A common
stock, par value $0.01 per share of Blockbuster.
"BLOCKBUSTER CLASS B COMMON STOCK" means the class B common
stock, par value $0.01 per share of Blockbuster.
"BLOCKBUSTER CLASS B COMMON STOCK OPTION" has the meaning
ascribed thereto in Section 7.01(a).
"BLOCKBUSTER CLASS B COMMON STOCK OPTION NOTICE" has the meaning
ascribed thereto in Section 7.02.
"BLOCKBUSTER COMMON STOCK" means the Blockbuster Class B Common
Stock, the Blockbuster Class A Common Stock, any other class of Blockbuster's
capital stock representing the right to vote generally for the election of
directors and, for so long as Blockbuster continues to be a subsidiary
corporation includible in a consolidated federal income tax return of the Viacom
Group, any other security of Blockbuster treated as stock for purposes of
Section 1504 of the Code.
"BLOCKBUSTER PUBLIC DOCUMENTS" has the meaning ascribed thereto
in Section 5.01(viii).
"BLOCKBUSTER PUBLIC FILINGS" has the meaning ascribed thereto in
Section 5.01(xii).
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"BLOCKBUSTER TRANSFER AGENT" means the company designated by
Blockbuster as the transfer agent and registrar for the Blockbuster Class A
Common Stock and the Blockbuster Class B Common Stock.
"BLOCKBUSTER'S AUDITORS" has the meaning ascribed thereto in
Section 5.01(xiii).
"BUSINESS" means the Blockbuster Business or the Viacom Business,
as the case may be.
"BUSINESS DAY" means any day other than a Saturday, a Sunday, or
a day on which banking institutions located in the State of New York are
authorized or obligated by law or executive order to close.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, together with the rules and regulations promulgated thereunder.
"CONFIDENTIAL INFORMATION" means, with respect to any party
hereto, (i) any Information concerning such party, its business or any of its
Affiliates that was obtained by another party hereto, (ii) any Information
concerning such party that is obtained by another party under Section 4.03, or
(iii) any other Information obtained by, or furnished to, another party hereto.
"CONTROL" means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, together with the rules and regulations promulgated
thereunder.
"INDEMNIFIED PARTY" means any Person who is entitled to received
payment or defense from an Indemnifying Party pursuant to this Agreement.
"INDEMNIFYING PARTY" means any party who is required to pay or
defend any other Person pursuant to this Agreement.
"INFORMATION" means all records, books, contracts, instruments,
computer data and other data.
"IPO" means the initial public offering by Blockbuster of shares
of Blockbuster Class A Common Stock as contemplated by the IPO Registration
Statement.
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"IPO EFFECTIVE DATE" means the date on which the IPO Registration
Statement is declared effective by the SEC.
"IPO REGISTRATION STATEMENT" means the Registration Statement on
Form S-1, Registration No. 333-77899, of Blockbuster, including all exhibits
thereto and as supplemented and amended from time to time.
"ISSUANCE EVENT" has the meaning ascribed thereto in Section
7.02.
"ISSUANCE EVENT DATE" has the meaning ascribed thereto in Section
7.02.
"LOSSES" has the meaning ascribed thereto in Section 2.01(a) of
the Release and Indemnification Agreement.
"MARKET PRICE" of any shares of Blockbuster Class A Common Stock
on any date means (i) the average of the last sale price of such shares on each
of the five trading days immediately preceding such date on the New York Stock
Exchange, Inc. or, if such shares are not listed thereon, on the principal
national securities exchange or automated interdealer quotation system on which
such shares are traded or (ii) if such sale prices are unavailable or such
shares are not so traded, the value of such shares on such date determined in
accordance with agreed-upon procedures reasonably satisfactory to Blockbuster
and Viacom.
"NONVOTING STOCK" means any class of Blockbuster' capital stock
not representing the right to vote generally for the election of directors.
"NONVOTING STOCK OPTION" has the meaning ascribed thereto in
Section 7.01(c).
"NONVOTING STOCK OPTION NOTICE" has the meaning ascribed thereto
in Section 7.02.
"OWNERSHIP PERCENTAGE" means, at any time, the fraction,
expressed as a percentage and rounded to the next highest thousandth of a
percent, whose numerator is the aggregate Value of the Applicable Stock and
whose denominator is the sum of the aggregate Value of the outstanding shares of
Blockbuster Common Stock; PROVIDED, HOWEVER, that any shares of Blockbuster
Common Stock issued by Blockbuster in violation of its obligations under Article
VII of this Agreement shall not be deemed outstanding for the purpose of
determining the Ownership Percentage. For purposes of this definition, "VALUE"
means, with respect to any share of stock, the value of such share determined by
Viacom under principles applicable for purposes of Section 1504 of the Code.
"OWNING PARTY" has the meaning ascribed thereto in Section 4.02.
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"PERSON" means any individual, corporation, limited or general
partnership, limited liability company, joint venture association, joint stock
company, trust unincorporated organization or government or any agency or
political subdivision thereof.
"PRIOR RELATIONSHIP" means the ownership relationship between
Viacom and Blockbuster at any time prior to the Split-Off Date.
"PUBLIC FILINGS" has the meaning ascribed thereto in Section
5.01(xii).
"QUARTERLY FINANCIAL STATEMENTS" has the meaning ascribed thereto
in Section 5.01(iv).
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement to be entered into on or before the IPO Effective Date between Viacom
and Blockbuster, in substantially the form attached hereto as Exhibit C.
"REGULATION S-K" means Regulation S-K of the General Rules and
Regulations promulgated by the SEC.
"REGULATION S-X" means Regulation S-X of the General Rules and
Regulations promulgated by the SEC.
"RELATED PARTIES" has the meaning ascribed thereto in Section
4.03.
"RELEASE AND INDEMNIFICATION AGREEMENT" means the Release and
Indemnification Agreement to be entered into on or before the IPO Effective Date
between Viacom and Blockbuster, in substantially the form attached hereto as
Exhibit A.
"REPRESENTATIVES" means directors, officers, employees, agents,
consultants, advisors, accountants, attorneys and representatives.
"REQUESTOR" has the meaning ascribed thereto in Section 4.03.
"RETENTION PERIOD" has the meaning ascribed thereto in Section
4.04.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, together with the rules and regulations promulgated
thereunder.
"SPLIT-OFF" means the distribution of Blockbuster Common Stock by
Viacom in one or more transactions occurring after the IPO that collectively
have the effect that all or a
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substantial part of the shares of Blockbuster Common Stock held by Viacom are
distributed to all or some of the stockholders of Viacom, whenever such
transaction(s) shall occur.
"SPLIT-OFF DATE" is the date upon which the Split-Off is
consummated.
"SUBSIDIARY" means, with respect to any Person, any other Person
a majority of the equity ownership or voting stock of which is at the time
owned, directly or indirectly, by such Person and/or one or more other
Subsidiaries of such Person; PROVIDED, HOWEVER, that prior to the Split-Off, a
Subsidiary of Viacom shall only include Persons who would be a Subsidiary of
Viacom assuming the Split-Off has occurred immediately prior to the
determination as to whether such Person were a Subsidiary of Viacom.
"TAX MATTERS AGREEMENT" means the Tax Matters Agreement to be
entered into on or before the IPO Effective Date between Viacom and Blockbuster,
in substantially the form as attached hereto as Exhibit D.
"THIRD PARTY CLAIM" has the meaning ascribed thereto in Section
8.01(b).
"TRANSITION SERVICES AGREEMENT" means the Transition Services
Agreement to be entered into on or before the IPO Effective Date between Viacom
and Blockbuster, in substantially the form attached hereto as Exhibit B.
"UNDERWRITING AGREEMENT" means the Underwriting Agreement between
Blockbuster and the underwriters relating to the IPO, as amended from time to
time.
"VIACOM" has the meaning ascribed thereto in the Preamble.
"VIACOM ANNUAL STATEMENTS" has the meaning ascribed thereto in
Section 5.01(xiv).
"VIACOM BUSINESS" means any assets, business or operations of
Viacom or any of its Affiliates other than the Blockbuster Business.
"VIACOM CLASS A COMMON STOCK" means the class A common stock, par
value $0.01 per share, of Viacom.
"VIACOM CLASS B COMMON STOCK" means the class B common stock, par
value $0.01 per share, of Viacom.
"VIACOM COMMON STOCK" means the Viacom Class A Common Stock and
the Viacom Class B Common Stock.
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"VIACOM GROUP" includes for federal income tax purposes, Viacom,
its Affiliates, Blockbuster and its Affiliates.
"VIACOM INTERNATIONAL" has the meaning ascribed thereto in the
Preamble.
"VIACOM PUBLIC FILINGS" has the meaning ascribed thereto in
Section 5.01(xii).
"VIACOM'S AUDITORS" has the meaning ascribed thereto in Section
5.01(xiv).
"VIACOM TRANSFER AGENT" means the company designated by Viacom as
the transfer agent and registrar for the Viacom Common Stock.
"WHEREHOUSE STOCK PURCHASE AGREEMENT" means the Stock Purchase
Agreement, dated as of August 10, 1998, between Viacom International and
Wherehouse Entertainment, Inc.
ARTICLE II
THE IPO AND THE SPLIT-OFF
Section 2.01. THE IPO AND OTHER PRIMARY OFFERINGS. Until the
Split-Off Date, Blockbuster shall consult with, and cooperate in all respects
with, Viacom in connection with any primary offering of the Blockbuster Common
Stock or any other securities of Blockbuster and shall, at Viacom's direction,
promptly take any and all actions necessary or desirable to consummate such
transactions.
Section 2.02. THE SPLIT-OFF. Viacom currently intends, following
the consummation of the IPO, to complete the Split-Off at a date after September
29, 1999. Viacom shall, in its sole and absolute discretion, determine whether
to proceed with all or part of the Split-Off and all terms of the Split-Off,
including, without limitation, the form, structure and terms of any
transaction(s) and/or offering(s) to effect the Split-Off and the timing of and
conditions to the consummation of the Split-Off. In addition, Viacom may at any
time and from time to time until the completion of the Split-Off abandon, modify
or change any or all of the terms of the Split-Off, including, without
limitation, by accelerating or delaying the timing of the consummation of all or
part of the Split-Off. Blockbuster shall cooperate with Viacom in all
commercially reasonable respects to accomplish the Split-Off and shall, at
Viacom's direction, promptly take any and all actions necessary or desirable to
effect the Split-Off, including, without limitation, the registration under the
Securities Act of Blockbuster Common Stock on an appropriate registration form
or forms to be designated by Viacom. Viacom shall select any investment
banker(s) and manager(s) in connection with the Split-Off, as well as any other
institutions providing services in connection with the Split-Off.
Section 2.03. CERTAIN STOCKHOLDER MATTERS. From and after the
distribution of Blockbuster Common Stock in connection with any transaction(s)
included as part of the
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Split-Off and until such Blockbuster Common Stock is duly transferred in
accordance with applicable law, Blockbuster shall regard the Persons receiving
Blockbuster Common Stock in such transaction(s) as record holders of Blockbuster
Common Stock in accordance with the terms of such transaction(s) without
requiring any action on the part of such Persons. Blockbuster agrees that,
subject to any transfers of such stock, (a) each such holder shall be entitled
to receive all dividends payable on, and exercise voting rights and all other
rights and privileges with respect to, the shares of Blockbuster Common Stock
then held by such holder and (b) each such holder shall be entitled, without any
action on the part of such holder, to receive one or more certificates
representing, or other evidence of ownership of, the shares of Blockbuster
Common Stock then held by such holder. Viacom shall cooperate, and shall
instruct the Viacom Transfer Agent to cooperate, with Blockbuster and the
Blockbuster Transfer Agent, and Blockbuster shall cooperate, and shall instruct
the Blockbuster Transfer Agent to cooperate, with Viacom and the Viacom Transfer
Agent, in connection with all aspects of the Split-Off and all other matters
relating to the issuance and delivery of certificates representing, or other
evidence of ownership of, the shares of Blockbuster Common Stock distributed to
the holders of Viacom Common Stock in connection with any transaction(s)
included as part of the Split-Off. Following the Split-Off, Viacom shall
promptly, but in no event no later than two business days thereafter, instruct
the Viacom Transfer Agent to deliver to the Blockbuster Transfer Agent true,
correct and complete copies of the stock and transfer records reflecting the
holders of Viacom Common Stock receiving shares of Blockbuster Common Stock in
connection with any transaction(s) included as part of the Split-Off.
Section 2.04. PRIOR RELATIONSHIP. Blockbuster, with respect to
Blockbuster and its Affiliates, and Viacom, with respect to Viacom and its
Affiliates, agree to take all commercially reasonable action to discontinue
their respective uses as promptly as is commercially reasonable of any printed
material that indicates an ownership or other relationship between or among
Viacom and Blockbuster or any of their respective Affiliates that has changed as
a result of the IPO, the Split-Off or any other transactions contemplated
hereby; PROVIDED that this Section 2.04 shall not prohibit the use of printed
material containing appropriate and accurate references to such relationship.
Section 2.05. FURTHER ASSURANCES REGARDING THE SPLIT-OFF. In
addition to the actions specifically provided for elsewhere in this Agreement,
Blockbuster shall, at Viacom's direction, use all commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things commercially reasonably necessary, proper or expeditious under
applicable laws, regulations and agreements in order to consummate and make
effective the Split-Off as promptly as reasonably practicable. Without limiting
the generality of the foregoing, Blockbuster shall, at Viacom's direction,
cooperate with Viacom, and execute and deliver, or use all commercially
reasonable efforts to cause to have executed and delivered, all instruments,
including instruments of conveyance, assignment and transfer, and to make all
filings with, and to obtain all consents, approvals or authorizations of, any
domestic or foreign governmental or regulatory authority requested by Viacom in
order to consummate and make effective the Split-Off.
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ARTICLE III
EXPENSES
Section 3.01. GENERAL. Except as otherwise provided in this
Agreement, the Ancillary Agreements or any other agreement between the parties
relating to the IPO or the Split-Off, all costs and expenses of either party
hereto in connection with the IPO and the Split-Off shall be paid by the party
that incurs such costs and expenses.
Section 3.02. CERTAIN EXPENSES RELATING TO THE IPO AND ANY OTHER
PRIMARY OFFERINGS BY BLOCKBUSTER. Except for the fees and disbursements related
to Viacom's counsel, accountants and other advisors, Blockbuster shall pay or
cause to be paid all third party expenses relating to the IPO or any other
primary offering by Blockbuster prior to the Split-Off Date, including (i) the
preparation, printing and filing of the IPO Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto or any other registration statements, (ii) the preparation, printing and
delivery to any underwriters of any underwriting agreement, any agreement among
underwriters and any other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Blockbuster Common Stock
or any other securities of Blockbuster, (iii) the preparation, issuance and
delivery of the certificates for the Blockbuster Common Stock or any other
securities of Blockbuster to any underwriters or any other purchasers, including
any stock or other transfer taxes and any stamp or other duties payable upon the
sale, issuance or delivery of the Blockbuster Common Stock or any other
securities of Blockbuster to any underwriters or any other securities, (iv) the
qualification of the Blockbuster Common Stock or any other securities of
Blockbuster under the securities laws in accordance with any state (Blue Sky
laws), including filing fees and the reasonable fees and disbursements of
counsel for any underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (v) the printing
and delivery to any underwriters of copies of each preliminary prospectus, any
term sheets and of the final prospectus and any amendments or supplements
thereto, (vi) the preparation, printing and delivery to any underwriters of
copies of the Blue Sky Survey and any supplement thereto, (vii) the fees and
expenses of any transfer agent or registrar for the Blockbuster Common Stock or
any other securities of Blockbuster, (viii) the filing fees incident to, and the
reasonable fees and disbursements of counsel to any underwriters in connection
with, the review by the National Association of Securities Dealers, Inc. (the
"NASD") of the terms of the sale of the Blockbuster Common Stock or any other
securities of Blockbuster and (ix) the fees and expenses incurred in connection
with the listing of the Blockbuster Common Stock or any other securities of
Blockbuster on the New York Stock Exchange, any other national securities
exchange or any national over the counter quotation system.
Section 3.03. CERTAIN EXPENSES RELATING TO THE SPLIT-OFF.
Except for the fees and disbursements related to Blockbuster's counsel,
accountants and other advisors, Viacom shall pay or cause to be paid all
third party expenses relating to the Split-Off, including (i) the fees and
expenses of the underwriter or dealer-manager, (ii) the preparation,
printing, filing (including under federal and state securities laws), mailing
and publishing of the offering materials relating to the Blockbuster Common
Stock, (iii) the preparation, printing and
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delivery of any certificates or documents entered into in connection with the
Split-Off, (iv) the fees and expenses of any exchange agent, information
agent, transfer agent or registrar for the Blockbuster Common Stock, (v) the
fees and expenses incurred in connection with the listing of the Blockbuster
Common Stock with the NASD or the New York Stock Exchange, any other national
securities exchange or any national over the counter quotation system, if
applicable and (vi) any other fees incurred in connection with the Split-Off.
ARTICLE IV
ACCESS TO INFORMATION
Section 4.01. RESTRICTIONS ON DISCLOSURE OF INFORMATION. (a)
Without limiting any rights or obligations under any other agreement between or
among the parties hereto and/or any of their respective Affiliates relating to
confidentiality, for a period of three years following the date hereof, each of
the parties hereto agrees that it shall not, and shall not permit any of its
Affiliates or Representatives to, disclose any Confidential Information to any
Person, other than to such Affiliates or Representatives on a need-to-know basis
in connection with the purpose for which the Confidential Information was
originally disclosed. Such Information shall no longer be deemed Confidential
Information, to the extent that it is or was (i) in the public domain other than
by the breach of this Agreement or by breach of any other agreement between or
among the parties hereto and/or any of their respective Affiliates, (ii)
available to such party outside the context of the Prior Relationship on a
nonconfidential basis prior to its disclosure by the other party, (iii) lawfully
acquired outside the context of the Prior Relationship on a nonconfidential
basis or independently developed by, or on behalf of, such party by Persons who
do not have access to, or descriptions of, any such Confidential Information,
(iv) required to be disclosed by law, governmental order or the rules and
regulations of the SEC, or (v) mutually agreed to by the parties.
(b) Each of the parties hereto shall maintain, and shall cause
its respective Affiliates to maintain, policies and procedures, and develop such
further policies and procedures as shall from time to time become necessary or
appropriate, to ensure compliance with this Section 4.01.
Section 4.02. LEGALLY REQUIRED DISCLOSURE OF CONFIDENTIAL
INFORMATION. If any of the parties to this Agreement or any of their respective
Affiliates or Representatives become legally required to disclose any
Confidential Information, such disclosing party shall promptly notify the party
owning the Confidential Information (the "OWNING PARTY") and shall use all
commercially reasonable efforts to cooperate with the Owning Party so that the
Owning Party may seek a protective order or other appropriate remedy and/or
waive compliance with this Section 4.02. All expenses reasonably incurred in
seeking a protective order or other remedy shall be borne by the Owning Party.
If such protective order or other remedy is not obtained, or if the Owning Party
waives compliance with this Section 4.02, the disclosing party or its Affiliate
or Representative, as applicable, shall (a) disclose only that portion of the
Confidential Information it is compelled by law to disclose, (b) use all
commercially reasonable efforts to obtain reliable
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assurance requested by the Owning Party that confidential treatment will be
accorded such Confidential Information, and (c) promptly provide the Owning
Party with a copy of the Confidential Information so disclosed, in the same form
and format so disclosed, together with a description of all Persons to whom such
Confidential Information was disclosed.
Section 4.03. ACCESS TO INFORMATION. (a) During the Retention
Period, each of the parties hereto shall cooperate with and afford, and shall
cause their respective Affiliates, Representatives, Subsidiaries, successors
and/or assignees, and shall use reasonable efforts to cause joint ventures that
are not Affiliates (collectively, "RELATED PARTIES") to cooperate with, and
afford to the other party, reasonable access upon reasonable advance written
request to all information (other than information created after the Split-Off
Date (i) the disclosure of which would have the effect of waiving a legal
privilege, or (ii) which is the subject of a confidentiality agreement between
such party and a third party which prohibits disclosure to the other party,
PROVIDED that such party shall use all commercially reasonable efforts to obtain
such third party's consent to disclosure of such information) within such
party's or any Related Party's possession. Access to the requested information
shall be provided so long as it relates to the requesting party's (the
"REQUESTOR") assets, business and operations, and access is reasonably required
by the Requestor as a result of the parties' Prior Relationship for purposes of
auditing, accounting, claims or litigation (except for claims or litigation
between the parties hereto), employee benefits, regulatory or tax purposes or
fulfilling disclosure or reporting obligations including, without limitation,
information reasonably necessary for the preparation of reports required by or
filed under the Securities Act or the Exchange Act with respect to any period
entirely or partially prior to the Split-Off Date or any other reasonable
purpose.
(b) Each party agrees to cooperate fully to allow access to each
others employees (i) to the extent that they are reasonably necessary to discuss
and explain all requested Information with and to the requesting party and (ii)
with respect to any claims brought against the other involving the conduct of
the Blockbuster Business prior to the Split-Off Date.
Section 4.04. RECORD RETENTION. (a) BOOKS AND RECORDS. Viacom and
Blockbuster shall preserve and keep all of their respective books and records in
the possession of such party or its Related Parties, whether in electronic form
or otherwise, for no less than the later of (i) the record retention policy of
Viacom and Blockbuster as in effect as of the Split-Off Date or (ii) any period
as may be required by any laws, regulations or rulings promulgated thereunder of
any jurisdiction (or of any political subdivision or taxing authority thereof)
(the "RETENTION PERIOD"), at such party's sole cost and expense. Viacom shall
deliver to Blockbuster on the Split-Off Date any and all original corporate
organization books that Viacom has in its possession relating solely to the
Blockbuster Business, copies of which Viacom may retain at its own expense. Upon
reasonable prior written request, Viacom and Blockbuster shall deliver to the
other copies of any and all books and records that Viacom or Blockbuster, as the
case may be, has in its possession relating to the Blockbuster Business.
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ARTICLE V
COVENANTS
Section 5.01. FINANCIAL AND OTHER INFORMATION. Blockbuster (and
Viacom with respect to clause (xii) below) agrees that, for so long as Viacom is
required to consolidate Blockbuster's results of operations and financial
position (determined in accordance with generally accepted accounting principles
consistently applied):
(i) Blockbuster shall, and shall cause each of its Subsidiaries
to, maintain a system of internal accounting controls in accordance with
generally accepted accounting principles and SEC and tax related
requirements that will provide reasonable assurance that Blockbuster's
and such Subsidiaries' books, records and accounts fairly reflect all
transactions and dispositions of assets.
(ii) Blockbuster shall, and shall cause each of its Subsidiaries
to, maintain a fiscal year which commences and ends on the same dates as
does Viacom's fiscal year of each calendar year.
(iii) As soon as practicable, and in any event within ten
Business Days after the end of each month in each fiscal year of
Blockbuster, Blockbuster shall deliver to Viacom (a) a monthly
consolidated income statement and related schedules for Blockbuster and
its Subsidiaries and (b) a year-to-date consolidated income statement
and related schedules for Blockbuster and its Subsidiaries. As soon as
practicable, and in any event within 20 Business Days (x) after the end
of each of the first three quarters in each fiscal year of Blockbuster,
and (y) after the end of each such fiscal year, Blockbuster shall
deliver to Viacom a consolidated balance sheet and related schedules and
statement of cash flows and related schedules for Blockbuster and its
Subsidiaries for such fiscal quarter or year end, as the case may be.
(iv) As soon as practicable, and in any event within 35 days
after the end of each of the first three quarters in each fiscal year of
Blockbuster and no later than ten days before Blockbuster intends to
file its Quarterly Financial Statements (as defined below) with the SEC,
Blockbuster shall deliver to Viacom drafts of (A) the consolidated
financial statements of Blockbuster and its Subsidiaries (and notes
thereto) for such periods and for the period from the beginning of the
current fiscal year to the end of such quarter, setting forth in each
case in comparative form for each such fiscal quarter of Blockbuster the
consolidated figures (and notes thereto) for the corresponding quarter
and periods of the previous fiscal year and all in reasonable detail and
prepared in accordance with Article 10 of Regulation S-X, and (B) a
discussion and analysis by management of Blockbuster's and its
Subsidiaries' financial condition and results of operations for such
fiscal period, including, without limitation, an explanation of any
material adverse change, all in reasonable detail and prepared in
accordance with Item 303(b) of Regulation S-K. The information set forth
in subsections (A) and (B) above is herein referred to as the
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"QUARTERLY FINANCIAL STATEMENTS." No later than the earlier of (x) two
Business Days prior to the date Blockbuster publicly files the Quarterly
Financial Statements with the SEC or otherwise makes such Quarterly
Financial Statements publicly available or (y) two Business Days prior
to the date on which Viacom has notified Blockbuster that it intends to
file its quarterly financial statements with the SEC, Blockbuster shall
deliver to Viacom the substantially final form of the Quarterly
Financial Statements certified by the chief financial officer of
Blockbuster as presenting fairly, in all material respects, the
financial condition and results of operations of Blockbuster and its
Subsidiaries; PROVIDED that Blockbuster and Viacom shall actively
consult with each other regarding any changes (whether or not
substantive) which Blockbuster may consider making to its Quarterly
Financial Statements and related disclosures prior to the filing with
the SEC. In addition to the foregoing, no (a) Quarterly Financial
Statement or (b) any other document which refers, or contains
information with respect, to the ownership of Blockbuster by Viacom, the
separation of Blockbuster from Viacom or the Split-Off shall be filed
with the SEC or otherwise made public by Blockbuster or any of its
Subsidiaries without the prior consent of Viacom which shall not be
unreasonably withheld. In any event, Blockbuster shall deliver to Viacom
its final Quarterly Report on Form 10-Q no later than 45 days after the
end of each of the first three quarters in each fiscal year of
Blockbuster. If the time period required by the SEC for Blockbuster to
file its Quarterly Report on Form 10-Q is changed, Blockbuster and
Viacom shall renegotiate in good faith to set more appropriate time
periods relating to the dates as set forth in this Section 5.01(iv). As
soon as practicable but in no event two Business Days prior to issuance,
Blockbuster shall deliver to Viacom copies of substantially final drafts
of all of its quarterly earnings releases. In addition, within such two
day period, Blockbuster shall actively consult with Viacom regarding any
changes (other than typographical or other similar minor changes) to
such substantially final drafts. Immediately following the issuance
thereof, Blockbuster shall deliver to Viacom final copies of such
earnings releases. Viacom shall determine, in its sole discretion, the
timing of Blockbuster's quarterly earnings releases; provided that
Blockbuster and Viacom will consult with each other on such timing if
the senior management of Blockbuster notifies Viacom that Blockbuster
is required by law as advised by its counsel not to release its
earnings at such time as initially determined by Viacom.
(v) Blockbuster shall deliver to Viacom as soon as practicable,
and in any event within 60 days after the end of each fiscal year of
Blockbuster and no later than 15 days before Blockbuster intends to file
its Annual Financial Statements with the SEC, (A) drafts of the
consolidated financial statements of Blockbuster (and notes thereto) for
such year, setting forth in each case in comparative form the
consolidated figures (and notes thereto) for the previous fiscal year
and all in reasonable detail and prepared in accordance with Regulation
S-X and (B) a discussion and analysis by management of Blockbuster's and
its Subsidiaries' financial condition and results of operations for such
year, including, without limitation, an explanation of any material
adverse change, all in reasonable detail and prepared in accordance with
Item 303(a) of Regulation S-K. The information set forth in (A) and (B)
above is herein referred to as the "ANNUAL FINANCIAL STATEMENTS."
Blockbuster shall deliver to Viacom all material revisions to such
drafts as soon as any such revisions are prepared or made. No later than
the earlier of (x) five Business Days prior to the date Blockbuster
publicly files the Annual Financial Statements with the SEC
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or otherwise makes such Annual Financial Statements publicly available
or (y) five Business Days prior to the date on which Viacom has
notified Blockbuster that it intends to file its annual financial
statements with the SEC, Blockbuster shall deliver to Viacom the final
form of the Annual Financial Statements certified by the chief financial
officer of Blockbuster as presenting fairly, in all material respects,
the financial condition and results of operations of Blockbuster and its
Subsidiaries; PROVIDED that Blockbuster and Viacom shall actively
consult with each other regarding any changes (whether or not
substantive) which Blockbuster may consider making to its Annual
Financial Statements and related disclosures prior to the filing with
the SEC. In addition to the foregoing, no (a) Annual Financial Statement
or (b) any other document which refers, or contains information with
respect, to the ownership of Blockbuster by Viacom, the separation of
Blockbuster from Viacom or the Split-Off shall be filed with the SEC or
otherwise made public by Blockbuster or any of its Subsidiaries without
the prior consent of Viacom which shall not be unreasonably withheld. In
any event, Blockbuster shall deliver to Viacom its final Annual Report
on Form 10-K no later than 90 days after the end of each fiscal year of
Blockbuster. If the time period required by the SEC for Blockbuster to
file its Annual Report on Form 10-K is changed, Blockbuster and Viacom
shall renegotiate in good faith to set more appropriate time periods
relating to the dates as set forth in this Section 5.01(v). As soon as
practicable but in no event two Business Days prior to issuance,
Blockbuster shall deliver to Viacom copies of substantially final drafts
of its annual earnings releases. In addition, within such two day
period, Blockbuster shall actively consult with Viacom regarding any
changes (other than typographical or other similar minor changes) to
such substantially final drafts. Immediately following the issuance
thereof, Blockbuster shall deliver to Viacom final copies of the
earnings release. Viacom shall determine, in its sole discretion, the
timing of Blockbuster's annual earnings release; provided that
Blockbuster and Viacom will consult with each other on such timing if
the senior management of Blockbuster notifies Viacom that Blockbuster
is required by law as advised by its counsel not to release its
earnings at such time as initially determined by Viacom.
(vi) Blockbuster shall deliver to Viacom all Quarterly and Annual
Financial Statements of each Subsidiary of Blockbuster which is itself
required to file financial statements with the SEC or otherwise make
such financial statements publicly available, with such financial
statements to be provided in the same manner and detail and on the same
time schedule as those financial statements of Blockbuster required to
be delivered to Viacom pursuant to this Section 5.01.
(vii) All information provided by Blockbuster or any of its
Subsidiaries to Viacom pursuant to Sections 5.01(iii) through (vi)
inclusive shall be consistent in terms of format and detail and
otherwise with the procedures in effect on the date hereof with respect
to the provision of such financial information by the Blockbuster
Business and/or Blockbuster and its Subsidiaries, as applicable, to
Viacom (and, where appropriate, as presently presented in financial
reports to Viacom's Board of Directors), with such changes therein as
may be requested by Viacom from time to time consistent with changes in
reporting by sectors and Subsidiaries of Viacom in accordance with
generally accepted accounting principles.
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(viii) Blockbuster and each of its Subsidiaries which files
information with the SEC shall deliver to Viacom: (A) as soon as the
same are prepared, substantially final drafts of (x) all reports,
notices and proxy and information statements to be sent or made
available by Blockbuster or any of its Subsidiaries to their security
holders, (y) all regular, periodic and other reports to be filed under
Sections 13, 14 and 15 of the Exchange Act (including current reports on
Form 8-K and annual reports to stockholders), and (z) all registration
statements and prospectuses to be filed by Blockbuster or any of its
Subsidiaries with the SEC or any securities exchange pursuant to the
listed company manual (or similar requirements) of such exchange
(collectively, the documents identified in clauses (x), (y) and (z) are
referred to herein as "BLOCKBUSTER PUBLIC DOCUMENTS"); and (B) as soon
as practicable, but in no event later than [four] Business Days prior to
the date the same are printed, sent or filed, whichever is earliest,
substantially final drafts of all such Blockbuster Public Documents;
PROVIDED that Blockbuster and Viacom shall actively consult with each
other regarding any changes (whether or not substantive) which
Blockbuster may consider making to any of its Blockbuster Public
Documents and related disclosures prior to any anticipated filing with
the SEC. In addition to the foregoing, no (a) Blockbuster Public
Document or (b) any other document which refers, or contains information
with respect, to the ownership of Blockbuster by Viacom, the separation
of Blockbuster from Viacom or the Split-Off shall be filed with the SEC
or otherwise made public by Blockbuster or any of its Subsidiaries
without the prior consent of Viacom which consent shall not unreasonably
be withheld.
(ix) Blockbuster shall, as promptly as practicable, deliver to
Viacom copies of all annual and other budgets and financial projections
(consistent in terms of format and detail and otherwise with the
procedures in effect on the date hereof) relating to Blockbuster or any
of its Subsidiaries and shall provide Viacom an opportunity to meet with
management of Blockbuster to discuss such budgets and projections.
(x) With reasonable promptness, Blockbuster shall deliver to
Viacom such additional financial and other information and data with
respect to Blockbuster and its Subsidiaries and their business,
properties, financial positions, results of operations and prospects as
from time to time may be reasonably requested by Viacom.
(xi) Except with respect to Blockbuster's quarterly and annual
earnings releases, Blockbuster shall deliver to Viacom as soon as
practicable but in no event two Business Days prior to issuance, copies
of substantially final drafts of all press releases and other statements
to be made available by Blockbuster or any of its Subsidiaries to
employees of Blockbuster or any of its Subsidiaries or to the public
concerning material developments in the business, properties, earnings,
results of operations, financial condition or prospects of Blockbuster
or any of its Subsidiaries or the relationship between (A) Blockbuster
or any of its Subsidiaries and (B) Viacom or any of its Affiliates. In
addition, within such two day period, prior to the issuance of any such
press release or public statement, Blockbuster shall actively consult
with Viacom regarding any changes
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(other than typographical or other similar minor changes) to such
substantially final drafts. Immediately following the issuance thereof,
Blockbuster shall deliver to Viacom copies of final drafts of all press
releases and other public statements.
(xii) Viacom and Blockbuster shall cooperate fully, and cause
their respective accountants to cooperate fully, to the extent requested
by the other party in the preparation of the other party's public
earnings releases, annual reports on Form 10-K, quarterly reports on
Form 10-Q, any current reports on Form 8-K and any other proxy,
information and registration statements, reports, notices, prospectuses
and any other filings made by Viacom or Blockbuster with the SEC, any
national securities exchange or otherwise made publicly available
(collectively, "VIACOM PUBLIC FILINGS" and the "BLOCKBUSTER PUBLIC
FILINGS" and together, the "PUBLIC FILINGS"). Viacom and Blockbuster
agree to provide to each other all information that the other party
reasonably requests in connection with any Public Filings or that, in
the judgment of either party's, is required to be disclosed or
incorporated by reference therein under any law, rule or regulation.
Such information shall be provided by such party in a timely manner on
the dates requested by the other party (which may be earlier than the
dates on which such party otherwise would be required hereunder to have
such information available) to enable the other party to prepare, print
and release all Public Filings on such dates as such party shall
determine. Viacom and Blockbuster shall use its reasonable best efforts
to cause their respective accountants to consent to any reference to
them as experts in any Public Filing required under any law, rule or
regulation. If and to the extent requested by either party, the other
party shall diligently and promptly review all drafts of such Public
Filing and prepare in a diligent and timely fashion any portion of such
Public Filing pertaining to that party. Prior to any printing or public
release of any Public Filing, an appropriate executive officer of Viacom
or Blockbuster shall, if requested by the other party, certify that the
information provided by such party relating to such party, its
Affiliates or its business in such Public Filing is accurate, true and
correct in all material respects. Unless required by law, rule,
regulation or generally accepted accounted principle, Blockbuster shall
not publicly release any financial or other information which
significantly conflicts with the information with respect to
Blockbuster, any of its Affiliates or the Blockbuster Business that is
included in any Viacom Public Filing without Viacom's prior written
consent. Prior to the release or filing thereof, Viacom and Blockbuster
shall provide each other with a draft of any portion of a Public Filing
containing information relating to the other party and its Subsidiaries
and shall give such party an opportunity to review such information and
comment thereon; PROVIDED that the other party shall determine in its
sole discretion the final form and content of all Public Filings.
(xiii) Blockbuster shall not change its independent certified
public accountants ("BLOCKBUSTER'S AUDITORS") without Viacom's prior
consent.
(xiv) Blockbuster shall use its reasonable best efforts to enable
the Blockbuster Auditors to complete their audit such that they will
date their opinion on Blockbuster's
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audited annual financial statements on the same date that Viacom's
independent certified public accountants ("VIACOM'S AUDITORS") date
their opinion on Viacom's audited annual financial statements (the
"VIACOM ANNUAL STATEMENTS"), and to enable Viacom to meet its timetable
for the printing, filing and public dissemination of the Viacom Annual
Statements.
(xv) Blockbuster shall authorize Blockbuster's Auditors to make
available to Viacom's Auditors both the personnel who performed or are
performing the annual audit of Blockbuster and work papers related to
the annual audit of Blockbuster, in all cases within a reasonable time
prior to Blockbuster's Auditors' opinion date, so that Viacom's Auditors
are able to perform the procedures they consider necessary to take
responsibility for the work of Blockbuster's Auditors as it relates to
Viacom's Auditors' report on Viacom's statements, all within sufficient
time to enable Viacom to meet its timetable for the printing, filing and
public dissemination of the Viacom Annual Statements.
(xvi) Blockbuster shall provide Viacom's internal auditors access
to Blockbuster's and its Subsidiaries, books and records so that Viacom
may conduct reasonable audits relating to the financial statements
provided by Blockbuster pursuant hereto as well as to the internal
accounting controls and operations of Blockbuster and its Subsidiaries.
(xvii) Blockbuster shall give Viacom as much prior notice as is
reasonably practical of any proposed determination of, or any changes
in, its accounting estimates or accounting principles from those in
effect on the date hereof. Blockbuster will consult with Viacom and, if
requested by Viacom, Blockbuster will consult with Viacom's independent
public accountants with respect thereto. Blockbuster will not make such
determination or changes without Viacom's prior consent, which shall not
be unreasonably withheld.
(xviii) Notwithstanding clause (xvii) above, Blockbuster shall
make any changes in its accounting estimates or accounting principles
that are requested by Viacom in order for Blockbuster's accounting
estimates and principles to be consistent with those of Viacom.
Nothing in this Section 5.01 shall require Blockbuster to violate any agreement
with any of its customers, suppliers or other third parties regarding the
confidentiality of commercially sensitive information relating to that customer,
suppliers or other third parties or its business; PROVIDED that in the event
that Blockbuster is required under this Section 5.01 to disclose any such
information, Blockbuster shall use all commercially reasonable efforts to seek
to obtain such customer's, suppliers' or other third parties, consent to the
disclosure of such information.
For the purposes of these covenants, Viacom and Blockbuster
understand and appreciate that their mutual interests will be best served by
effecting a rapid and fair resolution of
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any claims or disputes which may arise out of this Section 5.01. Therefore, each
party agrees to use its reasonable best efforts to resolve all such disputes as
rapidly as possible on a fair and equitable basis. Toward this end, each party
agrees to develop and follow a process for presenting, rapidly assessing, and
settling claims and other disputes on a fair and equitable basis. If any dispute
or claim arising under this Section 5.01 cannot be readily resolved by the
parties, the parties agree to refer the matter to the chief financial officers
of each party who shall meet and attempt to resolve the dispute within fifteen
days from the date the dispute was brought before their attention. If any
dispute or claim arising under this Section 5.01 cannot be resolved by chief
financial officers, the parties agree to refer the matter to a senior auditing
partner of a nationally recognized accounting firm not currently providing
services to either party.
Section 5.02. NO VIOLATIONS. (a) For so long as the Ownership
Percentage is equal to or greater than 50%, Blockbuster covenants and agrees
that it will not take any action or enter into any commitment or agreement which
may reasonably be anticipated to result, with or without notice and with or
without lapse of time or otherwise, in a contravention or event of default by
any of its Affiliates of (i) any provisions of applicable law or regulation,
including but not limited to provisions pertaining to the Code or the Employee
Retirement Income Security Act of 1974, as amended, (ii) any provision of
Viacom's certificate of incorporation or bylaws, (iii) any credit agreement or
other material agreements (including agreements relating to covenants not to
compete) binding upon Viacom or (iv) any judgment, order or decree of any
governmental body, agency or court having jurisdiction over Viacom or any of its
respective assets.
(b) Blockbuster and Viacom agree to provide to the other any
information and documentation requested by the other for the purpose of
evaluating and ensuring compliance with Section 5.02(a) hereof.
(c) Notwithstanding the foregoing Section 5.01, nothing in this
Agreement is intended to limit or restrict in any way Viacom's right's as a
stockholder of Blockbuster.
Section 5.03. OTHER AGREEMENTS. On or prior to the consummation
of the IPO, Viacom and Blockbuster shall have executed and delivered to each
other each of the Ancillary Agreements.
ARTICLE VI
ASSIGNMENT AND ASSUMPTION
Section 6.01. ASSIGNMENT OF OBLIGATIONS. Pursuant to the
assignment provision of Section 10.07 of the Wherehouse Stock Purchase
Agreement, Viacom International hereby transfers, conveys, sets over and assigns
to Blockbuster any and all rights under the Wherehouse Stock Purchase Agreement
and any ancillary agreements executed in connection therewith.
Section 6.02. ASSUMPTION OF OBLIGATIONS. Blockbuster hereby
undertakes, assumes and agrees to perform all of the duties, obligations and
liabilities of Viacom International
18
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under the Wherehouse Stock Purchase Agreement and any ancillary agreements
executed in connection therewith.
ARTICLE VII
OPTIONS
Section 7.01. OPTIONS. (a) Blockbuster hereby grants to Viacom
International, on the terms and conditions set forth herein, a continuing right
(the "BLOCKBUSTER CLASS B COMMON STOCK OPTION") to purchase from Blockbuster, at
the times set forth herein, such number of shares of Blockbuster Class B Common
Stock as is necessary to allow the Viacom International to maintain the
Ownership Percentage. The exercise price for the shares of Blockbuster Class B
Common Stock purchased pursuant to the Blockbuster Class B Common Stock Option
shall be the Market Price of the Blockbuster Class A Common Stock as of the date
of first delivery of notice of exercise of the Blockbuster Class B Common Stock
Option by Viacom International to Blockbuster.
(b) The provisions of Section 7.01(a) hereof notwithstanding, the
Blockbuster Class B Common Stock Option granted pursuant to Section 7.01(a)
shall not apply and shall not be exercisable in connection with the issuance by
Blockbuster of any shares of Blockbuster Common Stock pursuant to any stock
option or other executive or employee benefit or compensation plan maintained by
Blockbuster, so long as, from and after the date hereof and prior to the
issuance of such shares, Blockbuster or Viacom International has repurchased
from shareholders and Blockbuster has not subsequently reissued a number of
shares equal or greater to the number of shares to be issued in any such
issuance.
(c) Blockbuster hereby grants to Viacom International, on the
terms and conditions set forth herein, a continuing right (the "NONVOTING STOCK
OPTION" and, together with the Blockbuster Class B Common Stock Option, the
"OPTIONS") to purchase from Blockbuster, at the times set forth herein, such
number of shares of Nonvoting Stock as is necessary to allow the Viacom
International to own 80 percent of each class of outstanding Nonvoting Stock.
The exercise price for the shares of Nonvoting Stock purchased pursuant to the
Nonvoting Stock Option shall be the price at which such Nonvoting Stock is then
being sold to third parties, or, if no Nonvoting Stock is being sold, the fair
market value thereof as determined in good faith by an independent investment
advisor.
Section 7.02. NOTICE. At least two business days prior to the
issuance of any shares of Blockbuster Common Stock (other than in connection
with the IPO, including the full exercise of all underwriters' over-allotment
options granted in connection therewith and other than issuances of Blockbuster
Common Stock Viacom International) or the first date on which any event could
occur that, in the absence of a full or partial exercise of the Blockbuster
Class B Common Stock Option, would result in a reduction in the Ownership
Percentage, Blockbuster will notify Viacom International in writing (a
"BLOCKBUSTER CLASS B COMMON STOCK OPTION NOTICE") of any plans it has to issue
such shares or the date on which such event could first occur.
19
<PAGE>
At least two business days prior to the issuance of any shares of Nonvoting
Stock (other than issuances of Nonvoting Stock to Viacom International) or the
first date on which any event could occur that, in the absence of a full or
partial exercise of the Nonvoting Stock Option, would result in the Viacom
International owning less than 80 percent of each class of outstanding Nonvoting
Stock, Blockbuster will notify Viacom International in writing (a "NONVOTING
STOCK OPTION NOTICE" and, together with a Blockbuster Class B Common Stock
Option Notice, an "OPTION NOTICE") of any plans it has to issue such shares or
the date on which such event could first occur. Each Option Notice must specify
the date on which Blockbuster intends to issue such additional shares or on
which such event could first occur (such issuance or event being referred to
herein as an "ISSUANCE EVENT" and the date of such issuance or event as an
"ISSUANCE EVENT DATE"), the number of shares Blockbuster intends to issue or may
issue and the other terms and conditions of such Issuance Event.
Section 7.03. OPTION EXERCISE AND PAYMENT. The Blockbuster Class
B Common Stock Option may be exercised by Viacom International for a number of
shares equal to or less than the number of shares that are necessary for the
Viacom International to maintain, in the aggregate, the then-current Ownership
Percentage. The Nonvoting Stock Option may be exercised by Viacom International
for a number of shares equal to or less than the number of shares that are
necessary for the Viacom International to own, in the aggregate, 80 percent of
each class of outstanding Nonvoting Stock. Each Option may be exercised at any
time after receipt of an applicable Option Notice and prior to the applicable
Issuance Event Date by the delivery to Blockbuster of a written notice to such
effect specifying (i) the number of shares of Blockbuster Class B Common Stock
or Nonvoting Stock, as the case may be, to be purchased by Viacom International
and (ii) a calculation of the exercise price for such shares. Upon any such
exercise of either Option, Blockbuster will, prior to the applicable Issuance
Event Date, deliver to Viacom International, against payment therefor,
certificates (issued in the name of Viacom International) representing the
shares of Blockbuster Class B Common Stock or Nonvoting Stock, as the case may
be, being purchased upon such exercise. Payment for such shares shall be made by
wire transfer or intrabank transfer of immediately-available funds to such
account as shall be specified by Blockbuster, for the full purchase price for
such shares.
Section 7.04. EFFECT OF FAILURE TO EXERCISE. Except as provided
in Section 7.06, any failure by Viacom International to exercise either Option,
or any exercise for less than all shares purchasable under either Option, in
connection with any particular Issuance Event shall not affect Viacom
International's right to exercise the relevant Option in connection with any
subsequent Issuance Event.
Section 7.05. IPO. Notwithstanding the foregoing, Viacom
International shall not be entitled to exercise the Blockbuster Class B Common
Stock Option in connection with the IPO of the Blockbuster Class A Common Stock
if, upon the completion of the IPO, including the full exercise of all
underwriters' over-allotment options granted in connection therewith, the
Ownership Percentage would be greater than 80%.
20
<PAGE>
Section 7.06. TERMINATION OF OPTIONS. The Options shall terminate
upon the occurrence of any Issuance Event that, after considering Viacom
International's response thereto and to any other Issuance Events, results in
the Ownership Percentage being less than 45%, other than any Issuance Event in
violation of this Agreement.
ARTICLE VIII
INDEMNIFICATION
Section 8.01. INDEMNIFICATION PROCEDURES. (a) The indemnification
procedures set forth in Section 8.01(b) herein are applicable to any indemnity
granted pursuant to the Ancillary Agreements (other than the Tax Matters
Agreement).
(b) If a claim or demand is made against an Indemnified Party by
any Person who is not a party to the Ancillary Agreements (a "THIRD PARTY
CLAIM") as to which such Indemnified Party is entitled to indemnification
pursuant to the Ancillary Agreements, such Indemnified Party shall give the
Indemnifying Party notice of such Third Party Claim, as promptly as practicable,
but in any event no later than 15 days of the receipt by the Indemnified Party
of such notice; PROVIDED, HOWEVER, that the failure to provide such notice shall
not release the Indemnifying Party from any of its obligations under the
Ancillary Agreements except to the extent the Indemnifying Party is materially
prejudiced by such failure and shall not relieve the Indemnifying Party from any
other obligation or liability that it may have to any Indemnified Party
otherwise than under the Ancillary Agreements. If the Indemnifying Party
acknowledges in writing its obligations to indemnify the Indemnified Party
hereunder against any Losses that may result from such Third Party Claim, then
such Indemnifying Party shall be entitled to assume and control the defense of
such Third Party Claim at its expense and through counsel of its choice, subject
to the approval of the Indemnified Party (which approval shall not be
unreasonably withheld or delayed), if it gives notice of its intention to do so
to the Indemnified Party within 15 business days of the receipt of such notice
from the Indemnified Party; PROVIDED, HOWEVER, that if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the Indemnified Party for the same
counsel to represent both the Indemnified Party and the Indemnifying Party, then
the Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is required to
participate in such defense, at the expense of the Indemnifying Party. In the
event the Indemnifying Party exercises the right to undertake any such defense
against any such Third Party Claim as provided above, the Indemnified Party
shall cooperate with the Indemnifying Party in such defense and make available
to the Indemnifying Party, at the Indemnifying Party's expense, all witnesses,
pertinent records, materials and information in the Indemnified Party's
possession or under the Indemnified Party's control relating thereto as is
reasonably required by the Indemnifying Party, subject to reimbursement of
reasonable out-of-pocket expenses. Similarly, in the event the Indemnified Party
is, directly or indirectly, conducting the defense against any such Third Party
Claim, the Indemnifying Party shall cooperate with the Indemnified Party in such
defense and make available to the Indemnified Party all such witnesses, records,
materials and information in the Indemnifying Party's possession or under the
Indemnifying Party's control
21
<PAGE>
relating thereto as is reasonably required by the Indemnified Party, subject to
reimbursement of reasonable out-of-pocket expenses. No such Third Party Claim
may be settled by the Indemnifying Party without the prior written consent of
the Indemnified Party (which shall not be unreasonably withheld or delayed)
unless such settlement is solely for money and includes an unconditional release
of each Indemnified Party from any and all Losses arising out of such action,
claim, suit or proceeding and would not otherwise adversely affect the
Indemnified Party. No such Third Party Claim may be settled by the Indemnified
Party without the prior written consent of the Indemnifying Party which shall
not be unreasonably withheld or delayed.
Notwithstanding the foregoing, the Indemnifying Party shall not
be entitled to assume the defense of any Third Party Claim and shall be liable
for the fees and expenses of counsel incurred by the Indemnified Party in
defending such Third Party Claim if the Third Party Claim seeks an order,
injunction or other equitable relief or relief for other than money damages
against the Indemnified Party which the Indemnified Party reasonably determines,
after conferring with its counsel, cannot be separated from any related claim
for money damages. If such equitable relief or other relief portion of the Third
Party Claim can be so separated from that for money damages, the Indemnifying
Party shall be entitled to assume the defense of the portion relating to money
damages.
ARTICLE IX
CONDITION TO CONSUMMATION OF TRANSACTIONS; TERMINATION
Section 9.01. CONDITION. Consummation of the transactions
provided for in this Agreement and the Ancillary Agreements is conditioned upon,
and shall only be effected upon or after (i) the final approval of the IPO by
the Board of Directors of Blockbuster and Viacom, (ii) the final approval of the
Split-Off by the Board of Directors of Viacom and (iii) the closing of the IPO.
Section 9.02. TERMINATION. This Agreement may be terminated and
the IPO and Split-Off abandoned by the Board of Directors of Viacom in its sole
discretion, without the approval of Blockbuster at any time prior to the IPO
Effective Date or Split-Off Date, as applicable. In the event of any such
termination, no party shall have any liability of any kind to the other party.
ARTICLE X
MISCELLANEOUS
Section 10.01. LIMITATION OF LIABILITY. Neither Viacom nor
Blockbuster shall be liable to the other for any special, indirect, incidental
or consequential damages of the other arising in connection with this Agreement.
Section 10.02. FURTHER ASSURANCES. Each party agrees to execute,
acknowledge, deliver, file, record and publish such further certificates,
amendments to certificates, instruments
22
<PAGE>
and documents, and do all such other acts and things as may be required by law,
or as may be required to carry out the intent and purposes of this Agreement and
the Ancillary Agreements and the translations contemplated thereby.
Section 10.03. WAIVER. The observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party entitled to enforce such term, but
such waiver shall be effective only if it is in writing signed by a duly
authorized officer of the party against which such waiver is to be asserted.
Unless other expressly provided in this Agreement, no delay or omission on the
part of any party in exercising any right or privilege under this Agreement
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right or privilege under this Agreement operates as a waiver of any other
right or privilege under this Agreement nor shall any single or partial exercise
of any right or privilege preclude any other or future exercise thereof or the
exercise of any other right or privilege under this Agreement. No failure by
either party to take any action or assert any right or privilege hereunder shall
be deemed to be a waiver of such right or privilege in the event of the
continuation or repetition of the circumstances giving rise to such right unless
expressly waived in writing by the party against whom the existence of such
waiver is asserted.
Section 10.04. REMEDIES. Each of Viacom and Blockbuster
acknowledges and agrees that under certain circumstances the breach by Viacom or
any of its Affiliates or Blockbuster or any of its Affiliates of a term or
provision of this Agreement will materially and irreparably harm the other
party, that money damages will accordingly not be an adequate remedy for such
breach and that the non-defaulting party, in its sole discretion and in addition
to its rights under this Agreement and any other remedies it may have at law or
in equity, may apply to any court of law or equity of competent jurisdiction for
specific performance and/or other injunctive relief in order to enforce or
prevent any breach of the provisions of this Agreement.
Section 10.05. PERFORMANCE. Each of the parties hereto shall use
all commercially reasonable efforts to cause to be performed all actions,
agreements and obligations set forth herein to be performed by any Affiliate of
such party.
Section 10.06. REFERENCES; CONSTRUCTION. The table of contents
and the section and other headings and subheadings contained in this Agreement
and the exhibits hereto are solely for the purpose of reference, are not part of
the agreement of the parties hereto, and shall not in any way affect the meaning
or interpretation of this Agreement or any exhibit hereto. All references to
days or months shall be deemed references to calendar days or months. Unless the
context otherwise requires, any reference to a "Section" or an "Exhibit" shall
be deemed to refer to a section of this Agreement or an exhibit to this
Agreement, as applicable. The words "hereof," "herein" and "hereunder" and words
of similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. This Agreement shall be
construed without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing the document to be drafted.
23
<PAGE>
Section 10.07. AMENDMENTS. This Agreement shall not be
supplemented, amended or modified in any manner whatsoever (including without
limitation by course of dealing or of performance or usage of trade) except in
writing signed by the parties.
Section 10.08. SUCCESSORS AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. Except as set forth below, this Agreement may
not be assigned by any party by operation of law or otherwise without the
express written consent of the other party (which consent may be granted or
withheld). The Option granted to Viacom International pursuant to Article VII
hereof may be assigned to Viacom or any Subsidiary of Viacom.
Section 10.09. SEVERABILITY. Wherever possible, each provision of
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law. If any portion of this Agreement is declared invalid
for any reason in any jurisdiction, such declaration shall have no effect upon
the remaining portions of this Agreement, which shall continue in full force and
effect as if this Agreement had been executed with the invalid portions thereof
deleted; PROVIDED that the entirety of this Agreement shall continue in full
force and effect in all other jurisdictions.
Section 10.10. ENTIRE AGREEMENT. Other than the Ancillary
Agreements, this Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and thereof and supersede all
prior agreements, including Article 7 of the Asset Purchase Agreement dated June
7, 1999 between Viacom Entertainment Canada Inc. and Blockbuster Canada Inc.,
and undertakings, both written and oral, between the parties with respect to the
subject matter hereof and thereof.
Section 10.11. NOTICES. All notices, consents, requests,
approvals, and other communications provided for or required herein, and all
legal process in regard thereto, must be in writing and shall be deemed validly
given, made or served, (a) when delivered personally or sent by telecopy to the
facsimile number indicated below with a required confirmation copy sent in
accordance with subsection (c) below; or (b) on the next business day after
delivery to a nationally-recognized express delivery service with instructions
and payment for overnight delivery; or (c) on the fifth (5th) day after
deposited in any depository regularly maintained by the United States postal
service, postage prepaid, certified or registered mail, return receipt
requested, addressed to the following addresses or to such other address as the
party to be notified shall have specified to the other party in accordance with
this section:
If to Viacom:
Viacom Inc.
1515 Broadway
New York New York 10036
Attention: Michael D. Fricklas, General Counsel
24
<PAGE>
Phone Number: 212-258-6070
Fax Number: 212-258-6099
If to Blockbuster:
Blockbuster Inc.
1201 Elm Street
Dallas, Texas 75270
Attention: Ed Stead, General Counsel
Phone Number: 214-854-3499
Fax Number: 214-854-3677
Section 10.12. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York. Each of the
parties hereto agrees that any dispute relating to or arising from this
Agreement or the transactions contemplated hereby shall be resolved only in the
court of the State of New York sitting in the County of New York or the United
States District Court for the Southern District of New York and the appellate
court having jurisdiction of appeals in such courts. In that context, and
without limiting the generality of the foregoing, each of the parties hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal suit, action
or proceeding relating to this Agreement or any transaction contemplated
hereby, or for recognition and enforcement of any judgment in respect
thereof, to the exclusive jurisdiction of the courts of the State of New
York sitting in the County of New York or the United States District
Court for the Southern District of New York and appellate court having
jurisdiction of appeals in such courts, and each of the parties hereto
irrevocably and unconditionally agrees that all claims in respect of any
such suit, action, or proceeding shall be heard and determined in such
New York State court or, to the extent permitted by law, in such federal
court;
(b) consents that any such suit, action or proceeding may and
shall be brought in such courts and waives any objection that it may now
or hereafter have to the venue or jurisdiction or any such action or
proceeding in such court or that such action or proceeding was brought
in an inconvenient forum and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party in its address as provided in Section 10.11
hereof;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by New York law; and
25
<PAGE>
(e) agrees that this Agreement has been entered into in the State
of New York and performed in part in the State of New York.
Section 10.13. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same instrument.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the date and year first written above.
VIACOM INC.
By: ________________________________
Name:
Title:
VIACOM INTERNATIONAL INC.
By: ________________________________
Name:
Title:
BLOCKBUSTER INC.
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT A
Form of Release and Indemnification Agreement
[Filed as Exhibit 10.2 to the Registration Statement on Form S-1 of Blockbuster]
<PAGE>
EXHIBIT B
Form of Transition Services Agreement
[Filed as Exhibit 10.3 to the Registration Statement on Form S-1 of Blockbuster]
<PAGE>
EXHIBIT C
Form of Registration Rights Agreement
[Filed as Exhibit 10.4 to the Registration Statement on Form S-1 of Blockbuster]
<PAGE>
EXHIBIT D
Form of Tax Matters Agreement
[Filed as Exhibit 10.5 to the Registration Statement on Form S-1 of Blockbuster]
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.....................................................2
ARTICLE II
THE IPO AND THE SPLIT-OFF
Section 2.01. The IPO and Other Primary Offerings.............................7
Section 2.02. The Split-Off...................................................7
Section 2.03. Certain Stockholder Matters.....................................7
Section 2.04. Prior Relationship..............................................8
Section 2.05. Further Assurances Regarding the Split-Off......................8
ARTICLE III
EXPENSES
Section 3.01. General.........................................................9
Section 3.02. Certain Expenses Relating to the IPO and any Other
Primary Offerings by Blockbuster................................9
Section 3.03. Certain Expenses Relating to the Split-Off......................9
ARTICLE IV
ACCESS TO INFORMATION
Section 4.01. Restrictions on Disclosure of Information......................10
Section 4.02. Legally Required Disclosure of Confidential Information........10
Section 4.03. Access to Information..........................................11
Section 4.04. Record Retention...............................................11
ARTICLE V
COVENANTS
Section 5.01. Financial and Other Information................................12
Section 5.02. No Violations..................................................18
Section 5.03. Other Agreements...............................................18
ARTICLE VI
ASSIGNMENT AND ASSUMPTION
<PAGE>
Page
----
Section 6.01. Assignment of Obligations......................................18
Section 6.02. Assumption of Obligations......................................19
ARTICLE VII
OPTIONS
Section 7.01. Options........................................................19
Section 7.02. Notice.........................................................19
Section 7.03. Option Exercise and Payment....................................20
Section 7.04. Effect of Failure to Exercise..................................20
Section 7.05. IPO............................................................20
Section 7.06. Termination of Options.........................................21
ARTICLE VIII
INDEMNIFICATION
Section 8.01. Indemnification Procedures.....................................21
ARTICLE IX
CONDITION TO CONSUMMATION OF TRANSACTIONS; TERMINATION
Section 9.01. Condition......................................................22
Section 9.02. Termination....................................................22
ARTICLE X
MISCELLANEOUS
Section 10.01. Limitation of Liability........................................23
Section 10.02. Further Assurances.............................................23
Section 10.03. Waiver.........................................................23
Section 10.04. Remedies.......................................................23
Section 10.05. Performance....................................................23
Section 10.06. References; Construction.......................................23
Section 10.07. Amendments.....................................................24
Section 10.08. Successors and Assignment......................................24
Section 10.09. Severability...................................................24
Section 10.10. Entire Agreement...............................................24
Section 10.11. Notices........................................................24
Section 10.12. Governing Law..................................................25
Section 10.13. Counterparts...................................................26
EXHIBITS
Exhibit A Form of Release and Indemnification Agreement
ii
<PAGE>
Exhibit B Form of Transition Services Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Tax Matters Agreement
iii
<PAGE>
Exhibit 10.2
FORM OF RELEASE AND INDEMNIFICATION AGREEMENT
DATED AS OF , 1999
BY AND BETWEEN
VIACOM INC.
AND
BLOCKBUSTER INC.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.....................................................1
ARTICLE II
INDEMNIFICATION
Section 2.01. Indemnification by Blockbuster..................................4
Section 2.02. Indemnification by Viacom.......................................5
Section 2.03. Certain Tax Matters.............................................5
Section 2.04. Registration Indemnification....................................5
Section 2.05. Calculation of Indemnification Payments.........................7
Section 2.06. Indemnification Procedures......................................8
Section 2.07. Remedies Cumulative.............................................8
ARTICLE III
RELEASE
Section 3.01. General Release.................................................8
ARTICLE IV
MISCELLANEOUS
Section 4.01. Further Agreements..............................................9
Section 4.02. Amendments......................................................9
Section 4.03. Successors and Assignment.......................................9
Section 4.04. Consolidation, Merger and Sale of Assets........................9
Section 4.05. Severability...................................................10
Section 4.06. Entire Agreement...............................................10
Section 4.07. Notices........................................................10
Section 4.08. Governing Law..................................................11
Section 4.09. Counterparts...................................................12
<PAGE>
RELEASE AND INDEMNIFICATION AGREEMENT
RELEASE AND INDEMNIFICATION AGREEMENT (this "AGREEMENT") dated as
of , 1999 by and between VIACOM INC., a Delaware corporation ("VIACOM") and
BLOCKBUSTER INC., a Delaware corporation and an indirect, wholly owned
subsidiary of Viacom ("BLOCKBUSTER").
RECITALS
WHEREAS, on September 29, 1994, Viacom acquired the businesses
and operations of Blockbuster Entertainment Corporation, a Delaware Corporation
("BEC") through a merger of BEC with and into Viacom (the "MERGER");
WHEREAS, since the Merger, Viacom has owned and operated the
acquired businesses and operations of BEC and other related businesses and
operations and has made significant improvements and contributions thereto and
has transferred certain of the assets, businesses and operations acquired in the
Merger and certain other related assets, businesses and operations to
Blockbuster and its Subsidiaries (collectively, the "ASSET TRANSFERS");
WHEREAS, Viacom presently intends to split-off Blockbuster in a
tax-free transaction;
WHEREAS, prior to such split-off, Blockbuster proposes to issue
shares of its common stock in an initial public offering registered under the
Securities Act of 1933, as amended;
WHEREAS, in consideration of the foregoing and as a condition to
the willingness of the parties to proceed with the initial public offering,
Blockbuster has agreed to release and indemnify Viacom, and Viacom has agreed to
release and indemnify Blockbuster, as more fully described below; and
NOW, THEREFORE, in consideration of the mutual covenants set
forth in this Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
"AFFILIATES" means, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such specified
Person; PROVIDED, HOWEVER, that prior to the Split-Off, Affiliates of
Blockbuster or Viacom shall only include Persons who would be affiliates of
<PAGE>
Blockbuster or Viacom, respectively, assuming that the Split-Off had occurred
immediately prior to the determination as to whether such Person was an
affiliate of Blockbuster or Viacom, respectively.
"AGREEMENT" has the meaning ascribed thereto in the Preamble.
"ASSET TRANSFERS" has the meaning ascribed thereto in the
Recitals.
"BEC" has the meaning ascribed thereto in the Recitals.
"BLOCKBUSTER" has the meaning ascribed thereto in the Preamble.
"BLOCKBUSTER BUSINESS" has the meaning ascribed thereto in
Section 2.01(a)(i).
"BLOCKBUSTER REGISTRATION STATEMENT" means any registration
statement (or any preliminary or final prospectus included therein), information
memorandum or other offering document relating to a primary offer and sale of
securities of Blockbuster prepared by Blockbuster or at its direction, in each
case including all exhibits thereto and as supplemented and amended from time to
time.
"BLOCKBUSTER SUBSIDIARY OBLIGORS" means, collectively, any direct
or indirect Subsidiary of Blockbuster that is or becomes an obligor on,
guarantees, or otherwise becomes directly or indirectly liable with respect to
any Senior Indebtedness of Blockbuster.
"INDEMNIFIED PARTY" means any Person who is entitled to received
payment or defense from an Indemnifying Party pursuant to this Agreement.
"INDEMNIFYING PARTY" means any party who is required to pay or
defend any other Person pursuant to this Agreement.
"IPO" means the initial public offering by Blockbuster of shares
of Blockbuster Class A Common Stock as contemplated by the IPO Registration
Statement.
"IPO AND SPLIT-OFF AGREEMENT" means Initial Public Offering and
Split-Off Agreement date as of the dated hereof among Viacom, Viacom
International Inc. and Blockbuster.
"IPO REGISTRATION STATEMENT" means the Registration Statement on
Form S-1, Registration No. 333-77899, of Blockbuster, including all exhibits
thereto and as supplemented and amended from time to time.
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"INTERCOMPANY AGREEMENTS" means this Agreement, the IPO and
Split-Off Agreement and the Transition Services Agreement, the Registration
Rights Agreement and the Tax Matters Agreement, each dated the date hereof by
and between the parties.
"LOSSES" has the meaning ascribed thereto in Section 2.01(a).
"MERGER" has the meaning ascribed thereto in the Recitals.
"PERSON" means any individual, corporation, limited or general
partnership, limited liability company, joint venture association, joint stock
company, trust unincorporated organization or government or any agency or
political subdivision thereof.
"REPRESENTATIVES" means directors, officers, employees, agents,
consultants, advisors, accountants, attorneys and representatives.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, together with the rules and regulations promulgated
thereunder.
"SENIOR INDEBTEDNESS" means, with respect to a Person, (i) all
senior indebtedness of such Person for borrowed money, (ii) all senior
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments and (iii) all senior indebtedness of others secured by a
lien on any property of such person.
"SPLIT-OFF" means the distribution of Blockbuster Common Stock by
Viacom in one or more transactions occurring after the IPO that collectively
have the effect that all or a substantial part of shares of Blockbuster Common
Stock held by Viacom are distributed to all or some of the stockholders of
Viacom, whenever such transaction(s) shall occur.
"SPLIT-OFF REGISTRATION STATEMENT" means any registration
statement (or any preliminary or final prospectus included therein), information
memorandum or other offering document relating to the Split-Off, in each case
including all exhibits thereto and as supplemented and amended from time to
time.
"SUBSIDIARY" means with respect to any Person, any other Person a
majority of the equity ownership or voting stock of which is at the time owned,
directly or indirectly, by such Person and/or one or more other Subsidiaries of
such Person; PROVIDED, HOWEVER, that prior to the Split-Off, a Subsidiary of
Viacom shall only include Persons who would be a Subsidiary of Viacom assuming
the Split-Off has occurred immediately prior to the determination as to whether
such Person was a Subsidiary of Viacom.
"TRANSFER COSTS" means any payments, costs or expenses paid to a
third party associated with the Asset Transfers.
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"VIACOM" has the meaning ascribed thereto in the Preamble.
"VIACOM BUSINESS" has the meaning ascribed thereto in Section
2.02.
"VIACOM GUARANTEES" means guarantees of Viacom and its
Subsidiaries with respect to obligations arising out of or relating to the
Blockbuster Business, including without limitation guarantees or other
obligations under leases or other agreements relating to video and music stores,
offices, warehouses and equipment.
ARTICLE II
INDEMNIFICATION
Section 2.01. INDEMNIFICATION BY BLOCKBUSTER. (a) Blockbuster and
any Blockbuster Subsidiary Obligor jointly and severally agree to indemnify and
hold harmless Viacom and its past, present or future Subsidiaries and Affiliates
and any of their past, present or future Representatives, heirs, executors and
any of their successors and assigns against any and all payments, losses,
liabilities, damages, claims, and expenses (including without limitation,
attorney's fees and expenses incurred in good faith) and costs whatsoever
("LOSSES"), as incurred, arising out of or relating to:
(i) all assets, businesses and operations conducted, operated,
managed or owned, in whole or in part, by (A) BEC or any Person that was
any at time a Subsidiary or Affiliate of BEC, (B) Viacom or any Person
that was any at time a Subsidiary or Affiliate of Viacom that were the
responsibility of the chief executive officer of the Blockbuster
Entertainment operating unit of Viacom, (C) Blockbuster or any Person
that was at any time a Subsidiary or Affiliate of Blockbuster, or (D)
any successor, assign or Representative of any of the foregoing at any
time, whether before, at or after the IPO (including without limitation
any assets, businesses or operations that were purchased, newly started,
discontinued or sold) or any transaction related thereto or causes of
action arising therefrom (collectively, the "BLOCKBUSTER BUSINESS"); and
(ii) the Transfer Costs;
PROVIDED that, in case of clause (i) above, assets, businesses and operations
referred to therein shall (A) include, without limitation, home video retailing
(whether videocassette, laserdisc, digital versatile disc, digital video express
or otherwise and whether rental or sale or in a physical store or over the
Internet), video game retailing (whether rental or sale), music retailing, the
operation of children and adult entertainment centers (but this indemnification
shall not apply to assets, businesses and operations conducted by Paramount
Parks) and the development, marketing, sale and management of franchises related
to the foregoing assets, businesses and operations and the Viacom Guarantees and
(B) exclude all assets, businesses and operations of Spelling Entertainment
Group Inc. and its Subsidiaries (including Republic Entertainment Inc. and
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WorldVision Inc.), Showtime Networks Inc.,Virgin Interactive Entertainment
Limited and Virgin Interactive Entertainment Inc.
(b) To the extent that a Subsidiary of Blockbuster becomes a
Blockbuster Subsidiary Obligor, Blockbuster shall cause such Subsidiary to
become a party to this Agreement through an amendment hereto pursuant to which
such Blockbuster Subsidiary Obligor will expressly assume all of the
obligations, and acquire all of the rights, of Blockbuster under this Agreement.
Such assumption of obligations and acquisition of rights shall in no way
discharge Blockbuster from any of its obligations hereunder or diminish any of
Blockbuster's rights hereunder, as the case may be. Such amendment shall be (i)
executed and delivered to Viacom (and shall become effective) simultaneously
with the execution and delivery by such Blockbuster Subsidiary Obligor (and the
effectiveness) of the documentation pursuant to which it became a Blockbuster
Subsidiary Obligor and (ii) contain provisions reasonably satisfactory to Viacom
to maximize the likelihood that such amendment would not be subject to attack
under applicable fraudulent conveyance or similar laws.
(c) The obligations of the parties under this Section 2.01 shall
be in addition to any liability which any party may have to the other party.
Section 2.02. INDEMNIFICATION BY VIACOM. (a) Viacom agrees to
indemnify and hold harmless Blockbuster and its past, present or future
Subsidiaries and Affiliates and any of their past, present or future
Representatives, heirs and any of their executors, successors and assigns
against any and all Losses, as incurred, arising out of or relating to all
assets, businesses and operations conducted, operated, managed or owned, in
whole or in part, by Viacom or any Person that was at any time a Subsidiary or
Affiliate of Viacom or any predecessor, successor, assign or Representative of
any of the foregoing at any time whether before, at or after the IPO (including,
without limitation, any assets, businesses or operations that were purchased,
newly started, discontinued or sold) or any transaction related thereto or
causes of action arising therefrom other than the Blockbuster Business and
Transfer Costs which Blockbuster and any Blockbuster Subsidiary Obligor agree
to indemnify Viacom pursuant to Section 1.01) (the "VIACOM BUSINESS")
(b) The obligations of the parties under this Section 2.02 shall
be in addition to any liability which any party may have to the other party.
Section 2.03. CERTAIN TAX MATTERS. Notwithstanding anything to
the contrary herein, the rights and obligations of the parties with respect to
indemnification for the tax matters that are the subject matter of the Tax
Matters Agreement dated as of the date hereof between the parties thereto shall
be governed solely by such agreement.
Section 2.04. REGISTRATION INDEMNIFICATION. (a) Blockbuster and
any Blockbuster Subsidiary Obligor jointly and severally agree to indemnify and
hold harmless Viacom and each Person, if any, who controls Viacom within the
meaning of the Securities Act
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and Affiliates and Representatives of each of the foregoing from and against any
and all Losses (including, without limitation, any legal or other expenses
incurred in connection with defending or investigating any such action or
claim), as incurred, arising out of or relating to any untrue statement or
alleged untrue statement of a material fact contained in, or incorporated by
reference into (i) any Blockbuster Registration Statement filed at or prior to
the date of the Split-Off, including, without limitation, the IPO Registration
Statement and (ii) any Split-Off Registration Statement or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except that
Blockbuster and any Blockbuster Subsidiary Obligor shall not be liable in any
such case to the extent that any such Losses are arising out of or relating to
any such untrue statement or omission or alleged untrue statement or omission
based upon information relating to Viacom furnished to Blockbuster in writing by
Viacom expressly for use therein. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of Viacom and shall
survive the transfer of such securities. In the case of an offering with respect
to which Viacom has designated the lead or managing underwriters (or Viacom is
offering securities of Blockbuster directly, without an underwriter), this
indemnity does not apply to any Loss arising out of or relating to any untrue
statement or alleged untrue statement or omission or alleged omission in any
preliminary prospectus or offering memorandum if a copy of a final prospectus or
offering memorandum was not sent or given by or on behalf of any underwriter (or
Viacom) to such Person asserting such Loss at or prior to the written
confirmation of the sale of the securities of Blockbuster as required by the
Securities Act and such untrue statement or omission had been corrected in such
final prospectus or offering memorandum.
(b) Viacom agrees to indemnify and hold harmless Blockbuster and
each Person, if any, who controls Blockbuster within the meaning of the
Securities Act and Affiliates and Representatives of each of the foregoing from
and against any and all Losses (including, without limitation, any legal or
other expenses incurred in connection with defending or investigating any such
action or claim), as incurred, arising out of or relating to any untrue
statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, (i) any Blockbuster Registration Statement filed
at or prior to the date of the Split-Off, including, without limitation, the IPO
Registration Statement, (ii) and any Split-Off Registration Statement, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only with reference to Losses arising out of or relating to any untrue statement
or omission or alleged untrue statement or omission based on information
relating to Viacom furnished to Blockbuster in writing by Viacom expressly for
use therein. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of Blockbuster and shall survive the
transfer of such securities. In the case of an offering with respect to which
Blockbuster has designated the lead or managing underwriters (or Blockbuster is
offering securities of Blockbuster directly, without an underwriter), this
indemnity does not apply to any Loss arising out of or relating to any untrue
statement or alleged untrue statement or omission or alleged omission in any
preliminary prospectus or offering memorandum if a copy of a final prospectus or
offering memorandum was not sent or given by or on behalf of any underwriter (or
Blockbuster) to such
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Person asserting such Loss at or prior to the written confirmation of the sale
of the securities of Blockbuster as required by the Securities Act and such
untrue statement or omission had been corrected in such final prospectus or
offering memorandum.
(c) If the indemnification provided for in this Section 2.04
shall for any reason be unavailable (other than in accordance with its terms) to
an Indemnified Party in respect of any Loss referred to therein, then each
Indemnifying Party shall, in lieu of indemnifying such Indemnified Party,
contribute to the amount paid or payable by such Indemnified Party as a result
of such Loss as between Blockbuster on the one hand and Viacom on the other, in
such proportion as is appropriate to reflect the relative fault of Blockbuster
and of Viacom in connection with such statements or omissions which resulted in
such Loss as well as any other relevant equitable considerations. The relative
fault of Blockbuster on the one hand and of Viacom on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, but not by reference to Viacom's stock
ownership in Blockbuster. The amount paid or payable by an Indemnified Party as
a result of the Loss in respect thereof, referred to above in this paragraph (c)
shall be deemed to include, for purposes of this paragraph (c), any legal or
other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Blockbuster and Viacom
agree that it would not be just and equitable if contribution pursuant to this
Section 2.04 were determined by PRO RATA allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this paragraph. Notwithstanding any other provisions of this Section 2.04,
Viacom shall not be required to contribute any amount in excess of the amount by
which the total price at which the securities of Blockbuster were offered by
Viacom to the public exceeds the amount of any damages which Viacom has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No party guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any party who was not guilty of such
fraudulent misrepresentation.
(d) Indemnification and contribution similar to that specified in
the preceding paragraphs of this Section 2.04 (with appropriate modifications)
shall be given by Blockbuster and Viacom with respect to any required
registration or other qualification of securities under any state law or
regulation or governmental authority.
(e) The obligations of the parties under this Section 2.04 shall
be in addition to any liability which any party may otherwise have to the other
party.
Section 2.05. CALCULATION OF INDEMNIFICATION PAYMENTS. (a) The
amount which any Indemnifying Party is required to pay to any Indemnified Party
pursuant to this Agreement shall be reduced (including, but not limited to,
retroactively) by any recovery, judgment, settlement or other amounts actually
recovered, including insurance proceeds, by such
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Indemnified Party with respect to such Losses. If an Indemnified Party shall
have received payment with respect to Losses and shall subsequently actually
receive a recovery, judgment, settlement or other amount with respect to such
Losses, then such Indemnified Party shall promptly, but in no event later than
15 business days after such recovery, judgment, settlement or other amount
actually received, pay to such Indemnifying Party a sum equal to the lesser of
(i) the amount of such recovery, judgment, settlement or other amount actually
received or (ii) the amount of payments actually received previously in respect
of such Loss.
(b) All amounts which any Indemnifying Party is required to pay
to any Indemnified Party pursuant to this Agreement shall be calculated on an
after-tax basis, taking into account the net present value of any tax cost
and/or tax benefit to the Indemnified Party in connection with such
indemnification payment and the applicable Loss.
Section 2.06. INDEMNIFICATION PROCEDURES. The indemnification
procedures set forth in Section 8.01(b) of the IPO and Split-Off Agreement are
incorporated herein and made a part hereof for all purposes as if fully set
forth herein and shall govern the parties' rights and obligations with respect
thereto.
Section 2.07. REMEDIES CUMULATIVE. The remedies provided in this
Agreement shall be cumulative and shall not preclude assertion by any
Indemnified Party of any other rights or the seeking of any and all other
remedies against any Indemnifying Party.
ARTICLE III
RELEASE
Section 3.01. GENERAL RELEASE. (a) Blockbuster for itself and on
behalf of its Subsidiaries hereby releases, remises and forever discharges each
of Viacom and its Subsidiaries or Affiliates and any of their Representatives
from any losses, obligation or responsibility for any and all past actions or
failures to take action, including any actions which may be deemed to have been
negligent or grossly negligent, relating to, resulting from or arising out of
the operation or conduct of any assets, businesses and operations managed or
operated by, or operationally related or ancillary to, directly or indirectly,
the Blockbuster Business and the Viacom Business, except for any Losses,
obligation or responsibility for any willful or intentional misconduct in the
operation or conduct of the Blockbuster Business or the Viacom Business prior to
the date hereof.
(b) Viacom for itself and on behalf of its Subsidiaries hereby
releases, remises and forever discharges each of Blockbuster and its
Subsidiaries or Affiliates and any of their Representatives from any losses,
obligation or responsibility for any and all past actions or failures to take
action, including any actions which may be deemed to have been negligent or
grossly negligent, relating or ancillary to, resulting from or arising out of
the operation or conduct of any assets, businesses and operations managed or
operated by, or operationally related to, directly or indirectly, the
Blockbuster Business and the Viacom Business, except for any Losses, obligation
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or responsibility for any willful or intentional misconduct in the operation or
conduct of the Blockbuster Business or the Viacom Business prior to the date
hereof.
(c) Nothing set forth in subsections (a) and (b) shall limit or
otherwise affect any party's rights or obligations pursuant to, or contemplated
by the Intercompany Agreements.
ARTICLE IV
MISCELLANEOUS
Section 4.01. FURTHER AGREEMENTS. (a) Blockbuster agrees, and
Blockbuster will cause its Subsidiaries, to do all things necessary to (i)
maintain and conduct its business and operations, in a commercially reasonable
manner, including without limitation (x) paying, on a timely basis, principal
and interest in respect to its debt and rent in respect to leases and (y)
complying with its obligations under any credit agreement, indenture, lease,
guarantee or other agreement or document, and (ii) minimize any obligation
Viacom or any of its Subsidiaries (other than Blockbuster and its Subsidiaries)
may have under any standby, letter of credit, guarantee or otherwise.
(b) Viacom agrees, and Viacom will cause its Subsidiaries, to do
all things necessary to (i) maintain and conduct its business and operations, in
a commercially reasonable manner, including without limitation (x) paying, on a
timely basis, principal and interest in respect to its debt and (y) complying
with its obligations under any credit agreement, indenture, lease, guarantee or
other agreement or document, and (ii) minimize any obligation Blockbuster or any
of its Subsidiaries may have under any standby, letter of credit, guarantee or
otherwise.
Section 4.02. AMENDMENTS. This Agreement shall not be
supplemented, amended or modified in any manner whatsoever (including without
limitation by course of dealing or of performance or usage of trade) except in
writing signed by the parties.
Section 4.03. SUCCESSORS AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. Except as set forth in Section 4.04 hereof,
this Agreement may not be assigned by either party without the express written
consent of the other party (which consent shall not be unreasonably withheld).
Section 4.04. CONSOLIDATION, MERGER AND SALE OF ASSETS. Until
seven (7) years after the date hereof, in the event that Blockbuster
consolidates, merges, sells assets or engages in any other similar transaction
and Blockbuster is required, pursuant to an anti-consolidation, merger and/or
sale of assets covenant or other similar covenant contained in the then existing
credit agreement of Blockbuster, as it may be amended, restated, supplemented,
refinanced,
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extended or otherwise modified from time to time, to obtain the consent of
the banks who are parties thereto and, in obtaining such consent, such banks
receive a guarantee, security interest or protective covenant, Blockbuster
shall give the same guarantee, security interest or protective covenant PARI
PASSU (if applicable) to Viacom; PROVIDED that if (x) there is no
anti-consolidation, merger and/or sale of assets covenant or other similar
covenant contained in such credit agreement at such time or (y) there is no
such credit agreement existing at such time, the anti-consolidation, merger
and/or sale of assets covenant or other similar covenant contained in the
latest credit agreement that contained such covenants will be incorporated by
reference herein and, if consent is required under such covenant, Blockbuster
must obtain Viacom's written consent prior to any consolidation, merger, sale
of assets or similar transaction; PROVIDED, that Viacom's consent shall not
be required if the surviving corporation of the consolidation or merger or
the acquiror of assets agrees to assume all of the obligations of Blockbuster
hereunder (without release of any assignor); PROVIDED, HOWEVER, that this
Section 4.04 does not apply if the Split-Off (or other transaction whereby
Blockbuster ceases to be a Subsidiary of Viacom) has not been consummated.
Section 4.05. SEVERABILITY. Wherever possible, each provision of
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law. If any portion of this Agreement is declared invalid
for any reason in any jurisdiction, such declaration shall have no effect upon
the remaining portions of this Agreement, which shall continue in full force and
effect as if this Agreement had been executed with the invalid portions thereof
deleted; PROVIDED, that the entirety of this Agreement shall continue in full
force and effect in all other jurisdictions.
Section 4.06. ENTIRE AGREEMENT. Other then the other Intercompany
Agreements, this Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and thereof and supersede all
prior agreements and undertakings, both written and oral, between the parties
with respect to the subject matter hereof and thereof.
Section 4.07. NOTICES. All notices, consents, requests,
approvals, and other communications provided for or required herein, and all
legal process in regard thereto, must be in writing and shall be deemed validly
given, made or served, (a) when delivered personally or sent by telecopy to the
facsimile number indicated below with a required confirmation copy sent in
accordance with subsection (c) below; or (b) on the next business day after
delivery to a nationally-recognized express delivery service with instructions
and payment for overnight delivery; or (c) on the fifth (5th) day after
deposited in any depository regularly maintained by the United States postal
service, postage prepaid, certified or registered mail, return receipt
requested, addressed to the following addresses or to such other address as the
party to be notified shall have specified to the other party in accordance with
this section:
If to Viacom:
Viacom Inc.
1515 Broadway
New York New York 10036
Attention: Michael D. Fricklas, General Counsel
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Phone Number: 212-258-6070
Fax Number: 212-258-6099
If to Blockbuster:
Blockbuster Inc.
1201 Elm Street
Dallas, Texas 75270
Attention: Ed Stead, General Counsel
Phone Number: 214-854-3499
Fax Number: 214-854-3677
Section 4.08. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York. Each of the
parties hereto agrees that any dispute relating to or arising from this
Agreement or the transactions contemplated hereby shall be resolved only in the
court of the State of New York sitting in the County of New York or the United
States District Court for the Southern District of New York and the appellate
court having jurisdiction of appeals in such courts. In that context, and
without limiting the generality of the foregoing, each of the parties hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal suit, action
or proceeding relating to this Agreement or any transaction contemplated hereby,
or for recognition and enforcement of any judgment in respect thereof, to the
exclusive jurisdiction of the courts of the State of New York sitting in the
County of New York or the United States District Court for the Southern District
of New York and appellate court having jurisdiction of appeals in such courts,
and each of the parties hereto irrevocably and unconditionally agrees that all
claims in respect of any such suit, action, or proceeding shall be heard and
determined in such New York State court or, to the extent permitted by law, in
such federal court;
(b) consents that any such suit, action or proceeding may and
shall be brought in such courts and waives any objection that it may now or
hereafter have to the venue or jurisdiction or any such action or proceeding in
such court or that such action or proceeding was brought in an inconvenient
forum and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to such party
in its address as provided in Section 4.07 hereof;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by New York law; and
(e) agrees that this Agreement has been entered into in the State
of New York and performed in part in the State of New York.
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Section 4.09. COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
VIACOM INC.
By:
-----------------------------
Name:
Title:
BLOCKBUSTER INC.
By:
-----------------------------
Name:
Title:
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Exhibit 10.4
FORM OF REGISTRATION RIGHTS AGREEMENT
DATED AS OF , 1999
BY AND BETWEEN
VIACOM INC.
AND
BLOCKBUSTER INC.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.....................................................2
Section 1.02. Internal References.............................................5
ARTICLE II
REGISTRATION RIGHTS
Section 2.01. Demand Registration - Registrable Securities....................5
Section 2.02. Piggyback Registration..........................................7
Section 2.03. Expenses.......................................................10
Section 2.04. Registration and Qualification.................................10
Section 2.05. Conversion of Other Securities, Etc............................12
Section 2.06. Underwriting; Due Diligence....................................12
Section 2.07. Indemnification and Contribution...............................13
Section 2.08. Rule 144 and Form S-3..........................................16
Section 2.09. Transfer of Registration Rights................................16
Section 2.10. Holdback Agreement.............................................17
ARTICLE III
MISCELLANEOUS
Section 3.01. Limitation of Liability........................................17
Section 3.02. Subsidiaries...................................................17
Section 3.03. Term...........................................................17
Section 3.04. Further Assurances.............................................17
Section 3.05. Specific Performance...........................................17
Section 3.06. Amendments.....................................................18
Section 3.07. Successors and Assigns.........................................18
Section 3.08. Severability...................................................18
Section 3.09. Entire Agreement...............................................18
Section 3.10. Notices........................................................18
Section 3.11. Governing Law..................................................19
Section 3.12. Counterparts...................................................20
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") dated as of ,
1999 by and between VIACOM INC., a Delaware corporation ("VIACOM"), and
BLOCKBUSTER INC., a Delaware corporation and an indirect, wholly owned
subsidiary of Viacom ("BLOCKBUSTER").
RECITALS
WHEREAS, since September 29, 1994, Viacom has owned and operated
the businesses and operations related to Blockbuster;
WHEREAS, Viacom presently intends to split-off Blockbuster in a
tax-free transaction;
WHEREAS, prior to such split-off, Blockbuster proposes to issue
shares of its common stock in an initial public offering registered under the
Securities Act of 1933, as amended;
WHEREAS, Viacom beneficially owns all of the issued and
outstanding class B common stock, par value $0.01 per share, of Blockbuster (the
"BLOCKBUSTER CLASS B COMMON STOCK"); and
WHEREAS, the parties desire to enter into this Agreement to set
forth their agreement regarding certain registration rights with respect to
Blockbuster Class B Common Stock (and any other securities issued in respect
thereof or in exchange therefor).
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Viacom and Blockbuster, for
themselves, their successors, and assigns, hereby agree as follows:
Capitalized terms not otherwise defined herein have the meaning
given to them in the IPO and Split-Off Agreement dated , 1999 among Viacom,
Viacom International and Blockbuster.
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. As used in this Agreement, the
following terms will have the following meanings, applicable both to the
singular and the plural forms of the terms described:
"AFFILIATES" means, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under
<PAGE>
common control with such specified Person; PROVIDED, HOWEVER, that prior to the
Split-Off, Affiliates of Blockbuster or Viacom shall only include Persons who
would be affiliates of Blockbuster or Viacom, respectively, assuming that the
Split-Off had occurred immediately prior to the determination as to whether such
Person was an affiliate of Blockbuster or Viacom, respectively.
"AGREEMENT" has the meaning ascribed thereto in the Preamble.
"APPLICABLE STOCK" means at any time the (i) shares of
Blockbuster Common Stock owned by Viacom and its Affiliates that were owned on
the date hereof, PLUS (ii) shares of Blockbuster Class B Common Stock purchased
by Viacom and its Affiliates pursuant to Article VII of the Initial Public
Offering and Split-Off Agreement, PLUS (iii) shares of Blockbuster Common Stock
that were issued to Viacom and its Affiliates in respect of shares described in
either clause (i) or clause (ii) in any reclassification, share combination,
share subdivision, share dividend, share exchange, merger, consolidation or
similar transaction or event.
"BLOCKBUSTER" has the meaning ascribed thereto in the Preamble.
"BLOCKBUSTER CLASS A COMMON STOCK" means the class A common
stock, par value $.01 per share of Blockbuster.
"BLOCKBUSTER CLASS B COMMON STOCK" has the meaning ascribed
thereto in the Recitals.
"BLOCKBUSTER COMMON STOCK" means the Blockbuster Class B Common
Stock, the Blockbuster Class A Common Stock, any other class of Blockbuster's
capital stock representing the right to vote generally for the election of
directors and, for so long as Blockbuster continues to be a subsidiary
corporation includable in a consolidated federal income tax return of the Viacom
Group, any other security of Blockbuster treated as stock for purposes of
Section 1504 of the Internal Revenue Code of 1986, as amended.
"COMPANY SECURITIES" has the meaning ascribed thereto in Section
2.02(b).
"DISADVANTAGEOUS CONDITION" has the meaning ascribed thereto in
Section 2.01(a).
"HOLDER" means Viacom, its Affiliates and any Transferee.
"HOLDER SECURITIES" has the meaning ascribed thereto in Section
2.02(b).
"IPO" means the initial public offering by Blockbuster of shares
of Blockbuster Class A Common Stock as contemplated by the IPO Registration
Statement.
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"IPO AND SPLIT-OFF AGREEMENT" means the Initial Public Offering
and Split-Off Agreement dated as of the dated hereof among Viacom, Viacom
International and Blockbuster.
"IPO DATE" means the date of completion of the initial sale of
Blockbuster Class A Common Stock in the IPO.
"LOSSES" has the meaning ascribed thereto in Section 2.01(a) of
the Release and Indemnification Agreement.
"OTHER HOLDERS" has the meaning ascribed thereto in Section
2.02(c).
"OTHER SECURITIES" has the meaning ascribed thereto in Section
2.02.
"OWNERSHIP PERCENTAGE" means, at any time, the fraction,
expressed as a percentage and rounded to the next highest thousandth of a
percent, whose numerator is the aggregate Value of the Applicable Stock and
whose denominator is the sum of the aggregate Value of the outstanding shares of
Blockbuster Common Stock; PROVIDED, HOWEVER, that any shares of Blockbuster
Common Stock issued by Blockbuster in violation of its obligations under Article
VII of the IPO and Split-Off Agreement shall not be deemed outstanding for the
purpose of determining the Ownership Percentage. For purposes of this
definition, "VALUE" means, with respect to any share of stock, the value of such
share determined by Viacom under principles applicable for purposes of Section
1504 of the Internal Revenue Code of 1986, as amended.
"PERSON" means any individual, corporation, limited or general
partnership, limited liability company, joint venture association, joint stock
company, trust unincorporated organization or government or any agency or
political subdivision thereof.
"REGISTRABLE SECURITIES" means shares of Blockbuster Common Stock
and any stock or other securities into which or for which such Blockbuster
Common Stock may hereafter be changed, converted or exchanged and any other
shares or securities issued to Holders of such Blockbuster Common Stock (or such
shares or other securities into which or for which such shares are so changed,
converted or exchanged) upon any reclassification, share combination, share
subdivision, share dividend, share exchange, merger, consolidation or similar
transaction or event or pursuant to the Nonvoting Stock Option. As to any
particular Registrable Securities, such Registrable Securities shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale by the Holder thereof shall have been declared effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) they shall have been distributed to the
public in accordance with Rule 144, (iii) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been delivered by Blockbuster and subsequent disposition of
them shall not require registration or qualification of them under the
Securities Act or any state securities or blue sky law then in effect or (iv)
they shall have ceased to be outstanding.
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"REGISTRATION EXPENSES" means any and all reasonable expenses
incident to performance of or compliance with any registration of securities
pursuant to Article II, including, without limitation, (i) all expenses,
including filing fees, in connection with the preparation, printing and filing
of the registration statement, any preliminary prospectus or final prospectus,
any other offering document and amendments and supplements thereto and the
mailing and delivering of copies thereof to any underwriters and dealers; (ii)
the cost of printing or producing any agreements among underwriters,
underwriting agreements, and blue sky or legal investment memoranda, any selling
agreements and any other documents in connection with the offering, sale or
delivery of the securities to be disposed of; (iii) all expenses in connection
with the qualification of the securities to be disposed of for offering and sale
under state securities laws, including the fees and disbursements of counsel for
the underwriters of securities in connection with such qualification and in
connection with any blue sky and legal investment surveys; (iv) the filing fees
incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the securities to be
disposed of; (v) transfer agents' and registrars' fees and expenses and the fees
and expenses of any other agent or trustee appointed in connection with such
offering; (vi) all security engraving and security printing expenses; (vii) all
fees and expenses payable in connection with the listing of the securities on
any securities exchange or automated interdealer quotation system or the rating
of such securities and (ix) any other fees and disbursements of underwriters
customarily paid by issuers of securities.
"RULE 144" means Rule 144 (or any successor rule to similar
effect) promulgated under the Securities Act.
"RULE 415 OFFERING" means an offering on a delayed or continuous
basis pursuant to Rule 415 (or any successor rule to similar effect) promulgated
under the Securities Act.
"SEC" means the U.S. Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, together with the rules and regulations promulgated
thereunder.
"SELLING HOLDER" has the meaning ascribed thereto in Section
2.04(e).
"SPLIT-OFF" means the distribution of Blockbuster Common Stock by
Viacom in one or more transactions occurring after the IPO that collectively
have the effect that all or a substantial part of the shares of Blockbuster
Common Stock held by Viacom are distributed to all or some of the stockholders
of Viacom, whenever such transaction(s) shall occur.
"SUBSIDIARY" means with respect to any Person, any other Person a
majority of the equity ownership or voting stock of which is at the time owned,
directly or indirectly, by such Person and/or one or more other Subsidiaries of
such Person; PROVIDED, HOWEVER, that prior to the Split-Off, a Subsidiary of
Viacom shall only include Persons who would be a Subsidiary of
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Viacom assuming the Split-Off has occurred immediately prior to the
determination as to whether such Person were a Subsidiary of Viacom.
"TRANSFEREE" has the meaning ascribed thereto in Section 2.09.
"VIACOM" has the meaning ascribed thereto in the Preamble.
"VIACOM GROUP" means Viacom and its Affiliates and Blockbuster
and its Affiliates.
"VIACOM INTERNATIONAL" is Viacom International Inc., a Delaware
corporation and a wholly owned subsidiary of Viacom.
"VIACOM OWNERSHIP REDUCTION" means any decrease at any time in
the Ownership Percentage to less than 45%.
"VIACOM TRANSFEREE" has the meaning ascribed thereto in Section
2.09(a).
Section 1.02. INTERNAL REFERENCES. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement and references
to the parties shall mean the parties to this Agreement.
ARTICLE II
REGISTRATION RIGHTS
Section 2.01. DEMAND REGISTRATION - REGISTRABLE SECURITIES. (a)
Upon written notice provided at any time after the IPO Date from any Holder of
Registrable Securities requesting that Blockbuster effect the registration under
the Securities Act of any or all of the Registrable Securities held by such
Holder, which notice shall specify the intended method or methods of disposition
of such Registrable Securities, Blockbuster shall use its reasonable best
efforts to effect the registration under the Securities Act and applicable state
securities laws of such Registrable Securities for disposition in accordance
with the intended method or methods of disposition stated in such request
(including in a Rule 415 Offering, if Blockbuster is then eligible to register
such Registrable Securities on Form S-3 (or a successor form) for such
offering); provided that:
(i) with respect to any registration statement filed, or to be
filed, pursuant to this Section 2.01, if Blockbuster shall furnish to
the Holders of Registrable Securities that have made such request a
certified resolution of the Board of Directors of Blockbuster (adopted
by the affirmative vote of a majority of the directors not designated by
Viacom or its Affiliates) stating that in the Board of Directors' good
faith judgment it would (because of the existence of, or in anticipation
of, any acquisition or financing activity, or
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the unavailability for reasons beyond Blockbuster' reasonable control of
any required financial statements, or any other event or condition of
similar significance to Blockbuster) be significantly disadvantageous (a
"DISADVANTAGEOUS CONDITION") to Blockbuster for such a registration
statement to be maintained effective, or to be filed and become
effective, and setting forth the general reasons for such judgment,
Blockbuster shall be entitled to cause such registration statement to be
withdrawn and the effectiveness of such registration statement
terminated, or, in the event no registration statement has yet been
filed, shall be entitled not to file any such registration statement,
until such Disadvantageous Condition no longer exists (notice of which
Blockbuster shall promptly deliver to such Holders). Upon receipt of any
such notice of a Disadvantageous Condition, such Holders shall forthwith
discontinue use of the prospectus contained in such registration
statement and, if so directed by Blockbuster, each such Holder will
deliver to Blockbuster all copies, other than permanent file copies then
in such Holder's possession, of the prospectus then covering such
Registrable Securities current at the time of receipt of such notice;
PROVIDED that the filing of any such registration statement may not be
delayed for a period in excess of 90 days due to the occurrence of any
particular Disadvantageous Condition;
(ii) after any Viacom Ownership Reduction, the Holders of
Registrable Securities may collectively exercise their rights under this
Section 2.01 on not more than three occasions (it being acknowledged
that prior to any Viacom Ownership Reduction, there shall be no limit to
the number of occasions on which such Holders (other than any Viacom
Transferees and their Affiliates (other than Viacom or its Affiliates))
may exercise such rights); and
(iii) The Holders of Registrable Securities shall not have the
right to exercise registration rights pursuant to this Section 2.01
within the 180-day period following the registration and sale of
Registrable Securities effected pursuant to a prior exercise of the
registration rights provided in this Section 2.01.
(b) Notwithstanding any other provision of this Agreement to the
contrary, a registration requested by a Holder of Registrable Securities
pursuant to this Section 2.01 shall not be deemed to have been effected (and,
therefore, not requested for purposes of paragraph (a) above), (i) unless it has
become effective, (ii) if after it has become effective such registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason other than a
misrepresentation or an omission by such Holder and, as a result thereof, the
Registrable Securities requested to be registered cannot be completely
distributed in accordance with the plan of distribution set forth in the related
registration statement or (iii) if the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied or waived other than by reason of some act
or omission by such Holder of Registrable Securities.
(c) In the event that any registration pursuant to this Section
2.01 shall involve, in whole or in part, an underwritten offering, the Holders
of a majority of the Registrable
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Securities to be registered shall have the right to designate an underwriter or
underwriters as the lead or managing underwriters of such underwritten offering
reasonably acceptable to Blockbuster and, in connection with each registration
pursuant to this Section 2.01, such Holders may select one counsel to represent
all such Holders.
(d) Blockbuster shall have the right to cause the registration of
additional equity securities for sale for the account of any Person (including,
without limitation, Blockbuster, and any existing or former directors, officers
or employees of Blockbuster and its Affiliates) in any registration of
Registrable Securities requested by the Holders pursuant to paragraph (a) above;
PROVIDED, HOWEVER, that if such Holders are advised in writing (with a copy to
Blockbuster) by a nationally recognized investment banking firm selected by such
Holders reasonably acceptable to Blockbuster (which shall be the lead
underwriter or a managing underwriter in the case of an underwritten offering)
that, in such firm's good faith view, all or a part of such additional equity
securities cannot be sold and the inclusion of such additional equity securities
in such registration would be likely to have an adverse effect on the price,
timing or distribution of the offering and sale of the Registrable Securities
then contemplated by any Holder, the registration of such additional equity
securities or part thereof shall not be permitted. The Holders of the
Registrable Securities to be offered may require that any such additional equity
securities be included in the offering proposed by such Holders on the same
conditions as the Registrable Securities that are included therein. In the event
that the number of Registrable Securities requested to be included in a
registration statement by the Holders thereof exceeds the number which, in the
good faith view of such investment banking firm, can be sold without adversely
affecting the price, timing, distribution or sale of securities in the offering,
the number shall be allocated pro rata among the requesting Holders on the basis
of the relative number of Registrable Securities then held by each such Holder
(provided that any number in excess of a Holder's request may be reallocated
among the remaining requesting Holders in a like manner).
Section 2.02. PIGGYBACK REGISTRATION. In the event that
Blockbuster at any time after the IPO Date proposes to register any of its
Blockbuster Common Stock, any other of its equity securities or securities
convertible into or exchangeable for its equity securities (collectively,
including Blockbuster Common Stock, "OTHER SECURITIES") under the Securities
Act, whether or not for sale for its own account, in a manner that would permit
registration of Registrable Securities for sale for cash to the public under the
Securities Act, it shall at each such time give prompt written notice to each
Holder of Registrable Securities of its intention to do so and of the rights of
such Holder under this Section 2.02. Subject to the terms and conditions hereof,
such notice shall offer each such Holder the opportunity to include in such
registration statement such number of Registrable Securities as such Holder may
request. Upon the written request of any such Holder made within 15 days after
the receipt of Blockbuster' notice (which request shall specify the number of
Registrable Securities intended to be disposed of and the intended method of
disposition thereof), Blockbuster shall use its reasonable best efforts to
effect, in connection with the registration of the Other Securities, the
registration under the Securities Act of all Registrable Securities which
Blockbuster has been so requested to register, to the extent
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required to permit the disposition (in accordance with such intended method of
disposition thereof) of the Registrable Securities so requested to be
registered; PROVIDED that:
(a) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the effective date of
the registration statement filed in connection with such registration,
Blockbuster shall determine for any reason not to register the Other Securities,
Blockbuster may, at its election, give written notice of such determination to
such Holders and thereupon Blockbuster shall be relieved of its obligation to
register such Registrable Securities in connection with the registration of such
Other Securities, without prejudice, however, to the rights of the Holders of
Registrable Securities immediately to request that such registration be effected
as a registration under Section 2.01 to the extent permitted thereunder;
(b) if the registration referred to in the first sentence of this
Section 2.02 is to be an underwritten registration on behalf of Blockbuster, and
a nationally recognized investment banking firm selected by Blockbuster advises
Blockbuster in writing that, in such firm's good faith view, the inclusion of
all or a part of such Registrable Securities in such registration would be
likely to have an adverse effect upon the price, timing or distribution of the
offering and sale of the Other Securities then contemplated, Blockbuster shall
include in such registration: (i) first, all Other Securities Blockbuster
proposes to sell for its own account ("COMPANY SECURITIES"); (ii) second, up to
the full number of Registrable Securities held by Holders constituting Viacom
and its Affiliates that are requested to be included in such registration
(Registrable Securities that are so held being sometimes referred to herein as
"HOLDER SECURITIES") in excess of the number of Company Securities to be sold in
such offering which, in the good faith view of such investment banking firm, can
be sold without adversely affecting such offering and the sale of the Other
Securities then contemplated (and (x) if such number is less than the full
number of such Holder Securities, such number shall be allocated by Viacom among
Viacom and its Affiliates and (y) in the event that such investment banking firm
advises that less than all of such Holder Securities may be included in such
offering, Viacom and its Affiliates may withdraw their request for registration
of their Registrable Securities under this Section 2.02 and 90 days subsequent
to the effective date of the registration statement for the registration of such
Other Securities request that such registration be effected as a registration
under Section 2.01 to the extent permitted thereunder); (iii) third, up to the
full number of Registrable Securities held by Holders (other than Viacom and its
Affiliates) of Registrable Securities that are requested to be included in such
registration in excess of the number of Company Securities and Holder Securities
to be sold in such offering which, in the good faith view of such investment
banking firm, can be so sold without so adversely affecting such offering (and
(x) if such number is less than the full number of such Registrable Securities,
such number shall be allocated pro rata among such Holders on the basis of the
number of Registrable Securities requested to be included therein by each such
Holder and (y) in the event that such investment banking firm advises that less
than all of such Registrable Securities may be included in such offering, such
Holders may withdraw their request for registration of their Registrable
Securities under this Section 2.02 and 90 days subsequent to the effective date
of the registration statement for the registration of such Other Securities
request that such registration be effected as a registration under Section 2.01
to the extent permitted
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thereunder); and (iv) fourth, up to the full number of the Other Securities
(other than Company Securities), if any, in excess of the number of Company
Securities and Registrable Securities to be sold in such offering which, in the
good faith view of such investment banking firm, can be so sold without so
adversely affecting such offering (and, if such number is less than the full
number of such Other Securities, such number shall be allocated pro rata among
the holders of such Other Securities (other than Company Securities) on the
basis of the number of securities requested to be included therein by each such
holder);
(c) if the registration referred to in the first sentence of this
Section 2.02 is to be an underwritten secondary registration on behalf of
holders of Other Securities (the "OTHER HOLDERS"), and the lead underwriter or
managing underwriter advises Blockbuster in writing that in their good faith
view, all or a part of such additional securities cannot be sold and the
inclusion of such additional securities in such registration would be likely to
have an adverse effect on the price, timing or distribution of the offering and
sale of the Other Securities then contemplated, Blockbuster shall include in
such registration the number of securities (including Registrable Securities)
that such underwriters advise can be so sold without adversely affecting such
offering, allocated pro rata among the Other Holders and the Holders of
Registrable Securities on the basis of the number of securities (including
Registrable Securities) requested to be included therein by each Other Holder
and each Holder of Registrable Securities; PROVIDED that if such registration
statement is to be filed at any time after a Viacom Ownership Reduction, if any,
and if such Other Holders have requested that such registration statement be
filed pursuant to demand registration rights granted to them by Blockbuster,
Blockbuster shall include in such registration: (i) Other Securities sought to
be included therein by the Other Holders pursuant to the exercise of such demand
registration rights; (ii) the number of Holder Securities sought to be included
in such registration in excess of the number of Other Securities sought to be
included in such registration by the Other Holders which in the good faith view
of such investment banking firm, can be so sold without so adversely affecting
such offering (and (x) if such number is less than the full number of such
Holder Securities, such number shall be allocated by Viacom among Viacom and its
Affiliates and (y) in the event that such investment banking firm advises that
less than all of such Holder Securities may be included in such offering, Viacom
and its Affiliates may withdraw their request for registration of their
Registrable Securities under this Section 2.02 and 90 days subsequent to the
effective date of the registration statement for the registration of such Other
Securities request that such registration be effected as a registration under
Section 2.01 to the extent permitted thereunder); and (iii) the number of
Registrable Securities sought to be included in such registration by Holders
(other than Viacom and its Affiliates) of Registrable Securities in excess of
the number of Other Securities and the number of Holder Securities sought to be
included in such registration which, in the good faith view of such investment
banking firm, can be so sold without so adversely affecting such offering (and
(x) if such number is less than the full number of such Registrable Securities,
such number shall be allocated pro rata among such Holders on the basis of the
number of Registrable Securities requested to be included therein by each such
Holder and (y) in the event that such investment banking firm advises that less
than all of such Registrable Securities may be included in such offering, such
Holders may withdraw their request for registration of their Registrable
Securities under this Section 2.02 and 90 days
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subsequent to the effective date of the registration statement for the
registration of such Other Securities request that such registration be effected
as a registration under Section 2.01 to the extent permitted thereunder);
(d) Blockbuster shall not be required to effect any registration
of Registrable Securities under this Section 2.02 incidental to the registration
of any of its securities in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock option or
other executive or employee benefit or compensation plans; and
(e) no registration of Registrable Securities effected under this
Section 2.02 shall relieve Blockbuster of its obligation to effect a
registration of Registrable Securities pursuant to Section 2.01.
Section 2.03. EXPENSES. Except as provided herein, Viacom shall
pay all or its pro rata share of Registration Expenses with respect to a
particular offering (or proposed offering), as the case may be, except for fees,
disbursements and expenses related to Blockbuster's counsel, accountants and
other advisors. Notwithstanding the foregoing, each Holder and Blockbuster shall
be responsible for its own internal administrative and similar costs, which
shall not constitute Registration Expenses.
Section 2.04. REGISTRATION AND QUALIFICATION. If and whenever
Blockbuster is required to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 2.01 or 2.02, Blockbuster shall
as promptly as practicable:
(a) prepare, file and use its reasonable best efforts to cause to
become effective a registration statement under the Securities Act relating to
the Registrable Securities to be offered;
(b) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
Registrable Securities until the earlier of (A) such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition set forth in such registration statement and (B) the
expiration of (i) six months after such registration statement becomes effective
or (ii) twenty four months after a registration statement filed in a Rule 415
Offering becomes effective; PROVIDED, that such respective periods shall be
extended for such number of days that equals the number of days elapsing from
(x) the date the written notice contemplated by paragraph (f) below is given by
Blockbuster to (y) the date on which Blockbuster delivers to the Holders of
Registrable Securities the supplement or amendment contemplated by paragraph (f)
below;
(c) furnish to the Holders of Registrable Securities and to any
underwriter of such Registrable Securities such number of conformed copies of
such registration statement and
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of each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, such documents
incorporated by reference in such registration statement or prospectus, and such
other documents, as the Holders of Registrable Securities or such underwriter
may reasonably request, and a copy of any and all transmittal letters or other
correspondence to or received from, the SEC or any other governmental agency or
self-regulatory body or other body having jurisdiction (including any domestic
or foreign securities exchange) relating to such offering;
(d) use its reasonable best efforts to register or qualify all
Registrable Securities covered by such registration statement under the
securities or blue sky laws of such jurisdictions as the Holders of such
Registrable Securities or any underwriter to such Registrable Securities shall
request, and use its reasonable best efforts to obtain all appropriate
registrations, permits and consents in connection therewith, and do any and all
other acts and things which may be necessary or advisable to enable the Holders
of Registrable Securities or any such underwriter to consummate the disposition
in such jurisdictions of its Registrable Securities covered by such registration
statement; PROVIDED, that Blockbuster shall not for any such purpose be required
to qualify generally to do business as a foreign corporation in any such
jurisdiction wherein it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) (i) use its reasonable best efforts to furnish to each Holder
of Registrable Securities included in such registration (each, a "SELLING
HOLDER") and to any underwriter of such Registrable Securities an opinion of
counsel for Blockbuster addressed to each Selling Holder and dated the date of
the closing under the underwriting agreement (if any) (or if such offering is
not underwritten, dated the effective date of the registration statement) and
(ii) use its reasonable best efforts to furnish to each Selling Holder a "COLD
COMFORT" letter addressed to each Selling Holder and signed by the independent
public accountants who have audited the financial statements of Blockbuster
included in such registration statement, in each such case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities and such other matters as the
Selling Holders may reasonably request and, in the case of such accountants'
letter, with respect to events subsequent to the date of such financial
statements;
(f) as promptly as practicable, notify the Selling Holders in
writing (i) at any time when a prospectus relating to a registration pursuant to
Sections 2.01 or 2.02 is required to be delivered under the Securities Act of
the happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading and (ii) of any request by the SEC or any
other regulatory body or other body having jurisdiction for any amendment of or
supplement to any registration statement or other document
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relating to such offering, and in either such case, at the request of the
Selling Holders prepare and furnish to the Selling Holders a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
are made, not misleading;
(g) if reasonably requested by the lead or managing underwriters,
use its reasonable best efforts to list all such Registrable Securities covered
by such registration on each securities exchange and automated inter-dealer
quotation system on which a class of common equity securities of Blockbuster is
then listed;
(h) to the extent reasonably requested by the lead or managing
underwriters, send appropriate officers of Blockbuster to attend any "ROAD
SHOWS" scheduled in connection with any such registration, with all
out-of-pocket costs and expense incurred by Blockbuster or such officers in
connection with such attendance to be paid by Blockbuster; and
(i) furnish for delivery in connection with the closing of any
offering of Registrable Securities pursuant to a registration effected pursuant
to Sections 2.01 or 2.02 unlegended certificates representing ownership of the
Registrable Securities being sold in such denominations as shall be requested by
the Selling Holders or the underwriters.
Section 2.05. CONVERSION OF OTHER SECURITIES, ETC. In the event
that any Holder offers any options, rights, warrants or other securities issued
by it or any other Person that are offered with, convertible into or exercisable
or exchangeable for any Registrable Securities, the Registrable Securities
underlying such options, rights, warrants or other securities shall continue to
be eligible for registration pursuant to Sections 2.01 and 2.02.
Section 2.06. UNDERWRITING; DUE DILIGENCE. (a) If requested by
the underwriters for any underwritten offering of Registrable Securities
pursuant to a registration requested under this Article II, Blockbuster shall
enter into an underwriting agreement with such underwriters for such offering,
which agreement will contain such representations and warranties by Blockbuster
and such other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, indemnification and contribution provisions substantially to the
effect and to the extent provided in Section 2.07, and agreements as to the
provision of opinions of counsel and accountants' letters to the effect and to
the extent provided in Section 2.04(e). The Selling Holders on whose behalf the
Registrable Securities are to be distributed by such underwriters shall be
parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, Blockbuster to and for
the benefit of such underwriters, shall also be made to and for the benefit of
such Selling Holders. Such underwriting agreement shall also contain such
representations and warranties by such Selling Holders and such other terms and
provisions as are customarily contained in underwriting
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agreements with respect to secondary distributions, including, without
limitation, indemnification and contribution provisions substantially to the
effect and to the extent provided in Section 2.07.
(b) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the Securities
Act pursuant to this Article II, Blockbuster shall give the Holders of such
Registrable Securities and the underwriters, if any, and their respective
counsel and accountants, such reasonable and customary access to its books and
records and such opportunities to discuss the business of Blockbuster with its
officers and the independent public accountants who have certified the financial
statements of Blockbuster as shall be necessary, in the opinion of such Holders
and such underwriters or their respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
Section 2.07. INDEMNIFICATION AND CONTRIBUTION. (a) In the case
of each offering of Registrable Securities made pursuant to this Article II,
Blockbuster agrees to indemnify and hold harmless, to the extent permitted by
law, each Selling Holder, each underwriter of Registrable Securities so offered
and each Person, if any, who controls any of the foregoing Persons within the
meaning of the Securities Act and the officers, directors, Affiliates, employees
and agents of each of the foregoing, against any and all Losses (including,
without limitation, any legal or other expenses incurred in connection with
defending or investigating any such action or claim), as incurred, arising out
of or relating to any untrue statement or alleged untrue statement of a material
fact contained in, or incorporated by reference into, in the registration
statement (or in any preliminary or final prospectus included therein) or in any
offering memorandum or other offering document relating to the offering and sale
of such Registrable Securities prepared by Blockbuster or at its direction, or
any amendment thereof or supplement thereto, or any omission by Blockbuster or
alleged omission by Blockbuster to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
except that Blockbuster shall not be liable to any Person in any such case to
the extent that any such Loss arising out of or relating to any untrue statement
or alleged untrue statement, or any omission or alleged omission, if such
statement or omission shall have been made in reliance upon and in conformity
with information relating to a Selling Holder, another holder of securities
included in such registration statement or underwriter furnished in writing to
Blockbuster by or on behalf of such Selling Holder, other holder or underwriter,
as the case may be, specifically for use in the registration statement (or in
any preliminary or final prospectus included therein), offering memorandum or
other offering document, or any amendment thereof or supplement thereto. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of any Selling Holder, any other holder or any underwriter
and shall survive the transfer of such securities. In the case of an offering
with respect to which a Selling Holder has designated the lead or managing
underwriters (or a Selling Holder is offering Registrable Securities directly,
without an underwriter), this indemnity does not apply to any Loss arising out
of or relating to any untrue statement or alleged untrue statement or omission
or alleged omission in any preliminary prospectus or offering memorandum if a
copy of a final prospectus or offering memorandum was not sent or given by or on
behalf of any underwriter (or such Selling Holder or other holder, as the case
may be) to such Person asserting such Loss at or prior to the written
confirmation of the
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sale of the Registrable Securities as required by the Securities Act and such
untrue statement or omission had been corrected in such final prospectus or
offering memorandum.
(b) In the case of each offering made pursuant to this Agreement,
each Selling Holder, by exercising its registration rights hereunder, agrees to
indemnify and hold harmless, and to cause each underwriter of Registrable
Securities included in such offering (in the same manner and to the same extent
as set forth in Section 2.07(a)) to agree to indemnify and hold harmless,
Blockbuster, each other underwriter who participates in such offering, each
other Selling Holder or other holder with securities included in such offering
and in the case of an underwriter, such Selling Holder or other holder, and each
Person, if any, who controls any of the foregoing within the meaning of the
Securities Act and the Affiliates and Representatives of each of the foregoing,
against any and all Losses (including, without limitation, any legal or other
expenses incurred in connection with defending or investigating any such action
or claim), as incurred, arising out of or relating to any untrue statement or
alleged untrue statement of a material fact contained in, or incorporated by
reference into, the registration statement (or in any preliminary or final
prospectus included therein) or in any offering memorandum or other offering
document relating to the offering and sale of such Registrable Securities
prepared by Blockbuster or at its direction, or any amendment thereof or
supplement thereto, or any omission by such Selling Holder or underwriter, as
the case may be, or alleged omission by such Selling Holder or underwriter, as
the case may be, of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but in each case only to the
extent that such untrue statement of a material fact is contained in, or such
material fact is omitted from information relating to such Selling Holder or
underwriter, as the case may be, furnished in writing to Blockbuster by or on
behalf of such Selling Holder or underwriter, as the case may be, specifically
for use in such registration statement (or in any preliminary or final
prospectus included therein), offering memorandum or other offering document, or
any amendment thereof or supplement thereto. In the case of an offering made
pursuant to this Agreement with respect to which Blockbuster has designated the
lead or managing underwriters (or Blockbuster is offering securities directly,
without an underwriter), this indemnity does not apply to any Loss arising out
of or related to any untrue statement or alleged untrue statement or omission or
alleged omission in any preliminary prospectus or offering memorandum if a copy
of a final prospectus or offering memorandum was not sent or given by or on
behalf of any underwriter (or Blockbuster, as the case may be) to such Person
asserting such loss, liability, cost, claim or damage at or prior to the written
confirmation of the sale of the Registrable Securities as required by the
Securities Act and such untrue statement or omission had been corrected in such
final prospectus or offering memorandum.
(c) The indemnification procedures set forth in Section 8.01(b)
of the IPO and Split-Off Agreement are incorporated herein and made a part
hereof for all purposes as if fully set forth herein and shall govern the
parties' rights and obligations with respect thereto.
(d) If the indemnification provided for in this Section 2.07
shall for any reason be unavailable (other than in accordance with its terms) to
an Indemnified Party in respect of any Loss referred to therein, then each
Indemnifying Party shall, in lieu of indemnifying such
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Indemnified Party, contribute to the amount paid or payable by such Indemnified
Party as a result of such Loss (i) as between Blockbuster and the Selling
Holders on the one hand and the underwriters on the other, in such proportion as
shall be appropriate to reflect the relative benefits received by Blockbuster
and the Selling Holders on the one hand and the underwriters on the other hand
or, if such allocation is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits but also the relative
fault of Blockbuster and the Selling Holders on the one hand and the
underwriters on the other with respect to the statements or omissions which
resulted in such Loss as well as any other relevant equitable considerations and
(ii) as between Blockbuster on the one hand and each Selling Holder on the
other, in such proportion as is appropriate to reflect the relative fault of
Blockbuster and of each Selling Holder in connection with such statements or
omissions as well as any other relevant equitable considerations. The relative
benefits received by Blockbuster and the Selling Holders on the one hand and the
underwriters on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (net of underwriting discounts and commissions
but before deducting expenses) received by Blockbuster and the Selling Holders
bear to the total underwriting discounts and commissions received by the
underwriters, in each case as set forth in the table on the cover page of this
prospectus. The relative fault of Blockbuster and the Selling Holders on the one
hand and of the underwriters on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
Blockbuster and the Selling Holders or by the underwriters. The relative fault
of Blockbuster on the one hand and of each Selling Holder on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, but not by reference to any Indemnified
Party's stock ownership in Blockbuster. The amount paid or payable by an
Indemnified Party as a result of the Loss in respect thereof, referred to above
in this paragraph (d) shall be deemed to include, for purposes of this paragraph
(d), any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Blockbuster and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 2.07 were determined by PRO
RATA allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this paragraph. Notwithstanding any
other provisions of this Section 2.07, no Selling Holder shall be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities of such Selling Holder were offered to the public
exceeds the amount of any damages which such Selling Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. Each Selling Holder's obligations to contribute pursuant to
this Section 2.07 are several in proportion to the proceeds of the offering
received by such Selling Holder bears to the total proceeds of the offering
received by all the Selling Holders and not joint. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall
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be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) Indemnification and contribution similar to that specified in
the preceding paragraphs of this Section 2.07 (with appropriate modifications)
shall be given by Blockbuster, the Selling Holders and underwriters with respect
to any required registration or other qualification of securities under any
state law or regulation or governmental authority.
(f) The obligations of the parties under this Section 2.07 shall
be in addition to any liability which any party may otherwise have to any other
party.
Section 2.08. RULE 144 AND FORM S-3. Commencing 90 days after the
IPO Date, Blockbuster shall use its reasonable best efforts to ensure that the
conditions to the availability of Rule 144 set forth in paragraph (c) thereof
shall be satisfied. Upon the request of any Holder of Registrable Securities,
Blockbuster will deliver to such Holder a written statement as to whether it has
complied with such requirements. Blockbuster further agrees to use its
reasonable efforts to cause all conditions to the availability of Form S-3 (or
any successor form) under the Securities Act of the filing of registration
statements under this Agreement to be met as soon as practicable after the IPO
Date. Notwithstanding anything contained in this Section 2.08, Blockbuster may
deregister under Section 12 of the Securities Exchange Act of 1934, as amended,
if it then is permitted to do so pursuant to said Act and the rules and
regulations thereunder.
Section 2.09. TRANSFER OF REGISTRATION RIGHTS. (a) Any Holder
may transfer all or any portion of its rights under Article II to (i) any
other transferee in respect of a number of Registrable Securities owned by
such Holder equal to or exceeding 3% of the outstanding Blockbuster Common
Stock at the time of the transfer (each transferee that receives such minimum
number of Registrable Securities shall be referred to herein as a
"TRANSFEREE"). Any transfer of registration rights pursuant to this Section
2.09(a) shall be effective upon receipt by Blockbuster of (i) written notice
from such Holder stating the name and address of any Transferee and
identifying the number of Registrable Securities with respect to which the
rights under this Agreement are being transferred and the nature of the
rights so transferred and (ii) a written agreement from such Transferee to be
bound by the terms of this Article II and Sections 3.03, 3.06, 3.07, 3.09,
and 3.11 of this Agreement. The Holders may exercise their rights hereunder
in such priority as they shall agree upon among themselves.
(b) Notwithstanding the foregoing, in the event that any
stockholder of Viacom receives restricted Registrable Securities in the
Split-Off and as a result of the Split-Off,
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such stockholder is "affiliated" with Blockbuster for purposes of the Securities
Act, such stockholder shall be entitled to the rights hereunder; provided,
however, that it shall only be entitled to request registration of Registrable
Securities pursuant to Section 2.01 only twice and such stockholder signs a
written agreement to be bound by the terms of this Agreement. Any such
stockholder for purposes of this Agreement shall be considered a "Holder."
Section 2.10. HOLDBACK AGREEMENT. If any registration pursuant to
this Article II shall be in connection with an underwritten public offering of
Registrable Securities, each Selling Holder agrees not to effect any public sale
or distribution, including any sale under Rule 144, of any equity security of
Blockbuster (otherwise than through the registered public offering then being
made), within 7 days prior to or 90 days (or such lesser period as the lead or
managing underwriters may permit) after the effective date of the registration
statement (or the commencement of the offering to the public of such Registrable
Securities in the case of Rule 415 offerings). Upon the reasonable request of
the underwriters, Blockbuster hereby also so agrees and agrees to use its
reasonable best efforts to cause each other holder of equity securities or
securities convertible into or exchangeable or exercisable for such securities
(other than in the case of equity securities, under dividend reinvestment plans
or employee stock plans) purchased from Blockbuster otherwise than in a public
offering to so agree.
ARTICLE III
MISCELLANEOUS
Section 3.01. LIMITATION OF LIABILITY. Neither Viacom nor
Blockbuster shall be liable to the other for any special, indirect, incidental
or consequential damages of the other arising in connection with this Agreement.
Section 3.02. SUBSIDIARIES. Viacom agrees and acknowledges that
Viacom shall be responsible for the performance by each of its Affiliates of the
obligations hereunder applicable to such Affiliate.
Section 3.03. TERM. This Agreement shall remain in effect until
all Registrable Securities held by Holders have been transferred by them to
Persons other than Transferees; PROVIDED that the provisions of Section 2.07
shall survive any such expiration.
Section 3.04. FURTHER ASSURANCES. Viacom and Blockbuster shall
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such instruments and take such other action as may be necessary or
advisable to carry out their obligations under this Agreement and under any
exhibit, document or other instrument delivered pursuant hereto.
Section 3.05. SPECIFIC PERFORMANCE. The parties hereto
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, it is agreed that they
shall be entitled to an injunction or injunctions to prevent
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breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof in any court of competent jurisdiction in the United
States or any state thereof, in addition to any other remedy to which they may
be entitled at law or equity.
Section 3.06. AMENDMENTS. This Agreement shall not be
supplemented, amended or modified in any manner whatsoever (including without
limitation by course of dealing or of performance or usage of trade) except in
writing signed by the parties.
Section 3.07. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns. Nothing contained in this Agreement, express
or implied, is intended to confer upon any other person or entity any benefits,
rights or remedies.
Section 3.08. SEVERABILITY. Wherever possible, each provision of
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law. If any portion of this Agreement is declared invalid
for any reason in any jurisdiction, such declaration shall have no effect upon
the remaining portions of this Agreement, which shall continue in full force and
effect as if this Agreement had been executed with the invalid portions thereof
deleted; PROVIDED, that the entirety of this Agreement shall continue in full
force and effect in all other jurisdictions.
Section 3.09. ENTIRE AGREEMENT. Other than the IPO and Split-Off
Agreement, the Release and Indemnification Agreement, the Transition Services
Agreement and the Tax Matters Agreement, this Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both written and
oral, between the parties with respect to the subject matter hereof and thereof.
Section 3.10. NOTICES. All notices, consents, requests,
approvals, and other communications provided for or required herein, and all
legal process in regard thereto, must be in writing and shall be deemed validly
given, made or served, (a) when delivered personally or sent by telecopy to the
facsimile number indicated below with a required confirmation copy sent in
accordance with subsection (c) below; or (b) on the next business day after
delivery to a nationally-recognized express delivery service with instructions
and payment for overnight delivery; or (c) on the fifth (5th) day after
deposited in any depository regularly maintained by the United States postal
service, postage prepaid, certified or registered mail, return receipt
requested, addressed to the following addresses or to such other address as the
party to be notified shall have specified to the other party in accordance with
this section:
If to Viacom:
Viacom Inc.
1515 Broadway
New York New York 10036
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Attention: Michael D. Fricklas, General Counsel
Phone Number: 212-258-6070
Fax Number: 212-258-6099
If to Blockbuster:
Blockbuster Inc.
1201 Elm Street
Dallas, Texas 75270
Attention: Ed Stead, General Counsel
Phone Number: 214-854-3499
Fax Number: 214-854-3677
Section 3.11. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York. Each of the
parties hereto agrees that any dispute relating to or arising from this
Agreement or the transactions contemplated hereby shall be resolved only in the
court of the State of New York sitting in the County of New York or the United
States District Court for the Southern District of New York and the appellate
courts having jurisdiction of appeals in such courts. In that context, and
without limiting the generality of the foregoing, each of the parties hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal suit, action
or proceeding relating to this Agreement or any transaction contemplated hereby,
or for recognition and enforcement of any judgment in respect thereof, to the
exclusive jurisdiction of the courts of the State of New York sitting in the
County of New York or the United States District Court for the Southern District
of New York and appellate courts having jurisdiction of appeals in such courts,
and each of the parties hereto irrevocably and unconditionally agrees that all
claims in respect of any such suit, action, or proceeding shall be heard and
determined in such New York State court or, to the extent permitted by law, in
such federal court;
(b) consents that any such suit, action or proceeding may and
shall be brought in such courts and waives any objection that it may now or
hereafter have to the venue or jurisdiction or any such action or proceeding in
such court or that such action or proceeding was brought in an inconvenient
forum and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to such party
in its address as provided in Section 3.06 hereof;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by New York law; and
(e) agrees that this Agreement has been entered into in the State
of New York and performed in part in the State of New York.
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Section 3.12. COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
VIACOM INC.
By:
----------------------------------
Name:
Title:
BLOCKBUSTER INC.
By:
----------------------------------
Name:
Title:
<PAGE>
Exhibit 10.6
REVENUE SHARING AGREEMENT
THIS AGREEMENT (the "Agreement") is made the 21st day of November, 1997.
BETWEEN:
(1) BUENA VISTA HOME ENTERTAINMENT, INC. whose principal place of business
is at 3900 West Alameda Avenue, Burbank, California 91521 (hereinafter
referred to as "BVHE," which shall be deemed to include its permitted
assigns); and
(2) BLOCKBUSTER VIDEO INC. whose principal place of business is at 1201 Elm
Street, 31st Floor, Dallas, Texas 75270 (hereinafter referred to as
"Blockbuster," which shall be deemed to include its permitted assigns).
WHEREAS:
(A) Blockbuster and certain of its Affiliates own, operate and franchise
retail stores throughout the United States and Canada which, among other
things, rent, sell and market pre-recorded videocassette tapes to the
general public; and
(B) BVHE and certain of its Affiliates acquire, produce, license market and
sell motion pictures on pre-recorded videocassette tapes; and
(C) Blockbuster is willing to purchase on a per Store (the terms initially
capitalized in this Agreement and not otherwise defined herein shall have
the respective meanings set forth in Paragraph 19 of this Agreement) basis
a specified number of videocassette copies of each Rental Picture; and
(D) Blockbuster is willing to provide various marketing, advertising and
promotional services and activities in support of the Rental Pictures; and
(E) Blockbuster is willing to report electronically on an ongoing basis
information as to the rental and sales of Rental Pictures.
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* Pages where confidential treatment has been requested are stamped
"Confidential material omitted and separately filed with the Commission
under an application for confidential treatment", and the confidential
section has been marked with a star (*).
<PAGE>
2
NOW THEREFORE, based on the above premises and in consideration of the covenants
and agreements contained herein, the parties agree as follows:
1. AGREEMENT TERM:
The term of this Agreement shall be for five (5) years (the "Term"),
commencing as of the date of this Agreement. Each year of the Term, as
measured from the date of this Agreement, is a "Contract Year."
2. TERRITORY:
The territory for purposes of this Agreement with respect to each
Picture shall be the United States and Canada, their territories and
possessions (the "Territory"), except with respect to those Pictures for
which BVHE has only United States Home Video Distribution Rights, in which
case, the Territory with respect to such Pictures shall be limited to the
United States and, if and to the extent BVHE owns or controls such rights, to
territories and possessions of the United States (the "U.S. Territory").
3. BLOCKBUSTER COMMITMENTS:
Beginning as of the date of this Agreement for Stores located in the
United States, for Stores located in Canada within three (3) calendar months
hereafter, and for Participating Franchises within twelve (12) calendar months
hereafter, Blockbuster agrees as follows:
a. Purchasing: The following purchasing requirements shall apply to
all Stores and Participating Franchises (as defined in Paragraph 3.c.
below):
(1) RENTAL PICTURES: For each and every Rental Picture
with a Gross Box Office of * or more, released by BVHE in the Territory,
Blockbuster agrees to order for each Store, * and purchase, and BVHE
agrees to sell to Blockbuster, at least * of that number of Copies set
forth in the Buy Matrix attached hereto as Exhibit "A" which is
incorporated by this reference. For each and every Rental Picture with a
Gross Box Office of less than * released by BVHE in the Territory,
Blockbuster agrees to order for each Store, and *, and BVHE agrees to
sell to Blockbuster, at least * of that number of Copies set forth in the
Buy Matrix. Blockbuster further agrees that it will order and purchase
for each Store on a calendar month basis at least * of that number of
Copies set forth in the Buy Matrix across all Rental Pictures released
by BVHE in the Territory in each respective calendar month. There shall
be no cross collateralization of the purchase requirement from
month to month.
(2) PURCHASE PRICE: The purchase price of each videocassette
purchased by Blockbuster hereunder shall be an amount (the "Purchase
Price") equal to the sum of (i) * plus (ii) an amount equal to the
relevant percentages of the Rental Revenue (as defined below) generated
during the Revenue Sharing Period (the "Revenue Percentage") by the
relevant title.*
(3) RENTAL REVENUE: The Rental Revenue shall be defined *
(a) During the first * calendar days of the Revenue Sharing Period,
* of the Rental Revenue *.
(b) During the next * calendar days of the Revenue Sharing Period *
calendar day following the Video Street Date, *.
(c) *
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
3
(4) Missing Copies: For each Copy that is lost, stolen or
otherwise not reasonably accounted for, for more than thirty (30)
calendar days during the period commencing upon delivery to
Blockbuster's distribution center and ending on the last day of the
relevant Revenue Sharing Period (each, a "Missing Copy"),
Blockbuster shall pay to BVHE BVHE's *. For any such Missing Copy
recovered by Blockbuster or BVHE, BVHE will reimburse Blockbuster
the applicable distribution wholesale price less the applicable
average Purchase Price received by BVHE.
(5) Payment: Blockbuster shall pay the Upfront Price within
* calendar days following the *, but no sooner than receipt of the
Copies. Blockbuster shall pay the *, unless specified otherwise, on
a calendar monthly basis within * days following the end of the
relevant calendar month *.
(6) Remedy: The parties acknowledge and agree that if
Blockbuster fails to order the number or Copies required under this
Paragraph 3, Blockbuster shall pay to BVHE, as liquidated damages,
an amount equal to * for each Copy which Blockbuster failed to
order. If BVHE fails to deliver the number or Copies ordered by
Blockbuster under this Paragraph 3, BVHE shall pay to Blockbuster,
as liquidated damages, an amount equal to * for each Copy which BVHE
failed to deliver. The parties hereto expressly agree and
acknowledge that actual damages for purposes of this Subparagraph
would be difficult to ascertain and that the amount set forth above
represents the parties' reasonable estimate of such damages.
b. Marketing:
(1) Blockbuster agrees to provide advertising in measured
media to advertise the availability of Rental Pictures in Stores
in the amount of * of the Purchase Price of * of the Copies required
to be purchased in accordance with the Buy Matrix as set forth in
Paragraph 3.a. above. With respect to said advertising of Rental
Pictures, Blockbuster agrees to consult with BVHE and to keep BVHE
reasonably apprised of its marketing plans and activities and to
comply with BVHE's then-current customary marketing support policies
and practices to the extent they are reasonable and practicable.
BVHE shall have the right to approve such plans, and Blockbuster
shall provide a meaningful
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
4
and timely opportunity for said approval by BVHE. BVHE shall
exercise its approval rights in a timely and reasonable manner.
(2) Should BVHE fail to comply in good faith with its
obligations under Paragraph 3.b.(1), Blockbuster shall be entitled
to give written notice to BVHE of such failure. If BVHE fails
to remedy such failure to Blockbuster's satisfaction within *
calendar days following receipt of such notice, Blockbuster shall be
relieved from its obligation *. In no event shall Blockbuster be
obligated to provide such advertising which it would otherwise have
been obligated to provide during such time as Blockbuster's
obligations hereunder were suspended because of BVHE's failure to
fulfill its obligations under this Paragraph 3.b.(1).
c. Participating Franchises: While Blockbuster cannot guarantee that
its Franchises will adopt the Agreement, Blockbuster will use good faith
commercially reasonable efforts to recommend adoption of the Agreement to
its Franchises and anticipates a high level of adoption thereby.
Blockbuster hereby agrees that each Participating Franchise shall execute
a letter agreement, which has been approved by BVHE in form and substance,
in favor of BVHE, agreeing to be bound by the terms and conditions of this
Agreement as if it were a party hereto (the "Participating Franchise").
Blockbuster shall be liable for each Participating Franchise's performance
of its financial obligations hereunder as if such Participating Franchise
were a Store. BVHE shall have the right to proceed against Blockbuster for
money only for any failure of a Participating Franchise to fully perform
the financial terms and conditions of this Agreement. Participating
Franchises shall be subject to the same terms and conditions under the
Agreement as Stores, unless specifically designated otherwise.
Implementation of the Agreement at the Franchise level and Franchise
payments thereunder will be administered by Blockbuster.
d. Overage: Blockbuster may, subject to the written consent of
BVHE, which consent would not be unreasonably withheld, purchase a
quantity of Copies in excess of * of the Buy Matrix required to be
purchased on a monthly basis ("Overage"). *, Overage shall be subject
to the same terms and conditions as the Copies.
e. Placement: Blockbuster shall exercise good faith commercially
reasonable efforts to maximize Rental Revenue on the Rental Pictures. At
all times during the entire Revenue Sharing Period, Blockbuster shall
display for rental at each Store all of the Copies of the Rental Picture
purchased for such Store, which are not currently being rented, in the
"New Releases" rental section of such Store (or another section of such
Store which has been preapproved by BVHE).
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
5
f. Sell-Off: At the expiration of * calendar days, a Store may
sell *. At the expiration of the relevant Revenue Sharing Period,
Blockbuster may sell the remaining Copies. Said sell-off Copies may be
sold either by self-liquidation, i.e., to individual customers via
in-store retail sales, or by selling the Copies to its Franchises for
the sole purpose of stocking New Blockbuster Stores, *. In no event
shall Blockbuster knowingly sell any Copy or Copies to any third-party
reseller, including, but not limited to, brokers, liquidators, or other
wholesale video distributors. All sell-off copies will be prominently
labeled as "Previously Viewed Rental Product." Sell-off revenue is not
included in Rental Revenue.
g. Packing and Shipping: Blockbuster will be solely responsible for
making the Copies ready for consumer rental and for shipping the Copies
from its distribution center to its Stores.
h. Delivery: As between BVHE and Blockbuster, title in and to the
Copies and risk of loss shall pass upon delivery of the Copies to
Blockbuster's distribution center in accordance with Paragraph 4.b.
i. Returns/Exchanges: The purchase requirements set forth in this
Paragraph 3 shall not be subject to any returns by Blockbuster. BVHE will
exchange defective or damaged Copies for a working Copy of the same title.
Defective Copies shall mean those videocassettes which are mechanically
defective, mispackaged or contain extraneous material. Damaged Copies
shall mean those videocassettes which become materially damaged by Store
personnel, customers or otherwise, during the first * calendar days of the
Revenue Sharing Period. Blockbuster shall report defective or damaged
Copies to BVHE promptly following discovery of such defect or damage.
j. Store Count: Blockbuster will report to BVHE on a calendar month
basis the number of currently operating Stores, including Participating
Franchises, non-participating Franchises, New Blockbuster Stores and
recently store closed locations.
k. Demographic Information: Blockbuster will provide to BVHE, on an
ongoing basis, information regarding the demographic make-up generally of
those customers renting the Copies.
4. BVHE COMMITMENTS:
a. Marketing Support: In lieu of specific marketing support programs
such as rebate, co-op and MDF programs, and as payment for services and in
consideration for the various other services and activities which
Blockbuster has agreed to perform hereunder for the benefit of BVHE, such
as sales and rental reporting functions, BVHE agrees to credit on a per
Rental Picture basis (on the relevant invoice) Blockbuster with marketing
- ----------
* "Confidential material omitted and separately filed with the Commission
under an application for confidential treatment".
<PAGE>
6
support funds ("Marketing Support Funds") in the amount of * of the
Purchase Price generated by a Rental Picture for BVHE, excluding any
Purchase Price generated by Overage Copies. Marketing Support Funds shall
not be used to advertise, promote or otherwise market product not
distributed by BVHE. In addition to Marketing Support Funds, BVHE shall
continue to provide Blockbuster with BVHE's standard in-store point of
purchase marketing materials as customarily utilized by Blockbuster.
(1) Blockbuster shall use * of the Marketing Support Funds to
advertise in measured media the availability of Rental Pictures in
Stores. With respect to said advertising of Rental Pictures,
Blockbuster agrees to consult with BVHE and to keep BVHE reasonably
apprised of its marketing plans and activities and to comply with
BVHE's then-current customary marketing support policies and
practices to the extent that they are reasonable and practicable.
BVHE shall have the right to approve such plans, and Blockbuster
shall provide a meaningful and timely opportunity for said approval
by BVHE. BVHE shall exercise approval rights in a timely and
reasonable manner.
(2) With respect to * of the Marketing Support Funds, BVHE and
Blockbuster shall jointly determine how said monies will be used to
advertise, promote or otherwise market the Rental Pictures.
(3) Blockbuster shall use * of the Marketing Support Funds for
in-store Rental Picture specific marketing and promotion.
(4) Should Blockbuster fail to comply in good faith with its
obligations under paragraphs 4.a (1), (2) and (3), BVHE shall be
entitled to give written notice to Blockbuster of such failure. If
Blockbuster fails to remedy such failure to BVHE's satisfaction
within ten (10) calendar days following receipt of such notice,
BVHE shall be relieved of its obligations to provide Marketing
Support Funds, until such time as Blockbuster complies in good
faith with its obligations under this Paragraph 4.a. In no event
shall Blockbuster be entitled to receive Marketing Support Funds
which would otherwise have accrued during such time as
Blockbuster's rights hereunder were suspended because of its
failure to fulfill its obligations under this Paragraph 4.a.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
7
b. Shipping: BVHE will deliver the Copies to one (1) primary
distribution center in the United States, currently in McKinney, Texas, at
least ten (10) calendar days prior to Street Date and will use good faith
efforts to deliver the Copies fourteen (14) calendar days prior to Street
date.
c. Withdrawal Rights: BVHE shall have the right to withdraw any
Rental Picture from further distribution under this Agreement. In such
event, BVHE shall give Blockbuster written notice of such withdrawal
and Blockbuster shall not sell or rent any videocasettes of the withdrawn
Rental Picture after its receipt of such notice. It is expressly
understood and agreed that such notice shall be given by BVHE if, and
only if, BVHE shall simultaneously withdraw the Picture from all other
Home Video distribution outlets. If BVHE subsequently makes such Rental
Picture available in any other outlet of Home Video distribution in the
Territory during the Term, then it shall simultaneously also make such
Rental Picture available to Blockbuster hereunder. If BVHE withdraws
any Rental Picture from further distribution and does not, within sixty
(60) calendar days thereafter, make such Rental Picture available to
Blockbuster, BVHE shall reimburse Blockbuster any portion of the
Upfront Price, paid by Blockbuster to BVHE for Copies of said Rental
Picture, which has not been recouped by Blockbuster out of their relevant
share of the Rental Revenue.
5. ELECTRONIC REPORTING:
At no cost or expense to BVHE, Blockbuster will provide to BVHE,
electronically, daily access to all BVHE Rental Picture information along
with weekly summaries, in such form as may be reasonably specified by BVHE
from time to time, of all performance information as to Blockbuster's rental
of the Rental Pictures, including, but not limited to, daily rental turn
data, daily inventory and daily Rental Revenue from each Store on a Store by
Store, Rental Picture by Rental Picture, Copy by Copy basis. In addition,
during the Term and for * after the termination or expiration of the
Agreement whichever occurs first, BVHE shall have *. BVHE shall be entitled
to use such information internally for any legitimate business purpose so
long as it complies with its obligations of confidentiality and
non-disclosure as set forth in Paragraph 10 below. At no cost or expense to
Blockbuster, BVHE will, through SuperComm, assist in data collection services
and facilitate electronic reporting.
6. REVIEW:
Within thirty (30) calendar days following the end of each Contract
Year, the parties shall meet and in good faith review the terms of this
Agreement. Should no agreement be reached between the parties with respect to
adjusting or amending the terms of the Agreement, the then current terms of
the Agreement shall remain in full force and effect. Within the thirty (30)
calendar days following the end of the forty-second (42nd) month of the Term,
either party may give six (6) months' notice to terminate the Agreement. If
such notice is given by either party, from such notification forward,
Blockbuster shall have no right or obligation to purchase additional Rental
Pictures under this Agreement and BVHE shall be relieved of any right or
obligation to sell Rental Pictures to Blockbuster under this Agreement.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
8
7. PORNOGRAPHIC MATERIAL:
BVHE shall not sell to Blockbuster and Blockbuster shall not at any
time in any Store during the Term engage in any manner whatsoever, in the
production, license, advertisement, manufacture, promotion, distribution or
other commercial exploitation of Pornographic Material. In the event a
dispute arises between the parties concerning whether BVHE or Blockbuster is
involved in the production, license, advertisement, manufacture, promotion,
distribution or other commercial exploitation of Pornographic Material, such
dispute shall be resolved by an independent third party arbitrator to be
agreed upon between the parties, the findings of whom shall be binding upon
the parties. Should the arbitrator conclude that BVHE has breached this
provision, Blockbuster shall not be obligated to order or purchase any Copies
of said Pornographic Material. Should the arbitrator conclude that
Blockbuster has breached this provision, Blockbuster shall promptly cease its
commercial exploitation of said Pornographic Material. There shall be no
other remedy available to either party for a breach of this provision.
8. TERMINATION:
a. The following transactions or occurrences shall constitute
material events of default (each an "Event of Default") by the applicable
party (the "defaulting party") hereunder such that, in addition to and
without prejudice to or limiting any other rights and remedies available
to the non-defaulting party at law or in equity the non-defaulting party
may elect to immediately and prospectively terminate this Agreement at the
sole discretion of the non-defaulting party by giving written notice
thereof to the other party at any time after the occurrence of an Event of
Default setting forth sufficient facts to establish the existence of such
Event of Default:
(1) A material breach by a party of any material covenant,
material warranty, or material representation contained herein,
where such defaulting party fails to cure such breach within thirty
(30) calendar days after receipt of written notice thereof, or
within such specific cure period as is expressly provided for
elsewhere in this Agreement; or
(2) A party makes an attempt to make any arrangement for the
benefit of creditors, or a voluntary or involuntary bankruptcy,
insolvency or assignment for the benefit of creditors of a party or
in the event any action or proceeding is instituted relating to any
of the foregoing and the same is not dismissed within thirty (30)
calendar days after such institution; or
(3) A failure by either party to make payment of any monies
payable pursuant to this Agreement as and when due.
b. Should BVHE terminate this Agreement pursuant to Paragraph 9.a.,
BVHE shall immediately be relieved from any further obligations under
Paragraph 4 of this Agreement.
<PAGE>
9
c. Except as otherwise provided herein, no termination of this
Agreement for any reason shall relieve or discharge any party hereto from
any duty, obligation or liability hereunder which was accrued as of the
date of such termination.
9. PUBLIC DISCLOSURE AND CONFIDENTIALITY:
a. Public Disclosure: Each party agrees that no press release or
public announcement relating to the existence or terms of this Agreement
(including within the context of a trade press or other interview or
advertisement in any media) shall be issued without the express prior
written approval of the other party hereto.
b. Confidential Information: During the Term and for a period of
three (3) years thereafter, Blockbuster and BVHE shall hold, and shall
cause each of their directors, officers, employees and agents to hold in
confidence the terms of this Agreement (including the financial terms and
provisions hereof and all information received pursuant to, or developed
in accordance with, this Agreement) specifically including but not limited
to the *. Blockbuster and BVHE hereby acknowledge and agree that all
information contained in, relating to or furnished pursuant to this
Agreement, not otherwise known to the public, is confidential and
proprietary and is not to be disclosed to third parties without the prior
written consent of both Blockbuster and BVHE. Neither Blockbuster nor
BVHE shall disclose such information to any third party (other than to
officers, directors, employees, attorneys, accountants and agents of
Blockbuster and BVHE or the affiliates of either, who have a business
reason to know or have access to such information, and only after each of
whom agrees to being bound by this paragraph) except:
(1) To the extent necessary to comply with any Law or the
valid order of a governmental agency or court of competent
jurisdiction or as part of its normal reporting or review procedure
to regulatory agencies or as required by the rules of any major
stock exchange on which either party's stock may be listed;
provided, however, that the party making such disclosure shall seek,
and use reasonable efforts to obtain, confidential treatment of said
information and shall promptly, to the greatest extent practicable,
notify the other party in advance of such disclosure;
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
10
(2) As part of the normal reporting or review procedure by its
parent company, its auditors and its attorneys;
(3) To the extent necessary to obtain appropriate insurance,
to its insurance agent or carrier, that such agent or carrier agrees
to the confidential treatment of such information; and
(4) To actual or potential successors in interest, provided,
however, that such person or entity shall have first agreed in
writing to the confidential treatment of such information.
10. NO RIGHT TO USE NAMES:
a. Neither Blockbuster nor Stores nor Participating Franchises shall
acquire any right to use, nor shall the same use any copyrights,
trademarks, characters or designs owned or controlled by Disney or any of
its Affiliates, including without limitation, the names Disney, Buena
Vista, Walt Disney, Touchstone, Hollywood, Miramax, Dimension, ABC or
ESPN, alone or in conjunction with other words or names, in any
advertising, publicity or promotion, either express or implied, without
BVHE's prior consent in each case, and in no case shall any Blockbuster
or Store advertising, publicity, or promotion, express or imply any
endorsement of the same.
b. BVHE shall not acquire any right to use, nor shall the same use,
the name Blockbuster alone or in conjunction with other words or names,
or any copyrights, trademarks, characters or designs of the same in any
advertising, publicity or promotion, either express or implied, with
Blockbuster's prior consent in each case, and in no case shall any BVHE
advertising, publicity, or promotion, express or imply any endorsement of
the same.
11. ASSIGNMENT:
This Agreement and the rights and licenses granted hereunder are personal
and neither party shall have the right to sell, assign, transfer, mortgage,
pledge nor hypothecate (each an "Assignment") any such rights or licenses in
whole or in part without the prior written consent of the non-assigning party,
nor will any of said rights or licenses be assigned or transferred to any third
party by operation of law, including, without limitation, by merger or
consolidation or
<PAGE>
11
otherwise; provided, however, that an Assignment pursuant to or resulting
from a sale of all or substantially all of the assets or all or a majority of
the equity of Blockbuster to any Person or Persons or any other form of
business combination, such that the Blockbuster business as currently
existing remains substantially intact, including, without limitation, a sale
to the public, shall not require such consent so long as such Assignment is
not to an unaffiliated motion picture studio; and provided further that any
Assignment by (i) Blockbuster, to any Affiliate of Viacom or (ii) BVHE to any
Affiliate of Disney, where such Affiliate has access to the Disney library of
films generally equivalent to that of BVHE at the time of this Agreement,
shall also not require consent. In the event that Blockbuster or BVHE assigns
its rights or interest in or to this Agreement in whole or in part, the
assigning party will nevertheless continue to remain fully and primarily
responsible and liable to the other party for prompt, full, complete and
faithful performance of all terms and conditions of this Agreement.
12. AUDIT RIGHTS:
a. During the Term and continuing until the date six (6) months
following the date of expiration or earlier termination of this Agreement
BVHE may, audit the financial books, information systems and records
of Blockbuster as reasonably necessary to verify Blockbuster's
compliance with its obligations under this Agreement; provided,
however, that (a) such audit shall be at the sole cost and expense of
BVHE (unless such audit reveals that payments due to BVHE for any
twelve (12) month period were understated by more than five percent
(5%), in which case, in addition to all other rights which BVHE may
have, Blockbuster shall promptly reimburse BVHE to the extent of its
reasonable out-of-pocket costs of such audit), (b) BVHE may not audit
more than twice per year (and no such audit shall continue for more
than thirty (30) calendar days from the date the auditors are given
access to the applicable records), and (c) any such audit shall be
conducted only during regular business hours and in such a manner as
not unreasonably to interfere with the normal business activities of
Blockbuster. Blockbuster shall keep and maintain complete and accurate
books of account and records in connection with its obligations under
this Agreement at its principal place of business until the date
thirty-nine (39) months following the date of rendering of the initial
statement reflecting such records unless a legal action with regard
thereto is commenced during such period.
b. During the Term and continuing until the date six (6) months
following the date of expiration or earlier termination of this Agreement,
BVHE may inspect and audit
<PAGE>
12
the books, records and store premises of Stores and Participating
Franchises as reasonably necessary to verify compliance with this
Agreement; provided, however, that (a) such audit shall be at the sole
cost and expense of BVHE (unless such audit reveals that payments due
to BVHE for any twelve (12) month period were understated by more than
five percent (5%), in which case, in addition to all other rights which
BVHE may have, Blockbuster shall promptly reimburse BVHE to the extent
of its reasonable out-of-pocket costs of such audit), and (b) any such
audit shall be conducted only during regular business hours and in such
a manner as not unreasonably to interfere with the normal business
activities of Store or Participating Franchises.
13. BVHE'S REPRESENTATIONS AND WARRANTIES:
BVHE represents and warrants that:
a. It is a corporation organized and existing under the laws of the
State of California with its principal place of business in the State
of California;
b. The undersigned has the full right, power and authority to sign
this Agreement on behalf of BVHE;
c. The execution, delivery and performance of this Agreement does
not and will not, violate any provisions of BVHE's articles or
certificates or incorporation and bylaws, or any contract or other
Agreement to which BVHE is a party;
d. There is no broker, finder or intermediary involved in connection
with the negotiations and discussions incident to the execution of this
Agreement, and no broker, finder, agent or intermediary who might be
entitled to a fee, commission or any other payment upon the consummation
of the transactions contemplated by this Agreement;
e. This Agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligation of BVHE,
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereinafter in effect, affecting the
enforcement of creditors' rights in general and by general principles
of equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law; and
<PAGE>
13
f. Copies shall be new and unused and comparable in quality to other
videocassette units being sold by BVHE in rental distribution channels.
14. BLOCKBUSTER'S REPRESENTATIONS AND WARRANTIES:
Blockbuster represents and warrants that:
a. It is a corporation organized and existing under the laws of the
State of Delaware with its principal place of business in the State of
Texas;
b. The undersigned has the full right, power and authority to sign
this Agreement on behalf of Blockbuster;
c. There is no broker, finder or intermediary involved in connection
with the negotiations and discussions incident to the execution of this
Agreement, and no broker, finder, agent or intermediary who might be
entitled to a fee, commission or any other payment upon the consummation
of the transactions contemplated by this Agreement;
d. This Agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligation of Blockbuster
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereinafter in effect, affecting the enforcement of
creditors' rights in general and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law; and
e. The execution, delivery and performance of this Agreement does
not, and will not, violate any provisions of Blockbuster's articles or
certificates of incorporation and bylaws, or any contract or other
Agreement to which Blockbuster is a party.
15. FORCE MAJEURE:
The duties and obligations of the parties hereunder may be suspended upon
the occurrence and continuation of any "Event of Force Majeure" which inhibits
or prevents performance hereunder, and for a reasonable start-up period
thereafter. An "Event of Force Majeure" shall mean any act, cause, contingency
or circumstance beyond the reasonable control
<PAGE>
14
of such party (whether or not reasonably foreseeable), including, without
limitation, to the extent beyond the reasonable control of such party, any
governmental action, nationalization, expropriation, confiscation, seizure,
allocation, embargo, prohibition of import or export of goods or products,
regulation, order or restriction (whether foreign, federal or state), war
(whether or not declared), civil commotion, disobedience or unrest,
insurrection, public strike, riot or revolution, lack or shortage of, or
inability to obtain, any labor, machinery, materials, fuel, supplies or
equipment from normal sources of supply, strike, work stoppage or slowdown,
lockout or other labor dispute, fire, flood, earthquake, drought or other
natural calamity, weather or damage or destruction to plants and/or equipment,
commandeering of vessels or other carriers resulting from acts of God, or any
other accident, condition, cause, contingency or circumstances including
(without limitation, acts of God) within or without the United States. Neither
party shall, in any manner whatsoever, be liable or otherwise responsible for
any delay or default in, or failure of, performance resulting from or arising
out of or in connection with any Event of Force Majeure and no such delay,
default in, or failure of, performance shall constitute a breach by either party
hereunder. As soon as reasonably possible following the occurrence of an Event
of Force Majeure, the affected party shall notify the other party, in writing,
as to the date and nature of such Event of Force Majeure and the effects of
same. If any Event of Force Majeure shall prevent the performance of a material
obligation of either party hereunder, and if the same shall have continued for a
period of longer than 180 days, then either party hereto shall have the right to
terminate this Agreement by written notice to the other party hereto.
16. INDEMNIFICATION:
Each party (the "Indemnifying Party") shall indemnify and hold the other
party and its affiliates and their respective employees, officers, agents,
attorneys, stockholders and directors, and their respective permitted
successors, licensees and assigns (the "Indemnified Party(ies)") harmless from
and against (and shall pay as incurred) any and all claims, proceedings,
actions, damages, costs, expenses and other liabilities and losses (whether
under a theory of strict liability, or otherwise) of whatsoever kind or nature
("Claim(s)") incurred by, or threatened, imposed or filed against, any
Indemnified Party (including, without limitation, (a) actual and reasonable
costs of defense, which shall include without limitation court costs and
reasonable attorney and other reasonable expert and reasonable third party fees;
and (b) to the extent permitted by Law, any fines, penalties and forfeitures) in
connection with any proceedings against an Indemnified Party caused by any
breach (or, with respect to third party claims only, alleged breach) by the
Indemnifying Party of any representation, term, warranty or agreement hereunder.
Neither party shall settle, compromise or consent to the entry of any judgment
in or otherwise seek to terminate any pending or threatened Claim in respect of
which the Indemnified Party is entitled to indemnification hereunder (whether or
not the Indemnified Party is a party thereto), without the prior written consent
of the other party hereto; provided, however, that the Indemnifying Party shall
be entitled to settle any claim without the written consent of the Indemnified
Party so long as such settlement only involves the payment of money by the
Indemnifying Party and in no way affects any rights of the Indemnified Party.
<PAGE>
15
17. REMEDIES:
No remedy conferred by any of the specific provisions of this Agreement is
intended to be exclusive of any other remedy which is otherwise available at
law, in equity, by statute or otherwise, and except as otherwise expressly
provided for herein, each and every other remedy shall be cumulative and shall
be in addition to every other remedy given hereunder or now or hereafter
existing at law, in equity, by statute or otherwise and no provision hereof
shall be construed so as to limit any party's available remedies in the event of
a breach by the other party hereto. The election of any one or more of such
remedies by any of the parties hereto shall not constitute a waiver by such
party of the right to pursue any other available remedies.
18. DEFINITIONS:
a. "Affiliate" shall mean an entity in which either party has a
controlling interest.
b. "Copy" or "Copies" shall mean VHS videocassette units. Other
formats, including laserdisc and DVD are not included under this
Agreement.
c. *
d. "Franchises" shall mean all Blockbuster stores which Blockbuster
informs BVHE are Franchises.
e. "Gross Box Office" ("GBO" as used in the Buy Matrix) shall
mean the box office gross receipts earned by a Picture in the United
States and Canada measured from the Picture's initial theatrical
release in the Territory until the * of such Picture, as reported by
VARIETY or THE HOLLYWOOD REPORTER.
f. "Home Video" shall mean the providing of motion pictures and
other programming to members of the general public by means of the
temporary or permanent transfer of physical possession of a VHS
videocassette for non-public viewing on a home television receiver.
g. "Home Video Distribution Rights" shall mean the right to record
and distribute a motion picture on videocassette.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
16
h. "Laws" shall mean all international, federal, national, state,
provincial, municipal or other laws, ordinances, orders, statutes, rules
or regulations.
i. "New Blockbuster Store" shall mean a Store which Blockbuster or
any of its Franchisees first owns or operates after the commencement date
of this Agreement, excluding Blockbuster's acquisition of franchised
Blockbuster Stores.
j. "Non-Theatrical Pictures" shall mean audio-visual Pictures
initially distributed in the Territory via a medium other than theatrical
release (e.g., via Home Video, cable, pay or free television exhibition)
and which are being distributed to all rental channels of home video
distribution.
k. "Picture" shall mean any motion picture, including but not
limited to live-action, animated or other medium, or any other
programming for which BVHE owns or controls Home Video Distribution Rights
in the Territory or in the U.S. Territory as applicable. Further, BVHE
shall exercise equivalent practices relating to the acquisition and
distribution of Rental Pictures throughout the Term of this Agreement
as it does currently. Every Picture for which The Walt Disney Company
or its Affiliates has home video distribution rights in the Territory
and elects to distribute as a Rental Picture in the Territory shall be
made available to Blockbuster under the terms of this Agreement.
l. "Pornographic Material" shall mean X-rated, NC-17 rated and/or
unrated motion pictures or printed materials which either party shall in
good faith determine contain explicit sexual and/or violent scenes and
excluding (x) NC-17 Rated or unrated motion pictures of an artistic nature
and (v) motion pictures rated "R" by the Motion Picture Association of
America.
m. "Prebook Date" shall mean, with respect to any Picture, the date
specified by BVHE's, in its sole discretion, when BVHE videocassette
orders are due for all channels of distribution.
n. "Rental Picture" shall mean each and every Picture provided such
Picture is at least seventy (70) minutes in length and is not a sports
event, concert film, stage play, video or theatrical re-release or library
film, distributed by BVHE, which when initially released on videocassette
is priced by BVHE at a "rental price" (as opposed to a "sell-through
price"), as such terms are generally understood in the Home Video industry
in Los Angeles, California.
<PAGE>
17
o. "Revenue Sharing Period" shall mean the period commencing on the
Video Street Date of the relevant Picture and running through the end of
the twenty-sixth (26th) week thereafter.
p. "Store" shall mean any video store in the United States or
Canada, which, at any time during the Term of this Agreement, is wholly
owned and/or operated by Blockbuster, whether or not such store is
operated under the "Blockbuster" trademarks, excluding only the "Sixteen
Thousand Video" stores operated by Blockbuster in Florida. Should
Blockbuster undertake to own or operate retail outlets different than the
retail outlets it has traditionally operated, such as by way of example,
kiosks, carts, "stores within a store", "rack jobbing" operations or
vending machines, the parties shall negotiate in good faith to agree upon
terms for the inclusion of such retail outlets in this Agreement.
q. "Video Street Date" shall mean, with respect to any Picture, the
first date on which, in the Territory, both: (i) such Picture is
authorized by BVHE for Home Video distribution, and (ii) Home Video copies
of such Picture are actually available to the general public.
19. MISCELLANEOUS:
a. This Agreement shall not constitute any partnership, joint
venture or agency relationship between the parties hereto. The parties
shall be considered independent contractors.
b. This Agreement, together with the attached Exhibits, embodies the
entire understanding of the parties with respect to the subject matter
hereof and may not be altered, amended or otherwise modified except by an
instrument in writing executed by both parties.
c. The headings in this Agreement are for convenience of reference
only and shall not have any substantive effect.
<PAGE>
18
d. All rights and remedies granted to the parties hereunder are
cumulative and are in addition to any other rights or remedies that the
parties may have at law or in equity.
e. Should any non-material provision of this Agreement be held to be
void, invalid or inoperative, as a matter of law the remaining provisions
hereof shall not be affected and shall continue in effect as though such
unenforceable provision(s) have been deleted herefrom.
f. Unless otherwise indicated, all dollar amounts referenced herein
shall refer to and be paid in United States dollars.
g. No waiver of any right under or breach of this Agreement shall be
effective unless it is in writing and signed by the party to be charged.
h. This Agreement shall be governed by and construed in accordance
with the internal Laws of the State of California and the United States
of America, applicable to Agreements entered into and wholly performed
therein. Blockbuster hereby consents to and submits to the jurisdiction
of the federal and state courts located in the State of California, the
United States of America and any action or suit under this Agreement
may be brought in any federal or state court with appropriate
jurisdiction over the subject matter established or sitting within the
State of California.
i. None of the provisions of this Agreement is intended for the
benefit of or shall be enforceable by any third parties.
j. This Agreement may be executed in separate counterparts each of
which shall be an original and all of which taken together shall
constitute one and the same Agreement.
k. All notices shall be in writing and either personally delivered,
mailed first-class mail (postage prepaid), sent by reputable overnight
courier service (charges prepaid), or sent by transmittal by any
electronic means whether now known or hereafter developed, including, but
not limited to, telex, telecopier or laser transmissions, able to be
received by the party intended to receive notice, to the parties at the
following addresses:
<PAGE>
19
If to Blockbuster:
Blockbuster Entertainment Inc.
1201 Elm Street
31st Floor
Dallas, Texas 75270
Attention: John Antioco, Chairman and CEO
Edward B. Stead, Executive Vice President and General Counsel
If to BVHE:
Buena Vista Home Entertainment, Inc.
350 South Buena Vista Street
Burbank, California 91521
Attention: Richard F.X. Clair, Senior Vice President, Business & Legal Affairs
Mitchell L. Koch, Senior Vice President and General Manager
<PAGE>
20
IN WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
Buena Vista Home Entertainment, Inc.
/s/ Michael O. Johnson
----------------------------------
By: Michael O. Johnson
Title: President, Worldwide, Buena Vista Entertainment
BLOCKBUSTER VIDEO INC.
/s/ Edward B. Stead
----------------------------------
By: Edward B. Stead
Title: Executive Vice President and General Counsel
/s/ John Antioco
----------------------------------
By: John Antioco
Title: Chairman and Chief Executive Officer
<PAGE>
Exhibit A
BLOCKBUSTER BUY MATRIX
Copies per Rental Picture per Store
*
- ----------
* "Confidential material omitted and separately filed with the Commission
under an application for confidential treatment".
<PAGE>
Exhibit 10.7
REVENUE SHARING AGREEMENT
THIS AGREEMENT (the "Agreement") is made the 29th day of September, 1998 (the
"Effective Date").
BETWEEN:
(1) BLOCKBUSTER INC. whose principal place of business is at 1201 Elm Street,
Dallas, Texas 75270 (hereinafter referred to as "Blockbuster," which shall be
deemed to include its assigns once assigned); and
(2) TWENTIETH CENTURY FOX HOME ENTERTAINMENT, INC. whose principal place of
business is at Post Office Box 900, Beverly Hills, California 90213
(hereinafter referred to as "Fox," which shall be deemed to include its
assigns once assigned).
WHEREAS:
(A) Blockbuster and certain of its Affiliates (the terms initially capitalized
in this Agreement and not otherwise defined herein shall have the respective
meanings set forth in Paragraph 1 of this Agreement), own, operate and franchise
retail stores which, among other things, rent, sell and market pre-recorded
videocassette tapes to the general public; and
(B) Fox and certain of its Affiliates acquire, produce, lease, market and sell
motion pictures on pre-recorded videocassette tapes; and
(C) Blockbuster is willing to lease from Fox on a per Participating Store
basis a specified number of Copies of each Rental Picture released during the
Term as set forth herein; and
(D) Fox is willing to lease to Blockbuster on a per Participating Store basis a
specified number of Copies of each Rental Picture released during the Term as
set forth herein; and
(E) Blockbuster is willing to report electronically on an ongoing basis during
the Revenue Sharing Period information as to the rental of Copies per Rental
Picture as set forth in Exhibit C, attached hereto and made a part hereof.
- ----------
* Pages where confidential treatment has been requested are stamped
"Confidential material omitted and separately filed with the Commission
under an application for confidential treatment", and the confidential
section has been marked with a star (*).
<PAGE>
2
NOW THEREFORE, based on the above premises and in consideration of the mutual
covenants and agreements contained herein, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS:
a. "Affiliate" shall mean an entity in which either party has a
controlling interest or any entity that has a direct or indirect parent in
common.
b. "Agreement Year" shall mean a twelve (12) month period commencing on
the Effective Date of this Agreement. Each year in the Term may be referred
to as an "Agreement Year" or "Agreement Year One," "Agreement Year Two" or
"Agreement Year Three," respectively.
c. "Bad Debt" shall mean *
d. "Blockbuster Headquarters" shall mean the corporate office of
Blockbuster located at 1201 Elm Street, Dallas, Texas 75270.
e. "Copy(ies)" shall mean VHS videocassettes of the Rental Pictures
leased by Blockbuster from Fox under this Agreement. Other formats, including
laserdisc and DVD are not included under this Agreement.
f. "Defective Copies" shall mean those Copies that are mechanically
defective, mispackaged or contain extraneous material upon delivery to
Blockbuster.
g. "Distribution Center" shall mean Blockbuster's distribution center that
is currently in McKinney, Texas. Blockbuster may add two (2) additional delivery
points at its option.
h. "Franchise Stores" shall mean Blockbuster franchise stores operated
under the Blockbuster trademarks and designated by Blockbuster from time to time
as ordering Copies through Blockbuster, subject to Paragraph 4.c. hereof.
i. "Gross Box Office" or "GBO" shall mean the box office gross receipts
earned by a Rental Picture in the United States and Canada measured from the
Rental Picture's initial theatrical release in the Territory until the date
leased by Blockbuster, as reported by HOLLYWOOD REPORTER.
j. "Home Video Distribution" or "Home Video Distribution Rights" shall
mean the right to manufacture, record, sell and/or otherwise distribute a motion
picture on videocassette.
k. "Month" or "Monthly" shall mean Blockbuster's accounting cycles that is
based upon a four week, four week, five week rotation as set forth in Exhibit B,
attached hereto and made a part hereof.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
3
l. "Participating Store" shall mean (i) any Video Store in the United
States, which at any time during the Term of this Agreement, is wholly owned
and/or operated by Blockbuster and/or its Affiliates under the Blockbuster
trademarks; and (ii) Franchise Stores subject to Paragraph 4.c. hereof.
m. "Promotional and Operational Credits" shall mean *
n. "Rental Picture" shall mean each and every feature motion picture
for which Fox owns or controls Home Video Distribution Rights in the
Territory, provided such picture: (1) (A) is offered in Copy form to the
rental trade by Fox at a wholesale "rental price" (as opposed to a
"sell-through-price") of no less than Thirty-five Dollars (US$35.00) per unit
whether purchased as a single unit or in multiple unit quantities; (B) if
rated by the MPAA, is not rated NC-17 or more restrictive; and (C) upon
initial release in Copy form, is intended by Fox to be rented rather than
sold to consumers, and (2) is either (A) a picture previously released
theatrically in the Territory; or (B) if not previously released
theatrically, is either a Movie of the Week ("MOW") or Direct to Video
("DTV"), is at least seventy (70) minutes in length, and is not a sports
event, documentary or concert film, stage play (i.e., film of an on-stage
performance), theatrical re-release, or library film.
o. "Rental Revenue" shall mean *
p. "Revenue Sharing Period" shall mean the period commencing upon the
first rental of the applicable Rental Picture Copy and running for the
twenty-six (26) weeks after the Video Street Date of such Rental Picture.
q. "Rental Transaction" shall mean that period of time that a title is
rented to a customer, including any extended viewing period, as defined by
Blockbuster's then current practices across all videocassettes available for
rental from all videocassette suppliers.
r. "Video Store" shall mean a retail outlet which has at least one
thousand five hundred (1,500) square feet that is primarily engaged in the
rental of videocassettes to the public for home viewing entertainment purposes.
s. "Video Street Date" shall mean, with respect to any Rental Picture,
the first date on which, in the Territory such Rental Picture is authorized
by Fox for Home Video Distribution.
2. AGREEMENT TERM:
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
4
The term of this Agreement shall be for three (3) years (the "Term"),
commencing as of the Effective Date, but Fox may terminate this Agreement as
of December 22, 1999 by giving Blockbuster ninety (90) days prior written
notice. However, any Copies in Blockbuster's possession at the time of
termination shall continue to be leased under the terms of this Agreement
until such Copies are returned to Fox or sold by Blockbuster.
3. TERRITORY:
The territory for the purposes of this Agreement with respect to each
Rental Picture shall be the United States, its territories and possessions,
if and to the extent Fox owns or controls such rights to territories and
possessions of the United States (the "Territory").
4. BLOCKBUSTER COMMITMENTS:
Beginning as of the date of this Agreement, Blockbuster agrees as follows:
a. ORDERING REQUIREMENTS: Blockbuster shall timely submit orders of
Copies of Rental Pictures in compliance with this Agreement. Blockbuster
may purchase or otherwise obtain VHS videocassettes of Rental Pictures
from sources other than Fox (the "Excess Copies"). All such Excess Copies,
regardless of how obtained, shall be deemed to be "Copies" and reported
and Fox's share of Rental Revenue and PVT Share paid as if such VHS
videocassettes were obtained under this Agreement unless Fox has
materially breached its obligations under Paragraph 5.c. hereof. In such
event, Blockbuster shall not be obligated under the Agreement for any
such Excess Copies.
b. LEASE: The following terms shall apply to Rental Pictures:
(1) RENTAL PICTURES: For each and every Rental Picture
leased pursuant to this Agreement, Blockbuster agrees to
order and lease, and Fox agrees to lease to Blockbuster *
number of Copies of each Rental Picture based on such
Rental Picture's GBO * as set forth on the Matrix, attached
hereto as EXHIBIT A and made a part hereof (the "Revenue
Share Copies"). For Rental Pictures with a GBO of greater
than * except as otherwise agreed by *. Fox agrees to
provide Blockbuster with an additional three percent (3%)
of the Revenue Share Copies to be held at Blockbuster's
Distribution Center for replenishment, new Participating
Stores and unexpected spikes in product performance (the
"Replenishment Copies"). *
(2) UPFRONT FEE: The price of each Copy leased by
Blockbuster hereunder shall be an amount (the "Upfront
Fee") equal to * per Revenue Share Copy.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
5
(3) RENTAL REVENUE: During the applicable Revenue Sharing
Period, the percentage of Rental Revenue paid by
Blockbuster to Fox shall be:
a. For Rental Pictures with a Video Street Date
during the period commencing as of the Effective Date of this
Agreement and continuing through *
b. For Rental Pictures with a Video Street Date
during the period commencing on * and thereafter (i.e.,
remainder of Agreement Year One, Agreement Year Two and
Agreement Year Three), unless this Agreement is terminated
sooner by Fox as provided in Paragraph 2 hereof, *
(i)(A) For the *
(4) PAYMENT: Blockbuster shall pay Fox: (i) the Upfront Fee
within * calendar days following receipt of the Copies; (ii)
Fox's share of the Rental Revenue within * calendar days
following the end of the relevant Month, or portion thereof,
during the Term; and (iii) *. If Blockbuster fails to provide
Fox with all information required by Exhibit C when due, then
Blockbuster shall provide a good faith estimate of all such
information so that Fox can generate appropriate invoices.
Following delivery of all information required by Exhibit C
to Fox, Fox shall reconcile the information estimated by
Blockbuster with the actual information, Fox shall promptly
issue appropriate invoices and/or credits to Blockbuster.
Nothing herein shall serve to limit Fox's remedies regarding
Blockbuster's failure to provide Fox with all information
required by Exhibit C when due.
c. Participating Franchisees: Blockbuster may distribute Copies of
the Rental Pictures received under this Agreement to its Franchise Stores
that have elected to participate for at least the lesser of six (6) months
or the remaining Term of this Agreement, provided however, that Franchise
Stores who elect to participate may not start and stop more than one time
each. Subject to the requirements of this Paragraph 4.c., terms for
implementation of this Agreement at the franchise level and franchise
payments thereunder will be controlled and administered by Blockbuster.
For purposes of this Agreement and to the extent a Franchise Store elects
to participate hereunder, such Franchise Store shall be considered a
Participating Store. Blockbuster agrees that Franchise Stores shall be
obligated to Blockbuster to perform to terms that will provide Fox
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
6
with all of the benefits of this Agreement, including, without limitation,
with respect to Fox's audit rights under Paragraph 6 hereof.
d. SELL-OFF: Blockbuster agrees not to sell off any Copies of a
Rental Picture during the * days of the Revenue Sharing Period. *, at
the end of such * day period, Blockbuster shall, * Copies of such
Rental Picture at the Distribution Center, for return to Fox at *.
During the remainder of the Revenue Sharing Period, Blockbuster may
sell up *. At the expiration of the relevant Revenue Sharing Period,
Blockbuster may sell the * or, at Blockbuster's option, return the
remaining Copies to Fox at *. Said sell-off Copies may be sold by
Blockbuster only under the Blockbuster brand either by sales to
consumers or sales to Franchise Stores. *
e. Packing and Shipping: Promptly upon receipt of any Copies at the
Distribution Center and prior to any shipment to another location or
rental or sale thereof, Blockbuster shall barcode each Copy. Thereafter,
Blockbuster shall make all Copies (including Replenishment Copies) ready
for consumer rental and shall ship such Copies (except for Replenishment
Copies) to all Participating Stores for rental to members of the public
beginning no sooner and no later than the Video Street Date. Promptly upon
receipt of any Copies at a Participating Store and prior to any rental or
sale thereof, each Participating Store shall enter all applicable barcodes
and related information in such Participating Store's POS system.
Blockbuster shall comply with all generally applicable Video Street Date
policies of Fox, shall not copy any Copies or related marketing materials
nor rent any Copies to any customer it has knowledge intends to copy such
Copies. Blockbuster shall not cause or permit Copies to be sold, leased or
otherwise transferred to or by distributors, sub-distributors or Video
Stores other than Participating Stores, except as permitted in Paragraph
4.c. and 4.d. hereof. Blockbuster shall maintain and/or store all Copies
only at the Participating Store to which they were originally delivered,
except as follows: (i) during rentals to the public or following PVT sales
as permitted under Paragraph 4.c. and 4.d. hereof; (ii) during viewing by
employees of Blockbuster, provided such viewing is accounted for on a
dated employee checkout log or in accordance with Blockbuster's ordinary
checkout procedure for employees; or (iii) following shipment from one
Participating Store to another, provided that each such shipment and the
location of all Copies shipped is reported to Fox at all times during the
applicable Revenue Sharing Period pursuant to Exhibit C. Except as
required by Paragraph 4.d. hereof, Copies shall not be shipped from a
Participating Store to the Distribution Center at any time during the
Revenue Sharing Period, unless such Copies are Defective Copies.
Blockbuster shall be responsible for all physical distribution of Copies
following delivery by Fox to the Distribution Center, including shipment,
return and replacement of Defective Copies and non-defective Copies to and
from each Participating Store.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
7
f. Rental and Sale of Copies: (i) Blockbuster shall consult
with Fox with respect to all of Blockbuster's plans for marketing,
advertising and promotion of each Rental Picture Title, if any,
including, without limitation, all expenditures to be reimbursed by Fox
pursuant to this Agreement; (ii) Blockbuster shall display Revenue
Share Copies of each Rental Picture in the "new release" or equivalent
section of each Participating Store for at least the period commencing
upon the applicable Video Street Date and ending fourteen (14) weeks
thereafter; and (iii) prior to December 22, 1999, Blockbuster shall
spend at least One Million Dollars (US$1,000,000) of its own marketing
funds (subject to proof of performance and not using any Marketing
Support Funds, Promotional and Operational Credits or other amounts
deducted from amounts due to Fox hereunder) on advertisements relating
to Rental Pictures to be selected by mutual agreement.
g. Title to Copies: As between Fox and Blockbuster, title in and to
the Copies and risk of loss shall remain in Fox until the earlier of the
end of the Revenue Sharing Period or until sell-off by Blockbuster in
accordance with the above subparagraph 4.d.
h. Missing Copies: For any Copy that is lost, stolen or destroyed
subsequent to delivery to Blockbuster, Blockbuster agrees to pay to Fox *
of such Copy's then applicable suggested retail price ("SRP") (the
"Replacement Value") less the Upfront Fee and revenue share amounts
already paid to Fox. Blockbuster shall determine whether a Copy is lost,
stolen or destroyed; however, no Copy shall be unaccounted for longer than
forty-five (45) days. The Replacement Value shall be due and payable
within ten (10) days of the loss, theft or destruction of a Copy. Copies
discovered missing in the ordinary course of business are to be recorded
and paid for when discovered as if they had been sold off pursuant to
Paragraph 4.d. of this Agreement. Blockbuster shall notify Fox of any
theft or loss of any Copy that occurs outside of the ordinary course of
business at the time Blockbuster discovers the same.
i. Returns/Exchanges: Blockbuster shall destroy any Defective
Copies. In lieu of any obligation to return or account to Fox for
Defective Copies, Blockbuster shall have the right to deduct an allowance
for Defective Copies in the amount of * of each order, which deduction
shall be reflected in the invoice issued by Fox that corresponds to such
order. There shall be no other charge to Fox for Defective Copies.
j. Reporting: Blockbuster shall comply with the reporting
requirements set forth in Exhibit C. Notwithstanding the foregoing, Fox
shall have the right to modify its reporting requirements from time to
time provided it notifies Blockbuster at least ninety
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
8
(90) days in advance of any proposed modification, and provided further,
that Blockbuster is able to comply with each such proposed modifications,
without business disruption or material expense, following good faith
efforts to do so. Blockbuster shall only be obligated to report
to Fox until the earlier of such time Copies of a Rental Picture are sold
pursuant to Paragraph 4.d. or the end of the Revenue Sharing Period.
5. FOX COMMITMENTS:
a. Grant: Fox grants Blockbuster the right to distribute the Copies
of the Rental Pictures to Participating Stores for the transfer of
possession on a temporary or permanent basis to members of the general
public for home viewing purposes.
b. Marketing Support: For each Rental Picture, Copies of which are
leased to Blockbuster under this Agreement, Fox grants to Blockbuster an
allowance for cooperative advertising and market development funds equal
to * of the aggregate of the Upfront Fees, Fox's share of Rental Revenues
(after all deductions for Bad Debt and Promotional and Operational
Credits) and Fox's PVT Share received by Fox with respect to such Rental
Picture (the "Marketing Support Funds"). Such Marketing Support Funds
shall be available solely for advertising Rental Pictures in compliance
with Fox's published advertising conditions, including without limitation,
those contained in Exhibit F ("Fox's Co-op Policy") attached hereto and
made a part hereof. Fox shall have the right to audit Blockbuster's use
of the Marketing Support Funds as provided in Paragraph 6 below.
C. Shipping: Assuming Blockbuster is not in Default under this
Agreement as defined in Paragraph 10 hereof, Fox will deliver the Copies
to the Distribution Center at least three (3) weeks prior to Video Street
Date per Rental Picture but shall use reasonable commercial business
efforts to deliver the Copies four (4) weeks prior to Video Street Date
per Rental Picture.
6. AUDIT:
During the Term and continuing until the date six (6) months
following the date of expiration or earlier termination of this
Agreement, Blockbuster agrees that Fox, with twenty-four (24) hours
advance written notice, may conduct, during normal business hours: (a)
a reasonable number of audits per year of Blockbuster's business
operations and records relating to performance under this Agreement at
the Blockbuster Headquarters; and (b) a reasonable number of audits per
year, to be conducted Monday through Wednesday only, of business
operations and records at Participating Stores, solely pertaining to
the Copies leased by Blockbuster pursuant to
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
9
this Agreement and limited to the information specified in Section 7 of
Exhibit C. Any additional audit request of information not provided for
above including, without limitation, any audit of Bad Debt or
Promotional and Operational Credits shall be performed by Blockbuster's
certified public accountant on an annual basis. Any audits conducted
pursuant to this section shall relate to Blockbuster's compliance with
the terms of this Agreement and shall not unreasonably interfere with
Blockbuster's daily business operations. Within six (6) business days
following Fox's or its designee's reasonable request, Blockbuster shall
deliver to Fox or its designee (including an on-site auditor for
either) a list of every Rental Picture, Copies of which are leased to
Blockbuster under this Agreement, the number and location of each Copy
of each Rental Picture in each Participating Store and in the
Distribution Center, and, if such Copy is rented to a consumer, the
Participating Store from which such Copy was rented. Fox agrees that
the data and other information collected by Fox may be used by Fox only
in connection with such audits to fulfill Fox's commitments under this
Agreement. If any such audit establishes a material breach of this
Agreement, Blockbuster shall promptly pay any deficiency (to the extent
such amount is disputed) and the reasonable cost to conduct such audit.
7. FOX'S REPRESENTATION AND WARRANTIES:
Fox represents and warrants that:
a. It is a corporation organized and existing under the laws of
the State of Michigan with its principal place of business in the State
of California.
b. Twentieth Century Fox Home Entertainment Inc. is the proper
entity to be entering into this Agreement and performing its respective
obligations provided hereunder.
c. The undersigned has the full right, power and authority to
sign this Agreement on behalf of Fox.
d. The execution, delivery and performance of this Agreement does
not and will not, violate any provisions of Fox's articles or
certificates of incorporation and bylaws, or any contract or other
agreement to which Fox is a party.
e. There is no broker, finder or intermediary involved in
connection with the negotiations and discussions incident to the
execution of this Agreement, and no broker, finder or intermediary who
might be entitled to a fee, commissions or any other payment upon the
consummation of the transactions contemplated by this Agreement.
<PAGE>
10
f. This Agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligation of Fox enforceable
in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereinafter in effect, affecting the enforcement of
creditors' rights in general and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding
in equity or at law.
g. Copies shall be new and unused and comparable in quality to
other videocassette units being sold by Fox in rental distribution
channels.
8. BLOCKBUSTER'S REPRESENTATIONS AND WARRANTIES:
Blockbuster represents and warrants that:
a. It is a corporation organized and existing under the laws of the State
of Delaware, with its principal place of business in the State of Texas.
b. Blockbuster Inc. is the proper entity to be entering into this
Agreement and performing its respective obligations provided hereunder.
c. The undersigned has the full right, power and authority to sign this
Agreement on behalf of Blockbuster.
d. The execution, delivery and performance of this Agreement does not and
will not, violate any provisions of Blockbuster's articles or certificates of
incorporation and bylaws, or any contract or other agreement to which
Blockbuster is a party.
e. There is no broker, finder or intermediary involved in connection with
the negotiations and discussions incident to the execution of this Agreement,
and no broker, finder or intermediary who might be entitled to a fee,
commissions or any other payment upon the consummation of the transactions
contemplated by this Agreement.
f. This Agrement has been duly executed and delivered and constitutes the
legal, valid and binding obligation of Blockbuster enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereinafter
in effect, affecting the enforcement of creditors' rights in general and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
<PAGE>
11
9. INDEMNIFICATION:
(i) Fox agrees to, at all times, defend, indemnify and hold
Blockbuster, its parent company, their affiliates, subsidiaries,
franchisers and the officers, directors, agents and employees of each,
harmless from and against any and all claims, suits, damages, losses,
liabilities, obligations, fines, penalties, costs and expenses (whether
based on libel, slander, invasion of privacy, breach of contract, product
liability, patent, trademark, license or copyright infringement or
otherwise), including legal fees and expenses, of whatever kind or nature
(collectively, "Loss"), arising out of or based on (a) a breach or
violation of this Agreement by Fox or any failure by Fox to perform any
of the agreements, terms, covenants, conditions, representations or
warranties of this Agreement to be performed by Fox; (b) the content of
any Copy of a Rental Picture leased by Blockbuster pursuant to this
Agreement; or (c) negligent acts or omissions by Fox its employees and/or
agents.
(ii) Blockbuster agrees to, at all times, defend, indemnify and hold
Fox, its parent company, their affiliates, subsidiaries and the officers,
directors, agents and employees of each, harmless from and against any
Loss, arising out of or based on (a) a breach or violation of this
Agreement by Blockbuster or any failure by Blockbuster to perform any of
the agreements, terms, covenants, conditions, representations or
warranties of this Agreement to be performed by Blockbuster; (b)
Blockbuster's distribution of Copies including the use of advertising
materials not supplied by Fox and the actual rental and/or retail sale
thereof; or (c) negligent acts or omissions by Blockbuster, its employees
and/or agents.
(iii) The Indemnified Party shall give written notice to the
Indemnifying Party and the Indemnifying Party will promptly, at the
Indemnified Party's request, assume and diligently conduct the entire
defense of any suit or action, or the making of any claim as to which
indemnity may be sought hereunder, including settlements and appeals, at
the Indemnifying Party's sole cost and expense, and the Indemnifying Party
shall pay and discharge any and all settlement amounts, judgments or
decrees which may be rendered.
(iv) The Indemnifying Party shall not, except with the consent of
the Indemnified Party, consent to entry of any judgment or administrative
order or enter into any settlement that (i) could affect the intellectual
property rights or other business interest of the Indemnified Party; or
(ii) does not include as an unconditional term thereof the giving by the
claimant or plaintiff to the Indemnified Party of a release from all
liability with respect to such claim or litigation.
<PAGE>
12
(v) In the event that the Indemnifying Party is not asked or does
not accept the defense of any matter as above provided, the Indemnified
Party shall have the full right to defend against any such claim or
demand, and shall be entitled to settle or agree to pay in full such claim
or demand, in its sole discretion without releasing any obligation or
liability of the Indemnifying Party.
10. TERMINATION:
The non-defaulting party may terminate this Agreement if a
Default, as defined below, by the other party has occurred and is
continuing by giving written notice to the defaulting party. The term
"Default" shall mean any of the following: (a) failure by a party to
comply with or perform any provision or condition of this Agreement
that results in a material breach of this Agreement and, if such
material breach can be cured, continuance of such failure for thirty
(30) days after written notice to such party (if cure is not
practicable, the thirty (30) day notice period is not required); (b) a
party becomes insolvent, is unable to pay its debts as they mature or
is the subject of a petition in bankruptcy, whether voluntary or
involuntary, or of any other proceeding under bankruptcy, insolvency or
similar laws; or makes an assignment for the benefit of creditors; or
is named in, or its property is subject to a suit for appointment of a
receiver; or is dissolved or liquidated; or (c) any material warranty
or representation made in this Agreement is breached, false or
misleading in any material respect. In the event of such termination,
the non-defaulting party shall be entitled to pursue any and all
remedies provided in law and recover any damages it may have suffered
by reason of such Default, provided however, that Fox expressly waives
its right to seek equitable relief including, without limitation,
seeking injunctive relief. Fox acknowledges that no specification of a
particular legal or equitable remedy by Blockbuster shall be construed
as a waiver, prohibition or limitation of any legal or equitable
remedies in the event of a breach of this Agreement. Upon Default, any
Copies in Blockbuster's possession at time of termination shall
continue to be leased under the terms of this Agreement until such
Copies are returned to Fox or sold by Blockbuster in accordance with
the terms and conditions of this Agreement.
11. REMEDIES: No remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy which is otherwise
available at law, in equity, by statute or otherwise, and except as otherwise
expressly provided for herein, each and every other remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law, in equity, by statute or otherwise and no provision
hereof shall be construed so as to limit any party's available remedies in the
event of a breach by the other party hereto. The election of any one or more of
such remedies by any of the parties hereto shall not constitute a waiver by such
party of the right to pursue any other available remedies.
<PAGE>
13
12. MISCELLANEOUS:
12.1 FORCE MAJEURE: Neither party shall be considered in default of this
Agreement or be liable for damages, for any failure of performance hereunder
occasioned by an act of God, force of nature, war or warlike activity,
insurrection or civil commotion, labor dispute, transportation delay,
governmental regulatory action whether or not with proper authority or other
cause similar or dissimilar to the foregoing and beyond its reasonable control,
provided the party so affected gives prompt notice to the other. In the event of
a suspension of any obligation by reason of this section which extends beyond
ten (10) days, the party not affected may, at its option, elect to cancel those
aspects of this Agreement which are reasonably feasible to terminate. Such
cancellation shall be effective thirty (30) days after written notice of such
cancellation has been given to the other party.
12.2 NOTICE: Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given and received on the date
of delivery or on the third (3rd) business day following the day of mailing of
the same, or on the day of transmission by telecopier or other form of recorded
communication service of the same, as the case may be to the party to be
notified at the addresses set forth below:
If to Blockbuster: Blockbuster Inc.
1201 Elm Street, 21st Floor
Dallas, Texas 75270
Attn: General Counsel
cc: Chief Executive Officer
If to Fox: Twentieth Century Fox Home Entertainment, Inc.
Post Office Box 900
Beverly Hills, California 90213
Attn: President, Domestic
cc: Senior Vice President, Legal & Business Affairs
or such other address as may be designated by either party by written notice to
the other as hereinabove provided.
12.3 ENTIRE AGREEMENT: This Agreement, together with all Exhibits attached
hereto, represents the entire agreement and understanding between the parties
with respect to the subject matter of this Agreement, and supersedes any other
agreement or understanding, written or oral, that the parties hereto may have
had with respect thereto. No statement or inducement
<PAGE>
14
with respect to the subject matter by either party or by any agent or
representative of either party which is not contained in this Agreement shall be
valid or binding between the parties.
12.4 RELATIONSHIP OF PARTIES: The parties are independent contractors, and
nothing in this Agreement shall be deemed or construed to create, or have been
intended to create a partnership, joint venture, employment or agency
relationship between the parties. Each party agrees that it neither has nor will
give the appearance or impression of possessing the legal authority to bind or
commit any other party in any way except as provided in this Agreement.
12.5 EFFECT OF HEADINGS: The headings and subheadings of the sections of
this Agreement are inserted for convenience of reference only and shall not
control or affect the meaning or construction of any of the agreements, terms,
covenants and conditions of this Agreement in any manner.
12.6 CONSTRUCTION: This Agreement has been fully reviewed and negotiated
by the parties and their respective legal counsel. Accordingly, in interpreting
this Agreement, no weight shall be placed upon which party or its counsel
drafted the provision being interpreted.
12.7 SEVERABILITY: If any term or provision of this Agreement shall be
found to be void or contrary to law, such term or provision shall, but only to
the extent necessary to bring this Agreement within the requirements of law, be
deemed to be severable from the other terms and provisions of this Agreement,
and the remainder of this Agreement shall be given effect as if the parties had
not included the severed term herein.
12.8 AMENDMENTS: No provision of this Agreement may be modified, waived or
amended except by a written instrument duly executed by each of the parties. Any
such modifications, waivers or amendments shall not require additional
consideration to be effective.
12.9 COUNTERPARTS: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.10 IMPLIED WAIVER: Any failure on the part of either party to insist
upon the performance of this Agreement or any part of this Agreement, shall not
constitute a waiver of any right under this Agreement.
12.11 ASSIGNMENT: Fox may not assign its rights or delegate its
obligations under this Agreement except to a parent, subsidiary or Affiliate,
without Blockbuster's prior written
<PAGE>
15
consent. Any attempted assignment, sublicense, transfer, encumbrance or other
disposal by Fox (other than as permitted by this Paragraph 12.11) without
such consent shall be void and shall constitute a material breach of this
Agreement. "Transfer" within the meaning of this Section 12.11 shall include
any merger or consolidation involving Fox, any sale or transfer of all or
substantially all of Fox's assets and any transaction or series of related
transactions resulting in the transfer of thirty percent (30%) or more of the
voting stock of Fox. Blockbuster may assign its rights and obligations under
this Agreement, provided that the assignment is coextensive with an
assignment of the video rental business of Blockbuster and the obligations of
Blockbuster under this Agreement are assumed with any assignment (including
where applicable the required use of the Blockbuster trademarks).
12.12 SURVIVAL: All representations, warranties and indemnities made
herein shall survive the termination of this Agreement and shall remain in full
force and effect. All of a party's rights and privileges, to the extent they are
fairly attributable to events or conditions occurring or existing on or prior to
the termination of this Agreement, shall survive termination and shall be
enforceable by such party and its successors and assigns.
12.13 CONFIDENTIALITY: Except as otherwise required by applicable federal
and state laws, each party shall keep the information regarding the details of
this Agreement confidential and restrict dissemination to each of its own
personnel and to third parties to only a "need to know" basis, using the
standard of care which each uses to protect its own information from disclosure
during the Term of this Agreement and for two (2) years thereafter. The party
disclosing confidential information to its own personnel and third parties shall
require that these persons be bound by the confidentiality obligations set forth
in this Agreement. In addition to the foregoing, both parties agree to keep all
information provided hereunder in accordance with this Agreement confidential
and any unauthorized disclosure shall be considered a material breach of this
Agreement.
12.14 GOVERNING LAW: This Agreement shall be construed in accordance
with the laws of the State of New York without regard to its rules on
conflicts of law.
<PAGE>
16
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.
TWENTIETH CENTURY FOX
HOME ENTERTAINMENT, INC. BLOCKBUSTER INC.
- -------------------------------
Name: Laura P. Cook Name: Edward B. Stead
-------------------------- --------------------------------
Signature: /s/ Laura P. Cook Signature: /s/ Edward B. Stead
--------------------- ---------------------------
Title: Title: EVP
------------------------- -------------------------------
<PAGE>
Exhibit A
Matrix
(See Attached)
Matrix of Base Units/Location
*
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
Exhibit B
Accounting Calendar
(See Attached)
<PAGE>
1998 Accounting Calendar
Jan. 1- U.S. Corporate Holiday
Jan. 2- U.S. Corporate Holiday
Jan. 11- Video Pay Period
Jan. 16- A/P Close Complete
Jan. 17- GELCO Cut-Off
Jan. 25- Last day of JDE accounting period, Video Pay Period
Feb. 8- Video Pay Period
Feb. 13- A/P Close Complete
Feb. 14- GELCO Cut-Off
Feb. 22- Last day of JDE accounting period, Video Pay Period
March 8- Video Pay Period
March 20- A/P Close Complete
March 21- GELCO Cut-Off
March 22- Video Pay Period
March 29- Last day of JDE accounting period
April 5- Video Pay Period
April 17- A/P Close Complete
April 18- GELCO Cut-Off
April 19- Video Pay Period
April 26- Last day of JDE accounting period
May 3- Video Pay Period
May 15- A/P Close Complete
May 16- GELCO Cut-Off
May 17- Video Pay Period
May 24- Last day of JDE accounting period
May 25- U.S. Corporate Holiday
May 31- Video Pay Period
June 14- Video Pay Period
June 19- A/P Close Complete
June 20- GELCO Cut-Off
June 28- Last day of JDE accounting period, Video Pay Period
July 3- U.S. Corporate Holiday
July 12- Video Pay Period
July 17- A/P Close Complete
<PAGE>
July 18- GELCO Cut-Off
July 26- Last day of JDE accounting period, Video Pay Period
Aug. 9- Video Pay Period
Aug. 15- GELCO Cut-Off
Aug. 23- Last day of JDE accounting period, Video Pay Period
Sept. 6 - Video Pay Period
Sept. 7 - U.S. Corporate Holiday
Sept. 18- A/P Close Complete
Sept. 19- GELCO Cut-Off
Sept. 20- Video Pay Period
Sept. 27- Last day of JDE accounting period
Oct. 4- Video Pay Period
Oct. 16- A/P Close Complete
Oct. 17- GELCO Cut-Off
Oct. 18- Video Pay Period
Oct. 25- Last day of JDE accounting period
Nov. 1- Video Pay Period
Nov. 14- GELCO Cut-Off
Nov. 13- A/P Close Complete
Nov. 15- Video Pay Period
Nov. 22- Last day of JDE accounting period
Nov. 26- U.S. Corporate Holiday
Nov. 27- U.S. Corporate Holiday
Nov. 29- Video Pay Period
Dec. 13 - Video Pay Period
Dec. 18 - U.S. Corporate Holiday, A/P Close Complete
Dec. 19 - GELCO Cut-Off
Dec. 27 - Last day of JDE accounting period, Video Pay Period
1999 Accounting Calendar
Jan. 1- U.S. Corporate Holiday
Jan. 10- Video Pay Period
Jan. 18- U.S. Corporate Holiday
Jan. 24- Last day of JDE accounting period, Video Pay Period
<PAGE>
Feb. 7- Video Pay Period
Feb. 21- Video Pay Period, Last day of JDE accounting period
March 7- Video Pay Period
March 21- Video Pay Period
March 28- Last day of JDE accounting period
April 4- Video Pay Period
April 18- Video Pay Period
April 25- Last day of JDE accounting period
May 2- Video Pay Period
May 16- Video Pay Period
May 23- Last day of JDE accounting period
May 24- U.S. Corporate Holiday
May 30- Video Pay Period
June 13- Video Pay Period
June 27- Video Pay Period, Last day of JDE accounting period
July 5- U.S. Corporate Holiday
July 11- Video Pay Period
July 25- Last day of JDE accounting period, Video Pay Period
Aug. 8- Video Pay Period
Aug. 22- Video Pay Period, Last day of JDE accounting period
Sept. 5- Video Pay Period
Sept. 6- U.S. Corporate Holiday
Sept. 19- Video Pay Period
Sept. 26- Last day of JDE accounting period
Oct. 3- Video Pay Period
Oct. 17- Video Pay Period
Oct. 24- Last day of JDE accounting period
Oct. 31- Video Pay Period
Nov. 14- Video Pay Period
Nov. 21- Last day of JDE accounting period
Nov. 25- U.S. Corporate Holiday
Nov. 26- U.S. Corporate Holiday
Nov. 28- Video Pay Period
<PAGE>
Dec. 12- Video Pay Period
Dec. 23- U.S. Corporate Holiday
Dec. 24- U.S. Corporate Holiday
Dec. 26- Video Pay Period, last day of JDE accounting period
<PAGE>
Exhibit C
Electronic Reporting
1. Direct Transaction Reporting Specifications
Data files are ASCII. The records are of variable length. Field
delimiters are ASCII charter 254(*). Numeric fields such as Revenue are not to
include decimal points or commas. Dollar amounts such as $2.49 should be
reported as 249. A record is completed with a CR/LF combination. If the Title
field is greater than 40 characters, the left most 40 characters should be sent,
if other vendor variable length fields are longer than the definitions below,
the right-most characters should be sent. Fields are not to include leading
zeros or spaces. All date fields are in YYYYMMDD format. Data file structure is
made of a header, data segment, and a footer, as follows:
"Header Record, Data ...., Data...., Data ...., Footer Record"
2. Year 2000 Compliance
Blockbuster will provide to Fox the requested information as detailed
in this Exhibit C in a compliant file during the Term of this Agreement.
3. Data Communication Media/Transmission Methods
Except as otherwise agreed, the reported transactions may be
transmitted or delivered to Fox or its designee using one of the following
methods:
a. Modem. 56,000bps v.42bis transmission with Y modem protocol. Transmission
data will be transmitted twice a week using a high-speed modem. Calls are
initiated in the evening by the corporate computer system to the Sequent
computer.
b. UUCP using 56,000bps v.42bis transmission.
c. ISDN or Frame Relay communications.
d. ASCII file. Place all records in a file called DMMDDYY.ZIP where MMDDYY**
transmission date and in a directory specified by Fox or its designee and will
be transmitted using File Transfer Protocol (FTP).
e. Magnetic Tape. Due to environmental considerations, this option must be
pre-approved by Fox.
f. Iomega Zip 100 Disk.
<PAGE>
2
4. Transaction Records Segment Format
(a) Header Format
STADET* Transactions From Date* Transactions to Date* Segment Creation Date*
Store Number
(b) Detail Line(s): At a low, line item level:
<TABLE>
<CAPTION>
FILE OUTFILE Length = 102
Column/Field Start Length Alphanumeric Comments
(A)/Numeric (N)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TITLE 1 40 A Title
- ---------------------------------------------------------------------------------------
FILLER 1 41 1 A
- ---------------------------------------------------------------------------------------
UPC 42 13 A UPC
- ---------------------------------------------------------------------------------------
FILLER 2 55 1 A
- ---------------------------------------------------------------------------------------
DAYS RENTED 56 1 N Nights rented (2
evenings, 3
evening, etc.)
- ---------------------------------------------------------------------------------------
FILLER 3 57 1 A
- ---------------------------------------------------------------------------------------
REVENUE 58 5 N,2 Revenue amount,
with 2 decimal
places
- ---------------------------------------------------------------------------------------
SIGN 63 1 A '-' if Voided
transaction
- ---------------------------------------------------------------------------------------
FILLER 4 64 1 A
- ---------------------------------------------------------------------------------------
TRANSACTION 65 2 A Transaction Code
- ---------------------------------------------------------------------------------------
FILLER 5 67 1 A
- ---------------------------------------------------------------------------------------
TRANSACTION 68 8 A Transaction Date
DATE
- ---------------------------------------------------------------------------------------
FILLER 6 76 1 A
- ---------------------------------------------------------------------------------------
STORE 77 05 A Part of Bar Code
- ---------------------------------------------------------------------------------------
PART 82 06 A Part of Bar Code
- ---------------------------------------------------------------------------------------
COPY NUMBER 88 03 A Part of Bar Code
- ---------------------------------------------------------------------------------------
FILLER 7 91 1 A
- ---------------------------------------------------------------------------------------
CUSTOMER # 92 Last 5 characters A Customer Number
- ---------------------------------------------------------------------------------------
</TABLE>
The transaction codes are: RENTAL = R
USED = U (PVT)
EXTENDED VIEWING FEE = L
(c) Footer Format:
ENDDET* No. of All Transactions* Total Revenue* No. of PPT Rentals* PPT Revenue*
Store Number
Store Number Note: If the DMMDDYY.ZIP file is to contain data for only one
store, the store number should be included in the header, as well as the last
field of each record. If the
<PAGE>
3
DMMDDYY.ZIP file contains data for more than one store, the store number field
in the header should be NULL and each transaction record should include its
corresponding store number.
Transaction Types:
(1) Rentals -- Each rental of a Copy is treated as a separate transaction
and is considered one line of transaction detail. A customer invoice
containing three (3) rentals of Copies would have three (3) lines of
detail posted to the transactions interface file (to the extent that all
three (3) transactions were for Copies leased by Blockbuster pursuant to
this Agreement). A rental of one Copy for two (2) days generates a single
transaction, but the DAYS RENTED field value would be 2.
(2) Sales -- Each sale of a Copy must be treated as a separate
transaction. The UNITS field should always be 1. Note that Blockbuster
will not report the copy number sold.
(3) Voids -- A voided transaction is the mirror image of the original
rental or sale transaction, except that the SIGN field is filled with a
negative sign. A facility must be provided for voiding transactions at the
time of rental or sale, or subsequent to this date. All void transactions
regarding Copies pursuant to this Agreement shall be reported.
(4) Extended Viewing Fees -- Each day, Blockbuster shall report the
quantity of extended viewing fees charged during that day with respect to
Copies leased to Blockbuster under this Agreement.
5. Additional Rules Applicable to the REVENUE field
(a) All amounts in the REVENUE field shall be rounded up to the nearest penny.
(b) When a void of an invoice or a single item on an invoice occurs, a negative
sign should be placed in the SIGN field in the TRANSACTION HISTORY file. This
amount shall be the exact mirror image of the original transaction. If the POS
has the ability to modify the amount to be voided, and the amount is greater
than the amount in the REVENUE field on the original transaction, the new record
shall be written to the TRANSACTION HISTORY file that shows the excess credited
amount as void.
(c) All sales of Copies are to be reported individually so as to include the
applicable bar code number. As such, UNITS will always be 1 for such
transactions. Blockbuster shall not be required to report the copy number of the
Copy sold.
<PAGE>
4
6. Retransmission Request
Blockbuster acknowledges that, from time to time, transmissions to Fox or
its designee may not contain complete records of Participating Store activity
for a period of time, as a result of incorrect/incomplete building of the
DMMDDYY.ZIP file, incomplete processing transmission or delivery of the
DMMDDYY.ZIP data, simple file corruption or otherwise. Regardless of the cause,
if it becomes apparent at Fox or its designee that one or more Participating
Stores have not submitted complete transaction history as required under this
Agreement, Fox or its designee may require Blockbuster to retransmit the
DMMDDYY.ZIP file, and/or to (re)supply the rental and sale transaction data for
a specific time period or Participating Store. In such event, Blockbuster shall
output the requested data to a file entitled RMMDDYY.ZIP in a record format
identical to the DMMDDYY.ZIP file. Such RMMDDYY.ZIP file may be included on the
media of the next scheduled DMMDDYY.ZIP file delivery to Fox or its designee.
Blockbuster shall ensure that its transaction history and supporting systems are
capable of regenerating data for retransmission to Fox or its designee for up to
ninety (90) days following the original transaction date.
7. Audit Reports
The following reports and screens will be available to assist Fox or its
authorized designee's field representatives during on-site audits:
<PAGE>
5
Rental/Sale Status
Part Number: Bar Code (not copy specific)
Title: Names of Rental Picture
Category: Genre (action/adventure, family, comedy, etc.)
Temporary Category: New Release
Revenue Department: (ex. 01 ... Film)
Format: V - VHS
Location Code:
Street Date: Video Street Date
Prod Purchase:
Rating: MPAA rating (G, PG, PG-13, R)
Title Status:
Due Back Today: How many copies due back
Type On Shelf Out Total BRP Price Sticker Order Recent* Total**
Rental
New Items
PVT
Total
* Total rents of the applicable Rental Picture during the most recent Month (as
defined in Paragraph 1 of the Agreement).
**Total number of rents of the applicable Rental Picture for the calendar
year-to-date.
<PAGE>
6
Rental Copy Status
<TABLE>
<CAPTION>
Item Title: (Bar Code) Name
Category: New/Rel
- ----------- ----------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Copy Number of Status Last Last Second Third
Number Rents Rented Customer Customer Customer
- ----------- ----------- ----------- ----------- ----------- ----------- --------
001 # On Date Number Number Number
Shelf/Out
- ----------- ----------- ----------- ----------- ----------- ----------- --------
002 # On Date Number Number Number
Shelf/Out
- ----------- ----------- ----------- ----------- ----------- ----------- --------
</TABLE>
In addition, upon reasonable request, Blockbuster shall provide Fox
or its designee electronically with inventory on hand data showing Copies on
hand at each Participating Store and at the Distribution Center, and at any
other location at which inventory is stored.
<PAGE>
Exhibit D
Average Minimum for Rental Pictures with a Video Street Date during the
Period Commencing on the Effective Date and continuing through *.
*
- ---------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
Exhibit E
Average Minimum for Rental Pictures with a Video Street Date of * and
thereafter during the Term of this Agreement.
*
- ---------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
Exhibit F
Fox's Co-Op Policies
See Attached
<PAGE>
FOX CONSUMER PRODUCTS
CO-OPERATIVE ADVERTISING POLICY
TABLE OF CONTENTS
Section I
<TABLE>
<S> <C>
Introduction..............................................................1
Participants..............................................................1
Guidelines & Administrative Requirements..................................1
Fox Contacts for Questions and Approvals..................................2
Unreimbursable Advertising Costs..........................................3
Prior Approval of Advertising.............................................3
When Prior Approval is NOT Necessary............................3
When Prior Approval IS Necessary................................3
How to Obtain Prior Approval....................................4
Accruals..................................................................5
Payment of Claims.........................................................5
Preparing a Claim Form....................................................6
Payable Claim Timetable...................................................7
Monthly Statements........................................................7
Mutual Benefit............................................................7
Section II
User Friendly Guide.......................................................8
</TABLE>
i
<PAGE>
FOX CONSUMER PRODUCTS
CO-OPERATIVE ADVERTISING POLICY
INTRODUCTION
Designed to promote the sale of Fox Consumer Products (video, laser, interactive
and licensed merchandise), this Co-operative Advertising Policy (the "CO-OP
Policy") offers Fox customers an opportunity for support with advertising costs
for Fox Sales & Marketing programs that include a CO-OP element. This CO-OP
Policy provides comprehensive guidelines and administrative requirements for
obtaining CO-OP funds in connection with such programs. It tells you when prior
approvals are required and how to obtain them, steps for the claim process and
details about funding and monthly statements.
Providing you observe all the guidelines and administrative requirements, Fox
may reimburse your company up to 100% of your authorized advertising costs. The
amount of CO-OP support will be announced on a program-by-program basis. Please
note that the CO-OP Policy is subject to change at any time. Your company will
be notified of any changes.
PARTICIPANTS
Both direct and indirect Fox accounts are eligible to participate. Distributors
are responsible for disseminating this CO-OP Policy to their customers. While
CO-OP funds are directly available to direct accounts, indirect accounts need to
request support through their distributor.
GUIDELINES & ADMINISTRATIVE REQUIREMENTS
It is in your company's best interest to adhere to the guidelines and
administrative requirements as written in this CO-OP Policy. A deadline missed,
failure to secure prior approvals, improperly prepared advertisements, or
information left off claim forms will cause unnecessary delays and/or denial of
claims.
1
<PAGE>
FOX CONSUMER PRODUCTS
FOX CONTACTS FOR QUESTIONS AND APPROVALS
Taking the time to understand the Fox CO-OP Policy saves valuable time and
resources. For example, it is NOT always necessary to submit Prior Approval
Forms to Fox or to obtain Fox's approval of artwork, layouts or scripts. If
anything is unclear to you, or if you have questions, please feel free to call a
Fox representative as follows:
1. For questions about advertising, policy guidelines or administrative
requirements, contact your Fox Regional Sales Manager.
Your Fox Regional Sales Manager:
NAME:
-----------------------------------------------------------------
PHONE: FACSIMILE:
----------------------------- ------------------------
STREET ADDRESS:
-------------------------------------------------------
CITY, STATE, ZIP CODE:
------------------------------------------------
2. Refer to the General Advertising Guidelines in Section II, C-1. If you
then determine pre-approval of your artwork, layout or script is
definitely required and if you are:
a. a direct account of Fox, fax the item to the Fox corporate office
to:
FACSIMILE: 310-369-8850
ATTENTION: Sales Planning
b. an indirect account of Fox, fax the item to your Distributor
representative.
3. For questions about a pending claim, or the status of a title's
accrual bank, please contact your Fox CO-OP Claims Auditor.
Fox CO-OP Claims Auditor
C/O Tradeone Marketing
440 Ninth Avenue, Eleventh Floor
New York, New York 10001
TELEPHONE: 212-290-5427
FACSIMILE: 212-465-9893
2
<PAGE>
FOX CONSUMER PRODUCTS
UNREIMBURSABLE ADVERTISING COSTS
Not everything is reimbursable. Fox does not provide CO-OP support for any of
the following:
Agency Commissions Sponsorships
Internet Advertising Talent and Production Costs
Mailing Lists or Services Trade Magazines
Newspaper Engraving & Typesetting Yellow Pages
Photography
Again, if for any reason you are not certain whether or not your advertising
cost is reimbursable, consult with your Fox Regional Sales Manager.
PRIOR APPROVAL OF ADVERTISING
Depending on the type of advertisement and its cost, prior approval may or may
not be required.
Prior approval is NOT necessary for:
Radio and Television; Newspapers; Newspaper Inserts; General Circulation
Magazines; In-Store Flyers (Under $1,000 U.S.; $1,500 Canadian); Circulars and
other Direct Mail.
Prior approval IS necessary in the following cases:
1. Whenever artwork is used that is not provided by Fox or if Fox artwork
is altered in any way.
2. If it is unmeasured advertisement (i.e., if circulation and/or rate
information is not publicly available).
3. If the advertisement is in one of the following categories:
Catalogs
Omnibus
Premiums and Other Promotions
In-Store Flyers (over $1,000 U.S.; $1,500 Canadian)
Outdoor Advertising
3
<PAGE>
FOX CONSUMER PRODUCTS
How to Obtain Prior Approval:
Before executing advertising plans:
- - Obtain Prior Approval Forms through your Fox Regional Sales Manager
and submit the completed form to your Fox Regional Sales Manager for
preliminary review and approval (see Section II, B-1, for detailed
instructions). If approved, the authorized Form will be forwarded to
the Corporate Sales Office for final review and approval.
- - Prior Approval Forms must be completely filled out with a full
description of the media, product, date of the advertisement and the
total amount requested. Completed Prior Approval Forms must be
received by the Regional Sales Manager at least fifteen working days
before the advertisement is executed.
- - If your request is denied, your Fox Regional Sales Manager will
notify you.
4
<PAGE>
FOX CONSUMER PRODUCTS
ACCRUALS
New releases and re-promoted titles accrue CO-OP funds for all purchases during
the applicable program period. Such accruals expire six months from the
applicable title's Street Date. Catalog titles accrue CO-OP funds, and such
funds expire, on a rolling twelve-month basis. It is the customer's
responsibility to use available accruals before they expire.
PAYMENT OF CLAIMS
- - Fox will only reimburse up to the amount accrued under the specific
title's CO-OP program. For direct accounts, Fox will administer each
account's accrual bank. For indirect accounts, the distributor will
administer each account's accrual bank.
- - Before submitting a claim, make sure you have sufficient accruals to
cover the reimbursable cost of your advertisement. If you are a direct
account, our claim processing agency will provide monthly statements
reflecting your accrual bank balances for all active programs on a
title-by-title basis. Nevertheless, it is the responsibility of each
account to monitor its own accrual bank balances.
- - You may receive up to 100% of the net cost of approved advertising.
- To receive 100% on a payable claim, a minimum of 50% of the
advertisement must be dedicated to Fox product and no other
competing products can be advertised. If less than 50% of the
advertisement is dedicated to Fox, Fox will reimburse only
for the percentage actually dedicated to Fox.
- A specific portion of omnibus advertisements (advertising
featuring competitive product) is reimbursable. The
reimbursement is strictly based upon the percentage of the
space featuring Fox product. An additional 20% of the space
used for an authorized account's identification is also
reimbursable.
- - When there is more than one claim per title, claims are reimbursed in
the order they are received. Once a title's accrual bank is at zero
balance, outstanding claims are no longer reimbursed.
- - Advertising claims may never, under any circumstances, be deducted
from payments to Fox.
- - All inquiries concerning paid claims should be made directly to the
Fox claim processing agency as noted on Page 6.
5
<PAGE>
FOX CONSUMER PRODUCTS
PREPARING A CLAIM FORM
Claims must be submitted on an appropriate claim form.
- - You may use a Fox Advertising Prior Approval/Claim Form or use your
own claim form. If you use your own, it must include the same
information required on the Fox Advertising Claim Form.
- - All sections on Claim Forms must be completed and supported with the
required documentation and Proof of Performance. See the Required
Claim Documentation, Section II, Page E-1, to determine what
documentation you need.
- - All claims must be accurate, complete, signed and dated.
- - Only the original copy of the Claim Form is acceptable. Never send a
facsimile or xerox copy of either the Claim Form or support
documentation. When original copies are impossible (as in the case of
billboards) a color photograph will be accepted.
- - Copies of the Claim Form should be distributed according to the legend
at the bottom of the Fox Advertisement Claim Form. The original is
submitted to our claim processing agency together with all required
documentation.
Send completed payable claims as follows:
Fox CO-OP Claims Auditor
C/O Tradeone Marketing
440 9th Ave., 11th Floor
New York, New York 10001
TELEPHONE: 212-290-5427
FACSIMILE: 212-465-5893
6
<PAGE>
FOX CONSUMER PRODUCTS
PAYABLE CLAIM TIMETABLE
- - To facilitate timely payment, claims should be submitted within 60
days from the date of the advertisement.
- - Claims will not be reimbursed after the expiration of the applicable
accruals.
- - In most cases, claims will be reimbursed by credit within 60 days
after receipt by our claim processing agency.
- - If a response to a claim is not received within 60 days from the date
of submission, inquiries can be made directly to the claim processing
agency as noted on Page 6.
- - When inquiring about claims, be prepared with your claim number or the
claim processing agency reference number.
The claim process is summarized with action items in Section II, D-1.
MONTHLY STATEMENTS
- - Our claim processing agency provides direct customers with monthly
statements to reflect accrual bank balances for active programs on a
program-by-program basis.
- - Accruals are calculated by the title's or promotion's CO-OP percentage
against your gross purchases.
- - When a rental release is re-promoted as sell-through, a new accrual
bank is created.
MUTUAL BENEFIT
Fox hopes that this CO-OP Policy will enable you to effectively promote Fox
titles for our mutual benefit, while reducing the administrative burden for both
you and Fox. We appreciate your cooperation and support.
7
<PAGE>
FOX CONSUMER PRODUCTS
CO-OPERATIVE ADVERTISING POLICY
USER FRIENDLY GUIDE
TABLE OF CONTENTS
Section II
<TABLE>
<S> <C>
CO-OP Funding Available....................................................A-1
The Prior Approval Process.................................................B-1
General Advertising Guidelines.............................................C-1
Sample Logo and Copyright..................................................D-1
Claim Process..............................................................E-1
Required Claim Documentation...............................................F-1
</TABLE>
8
<PAGE>
FOX CONSUMER PRODUCTS
CO-OP FUNDING AVAILABLE
<TABLE>
<CAPTION>
Fund Description Timetable Comment
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
RENTAL Title and time Must be used within Unused accruals
NEW RELEASE specific 6 months from title's cannot be applied to
street date. other titles.
- ---------------------------------------------------------------------------------------
SELL-THROUGH Title and time Must be used within Unused accruals
NEW RELEASE specific 6 months from title's cannot be applied to
street date. other titles.
- ---------------------------------------------------------------------------------------
CATALOG TITLES Accruals are pooled Rolling 12 months Unused accruals
funds. cannot be applied to
other titles.
- ---------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
FOX CONSUMER PRODUCTS
PRIOR APPROVAL PROCESS
Securing Prior Approval for Advertising:
1. Not all advertising activities are reimbursable. Refer to Section II,
C-1, to determine if Fox provides CO-OP support for your planned
activity.
2. If prior approval is required, submit the completed Prior Approval
Form to your Fox Regional Sales Manager (RSM).
3. Your RSM will review the Prior Approval Form and either preliminarily
approve or deny it. If denied, the RSM will notify you. If approved,
the form will be forwarded to the corporate office for final approval.
4. If approved at the corporate level, the Prior Approval Form will be
returned to the address specified on the form. Corporate personnel
will notify the RSM if a request is denied, and the RSM will notify
you.
Securing Approval for Artwork, Layout and Scripts:
1. Your RSM does NOT approve artwork, layout or scripts.
2. Approval is NOT always necessary for artwork, layouts and scripts. See
Section II, C-1, for Fox General Advertising Guidelines.
3. After referring to the General Advertising Guidelines and determining
that approval is definitely required:
a. If you are a direct Fox account, fax your artwork, layout or
script to the Fox corporate office for review and approval.
FACSIMILE: 310-369-8850
ATTENTION: Fox Sales Planning
b. If you are an indirect account of Fox, fax the item to your
Distributor representative.
B-1
<PAGE>
FOX CONSUMER PRODUCTS
CLAIM PROCESS
Account Action Items
1. Complete an authorized Fox Advertising Prior Approval/Claim Form or
your own form with the same information.
2. Sign and date the Advertising Prior Approval/Claim Form.
3. See Section II, E-1, for Required Claim Documentation.
4. Attach required documentation.
5. Submit the Prior Approval/Claim Form within 60 days after the first
appearance of the advertising activities and forward with required
documentation (Section II, E-1) to Fox's claim processing agency:
Fox CO-COP Claims Auditor
C/O Tradeone Marketing
440 Ninth Avenue
Eleventh Floor
New York, New York 10001
Claims Auditor Action Items
1. Audit claim.
2. If the claim is incomplete, the auditor will return the entire claim
along with a resubmittal letter specifying the missing/required
documentation.
3. When an audit is complete, the auditor will issue a full credit, a
partial credit or a denial notice.
Inquiries Regarding Outstanding Claims
If you do not receive a response from your Claims Auditor within 60 days, be
prepared with your internal claim/debit number and contact him/her directly at:
TELEPHONE: 212-290-5427
FACSIMILE: 212-465-9893
E-1
<PAGE>
FOX CONSUMER PRODUCTS
REQUIRED CLAIM DOCUMENTATION
PRINT OR OUTDOOR
- ------------------------------------- ----------------------------------------
Type of Advertising Documentation
- ------------------------------------- ----------------------------------------
Catalogs Complete copy of the catalog. Printer's
Authorized in quality stock; bound or original invoice. Circulation list
stapled. notarized by an officer of the company.
- ------------------------------------- ----------------------------------------
Circulars and Other Direct Mail Original piece. Printer's and Post
Circulation information must be Office's (or fulfillment company's)
verifiable through independent audit original invoice. Circulation list
with published rate cards approved notarized by an officer of the company.
by Fox.
- ------------------------------------- ----------------------------------------
General Circulation Magazines Complete copy of the magazine containing
Circulation information must be the advertisement. Publisher's original
verifiable through independent invoice stating media used, date of
audit with published rate cards appearance, size and cost. Circulation
approved by Fox. list notarized by an officer of the
company.
- ------------------------------------- ----------------------------------------
Newspapers and Inserts Original media invoice. Full page
Circulation information must be original tear sheet. Circulation list,
verifiable through independent audit with details about where and when it
with published rate cards approved appeared, notarized by an officer of the
by Fox. company.
- ------------------------------------- ----------------------------------------
Outdoor Color photography of the posted outdoor
Posted outdoor advertisement. advertisement. Posting company's
original invoice indicating costs,
location and appearance dates.
- ------------------------------------- ----------------------------------------
BROADCAST PREMIUMS
- ------------------------------------- ----------------------------------------
Premiums and Other Promotions Sample of the item or color photograph.
Mugs, T-shirts, key chains, etc. Vendor's original invoice indicating
costs.
- ------------------------------------- ----------------------------------------
Radio Original station invoice indicating the
Any government, exclusively licensed net cost (after discounts) and date(s)
station. Stations must have published spot aired. Notarized script with
rates that can be audited. ANA documentation signed by station
official.
- ------------------------------------- ----------------------------------------
Television Original station invoice indicating the
Any government, exclusively licensed net cost (after discounts) and date spot
station, including cable. Stations aired. Notarized script with ANA/TVB or
must have published rates that can ANA/CATV documentation signed by station
be audited. official.
- ------------------------------------- ----------------------------------------
Never submit copies or facsimiles for documentation.
Submit only originals.
F-1
<PAGE>
Exhibit 10.8
REVENUE SHARING AGREEMENT
THIS AGREEMENT (the "Agreement") is made the 25th day of August, 1998 (the
"Effective Date").
BETWEEN:
(1) BLOCKBUSTER VIDEOS, INC. whose principal place of business is at 1201 Elm
Street, Dallas, Texas 75270 (hereinafter referred to as "Blockbuster," which
following assignment shall include its actual assigns); and
(2) COLUMBIA TRISTAR HOME VIDEO, INC. whose principal place of business is at
10202 West Washington Boulevard, Culver City, California 90232-3195
(hereinafter referred to as "CTHV," which shall be deemed to include its
permitted assigns).
WHEREAS:
(A) Blockbuster and certain of its Affiliates (the terms initially capitalized
in this Agreement and not otherwise defined herein shall have the respective
meanings set forth in Paragraph 1 of this Agreement) own, operate and franchise
retail stores which, among other things, rent, sell and market pre-recorded
videocassette tapes to the general public; and
(B) CTHV and certain of its Affiliates acquire, produce, license, market and
sell motion pictures on pre-recorded videocassette tapes; and
(C) CTHV is willing to provide Copies of each Rental Picture and each * to
Blockbuster; and
(D) Blockbuster is willing to obtain, on the terms and subject to the conditions
hereinafter set forth, a specified number of Copies of each Rental Picture and
each * distributed by CTHV during the Term; and
(E) Blockbuster is willing and has the operational capacity to report
electronically on an ongoing basis during the Revenue Sharing Period information
as to the rental of Copies per Rental Picture as set forth in Exhibit C,
attached hereto and made a part hereof.
- ----------
* Pages where confidential treatment has been requested are stamped
"Confidential material omitted and separately filed with the Commission
under an application for confidential treatment", and the confidential
section has been marked with a star (*).
<PAGE>
2
NOW THEREFORE, based on the above premises and in consideration of the mutual
covenants and agreements contained herein, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS:
a. "Affiliate" shall mean (i) in the case of CTHV, Sony Pictures
Entertainment Inc. ("SPE") and all entities controlled by SPE; and (ii) in
the case of Blockbuster or Blockbuster Entertainment Inc., all companies
which are controlled by Blockbuster and/or Blockbuster Entertainment Inc. or
which have a common direct or indirect parent.
b. Bad Debt shall mean *
c. "Blockbuster Headquarters" shall mean the corporate office of
Blockbuster located at 1201 Elm Street, Dallas, Texas 75270.
d. "Copy(ies)" shall mean VHS videocassettes of the Rental Pictures and
* obtained by Blockbuster from CTHV for Home Video Distribution. Other
formats, including, without limitation, laserdisc and DVD, are not included
under this Agreement.
e. * shall mean each and every feature motion picture for which CTHV owns
or controls Home Video Distribution Rights in the Territory, provided such
picture: (1) is at least seventy (70) minutes in length; (2) is within
Blockbuster's guidelines of the MPAA rating systems (i.e., Blockbuster does
not make available for rental to its customers pictures which are not rated
or which have a rating of NC17 or more restrictive); (3) is not a
documentary, foreign language film (excepting those qualifying under
subparagraph g. of this Paragraph 1), sports event, concert film, stage play,
video or theatrical re-release, or library/category film; *
f. "Distribution Center" shall mean Blockbuster's distribution center that
is currently in McKinney, Texas. Blockbuster may add an additional two (2)
delivery points at its option.
g. * shall mean each and every * feature motion picture which is * for
which CTHV owns or controls Home Video Distribution Rights in the Territory,
provided such picture: (1) is at least seventy (70) minutes in length; (2) is
within Blockbuster's guidelines of the MPAA rating system (i.e., Blockbuster
does not make available for rental to its customers pictures which are not
rated or which have a rating of NC17 or more restrictive); (3) is not a
documentary, sports event, concert film, stage play, video or theatrical
re-release, or library/category film; *
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
3
Video Distribution Rights in the Territory that fails to satisfy the
requirements set forth in this subparagraph shall not be subject to this
Agreement.
h. "Franchise Stores" shall mean Blockbuster franchise stores that are
operated pursuant to binding franchise agreements. If designated by Blockbuster
as ordering Copies through Blockbuster, such Franchise Store shall become a
Participating Store.
i. "Gross Box Office" or "GBO" shall mean the box office gross
receipts, as reported by VARIETY, earned by a Rental Picture or * in the United
States and Canada measured from the Rental Picture or * initial theatrical
release in the Territory through the date ordered by Blockbuster.
j. "Home Video Distribution" or "Home Video Distribution Rights" shall
mean the right to manufacture, record, sell and/or otherwise distribute a motion
picture on videocassette.
k. The "Matrix" shall mean Exhibit A, attached hereto and made a part
hereof, which sets forth the obligations for Rental Pictures, *. The Matrix
is based on the following assumptions: *
l. "Missing Copies" shall mean those Copies of a particular Rental Picture
that are unaccounted for due to theft or loss occurring outside of the ordinary
course of business. Blockbuster, in its good faith discretion, will determine if
a Copy is lost or stolen.
m. "Month" or "Monthly" shall mean Blockbuster's accounting cycle that is
based upon a four week, four week, five week rotation as set forth in Exhibit B,
attached hereto and made part hereof.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
4
n. "Participating Store" shall mean (i) any Video Store in the United
States, which at the relevant time during the Term of this Agreement, is wholly
owned and/or operated by Blockbuster and/or its Affiliates under the Blockbuster
trademarks; (ii) if designated by Blockbuster as ordering Copies through
Blockbuster, any Video Store in the United States, which at the relevant time
during the Term of this Agreement, is wholly owned and/or operated by
Blockbuster and/or its Affiliates not under the Blockbuster trademarks which
elect to participate pursuant to the terms and conditions hereof; and (iii)
Franchise Stores which elect to participate pursuant to the terms and conditions
hereof. For Copy quantity allocation purposes, Kiosks and Video Vending Machines
(the "Special Formats") shall not be included in the definition of
"Participating Stores."
o. "Promotional Credits" shall mean *
p. "Rental Picture" shall mean each and every feature motion picture
for which CTHV owns or controls Home Video Distribution Rights in the
Territory, provided such picture: (1) is at least seventy (70) minutes in
length; (2) is within Blockbuster's guidelines of the MPAA rating system
(i.e., Blockbuster does not make available for rental to its customers
pictures which are not rated or which have a rating of NC17 or more
restrictive); (3) is not a documentary, foreign language film (excepting
those qualifying under subparagraph g. of this Paragraph 1), sports event,
concert film, stage play, video or theatrical re-release, or library/category
film; and (4) is one theatrically distributed, which when initially released
on videocassette is priced and distributed by CTHV at a "rental price" and no
less than a "net effective unit price" of at least *, as such terms are
generally understood in the home video industry in Los Angeles, California.
"Net effective unit price" shall mean the price invoiced and accrued (before
adjustment for any marketing support funds) for each Copy of a specific
Rental Picture by the videocassette distributor, supplies and/or
retail/rental outlet which purchases videocassettes directly from CTHV other
than through leasing and/or "buy back" programs. *. Every other feature
motion picture for which CTHV owns or controls Home Video Distribution Rights
in the Territory that is priced and distributed by CTHV that fails to satisfy
the requirements set forth in this subparagraph shall not be subject to this
Agreement.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
5
q. "Rental Revenue" shall mean *
r. "Revenue Sharing Period" shall mean the period commencing on the Video
Street Date of the relevant Rental Picture and running through the end of
twenty-six (26) weeks immediately thereafter.
s. "Video Store" shall mean a retail outlet that has at least one thousand
five hundred (1,500) square feet and that is primarily engaged in the rental of
videocassettes to the public for home viewing entertainment purposes.
t. "Video Street Date" shall mean, with respect to any Rental Picture, the
first date on which, in the Territory, both: (i) such Rental Picture is
authorized by CTHV for Home Video Distribution, and (ii) Copies of such Rental
Picture are actually available to the general public at Participating Stores.
2. AGREEMENT TERM:
The term of this Agreement shall be for four (4) years (the "Term"),
commencing as of September 1, 1998.
3. TERRITORY:
The territory for purposes of this Agreement with respect to each
Rental Picture shall be the United States, its territories and possessions,
if any to the extent CTHV owns or controls such rights to territories and
possessions of the United States (the "Territory"). Blockbuster and CTHV
agree to discuss the inclusion of Canada, its provinces, territories and
possessions in the Territory in accordance with the terms and conditions of
this Agreement or comparable terms mutually agreed upon by the parties;
provided however, that neither party shall have any obligation to agree to
such inclusion.
- ----------
* "Confidential material omitted and separately filed with the Commission
under an application for confidential treatment".
<PAGE>
6
4. BLOCKBUSTER COMMITMENTS:
Beginning as of the date of this Agreement for Participating Stores,
Blockbuster agrees as follows:
a. The following terms shall apply to Rental Pictures:
(1) Rental Pictures * . For each and every Rental Picture *
Blockbuster agrees to obtain from CTHV, and CTHV agrees to
provide to Blockbuster, a specified number of Copies of each
Rental Picture as mutually determined by Blockbuster and
CTHV, provided however, that if the parties cannot agree on
a quantity of Copies, Blockbuster agrees to obtain from CTHV,
and CTHV agrees to provide to Blockbuster, the number of
Revenue Share Copies of each Rental Picture as set forth in
the Matrix, EXHIBIT A.
(2) *
(3) *
Blockbuster may retain up to * of the Revenue Share Copies of each
Rental Picture (including * ) at its Distribution Center
for replenishment, new Participating Stores and unexpected spikes in
product performance (the "Replenishment Copies").
(4) Upfront Price: The price of each Revenue Share Copy shall be
an amount (the "Upfront Price") equal to * per Revenue Share
Copy per Rental Picture. * . See Exhibit D attached hereto
and made a part hereof, for illustration purposes only.
(5) *
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
7
(6) * See Exhibit E, attached hereto and made a part hereof, for
illustration purposes only.
(7) *
(8) CTHV's Share of Rental Revenue: * the share of Rental
Revenue paid by Blockbuster to CTHV shall be:
(a) During the first * of the Revenue Sharing Period, * of
the Rental Revenue *
(b) During the * of the Revenue Sharing Period, *
(c) Two Dollars (US $2.00) of the Upfront Price shall be
deducted from CTHV's share of Rental Revenue for each Copy.
(9) Payment. Blockbuster shall pay: (i) the Upfront Price within
* calendar days following the end of the calendar month in
which the Copies are * ; (ii) CTHV's share of the Rental
Revenue * calendar days following the end of the relevant
Month, or portion thereof, in which revenue is received
during the Term; *
b. Participating Franchisees: Blockbuster may distribute Copies of the
Rental Pictures received under this Agreement to its Franchise Stores
which have elected to be governed by the terms and conditions of this
Agreement for all Rental Pictures whose
- ----------
* "Confidential material omitted and separately filed with the Commission
under an application for confidential treatment".
<PAGE>
8
Video Street Dates fall within a consecutive period of no less than six
(6) months, provided however, that if a Franchise Store elects to
discontinue participation hereunder, any Rental Pictures for which
orders have been placed or in its possession shall continue to be
subject to the terms of this Agreement for the applicable Revenue
Sharing Period until such Copies are returned to CTHV or sold by
Blockbuster (in accordance with Paragraph 4.c below) and all parties
shall remain obligated to perform their respective obligations with
respect thereto under this Agreement. Terms for implementation of this
Agreement at the franchise level and franchise payments thereunder will
be controlled and administered by Blockbuster. For purposes of this
Agreement and to the extent a Franchise Store elects to participate
under this Agreement, such Franchise Store shall be considered a
Participating Store. For the purposes of payment only and in the event
that a Franchise Store which has elected to participate hereunder is
unable to pay when due any amounts due and owing to CTHV, Blockbuster
shall pay CTHV any undisputed amount pursuant to Paragraph 4.a(9) of
this Agreement.
c. Sell-Off: Blockbuster agrees not to sell off any Copies of a Rental
Picture during the first * days of the applicable Revenue Sharing
Period. * , Blockbuster may sell up to * . At the expiration of the
relevant Revenue Sharing Period, Blockbuster may sell * Blockbuster
agrees not to sell and to use reasonable commercial business efforts to
prevent its Participating Stores from selling Copies other than
directly to consumers or Franchise Stores for home video use (i.e., no
bulk sales or sales to wholesalers or distributors). Notwithstanding
the preceding sentence, Blockbuster may sell "distressed" (i.e.,
broken-not capable of viewing) Copies of the Rental Pictures to
wholesalers and jobbers. Sell-off revenue is not included in Rental
Revenue.
d. Packing and Shipping: Blockbuster will be responsible for making the
Copies ready for consumer rental and for shipping the Copies for its
Distribution Center to its Participating Stores.
e. Missing Copies: During the first sixty (60) days of the applicable
Revenue Sharing Period, Blockbuster agrees to pay to CTHV * less the
Upfront Price and revenue share amounts already paid to CTHV for any
Missing Copy. Blockbuster shall notify CTHV of any theft or loss of any
Copy that occurs outside of the ordinary course of business at the time
Blockbuster discovers the same.
f. Damaged/Defective: "Damaged Copies" shall mean those videocassettes
which become materially damaged by Participating Store personnel,
customers, or otherwise, during the Revenue Sharing Period. "Defective
Copies" shall mean those Copies that are
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
9
mechanically defective, mispackaged or contain "extraneous material"
(as defined in Paragraph 9(i) below). CTHV shall deliver to
Blockbuster, at no cost, additional Copies of each Rental Picture in
the amount of * of the Base Buy Copies as set forth on Exhibit A for
Blockbuster to retain at its Distribution Center and to use solely, in
its discretion, as replacement of Defective Copies and Damaged Copies;
provided however, that if any of these Copies are placed in the
Participating Stores, CTHV shall receive its share of the Rental
Revenue for the Copy used to replace the Damaged or Defective Copy
since no Rental Revenue will thereafter be generated from the Damaged
or Defective Copy.
g. *
5. CTHV COMMITMENTS:
a. Grant: CTHV grants Blockbuster the right, and Blockbuster hereby
obligates itself, to distribute the Revenue Share Copies of the Rental
Pictures (excluding Replenishment Copies) for placement on the shelves
of its Participating Stores during the applicable Revenue Sharing
Period, for the transfer of possession on a temporary or permanent
basis consistent with this Agreement to members of the general public
for home viewing purposes. CTHV is obligated to ship the Copies to
Blockbuster pursuant to the terms and conditions of this Agreement.
b. Marketing-Support: In lieu of specific marketing support programs
and as payment for services and in consideration for the various other
services and activities which Blockbuster has agreed to perform
hereunder, CTHV agrees that Blockbuster shall accrue on a Qualified
Rental Picture basis marketing support funds (the "Marketing Support
Funds") in a minimum amount of * of the Minimum Guarantee for each
Qualified Rental Price. Blockbuster shall use the Marketing Support
Funds to advertise the Rental Pictures in its discretion and CTHV and
shall reimburse Blockbuster for the Marketing Support Funds when used.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
10
c. Shipping: CTHV will deliver the Copies to the Distribution Center at
least three (3) weeks prior to Video Street Date per Rental Picture.
6. AUDIT:
During the Term and continuing until the date twelve (12) months
following the date of expiration or earlier termination of this Agreement,
Blockbuster agrees that CTHV, with not less than three (3) business days
advance notice, any conduct, during normal business hours, Monday through
Wednesday: (i) one (1) audit per year of Blockbuster's business operation and
records at the Blockbuster Headquarters; and (ii) a total of ten (10) audits
per year of the business records at a Participating Store (i.e., ten (10)
total audits and not ten (10) audits per Participating Store), solely
pertaining to the Copies licensed by Blockbuster pursuant to this Agreement.
Any additional audit request of information not provided for above including,
without limitation, any audit of Bad Debt, Promotional or Operational Credits
shall be performed by Blockbuster's certified public accountant on an annual
basis and provided to CTHV within fifteen (15) days of their request. Any
audits conducted pursuant to this section shall relate to Blockbuster's
compliance with the terms of this Agreement and shall not unreasonably
interfere with Blockbuster' daily business operations. CTHV agrees that the
data and other information collected by CTHV may be used by CTHV only in
connection with such audits and to fulfill CTHV's commitments under this
Agreement and to enable CTHV to enforce its rights hereunder. Blockbuster
agrees to reimburse CTHV for actual costs incurred if any audit results in
deviation in excess of ten percent (10%) or more between the percentage of
Rental Revenue paid to CTHV by Blockbuster and the percentage of Rental
Revenue due to CTHV by Blockbuster.
7. CTHV's REPRESENTATIONS AND WARRANTIES:
CTHV represents and warrants that:
a. It is a corporation organized and existing under the laws of the State of
Delaware, with its principal place of business in the State of California.
b. The undersigned has the full right, power and authority to sign this
Agreement on behalf of CTHV.
c. The execution, delivery and performance of this Agreement does not and
will not violate any provisions of CTHV's articles or certificates of
incorporation and bylaws, or any contract or other agreement to which CTHV is
a party.
<PAGE>
11
d. There is no broker, finder or intermediary involved in connection with the
negotiations and discussions incident to the execution of this Agreement, and no
broker, finder, agent or intermediary who might be entitled to a fee,
commissions or any other payment upon the consummation of the transactions
contemplated by this Agreement.
e. This Agreement has been duly executed and delivered and constitutes the
legal, valid and binding obligation of CTHV enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in
effect, affecting the enforcement of creditors' rights in general and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
f. Copies shall be new and unused and comparable in quality to other
videocassette units being sold by CTHV in rental distribution channels.
8. BLOCKBUSTER'S REPRESENTATIONS AND WARRANTIES:
Blockbuster represents and warrants that:
a. It is a corporation organized and existing under the laws of the State of
Delaware, with its principal place of business in the State of Texas.
b. The undersigned has the full right, power and authority to sign this
Agreement on behalf of Blockbuster.
c. The execution, delivery and performance of this Agreement does not and will
not, violate any provisions of Blockbuster's articles or certificates of
incorporation and bylaws, or any contract or other agreement to which
Blockbuster is party.
d. There is no broker, finder or intermediary involved in connection with the
negotiations and discussions incident to the execution of this Agreement, and no
broker, finder, agent or intermediary who might be entitled to a fee,
commissions or any other payment upon the consummation of the transactions
contemplated by this Agreement.
e. This Agreement has been duly executed and delivered and constitutes the
legal, valid and binding obligation of Blockbuster enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereinafter
in effect, affecting the enforcement of creditors' rights in general
<PAGE>
12
and by general principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
9. INDEMNIFICATION:
(i) CTHV agrees to, at all times, defend, indemnify and hold
Blockbuster, its parent company, their affiliates, subsidiaries,
franchisees and the officers, directors, agents and employees of each,
harmless from and against any and all claims, suits, damages, losses,
liabilities, obligations, fines, penalties, costs and expenses (whether
based on libel, slander, invasion of privacy, breach of contract,
product liability, patent, trademark, license or copyright infringement
or otherwise), including legal fees and expenses, of whatever kind or
nature (collectively, "Loss"), arising out of or based on (a) a breach
or violation of this Agreement by CTHV or any failure by CTHV to
perform any of the agreements, terms, covenants, conditions,
representations or warranties of this Agreement to be performed by
CTHV; (b) any third party claim that any Rental Picture infringes the
copyright, trademark, contractual rights, right of publicity, right of
privacy, or otherwise defames such third party; or (c) any third party
claim regarding any extraneous material contained on any Copy of a
Rental Picture provided to Blockbuster pursuant to this Agreement. Such
extraneous material may include, without limitation, pornographic,
obscene material or scenes of an inappropriate nature placed on such
Copies, provided however, that such extraneous material shall not
include the actual feature motion picture content or trailers so long
as such content is not altered in any way and is in compliance with the
MPAA rating and the definition of Rental Pictures, * and * contained in
this Agreement.
(ii) Blockbuster agrees to, at all times, defend, indemnify and hold
CTHV, its parent company, their affiliates, subsidiaries, and the
officers, directors, agents and employees of each, harmless from and
against any Loss arising out of or based on a breach or violation of
this Agreement by Blockbuster or any failure by Blockbuster to perform
any of the agreements, terms, covenants, conditions, representations or
warranties of this Agreement to be performed by Blockbuster.
(iii) The Indemnified Party shall give written notice to the Indemnifying
Party and the Indemnifying Party will promptly assume and diligently
conduct the entire defense of any third party suit or action, or the
making of any third party claim as to which indemnity may be sought
hereunder, including settlements and appeals, at the Indemnifying Party's
sole cost and expense, and the Indemnifying Party shall pay and discharge
any and all settlement amounts, judgments or decrees which may be
rendered.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
13
(iv) The Indemnifying Party shall not, except with the consent of the
Indemnified Party, consent to entry of any judgment or administrative
order or enter into any settlement that (i) could affect the intellectual
property rights or other business interest of the Indemnified Party; or
(ii) does not include as an unconditional term thereof the giving by the
claimant or plaintiff to the Indemnified Party of a release from all
liability with respect to such claim or litigation.
(v) In the event that the Indemnifying Party does not accept the defense
of any matter as above provided, the Indemnified Party shall have the full
right to defend against any such claim or demand, and shall be entitled to
settle or agree to pay in full such claim or demand, in its sole
discretion without releasing any obligation or liability of the
Indemnifying Party.
10. TERMINATION:
A non-defaulting party may terminate this Agreement if a Default, as
defined below, by the other party has occurred and is continuing by giving
written notice to the defaulting party. The term "Default" shall mean any of
the following: (a) failure by a party to comply with or perform any provision
or condition of this Agreement that results in a material breach of this
Agreement and, if such material breach can be cured, continuance of such
failure for thirty (30) days after written notice to such party (if cure is
not practicable, the thirty (30) day notice period is not required); (b) a
party becomes insolvent, is unable to pay its debts as they mature or is the
subject of a petition in bankruptcy, whether voluntary or involuntary, or of
any other proceeding under bankruptcy, insolvency or similar laws; or makes
an assignment for the benefit of creditors; or is named in, or its property
is subject to a suit for appointment of a received; or is dissolved or
liquidated; or (c) any material warranty or representation made in this
Agreement is breached, false or misleading in any material respect. In the
event of such termination, the non-defaulting party shall be entitled to
pursue any and all remedies provided in law and in equity and recover any
damages it may have suffered by reason of such Default. The parties
acknowledge that no specification of a particular legal or equitable remedy
by a non-defaulting party shall be construed as a waiver, prohibition or
limitation of any legal or equitable remedies in the event of a breach of
this Agreement. Upon Default, any Copies in Blockbuster's possession at time
of termination shall continue to be subject to the terms of this Agreement
until such Copies are returned to CTHV or sold by Blockbuster and both
parties shall remain obligated to perform their respective obligations with
respect thereto under this Agreement.
<PAGE>
14
11. REMEDIES:
a. No remedy conferred by any of the specific provisions of this Agreement
is intended to be exclusive of any other remedy which is otherwise available at
law, in equity, by statute or otherwise, and except as otherwise expressly
provided for herein, each and every other remedy shall be cumulative and shall
be in addition to every other remedy given hereunder or now or hereafter
existing at law, in equity, by statute or otherwise and no provision hereof
shall be construed so as to limit any party's available remedies in the event of
a breach by the other party hereto. The election of any one or more of such
remedies by any of the parties hereto shall not constitute a waiver by such
party of the right to pursue any other available remedies.
b. Except as provided herein, no civil action with respect to any dispute,
claim or controversy arising out of or relating to this Agreement may be
commenced until:
(i) The parties attempt in good faith to resolve through negotiation
any dispute, claim or controversy arising out of or relating to this
Agreement. Either party may initiate negotiations by providing written
notice in letter form to the other party, setting forth the subject of the
dispute and the relief requested. The recipient of such notice will
respond in writing within (5) business days with a statement of its
position on and recommended solution to the dispute. If the dispute is not
resolved by this exchange or correspondence, then representatives of each
party with full settlement authority will meet at a mutually agreeable
time and place within ten (10) business days of the date of the initial
notice in order to exchange relevant information and perspectives, and to
attempt to resolve the dispute. If the dispute is not resolved by these
negotiations, the matter will be submitted to J. A. M. S/ENDISPUTE, or its
successor, for non-binding arbitration; and
(ii) If the parties are unable to resolve the dispute, claim or
controversy arising out of or relating to this Agreement pursuant to the
above subparagraph b.(i), such dispute, claim or controversy shall be
submitted to non-final and non-binding arbitration before J. A. M.
S/ENDISPUTE, or its successor, pursuant to the United States Arbitration
Act, 9 U.S.C. Sec. 1 et seq. Either party may commence the arbitration
process called for in this Agreement by filing a written demand for
arbitration with J. A. M. S/ENDISPUTE, with a copy to the other party. The
arbitration will be conducted in accordance with the provisions of J. A.
M. S/ENDISPUTE'S Streamlined Arbitration Rules and Procedures in effect at
the time of filing of the demand for arbitration. The parties will
cooperate with J. A. M. S/ENDISPUTE and with one another in selecting an
arbitrator from J. A. M. S/ENDISPUTE'S panel of neutrals, and in
scheduling the arbitration proceedings. The parties covenant that they
will participate in the arbitration in good faith, and that they will
share equally in its costs. The provisions of this Paragraph may be
enforced by any court of competent jurisdiction, and the party seeking
enforcement shall be entitled to an award of all costs, fees and expenses,
including attorneys fees, to be paid by the party against whom enforcement
is ordered.
<PAGE>
15
(iii) Notwithstanding the provisions of subparagraphs (i) and (ii)
above, a party seeking preliminary or temporary injunctive relief may, in
connection therewith, proceed before a court of competent jurisdiction (as
provided in Paragraph 12.14 below) for such purpose without regard to the
provisions of subparagraphs (i) and (ii) above.
12. MISCELLANEOUS:
12.1 FORCE MAJEURE: Neither party shall be considered in default of this
Agreement or be liable for damages, for any failure of performance hereunder
occasioned by an act of God, force of nature, war or warlike activity,
insurrection or civil commotion, labor dispute, transportation delay,
governmental regulatory action whether or not with proper authority or other
cause similar or dissimilar to the foregoing and beyond its reasonable control,
provided the party so affected gives prompt notice to the other. In the event of
a suspension of any obligation by reason of this section which extends beyond
ten (10) days, the party not affected may, at its option, elect to cancel those
aspects of this Agreement which are reasonably feasible to terminate, provided
however, that this Paragraph shall only excuse performance by the parties of the
stated obligations on the affected Rental Picture and shall not be a basis to
terminate the overall Agreement unless such suspension or nonperformance relates
to multiple Rental Pictures to the extent that such suspension or nonperformance
renders this Agreement impracticable for the party not affected. Such
cancellation shall be effective thirty (30) days after written notice of such
cancellation has been given to the other party.
12.2 NOTICE: Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given and received on the date
of delivery or on the third (3rd) business day following the day of mailing of
the same, or on the day of transmission by telecopier or other form of recorded
communication service of the same, as the case may be to the party to be
notified at the addresses set forth below:
If to Blockbuster: Blockbuster Videos, Inc.
1201 Elm Street, 21st Floor
Dallas, Texas 75270
Attn: General Counsel
If to CTHV: Columbia TriStar Home Video
10202 West Washington Boulevard
Culver City, California 90232-3195
Attn: Robin Russell, Executive Vice President
<PAGE>
16
or such other address as may be designated by either party by written notice to
the other as hereinabove provided.
12.3 ENTIRE AGREEMENT: This Agreement, together with all Exhibits attached
hereto, represents the entire agreement and understanding between the parties
with respect to the subject matter of this Agreement, and supersedes any other
agreement or understanding, written or oral, that the parties hereto may have
had with respect thereto. No statement or inducement with respect to the subject
matter by either party or by any agent or representative of either party which
is not contained in this Agreement shall be valid or binding between the
parties.
12.4 RELATIONSHIP OF PARTIES: The parties are independent contractors, and
nothing in this Agreement shall be deemed or construed to create, or have been
intended to create a partnership, joint venture, employment or agency
relationship between the parties. Each party agrees that it neither has nor will
give the appearance or impression of possessing the legal authority to bind or
to commit any other party in any way except as provided in this Agreement.
12.5 EFFECT OF HEADINGS: The headings and subheadings of the sections of
this Agreement are inserted for convenience of reference only and shall not
control or affect the meaning or construction or any of the agreements, terms,
covenants and conditions of this Agreement in any manner.
12.6 CONSTRUCTION: This Agreement has been fully reviewed and negotiated
by the parties and their respective legal counsel. Accordingly, in interpreting
this Agreement, no weight shall be placed upon which party or its counsel
drafted the provision being interpreted.
12.7 AMENDMENTS: No provision of this Agreement may be modified, waived or
amended except by a written instrument duly executed by each of the parties. Any
such modifications, waivers or amendments shall not require additional
consideration to be effective.
12.8 COUNTERPARTS: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.9 IMPLIED WAIVER: Any failure on the part of either party to insist
upon the performance of this Agreement or any part of this Agreement, shall not
constitute a waiver of any right under this Agreement.
<PAGE>
17
12.10 ASSIGNMENT:
a. By CTHV: CTHV may not assign its rights or delegate its obligations
under this Agreement without Blockbuster's prior written consent, subject to
the following (each, a "Permitted Transfer"): (i) CTHV may assign its rights
or delegate its obligations to (1) an Affiliate or (2) an entity acquiring
all or substantially all of the U.S. videocassette distribution business of
CTHV, provided that such entity obtains or retains substantially the same
access to the "SPE" trade names/trademarks and the Home Video Distribution
Rights to Columbia Pictures' "new" (i.e., yet to-be-released) theatrical
releases as CTHV enjoyed immediately prior to the applicable transfer; and
(ii) shall have the right to assign its right to receive payments hereunder.
A "change-of-control" of CTHV, by direct transfer or by operation of law,
shall be considered to result in an assignment of CTHV's rights and a
delegation of CTHV's obligations under this Agreement; provided, that such
"change-of-control" shall be considered a Permitted Transfer if, following
such "change-of-control," CTHV (or any successor entity) obtains or retains
substantially the same access to the "SPE" trade names/trademarks and Home
Video Distribution Rights to Columbia Pictures' "new" theatrical releases as
CTHV enjoyed at the time of entering into this Agreement. In connection with
any Permitted Transfer, the permitted transferee shall assume CTHV's
obligations hereunder. Any attempted assignment or other transfer by CTHV,
other than a Permitted Transfer, without Blockbuster's prior written consent
shall be null and void.
b. By Blockbuster: Blockbuster may not assign its rights and delegate
its obligations under this Agreement without CTHV's prior written consent,
subject to the following (each a "Permitted Transfer"): (i) Blockbuster may
assign its rights or delegate its obligations to (1) an Affiliate or (2) any
financially responsible party, other than a Competing Major Studio (as
defined below), capable of performing all of Blockbuster's obligations under
this Agreement, provided that such assignment is coextensive with an
assignment to such financially responsible party of the video rental business
of Blockbuster and the "Blockbuster" trade names/trademarks. For the purposes
of the foregoing, the following entities shall be deemed to be financially
responsible parties: (a) a publicly traded entity into which or through which
the video rental business of Blockbuster and the "Blockbuster" trade
names/trademarks are "spun-off" and either directly or indirectly owned and
(b) any other assignee that has a Standard & Poor's or Moody's rating which
is not less than one rating level below that assigned to Blockbuster
immediately prior to any such assignment. A "change-of-control" of
Blockbuster, by direct transfer or by operation of law, shall be considered
to result in an assignment of Blockbuster's rights and a delegation of
Blockbuster's obligations under this Agreement; provided, that such
"change-of-control," other than one involving a "Competing Major Studio,"
shall be considered a Permitted Transfer if, following such
"change-of-control," Blockbuster (or any successor entity): (x) directly or
indirectly obtains or retains the video rental business of Blockbuster; (y)
retains the rights to use the "Blockbuster" trade names/trademarks; and (z)
is financially responsible and is capable of performing all of
<PAGE>
18
Blockbuster's obligations under this Agreement (with any entity that
satisfies clauses (a) or (b) above being deemed to be financially
responsible). In connection with any Permitted Transfer, the permitted
transferee shall assume Blockbuster's obligations hereunder; provided that no
such assignment or other transfer by Blockbuster, other than a Permitted
Transfer, without CTHV's (prior written consent shall be null and void. As
used herein, a "Competing Major Studio" shall mean Universal Studios, Inc.,
Warner Bros., a division of Time Warner Entertainment Company, L.P., MGM,
Twentieth Century Fox Film Corporation, or the Walt Disney Company, or any
division or any of the foregoing, or any entity which controls, is controlled
by, or is under common control with any of the foregoing.
c. "Change of Control":
(i) A "change-of-control" of Blockbuster shall be deemed to have
occurred, if, following the applicable transaction: (A) a person, entity
or group of persons or entities, within the meaning of section 13(d) or
14(d) of the Securities Exchange Act of 1934, or any comparable successor
provisions, other than Viacom, Inc. ("Viacom"), shall, directly or
indirectly, own fifty percent (50%) or more of the equity interests in
Blockbuster; or (B) Viacom shall cease to own, indirectly or indirectly,
at least fifty-one percent (51%) of the equity interests in Blockbuster.
(ii) A "change-of-control" of CTHV shall be deemed to have
occurred if, following the applicable transaction: (A) a person, entity
or group of persons or entities, within the meaning of section 13(d) or
14(d) of the Securities Exchange Act of 1934, or any comparable
successor provisions, other than Sony Corp. ("Sony") or SPE, shall,
directly or indirectly, own fifty percent (50%) or more of the equity
interests in CTHV, or (B) Sony and SPE shall each cease to own,
directly or indirectly, at least fifty-one percent (51%) of the equity
interests in CTHV.
12.11 SURVIVAL: All representations, warranties and indemnities made
herein shall survive the termination of this Agreement and shall remain in full
force and effect. All of a party's rights and privileges, to the extent they are
fairly attributable to events or conditions occurring or existing on or prior to
the termination of this Agreement, shall survive termination and shall be
enforceable by such party and its successors and assigns.
12.12 CONFIDENTIALITY: Except as otherwise required by applicable federal
and state securities laws, each party shall keep the information regarding the
details of this Agreement confidential and restrict dissemination to each of its
own personnel and to third parties to only a "need to know" basis, using the
standard of care which each uses to protect its own information from disclosure
during the Term of this Agreement and thereafter. The party disclosing
confidential information to its own personnel and third parties shall require
that these persons be bound by the confidentiality obligations set forth in this
Agreement. In addition to the
<PAGE>
19
foregoing, CTHV must keep all information provided by Blockbuster in
accordance with this Agreement confidential and any unauthorized disclosure
shall be considered a material breach of this Agreement. Any press release
issued by CTHV must be approved by Blockbuster prior to its release.
12.13 GOVERNING LAW: The substantive laws (as distinguished from the
choice of law rules) of the state of New York and the United States of
America applicable to contracts shall govern (i) the validity and
interpretation of this Agreement, (ii) the performance by the parties of
their respective obligations hereunder, and (iii) all other causes of action
(whether sounding in contract or in tort) arising out of or relating to this
Agreement or the termination of this Agreement. Only the New York courts
(state and federal) will have jurisdiction over any controversies regarding
this Agreement; any action or other proceeding which involves such a
controversy will be brought in these courts and not elsewhere.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.
COLUMBIA TRISTAR HOME VIDEO BLOCKBUSTER VIDEOS, INC.
Name: Benjamin S. Feingold Name: Edward B. Stead
-------------------------------- --------------------------------------
Signature: /s/ Benjamin S. Feingold Signature: /s/ Edward B. Stead
--------------------------------------
Title: President Title: EVP
--------------------------------------
<PAGE>
Exhibit A
Matrix
(See Attached)
BLOCKBUSTER PER STORE UNIT MATRIX
*
- ---------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment. Two pages have been
omitted from Exhibit A.
<PAGE>
Exhibit B
Accounting Calendar
(See Attached)
<PAGE>
1998 Accounting Calendar
Jan. 1- U.S. Corporate Holiday
Jan. 2- U.S. Corporate Holiday
Jan. 11- Video Pay Period
Jan. 16- A/P Close Complete
Jan. 17- GELCO Cut-Off
Jan. 25- Last day of JDE accounting period, Video Pay Period
Feb. 8- Video Pay Period
Feb. 13- A/P Close Complete
Feb. 14- GELCO Cut-Off
Feb. 22- Last day of JDE accounting period, Video Pay Period
March 8- Video Pay Period
March 20- A/P Close Complete
March 21- GELCO Cut-Off
March 22- Video Pay Period
March 29- Last day of JDE accounting period
April 5- Video Pay Period
April 17- A/P Close Complete
April 18- GELCO Cut-Off
April 19- Video Pay Period
April 26- Last day of JDE accounting period
May 3- Video Pay Period
May 15- A/P Close Complete
May 16- GELCO Cut-Off
May 17- Video Pay Period
May 24- Last day of JDE accounting period
May 25- U.S. Corporate Holiday
May 31- Video Pay Period
June 14- Video Pay Period
June 19- A/P Close Complete
June 20- GELCO Cut-Off
June 28- Last day of JDE accounting period, Video Pay Period
July 3- U.S. Corporate Holiday
July 12- Video Pay Period
July 17- A/P Close Complete
<PAGE>
July 18- GELCO Cut-Off
July 26- Last day of JDE accounting period, Video Pay Period
Aug. 9- Video Pay Period
Aug. 15- GELCO Cut-Off
Aug. 23- Last day of JDE accounting period, Video Pay Period
Sept. 6 - Video Pay Period
Sept. 7 - U.S. Corporate Holiday
Sept. 18- A/P Close Complete
Sept. 19- GELCO Cut-Off
Sept. 20- Video Pay Period
Sept. 27- Last day of JDE accounting period
Oct. 4- Video Pay Period
Oct. 16- A/P Close Complete
Oct. 17- GELCO Cut-Off
Oct. 18- Video Pay Period
Oct. 25- Last day of JDE accounting period
Nov. 1- Video Pay Period
Nov. 14- GELCO Cut-Off
Nov. 13- A/P Close Complete
Nov. 15- Video Pay Period
Nov. 22- Last day of JDE accounting period
Nov. 26- U.S. Corporate Holiday
Nov. 27- U.S. Corporate Holiday
Nov. 29- Video Pay Period
Dec. 13 - Video Pay Period
Dec. 18 - U.S. Corporate Holiday, A/P Close Complete
Dec. 19 - GELCO Cut-Off
Dec. 27 - Last day of JDE accounting period, Video Pay Period
<PAGE>
Exhibit C
Electronic Reporting
(See Attached)
<PAGE>
Columbia Tristar Home Video
Revenue Sharing System
System Interface Requirements - Blockbuster Version 1.7-August 27, 1998
- --------------------------------------------------------------------------------
General Requirements for data transmission of transactions to CTHV
Frequency: Daily
Source: From a central point in each Participating Store
(not from each store in Participating Store)
CTHV Preferred Method EDI using X12 Transaction Set or proprietary format
of Transport (not (to be defined by CTHV) transferred through 3rd party
currently available): VAN (at CTHV's cost)
File Descriptions for data transmissions
All the following data is required from the Participating Stores. Some of the
data here (A8 and B2) may not be currently available. In the event the data
described here becomes available at Blockbuster headquarters, Blockbuster will
use reasonable commercial efforts to provide such data to CTHV.
A. Inventory Transactions file
This file will contain all transactions that deal with the actual movements of
individual copies. Any transaction with the transaction types stated below
should be captured in this file.
The file that CTHV needs to receive is to contain the following information:
Data Required Description
- ------------- -----------
1. Bar Code This must uniquely identify the specific
copy of a Revenue Sharing (RS) title
2. Transaction Date Date when the transaction took place
3. Transaction Type 'R1' for Store Receipts from DC
'R2' for Store Receipts from other stores
'T1' for Store Transfers to DC
'T2' for Store Transfers to other stores
'DC' for Store Transfers out for Defective Copies
'SH' for Shortages
'SF' Shortage Found
<PAGE>
Columbia Tristar Home Video 2
Revenue Sharing System
System Interface Requirements - Blockbuster Version 1.7-August 27, 1998
- --------------------------------------------------------------------------------
4. Process Date Date when data was processed for transmission
to CTHV
5. UPC# UPC Code of the tape
6. Store # Store Number of store receiving tape
7. Former Store # Store Number of store where tape was sent from
(for Store Transfers)
8. Former Bar Code Bar Code as used in previous store (if bar code
was changed)
B. Revenue Sharing Transactions
This file will contain details of any transaction that has an impact on the
Revenue Sharing computations. These transactions include:
Transaction Type
1. Rental Out transactions. These transactions are to be
generated whenever a customer rents out a RS title
2. Rental Return transactions. These transactions are to be
generated whenever a customer returns a RS title
3. Extended Viewing Fee (EVF) transactions. These transactions
are to be generated whenever an EVF is billed for a RS title
4. PVT Sales transactions. These transactions are to be
generated whenever PVT sale takes place for a RS title
5. Missing Copy transaction. These transactions are to be
generated whenever a missing copy is identified for a RS title
Note: This transaction is not required if the Missing Copy
fee can be derived from the Inventory Transactions.
The file that CTHV needs to receive is to contain the following information:
<PAGE>
Columbia Tristar Home Video 3
Revenue Sharing System
System Interface Requirements - Blockbuster Version 1.7-August 27, 1998
- --------------------------------------------------------------------------------
Data Required Description
- ------------- -----------
1. Bar Code This must uniquely identify the specific copy of
a Revenue Sharing title
2. Transaction Date Date when the transaction took place
3. Transaction Code 'RO' for Rental Out transactions,
'RR' for Rental Return transactions,
'EV' for Extended Viewing Fee transactions,
'SA' for PVT Sales transactions and
'MC' for Missing copy transactions.
4. Process Date Date when data was processed for transmission to
CTHV.
5. UPC# UPC Code
6. Store # Store number of Store where tape is currently
located.
7. Revenue The actual revenue that the store charged for a
Rental Out, EVF or PVT Sale transaction.
8. Days Rented The number of rental days allowed for a
particular Rental Out transaction or the actual
number of rental days for a Rental Return
transaction.
<PAGE>
Exhibit D
*
- ---------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment. Two pages have been
omitted from Exhibit D.
<PAGE>
Exhibit E
*
- ---------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment. Two pages have been
omitted from Exhibit E.
<PAGE>
Exhibit 10.9
DIRECT REVENUE SHARING ADJUSTABLE LICENSE AGREEMENT
THIS AGREEMENT (the "Agreement") is made the 13th day of October, 1998 (the
"Effective Date").
BETWEEN:
(1) BLOCKBUSTER INC. whose principal place of business is at 1201 Elm Street,
Dallas, Texas 75270 (hereinafter referred to as "Blockbuster," which shall be
deemed to include its assigns once assigned); and
(2) UNIVERSAL STUDIOS HOME VIDEO whose principal place of business is at 100
Universal City Plaza, Universal City, California 91608 (hereinafter referred
to as "USHV," which shall be deemed to include its permitted assigns once
assigned).
WHEREAS:
(A) Blockbuster and certain of its Affiliates (the terms initially
capitalized in this Agreement and not otherwise defined herein shall have the
respective meanings set forth in Paragraph 1 of this Agreement) own, operate
and franchise retail stores which, among other things, rent, sell and market
pre-recorded videocassette tapes to the general public; and
(B) USHV and certain of its Affiliates acquire, produce, license, market and
sell motion pictures on pre-recorded videocassette tapes;
(C) USHV and Blockbuster are willing to enter into this Agreement under which
Blockbuster licenses, and has the option to purchase at the end of the
Revenue Sharing Period from USHV, the specified number of Copies of each
Rental Picture set forth herein;
(D) Blockbuster is willing to report electronically on an ongoing basis during
the Revenue Sharing Period information as to the rental of Copies per Rental
Picture as set forth in Exhibit D, attached hereto and made a part hereof.
- ----------
* Pages where confidential treatment has been requested are stamped
"Confidential material omitted and separately filed with the Commission
under an application for confidential treatment", and the confidential
section has been marked with a star (*).
<PAGE>
2
NOW THEREFORE, based on the above premises and in consideration of the mutual
covenants and agreements contained herein, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS:
a. "Affiliate" shall mean (i) in the case of USHV, all companies which
are controlled by or in which USHV has a controlling interest or which have a
common direct or indirect parent; and (ii) in the case of Blockbuster, all
companies which are controlled by or in which Blockbuster has a controlling
interest or which have a common direct or indirect parent.
b. "Agreement Year" shall mean a twelve (12) month period commencing on
the Effective Date of this Agreement. Each year in the Term may be referred
to as an "Agreement Year" or "Agreement Year One" or "Agreement Year Two."
c. "Bad Debt" shall mean *
d. "Blockbuster Headquarters" shall mean the corporate office of
Blockbuster located at 1201 Elm Street, Dallas, Texas 75270.
e. "Copy(ies)" shall mean English language and Spanish sub-titled VHS
videocassettes of the Rental Pictures licensed by Blockbuster from USHV for
Home Video Distribution. All other formats, including laserdisc, digital,
divx and DVD are not included under this Agreement.
f. "Damaged Copies" shall mean those Copies which become materially
damaged by Participating Store personnel, customers, or otherwise, during the
first ninety (90) calendar days of the Revenue Sharing Period.
g. "Defective Copies" shall mean those Copies that are mechanically
defective, mispackaged or contain extraneous material. Such extraneous material
may include, without limitation, pornographic, obscene or scenes of an
inappropriate nature placed on Copies, provided, however, that such extraneous
material shall not include the actual feature motion
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
3
picture content or trailers so long as such content is not altered in any way
and is in compliance with the MPAA rating and the definition of Rental Pictures.
h. "Distribution Center" shall mean Blockbuster's distribution center that
is currently in McKinney, Texas. Blockbuster may add an additional two (2)
delivery points in the United States at its option.
i. "Dreamworks Pictures" shall mean all pictures, whether
theatrical-length or otherwise, for which USHV provides fulfillment services
under its Dreamworks deal agreement.
j. "Franchise Stores" shall mean Blockbuster franchise stores designated
by Blockbuster from time to time as ordering Copies through Blockbuster. If a
Franchise Store elects to participate hereunder and is therefore designated by
Blockbuster pursuant to this Paragraph, it shall be deemed a Participating
Store.
k. "Gross Box Office" or "GBO" shall mean the box office gross receipts
earned by a Rental Picture in the United States and Canada measured from the
Rental Picture's initial theatrical release in the Territory until the date
licensed by Blockbuster, as reported by HOLLYWOOD REPORTER or VARIETY.
l. "Home Video Distribution" or "Home Video Distribution Rights" shall
mean the right to manufacture, record, sell and/or distribute a motion picture
on videocassettes.
m. "Month" or "Monthly" shall mean Blockbuster's accounting cycles that
are based upon a four week, four week, five week rotation as set forth in
Exhibit C attached hereto and made a part hereof.
n. "Non-Theatrical Rental Pictures" shall mean each and every
non-theatrical feature motion picture for which USHV owns or controls Home
Video Distribution Rights in the Territory except for Dreamworks Pictures,
provided such picture; (1) is at least seventy (70) minutes in length; (2) is
within Blockbuster's guidelines of the MPAA rating system (i.e., Blockbuster
does not make available for rental to its customers' pictures which are
either not rated or which have a rating of NC17 or more restrictive); (3) is
not a sports event, concert film, stage play, foreign film, (with the
exception of foreign produced films in the English language), documentary,
video or theatrical re-release, or library film; and (4) is initially
distributed by USHV via a medium other than theatrical release (e.g., via
home video, cable, pay or free television exhibition) which when released on
videocassette is priced and distributed by USHV at the then current
"wholesale price for rental" now estimated at Fifty-eight Dollars (US$58.00)
(as opposed to a "sell-through price"), and is intended by USHV to be rented
rather than sold to consumers. If USHV and a third party execute a direct
<PAGE>
4
revenue sharing agreement which contains more favorable compensation terms
than the terms of this Agreement (the "New Output Agreement"), then
Blockbuster shall have the option to substitute all, but not less than all,
of the terms of the New Output Agreement for the terms of this Agreement
during the remainder of the Term of this Agreement. Further, USHV shall
exercise practices relating to the acquisition and distribution of Rental
Pictures throughout the Term of this Agreement substantially similar to those
in which it engages at the time of entering this Agreement, and to the extent
such practices deviate, it shall be a basis for Blockbuster to refuse any
Rental Picture.
o. "Participating Store" shall mean (i) any Video Store in the United
States, which at any time during the Term of this Agreement, is wholly owned
and/or operated by Blockbuster or its Affiliates under the Blockbuster
trademarks; (ii) if designated by Blockbuster as ordering Copies through
Blockbuster, any Video Store in the United States, which at any time during the
Term of this Agreement, is wholly owned and/or operated by Blockbuster or its
Affiliates not under the Blockbuster trademarks; and (iii) Franchise Store. With
regard to Blockbuster stores in Canada, it shall mean those stores designated by
Blockbuster or an Affiliate from time to time as ordering Copies through
Blockbuster. For Copy quantity allocation purposes, Kiosks and Video Vending
Machines (the "Special Formats") shall not be included in the definition of
"Participating Stores." Blockbuster will continue to test various Special
Formats and at the time of general adoption by Blockbuster of a Special Format
following completion of a test, the parties shall discuss the results of the
test and mutually develop a matrix to facilitate the license of Copies for such
Special Formats.
p. "Promotional and Operational Credits" shall mean *
q. "Rental Picture" and "Theatrical Rental Picture" shall mean each and
every feature motion picture for which USHV owns or controls Home Video
Distribution Rights in the Territory except for Dreamworks Pictures, provided
such picture: (1) is at least seventy (70) minutes in length; (2) is within
Blockbuster's guidelines of the MPAA rating system (i.e., Blockbuster does
not make available for rental to its customers pictures which are either not
rated or which have a rating of NC17 or more restrictive); (3) is not a
sports event, concert film, stage play, foreign film (with the exception of
foreign produced films in the English language), documentary, video or
theatrical re-release, or library film; and (4) is distributed by USHV when
initially released on videocassette, is
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
5
priced and priced by USHV at the then current "wholesale price for rental"
now estimated at Fifty-eight Dollars (US$58.00) (as opposed to a
"sell-through price"), and is intended by USHV to be rented rather than sold to
consumers. If USHV and a third party execute a direct revenue sharing output
agreement which contains more favorable compensation terms than the terms of
this Agreement (the "New Output Agreement"), then Blockbuster shall have the
option to substitute all, but not less than all, of the terms of the New
Output Agreement for the terms of this Agreement during the remainder of the
Term of this Agreement. Further, USHV shall exercise practices relating to
the acquisition and distribution of Rental Pictures throughout the Term of
this Agreement substantially similar to those in which it engages at the time
of entering this Agreement, and to the extent such practices deviate, it
shall be a basis for Blockbuster to refuse any Rental Picture.
r. "Rental Revenue" shall mean the *
s. "Rental Transaction" shall mean that period of time that a title is
rented to a customer, including any extended viewing period, as defined by
Blockbuster's then current practices across all videocassettes available for
rental from all videocassettes suppliers.
t. "Revenue Sharing Period" shall mean the period commencing on the Video
Street Date of the relevant Rental Picture and running for the twenty-six (26)
weeks immediately following.
u. "Video Store" shall mean a retail outlet that is at least one thousand
five hundred (1,500) square feet that is primarily engaged in the rental of
videocassettes to the public for home viewing entertainment purposes.
v. "Video Street Date" shall mean, with respect to any Picture, the
first date on which, in the Territory, both: (i) such Picture is authorized
by USHV for Home Video Distribution, and (ii) Copies of such Picture are
actually available to the general public.
2. AGREEMENT TERM:
The term of this Agreement shall be for two (2) years (the "Term"),
commencing as of the Effective Date.
3. TERRITORY:
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
6
The territory for purposes of this Agreement with respect to each
Rental Picture shall be the United States, its territories and possessions,
if and to the extent USHV owns or controls such rights to territories and
possessions of the United States (the "Territory"). Blockbuster and USHV
agree to discuss the inclusion of Canada, its provinces, territories and
possessions in the Territory in accordance with the terms and conditions of
this Agreement or comparable terms mutually agreed upon by the parties.
4. BLOCKBUSTER COMMITMENTS:
Beginning as of the date of this Agreement for Participating Stores,
Blockbuster agrees as follows:
a. License: The following terms shall apply to Rental Pictures:
(1) REVENUE SHARES COPIES: For each and every * licensed pursuant
to this Agreement, Blockbuster agrees to license, and USHV agrees to
license to Blockbuster, * the Base Units number of Copies set forth in
the Matrices attached hereto as EXHIBIT A and EXHIBIT B ( * ), and made
a part hereof. For each and every * licensed by Blockbuster pursuant to
this Agreement, Blockbuster agrees to license from USHV, and USHV
agrees to license to Blockbuster a quantity of not less than the * Base
Units number of Copies as set forth on the Matrix multiplied by * and
up to, in Blockbuster's discretion, an aggregate of * the Base Units
number of Copies as set forth in EXHIBIT A and EXHIBIT B. The total
number of Copies licensed by Blockbuster pursuant to this subparagraph
may hereinafter be referred to as the "Revenue Share Copies."
Blockbuster may retain up to * of the Revenue Share Copies at its
Distribution Center for replenishment, new Participating Stores and
unexpected spikes in product performance (the "Excess Copies").
Blockbuster and USHV acknowledge that the * equal to or greater than *
and therefore, the parties shall negotiate in good faith with respect
to each * which shall be for terms * than the terms of this Agreement.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
7
(2) RENTAL REVENUE: The percentage of Rental Revenue on all
Revenue Share Copies (excluding * ) paid by Blockbuster to USHV shall
be as follows, unless USHV * under Paragraph 4.c., in which event
Paragraph 4.a.(2)(b) shall apply:
(a) If USHV * under Paragraph 4.c. below:
(1) * Pictures
(i) For each and every * with a GBO of *
released by USHV in the Territory, the * per Base
Units Copy of each Rental Picture * of the Rental
Revenue derived from the Revenue Share Copies of each
Rental Picture during the applicable Revenue Share
Period * during the applicable Revenue Sharing Period,
unless such Copy is purchased sooner by Blockbuster
according to Paragraph 4.c.
(ii) For each and every * , and * (as provided
in subparagraph * below) to be selected * by the
parties, all of which shall have a GBO of * and be
released by USHV in the Territory, the * per Base
Units Copy of each Rental Picture * of the Rental
Revenue derived from the Revenue Share Copies of the
Rental Picture during the applicable Revenue Share
Period * during the applicable Revenue Sharing
Period, unless such Copy is purchased sooner by
Blockbuster according to Paragraph 4.c.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
8
(iii) For each and every * with a GBO of *
released by USHV in the Territory * of the Rental
Revenue derived from the Revenue Share Copies of the
Rental Picture during the applicable Revenue Share
Period * during the applicable Revenue Sharing
Period, unless such Copy is purchased sooner by
Blockbuster according to Paragraph 4.c.
(iv) There shall be no cross collaterization of
any kind under the Agreement including, without
limitation, between Rental Pictures.
(2) * Pictures: For each and every * of the Rental
Revenue derived from Revenue Share Copies of the
Rental Picture during the applicable Revenue Share
Period * during the Revenue Sharing Period, unless
such Copy is purchased sooner by Blockbuster
according to Paragraph 4.c.
(b) If USHV * under Paragraph 4.c. below:
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
9
(1) * Pictures:
(i) For each and every * with a GBO of * or
more released by USHV in the Territory, * of the
Rental Revenue derived from the Revenue Share Copies
of each Rental Picture during the * of the applicable
Revenue Share Period and * of the Rental Revenue
derived from the Revenue Share Copies of each Rental
Picture * of the applicable Revenue Share Period.
(ii) For each and every * and * (as provided in
subparagraph * below) to be selected and mutually
agreed upon by the parties, all of which shall have a
GBO of * and be released by USHV in the Territory, *
of the Rental Revenue derived from the Revenue Share
Copies of each Rental Picture during the * of the
applicable Revenue Share Period and * of the Rental
Revenue derived from the Revenue Share Copies of each
Rental Picture during the * of the applicable Revenue
Share Period.
(iii) For each and every * with a GBO of *
released by USHV in the Territory * of the Rental
Revenue derived from the Revenue Share Copies of each
Rental Picture during the * of the applicable Revenue
Share Period and * of the Rental Revenue derived from
the Revenue Share Copies of each Rental Picture
during the * of the applicable Revenue Share Period.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
10
(iv) There shall be no cross collaterization of
any kind under the Agreement including, without
limitation, between Rental Pictures.
(2) * Pictures: For each and every * of the Rental
Revenue derived from the Revenue Share Copies of each
Rental Picture during the * of the applicable Revenue Share
Period * of the Rental Revenue derived from the Revenue
Share Copies of each Rental Picture during the * of the
applicable Revenue Share Period.
(3) Payment: Blockbuster shall pay: (i) USHV's share of the
Rental Revenue on * , the * pursuant to Paragraph 4.c. hereof, and the
applicable * (as defined below) within * calendar days following * ,
but no sooner than * calendar days * , with full payment on all *
calendar days * of the Revenue Sharing Period; and (ii) USHV's share of
the Rental Revenue on * and the * calendar days * expiration of the
Revenue Sharing Period.
b. Participating Franchise Stores: In accordance with the terms and
conditions of this Agreement, Blockbuster may distribute Copies of the Rental
Pictures received under this Agreement to its Franchise Stores. Terms for
implementation of this Agreement at the franchise level and franchise payments
thereunder will be controlled and administered by Blockbuster but shall not be
inconsistent with the terms and conditions of this Agreement. For purposes of
this Agreement if a Franchise Store elects to participate under this Agreement,
such Franchise Store shall be a Participating Store.
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
11
c. SELL-OFF/BUY BACK: Blockbuster agrees not to sell off any Copies of
a Rental Picture during the * of the Revenue Sharing Period. * to Blockbuster
within the * of the applicable Revenue Share Period, may * . In such event,
Blockbuster will, * , Blockbuster may, during weeks * through * sell up to *
of all Copies of a Rental Picture in inventory and shall pay to USHV * for
each Base Unit number of Copies in the Matrix for each Rental Picture
(the *). Blockbuster will not be obligated to * . In exercising Blockbuster's
sell-off rights pursuant to Paragraph 4 hereof, Blockbuster shall not sell,
lease, license or otherwise dispose of any Copies of any Rental Picture to
any Affiliate, franchisee, or third party, including, without limitation, any
third party liquidator. * Blockbuster may sell Copies of Rental Pictures to
consumers pursuant to the terms of this Agreement through the Internet under
the Blockbuster brand name so long as such sales are not to a third party for
resale and do not otherwise violate the terms of the Agreement. Revenue
generated from selling Copies of a Rental Picture shall not be included in
Rental Revenue.
d. Packing and Shipping: Blockbuster will be responsible for making the
Copies ready for consumer rental at the Distribution Center and will pay for
shipping the Copies from its Distribution Center to its Participating Stores.
e. Damages/Defective Copies: USHV shall deliver to Blockbuster, at no
cost, additional Copies of each Rental Picture in the amount of * of the Base
Buy Copies as set forth on Exhibit A for Blockbuster to retain at its
Distribution Center and to use solely as replacement of Defective Copies and
Damaged Copies; provided, however, that if any of these Copies are placed in
the Participating Stores, USHV shall receive its share of the Rental Revenue
for the new Copy used
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
12
to replace the Damaged or Defective Copy in place of its share of the Rental
Revenue for the Damaged or Defective Copy.
f. Reporting: On a weekly basis throughout each Rental Picture's
respective Revenue Sharing Period and until such time Revenue Share Copies of
such Rental Picture are purchased pursuant to Paragraph 4.c., Blockbuster
shall electronically (or by any other means mutually agreed to by USHV and
Blockbuster) deliver to USHV reports (in a form mutually agreed to by USHV
and Blockbuster) detailing the number of rental transactions per Rental
Picture licensed pursuant to this Agreement and in a format set forth on
Exhibit D.
g. No First Sale: Blockbuster agrees that the license of a Copy of any
Rental Picture and every Non-Theatrical Rental Picture under this Agreement
shall not be deemed a "sale or other transfer of ownership" within the meaning
of Section 106(3) of the Copyright Act, 17 U.S.C. Section 106(3), and shall not
render Blockbuster an "owner" of the Copy of that Theatrical Rental Picture or
Non-Theatrical Rental Picture within the meaning of the Section 109(a) of the
Copyright Act, 17 U.S.C. Section 109(a). Blockbuster expressly agrees that as
license it has no right to "sell or otherwise dispose of the possession of any
Copy of any Rental Picture and every Non-Theatrical Rental Picture except as
expressly provided in this Agreement.
5. USHV COMMITMENTS:
a. Grant: USHV grants Blockbuster the right to distribute the Copies of
the Rental Pictures to Participating Stores or Blockbuster owned alternative
distribution channels including, without limitation, video vending machines,
for the transfer of possession on a temporary or permanent basis to members
of the general public for home viewing purposes.
b . Marketing Support: In consideration for the various services and
activities which Blockbuster has agreed to perform hereunder for the benefit
of USHV, such as rental reporting functions, USHV agrees to credit
Blockbuster on a per Rental Picture basis (on the relevant invoice) with
marketing support funds (the "Marketing Support Funds") in a minimum amount
of * of the fixed revenue generated for USHV on the Base number of Copies by
Theatrical Rental Pictures (i.e., * x base number of Copies for those with *
or greater x * x base number of Copies for those with Gross Box Office of
less than * Marketing Support Funds) or * per respective Copy. * of the
Marketing Support Funds shall be utilized by Blockbuster at its discretion
for title specific promotion of a particular Rental Picture and advertising
the availability or association of such Rental Picture with Blockbuster (with
a USHV right of consultation) while the remaining * shall be utilized by USHV
at its discretion (with a Blockbuster right of consultation) for title specific
promotion of particular Rental Pictures featuring Blockbuster's trademarks
and logos in any such
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
13
advertisement where applicable (the "Advertisement"). All Advertisements and
marketing materials shall be submitted to the respective party at least
fifteen (15) days prior to broadcast or publication for written approval. If
such party fails to respond within the fifteen (15) days such submission
shall be deemed approved. Both parties shall attempt to work within the
allotted time period for the approval process, provided, however, that if
such time period becomes unreasonable for either Blockbuster or USHV, the
parties shall discuss and extend, if desired, the time period. In certain
instances, based on written communication of specific shorter deadlines, all
reasonable efforts will be made to meet these shorter deadlines. Each party
shall promptly provide the other with written documentation that funds have
been spent in accordance with the terms of this Paragraph.
c. Shipping: USHV will deliver the Copies to the Distribution Center at
least three (3) weeks prior to Video Street Date and will make a good faith
effort to deliver the Copies up to four (4) weeks prior to Video Street Date
per each respective Rental Picture as long as Blockbuster submits its order
by the stated deadline reasonably provided by USHV, provided, however, that
consistent failure by USHV to deliver the Copies within the specified time
period will be considered a material breach of this Agreement.
6. AUDIT:
a. Audit. During the Term and continuing until the date six (6) months
following the date of expiration or earlier termination of this Agreement,
Blockbuster agrees that USHV or USHV's authorized designee with three (3)
business days advance written notice, may conduct, during normal business
hours, Monday through Wednesday; (i) a total of four (4) audits per year of
Blockbuster's business operation and records at the Blockbuster Headquarters;
and (ii) a total of ten (10) audits per year of the business records at a
Participating Store (i.e., ten (10) total audits and not ten (10) audits per
Participating Store), solely pertaining to the Copies licensed by Blockbuster
pursuant to this Agreement. Any additional audit request of information not
provided for above including, without limitation, any audit of Bad Debt or
Promotional and Operational Credits shall be performed by an independent
certified public accountant on an annual basis who will only be given access
to those records pertaining to USHV's Revenue Share Copies. Any audits
conducted pursuant to this section shall relate to Blockbuster's compliance
with the terms of this Agreement and shall not unreasonably interfere with
Blockbuster's daily business operations. USHV agrees that the data and other
information collected by USHV may be used by USHV only in connection with
such audits and to fulfill USHV's commitments under this Agreement.
Blockbuster agrees to reimburse USHV for actual costs incurred if any audit
results in deviation of five percent (5%) or more between the percentage of
Rental Revenue paid to USHV by Blockbuster and the percentage of Rental
Revenue due to USHV by Blockbuster.
<PAGE>
14
b. Rentrak/SuperComm: Blockbuster shall provide a daily transaction
file in standard Blockbuster format for each Rental Picture to the entity
designated by USHV, which shall be either Rentrak or SuperComm, to allow
Rentrak or SuperComm, as the case may be, to account for revenues due to USHV
pursuant to the terms of this Agreement.
7. USHV'S REPRESENTATIONS AND WARRANTIES:
USHV represents and warrants that:
a. It is a corporation organized and existing under the laws of the State
of California with its principal place of business in the State of California.
b. The undersigned has the full right, power and authority to sign this
Agreement on behalf of USHV.
c. The execution, delivery and performance of this Agreement does not
and will not, violate any provisions of USHV's articles or certificates of
incorporation and bylaws, or any contract or other agreements to which USHV
is a party.
d. There is no broker, finder or intermediary involved in connection with
the negotiations and discussions incident to the execution of this Agreement,
and no broker, finder, agent or intermediary who might be entitled to a fee,
commissions or any other payment upon the consummation of the transactions
contemplated by this Agreement.
e. This Agreement has been duly executed and delivered and constitutes
the legal, valid and binding obligation of USHV enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or any other laws now or hereinafter
in effect and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
f. Copies shall be new and unused and comparable in quality to other
videocassette units being purchased by USHV in rental distribution channels.
8. BLOCKBUSTER'S REPRESENTATIONS AND WARRANTIES:
Blockbuster represents and warrants that:
a. It is a corporation organized and existing under the laws of the State
of Delaware, with its principal place of business in the State of Texas.
<PAGE>
15
b. The undersigned has the full right, power and authority to sign this
Agreement on behalf of Blockbuster.
c. The execution, delivery and performance of this Agreement does not and
will not, violate any provisions of Blockbuster's articles or certificates of
incorporation and bylaws, or any contract or other agreement to which
Blockbuster is a party.
d. There is no broker, finder or intermediary involved in connection with
the negotiations and discussions incident to the execution of this Agreement,
and no broker, finder, agent or intermediary who might be entitled to a fee,
commissions or any other payment upon the consummation of the transactions
contemplated by this Agreement.
e. This Agreement has been duly executed and delivered and constitutes the
legal, valid and binding obligation of Blockbuster enforceable in accordance
with its terms, except as enforceability may be limited to bankruptcy,
insolvency, reorganization, moratorium or any other laws now or hereinafter in
effect and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
9. INDEMNIFICATION:
(i) USHV agrees to, at all times, defend, indemnify and hold
Blockbuster, its parent company, their affiliates, subsidiaries,
franchisees and the officers, directors, agents and employees of each,
harmless from and against any and all claims, suits, damages, losses,
liabilities, obligation, fines, penalties, cost and expenses (whether
based on libel, slander, invasion of privacy, breach of contract,
product liability, patent, trademark, license or copyright infringement
or otherwise), including legal fees and expenses, of whatever kind or
nature (collectively, "Loss"), arising out of or based on (a) a
material breach or violation of this Agreement by USHV or any failure
by USHV to perform any of the agreements, terms, covenants, conditions,
representations or warranties of this Agreement to be performed by
USHV; (b) the content of any Copy of a Rental Picture licensed by
Blockbuster pursuant to this Agreement; or (c) any negligent acts or
omissions by USHV its employees and/or agents.
(ii) Blockbuster agrees to, at all times, defend, indemnify and hold USHV,
its parent company, their affiliates, subsidiaries, franchisees and the
officers, directors, agents and employees of each, harmless from and
against any Loss, arising out of or based on (a) a material breach or
violation of this Agreement by Blockbuster any failure by Blockbuster to
perform any of the agreements, terms, covenants, conditions,
representations or
<PAGE>
16
warranties of this Agreement to be performed by Blockbuster, or (b)
negligent acts or omissions by Blockbuster, its employees and/or agents.
(iii) The Indemnified Party shall give written notice to the Indemnifying
Party and the Indemnifying Party will promptly, at the Indemnified Party's
request, assume and diligently conduct the entire defense of any suit or
action, or the making of any claim as to which indemnity may be sought
hereunder, including settlements and appeals, at the Indemnifying Party's
sole cost and expense, and the Indemnifying Party shall pay and discharge
any and all settlement amounts, judgments or decrees which may be
rendered.
(iv) The Indemnifying Entity shall not, except with the consent of the
Indemnified Party, consent to entry of any judgment or administrative
order or enter into any settlement that (i) could affect the intellectual
property rights or other business interest of the Indemnified Party; or
(ii) does not include as an unconditional term thereof the giving by the
claimant or plaintiff by the Indemnified Party of a release from all
liability with respect to such claim or litigation.
(v) In the event that the Indemnifying Party is not asked or does not
accept the defense of any matter as above provided, the Indemnified Party
shall have the full right to defend against any such claim or demand, and
shall be entitled to settle or agree to pay in full such claim of demand,
in its sole discretion without releasing any obligation or liability of
the Indemnifying Party.
10. TERMINATION:
The non-defaulting party may terminate this Agreement if a Default, as
defined below, by the other party has occurred and is continuing by giving
written notice to the defaulting party. The term "Default" shall mean any of the
following: (a) failure by a party to comply with or perform any provision or
condition of this Agreement that results in a material breach of this Agreement
and, if such material breach can be cured, continuance of such failure for
thirty (30) days after written notice to such party (if cure is not practicable,
the thirty (30) day notice period is not required); (b) a party becomes
insolvent, is unable to pay its debts as they mature or is the subject of a
petition in bankruptcy, whether voluntary or involuntary, or of any other
proceeding under bankruptcy, insolvency or similar laws; or makes an assignment
for the benefit of creditors; or is named in, or its property is subject to a
suit for appointment of a receiver, or is dissolved or liquidated; or (c) any
material warranty or representation made in this Agreement is breached, false or
misleading in any material respect. In the event of such termination, the
non-defaulting party shall be entitled to pursue any and all remedies provided
in law and recover any damages it may have suffered by reason of such Default,
provided, however, that USHV expressly
<PAGE>
17
waives its right to seek equitable relief including, without limitation, seeking
injunctive relief. Upon Default and/or termination hereunder, any Copies in
Blockbuster's possession at time of termination shall continue to be licensed
under the terms of this Agreement until such Copies are returned to USHV or
purchased by Blockbuster.
11. REMEDIES:
a. No remedy conferred by any of the specific provisions of this Agreement
is intended to be exclusive of any other remedy which is otherwise available at
law, in equity, by statute or otherwise, and except as otherwise expressly
provided for herein, each and every other remedy shall be cumulative and shall
be in addition to every other remedy given hereunder or now or hereafter
existing at law, in equity, by statute or otherwise and no provision hereof
shall be construed so as to limit any party's available remedies in the event of
a breach by the other party hereto. The election of any one or more of such
remedies by any of the parties hereto shall not constitute a waiver by such
party of the right to pursue any other available remedies.
b. Except as provided herein, no civil action with respect to any dispute,
claim or controversy arising out of or relating to this Agreement may be
commenced until:
(i) The parties attempt in good faith to resolve through negotiation
any dispute, claim or controversy arising out of or relating to this
Agreement. Either party may initiate negotiations by sending written
notice in letter form to the other party, setting forth the subject of the
dispute and the relief requested. The recipient of such notice will
respond in writing within five (5) business days with a statement of its
position on and recommend a solution to the dispute. If the dispute is not
resolved by this exchange of correspondence then representatives of each
part with full settlement authority will meet at a mutual agreeable time
and place within ten (10) business days of the date of the initial notice
in order to exchange relevant information and perspectives, and to attempt
to resolve the dispute. If the dispute is not resolved by these
negotiations, the matter will be submitted to J.A.M.S/ENDISPUTE, or its
successor, for binding arbitration; and
(ii) If the parties are unable to resolve the dispute, claim or
controversy arising out of or relating to this Agreement pursuant to the
above subparagraph b., such dispute, claim or controversy shall be
submitted to final and binding arbitration before J.A.M.S/ENDISPUTE, or
its successor, pursuant to the United States Arbitration Act, 9 U.S.C.
Sec. 1 et seq. Either party may commence the arbitration process called
for in this Agreement by filing a written demand for arbitration with
J.A.M.S/ENDISPUTE, with a copy to the other party. The arbitration will be
conducted in accordance with the provisions of J.A.M.S/ENDISPUTE's
Streamlined Arbitration Rules and Procedures in
<PAGE>
18
effect at the time of filing of the demand for arbitration. The parties
will cooperate with J.A.M.S/ENDISPUTE and with one another in selecting an
arbitrator from J.A.M.S/ENDISPUTE's panel of neutrals, and in scheduling
the arbitration proceedings. The parties covenant that they will
participate in the arbitration in good faith, and that they will share
equally in its costs. The provisions of this Paragraph may be enforced by
any court of competent jurisdiction, and the party seeking enforcement
shall be entitled to an award of all costs, fees and expenses, including
attorneys fees, to be paid by the party against whom enforcement is
ordered.
12. MISCELLANEOUS:
12.1 FORCE MAJEURE: Neither party shall be considered in default of this
Agreement or be liable for damage for any failure of performance hereunder
occasioned by an act of God, force of nature, war or warlike activity,
insurrection or civil commotion, labor dispute, lock out (whether or not such is
under the parties' control, transportation delay, governmental regulatory action
whether or not with proper authority or other cause similar or dissimilar to the
foregoing and beyond its reasonable control, provided the party so affected
gives prompt notice to the other. In the event of a suspension of any obligation
by reason of this section which extends beyond ten (10) days, the party not
affected may, at its option, elect to cancel those aspects of this Agreement
which are reasonably feasible to terminate. Such cancellation shall be effective
thirty (30) days after written notice of such cancellation has been given to the
other party.
12.2 NOTICE: Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given and received on the date
of delivery or on the third (3rd) business day following the date of mailing of
the same, or on the day of transmission by telecopier or other form of recorded
communication service of the same, as the case may be to the party to be
notified at the addresses set forth below:
If to Blockbuster: Blockbuster Inc.
1201 Elm Street, 21st Floor
Dallas, Texas 75270
Attn: General Counsel
Facsimile: (214) 854-3677
cc: Chief Executive Officer
If to USHV: Universal Studios Home Video
70 Universal City Plaza
Universal City, California 91608
Attn: Executive Vice President & Chief
Operating Officer
Facsimile: 818-866-2638
with copy to: Universal Family and Home Entertainment Productions
70 Universal City Plaza
Universal City, California 91608
Attn: Executive Vice President
Facsimile: 818-866-0860
<PAGE>
19
or such other address as may be designated by either party by written notice to
the other as hereinabove provided.
12.3 ENTIRE AGREEMENT: This Agreement, together with all Exhibits attached
hereto, represents the entire agreement and understanding between the parties
with respect to the subject matter of this Agreement, and supersedes any other
agreement or understanding, written or oral, that the parties hereto may have
had with respect thereto. No statement or inducement with respect to the subject
matter by either party or by any agent or representative of either party which
is not contained in this Agreement shall be valid or binding between the
parties.
12.4 RELATIONSHIP OF PARTIES: The parties are independent contractors, and
nothing in this Agreement shall be deemed or construed to create, or have been
intended to create a partnership, joint venture, employment or agency
relationship between the parties. Each party agrees that it neither has nor will
give the appearance or impression of possessing the legal authority to bind or
commit any other party in any way except as provided in this Agreement.
12.5 EFFECT OF HEADINGS: The headings and subheadings of the sections of
this Agreement are inserted for convenience of reference only and shall not
control or affect the meaning or construction of any of the agreements, terms,
covenants and conditions of this Agreement in any manner.
12.6 CONSTRUCTION: The Agreement has been fully reviewed and negotiated by
the parties and their respective legal counsel. Accordingly, in interpreting
this Agreement, no weight shall be placed upon which party or its counsel
drafted the provision being interpreted.
12.7 SEVERABILITY: If any term or provision of this Agreement shall be
found to be void or contrary to law, such term or provision shall, but only to
the extent necessary to bring this Agreement within the requirements of law, be
deemed to be severable from the other terms and provisions of this Agreement,
and the remainder of this Agreement shall be given effect as if the parties had
not included the severed term herein.
<PAGE>
20
12.8 AMENDMENTS: No provision of this Agreement may be modified, waived or
amended except by a written instrument duly executed by each of the parties. Any
such modifications, waivers or amendments shall not require additional
consideration to be effective.
12.9 COUNTERPARTS: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.10 IMPLIED WAIVER: Any failure on the part of either party to insist
upon the performance of this Agreement or any part of this Agreement, shall not
constitute a waiver of any right under this Agreement.
12.11 ASSIGNMENT: Neither party may assign its rights or delegate its
obligations under this Agreement without the other party's prior written
consent, subject to the following: (i) as to USHV, USHV may assign its rights
or delegate its obligations under this Agreement to an Affiliate, provided
that such entity obtains or retains substantially the same access to the
trade names/trademarks of USHV and the Home Video Distribution Rights to USHV
"new" (i.e., yet-to-be-released) theatrical releases as USHV enjoyed
immediately prior to the applicable transfer; and (ii) USHV shall have the
right to assign its right to receive payments to any entity hereunder; and
(ii) as to Blockbuster, Blockbuster may assign its rights or delegate its
obligations under this Agreement, to an Affiliate, provided that such
assignment is coextensive with an assignment of all or substantially all the
video rental business of Blockbuster.
12.12 SURVIVAL: All representations, warranties and indemnities made
herein shall survive the termination of this Agreement and shall remain in full
force and effect for a period of two (2) years. All of the party's rights and
privileges, to the extent they are fairly attributable to events or conditions
occurring or existing on or prior to the termination of this Agreement, shall
survive termination and shall be enforceable by such party and its successors
and assigns.
12.13 CONFIDENTIALITY: Except as otherwise required by applicable federal
and state laws, or as may be required for the preparation of tax returns or
other legally required documents or as reasonably necessary to the employees,
agents, lawyers, accountants, or auditors of either party, or in any action to
enforce the provisions hereof, each party shall keep the information regarding
the details of this Agreement confidential and restrict dissemination to each of
its own personnel and to third parties to only a "need to know" basis, using the
standard of care which each uses to protect its own information from disclosure
thereafter. The party disclosing confidential information to its own personnel
and third parties shall require that these persons be bound by the
confidentiality obligations set forth in this Agreement. In addition to the
foregoing, the parties must keep all information provided by each other in
accordance with this
<PAGE>
21
Agreement confidential and any unauthorized disclosure shall be considered a
material breach of this Agreement. Any press release issued hereunder by either
party must be approved in writing by the other party prior to its release.
12.14 GOVERNING LAW: This Agreement shall be constructed in accordance
with the laws of the State of New York without regard to its rules on
conflicts of law.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the date and year first above
written.
UNIVERSAL STUDIOS HOME VIDEO BLOCKBUSTER INC.
Name: William P. Clark Name: Edward B. Stead
-------------------------------- --------------------------------
Signature: /s/ William P. Clark Signature: /s/ Edward B. Stead
--------------------------- ---------------------------
Title: Executive Vice President & Title: EVP
Chief Operating Officer -------------------------------
-------------------------------
<PAGE>
Exhibit A
Blockbuster Direct Revenue Sharing Matrix
*
- ----------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment. Two pages have been
omitted from Exhibit A.
<PAGE>
Exhibit B
Spanish Sub-titled Matrix to be negotiated and inserted at a later date.
<PAGE>
Exhibit C
Accounting Calendar
(See Attached)
<PAGE>
1998 Accounting Calendar
Jan. 1- U.S. Corporate Holiday
Jan. 2- U.S. Corporate Holiday
Jan. 11- Video Pay Period
Jan. 16- A/P Close Complete
Jan. 17- GELCO Cut-Off
Jan. 25- Last day of JDE accounting period, Video Pay Period
Feb. 8- Video Pay Period
Feb. 13- A/P Close Complete
Feb. 14- GELCO Cut-Off
Feb. 22- Last day of JDE accounting period, Video Pay Period
March 8- Video Pay Period
March 20- A/P Close Complete
March 21- GELCO Cut-Off
March 22- Video Pay Period
March 29- Last day of JDE accounting period
April 5- Video Pay Period
April 17- A/P Close Complete
April 18- GELCO Cut-Off
April 19- Video Pay Period
April 26- Last day of JDE accounting period
May 3- Video Pay Period
May 15- A/P Close Complete
May 16- GELCO Cut-Off
May 17- Video Pay Period
May 24- Last day of JDE accounting period
May 25- U.S. Corporate Holiday
May 31- Video Pay Period
June 14- Video Pay Period
June 19- A/P Close Complete
June 20- GELCO Cut-Off
June 28- Last day of JDE accounting period, Video Pay Period
July 3- U.S. Corporate Holiday
July 12- Video Pay Period
July 17- A/P Close Complete
<PAGE>
July 18- GELCO Cut-Off
July 26- Last day of JDE accounting period, Video Pay Period
Aug. 9- Video Pay Period
Aug. 15- GELCO Cut-Off
Aug. 23- Last day of JDE accounting period, Video Pay Period
Sept. 6 - Video Pay Period
Sept. 7 - U.S. Corporate Holiday
Sept. 18- A/P Close Complete
Sept. 19- GELCO Cut-Off
Sept. 20- Video Pay Period
Sept. 27- Last day of JDE accounting period
Oct. 4- Video Pay Period
Oct. 16- A/P Close Complete
Oct. 17- GELCO Cut-Off
Oct. 18- Video Pay Period
Oct. 25- Last day of JDE accounting period
Nov. 1- Video Pay Period
Nov. 14- GELCO Cut-Off
Nov. 13- A/P Close Complete
Nov. 15- Video Pay Period
Nov. 22- Last day of JDE accounting period
Nov. 26- U.S. Corporate Holiday
Nov. 27- U.S. Corporate Holiday
Nov. 29- Video Pay Period
Dec. 13- Video Pay Period
Dec. 18- U.S. Corporate Holiday, A/P Close Complete
Dec. 19- GELCO Cut-Off
Dec. 27- Last day of JDE accounting period, Video Pay Period
1999 Accounting Calendar
Jan. 1- U.S. Corporate Holiday
Jan. 10- Video Pay Period
Jan. 18- U.S. Corporate Holiday
Jan. 24- Last day of JDE accounting period, Video Pay Period
<PAGE>
Feb. 7- Video Pay Period
Feb. 21- Video Pay Period, Last day of JDE accounting period
March 7- Video Pay Period
March 21- Video Pay Period
March 28- Last day of JDE accounting period
April 4- Video Pay Period
April 18- Video Pay Period
April 25- Last day of JDE accounting period
May 2- Video Pay Period
May 16- Video Pay Period
May 23- Last day of JDE accounting period
May 24- U.S. Corporate Holiday
May 30- Video Pay Period
June 13- Video Pay Period
June 27- Video Pay Period, Last day of JDE accounting period
July 5- U.S. Corporate Holiday
July 11- Video Pay Period
July 25- Last day of JDE accounting period, Video Pay Period
Aug. 8- Video Pay Period
Aug. 22- Video Pay Period, Last day of JDE accounting period
Sept. 5- Video Pay Period
Sept. 6- U.S. Corporate Holiday
Sept. 19- Video Pay Period
Sept. 26- Last day of JDE accounting period
Oct. 3- Video Pay Period
Oct. 17- Video Pay Period
Oct. 24- Last day of JDE accounting period
Oct. 31- Video Pay Period
Nov. 14- Video Pay Period
Nov. 21- Last day of JDE accounting period
Nov. 25- U.S. Corporate Holiday
Nov. 26- U.S. Corporate Holiday
Nov. 28- Video Pay Period
<PAGE>
Dec. 12 - Video Pay Period
Dec. 23 - U.S. Corporate Holiday
Dec. 24 - U.S. Corporate Holiday
Dec. 26 - Video Pay Period, Last day of JDE accounting period
<PAGE>
Exhibit D
Electronic Reporting Format
(See Attached)
<PAGE>
BLOCKBUSTER ENTERTAINMENT - Exhibit D
DAILY DETAIL TRANSACTION FILES BY ELECTRONIC TRANSFER
Revenue Sharing Standard Record Layout
HEADREC FB (102 31926)
START-ID 01 6 A Constant "STADET"
TRAN-EDATE 08 08 A Transaction From Date
TRAN-LDATE 17 08 A Transaction To Date
OUT-DATE-CC 26 02 N File Creation Date
OUT-DATE-YY 28 02 N
OUT-DATE-MM 30 02 N
OUT-DATE-DD 32 02 N
FILE TAILREC FB (102 31926)
END-ID 01 6 A Constant "ENDDET"
NO-TRANS 08 7 N Number of Transactions
TOT-REV 16 12 N 2 Total Revenue
FILE OUTFILE FB (102 31926)
OUT-TITLE 1 40 A Title Name
FILLER1 41 1 A
OUT-UPC 42 13 A UPC
FILLER2 55 1 A
OUT-DAYS-OUT 56 1 N Number of Days out
FILLER3 57 1 A
OUT-REV 58 5 N 2 Revenue
OUT-SIGN 63 1 A Sign "-" for negative
FILLER4 64 1 A
OUT-TRAN 65 2 A Tran Type R=Rental, P=Put, L=Late Fee
FILLER5 67 1 A
OUT-TRAN-DATE 68 8 A Tran Date YYYYMMDD
FILLER6 76 1 A
Bar code is a unique code
OUT-BAR-STORE 77 05 A Store Number
OUT-BAR-PART 82 06 A Part Number
OUT-BAR-CPYNO 88 03 A
FILLER7 91 01 A
OUT-CUST-NO 92 05 A Customer Number
FILLER8 97 01 A
OUT-STORE-NO 98 05 A Store Number
D-1
<PAGE>
Exhibit 10.10
[LOGO]
WARNER HOME VIDEO
January 20, 1999
Mr. Dean Wilson
Executive Vice President
General Merchandising Manager
Blockbuster Inc.
1201 Elm Street
Dallas, TX 75270
RE: VHS REVENUE SHARING LICENSE AGREEMENT
Dear Dean:
The following (the "Letter Agreement") sets forth the terms of the license
agreement (the "License") between Warner Home Video, a division of Time
Warner Entertainment Company, L.P. ("WHV") and Blockbuster Inc.
("Blockbuster") for revenue sharing on WHV's Rental Picture output.
1. TERM: Three (3) year period commencing upon the "Street Date" of the
first "Rental Picture" (as such terms are defined below) released by
WHV on or after March 1, 1999.
2. TERRITORY: United States only; provided, however, Blockbuster shall
have the option to enter into an agreement with WHV (Canada) on
substantially the same terms and conditions, and for a term coextensive
with the Term hereof, upon one hundred and eighty (180) days prior
written notice to WHV.
3. DEFINITIONS AND CALCULATIONS:
a. "Base Units":
(i) Calculation Based on Revenue Sharing Measurement Titles:
The following calculation shall be used for determining *
- ----------------------
* Pages where confidential treatment has been requested are stamped
"Confidential material omitted and separately filed with the Commission
under an application for confidential treatment", and the confidential
section has been marked with a star (*).
<PAGE>
(A) *
(B) *
(C) *
(D) *
(E) *
(F) *
(ii) *
b. "Bonus Units" *
c. "Box Office Receipts" shall mean North American (United States
and Canada) gross box office receipts, as reported or estimated
in VARIETY or the HOLLYWOOD REPORTER *
d. "Guarantee Program" shall mean the program under which Blockbuster
nationally advertises a money-back guarantee or free rental to
consumers if videocassettes of certain titles are not available for
rental from the Stores or another comparable program.
e. "Licensed Units" shall mean the sum of the Base Units and the
Bonus Units for each Rental Picture.
f. "Month" shall be defined as set forth on Exhibit 3(e) attached
hereto and by this reference made a part hereof.
g. "Picture Term" means for each Rental Picture the first 26 weeks of
rental release beginning with Street Date.
h. "Rental Picture" means each and every new release on videocassette
of a feature motion picture for which WHV owns or controls home
video distribution rights in the Territory (subject to any and
all approvals required by any third party) of not
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
2
<PAGE>
fewer than seventy (70) minutes in length, priced for rental in the
retail market; provided, however, the following shall be
specifically excluded from Rental Pictures: (i) New Line, MGM and
HBO distributed lines (unless and until the terms of this Letter
Agreement are accepted and agreed by any such distributed line),
(ii) product controlled by third parties who do not approve of
the terms hereof and (iii) videocassettes of sports events,
concert footage, stage plays, documentaries, video or theatrical
re-releases, foreign language titles or product rated NC-17 or
more restrictive by the MPAA, or library titles.
i. "Revenue" means *
(i) "Bad Debt" shall mean *
(ii) "Credits" *
(iii) "Taxes" shall mean any and all sales, excise, value added or
other taxes which meet the following qualifications: (A) the
taxes are separately stated, (B) the taxes are required by law
to be collected from Blockbuster's customers, and (C) the
taxes are actually paid by Blockbuster to taxing authorities.
j. "Stores" shall mean (i) all Blockbuster-owned rental retail stores,
(ii) any and all Blockbuster franchises that elect to participate
in, and comply with, the obligations set forth under this Letter
Agreement and any other obligations that Blockbuster may impose to
administer the terms hereof with respect to any such franchisees,
and (iii) Blockbuster-owned alternative direct-to-consumer VHS
rental distribution systems by which Blockbuster rents VHS
videocassettes to consumers for home use and/or sells PVTs to
consumers via internet, vending machines and/or kiosks
(collectively, "Alternative Distribution Systems"). * All
franchisees that participate shall be treated as Blockbuster Stores
for the purposes of this Letter Agreement, and the actual rental
transactions of such franchisees on Measurement Titles shall be
included in Blockbuster's total rental transactions. In the event
that there is insufficient historical data, the parties shall use
good faith efforts to agree on estimated rental transactions for
such franchisees. "Stores" shall specifically exclude any new store
or stores owned or controlled by Blockbuster operating under any
name other than Blockbuster. The parties agree
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
3
<PAGE>
that with respect to stores and/or chains of stores acquired by
Blockbuster during the Term, such stores shall be eligible to assume
the rights and obligations set forth hereunder provided Blockbuster
shall report for such new stores through its existing established
reporting mechanism, and, any existing revenue sharing agreement of
any such store with WHV shall terminate. Upon the addition or
acquisition of stores, Blockbuster shall notify WHV immediately in
writing, and the parties shall begin good faith discussions to
immediately increase the number of Base Units to reflect such store
acquisitions and/or additions.
k. "Street Date" means the first day retailers are permitted by WHV to
make a title available for rental to consumers.
4. LICENSED RIGHTS:
a. Homevideo Distribution License: WHV licenses to Blockbuster on a
limited and non-exclusive basis homevideo distribution rights to all
Rental Pictures in the VHS format for rental (i) only to consumers
for home use and (ii) only from Stores in the Territory during the
Term, subject to the terms hereunder.
b. Reservation of Title: Legal title to, and risk of loss of, the
Licensed Units hereunder shall remain vested in WHV, subject to
disposition of PVTs pursuant to Paragraph 8 below. Blockbuster shall
not permit any encumbrance to attach to any Licensed Units delivered
pursuant to this Letter Agreement.
5. INITIAL PAYMENT TO WHV:
a. Calculation:
(i) For each Rental Picture licensed hereunder with Box Office
Receipts of *
(ii) *
b. Payment Terms: For each Rental Picture, if applicable, the *
shall be due and payable by Blockbuster within *
c. Recoupment: Blockbuster shall recoup *
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
4
<PAGE>
6. REVENUE SHARING: For each Rental Picture, subject to Paragraph 5(c)
above, WHV's share of the Revenue shall be calculated as follows:
a. For weeks*
b. For weeks *
c. *
7. STATEMENTS AND PAYMENTS:
a. Statements: On a Monthly basis, * Blockbuster shall provide to
WHV, in the formats reasonably requested and as periodically
amended by WHV, a statement (the "Statement") which reflects the
rental and related activities for such Month, *.
b. Payments: For each Rental Picture, to the extent any amounts are due
pursuant to the Statements, Blockbuster shall wire transfer such
amounts to an account designated by WHV no later than *.
8. DISPOSITION OF PREVIOUSLY VIEWED TAPES:
a. Sale: For each Rental Picture, WHV may direct Blockbuster, as its
licensee, to sell previously viewed tapes ("PVTs") to consumers
pursuant to the following conditions:
(i) For Rental Pictures with *
(ii) For Rental Pictures with *
(iii) Restriction on Sale of PVT's: In addition to and without
limiting in any way the foregoing, the following
restrictions shall apply on a title-by-title basis for all
Rental Pictures:
(A) *
(B) *
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
5
<PAGE>
(iv) No Revenue Share: There shall be no revenue sharing between
Blockbuster and WHV with respect to the proceeds from sales
of PVTs by Blockbuster except *.
(v) *
(vi) In the event WHV changes its current practice with respect to
directing Blockbuster to sell PVTs consistent with
Subparagraphs (i)-(v) of 8.a. above ("Redirection"), the
parties shall in good faith review and reduce WHV's Revenue
Share effective with any Redirection, if necessary, to
provide for the sharing on a pre-established * basis of
revenues generated by Blockbuster under this Letter
Agreement in excess of the revenues Blockbuster would have
earned prior to the parties' revenue sharing relationship.
The calculation of WHV's Revenue Share shall be based on
historical data relating to revenues generated from the
Rental Pictures during the prior year and shall be subject
to audit. The Minimum Share shall be adjusted on a pro rata
basis to reflect any new WHV Revenue Share percentage.
b. Other Disposition:
(i) Box Office Receipts of *: Subject to the foregoing, with
respect to Rental Pictures with Box Office Receipts of * at
the end of the applicable Picture Term, the Licensed Units
shall be treated as follows:
(A) Base Units: * of Base Units * except as otherwise
specified herein.
(B) Bonus Units: Blockbuster and WHV shall * of Bonus
Units by the end of the Picture Term for each Rental
Picture, with *. To the extent any Bonus Unit is *
WHV * within * after the end of the applicable
Picture Term, which * shall not be recoupable.*
(C) * of Licensed Units: In the event that * the Bonus
Units, then, * thereafter for each such Rental
Picture. The parties agree that, *.
(ii) Box Office Receipts of *: Subject to the foregoing, with
respect to Rental Pictures with Box Office Receipts of *,
Blockbuster shall at the end of the applicable Picture
Term, * of the Licnesed Units for each Rental Picture.
c. Payment Terms: For each Rental Picture licensed hereunder, within
* days after the end of the Picture Term, *.
9. PLACEMENT OF LICENSED UNITS: Blockbuster shall place all licensed Units of
each Rental Picture licensed hereunder (except those units out for rental
by consumers) on prominent "new release" display walls or another agreed
equivalent in-store location
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
6
<PAGE>
for not fewer than ninety (90) days after Street Date, subject to prior
sale pursuant to the terms of Paragraph 8.a. above.
10. ADVERTISING SUPPORT: WHV shall provide advertising support to
Blockbuster for Base Units only, consistent with current practices,
provided, however, in the event that any two (2) other major motion
picture studios (e.g., Disney, Fox, Sony, Paramount, or Universal)
(each, a "Major Studio") offer substantially different advertising
support that results in a material change in the video industry, WHV
shall have the option to modify its advertising support accordingly
with respect to the Rental Pictures hereunder. In such event,
Blockbuster shall have the option to modify the Base Units calculation,
provided that, in the event that Blockbuster modifies the calculation
to decrease the Base Units by * or more, WHV shall have the option
immediately to terminate this Letter Agreement.
11. DELIVERY: WHV, at its cost, shall use its reasonable good faith efforts
to deliver product to Blockbuster's distribution center in McKinney,
Texas four (4) weeks prior to Street Date for each Rental Picture. The
parties agree that for each Rental Picture, Blockbuster may retain up
to * of the Base Units at its distribution center for replenishment of
defectives (the "Replenishment Units"), new stores, and unexpected
spikes in product performance. To the extent the Replenishment Units
are still in the distribution center at the end of the applicable
Picture Term for each Rental Picture, such Replenishment Units shall be
subject to disposition pursuant to the terms of Paragraph 8.b. above.
12. INFORMATION TO BE PROVIDED BY BLOCKBUSTER: To the extent reasonably
available to Blockbuster and with respect to WHV product only,
Blockbuster agrees to provide the following information to WHV at
Blockbuster's expense:
a. Revenue Share Reporting: On a bi-weekly basis, Blockbuster shall
deliver to WHV * reports detailing the number of rental
transactions and gross revenues per Rental Picture for all
WHV-distributed labels subject to this Letter Agreement.
b. Other Information: Blockbuster and WHV shall mutually agree on
other information to be provided to WHV for all WHV-distributed
labels subject to this Letter Agreement.
13. SHARING OF COSTS: WHV shall reimburse Blockbuster for a portion of its
reasonable, out-of-pocket, third party costs for the following: (i) making
the Bonus Units rental-
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
7
<PAGE>
ready; (ii) shipping the Bonus Units to the Stores; and (iii) purchasing
Amaray boxes for the Bonus Units. Such reimbursement amount shall be * for
each Bonus Unit.
14. AUDIT RIGHTS: Upon not less than fourteen (14) days advance written
notice to Blockbuster, WHV, or its representatives or designees, shall
have the right during normal business hours, but not more than two (2)
times during each calendar year of the Term and one (1) time after the
expiration or earlier termination of the Term, to inspect, audit and
make extracts of the books and records of Blockbuster insofar as said
books and records relate to the calculation or determination by
Blockbuster of (a) Revenue, (b) WHV's Revenue Share, (c) Credit, (d)
Bad Debt, and (e) the rights licensed hereunder as they relate to WHV;
provided, however, WHV shall have the right to conduct store audits as
reasonably required throughout the Term. Such rights of audit shall
continue for a period of two (2) years following the expiration of all
Picture Terms as provided for under this Letter Agreement. The parties
agree that Blockbuster shall have the right reasonably to approve
independent auditors hired by WHV to conduct an audit, provided that
the internal auditors of WHV and/or Time Warner and the accounting firm
of Ernst & Young or WHV's then existing auditors shall be deemed
pre-approved for any and all audits conducted pursuant hereto.
Notwithstanding the foregoing, the parties agree that no WHV or Time
Warner employees shall have direct or indirect access to Blockbuster's
information relating to WHV's competitors or Blockbuster's aggregate
market data; provided, however, WHV's auditors shall have the right to
review Blockbuster's aggregate market data subject to executing a
confidentiality agreement.
15. CONFIDENTIALITY: Each of WHV and Blockbuster acknowledges that all
information and data (including, without limitation, rental and revenue
forecasts, projections and estimates and actual results, in whatever
form or medium) (collectively, the "Confidential Information") provided
by each party to the other under this Letter Agreement is highly
proprietary and confidential. Each of WHV and Blockbuster agrees that
it shall not use (other than in (a) connection with the performance of
its obligations under this Letter Agreement, or (b) the exercise of its
rights, under this Letter Agreement, or (c) as required by law, but
only to the extent the law so requires, or (d) unless compelled by
subpoena or court order) or disclose to any person (other than its
officers, employees, agents, representatives, licensors and
participants on a need-to-know basis only and who agree to be bound by
the confidentiality obligations hereunder) any such Confidential
Information. Blockbuster further agrees that (i) it shall not disclose
under any circumstances any Confidential Information to Paramount
without WHV's prior written approval and (ii) it shall only disclose
Confidential Information to Viacom on a need-to-know basis, provided
that no Paramount employee shall have or be given direct or indirect
access to any WHV information. This Paragraph 15 shall survive
expiration or earlier termination of this Letter Agreement.
- ----------------------
* "Confidential material omitted and separately filed with the Commission
under an application for confidential treatment".
8
<PAGE>
16. INDEMNIFICATION:
a. Indemnification by Blockbuster: Except as otherwise provided in
Paragraph 16.b. below, Blockbuster shall defend, indemnify and
hold WHV, its parent company, their affiliates and subsidiaries,
and the officers, directors, agents and employees of each, free
and harmless from all suits, claims, demands and other
liabilities and expenses (including reasonable attorneys' fees)
(each, a "Claim") which may arise directly or indirectly out of
or by reason of (i) the unauthorized use by Blockbuster of any
patented invention, or of any copyrighted material provided by
WHV, (ii) a Claim from a customer arising out of Blockbuster's
rental or retail practices or course of dealing with respect to
such customer, and/or (iii) a breach or violation of this Letter
Agreement by Blockbuster.
b. Indemnification by WHV: Except as otherwise provided in Paragraph
16.a. above, WHV shall defend, indemnify and hold Blockbuster,
its parent company, their affiliates, subsidiaries, and
franchisees, and the officers, directors, agents, and employees
of each, free and harmless from all Claims (including reasonable
attorneys' fees) which may arise directly or indirectly out of or
by reason of (i) copyright infringement by, or other third party
Claim against, WHV with respect to the content of any Rental
Picture, provided such Claim or infringement is not the result of
the negligence of Blockbuster or any employee or agent of
Blockbuster, (ii) a physical defect in any Licensed Unit provided
to Blockbuster hereunder by WHV, provided such defect was not
caused by the negligence of Blockbuster or any employee or agent
of Blockbuster, and/or (iii) a breach or violation of this Letter
Agreement by WHV.
17. REMEDIES: Each of WHV and Blockbuster acknowledge and agree that a
material breach by either party of any of its obligations under this
Letter Agreement, gives the other party the right to terminate this
Letter Agreement upon * prior written notice. Blockbuster waives any
rights to seek injunctive relief with respect to the sale, license
and/or other distribution of any Rental Picture, provided that
Blockbuster does not waive any right it may have to seek specific
performance under this Letter Agreement with respect to any Rental
Picture being distributed by WHV. The termination of this Letter
Agreement shall not relieve the parties of any obligations incurred
prior to such termination.
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
9
<PAGE>
18. DEFECTIVES: The parties agree that there shall be no replacements of, or
credits or set-offs against the Initial Payment, overages, or any other
amounts owed to WHV by Blockbuster for, defective Licensed Units. For each
Rental Picture, to the extent defectives exceed * of the total number of
Licensed Units delivered to Blockbuster during the first thirty (30) days
after Street Date, Blockbuster may exchange defectives for new videos from
WHV to be delivered within a reasonable time thereafter, which reasonable
time shall be within seventy-two (72) hours, provided that Blockbuster
utilizes WHV's eight hundred (800) number defective replacement system.
19. MISCELLANEOUS:
a. Amendment and Waiver: Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Letter
Agreement shall be effective against any party unless such
modification, amendment or waiver is approved in writing by
Blockbuster and WHV. The failure of any party to enforce any of the
provisions of this Letter Agreement shall in no way be construed as
a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Letter
Agreement in accordance with its terms.
b. Severability: Whenever possible, each provision of this Letter
Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Letter
Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any
other provision or any other jurisdiction, but this Letter Agreement
shall be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been
contained herein.
c. Entire Agreement: Except as otherwise expressly set forth herein,
this document embodies the complete agreement and understanding
between the parties hereto with respect to the subject matter hereof
and supersedes and preempts any prior understandings, agreements or
representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
d. Assignment:
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
10
<PAGE>
(i) Blockbuster Assignment: This Letter Agreement shall not be
assigned by Blockbuster without the prior written consent of
WHV, except (a) to any corporation or entity with which
Blockbuster is merged or consolidated, or (b) to any
corporation or entity which succeeds to all or substantially
all of Blockbuster's assets, or (c) to any corporation or
entity which controls, is controlled by, or under common
control with Blockbuster. All the foregoing exceptions shall
be subject to (1) written notice to WHV on or before
assignment, (2) Paragraph 3.i. above with respect to
non-Blockbuster stores, (3) *.
(ii) WHV Assignment: This Letter Agreement shall not be assigned
by WHV without the prior written consent of Blockbuster,
except (a) to any corporation or entity with which WHV is
merged or consolidated, or (b) to any corporation or entity
which succeeds to all or substantially all of WHV's assets,
or (c) to any corporation or entity which controls, is
controlled by, or under common control with WHV (in each
instance, an "Excluded Assignment"); provided, however, the
assignee continues to distribute the Rental Pictures under
the "Warner Home Video" or similar name and logo. To the
extent a non-Excluded Assignment by WHV results in a
material change in the mix of Rental Pictures or a material
decrease in the number of Rental Pictures, Blockbuster
shall have the option to terminate this Letter Agreement
upon written notice to WHV.
(iii) Purchase of Blockbuster by a Major Studio or Retailer:
(A) Purchase By Major Studio: In the event a Major Studio
enters into an agreement to acquire Blockbuster, WHV
shall be given prompt notice of such agreement and
shall have the option to terminate this Letter
Agreement immediately upon written notice to
Blockbuster. Promptly following such notice of
acquisition agreement, Blockbuster, in consultation
with WHV, shall undertake to provide adequate
assurance in writing to WHV that proprietary and
confidential information of WHV shall not be
disclosed to, or otherwise made accessible to, the
management or other employees of such Major Studio
following such acquisition. As used in this Paragraph
19.d.(iii) (A), the term "Major Studio" shall (i)
also include, without limitation, (x) MGM and (y) the
respective affiliated
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
11
<PAGE>
corporations which control, are controlled by, or are
under common control with, each Major Studio and (ii)
exclude Viacom and the affiliated corporations which
control, are controlled by, or are under common control
with Viacom. The term "control" shall refer to the
ownership of at least fifty percent (50%) of the
outstanding voting power of the corporation or entity
which is subject to such "control".
(B) Purchase By/of Retailer: In the event a retailer enters
into an agreement to acquire Blockbuster or Blockbuster
enters into an agreement to acquire a retailer, WHV and
Blockbuster agree that in such event, the terms of this
Letter Agreement shall apply only (i) to already
existing Blockbuster stores and (ii) to any new stores
which operate under the Blockbuster name at the retail
level, and/or to the extent such new stores are capable
of reporting through Blockbuster's established reporting
mechanism.
(C) Definition of "Purchase": For purposes of this
Subparagraph 19.d.(iii) the term "Purchase" shall
include acquisition, merger and/or other consolidation.
e. Counterparts. This Letter Agreement may be executed in separate
counterparts each of which shall be an original and all of which
taken together shall constitute one and the same agreement.
f. Due Authorization. Each of WHV and Blockbuster represents and
warrants that the officer executing this Letter Agreement has been
duly authorized and that this Letter Agreement when executed and
delivered shall be valid and binding and enforceable in accordance
with its terms.
g. Notices. All notices provided for in this Letter Agreement shall be
in writing and shall be either personally delivered, or mailed first
class mail (postage prepaid) or sent by reputable overnight courier
service (charges prepaid) to the parties at the following address:
If to Blockbuster:
12
<PAGE>
Blockbuster Inc.
1201 Elm Street
Dallas, TX 75270
Attention: Dean Wilson, Executive Vice President
General Merchandising Manager
Ed Stead, Executive Vice President and General Counsel
If to WHV:
Warner Home Video
4000 Warner Boulevard
Burbank, CA 91522
Attention: Jim Cardwell, Executive Vice President,
North American Operations
Beth Baier, Senior Vice President, Business Affairs and
General Counsel
h. Governing Law. This Letter Agreement and all matters or issues
material thereto shall be governed by the laws of the State of
New York, applicable to contracts performed entirely therein. WHV
and Blockbuster hereby agree that all actions, proceedings or
litigation relating to this Letter Agreement shall be instituted
and prosecuted solely within the county of New York, State of New
York and each party hereby consents to the jurisdiction of the
state courts of New York and the federal courts located within
the State of New York with respect to any matter arising out of
or relating to this Letter Agreement.
i. Descriptive Headings. The descriptive headings of this Letter
Agreement are inserted for convenience only and do not constitute a
part of this Letter Agreement.
j. Relationship of Parties. Nothing contained herein shall constitute a
partnership, joint venture, association or principal and agent
relationship or be construed to evidence the intention of the
parties to constitute such. Blockbuster and WHV are independent
contractors and neither has any authority to act on the other's
behalf or to bind the other in any way.
k. Force Majeure. Whenever performance by any party of its obligations
under this Letter Agreement, other than any of Blockbuster's payment
obligations hereunder, is substantially prevented by reason of any
act of God, strike, lock-out, or other industrial or
transportational disturbance, fire, lack of materials, law,
regulation or ordinance, war or war conditions, or by reason of any
other matter beyond such party's reasonable control, then such
performance shall be excused and this Letter Agreement shall be
deemed suspended during the continuation of such
13
<PAGE>
prevention, and the term shall be extended for a period equal to the
time of such suspension.
l. Third Parties. None of the provisions of this Letter Agreement is
intended for the benefit of or shall be enforceable by any third
party including creditors of Blockbuster or WHV.
In WITNESS WHEREOF, this Letter Agreement was executed by the parties on the
date first written above.
BLOCKBUSTER INC. ("Blockbuster") WARNER HOME VIDEO,
a division of Time Warner
Entertainment Company, L.P. ("WHV")
By: /s/ Edward B. Stead By: /s/ Jim Cardwell
----------------------------- -------------------------------
Its: EVP Its:
----------------------------- -------------------------------
14
<PAGE>
Exhibit 3(a)(i)
BLOCKBUSTER REVENUE SHARE AGREEMENT EXHIBIT
*
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
Exhibit 3(a)(i)(B)
BLOCKBUSTER REVENUE SHARE AGREEMENT EXHIBIT
*
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
Exhibit 3(a)(i)(F)
*
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
Exhibit 3(b)
*
- ----------------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
<PAGE>
[LOGO]
WARNER HOME VIDEO
January 20, 1999
Mr. Dean Wilson
Senior Vice President
General Merchandising Manager
Blockbuster, Inc.
1201 Elm Street
Dallas, TX 75270
RE: VHS REVENUE SHARING LICENSE AGREEMENT - HBO
Dear Mr. Wilson:
Reference is hereby made to that certain Revenue Sharing License Agreement
(the "Agreement") dated January 20, 1999, by and between Warner Home Video, a
division of Time Warner Entertainment Company, L.P. ("WHV") and Blockbuster
Inc. ("Blockbuster") for VHS revenue sharing on WHV's Rental Picture output.
Capitalized terms used herein and not otherwise defined shall have the same
meanings as in the Agreement.
Pursuant to Paragraph 3 of the Agreement, the parties agree that the term
"Rental Pictures" shall include all HBO titles distributed by WHV, subject to
the exclusions set forth in Paragraph 3.h. of the Agreement.
Except as otherwise modified herein, all other terms and conditions of the
agreement are hereby ratified and shall remain in full force and effect.
IN WITNESS WHEREOF, this letter agreement was executed by the parties on the
date first written above.
WARNER HOME VIDEO, a division of Time
Warner Entertainment Company, L.P. ("WHV")
By:/s/ Jim Cardwell
-----------------------
Its:
----------------------
BLOCKBUSTER, INC. ("Blockbuster")
By:/s/ Edward B. Stead
-----------------------
Its: EVP
----------------------
<PAGE>
Exhibit 10.11
PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
1. License PHV hereby grants and BB accepts a license to sell and rent *
VHS Units of PHV rental Titles on a revenue sharing basis in
the Territory during the Term subject to the terms and
conditions set forth herein.
2. *
3. Unit Fee BB shall pay to PHV as a Unit Fee * for each Base Unit (which,
for the avoidance of doubt, shall be included in the *, Base
Multiple Unit and Enhanced Multiple Unit. BB shall pay to PHV
* for each Hyper-Buy Unit up to a multiple of * and * for each
Hyper-Buy Unit at a multiple of * or above [* of each Unit Fee
shall be denominated as the "Buy-Out-Fee."] For example, if
the Grid provides for a purchase of * Base Unit and a multiple
of * applies, BB would pay a * of * (or *), and * in total for
Unit Fees for the Units in excess of the Base Unit (* Units in
total).
4. Splits With respect to each Title BB shall pay to PHV:
(A) * of * rental revenues derived from such Title during
weeks * of its License Period; and
(B) * of * rental revenues derived from such Title during
weeks * of its License Period; and
5. Split Notwithstanding the splits described in Section 4 above, the
Adjustment following adjustment may apply if the corresponding conditions
are met.
- ----------------
* Pages where confidential treatment has been requested are stamped
"Confidential material omitted and separately filed with the Commission
under an application for confidential treatment", and the confidential
section has been marked with a star (*).
<PAGE>
PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
"A" Tranches will consist of * consecutive Titles with US/Can
gross box office equal to or in excess of * each. "B" Tranches
will consist of * consecutive Titles with US/Can gross box
office less than * each.
*
6. PVT BB shall have the right, as consignee, to sell previously
viewed Units ("PVTs") in accordance with the following:
A. With respect to each Title, BB shall not sell any PVT
Units prior to * after its street date and then only
subject to its standard *.
BB shall not sell PVT Units * computed for all PHV Units
sold during each * period starting with the Commencement
Date and BB shall not market or sell PVT Units of PHV
Titles for * the PVT Units of titles from *. For the
avoidance of doubt and without limiting anything else in
this section 6A, BB shall have the right * based on BB's
marketing and sales needs and the performance of
individual titles as determined by BB.
B. Subject to 6A above, after the License Period BB shall
have the right to keep or sell all Base and Base
Multiple Units and retain all
- ----------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Page 2
<PAGE>
PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
proceeds from such sales.
C. Subject to 6A above, after the License Period * as a PVT
Unit, BB keeps all proceeds from such sale.
D. Subject to 6A above, after the License Period *, PHV
shall have the option to instruct BB to (i) * (ii) to
keep such Unit and to the extent BB sells such Unit as
PVT Unit, BB keeps all proceeds from such sale.
E. Notwithstanding 6 B, C and D above, *
F. *. Major Studio in this Term Sheet shall mean: Disney,
Universal, Warner Bros., Twentieth Century Fox, Sony,
MGM, Dreamworks including any of their successors or
affiliates.
G. In all instances in this Section 6 where PHV *, such
notification shall be made on or before the order
cut-off date for such Units.
H. BB shall be permitted to offer PVT Units to ultimate
consumers in the Territory by means of advertising on
the internet (i.e., no sales to wholesalers, middlemen
or brokers) all in accordance with the terms of this
Agreement.
- ----------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Page 3
<PAGE>
PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
7. * BB shall pay to PHV the * fees for each transaction:
Price Per
Transaction For theatrical Titles with US/Can gross box office receipts
greater than *:
*
For theatrical Titles with US/Can gross box office receipts
equal to or less than * and non-theatrical Titles:
*
Throughout the Term BB shall apply credits and bad debts to
PHV product in a manner consistent with the way BB applies
credit and bad debt with respect to the product of the other
Major Studios.
8. Recoupability With respect to each Title, BB shall have the right to recoup
from the * the revenues due to PHV from its share of rental
revenues for such Title. (For the avoidance of doubt, there is
no recoupment from Unit Fees other than Bases Unit Fees,
which are included in the *.)
9. Payment BB shall pay monies due to PHV in accordance with the
Schedule following schedule:
*: Due and payable no later than *
Unit Fees: Due and payable no later than *
PHV's Share of Rental Revenues: Due and payable no later than
*
10. Territory United States. Canada will be included using separate Units
Per Store Grids for US, English-speaking Canada and
French-speaking Canada. Terms for Canada will be on the same
economic basis factoring in
- ----------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Page 4
<PAGE>
PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
currency exchange and cost of goods differences (if any) to
be determined and discussed by PHV and BB.
11. Output The product licensed hereunder shall be all product which PHV
distributes * for the VHS rental market (i.e., with a net
effective wholesale price of * and above) for which it
unilaterally controls the rights necessary to grant the rights
hereunder.
Notwithstanding the above, the following product is not
licensed hereunder.
o less than 70 minutes in duration;
o rated NC-17 or unrated;
o live sports programs;
o musical concerts;
o stage plays which are filmed;
o theatrical re-releases; and
o catalog titles at rental prices.
In addition, BB shall license *, which are distributed by PHV
hereunder except that BB shall not be required to license in
excess of * such title in the aggregate per year. If PHV
releases more than * such titles in any year, BB shall have
the right to choose which * titles per year it shall license.
With respect to all such such * the * (inclusive of the Unit
fee) for each Base Unit.
Note that titles which may contain non-substantial amounts of
documentary footage, live sports footage, musical concert
footage or excerpts of live stage plays shall not be excluded
under this sub-paragraph.
12. Term This Agreement shall apply with respect to Units with
Street Dates after July 26, 1999 and before August 1, 2003.
(For the avoidance of doubt, this Agreement begins with the
street date for PAYBACK and runs for 4 years.)
- ----------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Page 5
<PAGE>
PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
13. License With respect to each Title the license period shall be
Period 26 weeks commencing on the Street Date for such Title.
14. Grid BB commits to license a Minimum Number of Base Units per
store in accordance with the following:
a. July 1, 1999-June 30, 2000 - Grid "A" (attached)
b. July 1, 2000-June 30, 2001 - Grid "B" (attached)
c. July 1, 2001-end of Term - Grid "C" (attached)
*
Multiples are in three brackets (see attached Matrix);
A. Base Multiple with ranges from *;
B. Enhanced Multiple which at BB's sole option allows BB to
increase any buy to a * multiple wherever it is below
that threshold (high end films) provided that on or
after January 1, 2000 * then the reference to * shall be
increased to *;
C. Hyper-buys with mutual approval, allows BB to raise its
buy to as high as a * multiple wherever it is below that
level.
15. Advertising With respect to each Title PHV shall grant to BB an
Allowances advertising allowance of * of gross rental revenues generated
by such Title.
16. Audit PHV shall have the right to audit BB's performance hereunder
at BB's headquarters as well as a reasonable number of stores
and participating franchises provided that PHV shall not have
access to data concerning its competitors. Data, to the
extent needed to verify PHV's results, shall be audited by a
third party auditor, which
- ----------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Page 6
<PAGE>
PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
shall advise PHV only whether BB is in compliance or not.
17. In Store PHV products shall be placed in the new release section or its
Placement equivalent of each store and PHV product *
18. Participa- BB shall have the right to distribute PHV product in all
ting retail store locations owned and operated by BB and all
Stores participating franchises. To participate, franchises must
Franchises commit for minimum * periods and allow PHV its audit
hereunder. BB shall be financially responsible for each
participating franchisee's payment to PHV.
19. Lost Units With respect to each Title, if any Units are not traceable at
any time during the License Period (up to * of total Units for
that Title) BB shall pay PHV an amount equal to the average
per Unit rental revenue generated by the Units of such Title
which were not lost less any earned revenues from the
applicable Unit prior to its being lost (so long as such
revenues are paid). It will be a material breach of this
Agreement if Units in excess of * for any Title are not
traceable at any time during the license period.
20. Computer & BB must have the minimum levels of electronic reporting
Administrative capabilities required by PHV pursuant to the attached exhibit.
Requirements
21. Program While participating in revenue sharing with PHV, BB must not
Restriction obtain any PHV Rental Titles licensed hereunder through any
other means, including any other distributor or program, in
any of its store locations, including participating
franchisees.
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Page 7
<PAGE>
GRID "A" - REMAINING 1999
<PAGE>
BLOCKBUSTER VIDEO MATRIX
PARAMOUNT PROPOSAL 7/15/99
GRID "A" - REMAINING 1999
*
- ----------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment. Two pages have been
omitted from Grid "A".
<PAGE>
GRID "B" - REMAINING 2000
<PAGE>
BLOCKBUSTER VIDEO MATRIX
PARAMOUNT PROPOSAL 7/15/99
GRID "B" - REMAINING 2000
*
- ----------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment. Two pages have been
omitted from Grid "B".
<PAGE>
GRID "C" - REMAINING 2001
<PAGE>
BLOCKBUSTER VIDEO MATRIX
PARAMOUNT PROPOSAL 7/15/99
GRID "C" - REMAINING 2001
*
- ----------------
* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment. Two pages have been
omitted from Grid "C".
<PAGE>
Exhibit 10.12
July 15, 1999
John F. Antioco
10592 North 106th Place
Scottsdale, Arizona 85258
Dear Mr. Antioco:
Blockbuster Inc. ("Blockbuster"), having an address at 1201 Elm Street,
Dallas, Texas 75270, agrees to employ you and you agree to accept such
employment upon the following terms and conditions:
l. TERM. Your employment hereunder shall commence on July 15, 1999 and,
unless terminated by Blockbuster or you pursuant to paragraph 8 hereof, shall
continue through and until June 15, 2002. The period from July 15, 1999 through
June 15, 2002 shall hereinafter be referred to as the "Employment Term"
notwithstanding any earlier termination of your employment pursuant to paragraph
8.
2. DUTIES. During the Employment Term, you agree to devote your entire
business time, attention and energies to the business of Blockbuster. You will
be Chairman, Chief Executive Officer of Blockbuster and you agree to perform
such duties, and such other duties reasonable and consistent with such office as
may be assigned to you from time to time by the Chief Executive Officer (the
"CEO") of Viacom Inc. ("Viacom") or a Deputy Chairman of Viacom until
Blockbuster completes its initial public offering (the "IPO") of its Class A
Common Stock (the "Blockbuster A Stock") and thereafter as may be assigned from
time to time by the Blockbuster Board of Directors. However, nothing in this
Agreement shall preclude you from serving on the Boards of Directors of Main
Street & Main Inc. and any charitable, educational, religious, public interest
or public service organization, in each instance not inconsistent with
Blockbuster, or from devoting reasonable periods of time to the aforementioned
organizations, provided that such activities do not interfere with the
performance of your duties and responsibilities hereunder. You will have such
authority as is necessary for the performance of your duties as Chairman, Chief
Executive Officer of Blockbuster, within the authorization limits established by
the Viacom Board of Directors for management and consistent with on-going
policies developed by Viacom's senior management before the IPO and thereafter
within the authorization limits established by the Blockbuster Board of
Directors. Your principal place of business shall be at Blockbuster's
headquarters in the Dallas, Texas metropolitan area.
<PAGE>
John F. Antioco
July 15, 1999
Page 2
3. COMPENSATION.
(a) SALARY: For all the services rendered by you in any capacity
hereunder, Blockbuster agrees to pay you the sum of One Million Three Hundred
Thousand Dollars ($1,300,000) per annum ("Salary") for the balance of the 1999
calendar year, payable in accordance with Blockbuster's then effective payroll
practices. Your Salary for the period from January 1, 2000 through June 15, 2002
shall be One Million Dollars ($1,000,000) per annum.
(b) BONUS COMPENSATION: In addition to your Salary, you shall be
entitled to receive bonus compensation for each of the calendar years during the
Employment Term, determined and payable as follows ("Bonus"):
(i) Your Bonus for each calendar year during your employment with
Blockbuster under this Agreement will be determined in
accordance with Blockbuster's Senior Executive Short-Term
Incentive Plan (the "Senior Executive STIP") or Viacom's
Short-Term Incentive Plan (the "STIP"), as applicable, as the
same may be amended from time to time.
(ii) Your Bonus for any full calendar year during the Employment
Term before the IPO occurs shall be determined in accordance
with the STIP. Your Bonus for the calendar year in which the
IPO occurs and for each subsequent calendar year or portion
thereof during the Employment Term shall be determined in
accordance with the Senior Executive STIP.
(iii) Your Target Bonus for each of the calendar years during the
Employment Term shall be 125% of Salary and the annual rate of
Deferred Compensation (as defined in paragraph 3(c)) for such
year. Your Bonus for calendar year 2002 may be pro-rated.
(iv) Your Bonus for each calendar year shall be payable by February
28 of the following year.
(c) DEFERRED COMPENSATION: In addition to your Salary and Bonus, you
shall earn, in respect of each calendar year during the Employment Term,
commencing with the calendar year 2000, an additional amount ("Deferred
Compensation"), the payment of which (together with the return thereon as
provided in this paragraph 3(c)) shall be deferred until January of the first
calendar year in which you cease to be an executive officer of Blockbuster for
purposes of the Securities Exchange Act of 1934, as amended. The amount of
Deferred Compensation shall be Three Hundred Fifty Five Thousand Dollars
($355,000) for calendar year 2000, Four Hundred Fifty Five Thousand Dollars
($455,000) for calendar year 2001 and Two Hundred Thirty Thousand Dollars
($230,000) for the portion of calendar year 2002 during the Employment Term.
Deferred Compensation shall be credited to a bookkeeping account
<PAGE>
John F. Antioco
July 15, 1999
Page 3
maintained by Blockbuster for your account, the balance of which account shall
periodically be credited (or debited) with the deemed positive (or negative)
return calculated in the same manner and at the same times, as the deemed return
on your account is determined under Blockbuster's Excess 401(k) Plan, as such
plan may be amended from time to time. Blockbuster's obligation to pay the
Deferred Compensation, including the return thereon provided for in this
paragraph 3(c)) shall be an unfunded obligation to be satisfied from the general
funds of Blockbuster.
(d) BLOCKBUSTER STOCK OPTIONS:
(i) IPO COMPLETION GRANT AND INITIAL ANNUAL GRANT. Upon the
successful completion of the IPO, you shall receive stock
options to purchase one million (1,000,000) shares of the
Blockbuster A Stock (the "IPO Grant") issued at fair market
value at the time of grant, vesting in five (5) equal equal
installments on the first, second, third, fourth and fifth
anniversaries of the date of grant. The IPO Grant represents
your IPO completion grant and your initial annual grant.
(ii) SUBSEQUENT ANNUAL GRANTS. In addition to the IPO Grant, you
shall receive, upon each of the first and second anniversaries
of the IPO, a grant of stock options with respect to the
Blockbuster A Stock (a "Subsequent Annual Grant"), issued at
fair market value at the time of grant, with an aggregate
exercise price equal to Six Million Dollars ($6,000,000) for
each Subsequent Annual Grant. To illustrate, if the fair market
value of the Blockbuster A Stock was $30 per share on the date
of grant, you would receive a Subsequent Annual Grant of stock
options to purchase 200,000 shares of Blockbuster A Stock. The
Subsequent Annual Grants shall vest in four equal installments
on the first, second, third and fourth anniversaries of the
date of grant.
4. BENEFITS. You shall be entitled to participate in such medical, dental
and life insurance, 401(k), pension and other plans as Blockbuster may have or
establish from time to time and in which you would be entitled to participate
pursuant to the terms thereof. The foregoing, however, shall not be construed to
require Blockbuster to establish any such plans or to prevent the modification
or termination of such plans once established, and no such action or failure
thereof shall affect this Agreement. It is further understood and agreed that
all benefits you may be entitled to as an employee of Blockbuster shall be based
upon your Salary and Deferred Compensation, as set forth in paragraphs 3(a) and
(c) hereof, and not upon any bonus compensation due, payable or paid to you
hereunder, except where the benefit plan expressly provides otherwise. You shall
be entitled to four (4) weeks vacation.
<PAGE>
John F. Antioco
July 15, 1999
Page 4
5. BUSINESS EXPENSES. During the Employment Term, you shall be reimbursed
for such reasonable travel and other expenses incurred in the performance of
your duties hereunder as are customarily reimbursed to senior executives of
Blockbuster. You shall be entitled to a car allowance in the amount of One
Thousand One Hundred Dollars ($1,100) per month.
6. EXCLUSIVE EMPLOYMENT, CONFIDENTIAL INFORMATION, ETC.
(a) NON-COMPETITION. You agree that your employment hereunder is on an
exclusive basis, and that during the shorter of (x) the Employment Term and (y)
one (1) year after the termination of your employment pursuant to paragraph 8(b)
or 8(c) hereof or eighteen (18) months after the termination of your employment
pursuant to paragraph 8(a) hereof (the "Non-Compete Period"), you will not
engage in any other business activity which is in conflict with your duties and
obligations hereunder. You agree that during the Non-Compete Period you shall
not directly or indirectly engage in or participate as an officer, employee,
director, agent of or consultant for any business directly competitive with any
business that Viacom or Blockbuster is in or may enter into during the
Employment Term, nor shall you make any investments in any company or business
competing with Viacom or Blockbuster; PROVIDED, HOWEVER, that nothing herein
shall prevent you from investing as less than a one (1%) percent shareholder in
the securities of any company listed on a national securities exchange or quoted
on an automated quotation system.
(b) CONFIDENTIAL INFORMATION. You agree that you shall not, during the
Employment Term or at any time thereafter, use for your own purposes, or
disclose to or for the benefit of any third party, any trade secret or other
confidential information of Blockbuster, Viacom or any of Viacom's affiliates
(except as may be required by law or in the performance of your duties hereunder
consistent with Blockbuster's policies) and that you will comply with any
confidentiality obligations of Blockbuster or Viacom to a third party, whether
under agreement or otherwise. Notwithstanding the foregoing, confidential
information shall be deemed not to include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by you
or any other person who directly or indirectly receives such information from
you or at your direction or (ii) is or becomes available to you on a
non-confidential basis from a source which is entitled to disclose it to you.
(c) NO EMPLOYEE SOLICITATION. You agree that, during the Employment
Term and for one (1) year thereafter, you shall not, directly or indirectly,
engage, employ, or solicit the employment of any person who is then or has been
within six (6) months prior thereto, an employee of Blockbuster, Viacom or any
of Viacom's affiliates.
<PAGE>
John F. Antioco
July 15, 1999
Page 5
(d) BLOCKBUSTER OWNERSHIP. The results and proceeds of your services
hereunder, including, without limitation, any works of authorship resulting from
your services during your employment with Blockbuster, Viacom and/or any of
Viacom's affiliates and any works in progress, shall be works-made-for-hire and
Blockbuster shall be deemed the sole owner throughout the universe of any and
all rights of whatsoever nature therein, whether or not now or hereafter known,
existing, contemplated, recognized or developed, with the right to use the same
in perpetuity in any manner Blockbuster determines in its sole discretion
without any further payment to you whatsoever. If, for any reason, any of such
results and proceeds shall not legally be a work-for-hire and/or there are any
rights which do not accrue to Blockbuster under the preceding sentence, then you
hereby irrevocably assign and agree to assign any and all of your right, title
and interest thereto, including, without limitation, any and all copyrights,
patents, trade secrets, trademarks and/or other rights of whatsoever nature
therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed to Blockbuster, and Blockbuster shall have the right to
use the same in perpetuity throughout the universe in any manner Blockbuster
determines without any further payment to you whatsoever. You shall, from time
to time, as may be requested by Blockbuster, do any and all things which
Blockbuster may deem useful or desirable to establish or document Blockbuster's
exclusive ownership of any and all rights in any such results and proceeds,
including, without limitation, the execution of appropriate copyright and/or
patent applications or assignments. To the extent you have any rights in the
results and proceeds of your services that cannot be assigned in the manner
described above, you unconditionally and irrevocably waive the enforcement of
such rights. This paragraph 6(d) is subject to, and shall not be deemed to
limit, restrict, or constitute any waiver by Blockbuster of any rights of
ownership to which Blockbuster may be entitled by operation of law by virtue of
Blockbuster or any of its affiliates being your employer.
(e) LITIGATION. You agree that, during the Employment Term, for one
(1) year thereafter and, if longer, during the pendancy of any litigation or
other proceeding, (i) you shall not communicate with anyone (other than your own
attorneys and tax advisors and, except to the extent necessary in the
performance of your duties hereunder) with respect to the facts or subject
matter of any pending or potential litigation, or regulatory or administrative
proceeding involving any of Blockbuster, Viacom or any of Viacom's affiliates,
other than any litigation or other proceeding in which you are a
party-in-opposition, without giving prior notice to Blockbuster or Blockbuster's
counsel, and (ii) in the event that any other party attempts to obtain
information or documents from you with respect to matters possibly related to
such litigation or other proceeding, you shall promptly so notify Blockbuster's
counsel.
<PAGE>
John F. Antioco
July 15, 1999
Page 6
(f) NO RIGHT TO GIVE INTERVIEWS OR WRITE BOOKS, ARTICLES, ETC. During
the Employment Term, except as authorized by Blockbuster or Viacom or in the
performance of your duties, you shall not (i) give any interviews or speeches,
or (ii) prepare or assist any person or entity in the preparation of any books,
articles, television or motion picture productions or other creations, in either
case, concerning Blockbuster, Viacom or any of Viacom's affiliates or any of
their officers, directors, agents, employees, suppliers or customers.
(g) RETURN OF PROPERTY. All documents, data, recordings, or other
property, whether tangible or intangible, including all information stored in
electronic form, obtained or prepared by or for you and utilized by you in the
course of your employment with Blockbuster or any of its affiliates shall remain
the exclusive property of Blockbuster. In the event of the termination of your
employment for any reason, Blockbuster reserves the right, to the extent
permitted by law and in addition to any other remedy Blockbuster may have, to
deduct from any monies otherwise payable to you the following: (i) the full
amount of any debt you owe to Blockbuster, Viacom or any of Viacom's affiliates
at the time of or subsequent to the termination of your employment with
Blockbuster, and (ii) the value of the Blockbuster property which you retain in
your possession after the termination of your employment with Blockbuster. In
the event that the law of any state or other jurisdiction requires the consent
of an employee for such deductions, this Agreement shall serve as such consent.
(h) NON-DISPARAGEMENT. You agree that you shall not, during the
Employment Term and for one (1) year thereafter, in any communications with any
customer or client of Blockbuster, Viacom or any of Viacom's affiliates,
criticize, ridicule or make any statement which disparages or is derogatory of
Blockbuster, Viacom or any of Viacom's affiliates or any of their officers,
directors, agents or employees.
(i) INJUNCTIVE RELIEF. Blockbuster has entered into this Agreement in
order to obtain the benefit of your unique skills, talent, and experience. You
acknowledge and agree that any violation of paragraphs 6(a) through (h) hereof
will result in irreparable damage to Blockbuster and Viacom, and, accordingly,
Blockbuster and Viacom may obtain injunctive and other equitable relief for any
breach or threatened breach of such paragraphs, in addition to any other
remedies available to Blockbuster and Viacom.
(j) SURVIVAL; MODIFICATION OF TERMS. Your obligations under paragraphs
6(a) through (i) hereof shall remain in full force and effect for the entire
period provided therein notwithstanding the termination of your employment
hereunder. You and Blockbuster agree that the restrictions and remedies
contained in paragraphs 6(a) through (i) are reasonable and that it is your
intention and the intention of Blockbuster that such restrictions and remedies
shall be
<PAGE>
John F. Antioco
July 15, 1999
Page 7
enforceable to the fullest extent permissible by law. If it shall be found by a
court of competent jurisdiction that any such restriction or remedy is
unenforceable but would be enforceable if some part thereof were deleted or the
period or area of application reduced, then such restriction or remedy shall
apply with such modification as shall be necessary to make it enforceable.
7. INCAPACITY. In the event you become totally medically disabled and
cannot substantially perform your duties at any time during the Employment Term,
the Blockbuster Board of Directors at any time after such disability has
continued for 60 consecutive days, may determine that Blockbuster requires that
such duties and responsibilities be performed by another executive. In the event
you become disabled, you will receive your Salary for the first 26 weeks of
consecutive absence. Thereafter, you will be eligible to receive benefits under
Blockbuster's Long-Term Disability ("LTD") program in accordance with its terms.
Upon receipt of benefits under the LTD program, you will also be entitled to
receive the following:
(i) a pro-rated Target Bonus, subject to applicable withholding
taxes, for the calendar year in which such benefits commence;
(ii) pro-rated Deferred Compensation for the calendar year in which
such benefits commence and Deferred Compensation attributable
to prior calendar years, payable, together with the return
thereon as provided in paragraph 3(c), prior to January 31 of
the calendar year following the calendar year in which such
benefits commence; and
(iii) the vesting of all stock options granted to you with respect to
the Blockbuster A Stock which have not become exercisable on or
prior to the date on which benefits commence under the LTD
program will be accelerated and such stock options, together
with all stock options granted to you with respect to the
Blockbuster A Stock which are exercisable on or prior to the
date on which such benefits commence, will be exercisable until
one (1) year after the date on which such benefits commence,
or, if earlier, the expiration date of such stock options.
8. TERMINATION.
(a) TERMINATION FOR CAUSE. Blockbuster may, at its option, terminate
this Agreement forthwith for "cause", and Blockbuster shall thereafter have no
further obligations under this Agreement, including, without limitation, any
obligation to pay Salary, Deferred Compensation or Bonus or provide benefits
under this Agreement. For purposes of this Agreement, termination of this
Agreement for "cause" shall mean termination for embezzlement, fraud or other
conduct which would constitute a felony, conviction of a felony, or willful
unauthorized disclosure of confidential information, or if you at any time
materially breach this Agreement (including, without limitation, your willful
failure, neglect of or intentional refusal to
<PAGE>
John F. Antioco
July 15, 1999
Page 8
substantially perform your obligations hereunder as set forth in paragraphs 2
and 11 hereof), except in the event of your disability as set forth in paragraph
7. Anything herein to the contrary notwithstanding, Blockbuster will give you
written notice prior to terminating this Agreement for your material breach
setting forth the exact nature of any alleged breach and the conduct required to
cure such breach. You shall have ten (10) business days from the giving of such
notice within which to cure to the extent the breach is curable.
(b) GOOD REASON TERMINATION. You may terminate your employment
hereunder for "Good Reason" at any time during the Employment Term by written
notice to Blockbuster not more than thirty (30) days after the occurrence of the
event constituting "Good Reason". Such notice shall state an effective date no
later than ten (10) business days after the date it is given. Blockbuster shall
have ten (10) business days from the giving of such notice to cure the alleged
cause for "Good Reason". "Good Reason shall mean, without your prior written
consent, other than in connection with the termination of your employment for
"cause" (as defined above) or in connection with your permanent disability, the
assignment to you by Blockbuster or, before the IPO, Viacom of duties
substantially inconsistent with your positions, duties, responsibilities, titles
or offices, the withdrawal of a material part of your responsibilities as set
forth in paragraph 2 to the degree that you cannot exercise the authority of
your office, the material breach by Blockbuster of its material obligations
hereunder, or the relocation of Blockbuster's principal place of business
outside of the Dallas, Texas metropolitan area.
(c) TERMINATION WITHOUT CAUSE. Blockbuster may terminate your
employment hereunder without "cause" (as defined above) at any time during the
Employment Term by written notice to you.
(d) TERMINATION PAYMENTS, ETC. In the event that your employment
terminates pursuant to paragraph 8(b) or 8(c) hereof, you shall be entitled to
receive, subject to applicable withholding taxes:
(i) your Salary as provided in paragraph 3(a) until the end of the
Employment Term, payable in accordance with Blockbuster's then
effective payroll practices;
(ii) bonus compensation for each calendar year during the Employment
Term equal to your Target Bonus as set forth in paragraph 3(b);
(iii) Deferred Compensation for each calendar year during the
Employment Term as set forth in paragraph 3(c); Deferred
Compensation attributable to the calendar year in which the
termination pursuant to paragraph 8(b) or 8(c) hereof occurs
and to prior calendar years shall be payable, together with the
return thereon as provided in paragraph 3(c), prior to January
31 of the calendar year following such termination; and
Deferred
<PAGE>
John F. Antioco
July 15, 1999
Page 9
Compensation attributable to subsequent calendar years shall be
payable, together with the return thereon as provided in
paragraph 3(c), prior to January 31 of the following calendar
year;
(iv) your car allowance as provided in paragraph 5 until the end of
the Employment Term, payable in accordance with Blockbuster's
then effective payroll practices;
(v) medical and dental insurance coverage under COBRA until the end
of the Employment Term or, if earlier, the date on which you
become eligible for medical and dental coverage from a third
party employer; during this period, Blockbuster will pay an
amount equal to the applicable COBRA premiums (or such other
amounts as may be required by applicable law) (which amount
will be included in your income for tax purposes to the extent
required by applicable law); at the end of such period, you may
elect to continue your medical and dental insurance coverage at
your own expense for the balance, if any, of the period
required by law;
(vi) life insurance coverage until the end of the Employment Term
(the amount of Salary covered by such insurance to be reduced
by the amount of any salary payable to you by a third party);
(vii) the following with respect to grants to you of stock options
with respect to the Blockbuster A Stock:
(x) stock options granted to you with respect to the
Blockbuster A Stock which are exercisable on or prior to
the date of the termination of your employment under
paragraph 8(b) or 8(c) will be exercisable until six (6)
months (or, if provided under the plan governing such
stock options, until one (1) year) after the date of
such termination or, if earlier, the expiration date of
such stock options;
(y) the vesting of all stock options granted to you with
respect to the Blockbuster A Stock which have not become
exercisable on or prior to the date of the termination
of your employment under paragraph 8(b) or 8(c) will be
accelerated and such stock options will be exercisable
until six (6) months (or, if provided under the plan
governing such stock options, until one (1) year) after
the date of such termination; and
<PAGE>
John F. Antioco
July 15, 1999
Page 10
(z) stock options that would have been issued to you with
respect to the Blockbuster A Stock pursuant to paragraph
3(d)(ii) shall be granted at fair market value as of the
date of the termination of your employment under
paragraph 8(b) or 8(c) and such stock options will be
exercisable until six (6) months (or, if provided under
the terms of the plan governing such options, until one
(1) year) after the date of such termination;
PROVIDED, HOWEVER, you shall be required to mitigate the amount of any payment
provided for in (i), (ii), (iii) and (iv) of this paragraph 8(d) by seeking
other employment or otherwise (I.E., by self-employment), and the amount of any
such payment provided for in (i), (ii), (iii) and (iv) shall be reduced by any
cash compensation earned by you from a third party (I.E., as salary, bonus, car
allowance, etc.) except that mitigation shall not be required, and no reduction
for any other cash compensation shall be made, for eighteen (18) months after
the termination of your employment or for the period commencing with the
termination of your employment and ending on the last day of the Employment
Term, whichever is shorter. The payments provided for in (i) above are in lieu
of any severance or income continuation or protection under any Viacom or
Blockbuster plan that may now or hereafter exist. The payments and benefits to
be provided pursuant to this paragraph 8(d) shall constitute liquidated damages,
and shall be deemed to satisfy and be in full and final settlement of all
obligations of Blockbuster to you under this Agreement.
(e) TERMINATION OF BENEFITS. Notwithstanding anything in this
Agreement to the contrary (except as otherwise provided in paragraph 8(d) with
respect to medical, dental and life insurance), coverage under all Blockbuster
benefit plans and programs (including, without limitation, vacation, 401(k),
excess 401(k), pension plan, excess pension plan, LTD, car insurance, accidental
death and dismemberment and business travel and accident insurance) will
terminate upon the termination of your employment except to the extent otherwise
expressly provided in such plans or programs.
(f) NON-RENEWAL. In the event that Blockbuster does not extend or
renew this Agreement at the end of the Employment Term on no less favorable
terms, the vesting of all stock options granted to you with respect to the
Blockbuster A Stock that are not exercisable as of the end of the Employment
Term shall be accelerated and such stock options, together with all stock
options (if any) granted to you with respect to the Blockbuster A Stock which
are exercisable at the end of the Employment Term, will be exercisable until six
(6) months (or, if provided under the plan governing such stock options, until
one (1) year) after the end of the Employment Term.
<PAGE>
John F. Antioco
July 15, 1999
Page 11
9. DEATH. If you die prior to the end of the Employment Term, your
beneficiary or estate shall be entitled to receive, subject to applicable
withholding taxes, the following:
(i) your Salary up to the date on which the death occurs;
(ii) a pro-rated Target Bonus for the calendar year in which the
death occurs;
(iii) Deferred Compensation attributable to prior calendar years
payable, together with the return thereon as provided in
paragraph 3(c), prior to January 31 of the following year; and
(iv) the vesting of all stock options granted to you with respect to
the Blockbuster A Stock which have not become exercisable on or
prior to the date on which the death occurs will be accelerated
and such stock options, together with all stock options granted
to you with respect to the Blockbuster A Stock which are
exercisable on or prior to the date on which the death occurs,
will be exercisable until one (1) year after such date or, if
earlier, the expiration date of such stock options.
10. SECTION 317 AND 507 OF THE FEDERAL COMMUNICATIONS ACT. You represent
that you have not accepted or given nor will you accept or give, directly or
indirectly, any money, services or other valuable consideration from or to
anyone other than Blockbuster for the inclusion of any matter as part of any
film, television program or other production produced, distributed and/or
developed by Blockbuster and/or any of its affiliates.
11. EQUAL OPPORTUNITY EMPLOYER. You acknowledge that Blockbuster is an
equal opportunity employer. You agree that you will comply with Blockbuster
policies regarding employment practices and with applicable federal, state and
local laws prohibiting discrimination on the basis of race, color, creed,
national origin, age, sex or disability.
12. NOTICES. All notices required to be given hereunder shall be given in
writing, by personal delivery or by mail at the respective addresses of the
parties hereto set forth above, or at such other address as may be designated in
writing by either party, and, in the case of Blockbuster, to the attention of
the General Counsel of Viacom before the IPO and the General Counsel of
Blockbuster after the IPO. Any notice given by mail shall be deemed to have been
given three days following such mailing.
13. ASSIGNMENT. This is an Agreement for the performance of personal
services by you and may not be assigned by you or Blockbuster except that
Blockbuster may assign this Agreement to any affiliate of Blockbuster or any
successor in interest to Blockbuster and, before the IPO, to Viacom or any
affiliate of Viacom or any successor in interest to Viacom.
<PAGE>
John F. Antioco
July 15, 1999
Page 12
14. TEXAS LAW, ETC. This Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of Texas applicable to
contracts entered into and performed entirely therein. Any action to enforce
this Agreement shall be brought in the state or federal courts located in the
State of Texas.
15. NO IMPLIED CONTRACT. Nothing contained in this Agreement shall be
construed to impose any obligation on Blockbuster to renew this Agreement or any
portion thereof. The parties intend to be bound only upon execution of a written
agreement and no negotiation, exchange of draft or partial performance shall be
deemed to imply an agreement. Neither the continuation of employment nor any
other conduct shall be deemed to imply a continuing agreement upon the
expiration of this Agreement.
16. ENTIRE UNDERSTANDING. This Agreement contains the entire understanding
of the parties hereto relating to the subject matter herein contained, and can
be changed only by a writing signed by both parties hereto.
17. VOID PROVISIONS. If any provision of this Agreement, as applied to
either party or to any circumstances, shall be adjudged by a court to be void or
unenforceable, the same shall be deemed stricken from this Agreement and shall
in no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement.
18. SUPERSEDES PREVIOUS AGREEMENT. This Agreement supersedes and cancels
all prior agreements relating to your employment by Blockbuster, Viacom or any
of Viacom's affiliates except that the provision in your prior employment
agreement dated as of May 28, 1997 with Viacom shall remain in effect and be
incorporated into this Agreement which provided that, upon the termination of
your employment with Viacom for Good Reason or without "cause" (or, if earlier,
your death, your receipt of benefits under the LTD program or the non-renewal of
your employment agreement upon no less favorable terms at the end of the
employment term on June 15, 2002), the vesting of all stock options granted to
you under Viacom's 1997 Long-Term Management Incentive Plan or any successor
plan (collectively, the "LTMIP") which have not become exercisable on or prior
to such date will be accelerated, and such stock options will be exercisable
until six (6) months (or, if provided under the LTMIP, until one (1) year) after
such date. Defined terms used in the preceding sentence shall have the meanings
provided in this Agreement.
19. SEPARATION FROM VIACOM. After Viacom ceases to own a majority of
Blockbuster's Class B Common Stock, the references to Viacom and Viacom's
affiliates in Article 6 shall be eliminated except that such references in the
covenants set forth in paragraphs 6(b), (c) and (e) (with respect to
confidential information, no employee solicitation and litigation) shall,
without limiting the scope of such covenants, continue to apply to Viacom and
Viacom's affiliates.
<PAGE>
John F. Antioco
July 15, 1999
Page 13
If the foregoing correctly sets forth our understanding, please sign one
copy of this letter and return it to the undersigned, whereupon this letter
shall constitute a binding agreement between us.
Very truly yours,
BLOCKBUSTER INC.
By: /s/ Gary J. Peterson
-------------------------------------
Name: Gary J. Peterson
Title: Executive Vice President,
Chief Operations Officer
ACCEPTED AND AGREED:
/s/ John F. Antioco
----------------------
John F. Antioco
<PAGE>
Exhibit 10.13
As of June 1, 1998
Jim Notarnicola
3514 Raintree Drive
Flower Mound, TX 75028
Dear Jim:
Blockbuster Entertainment Group ("Blockbuster"), a business unit of
Viacom Inc. ("Viacom"), currently having an address at 1201 Elm Street, Dallas,
Texas 75270, agrees to employ you and you agree to accept such employment on the
terms and conditions set forth herein.
1. TERM. The term of your employment hereunder shall commence on June 1,
1998 and, unless terminated by Blockbuster pursuant to paragraph 8 hereof, shall
continue through and until May 31, 2001. The period from June 1, 1998 through
May 31, 2001 shall hereinafter be referred to as the "Employment Term"
notwithstanding any earlier termination pursuant to paragraph 8.
2. DUTIES. During the Employment Term, you agree to devote your entire
business time, attention and energies to the business of Blockbuster. You will
be Blockbuster's Chief Marketing Officer and you agree to perform such duties,
and such other duties reasonable and consistent with such office as may be
assigned to you from time to time by the Chairman and Chief Executive Officer of
Blockbuster or such other individual as may be designated by the Chairman and
Chief Executive Officer of Blockbuster (the "CEO"). Your principal place of
business shall be in the greater metropolitan Dallas, Texas area.
3. COMPENSATION.
(a) SALARY. For all the services rendered by you in any capacity
hereunder, Blockbuster agrees to pay you the sum of Four Hundred Thousand
Dollars ($400,000) per annum ("Salary"), payable in accordance with
Blockbuster's then effective payroll practices. Your Salary will be reviewed
during the first quarter of each calendar year during the Employment Term,
commencing with the first quarter of 1999, and will, at that time, be increased
by a percentage that is generally consistent with the range of percentages by
which the salaries of other comparable executives are then increased.
(b) BONUS. In addition to your Salary, you shall be entitled to
receive bonus compensation for each of the calendar years during the Employment
Term, determined and payable as follows ("Bonus"):
(i) Your Bonus for each of the calendar years during the
Employment Term will be based upon a measurement of
performance against objectives in accordance with the
Viacom
<PAGE>
Short-Term Incentive Plan, as the same may be amended
from time to time.
(ii) Your Target Bonus for each of the calendar years during
the Employment Term shall be 50% of Salary which may be
prorated for any partial calendar year during the
Employment Term.
(iii) Your Bonus for any calendar year shall be payable by
February 28 of the following year.
4. BENEFITS. You shall be entitled to participate in such vacation,
medical, dental and life insurance, 401(k), pension and other plans as
Blockbuster may have or establish from time to time and in which you would be
entitled to participate pursuant to the terms thereof. The foregoing, however,
shall not be construed to require Blockbuster to establish any such plans or to
prevent the modification or termination of such plans once established, and no
such action or failure thereof shall affect this Agreement. It is further
understood and agreed that all benefits you may be entitled to as an employee of
Blockbuster shall be based upon your Salary, as set forth in paragraph 3(a)
hereof, and not upon any bonus compensation due, payable or paid to you
hereunder, except where the benefit plan expressly provides otherwise.
5. BUSINESS EXPENSES. During your employment with Blockbuster, you
shall be reimbursed for such reasonable travel and other expenses incurred in
the performance of your duties hereunder as are customarily reimbursed to
comparable executives of Blockbuster. You shall be entitled to a car allowance
in accordance with Blockbuster's policy.
6. EXCLUSIVE EMPLOYMENT, CONFIDENTIAL INFORMATION, ETC.
(a) NON-COMPETITION. You agree that your employment hereunder
is on an exclusive basis, and that as long as you are employed by Blockbuster,
you will not engage in any other business activity which is in conflict with
your duties and obligations hereunder. You agree that during the Employment Term
and for a period of one (1) year thereafter you shall not directly or indirectly
engage in or participate as an owner, partner, shareholder, officer, employee,
director, agent of or consultant for any business that competes with any of the
principal business activities of Blockbuster; PROVIDED, HOWEVER, that nothing
herein shall prevent you from investing as less than a one percent (1%)
shareholder in the securities of any company listed on a national securities
exchange or quoted on an automated quotation system. Notwithstanding anything to
the contrary in this Agreement, your obligations under the second sentence of
this paragraph 6(a) shall survive a termination of your employment with
Blockbuster and remain in full force and effect for the period set forth therein
regardless of the reason for your termination (or lack thereof).
(b) CONFIDENTIAL INFORMATION. You agree that you shall not, during
the Employment Term or at any time thereafter, use for your own purposes, or
disclose to or for the benefit of any third party, any trade secret or other
confidential information of Blockbuster,
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Viacom or any of Viacom's affiliates (except as may be required by law or in the
performance of your duties hereunder consistent with Blockbuster's policies) and
that you will comply with any confidentiality obligations of Blockbuster or
Viacom to a third party, whether under agreement or otherwise. Notwithstanding
the foregoing, confidential information shall be deemed not to include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by you or any other person who directly or
indirectly receives such information from you or at your direction or (ii) is or
becomes available to you on a non-confidential basis from a source which is
entitled to disclose it to you.
(c) NO EMPLOYEE SOLICITATION. You agree that, during the Employment Term
and for one (1) year thereafter, you shall not, directly or indirectly, engage,
employ, or solicit the employment of any person who is then or has been within
six (6) months prior thereto, an employee of Blockbuster, Viacom or any of
Viacom's affiliates.
(d) BLOCKBUSTER OWNERSHIP. The results and proceeds of your services
hereunder, including, without limitation, any works of authorship resulting from
your services during your employment with Blockbuster, Viacom and/or any of
Viacom's affiliates and any works in progress, shall be works-made-for-hire and
Blockbuster shall be deemed the sole owner throughout the universe of any and
all rights of whatsoever nature therein, whether or not now or hereafter known,
existing, contemplated, recognized or developed, with the right to use the same
in perpetuity in any manner Blockbuster determines in its sole discretion
without any further payment to you whatsoever. If, for any reason, any of such
results and proceeds shall not legally be a work-for-hire and/or there are any
rights which do not accrue to Blockbuster under the preceding sentence, then you
hereby irrevocably assign and agree to assign any and all of your right, title
and interest thereto, including, without limitation, any and all copyrights,
patents, trade secrets, trademarks and/or other rights of whatsoever nature
therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed to Blockbuster, and Blockbuster shall have the right to
use the same in perpetuity throughout the universe in any manner Blockbuster
determines without any further payment to you whatsoever. You shall, from time
to time, as may be requested by Blockbuster, do any and all things which
Blockbuster may deem useful or desirable to establish or document Blockbuster's
exclusive ownership of any and all rights in any such results and proceeds,
including, without limitation, the execution of appropriate copyright and/or
patent applications or assignments. To the extent you have any rights in the
results and proceeds of your services that cannot be assigned in the manner
described above, you unconditionally and irrevocably waive the enforcement of
such rights. This paragraph 6(d) is subject to, and shall not be deemed to
limit, restrict, or constitute any waiver by Blockbuster of any rights of
ownership to which Blockbuster may be entitled by operation of law by virtue of
Blockbuster being your employer.
(e) LITIGATION. You agree that, during the Employment Term, for one (1)
year thereafter and, if longer, during the pendency of any litigation or other
proceeding, (i) you shall not communicate with anyone (other than your own
attorneys and tax advisors and, except to the extent necessary in the
performance of your duties hereunder) with respect to the
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facts or subject matter of any pending or potential litigation, or regulatory or
administrative proceeding involving Blockbuster or Viacom or any of their
officers, directors, agents, employees, suppliers or customers, other than any
litigation or other proceeding in which you are a party-in-opposition, without
giving prior notice to Blockbuster's General Counsel, and (ii) in the event that
any other party attempts to obtain information or documents from you with
respect to matters possibly related to such litigation or other proceeding, you
shall promptly so notify Blockbuster's General Counsel.
(f) NO RIGHT TO GIVE INTERVIEWS OR WRITE BOOKS, ARTICLES, ETC. You agree
that during the Employment Term and for a period of one (1) year thereafter,
except as authorized by Blockbuster or Viacom, you shall not (i) give any
interviews or speeches, or (ii) prepare or assist any person or entity in the
preparation of any books, articles, television or motion picture productions or
other creations, in either case, concerning Blockbuster, Viacom or any of
Viacom's affiliates or any of their officers, directors, agents, employees,
suppliers or customers.
(g) RETURN OF PROPERTY. All documents, data, recordings, or other
property, whether tangible or intangible, including all information stored in
electronic form, obtained or prepared by or for you and utilized by you in the
course of your employment with Blockbuster shall remain the exclusive property
of Blockbuster. In the event of the termination of your employment for any
reason, Blockbuster reserves the right, to the extent permitted by law and in
addition to any other remedy Blockbuster may have, to deduct from any monies
otherwise payable to you the following: (i) the full amount of any debt you owe
to Blockbuster, Viacom or any of Viacom's affiliates at the time of or
subsequent to the termination of your employment with Blockbuster, and (ii) the
value of the Blockbuster property which you retain in your possession after the
termination of your employment with Blockbuster. In the event that the law of
any state or other jurisdiction requires the consent of an employee for such
deductions, this Agreement shall serve as such consent. You acknowledge and
agree that the foregoing remedy shall not be the sole and exclusive remedy of
Blockbuster with respect to a breach of this paragraph 6(g).
(h) NON-DISPARAGEMENT. You agree that you shall not, during the
Employment Term and for a period of one (1) year thereafter, criticize, ridicule
or make any statement which disparages or is derogatory of Blockbuster, Viacom
or any of Viacom's affiliates or any of their officers, directors, agents or
employees.
(i) INJUNCTIVE RELIEF. Blockbuster has entered into this Agreement in
order to obtain the benefit of your unique skills, talent, and experience. You
acknowledge and agree that any violation of paragraphs 6(a) through (h) hereof
will result in irreparable harm to Blockbuster and Viacom for which damages are
not readily ascertainable. Accordingly, you agree that Blockbuster and/or Viacom
may obtain injunctive and other equitable relief for any breach or threatened
breach of such paragraphs, in addition to any other remedies available to
Blockbuster and/or Viacom.
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(j) SURVIVAL; MODIFICATION OF TERMS. Your obligations under
paragraphs 6(a) through (i) hereof shall remain in full force and effect for the
entire period provided therein notwithstanding the termination of the Employment
Term pursuant to paragraph 8 hereof or otherwise. You and Blockbuster agree that
the restrictions and remedies contained in paragraphs 6(a) through (i) are
reasonable and that it is your intention and the intention of Blockbuster that
such restrictions and remedies shall be enforceable to the fullest extent
permissible by law. If it shall be found by a court of competent jurisdiction
that any such restriction or remedy is unenforceable but would be enforceable if
some part thereof were deleted or the period or area of application reduced,
then such restriction or remedy shall apply with such modification as shall be
necessary to make it enforceable.
7. INCAPACITY. In the event you become medically disabled and cannot
substantially perform your duties at any time during the Employment Term, the
CEO, at any time after such disability has continued for 30 consecutive days,
may determine that Blockbuster requires such duties and responsibilities be
performed by another executive. In the event you become disabled, you will first
receive benefits under Blockbuster's short-term disability program for the first
26 weeks of consecutive absence in accordance with its terms. Thereafter, you
will be eligible to receive benefits under the Blockbuster Long-Term Disability
("LTD") program in accordance with its terms. Upon receipt of benefits under the
LTD program, you will also be entitled to receive a pro-rated Target Bonus for
the calendar year in which such benefits commence.
8. TERMINATION.
(a) TERMINATION FOR CAUSE. Blockbuster may, at its option, terminate
this Agreement forthwith for "cause", and Blockbuster shall thereafter have no
further obligations under this Agreement, including, without limitation, any
obligation to pay Salary or Bonus or provide benefits under this Agreement. For
purposes of this Agreement, "cause" shall mean (i) the commission of a felony or
the commission of any other act involving dishonesty, disloyalty or fraud with
respect to Blockbuster, Viacom or any of Viacom's affiliates, (ii) conduct
bringing, or having the potential to bring, Blockbuster, Viacom or any of
Viacom's affiliates into substantial public disgrace or disrepute, (iii) willful
misconduct with respect to Blockbuster, Viacom or any of Viacom's affiliates, or
(iv) any material breach of this Agreement (including, without limitation, your
failure, neglect of or refusal to substantially perform your obligations
hereunder as set forth in paragraphs 2 and 11 hereof), except in the event of
your disability as set forth in paragraph 7. Anything herein to the contrary
notwithstanding, Blockbuster will give you written notice prior to terminating
this Agreement for your material breach setting forth the exact nature of any
alleged breach and the conduct required to cure such breach. Except for a breach
which by its nature cannot be cured, you shall have ten (10) business days from
the giving of such notice within which to cure.
(b) GOOD REASON TERMINATION. You may terminate your employment
hereunder for "Good Reason" at any time during the Employment Term by written
notice to Blockbuster not more than thirty (30) days after the occurrence of the
event constituting "Good
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Reason". Such notice shall state an effective date no earlier than thirty (30)
business days after the date it is given. Blockbuster shall have ten (10)
business from the giving such notice within which to cure. Good Reason shall
mean (x) the breach by Blockbuster of any of its material obligations hereunder,
or (y) without your prior written consent, other than in connection with the
termination of your employment for "cause" (as defined above) or in connection
with your permanent disability, the assignment to you by Blockbuster or Viacom
of duties substantially inconsistent with the duties of an officer of
Blockbuster.
(c) TERMINATION WITHOUT CAUSE. Blockbuster may terminate your employment
hereunder without "cause" (as defined above) at any time during the Employment
Term by written notice to you.
(d) TERMINATION PAYMENTS, ETC. In the event that your employment
terminates pursuant to paragraph 8(b) or 8(c) hereof, you shall be entitled to
receive, subject to applicable withholding taxes:
(i) your Salary as provided in paragraph 3(a) until the end
of the Employment Term, payable in accordance with
Blockbuster's then effective payroll practices;
(ii) bonus compensation for each calendar year during the
Employment Term equal to your Target Bonus as set forth
in paragraph 3(b);
(iii) your car allowance as provided in paragraph 5 until the
end of the Employment Term, payable in accordance with
Blockbuster's then effective payroll practices;
(iv) medical and dental insurance coverage under
Blockbuster's then current benefit plans pursuant to
COBRA until the end of the Employment Term or, if
earlier, the date on which you become eligible for
medical and dental coverage from a third party employer;
during this period, Blockbuster will pay an amount equal
to the applicable COBRA premiums (or such other amounts
as may be required by applicable law) (which amount will
be included in your income for tax purposes to the
extent required by applicable law); at the end of such
period, you may elect to continue your medical and
dental insurance coverage at your own expense for the
balance, if any, of the period required by law;
(v) life insurance coverage pursuant to Blockbuster's then
current policies until the end of the Employment Term
(the amount of Salary covered by such insurance to be
reduced by the amount of any salary payable to you by a
third party); and
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(vi) stock options granted to you under Viacom's
1997 Long-Term Management Incentive Plan and any
successor plans (collectively, the "LTMIP") which are
exercisable on or prior to the date of the termination
of your employment under paragraph 8(b) or 8(c) hereof
or that would have vested and become exercisable on or
before the last date of the Employment Term will be
exercisable until six (6) months after the date of such
termination or, if earlier, the expiration date of the
stock options;
PROVIDED, HOWEVER, you shall be required to mitigate the amount of any payment
provided for in (i), (ii) and (iii) of this paragraph 8(d) by seeking other
employment or otherwise, and the amount of any such payment provided for in (i),
(ii) and (iii) shall be reduced by any compensation earned by you from a third
person except that mitigation shall not be required for twelve (12) months after
the termination of your employment or for the period commencing with the
termination of your employment and ending on the last day of the Employment
Term, whichever is shorter. The payments provided for in (i) above are in lieu
of any severance or income continuation or protection under any Blockbuster or
Viacom plan that may now or hereafter exist. The payments and benefits to be
provided pursuant to this paragraph 8(d) shall constitute liquidated damages,
and shall be deemed to satisfy and be in full and final settlement of all
obligations of Blockbuster to you under this Agreement.
(e) TERMINATION OF BENEFITS. Notwithstanding anything in this Agreement
to the contrary (except as otherwise provided in paragraph 8(d) with respect to
medical, dental and life insurance), coverage under all Blockbuster benefit
plans and programs (including, without limitation, vacation, the 401(k) plan,
the pension plan, LTD, car insurance and accidental death and dismemberment and
business travel and accident insurance) will terminate upon the termination of
your employment except to the extent otherwise expressly provided in such plans
or programs.
(f) NON-RENEWAL NOTICE. Blockbuster shall notify you in writing in the
event that Blockbuster elects not to extend or renew this Agreement. If
Blockbuster gives you such notice less than twelve (12) months before the end of
the Employment Term, or your employment terminates pursuant to paragraph 8(b) or
8(c) hereof during the final twelve (12) months of the Employment Term, you
shall be entitled to receive your Salary as provided in paragraph 3(a), payable
in accordance with Blockbuster's then effective payroll practices, subject to
applicable withholding requirements, for the period commencing after the end of
the Employment Term which, when added to the portion of the Employment Term, if
any, remaining when the notice is given or the termination occurs, equals twelve
(12) months. The payments provided for in this paragraph 8(f) are in lieu of any
severance or income continuation or protection under any Blockbuster or Viacom
plan that may now or hereafter exist. You shall be required to mitigate the
amount of any payment provided for in this paragraph 8(f) by seeking other
employment or otherwise, and the amount of any such
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payment provided hereunder shall be reduced by any compensation earned by you
from a third person.
9. DEATH. If you die prior to the end of the Employment Term, your
beneficiary or estate shall be entitled to receive your Salary up to the date on
which the death occurs and a pro-rated Target Bonus.
10. SECTION 317 AND 507 OF THE FEDERAL COMMUNICATIONS ACT. You represent
that you have not accepted or given nor will you accept or give, directly or
indirectly, any money, services or other valuable consideration from or to
anyone other than Blockbuster for the inclusion of any matter as part of any
film, television program or other production produced, distributed and/or
developed by Blockbuster, Viacom and/or any of Viacom's affiliates.
11. EQUAL OPPORTUNITY EMPLOYER. You acknowledge that Blockbuster is an
equal opportunity employer. You agree that you will comply with Blockbuster
policies and applicable federal, state, and local laws prohibiting
discrimination on the basis of race, color, creed, national origin, age, sex or
disability.
12. NOTICES. All notices required to be given hereunder shall be given
in writing, by personal delivery or by mail at the respective addresses of the
parties hereto set forth above, or at such other address as may be designated in
writing by either party, and in the case of Blockbuster, to the attention of the
General Counsel of Blockbuster. Any notice given by mail shall be deemed to have
been given three days following such mailing.
13. ASSIGNMENT. This is an Agreement for the performance of personal
services by you and may not be assigned by you. Blockbuster or Viacom may assign
this Agreement to Viacom or any affiliate of Viacom or any purchaser of all or
substantially all of the assets of Blockbuster or Viacom or any successor in
interest to Viacom or Blockbuster.
14. GOVERNING LAW. This Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of Texas.
15. NO IMPLIED CONTRACT. Nothing contained in this Agreement shall be
construed to impose any obligation on Blockbuster to renew this Agreement or any
portion thereof. The parties intend to be bound only upon execution of a written
agreement and no negotiation, exchange of draft or partial performance shall be
deemed to imply an agreement. Neither the continuation of employment nor any
other conduct shall be deemed to imply a continuing agreement upon the
expiration of this Agreement.
16. ENTIRE UNDERSTANDING. This Agreement contains the entire
understanding of the parties hereto relating to the subject matter herein
contained, and can be changed only by a writing signed by both parties hereto.
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17. VOID PROVISIONS. If any provision of this Agreement, as applied to
either party or to any circumstances, shall be adjudged by a court to be void or
unenforceable, the same shall be deemed stricken from this Agreement and shall
in no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement.
* * * * *
If the foregoing correctly sets forth our understanding, please sign and
date one copy of this letter and return it to the undersigned whereupon this
letter shall constitute a binding agreement between us.
Very truly yours,
BLOCKBUSTER ENTERTAINMENT GROUP
By: /s/ Steven J. Becker
-------------------------------------
Steven J. Becker
Senior Vice President
Worldwide Human Resources
ACCEPTED AND AGREED:
/s/ Jim Notarnicola
- -----------------------------------
Jim Notarnicola
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Exhibit 10.14
As of June 1, 1998
Gary Peterson
5384 Spicewood Lane
Frisco, TX 75034
Dear Gary:
Blockbuster Entertainment Group ("Blockbuster"), a business unit of
Viacom Inc. ("Viacom"), currently having an address at 1201 Elm Street, Dallas,
Texas 75270, agrees to employ you and you agree to accept such employment on the
terms and conditions set forth herein.
1. TERM. The term of your employment hereunder shall commence on June 1,
1998 and, unless terminated by Blockbuster pursuant to paragraph 8 hereof, shall
continue through and until May 31, 2001. The period from June 1, 1998 through
May 31, 2001 shall hereinafter be referred to as the "Employment Term"
notwithstanding any earlier termination pursuant to paragraph 8.
2. DUTIES. During the Employment Term, you agree to devote your entire
business time, attention and energies to the business of Blockbuster. You will
be Blockbuster's Chief Operations Officer and you agree to perform such duties,
and such other duties reasonable and consistent with such office as may be
assigned to you from time to time by the Chairman and Chief Executive Officer of
Blockbuster or such other individual as may be designated by the Chairman and
Chief Executive Officer of Blockbuster (the "CEO"). Your principal place of
business shall be in the greater metropolitan Dallas, Texas area.
3. COMPENSATION.
(a) SALARY. For all the services rendered by you in any capacity
hereunder, Blockbuster agrees to pay you the sum of Four Hundred Thousand
Dollars ($400,000) per annum ("Salary"), payable in accordance with
Blockbuster's then effective payroll practices. Your Salary will be reviewed
during the first quarter of each calendar year during the Employment Term,
commencing with the first quarter of 1999, and will, at that time, be increased
by a percentage that is generally consistent with the range of percentages by
which the salaries of other comparable executives are then increased.
(b) BONUS. In addition to your Salary, you shall be entitled to
receive bonus compensation for each of the calendar years during the Employment
Term, determined and payable as follows ("Bonus"):
(i) Your Bonus for each of the calendar years during the
Employment Term will be based upon a measurement of
performance against objectives in accordance with the
Viacom
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Short-Term Incentive Plan, as the same may be amended
from time to time.
(ii) Your Target Bonus for each of the calendar years during
the Employment Term shall be 50% of Salary which may be
prorated for any partial calendar year during the
Employment Term.
(iii) Your Bonus for any calendar year shall be payable by
February 28 of the following year.
4. BENEFITS. You shall be entitled to participate in such vacation,
medical, dental and life insurance, 401(k), pension and other plans as
Blockbuster may have or establish from time to time and in which you would be
entitled to participate pursuant to the terms thereof. The foregoing, however,
shall not be construed to require Blockbuster to establish any such plans or to
prevent the modification or termination of such plans once established, and no
such action or failure thereof shall affect this Agreement. It is further
understood and agreed that all benefits you may be entitled to as an employee of
Blockbuster shall be based upon your Salary, as set forth in paragraph 3(a)
hereof, and not upon any bonus compensation due, payable or paid to you
hereunder, except where the benefit plan expressly provides otherwise.
5. BUSINESS EXPENSES. During your employment with Blockbuster, you shall
be reimbursed for such reasonable travel and other expenses incurred in the
performance of your duties hereunder as are customarily reimbursed to comparable
executives of Blockbuster. You shall be entitled to a car lease in accordance
with Blockbuster's policy.
6. EXCLUSIVE EMPLOYMENT, CONFIDENTIAL INFORMATION, ETC.
(a) NON-COMPETITION. You agree that your employment hereunder
is on an exclusive basis, and that as long as you are employed by Blockbuster,
you will not engage in any other business activity which is in conflict with
your duties and obligations hereunder. You agree that during the Employment Term
and for a period of one (1) year thereafter you shall not directly or indirectly
engage in or participate as an owner, partner, shareholder, officer, employee,
director, agent of or consultant for any business that competes with any of the
principal business activities of Blockbuster; PROVIDED, HOWEVER, that nothing
herein shall prevent you from investing as less than a one percent (1%)
shareholder in the securities of any company listed on a national securities
exchange or quoted on an automated quotation system. Notwithstanding anything to
the contrary in this Agreement, your obligations under the second sentence of
this paragraph 6(a) shall survive a termination of your employment with
Blockbuster and remain in full force and effect for the period set forth therein
regardless of the reason for your termination (or lack thereof).
(b) CONFIDENTIAL INFORMATION. You agree that you shall not, during
the Employment Term or at any time thereafter, use for your own purposes, or
disclose to or for the benefit of any third party, any trade secret or other
confidential information of Blockbuster,
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Viacom or any of Viacom's affiliates (except as may be required by law or in the
performance of your duties hereunder consistent with Blockbuster's policies) and
that you will comply with any confidentiality obligations of Blockbuster or
Viacom to a third party, whether under agreement or otherwise. Notwithstanding
the foregoing, confidential information shall be deemed not to include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by you or any other person who directly or
indirectly receives such information from you or at your direction or (ii) is or
becomes available to you on a non-confidential basis from a source which is
entitled to disclose it to you.
(c) NO EMPLOYEE SOLICITATION. You agree that, during the Employment Term
and for one (1) year thereafter, you shall not, directly or indirectly, engage,
employ, or solicit the employment of any person who is then or has been within
six (6) months prior thereto, an employee of Blockbuster, Viacom or any of
Viacom's affiliates.
(d) BLOCKBUSTER OWNERSHIP. The results and proceeds of your services
hereunder, including, without limitation, any works of authorship resulting from
your services during your employment with Blockbuster, Viacom and/or any of
Viacom's affiliates and any works in progress, shall be works-made-for-hire and
Blockbuster shall be deemed the sole owner throughout the universe of any and
all rights of whatsoever nature therein, whether or not now or hereafter known,
existing, contemplated, recognized or developed, with the right to use the same
in perpetuity in any manner Blockbuster determines in its sole discretion
without any further payment to you whatsoever. If, for any reason, any of such
results and proceeds shall not legally be a work-for-hire and/or there are any
rights which do not accrue to Blockbuster under the preceding sentence, then you
hereby irrevocably assign and agree to assign any and all of your right, title
and interest thereto, including, without limitation, any and all copyrights,
patents, trade secrets, trademarks and/or other rights of whatsoever nature
therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed to Blockbuster, and Blockbuster shall have the right to
use the same in perpetuity throughout the universe in any manner Blockbuster
determines without any further payment to you whatsoever. You shall, from time
to time, as may be requested by Blockbuster, do any and all things which
Blockbuster may deem useful or desirable to establish or document Blockbuster's
exclusive ownership of any and all rights in any such results and proceeds,
including, without limitation, the execution of appropriate copyright and/or
patent applications or assignments. To the extent you have any rights in the
results and proceeds of your services that cannot be assigned in the manner
described above, you unconditionally and irrevocably waive the enforcement of
such rights. This paragraph 6(d) is subject to, and shall not be deemed to
limit, restrict, or constitute any waiver by Blockbuster of any rights of
ownership to which Blockbuster may be entitled by operation of law by virtue of
Blockbuster being your employer.
(e) LITIGATION. You agree that, during the Employment Term, for one (1)
year thereafter and, if longer, during the pendency of any litigation or other
proceeding, (i) you shall not communicate with anyone (other than your own
attorneys and tax advisors and, except to the extent necessary in the
performance of your duties hereunder) with respect to the
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facts or subject matter of any pending or potential litigation, or regulatory or
administrative proceeding involving Blockbuster or Viacom or any of their
officers, directors, agents, employees, suppliers or customers, other than any
litigation or other proceeding in which you are a party-in-opposition, without
giving prior notice to Blockbuster's General Counsel, and (ii) in the event that
any other party attempts to obtain information or documents from you with
respect to matters possibly related to such litigation or other proceeding, you
shall promptly so notify Blockbuster's General Counsel.
(f) NO RIGHT TO GIVE INTERVIEWS OR WRITE BOOKS, ARTICLES, ETC. You agree
that during the Employment Term and for a period of one (1) year thereafter,
except as authorized by Blockbuster or Viacom, you shall not (i) give any
interviews or speeches, or (ii) prepare or assist any person or entity in the
preparation of any books, articles, television or motion picture productions or
other creations, in either case, concerning Blockbuster, Viacom or any of
Viacom's affiliates or any of their officers, directors, agents, employees,
suppliers or customers.
(g) RETURN OF PROPERTY. All documents, data, recordings, or other
property, whether tangible or intangible, including all information stored in
electronic form, obtained or prepared by or for you and utilized by you in the
course of your employment with Blockbuster shall remain the exclusive property
of Blockbuster. In the event of the termination of your employment for any
reason, Blockbuster reserves the right, to the extent permitted by law and in
addition to any other remedy Blockbuster may have, to deduct from any monies
otherwise payable to you the following: (i) the full amount of any debt you owe
to Blockbuster, Viacom or any of Viacom's affiliates at the time of or
subsequent to the termination of your employment with Blockbuster, and (ii) the
value of the Blockbuster property which you retain in your possession after the
termination of your employment with Blockbuster. In the event that the law of
any state or other jurisdiction requires the consent of an employee for such
deductions, this Agreement shall serve as such consent. You acknowledge and
agree that the foregoing remedy shall not be the sole and exclusive remedy of
Blockbuster with respect to a breach of this paragraph 6(g).
(h) NON-DISPARAGEMENT. You agree that you shall not, during the
Employment Term and for a period of one (1) year thereafter, criticize, ridicule
or make any statement which disparages or is derogatory of Blockbuster, Viacom
or any of Viacom's affiliates or any of their officers, directors, agents or
employees.
(i) INJUNCTIVE RELIEF. Blockbuster has entered into this Agreement in
order to obtain the benefit of your unique skills, talent, and experience. You
acknowledge and agree that any violation of paragraphs 6(a) through (h) hereof
will result in irreparable harm to Blockbuster and Viacom for which damages are
not readily ascertainable. Accordingly, you agree that Blockbuster and/or Viacom
may obtain injunctive and other equitable relief for any breach or threatened
breach of such paragraphs, in addition to any other remedies available to
Blockbuster and/or Viacom.
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(j) SURVIVAL; MODIFICATION OF TERMS. Your obligations under
paragraphs 6(a) through (i) hereof shall remain in full force and effect for the
entire period provided therein notwithstanding the termination of the Employment
Term pursuant to paragraph 8 hereof or otherwise. You and Blockbuster agree that
the restrictions and remedies contained in paragraphs 6(a) through (i) are
reasonable and that it is your intention and the intention of Blockbuster that
such restrictions and remedies shall be enforceable to the fullest extent
permissible by law. If it shall be found by a court of competent jurisdiction
that any such restriction or remedy is unenforceable but would be enforceable if
some part thereof were deleted or the period or area of application reduced,
then such restriction or remedy shall apply with such modification as shall be
necessary to make it enforceable.
7. INCAPACITY. In the event you become medically disabled and cannot
substantially perform your duties at any time during the Employment Term, the
CEO, at any time after such disability has continued for 30 consecutive days,
may determine that Blockbuster requires such duties and responsibilities be
performed by another executive. In the event you become disabled, you will first
receive benefits under Blockbuster's short-term disability program for the first
26 weeks of consecutive absence in accordance with its terms. Thereafter, you
will be eligible to receive benefits under the Blockbuster Long-Term Disability
("LTD") program in accordance with its terms. Upon receipt of benefits under the
LTD program, you will also be entitled to receive a pro-rated Target Bonus for
the calendar year in which such benefits commence.
8. TERMINATION.
(a) TERMINATION FOR CAUSE. Blockbuster may, at its option, terminate
this Agreement forthwith for "cause", and Blockbuster shall thereafter have no
further obligations under this Agreement, including, without limitation, any
obligation to pay Salary or Bonus or provide benefits under this Agreement. For
purposes of this Agreement, "cause" shall mean (i) the commission of a felony or
the commission of any other act involving dishonesty, disloyalty or fraud with
respect to Blockbuster, Viacom or any of Viacom's affiliates, (ii) conduct
bringing, or having the potential to bring, Blockbuster, Viacom or any of
Viacom's affiliates into substantial public disgrace or disrepute, (iii) willful
misconduct with respect to Blockbuster, Viacom or any of Viacom's affiliates, or
(iv) any material breach of this Agreement (including, without limitation, your
failure, neglect of or refusal to substantially perform your obligations
hereunder as set forth in paragraphs 2 and 11 hereof), except in the event of
your disability as set forth in paragraph 7. Anything herein to the contrary
notwithstanding, Blockbuster will give you written notice prior to terminating
this Agreement for your material breach setting forth the exact nature of any
alleged breach and the conduct required to cure such breach. Except for a breach
which by its nature cannot be cured, you shall have ten (10) business days from
the giving of such notice within which to cure.
(b) GOOD REASON TERMINATION. You may terminate your employment
hereunder for "Good Reason" at any time during the Employment Term by written
notice to Blockbuster not more than thirty (30) days after the occurrence of the
event constituting "Good
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Reason". Such notice shall state an effective date no earlier than thirty (30)
business days after the date it is given. Blockbuster shall have ten (10)
business from the giving such notice within which to cure. Good Reason shall
mean (x) the breach by Blockbuster of any of its material obligations hereunder,
or (y) without your prior written consent, other than in connection with the
termination of your employment for "cause" (as defined above) or in connection
with your permanent disability, the assignment to you by Blockbuster or Viacom
of duties substantially inconsistent with the duties of an officer of
Blockbuster.
(c) TERMINATION WITHOUT CAUSE. Blockbuster may terminate your employment
hereunder without "cause" (as defined above) at any time during the Employment
Term by written notice to you.
(d) TERMINATION PAYMENTS, ETC. In the event that your employment
terminates pursuant to paragraph 8(b) or 8(c) hereof, you shall be entitled to
receive, subject to applicable withholding taxes:
(i) your Salary as provided in paragraph 3(a) until the end
of the Employment Term, payable in accordance with
Blockbuster's then effective payroll practices;
(ii) bonus compensation for each calendar year during the
Employment Term equal to your Target Bonus as set forth
in paragraph 3(b);
(iii) your car allowance as provided in paragraph 5 until the
end of the Employment Term, payable in accordance with
Blockbuster's then effective payroll practices;
(iv) medical and dental insurance coverage under
Blockbuster's then current benefit plans pursuant to
COBRA until the end of the Employment Term or, if
earlier, the date on which you become eligible for
medical and dental coverage from a third party employer;
during this period, Blockbuster will pay an amount equal
to the applicable COBRA premiums (or such other amounts
as may be required by applicable law) (which amount will
be included in your income for tax purposes to the
extent required by applicable law); at the end of such
period, you may elect to continue your medical and
dental insurance coverage at your own expense for the
balance, if any, of the period required by law;
(v) life insurance coverage pursuant to Blockbuster's then
current policies until the end of the Employment Term
(the amount of Salary covered by such insurance to be
reduced by the amount of any salary payable to you by a
third party); and
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(vi) stock options granted to you under Viacom's 1994 and
1997 Long-Term Management Incentive Plans and any
successor plans (collectively, the "LTMIP") which are
exercisable on or prior to the date of the termination
of your employment under paragraph 8(b) or 8(c) hereof
or that would have vested and become exercisable on or
before the last date of the Employment Term will be
exercisable until six (6) months after the date of such
termination or, if earlier, the expiration date of the
stock options;
PROVIDED, HOWEVER, you shall be required to mitigate the amount of any payment
provided for in (i), (ii) and (iii) of this paragraph 8(d) by seeking other
employment or otherwise, and the amount of any such payment provided for in (i),
(ii) and (iii) shall be reduced by any compensation earned by you from a third
person except that mitigation shall not be required for twelve (12) months after
the termination of your employment or for the period commencing with the
termination of your employment and ending on the last day of the Employment
Term, whichever is shorter. The payments provided for in (i) above are in lieu
of any severance or income continuation or protection under any Blockbuster or
Viacom plan that may now or hereafter exist. The payments and benefits to be
provided pursuant to this paragraph 8(d) shall constitute liquidated damages,
and shall be deemed to satisfy and be in full and final settlement of all
obligations of Blockbuster to you under this Agreement.
(e) TERMINATION OF BENEFITS. Notwithstanding anything in this Agreement
to the contrary (except as otherwise provided in paragraph 8(d) with respect to
medical, dental and life insurance), coverage under all Blockbuster benefit
plans and programs (including, without limitation, vacation, the 401(k) plan,
the pension plan, LTD, car insurance and accidental death and dismemberment and
business travel and accident insurance) will terminate upon the termination of
your employment except to the extent otherwise expressly provided in such plans
or programs.
(f) NON-RENEWAL NOTICE. Blockbuster shall notify you in writing in the
event that Blockbuster elects not to extend or renew this Agreement. If
Blockbuster gives you such notice less than twelve (12) months before the end of
the Employment Term, or your employment terminates pursuant to paragraph 8(b) or
8(c) hereof during the final twelve (12) months of the Employment Term, you
shall be entitled to receive your Salary as provided in paragraph 3(a), payable
in accordance with Blockbuster's then effective payroll practices, subject to
applicable withholding requirements, for the period commencing after the end of
the Employment Term which, when added to the portion of the Employment Term, if
any, remaining when the notice is given or the termination occurs, equals twelve
(12) months. The payments provided for in this paragraph 8(f) are in lieu of any
severance or income continuation or protection under any Blockbuster or Viacom
plan that may now or hereafter exist. You shall be required to mitigate the
amount of any payment provided for in this paragraph 8(f) by seeking other
employment or otherwise, and the amount of any such
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payment provided hereunder shall be reduced by any compensation earned by you
from a third person.
9. DEATH. If you die prior to the end of the Employment Term, your
beneficiary or estate shall be entitled to receive your Salary up to the date on
which the death occurs and a pro-rated Target Bonus.
10. SECTION 317 AND 507 OF THE FEDERAL COMMUNICATIONS ACT. You represent
that you have not accepted or given nor will you accept or give, directly or
indirectly, any money, services or other valuable consideration from or to
anyone other than Blockbuster for the inclusion of any matter as part of any
film, television program or other production produced, distributed and/or
developed by Blockbuster, Viacom and/or any of Viacom's affiliates.
11. EQUAL OPPORTUNITY EMPLOYER. You acknowledge that Blockbuster is an
equal opportunity employer. You agree that you will comply with Blockbuster
policies and applicable federal, state, and local laws prohibiting
discrimination on the basis of race, color, creed, national origin, age, sex or
disability.
12. NOTICES. All notices required to be given hereunder shall be given
in writing, by personal delivery or by mail at the respective addresses of the
parties hereto set forth above, or at such other address as may be designated in
writing by either party, and in the case of Blockbuster, to the attention of the
General Counsel of Blockbuster. Any notice given by mail shall be deemed to have
been given three days following such mailing.
13. ASSIGNMENT. This is an Agreement for the performance of personal
services by you and may not be assigned by you. Blockbuster or Viacom may assign
this Agreement to Viacom or any affiliate of Viacom or any purchaser of all or
substantially all of the assets of Blockbuster or Viacom or any successor in
interest to Viacom or Blockbuster.
14. GOVERNING LAW. This Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of Texas.
15. NO IMPLIED CONTRACT. Nothing contained in this Agreement shall be
construed to impose any obligation on Blockbuster to renew this Agreement or any
portion thereof. The parties intend to be bound only upon execution of a written
agreement and no negotiation, exchange of draft or partial performance shall be
deemed to imply an agreement. Neither the continuation of employment nor any
other conduct shall be deemed to imply a continuing agreement upon the
expiration of this Agreement.
16. ENTIRE UNDERSTANDING. This Agreement contains the entire
understanding of the parties hereto relating to the subject matter herein
contained, and can be changed only by a writing signed by both parties hereto.
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17. VOID PROVISIONS. If any provision of this Agreement, as applied to
either party or to any circumstances, shall be adjudged by a court to be void or
unenforceable, the same shall be deemed stricken from this Agreement and shall
in no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement.
* * * * *
If the foregoing correctly sets forth our understanding, please sign and
date one copy of this letter and return it to the undersigned whereupon this
letter shall constitute a binding agreement between us.
Very truly yours,
BLOCKBUSTER ENTERTAINMENT GROUP
By: /s/ Steven J. Becker
-------------------------------------
Steven J. Becker
Senior Vice President
Worldwide Human Resources
ACCEPTED AND AGREED:
/s/ Gary Peterson
- -----------------------------------
Gary Peterson
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Exhibit 10.15
[Viacom Letterhead]
December 1, 1998
Gary Peterson
5384 Spicewood Lane
Frisco, Texas 75034
Dear Gary:
This is to confirm our understanding that your employment agreement
dated as of June 1, 1998 shall be amended to change the last day of the
employment term from May 31, 2001 to May 31, 2002. Except as amended hereby,
your employment agreement shall remain in full force and effect.
Please sign and return the attached copy of this letter to indicate
your agreement with the foregoing.
Very truly yours,
/s/ BILL ROSKIN
ACCEPTED AND AGREED:
/s/ Gary Peterson
-----------------------
Gary Peterson
<PAGE>
Exhibit 10.16
As of September 2, 1997
Mr. Edward B. Stead
169 Tiger Tail
Olympic Valley, CA 96146
Dear Ed:
Blockbuster Entertainment Group ("Blockbuster"), a business unit of
Viacom Inc. ("Viacom"), currently having an address at 1201 Elm Street, Dallas,
Texas 75270, agrees to employ you and you agree to accept such employment on the
terms and conditions set forth herein.
1. TERM. The term of your employment hereunder shall commence on
September 2, 1997 and, unless terminated by Blockbuster pursuant to paragraph 8
hereof, shall continue through and until September 1, 2000. The period from
September 2, 1997 through September 1, 2000 shall hereinafter be referred to as
the "Employment Term" notwithstanding any earlier termination pursuant to
paragraph 8.
2. DUTIES. During the Employment Term, you agree to devote your entire
business time, attention and energies to the business of Blockbuster. You will
be Blockbuster's Executive Vice President and General Counsel and you agree to
perform such duties, and such other duties reasonable and consistent with such
office as may be assigned to you from time to time by the Chairman and Chief
Executive Officer of Blockbuster or such other individual as may be designated
by the Chairman and Chief Executive Officer of Blockbuster (the "CEO"). Your
principal place of business shall be in the greater metropolitan Dallas, Texas
area.
3. COMPENSATION.
(a) SALARY. For all the services rendered by you in any capacity
hereunder, Blockbuster agrees to pay you the sum of Three Hundred Fifty Thousand
Dollars ($350,000) per annum ("Salary"), payable in accordance with
Blockbuster's then effective payroll practices. Your Salary will be reviewed
during the first quarter of each calendar year during the Employment Term,
commencing with the first quarter of 1998, and will, at that time, be increased
by a percentage that is generally consistent with the range of percentages by
which the salaries of other comparable executives are then increased. Any 1998
adjustment will be prorated from your start date.
(b) BONUS. In addition to your Salary, you shall be entitled to receive
bonus compensation for each of the calendar years during the Employment Term,
determined and payable as follows ("Bonus"):
(i) Your Bonus for each of the calendar years during the
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Employment Term will be based upon a measurement of
performance against objectives in accordance with the
Viacom Short-Term Incentive Plan, as the same may be
amended from time to time.
(ii) Your Target Bonus for each of the calendar years during
the Employment Term shall be 50% of Salary which may be
prorated for any partial calendar year during the
Employment Term.
(iii) Your Bonus for any calendar year shall be payable by
February 28 of the following year.
4. BENEFITS. You shall be entitled to participate in such vacation,
medical, dental and life insurance, 401(k), pension and other plans as
Blockbuster may have or establish from time to time and in which you would be
entitled to participate pursuant to the terms thereof. The foregoing, however,
shall not be construed to require Blockbuster to establish any such plans or to
prevent the modification or termination of such plans once established, and no
such action or failure thereof shall affect this Agreement. It is further
understood and agreed that all benefits you may be entitled to as an employee of
Blockbuster shall be based upon your Salary, as set forth in paragraph 3(a)
hereof, and not upon any bonus compensation due, payable or paid to you
hereunder, except where the benefit plan expressly provides otherwise.
5. BUSINESS EXPENSES. During your employment with Blockbuster, you
shall be reimbursed for such reasonable travel and other expenses incurred in
the performance of your duties hereunder as are customarily reimbursed to
comparable executives of Blockbuster. You shall be entitled to a car allowance
in accordance with Blockbuster's policy.
6. EXCLUSIVE EMPLOYMENT, CONFIDENTIAL INFORMATION, ETC.
(a) NON-COMPETITION. You agree that your employment hereunder is on an
exclusive basis, and that as long as you are employed by Blockbuster, you will
not engage in any other business activity which is in conflict with your duties
and obligations hereunder. You agree that during the Employment Term and for a
period of one (1) year thereafter you shall not directly or indirectly engage in
or participate as owner, partner, shareholder, officer, employee, director,
agent of or consultant for any business that competes with any of the principal
business activities of Blockbuster; PROVIDED, HOWEVER, that nothing herein shall
prevent you from investing as less than a one percent (1%) shareholder in the
securities of any company listed on a national securities exchange or quoted on
an automated quotation system. Notwithstanding anything to the contrary in this
Agreement, your obligations under the second sentence of this paragraph 6(a)
shall survive a termination of your employment with Blockbuster and remain in
full force and effect for the period set forth therein regardless of the reason
for your termination (or lack thereof).
(b) CONFIDENTIAL INFORMATION. You agree that you shall not, during the
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Employment Term or at any time thereafter, use for your own purposes, or
disclose to or for the benefit of any third party, any trade secret or other
confidential information of Blockbuster, Viacom or any of Viacom's affiliates
(except as may be required by law or in the performance of your duties hereunder
consistent with Blockbuster's policies) and that you will comply with any
confidentiality obligations of Blockbuster or Viacom to a third party, whether
under agreement or otherwise. Notwithstanding the foregoing, confidential
information shall be deemed not to include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by you
or any other person who directly or indirectly receives such information from
you or at your direction or (ii) is or becomes available to you on a
non-confidential basis from a source which is entitled to disclose it to you.
(c) NO EMPLOYEE SOLICITATION. You agree that, during the Employment Term
and for one (1) year thereafter, you shall not, directly or indirectly, engage,
employ, or solicit the employment of any person who is then or has been within
six (6) months prior thereto, an employee of Blockbuster, Viacom or any of
Viacom's affiliates.
(d) BLOCKBUSTER OWNERSHIP. The results and proceeds of your services
hereunder, including, without limitation, any works of authorship resulting from
your services during your employment with Blockbuster, Viacom and/or any of
Viacom's affiliates and any works in progress, shall be works-made-for-hire and
Blockbuster shall be deemed the sole owner throughout the universe of any and
all rights of whatsoever nature therein, whether or not now or hereafter known,
existing, contemplated, recognized or developed, with the right to use the same
in perpetuity in any manner Blockbuster determines in its sole discretion
without any further payment to you whatsoever. If, for any reason, any of such
results and proceeds shall not legally be a work-for-hire and/or there are any
rights which do not accrue to Blockbuster under the preceding sentence, then you
hereby irrevocably assign and agree to assign any and all of your right, title
and interest thereto, including, without limitation, any and all copyrights,
patents, trade secrets, trademarks and/or other rights of whatsoever nature
therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed to Blockbuster, and Blockbuster shall have the right to
use the same in perpetuity throughout the universe in any manner Blockbuster
determines without any further payment to you whatsoever. You shall, from time
to time, as may be requested by Blockbuster, do any and all things which
Blockbuster may deem useful or desirable to establish or document Blockbuster's
exclusive ownership of any and all rights in any such results and proceeds,
including, without limitation, the execution of appropriate copyright and/or
patent applications or assignments. To the extent you have any rights in the
results and proceeds of your services that cannot be assigned in the manner
described above, you unconditionally and irrevocably waive the enforcement of
such rights. This paragraph 6(d) is subject to, and shall not be deemed to
limit, restrict, or constitute any waiver by Blockbuster of any rights of
ownership to which Blockbuster may be entitled by operation of law by virtue of
Blockbuster being your employer.
(e) LITIGATION. You agree that, during the Employment Term, for one (1)
year thereafter and, if longer, during the pendency of any litigation or other
proceeding, (i)
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you shall not communicate with anyone (other than your own attorneys and tax
advisors and, except to the extent necessary in the performance of your duties
hereunder) with respect to the facts or subject matter of any pending or
potential litigation, or regulatory or administrative proceeding involving
Blockbuster or Viacom or any of their officers, directors, agents, employees,
suppliers or customers, other than any litigation or other proceeding in which
you are a party-in-opposition, without giving prior notice to Blockbuster's CEO,
and (ii) in the event that any other party attempts to obtain information or
documents from you with respect to matters possibly related to such litigation
or other proceeding, you shall promptly so notify Blockbuster's CEO.
(f) NO RIGHT TO GIVE INTERVIEWS OR WRITE BOOKS, ARTICLES, ETC. You agree
that during the Employment Term and for a period of one (1) year thereafter,
except as authorized by Blockbuster or Viacom, you shall not (i) give any
interviews or speeches, or (ii) prepare or assist any person or entity in the
preparation of any books, articles, television or motion picture productions or
other creations, in either case, concerning Blockbuster, Viacom or any of
Viacom's affiliates or any of their officers, directors, agents, employees,
suppliers or customers.
(g) RETURN OF PROPERTY. All documents, data, recordings, or other
property, whether tangible or intangible, including all information stored in
electronic form, obtained or prepared by or for you and utilized by you in the
course of your employment with Blockbuster shall remain the exclusive property
of Blockbuster. In the event of the termination of your employment for any
reason, Blockbuster reserves the right, to the extent permitted by law and in
addition to any other remedy Blockbuster may have, to deduct from any monies
otherwise payable to you the following: (i) the full amount of any debt you owe
to Blockbuster, Viacom or any of Viacom's affiliates at the time of or
subsequent to the termination of your employment with Blockbuster, and (ii) the
value of the Blockbuster property which you retain in your possession after the
termination of your employment with Blockbuster. In the event that the law of
any state or other jurisdiction requires the consent of an employee for such
deductions, this Agreement shall serve as such consent. You acknowledge and
agree that the foregoing remedy shall not be the sole and exclusive remedy of
Blockbuster with respect to a breach of this paragraph 6(g).
(h) NON-DISPARAGEMENT. You agree that you shall not, during the
Employment Term and for a period of one (1) year thereafter, criticize, ridicule
or make any statement which disparages or is derogatory of Blockbuster, Viacom
or any of Viacom's affiliates or any of their officers, directors, agents or
employees. Additionally Blockbuster assumes a similar obligation with respect to
you for its Chairman and his direct reports.
(i) INJUNCTIVE RELIEF. Blockbuster has entered into this Agreement in
order to obtain the benefit of your unique skills, talent, and experience. You
acknowledge and agree that any violation of paragraphs 6(a) through (h) hereof
will result in irreparable harm to Blockbuster and Viacom for which damages are
not readily ascertainable. Accordingly, you agree that Blockbuster and/or Viacom
may obtain injunctive and other equitable relief for any
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breach or threatened breach of such paragraphs, in addition to any other
remedies available to Blockbuster and/or Viacom. Additionally Blockbuster
assumes a similar obligation with respect to you for its Chairman and his direct
reports.
(j) SURVIVAL; MODIFICATION OF TERMS. Your obligations under
paragraphs 6(a) through (i) hereof shall remain in full force and effect for the
entire period provided therein notwithstanding the termination of the Employment
Term pursuant to paragraph 8 hereof or otherwise. You and Blockbuster agree that
the restrictions and remedies contained in paragraphs 6(a) through (i) are
reasonable and that it is your intention and the intention of Blockbuster that
such restrictions and remedies shall be enforceable to the fullest extent
permissible by law. If it shall be found by a court of competent jurisdiction
that any such restriction or remedy is unenforceable but would be enforceable if
some part thereof were deleted or the period or area of application reduced,
then such restriction or remedy shall apply with such modification as shall be
necessary to make it enforceable.
7. INCAPACITY. In the event you become medically disabled and cannot
substantially perform your duties at any time during the Employment Term, the
CEO, at any time after such disability has continued for 30 consecutive days,
may determine that Blockbuster requires such duties and responsibilities be
performed by another executive. In the event you become disabled, you will first
receive benefits under Blockbuster's short-term disability program for the first
26 weeks of consecutive absence in accordance with its terms. Thereafter, you
will be eligible to receive benefits under the Blockbuster Long-Term Disability
("LTD") program in accordance with its terms. Upon receipt of benefits under the
LTD program, you will also be entitled to receive a pro-rated Target Bonus for
the calendar year in which such benefits commence.
8. TERMINATION.
(a) TERMINATION FOR CAUSE. Blockbuster may, at its option, terminate
this Agreement forthwith for "cause", and Blockbuster shall thereafter have no
further obligations under this Agreement, including, without limitation, any
obligation to pay Salary or Bonus or provide benefits under this Agreement. For
purposes of this Agreement, "cause" shall mean (i) the commission of a felony or
the commission of any other act involving dishonesty, disloyalty or fraud with
respect to Blockbuster, Viacom or any of Viacom's affiliates, (ii) willful
misconduct with respect to Blockbuster, Viacom, or (iv) any material breach of
this Agreement (including, without limitation, your failure, neglect of or
refusal to substantially perform your obligations hereunder as set forth in
paragraphs 2 and 11 hereof), except in the event of your disability as set forth
in paragraph 7. Anything herein to the contrary notwithstanding, Blockbuster
will give you written notice prior to terminating this Agreement for your
material breach setting forth the exact nature of any alleged breach and the
conduct required to cure such breach. You shall have ten (10) business days from
the giving of such notice within which to cure.
(b) GOOD REASON TERMINATION. You may terminate your employment
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hereunder for "Good Reason" at any time during the Employment Term by written
notice to Blockbuster not more than thirty (30) days after the occurrence of the
event constituting "Good Reason". Such notice shall state an effective date no
later than ten (10) business days after the date it is given. Good Reason shall
mean (x) the breach by Blockbuster of any of its material obligations hereunder,
or (y) without your prior written consent, other than in connection with the
termination of your employment for "cause" (as defined above) or in connection
with your permanent disability, the assignment to you by Blockbuster or Viacom
of duties substantially inconsistent with the duties of an officer of
Blockbuster.
(c) TERMINATION WITHOUT CAUSE. Blockbuster may terminate your employment
hereunder without "cause" (as defined above) at any time during the Employment
Term by written notice to you.
(d) TERMINATION PAYMENTS, ETC. In the event that your employment
terminates pursuant to paragraph 8(b) or 8(c) hereof, you shall be entitled to
receive, subject to applicable withholding taxes:
(i) your Salary as provided in paragraph 3(a) until the end
of the Employment Term, payable in accordance with
Blockbuster's then effective payroll practices;
(ii) bonus compensation for each calendar year during the
Employment Term equal to your Target Bonus as set forth
in paragraph 3(b);
(iii) your car allowance as provided in paragraph 5 until the
end of the Employment Term, payable in accordance with
Blockbuster's then effective payroll practices;
(iv) medical and dental insurance coverage under
Blockbuster's then current benefit plans pursuant to
COBRA until the end of the Employment Term or, if
earlier, the date on which you become eligible for
medical and dental coverage from a third party employer;
during this period, Blockbuster will pay an amount equal
to the applicable COBRA premiums (or such other amounts
as may be required by applicable law) (which amount will
be included in your income for tax purposes to the
extent required by applicable law); at the end of such
period, you may elect to continue your medical and
dental insurance coverage at your own expense for the
balance, if any, of the period required by law;
(i) life insurance coverage pursuant to Blockbuster's then
current policies until the end of the Employment Term
(the amount of Salary covered by such insurance to be
reduced by the amount of
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any salary payable to you by a third party); and
(ii) stock options granted to you under Viacom's 1989 and
1994 Long-Term Management Incentive Plans and any
successor plans (collectively, the "LTMIP") which are
exercisable on or prior to the date of the termination
of your employment under paragraph 8(b) or 8(c) hereof
or that would have vested and become exercisable on or
before the last date of the Employment Term will be
exercisable until six (6) months after the date of such
termination or, if earlier, the expiration date of the
stock options;
PROVIDED, HOWEVER, you shall be required to mitigate the amount of any payment
provided for in (i), (ii) and (iii) of this paragraph 8(d) by seeking other
employment or otherwise, and the amount of any such payment provided for in (i),
(ii) and (iii) shall be reduced by any compensation earned by you from a third
person except that mitigation shall not be required for twelve (12) months after
the termination of your employment or for the period commencing with the
termination of your employment and ending on the last day of the Employment
Term, whichever is shorter. The payments provided for in (i) above are in lieu
of any severance or income continuation or protection under any Blockbuster or
Viacom plan that may now or hereafter exist. The payments and benefits to be
provided pursuant to this paragraph 8(d) shall constitute liquidated damages,
and shall be deemed to satisfy and be in full and final settlement of all
obligations of Blockbuster to you under this Agreement.
(e) TERMINATION OF BENEFITS. Notwithstanding anything in this Agreement
to the contrary (except as otherwise provided in paragraph 8(d) with respect to
medical, dental and life insurance), coverage under all Blockbuster benefit
plans and programs (including, without limitation, vacation, the 401(k) plan,
the pension plan, LTD, car insurance and accidental death and dismemberment and
business travel and accident insurance) will terminate upon the termination of
your employment except to the extent otherwise expressly provided in such plans
or programs.
(f) NON-RENEWAL NOTICE. Blockbuster shall notify you in writing in the
event that Blockbuster elects not to extend or renew this Agreement. If
Blockbuster gives you such notice less than twelve (12) months before the end of
the Employment Term, or your employment terminates pursuant to paragraph 8(b) or
8(c) hereof during the final twelve (12) months of the Employment Term, you
shall be entitled to receive your Salary as provided in paragraph 3(a), payable
in accordance with Blockbuster's then effective payroll practices, subject to
applicable withholding requirements, for the period commencing after the end of
the Employment Term which, when added to the portion of the Employment Term, if
any, remaining when the notice is given or the termination occurs, equals twelve
(12) months. The payments provided for in this paragraph 8(f) are in lieu of any
severance or income continuation or protection under any Blockbuster or Viacom
plan that may now or hereafter exist. You shall be required to mitigate the
amount of any payment provided for in this paragraph 8(f) by seeking other
employment or otherwise, and the amount of any such
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payment provided hereunder shall be reduced by any compensation earned by you
from a third person.
9. DEATH. If you die prior to the end of the Employment Term, your
beneficiary or estate shall be entitled to receive your Salary up to the date on
which the death occurs and a pro-rated Target Bonus.
10. SECTION 317 AND 507 OF THE FEDERAL COMMUNICATIONS ACT. You
represent that you have not accepted or given nor will you accept or give,
directly or indirectly, any money, services or other valuable consideration from
or to anyone other than Blockbuster for the inclusion of any matter as part of
any film, television program or other production produced, distributed and/or
developed by Blockbuster, Viacom and/or any of Viacom's affiliates.
11. EQUAL OPPORTUNITY EMPLOYER. You acknowledge that Blockbuster is an
equal opportunity employer. You agree that you will comply with Blockbuster
policies and applicable federal, state, and local laws prohibiting
discrimination on the basis of race, color, creed, national origin, age, sex or
disability.
12. NOTICES. All notices required to be given hereunder shall be given
in writing, by personal delivery or by mail at the respective addresses of the
parties hereto set forth above, or at such other address as may be designated in
writing by either party, and in the case of Blockbuster, to the attention of the
CEO of Blockbuster. Any notice given by mail shall be deemed to have been given
three days following such mailing.
13. ASSIGNMENT. This is an Agreement for the performance of personal
services by you and may not be assigned by you. Blockbuster or Viacom may assign
this Agreement to Viacom or any affiliate of Viacom or any purchaser of all or
substantially all of the assets of Blockbuster or Viacom or any successor in
interest to Viacom or Blockbuster.
14. GOVERNING LAW. This Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of Texas.
15. NO IMPLIED CONTRACT. Nothing contained in this Agreement shall be
construed to impose any obligation on Blockbuster to renew this Agreement or any
portion thereof. The parties intend to be bound only upon execution of a written
agreement and no negotiation, exchange of draft or partial performance shall be
deemed to imply an agreement. Neither the continuation of employment nor any
other conduct shall be deemed to imply a continuing agreement upon the
expiration of this Agreement.
16. ENTIRE UNDERSTANDING. This Agreement contains the entire
understanding of the parties hereto relating to the subject matter herein
contained, and can be changed only by a writing signed by both parties hereto.
17. VOID PROVISIONS. If any provision of this Agreement, as applied to
either party
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or to any circumstances, shall be adjudged by a court to be void or
unenforceable, the same shall be deemed stricken from this Agreement and shall
in no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement.
* * * * *
If the foregoing correctly sets forth our understanding, please sign and
date one copy of this letter and return it to the undersigned whereupon this
letter shall constitute a binding agreement between us.
Very truly yours,
BLOCKBUSTER ENTERTAINMENT GROUP
By: /s/ Steven J. Becker
----------------------------------
Steven J. Becker
Senior Vice President
Worldwide Human Resources
ACCEPTED AND AGREED:
/s/ Edward B. Stead
- -----------------------------------
Edward B. Stead
DATED: 9/2/97
-----------------------------
9
<PAGE>
Exhibit 10.17
[Viacom Letterhead]
December 1, 1998
Edward B. Stead
169 Tiger Tail
Olympic Valley, California 96146
Dear Ed:
This is to confirm our understanding that your employment agreement
dated as of September 2, 1997 shall be amended to change the last day of the
employment term from September 1, 2000 to September 2, 2001. Except as amended
hereby, your employment agreement shall remain in full force and effect.
Please sign and return the attached copy of this letter to indicate
your agreement with the foregoing.
Very truly yours,
/s/ BILL ROSKIN
ACCEPTED AND AGREED:
/s/ Edward B. Stead
- -----------------------
Edward B. Stead
<PAGE>
Exhibit 10.18
As of June 1, 1998
Nigel Travis
5109 Hedrick Court
Flower Mound, TX 75028
Dear Nigel:
Blockbuster Entertainment Group ("Blockbuster"), a business unit of
Viacom Inc. ("Viacom"), currently having an address at 1201 Elm Street, Dallas,
Texas 75270, agrees to employ you and you agree to accept such employment on the
terms and conditions set forth herein.
1. TERM. The term of your employment hereunder shall commence on June
1, 1998 and, unless terminated by Blockbuster pursuant to paragraph 8 hereof,
shall continue through and until May 31, 2001. The period from June 1, 1998
through May 31, 2001 shall hereinafter be referred to as the "Employment Term"
notwithstanding any earlier termination pursuant to paragraph 8.
2. DUTIES. During the Employment Term, you agree to devote your entire
business time, attention and energies to the business of Blockbuster. You will
be President, Retail Operations of Blockbuster and you agree to perform such
duties, and such other duties reasonable and consistent with such office as may
be assigned to you from time to time by the Chairman, Chief Executive Officer of
Blockbuster (the "CEO") or such other individual as may be designated by the
CEO. Your principal place of business shall be in the greater metropolitan
Dallas, Texas area.
3. COMPENSATION.
(a) SALARY. For all the services rendered by you in any capacity
hereunder, Blockbuster agrees to pay you the sum of Four Hundred Thirty Thousand
Dollars ($430,000) per annum ("Salary"), payable in accordance with
Blockbuster's then effective payroll practices. Your Salary will be increased to
Four Hundred Sixty Five Thousand Dollars ($465,000) per annum on June 1, 1999
and to Five Hundred Five Thousand Dollars ($505,000) per annum on June 1, 2000.
(b) BONUS. In addition to your Salary, you shall be entitled to
receive bonus compensation for each of the calendar years during the Employment
Term, determined and payable as follows ("Bonus"):
(i) Your Bonus for each of the calendar years during the
Employment Term will be based upon a measurement of
performance against objectives in accordance with the
Viacom Short-Term Incentive Plan, as the same may be
amended from time to time.
(ii) Your Target Bonus for each of the calendar years during
the Employment Term shall be 50% of Salary which may be
prorated for any partial calendar year during the
Employment Term.
(iii) Your Bonus for any calendar year shall be payable by
February 28 of the following year.
<PAGE>
(c) ANNUAL STOCK OPTION GRANTS. You shall receive an annual grant (the
"Annual Grant") for the 1999 and 2000 calendar years under the Viacom Inc. 1997
Long-Term Management Incentive Plan and any successor plans (collectively, the
"LTMIP") of stock options to purchase not less than 15,000 shares of Viacom's
Class B Common Stock. Each Annual Grant shall be made as of August 1st or the
date on which the Compensation Committee of the Viacom Board of Directors shall
award the major stock option grant under the LTMIP to Viacom's senior executives
for such calendar year and shall be on the same terms with respect to vesting
and so forth as such major stock option grant.
4. BENEFITS. During the Employment Term, you will continue to
participate in (i) the U.K. Pension Plan on the same basis that you have
previously participated (i.e., Blockbuster will make contributions of 15% of
your Salary on a basis that is tax-free to you), and (ii) the Blockbuster U.K.
vacation policy except that you will adopt Blockbuster's U.S. work schedule,
including hours of work, time off and public holidays. Except for the foregoing,
you shall be entitled to participate in such medical, dental and life insurance,
401(k), and other plans as Blockbuster may have or establish from time to time
and in which you would be entitled to participate pursuant to the terms thereof.
The foregoing, however, shall not be construed to require Blockbuster to
establish any such plans or to prevent the modification or termination of such
plans once established, and no such action or failure thereof shall affect this
Agreement. It is further understood and agreed that all benefits you may be
entitled to as an employee of Blockbuster shall be based upon your Salary, as
set forth in paragraph 3(a) hereof, and not upon any bonus compensation due,
payable or paid to you hereunder, except where the benefit plan expressly
provides otherwise.
5. BUSINESS EXPENSES. During your employment with Blockbuster, you shall
be reimbursed for such reasonable travel and other expenses incurred in the
performance of your duties hereunder as are customarily reimbursed to senior
executives of Blockbuster. You shall be entitled to a car lease of $750 per
month for one car in accordance with Blockbuster's policy.
6. EXCLUSIVE EMPLOYMENT, CONFIDENTIAL INFORMATION, ETC.
(a) NON-COMPETITION. You agree that your employment hereunder
is on an exclusive basis, and that as long as you are employed by Blockbuster,
you will not engage in any other business activity which is in conflict with
your duties and obligations hereunder. You agree that during the Employment Term
and for a period of one (1) year thereafter you shall not directly or indirectly
engage in or participate as an owner, partner, shareholder, officer, employee,
director, agent of or consultant for any business that competes with any of the
principal business activities of Blockbuster; PROVIDED, HOWEVER, that nothing
herein shall prevent you from investing as less than a one percent (1%)
shareholder in the securities of any company listed on a national securities
exchange or quoted on an automated quotation system. Notwithstanding anything to
the contrary in this Agreement, your obligations under the second sentence of
this paragraph 6(a) shall survive a termination of your employment with
Blockbuster and remain in full force and effect for the period set forth therein
regardless of the reason for your termination (or lack thereof).
(b) CONFIDENTIAL INFORMATION. You agree that you shall not, during
the Employment Term or at any time thereafter, use for your own purposes, or
disclose to or for the benefit of any third party, any trade secret or other
confidential information of Blockbuster, Viacom or any of Viacom's affiliates
(except as may be required by law or in the performance of your duties hereunder
consistent with Blockbuster's policies) and that you will comply with any
confidentiality obligations of Blockbuster or Viacom to a third party, whether
under agreement or otherwise. Notwithstanding the foregoing,
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confidential information shall be deemed not to include information which (i) is
or becomes generally available to the public other than as a result of a
disclosure by you or any other person who directly or indirectly receives such
information from you or at your direction or (ii) is or becomes available to you
on a non-confidential basis from a source which is entitled to disclose it to
you.
(c) NO EMPLOYEE SOLICITATION. You agree that, during the Employment Term
and for one (1) year thereafter, you shall not, directly or indirectly, engage,
employ, or solicit the employment of any person who is then or has been within
six (6) months prior thereto, an employee of Blockbuster, Viacom or any of
Viacom's affiliates.
(d) BLOCKBUSTER OWNERSHIP. The results and proceeds of your services
hereunder, including, without limitation, any works of authorship resulting from
your services during your employment with Blockbuster, Viacom and/or any of
Viacom's affiliates and any works in progress, shall be works-made-for-hire and
Blockbuster shall be deemed the sole owner throughout the universe of any and
all rights of whatsoever nature therein, whether or not now or hereafter known,
existing, contemplated, recognized or developed, with the right to use the same
in perpetuity in any manner Blockbuster determines in its sole discretion
without any further payment to you whatsoever. If, for any reason, any of such
results and proceeds shall not legally be a work-for-hire and/or there are any
rights which do not accrue to Blockbuster under the preceding sentence, then you
hereby irrevocably assign and agree to assign any and all of your right, title
and interest thereto, including, without limitation, any and all copyrights,
patents, trade secrets, trademarks and/or other rights of whatsoever nature
therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed to Blockbuster, and Blockbuster shall have the right to
use the same in perpetuity throughout the universe in any manner Blockbuster
determines without any further payment to you whatsoever. You shall, from time
to time, as may be requested by Blockbuster, do any and all things which
Blockbuster may deem useful or desirable to establish or document Blockbuster's
exclusive ownership of any and all rights in any such results and proceeds,
including, without limitation, the execution of appropriate copyright and/or
patent applications or assignments. To the extent you have any rights in the
results and proceeds of your services that cannot be assigned in the manner
described above, you unconditionally and irrevocably waive the enforcement of
such rights. This paragraph 6(d) is subject to, and shall not be deemed to
limit, restrict, or constitute any waiver by Blockbuster of any rights of
ownership to which Blockbuster may be entitled by operation of law by virtue of
Blockbuster being your employer.
(e) LITIGATION. You agree that, during the Employment Term, for one (1)
year thereafter and, if longer, during the pendency of any litigation or other
proceeding, (i) you shall not communicate with anyone (other than your own
attorneys and tax advisors and, except to the extent necessary in the
performance of your duties hereunder) with respect to the facts or subject
matter of any pending or potential litigation, or regulatory or administrative
proceeding involving Blockbuster or Viacom or any of their officers, directors,
agents, employees, suppliers or customers, other than any litigation or other
proceeding in which you are a party-in-opposition, without giving prior notice
to Blockbuster's General Counsel, and (ii) in the event that any other party
attempts to obtain information or documents from you with respect to matters
possibly related to such litigation or other proceeding, you shall promptly so
notify Blockbuster's General Counsel.
(f) NO RIGHT TO GIVE INTERVIEWS OR WRITE BOOKS, ARTICLES, ETC. You agree
that during the Employment Term and for a period of one (1) year thereafter,
except as authorized by Blockbuster or Viacom, you shall not (i) give any
interviews or speeches, or (ii) prepare or assist any person or entity in the
preparation of any books, articles, television or motion picture productions or
3
<PAGE>
other creations, in either case, concerning Blockbuster, Viacom or any of
Viacom's affiliates or any of their officers, directors, agents, employees,
suppliers or customers.
(g) RETURN OF PROPERTY. All documents, data, recordings, or other
property, whether tangible or intangible, including all information stored in
electronic form, obtained or prepared by or for you and utilized by you in the
course of your employment with Blockbuster shall remain the exclusive property
of Blockbuster. In the event of the termination of your employment for any
reason, Blockbuster reserves the right, to the extent permitted by law and in
addition to any other remedy Blockbuster may have, to deduct from any monies
otherwise payable to you the following: (i) the full amount of any debt you owe
to Blockbuster, Viacom or any of Viacom's affiliates at the time of or
subsequent to the termination of your employment with Blockbuster, and (ii) the
value of the Blockbuster property which you retain in your possession after the
termination of your employment with Blockbuster. In the event that the law of
any state or other jurisdiction requires the consent of an employee for such
deductions, this Agreement shall serve as such consent. You acknowledge and
agree that the foregoing remedy shall not be the sole and exclusive remedy of
Blockbuster with respect to a breach of this paragraph 6(g).
(h) NON-DISPARAGEMENT. You agree that you shall not, during the
Employment Term and for a period of one (1) year thereafter, criticize, ridicule
or make any statement which disparages or is derogatory of Blockbuster, Viacom
or any of Viacom's affiliates or any of their officers, directors, agents or
employees.
(i) INJUNCTIVE RELIEF. Blockbuster has entered into this Agreement in
order to obtain the benefit of your unique skills, talent, and experience. You
acknowledge and agree that any violation of paragraphs 6(a) through (h) hereof
will result in irreparable harm to Blockbuster and Viacom for which damages are
not readily ascertainable. Accordingly, you agree that Blockbuster and/or Viacom
may obtain injunctive and other equitable relief for any breach or threatened
breach of such paragraphs, in addition to any other remedies available to
Blockbuster and/or Viacom.
(j) SURVIVAL; MODIFICATION OF TERMS. Your obligations under paragraphs
6(a) through (i) hereof shall remain in full force and effect for the entire
period provided therein notwithstanding the termination of the Employment Term
pursuant to paragraph 8 hereof or otherwise. You and Blockbuster agree that the
restrictions and remedies contained in paragraphs 6(a) through (i) are
reasonable and that it is your intention and the intention of Blockbuster that
such restrictions and remedies shall be enforceable to the fullest extent
permissible by law. If it shall be found by a court of competent jurisdiction
that any such restriction or remedy is unenforceable but would be enforceable if
some part thereof were deleted or the period or area of application reduced,
then such restriction or remedy shall apply with such modification as shall be
necessary to make it enforceable.
7. INCAPACITY. In the event you become medically disabled and cannot
substantially perform your duties at any time during the Employment Term, the
CEO, at any time after such disability has continued for 30 consecutive days,
may determine that Blockbuster requires such duties and responsibilities be
performed by another executive. In the event you become disabled, you will first
receive benefits under Blockbuster's short-term disability program for the first
26 weeks of consecutive absence in accordance with its terms. Thereafter, you
will be eligible to receive benefits under the Blockbuster Long-Term Disability
("LTD") program in accordance with its terms. Upon receipt of benefits under the
LTD program, you will also be entitled to receive a pro-rated Target Bonus for
the calendar year in which such benefits commence.
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8. TERMINATION.
(a) TERMINATION FOR CAUSE. Blockbuster may, at its option, terminate
this Agreement forthwith for "cause", and Blockbuster shall thereafter have no
further obligations under this Agreement, including, without limitation, any
obligation to pay Salary or Bonus or provide benefits under this Agreement. For
purposes of this Agreement, "cause" shall mean (i) the commission of a felony or
the commission of any other act involving dishonesty, disloyalty or fraud with
respect to Blockbuster, Viacom or any of Viacom's affiliates, (ii) conduct
bringing, or having the potential to bring, Blockbuster, Viacom or any of
Viacom's affiliates into substantial public disgrace or disrepute, (iii) willful
misconduct with respect to Blockbuster, Viacom or any of Viacom's affiliates, or
(iv) any material breach of this Agreement (including, without limitation, your
failure, neglect of or refusal to substantially perform your obligations
hereunder as set forth in paragraphs 2 and 11 hereof), except in the event of
your disability as set forth in paragraph 7. Anything herein to the contrary
notwithstanding, Blockbuster will give you written notice prior to terminating
this Agreement for your material breach setting forth the exact nature of any
alleged breach and the conduct required to cure such breach. Except for a breach
which by its nature cannot be cured, you shall have ten (10) business days from
the giving of such notice within which to cure.
(b) GOOD REASON TERMINATION. You may terminate your employment
hereunder for "Good Reason" at any time during the Employment Term by written
notice to Blockbuster not more than thirty (30) days after the occurrence of the
event constituting "Good Reason". Such notice shall state an effective date no
earlier than thirty (30) business days after the date it is given. Blockbuster
shall have ten (10) business days from the giving such notice within which to
cure. Good Reason shall mean (x) the breach by Blockbuster of any of its
material obligations hereunder, or (y) without your prior written consent, other
than in connection with the termination of your employment for "cause" (as
defined above) or in connection with your permanent disability, the assignment
to you by Blockbuster or Viacom of duties substantially inconsistent with the
duties of an officer of Blockbuster.
(c) TERMINATION WITHOUT CAUSE. Blockbuster may terminate your
employment hereunder without "cause" (as defined above) at any time during the
Employment Term by written notice to you.
(d) TERMINATION PAYMENTS, ETC. In the event that your employment
terminates pursuant to paragraph 8(b) or 8(c) hereof, you shall be entitled to
receive, subject to applicable withholding taxes:
(i) your Salary as provided in paragraph 3(a) until the end
of the Employment Term, payable in accordance with
Blockbuster's then effective payroll practices;
(ii) bonus compensation for each calendar year during the
Employment Term equal to your Target Bonus as set forth
in paragraph 3(b);
(iii) your car lease as provided in paragraph 5 until the end
of the Employment Term, payable in accordance with
Blockbuster's then effective payroll practices;
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(iv) for as long as you remain in the United States after
your termination, medical and dental insurance coverage
under Blockbuster's then current benefit plans pursuant
to COBRA until the end of the Employment Term or, if
earlier, the date on which you become eligible for
medical and dental coverage from a third party employer;
during this period, Blockbuster will pay an amount equal
to the applicable COBRA premiums (or such other amounts
as may be required by applicable law) (which amount will
be included in your income for tax purposes to the
extent required by applicable law); at the end of such
period, you may elect to continue your medical and
dental insurance coverage at your own expense for the
balance, if any, of the period required by law;
(v) life insurance coverage pursuant to Blockbuster's then
current policies until the end of the Employment Term
(the amount of Salary covered by such insurance to be
reduced by the amount of any salary payable to you by a
third party); and
(vi) stock options granted to you under Viacom's 1994 and
1997 Long-Term Management Incentive Plans and any
successor plans which are exercisable on or prior to the
date of the termination of your employment under
paragraph 8(b) or 8(c) hereof or that would have vested
and become exercisable on or before the last date of the
Employment Term will be exercisable until six (6) months
after the date of such termination or, if earlier, the
expiration date of the stock options;
PROVIDED, HOWEVER, you shall be required to mitigate the amount of any payment
provided for in (i), (ii) and (iii) of this paragraph 8(d) by seeking other
employment or otherwise, and the amount of any such payment provided for in (i),
(ii) and (iii) shall be reduced by any compensation earned by you from a third
person except that mitigation shall not be required for twelve (12) months after
the termination of your employment or for the period commencing with the
termination of your employment and ending on the last day of the Employment
Term, whichever is shorter. The payments provided for in (i) above are in lieu
of any severance or income continuation or protection under any Blockbuster or
Viacom plan that may now or hereafter exist. The payments and benefits to be
provided pursuant to this paragraph 8(d) shall constitute liquidated damages,
and shall be deemed to satisfy and be in full and final settlement of all
obligations of Blockbuster to you under this Agreement.
(e) TERMINATION OF BENEFITS. Notwithstanding anything in this Agreement
to the contrary (except as otherwise provided in paragraph 8(d) with respect to
medical, dental and life insurance), (i) coverage under all Blockbuster benefit
plans and programs (including, without limitation, vacation, upon the
termination of your employment the 401(k) plan, the U.K. Pension Plan, LTD, car
insurance and accidental death and dismemberment and business travel and
accident insurance) will terminate except to the extent otherwise expressly
provided in such plans or programs; and (ii) Blockbuster will have no obligation
and make any further contributions to the U.K. Pension Plan.
(f) NON-RENEWAL NOTICE. Blockbuster shall notify you in writing in the
event that Blockbuster elects not to extend or renew this Agreement. If
Blockbuster gives you such notice less than
6
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twelve (12) months before the end of the Employment Term, or your employment
terminates pursuant to paragraph 8(b) or 8(c) hereof during the final twelve
(12) months of the Employment Term, you shall be entitled to receive your Salary
as provided in paragraph 3(a), payable in accordance with Blockbuster's then
effective payroll practices, subject to applicable withholding requirements, for
the period commencing after the end of the Employment Term which, when added to
the portion of the Employment Term, if any, remaining when the notice is given
or the termination occurs, equals twelve (12) months. The payments provided for
in this paragraph 8(f) are in lieu of any severance or income continuation or
protection under any Blockbuster or Viacom plan that may now or hereafter exist.
You shall be required to mitigate the amount of any payment provided for in this
paragraph 8(f) by seeking other employment or otherwise, and the amount of any
such payment provided hereunder shall be reduced by any compensation earned by
you from a third person.
9. DEATH. If you die prior to the end of the Employment Term, your
beneficiary or estate shall be entitled to receive your Salary up to the date on
which the death occurs and a pro-rated Target Bonus.
10. SECTION 317 AND 507 OF THE FEDERAL COMMUNICATIONS ACT. You
represent that you have not accepted or given nor will you accept or give,
directly or indirectly, any money, services or other valuable consideration from
or to anyone other than Blockbuster for the inclusion of any matter as part of
any film, television program or other production produced, distributed and/or
developed by Blockbuster, Viacom and/or any of Viacom's affiliates.
11. EQUAL OPPORTUNITY EMPLOYER. You acknowledge that Blockbuster is an
equal opportunity employer. You agree that you will comply with Blockbuster
policies and applicable federal, state, and local laws prohibiting
discrimination on the basis of race, color, creed, national origin, age, sex or
disability.
12. NOTICES. All notices required to be given hereunder shall be given
in writing, by personal delivery or by mail at the respective addresses of the
parties hereto set forth above, or at such other address as may be designated in
writing by either party, and in the case of Blockbuster, to the attention of the
General Counsel of Blockbuster. Any notice given by mail shall be deemed to have
been given three days following such mailing.
13. ASSIGNMENT. This is an Agreement for the performance of personal
services by you and may not be assigned by you. Blockbuster or Viacom may assign
this Agreement to Viacom or any affiliate of Viacom or any purchaser of all or
substantially all of the assets of Blockbuster or Viacom or any successor in
interest to Viacom or Blockbuster.
14. GOVERNING LAW. This Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of Texas.
15. NO IMPLIED CONTRACT. Nothing contained in this Agreement shall be
construed to impose any obligation on Blockbuster to renew this Agreement or any
portion thereof. The parties intend to be bound only upon execution of a written
agreement and no negotiation, exchange of draft or partial performance shall be
deemed to imply an agreement. Neither the continuation of employment nor any
other conduct shall be deemed to imply a continuing agreement upon the
expiration of this Agreement.
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16. ENTIRE UNDERSTANDING. This Agreement contains the entire
understanding of the parties hereto relating to the subject matter herein
contained, and can be changed only by a writing signed by both parties hereto.
17. VOID PROVISIONS. If any provision of this Agreement, as applied to
either party or to any circumstances, shall be adjudged by a court to be void or
unenforceable, the same shall be deemed stricken from this Agreement and shall
in no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement.
* * * * *
If the foregoing correctly sets forth our understanding, please sign and
date one copy of this letter and return it to the undersigned whereupon this
letter shall constitute a binding agreement between us.
Very truly yours,
BLOCKBUSTER ENTERTAINMENT GROUP
By: /s/ Steven J. Becker
-------------------------------------
Steven J. Becker
Senior Vice President
Worldwide Human Resources
ACCEPTED AND AGREED:
/s/ Nigel Travis
- -----------------------------------
Nigel Travis
8
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Exhibit 10.19
[Viacom Letterhead]
December 1, 1998
Nigel Travis
5109 Hedrick Court
Flower Mound, Texas 75028
Dear Nigel:
This is to confirm our understanding that your employment agreement
dated as of June 1, 1998 shall be amended to change the last day of the
employment term from May 31, 2001 to May 31, 2002 and to delete the annual stock
option grants for the 1999 and 2000 calendar years under the LTMIP. We will
determine your salary for the final year of the extended term at a later date.
Except as amended hereby, your employment agreement shall remain in full force
and effect.
Please sign and return the attached copy of this letter to indicate
your agreement with the foregoing.
Very truly yours,
/s/ Bill Roskin
ACCEPTED AND AGREED:
/s/ Nigel Travis
----------------
Nigel Travis
<PAGE>
Exhibit 10.20
BLOCKBUSTER INC.
1999 LONG-TERM MANAGEMENT INCENTIVE PLAN
ARTICLE I
GENERAL
SECTION 1.1 PURPOSE.
The purpose of the Blockbuster Inc. 1999 Long-Term Management Incentive
Plan (the "Plan") is to benefit and advance the interests of Blockbuster Inc., a
Delaware corporation (the "Company"), and its subsidiaries by attracting and
retaining employees, Non-Employee Directors and Advisors (as defined below) of
the Company and its subsidiaries, rewarding them for their contributions to the
financial success of the Company and thereby motivating them to continue to make
such contributions in the future.
SECTION 1.2 DEFINITIONS.
As used in the Plan, the following terms shall have the following
meanings:
(a) "Advisor" shall mean any person performing advisory or consulting
services for the Company or any subsidiary, with or without compensation, to
whom the Company chooses to make a Grant in accordance with the Plan; PROVIDED
that (i) BONA FIDE services must be rendered by such person; and (ii) such
services shall not be rendered in connection with the offer or sale of
securities in a capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Company's securities.
(b) "Agreement" shall mean the written agreement governing a Grant
under the Plan, in a form approved by the Committee, which shall contain terms
and conditions not inconsistent with the Plan and which shall incorporate the
Plan by reference.
(c) "Appreciation Value" shall mean the excess, if any, of the Value
of a Phantom Share on the applicable Valuation Date or date of termination of
service or of the Participant's death or Permanent Disability (as described in
Section 5.5(a) hereof), as the case may be, over the Initial Value of such
Phantom Share.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended,
including any successor law thereto.
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(f) "Committee" shall mean the committee(s) appointed or designated by
the Board to administer the Plan in accordance with Section 1.3 of the Plan.
(g) "Common Stock" shall mean shares of Class A Common Stock, par
value $0.01 per share, of the Company.
(h) "Date of Grant" shall mean the effective date of the Grant of the
Stock Options, Stock Appreciation Rights, Restricted Shares, Restricted Share
Units and/or Phantom Shares as set forth in the applicable Agreement.
(i) "Effective Date" shall have the meaning set forth in Article X.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, including any successor law thereto.
(k) "Fair Market Value" of a share of Common Stock on a given date
shall be the closing price of a share of Common Stock on the New York Stock
Exchange or such other national securities exchange as may be designated by the
Committee, or, in the event that the Common Stock is not listed for trading on a
national securities exchange but is quoted on an automated quotation system, the
average closing bid per share of the Common Stock on such automated quotation
system or, in the event that the Common Stock is not quoted on any such system,
the average of the closing bid prices per share of the Common Stock as furnished
by a professional marketmaker making a market in the Common Stock designated by
the Committee. Notwithstanding the foregoing, with respect to any option granted
in connection with the Company's initial public offering, the Fair Market Value
of a share of Class A Common Stock shall mean the initial public offering price.
(l) "Grant" shall mean a grant under the Plan which may consist of a
grant of Stock Options, Stock Appreciation Rights, Restricted Shares, Restricted
Share Units or Phantom Shares or a combination of any of the above.
(m) "Initial Value" shall mean the value of a Phantom Share as
specified by the Committee as of the Date of Grant or the Value of a Phantom
Share calculated as of the Date of Grant or such earlier date as the Committee
may determine.
(n) "Non-Employee Director" shall mean a member of the Board of
Directors of the Company or any subsidiary who is not an employee of the
Company, the parent thereof or any subsidiary.
(o) "Outstanding Phantom Share" shall mean a Phantom Share granted to
a Participant for which the Valuation Date has not yet occurred.
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(p) "Outstanding Stock Option" shall mean a Stock Option granted to a
Participant which has not yet been exercised and which has not yet expired or
been terminated in accordance with its terms.
(q) "Participant" shall mean any employee, Non-Employee Director or
Advisor who has met the eligibility requirements set forth in Section 1.4 hereof
and to whom an outstanding Grant has been made under the Plan.
(r) "Permanent Disability" shall have the same meaning as such term or
a similar term has in the long-term disability policy maintained by the Company,
the parent thereof or a subsidiary thereof for the Participant and that is in
effect on the date of the onset of the Participant's Permanent Disability,
unless the Committee determines otherwise, in its discretion, and sets forth an
alternative definition in the applicable Agreement; PROVIDED, HOWEVER, with
respect to grants of Incentive Stock Options, permanent disability shall have
the meaning given it under the rules governing Incentive Stock Options under the
Code. With respect to any Grant other than an Incentive Stock Option, to the
extent that a Participant's employment agreement differs from the Plan with
respect to the meaning of disability, if such employment agreement has been
approved by the Committee which granted the Stock Options, the definition
included in such employment agreement shall govern. Anything in the Plan to the
contrary notwithstanding, "Permanent Disability" is a term that shall apply only
to Participants who are employees of the Company.
(s) "Phantom Share" shall mean a contractual right granted to a
Participant pursuant to Article V to receive an amount equal to the Appreciation
Value at such time, and subject to such terms and conditions, as are set forth
in the Plan and the applicable Agreement.
(t) "Restricted Share" shall mean a share of Common Stock granted to a
Participant pursuant to Article III, which is subject to the restrictions set
forth in Section 3.3 hereof and to such other terms, conditions and restrictions
as are set forth in the Plan and the applicable Agreement.
(u) "Restricted Share Unit" shall mean a contractual right granted to
a Participant pursuant to Article IV to receive either Common Stock, a cash
payment equal to the Fair Market Value of such Common Stock or a combination of
Common Stock and cash, subject to the terms and conditions as are set forth in
the Plan and in the applicable Agreement.
(v) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange
Act, as amended from time to time, or any successor provision.
(w) "Section 162(m)" shall mean Section 162(m) of the Code and the
regulations promulgated thereunder from time to time.
(x) "Section 162(m) Exception" shall mean the exception under Section
162(m) for "qualified performance-based compensation."
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(y) "Stock Appreciation Right" shall mean a contractual right granted
to a Participant pursuant to Article II to receive an amount determined in
accordance with Section 2.5 of the Plan.
(z) "Stock Option" shall mean a contractual right granted to a
Participant pursuant to Article II to purchase shares of Common Stock at such
time and price, and subject to such other terms and conditions, as are set forth
in the Plan and the applicable Agreement. Stock Options may be "Incentive Stock
Options" within the meaning of Section 422 of the Code or "Non-Qualified Stock
Options" which do not meet the requirements of such Code section.
(aa) "Termination for Cause" for Participants who are employees of the
Company and for Advisors, shall mean a termination of service with the Company
or any of its subsidiaries which, as determined by the Committee, is by reason
of (i) "cause" as such term or a similar term is defined in any employment or
consulting agreement applicable to the Participant, or (ii) if there is no such
employment or consulting agreement or if such employment or consulting agreement
contains no such term, (x) dishonesty, conviction of a felony, or willful
unauthorized disclosure of confidential information, (y) failure, neglect of or
refusal by a Participant to substantially perform the duties of such
Participant's service, or (z) any other act or omission which is materially
injurious to the financial condition or business reputation of the Company or
any subsidiary thereof.
"Termination for Cause" for Participants who are Non-Employee
Directors shall mean removal from the Board for "cause" in accordance with the
certificate of incorporation or by-laws of the Company, as amended from time to
time.
(bb) "Valuation Date" shall mean the date on which the Appreciation
Value of a Phantom Share shall be measured and fixed in accordance with Section
5.2(a) hereof.
(cc) The "Value" of a Phantom Share shall be determined by reference to
the "average Fair Market Value" of a share of Common Stock. The "average Fair
Market Value" on a given date of a share of Common Stock shall be determined
over the 30-day period ending on such date or such other period as the Committee
may decide shall be applicable to a Grant of Phantom Shares, determined by
dividing (i) by (ii), where (i) shall equal the sum of the Fair Market Values on
each day that the Common Stock was traded and a closing price was reported on
such national securities exchange or on such automated quotation system or by
such marketmaker, as the case may be, during such period, and (ii) shall equal
the number of days, as determined by the Committee for the purposes of
determining the average Fair Market Value for such Phantom Shares, on which the
Common Stock was traded and a closing price was reported on such national
securities exchange or on such automated quotation system or by such
marketmaker, as the case may be, during such period.
(dd) To "vest" a Stock Option, Stock Appreciation Right, Restricted
Share, Restricted Share Unit or Phantom Share held by a Participant shall mean,
with respect to a Stock Option or Stock Appreciation Right, to render such Stock
Option or Stock Appreciation Right exercisable, subject to the terms of the Plan
or the Agreement, and, in the case of a Restricted Share, Restricted
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Share Unit or Phantom Share, to render such Restricted Share, Restricted Share
Unit or Phantom Share nonforfeitable.
SECTION 1.3 ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Board or by a Committee appointed
by the Board, consisting of at least two members of the Board; PROVIDED that (i)
with respect to any Grant that is intended to satisfy the requirements of Rule
16b-3, such Committee shall consist of at least such number of directors as is
required from time to time by Rule 16b-3, and each such Committee member shall
satisfy the qualification requirements of such rule; and (ii) with respect to
any Grant that is also intended to satisfy the requirements of the Section
162(m) Exception, such Committee shall consist of at least such number of
directors as is required from time to time to satisfy the Section 162(m)
Exception, and each such Committee member shall satisfy the qualification
requirements of such exception. The Committee shall adopt such rules as it may
deem appropriate in order to carry out the purpose of the Plan. All questions of
interpretation, administration and application of the Plan shall be determined
by a majority of the members of the Committee then in office, except that the
Committee may authorize any one or more of its members, or any officer of the
Company, to execute and deliver documents on behalf of the Committee. The
determination of such majority shall be final and binding as to all matters
relating to the Plan. The Committee shall have authority to select Participants
from among the class of eligible persons specified in Section 1.4 below and to
determine the number of Stock Options, Stock Appreciation Rights, Restricted
Shares, Restricted Share Units or Phantom Shares (or combination thereof) to be
granted to each Participant; PROVIDED, HOWEVER, no member of the Committee shall
participate in such decisions contemplated by this Section 1.3 if it relates to
a Grant made on his or her behalf. The Committee shall also have the authority
to amend the terms of any outstanding Grant or waive any conditions or
restrictions applicable to any Grant; PROVIDED, HOWEVER, that no amendment shall
impair the rights of the holder thereof. With respect to any restrictions in the
Plan or in any Agreement that are based on the requirements of Rule 16b-3,
Section 422 of the Code, the Section 162(m) Exception, the rules of any exchange
upon which the Company's securities are listed, or any other applicable law,
rule or restriction to the extent that any such restrictions are no longer
required, the Committee shall have the sole discretion and authority to make
Grants that are not subject to such restrictions and/or to waive any such
restrictions with respect to outstanding Grants.
SECTION 1.4 ELIGIBLE PERSONS.
Grants may be awarded to any employee, Non-Employee Director or Advisor
of the Company or any of its subsidiaries selected by the Committee, PROVIDED
that only employees shall be eligible to receive Incentive Stock Options.
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SECTION 1.5 COMMON STOCK SUBJECT TO THE PLAN.
The total aggregate number of shares of Common Stock that may be
distributed under the Plan (whether reserved for issuance upon grant of Stock
Options or Stock Appreciation Rights or granted as Restricted Shares or
Restricted Share Units) shall be 25,000,000, subject to adjustment pursuant to
Article VI hereof. The shares of Common Stock shall be made available from
authorized but unissued Common Stock or from Common Stock issued and held in the
treasury of the Company. The delivery of shares of Common Stock upon exercise of
a Stock Option or Stock Appreciation Right in any manner and the vesting of
Restricted Shares or Restricted Share Units shall result in a decrease in the
number of shares which thereafter may be issued for purposes of this Section
1.5, by the number of shares as to which the Stock Option or Stock Appreciation
Right is exercised or by the number of Restricted Shares or Restricted Share
Units which vest. To the extent permitted by law or the rules and regulations of
any stock exchange on which the Common Stock is listed, shares of Common Stock
with respect to which Stock Options and Stock Appreciation Rights expire, are
canceled without being exercised or are otherwise terminated or, in the case of
Stock Appreciation Rights or Restricted Share Units, are exercised for cash, may
be regranted under the Plan. Restricted Shares or Restricted Share Units that
are forfeited for any reason shall not be deemed granted for purposes of this
Section 1.5 and may thereafter be regranted under the Plan.
SECTION 1.6 LIMIT ON GRANTS TO PARTICIPANTS.
The maximum aggregate number of (i) shares of Common Stock that may be
granted under the Plan (whether reserved for issuance upon grant of Stock
Options or Stock Appreciation Rights or granted as Restricted Shares or
Restricted Share Units) and (ii) Phantom Shares or Restricted Share Units that
may be granted under the Plan to any Participant during the five-year period
starting on the Effective Date of the Plan is 5,000,000.
SECTION 1.7 AGREEMENTS.
Each Agreement (i) shall state the Date of Grant and the name of the
Participant, (ii) shall specify the terms of the Grant, (iii) shall be signed by
the Participant and a person designated by the Committee, (iv) shall incorporate
the Plan by reference and (v) shall be delivered to the Participant. The
Agreement shall contain such other terms and conditions as are required by the
Plan and, in addition, such other terms not inconsistent with the Plan as the
Committee may deem advisable.
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ARTICLE II
PROVISIONS APPLICABLE TO STOCK OPTIONS
SECTION 2.1 GRANTS OF STOCK OPTIONS.
The Committee may from time to time grant Stock Options on the terms
and conditions set forth in the Plan and on such other terms and conditions as
are not inconsistent with the purposes and provisions of the Plan, as the
Committee, in its discretion, may from time to time determine, and subject to
satisfaction of any performance goal requirements established by the Committee.
Each Agreement covering a Grant of Stock Options shall specify the number of
Stock Options granted, the Date of Grant, the exercise price of such Stock
Options, whether such Stock Options are Incentive Stock Options or Non-Qualified
Stock Options, the period during which such Stock Options may be exercised and
any vesting schedule, including any applicable performance goal requirements.
Any Stock Option intended to qualify as an Incentive Stock Option that fails to
so qualify will be deemed a Non-Qualified Stock Option.
SECTION 2.2 EXERCISE PRICE.
The Committee shall establish the per share exercise price at the time
any Stock Option is granted at such amount as the Committee shall determine;
PROVIDED that, with respect to any Incentive Stock Option or any Stock Option
intended to qualify for the Section 162(m) Exception, such exercise price shall
not be less than 100% of the Fair Market Value of a share of Common Stock on the
Date of Grant; and PROVIDED FURTHER that, with respect to any Incentive Stock
Option that is granted to a person holding more than 10% of the combined voting
power of all the classes of common stock of the Company (or its parent or any
subsidiaries within the meaning of the Code), such exercise price shall not be
less than 110% of the Fair Market Value of a share of Common Stock on the Date
of Grant. The exercise price will be subject to adjustment in accordance with
the provisions of Article VI of the Plan.
SECTION 2.3 EXERCISE OF STOCK OPTIONS.
(a) EXERCISABILITY. Stock Options shall be exercisable only to the
extent the Participant is vested therein, subject to any restrictions that the
Committee shall determine and specify in the applicable Agreement (or any
employment or consulting agreement applicable to the Participant). A Participant
shall vest in Stock Options over such time and in such increments as the
Committee shall determine and specify in a vesting schedule set forth in the
applicable Agreement (or any employment or consulting agreement applicable to
the Participant). The Committee may, however, in its sole discretion, accelerate
the time at which a Participant vests in his Stock Options.
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(b) OPTION PERIOD. For each Stock Option granted, the Committee shall
specify the period during which the Stock Option may be exercised; PROVIDED,
HOWEVER, that anything in the Plan or in the applicable Agreement to the
contrary notwithstanding:
(i) LATEST EXERCISE DATE. No Stock Option granted under the
Plan shall be exercisable after the tenth anniversary of the Date of
Grant thereof.
(ii) REGISTRATION RESTRICTIONS. A Stock Option shall not be
exercisable, no transfer of shares of Common Stock shall be made to any
Participant, and any attempt to exercise a Stock Option or to transfer
any such shares shall be void and of no effect, unless and until (A) a
registration statement under the Securities Act of 1933, as amended,
has been duly filed and declared effective pertaining to the shares of
Common Stock subject to such Stock Option, and the shares of Common
Stock subject to such Stock Option have been duly qualified under
applicable Federal or state securities or blue sky laws or (B) the
Committee, in its sole discretion, determines, or the Participant, upon
the request of the Committee, provides an opinion of counsel
satisfactory to the Committee, that such registration or qualification
is not required as a result of the availability of an exemption from
registration or qualification under such laws. Without limiting the
foregoing, if at any time the Committee shall determine, in its sole
discretion, that the listing, registration or qualification of the
shares of Common Stock subject to such Stock Option is required under
any federal or state law or on any securities exchange or the consent
or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, delivery or
purchase of such shares pursuant to the exercise of a Stock Option,
such Stock Option shall not be exercised in whole or in part unless and
until such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not
acceptable to the Committee.
(c) EXERCISE IN THE EVENT OF TERMINATION OF SERVICE FOR PARTICIPANTS
OTHER THAN NON-EMPLOYEE DIRECTORS.
(i) TERMINATION OF SERVICE OTHER THAN A TERMINATION FOR
CAUSE OR DUE TO DEATH OR PERMANENT DISABILITY. In the event that (A)
such Participant's service with the Company or any of its subsidiaries
ends by reason of a voluntary termination by the Participant or due to
termination by the Company or any of its subsidiaries other than due to
a Termination for Cause, the Participant's Outstanding Stock Options
may be exercised, to the extent then exercisable, for a period of six
months after the date of termination or such longer period, not in
excess of twelve months following the date of termination, as
determined by the Committee, (B) such Participant dies during a period
during which his Stock Options could have been exercised by him, his
Outstanding Stock Options may be exercised, to the extent exercisable,
at the date of death by the person who acquired the right to exercise
such Stock Options by will or the laws of descent and distribution or
permitted transfer for a period of twelve months following the date of
death or such longer period as may be determined by the Committee, in
its discretion, prior to the expiration of such twelve-month period),
or (C)
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the Permanent Disability of such Participant occurs, his Outstanding
Stock Options may be exercised, to the extent exercisable, upon the
date of the onset of such Permanent Disability for a period of twelve
months following such date or such longer period, not in excess of
twenty-four months following the date of the Permanent Disability, as
may be determined by the Committee, in its discretion. Upon the
occurrence of an event described in clause (A), (B) or (C) of this
Section 2.3(c)(i), all rights with respect to Stock Options that are
not vested as of such event will be relinquished.
(ii) TERMINATION FOR CAUSE. If such Participant's service
with the Company or any of its subsidiaries ends due to a Termination
for Cause then, unless the Committee in its discretion determines
otherwise, all Outstanding Stock Options, whether or not then vested,
shall terminate effective as of the date of such termination.
(iii) MAXIMUM EXERCISE PERIOD. Anything in this Section 2.3(c)
to the contrary notwithstanding, no Stock Option shall be exercisable
after the earlier to occur of (A) the expiration of the option period
set forth in the applicable Agreement or (B) the tenth anniversary of
the Date of Grant thereof.
(iv) MINIMUM EXERCISE PERIOD. With respect to a termination
described in Section 2.3(c)(i)(A) only, the Committee may establish a
shorter exercise period for Incentive Stock Options of not less than
three months following the date of termination.
(d) EXERCISE IN THE EVENT OF TERMINATION OF SERVICE FOR NON-EMPLOYEE
DIRECTORS.
(i) TERMINATION OF SERVICE FOR ANY REASON OTHER THAN A
TERMINATION FOR CAUSE. In the event that a Non-Employee Director ceases
to be a member of the Board for any reason other than due to a
Termination for Cause, the Non-Employee Director may exercise any
Outstanding Stock Options for a period of twelve months following the
date of such termination, but only to the extent such Outstanding
Options were vested on the date of such termination. The Non-Employee
Director shall relinquish all rights with respect to Stock Options that
are not vested as of the date of such termination of service.
(ii) TERMINATION FOR CAUSE. In the event that a Non-Employee
Director ceases to be a member of the Board due to a Termination for
Cause then, unless the Committee, in its discretion, determines
otherwise, all Outstanding Stock Options, whether or not then vested,
shall terminate effective as of the date of such termination.
(iii) MAXIMUM EXERCISE PERIOD. Anything in this Section 2.3(d)
to the contrary notwithstanding, no Stock Option shall be exercisable
after the earlier to occur of (A) the expiration of the option period
set forth in the applicable Agreement or (B) the tenth anniversary of
the Date of Grant thereof.
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SECTION 2.4 PAYMENT OF PURCHASE PRICE UPON EXERCISE.
Every share purchased through the exercise of a Stock Option shall be
paid for in full at the time of exercise in cash or, in the discretion of the
Committee, in shares of Common Stock (PROVIDED that such shares of Common Stock
have been held for at least six months by the Participant) or other securities
of the Company designated by the Committee, in a combination of cash, shares or
such other securities or in any other form of valid consideration that is
acceptable to the Committee in its sole discretion.
SECTION 2.5 STOCK APPRECIATION RIGHTS.
The Committee may grant Stock Appreciation Rights only in tandem with a
Stock Option, either at the time of Grant or by amendment at any time prior to
the exercise, expiration or termination of such Stock Option. Each Stock
Appreciation Right shall be subject to the same terms and conditions as the
related Stock Option and shall be exercisable only at such times and to such
extent as the related Stock Option is exercisable. A Stock Appreciation Right
shall entitle the holder to surrender to the Company the related Stock Option
unexercised and receive from the Company in exchange therefor an amount equal to
the excess of the Fair Market Value of the shares of Common Stock subject to
such Stock Option, determined as of the day preceding the surrender of such
Stock Option, over the Stock Option aggregate exercise price. Such amount shall
be paid in cash or, in the discretion of the Committee, in shares of Common
Stock or other securities of the Company designated by the Committee or in a
combination of cash, shares or such other securities.
ARTICLE III
PROVISIONS APPLICABLE TO RESTRICTED SHARES
SECTION 3.1 GRANTS OF RESTRICTED SHARES.
The Committee may from time to time grant Restricted Shares on the
terms and conditions set forth in the Plan and on such other terms and
conditions as are not inconsistent with the purposes and provisions of the Plan,
as the Committee, in its discretion, may from time to time determine. Each
Agreement covering a Grant of Restricted Shares shall specify the number of
Restricted Shares granted, the Date of Grant, the price, if any, to be paid by
the Participant for such Restricted Shares and the vesting schedule (as provided
for in Section 3.2 hereof) for such Restricted Shares, including any applicable
performance goal requirements.
SECTION 3.2 VESTING.
The Committee shall establish the vesting schedule applicable to
Restricted Shares granted hereunder, which vesting schedule shall specify the
period of time, the increments in which a
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Participant shall vest in the Grant of Restricted Shares and any applicable
performance goal requirements, subject to any restrictions that the Committee
shall determine and specify in the applicable Agreement.
SECTION 3.3 RIGHTS AND RESTRICTIONS GOVERNING RESTRICTED SHARES.
As of the Date of Grant of Restricted Shares, one or more certificates
representing the appropriate number of shares of Common Stock granted to a
Participant shall be registered in his name but shall be held by the Company for
the account of the Participant. The Participant shall have all rights of a
holder as to such shares of Common Stock (including, to the extent applicable,
the right to receive dividends and to vote), subject to the following
restrictions: (a) the Participant shall not be entitled to delivery of
certificates representing such shares of Common Stock until such shares have
vested; (b) none of the Restricted Shares may be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of until such shares have vested;
and (c) except as otherwise provided in Section 3.6 below, all unvested
Restricted Shares shall be immediately forfeited upon a Participant's
termination of service with the Company or any subsidiary for any reason.
SECTION 3.4 ADJUSTMENT WITH RESPECT TO RESTRICTED SHARES.
Any other provision of the Plan to the contrary notwithstanding, the
Committee may, in its discretion, at any time accelerate the date or dates on
which Restricted Shares vest. The Committee may, in its sole discretion, remove
any and all restrictions on such Restricted Shares whenever it may determine
that, by reason of changes in applicable law, the rules of any stock exchange on
which the Common Stock is listed or other changes in circumstances arising after
the Date of Grant, such action is appropriate.
SECTION 3.5 DELIVERY OF RESTRICTED SHARES.
On the date on which Restricted Shares vest, all restrictions contained
in the Agreement covering such Restricted Shares and in the Plan shall lapse as
to such Restricted Shares. One or more stock certificates for the appropriate
number of shares of Common Stock, free of the restrictions set forth in the Plan
and applicable Agreement, shall be delivered to the Participant or such shares
shall be credited to a brokerage account if the Participant so directs;
PROVIDED, HOWEVER, that such certificates shall bear such legends as the
Committee, in its sole discretion, may determine to be necessary or advisable in
order to comply with applicable federal or state securities laws.
SECTION 3.6 TERMINATION OF SERVICE.
In the event that the Participant's service with the Company or any of
its subsidiaries ends for any reason prior to the date or dates on which
Restricted Shares vest, the Participant shall forfeit all unvested Restricted
Shares as of the date of such event, unless, other than due to a Termination for
Cause, the Committee determines that the circumstances in the particular case so
warrant and provides that some or all of such Participant's unvested Restricted
Shares shall vest as of the date of
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such event, in which case certificates representing such shares shall be
delivered, in accordance with Section 3.5 above, to the Participant or in the
case of the Participant's death, to the person or persons who acquired the right
to receive such certificates by will or the laws of descent and distribution.
ARTICLE IV
PROVISIONS APPLICABLE TO RESTRICTED SHARE UNITS
SECTION 4.1 GRANTS OF RESTRICTED SHARE UNITS.
The Committee may from time to time grant Restricted Share Units on the
terms and conditions set forth in the Plan and on such other terms and
conditions as are not inconsistent with the purposes and provisions of the Plan
as the Committee, in its discretion, may from time to time determine. Each
Restricted Share Unit awarded to a Participant shall correspond to one share of
Common Stock. Each Agreement covering a Grant of Restricted Share Units shall
specify the number of Restricted Share Units granted and the vesting schedule
(as provided for in Section 4.2 hereof) for such Restricted Share Units,
including any applicable performance goal requirements.
SECTION 4.2 VESTING.
The Committee shall establish the vesting schedule applicable to
Restricted Share Units granted hereunder, which vesting schedule shall specify
the period of time, the increments in which a Participant shall vest in the
Grant of Restricted Share Units and any applicable performance goal
requirements, subject to any restrictions that the Committee shall determine and
specify in the applicable Agreement.
SECTION 4.3 ADJUSTMENT WITH RESPECT TO RESTRICTED SHARE UNITS.
Any other provision of the Plan to the contrary notwithstanding, the
Committee may, in its discretion, at any time accelerate the date or dates on
which Restricted Share Units vest.
SECTION 4.4 SETTLEMENT OF RESTRICTED SHARE UNITS.
On the date on which Restricted Share Units vest, all restrictions
contained in the Agreement covering such Restricted Share Units and in the Plan
shall lapse as to such Restricted Share Units and the Restricted Stock Units
will be payable, at the discretion of the Committee, in Common Stock, in cash
equal to the Fair Market Value of the shares subject to such Restricted Share
Units or in a combination of Common Stock and cash. In the event the Restricted
Share Units are paid in Common Stock, one or more stock certificates for the
appropriate number of shares of Common Stock, free of the restrictions set forth
in the Plan and applicable Agreement, shall be delivered to the Participant or
such shares shall be credited to a brokerage account if the Participant so
directs;
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PROVIDED, HOWEVER, that such certificates shall bear such legends as the
Committee, in its sole discretion, may determine to be necessary or advisable in
order to comply with applicable federal or state securities laws.
SECTION 4.5 TERMINATION OF SERVICE.
In the event that the Participant's service with the Company or any of
its subsidiaries ends for any reason prior to the date or dates on which
Restricted Share Units vest, the Participant shall forfeit all unvested
Restricted Share Units as of the date of such event, unless, other than due to a
Termination for Cause, the Committee determines that the circumstances in the
particular case so warrant and provides that some or all of such Participant's
unvested Restricted Share Units shall vest as of the date of such event, in
which case, in the discretion of the Committee, either certificates representing
shares of Common Stock or a cash payment equal to the Fair Market Value of the
shares of Common Stock, shall be delivered in accordance with Section 4.4 above,
to the Participant or in the case of the Participant's death, to the person or
persons who acquired the right to receive such certificates by will or the laws
of descent and distribution.
ARTICLE V
PROVISIONS APPLICABLE TO PHANTOM SHARES
SECTION 5.1 GRANTS OF PHANTOM SHARES.
The Committee may from time to time grant Phantom Shares, the value of
which is determined by reference to a share of Common Stock, on the terms and
conditions set forth in the Plan and on such other terms and conditions as are
not inconsistent with the purposes and provisions of the Plan as the Committee,
in its discretion, may from time to time determine. Each Agreement covering a
Grant of Phantom Shares shall specify the number of Phantom Shares granted, the
Initial Value of such Phantom Shares, the Valuation Dates, the number of Phantom
Shares whose Appreciation Value shall be determined on each such Valuation Date,
any applicable vesting schedule (as provided for in Section 5.3 hereof) for such
Phantom Shares, and any applicable limitation on payment (as provided for in
Section 5.4 hereof) for such Phantom Shares.
SECTION 5.2 APPRECIATION VALUE.
(a) VALUATION DATES; MEASUREMENT OF APPRECIATION VALUE. The Committee
shall provide in the Agreement for one or more Valuation Dates on which the
Appreciation Value of the Phantom Shares granted pursuant to the Agreement shall
be measured and fixed, and shall designate in the Agreement the number of such
Phantom Shares whose Appreciation Value is to be calculated on each such
Valuation Date.
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(b) PAYMENT OF APPRECIATION VALUE. Except as otherwise provided in
Section 5.5 hereof, and subject to the limitation contained in Section 5.4
hereof, the Appreciation Value of a Phantom Share shall be paid to a Participant
in cash in a lump sum as soon as practicable following the Valuation Date
applicable to such Phantom Share.
SECTION 5.3 VESTING.
The Committee may, in its discretion, provide in the Agreement that
Phantom Shares granted thereunder shall vest (subject to such terms and
conditions as the Committee may provide in the Agreement) over such period of
time, from the Date of Grant, as may be specified in a vesting schedule
contained therein.
SECTION 5.4 LIMITATION ON PAYMENT.
The Committee may, in its discretion, establish and set forth in the
Agreement a maximum dollar amount payable under the Plan for each Phantom Share
granted pursuant to such Agreement.
SECTION 5.5 TERMINATION OF SERVICE, DEATH OR PERMANENT DISABILITY.
(a) TERMINATION OF SERVICE OTHER THAN A TERMINATION FOR CAUSE, OR DUE
TO DEATH OR PERMANENT DISABILITY. If, before the occurrence of one or more
Valuation Dates applicable to the Participant's Outstanding Phantom Shares, the
Participant's service with the Company or any of its subsidiaries ends by reason
of (i) a voluntary termination by the Participant or a termination by the
Company or any of its subsidiaries other than due to a Termination for Cause or
(ii) the Participant's death or, in the case of a Participant who is an
employee, Permanent Disability, then, unless the Committee, in its discretion,
determines otherwise, the Appreciation Value of each Outstanding Phantom Share
as to which the Participant's rights are vested as of the date of such event
shall be the lesser of (x) the Appreciation Value of such Phantom Share
calculated as of the date of such event or (y) the Appreciation Value of such
Phantom Share calculated as of the originally scheduled Valuation Date
applicable thereto. Unless the Committee, in its discretion determines
otherwise, the Appreciation Value so determined for each such vested Outstanding
Phantom Share shall then be payable to the Participant or the Participant's
estate following the originally scheduled Valuation Date applicable thereto in
accordance with Section 5.2(b) hereof. Upon the occurrence of an event described
in this Section 5.5(a), all rights with respect to Phantom Shares that are not
vested as of such date will be relinquished.
(b) TERMINATION FOR CAUSE. If a Participant's service with the Company
or any of its subsidiaries ends due to a Termination for Cause, then, unless the
Committee, in its discretion, determines otherwise, all Outstanding Phantom
Shares, whether or not vested, and any and all rights to the payment of
Appreciation Value with respect to such Outstanding Phantom Shares shall be
forfeited effective as of the date of such termination.
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ARTICLE VI
EFFECT OF CERTAIN CORPORATE CHANGES
In the event of a merger, consolidation, stock-split, dividend,
distribution, combination, reclassification or recapitalization that changes the
character or amount of the Common Stock, the Committee shall make such
adjustments to (i) the number and kind of shares of Common Stock subject to any
Stock Options or Stock Appreciation Rights or the number and kind of Restricted
Shares, Restricted Share Units or Phantom Shares granted to each Participant,
(ii) the exercise price of any Outstanding Stock Options or Stock Appreciation
Rights or the Initial Value of any Outstanding Phantom Shares, and (iii) the
maximum number of shares of Common Stock referred to in Section 1.5 and Section
1.6 of the Plan, in each case, as it deems appropriate. Such determinations
shall be conclusive and binding for all purposes.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 NO RIGHTS TO GRANTS OR CONTINUED SERVICE.
Neither the adoption of this Plan nor any action of the Board or the
Committee shall be deemed to give any person any right to a Grant or any other
rights except as may be evidenced by an Agreement, or any amendment thereto,
duly authorized by the Committee and executed on behalf of the Company, and then
only to the extent and upon the terms and conditions expressly set forth
therein. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee, Non-Employee Director or Advisor, any right to be retained
by the Company or any of its subsidiaries nor the right to be nominated,
reelected or retained as a member of the Board for any period of time or at any
particular rate of compensation.
SECTION 7.2 RESTRICTION ON TRANSFER.
The rights of a Participant with respect to Stock Options, Stock
Appreciation Rights, Restricted Shares, Restricted Share Units or Phantom Shares
shall not be transferable by the Participant to whom such Stock Options, Stock
Appreciation Rights, Restricted Shares, Restricted Share Units or Phantom Shares
are granted, except by will or the laws of descent and distribution.
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SECTION 7.3 TAXES.
The Company or a subsidiary thereof, as appropriate, shall have the
right to deduct from all payments made under the Plan to a Participant or to a
Participant's estate any federal, state, local or other taxes required by law to
be withheld with respect to such payments. The Committee, in its discretion, may
require, as a condition to the exercise of any Stock Option or Stock
Appreciation Right or delivery of any certificate(s) for shares of Common Stock,
that an additional amount be paid in cash equal to the amount of any federal,
state, local or other taxes owed as a result of such exercise. Any Participant
who makes an election under Section 83(b) of the Code to have his or her receipt
of shares of Restricted Stock taxed in accordance with such election must give
notice to the Company of such election immediately upon making a valid election
in accordance with the rules and regulations of the Code. Any such election must
be made in accordance with the rules and regulations of the Code.
SECTION 7.4 STOCKHOLDER RIGHTS.
No Grant under the Plan shall entitle a Participant or a Participant's
estate or permitted transferee to any rights of a holder of shares of common
stock of the Company, except as provided in Article III with respect to
Restricted Shares or when and until share certificates are delivered upon
exercise of a Stock Option or when and until share certificates are delivered in
settlement of a Stock Appreciation Right or a Restricted Share Unit.
SECTION 7.5 NO RESTRICTION ON RIGHT OF COMPANY TO EFFECT CORPORATE CHANGES.
The Plan shall not affect in any way the right or power of the Company
or its stockholders to make or authorize any or all adjustments,
recapitalization, reorganization or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stock whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
SECTION 7.6 SOURCE OF PAYMENTS.
The general funds of the Company shall be the sole source of cash
settlements of Stock Appreciation Rights or Restricted Share Units under the
Plan and payments of Appreciation Value and the Company shall not have any
obligation to establish any separate fund or trust or other segregation of
assets to provide for payments under the Plan. Nothing contained in this Plan,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between the Company and
a Participant or any other person. To the extent a person acquires any rights to
receive payments hereunder from the Company, such rights shall be no greater
than those of an unsecured creditor.
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ARTICLE VIII
AMENDMENT AND TERMINATION
The Plan may be terminated and may be altered, amended, suspended or
terminated at any time, in whole or in part, by the Board; PROVIDED, HOWEVER,
that no alteration or amendment will be effective without stockholder approval
if such approval is required by law or under the rules of the New York Stock
Exchange, the NASDAQ Stock Market or any stock exchange on which the Common
Stock is listed. No termination or amendment of the Plan may, without the
consent of the Participant to whom a grant has been made, adversely affect the
rights of such Participant in the Stock Options, Stock Appreciation Rights,
Restricted Shares, Restricted Share Units or Phantom Shares covered by such
Grant. Unless previously terminated pursuant to this Article VIII, the Plan
shall terminate on the fifth anniversary of the Effective Date (as defined
below), and no further Grants may be awarded hereunder after such date.
ARTICLE IX
INTERPRETATION
SECTION 9.1 GOVERNMENTAL REGULATIONS.
The Plan, and all Grants hereunder, shall be subject to all applicable
rules and regulations of governmental or other authorities.
SECTION 9.2 HEADINGS.
The headings of articles and sections herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of the Plan.
SECTION 9.3 GOVERNING LAW.
The Plan and all rights hereunder shall be construed in accordance with
and governed by the laws of the State of Delaware.
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ARTICLE X
EFFECTIVE DATE AND STOCKHOLDER APPROVAL
The Plan became effective upon its adoption by the Board and its
approval by the stockholder of the Company on July 15, 1999.
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Exhibit 10.21
BLOCKBUSTER INC.
SENIOR EXECUTIVE
SHORT-TERM INCENTIVE PLAN
ARTICLE I
GENERAL
SECTION 1.1 PURPOSE.
The purpose of the Blockbuster Inc. Senior Executive Short-Term
Incentive Plan (the "Plan") is to benefit and advance the interests of
Blockbuster Inc., a Delaware corporation (the "Company"), by rewarding selected
senior executives of the Company and its subsidiaries for their contributions to
the Company's financial success and thereby motivating them to continue to make
such contributions in the future by granting annual performance-based awards
("Awards").
SECTION 1.2 ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a committee (the "Committee")
appointed by the Board of Directors of the Company (the "Board"), consisting of
at least such number of directors as is required from time to time to satisfy
the requirements of the exception under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), for "qualified performance-based
compensation," and each such Committee member shall satisfy the qualification
requirements of Section 162(m) of the Code. The Committee shall adopt such rules
as it may deem appropriate in order to carry out the purpose of the Plan. All
questions of interpretation, administration and application of the Plan shall be
determined by a majority of the members of the Committee then in office, except
that the Committee may authorize any one or more of its members, or any officer
of the Company, to execute and deliver documents on behalf of the Committee. The
determination of such majority shall be final and binding in all matters
relating to the Plan. The Committee shall have authority to determine the terms
and conditions of the Awards granted to eligible persons specified in Section
1.3 below ("Participants").
With respect to any restrictions in the Plan that are based on the
requirements of Section 162(m) of the Code or any other applicable law, rule or
restriction, to the extent that any such restrictions are no longer required,
the Committee shall have the sole discretion and authority to grant Awards that
are not subject to such restrictions and/or to waive any such restrictions with
respect to outstanding Awards.
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SECTION 1.3 ELIGIBLE PERSONS.
Awards may be granted only to employees of the Company or one of its
subsidiaries who are at the level of Senior Vice President of the Company or one
of its subsidiaries or at a more senior level. An individual shall not be deemed
an employee for purposes of the Plan unless such individual receives
compensation from either the Company or one of its subsidiaries for services
performed as an employee of the Company or any of its subsidiaries.
ARTICLE II
AWARDS
SECTION 2.1 AWARDS.
The Committee may grant Awards to eligible employees with respect to
each fiscal year of the Company or the portion of the fiscal year remaining
after the initial public offering of Class A Common Stock of the Company (the
"IPO"), subject to the terms and conditions set forth in the Plan.
SECTION 2.2 TERMS OF AWARDS.
Not later than ninety days after the start of each fiscal year of the
Company or, in the case of the fiscal period commencing with the IPO, before
twenty-five percent of such fiscal period has elapsed, the Committee shall
establish (i) performance goals and objectives ("Performance Targets") for the
Company and the subsidiaries and divisions thereof for such period ("Performance
Period") and (ii) target awards ("Target Awards") for each Participant which
shall be a percentage of the Participant's Salary (as defined in Section 2.3
below). Such Performance Targets shall relate to the achievement of annual
financial goals based on the attainment of specified levels of Operating Income,
Net Earnings and/or Cash Flow (as such terms are defined below) for the Company
and the subsidiaries and divisions thereof. For purposes of the Plan, "Operating
Income" shall mean revenues less operating expenses (other than depreciation,
amortization and non-recurring charges); "Net Earnings" shall mean net earnings
from continuing operations; and "Cash Flow" shall mean Operating Income less
cash capital expenditures and rental library purchases and increases or
decreases in working capital and in other balance sheet investments.
SECTION 2.3 LIMITATION ON AWARDS.
The aggregate amount of all Awards to any Participant for any
Performance Period shall not exceed the amount determined by multiplying such
Participant's Salary by a factor of eight. For purposes of the Plan, "Salary"
shall mean (a) for any Participant hired on or before July 15, 1999, the sum of
(i) the annual base salary of the Participant for such year, and (ii) an amount
equal to the annual rate of any deferred compensation for such year, in each
case, as set forth in
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the Participant's employment agreement as in effect on July 15, 1999; PROVIDED
that, if the employment agreement expires prior to the end of any Performance
Period, the amount of base salary and deferred compensation determined hereunder
shall relate to the highest annual amounts that were provided for under such
employment agreement; and (b) for any Participant hired after July 15, 1999, the
sum of (x) such Participant's annual base salary on the date of hire, and (y) an
amount equal to the annual rate of any deferred compensation for the year of
hire, in each case, as set forth in such Participant's employment agreement as
in effect on his date of hire; PROVIDED, that the Salary for this purpose of a
Participant hired after July 15, 1999, shall not exceed 1.5 times the highest
Salary on July 15, 1999 for any Participant determined pursuant to clause (a) of
this Section 2.3. Notwithstanding the foregoing, "Salary" determined hereunder
shall not include any amounts that would cause the Committee to exercise
discretion not otherwise permitted by Section 162(m) of the Code.
SECTION 2.4 DETERMINATION OF AWARD.
The Committee shall, promptly after the date on which the necessary
financial or other information for a particular Performance Period becomes
available, certify whether the Performance Targets have been achieved in the
manner required by Section 162(m) of the Code. If the Performance Targets have
been achieved, the Awards for such Performance Period shall have been earned
except that the Committee may, in its sole discretion, reduce the amount of any
Award to reflect the Committee's assessment of the Participant's individual
performance or for any other reason. Subject to Section 2.5, such Awards shall
become payable in cash as promptly as practicable thereafter.
SECTION 2.5 EMPLOYMENT REQUIREMENT.
To be eligible to receive payment of an Award, the Participant must
have remained in the continuous employ of the Company or its subsidiaries
through the end of the applicable Performance Period; PROVIDED that, if a
Participant becomes "permanently disabled" (in each case, as determined by the
Committee in its sole discretion) or a Participant dies during a Performance
Period, such Participant or his estate shall be awarded, unless his employment
agreement provides otherwise, a pro rata portion of the amount of the Award
earned for such Performance Period, except that the Committee may, in its sole
discretion, reduce the amount of such Award to reflect the Committee's
assessment of such Participant's individual performance prior to such
Participant's becoming permanently disabled or such Participant's death, as the
case may be, or for any other reason.
ARTICLE III
ADJUSTMENT OF AWARDS
In the event that, during a Performance Period, any recapitalization,
reorganization, merger, acquisition, divestiture, consolidation, spin-off,
combination, liquidation, dissolution,
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sale of assets, or other similar corporate transaction or event, or any other
extraordinary item or event not foreseen at the time of the grant of the Award,
or any other event which distorts the applicable performance criteria occurs
involving the Company or a subsidiary or division thereof, the Committee shall,
to the extent consistent with Section 162(m) of the Code, adjust or modify, as
determined by the Committee in its sole and absolute discretion, the calculation
of Operating Income, Net Earnings and/or Cash Flow, or the applicable
Performance Targets, to the extent necessary to prevent reduction or enlargement
of Participants' Awards under the Plan for such Performance Period attributable
to such transaction or event. Such adjustments shall be conclusive and binding
for all purposes.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 NO RIGHTS TO AWARDS OR CONTINUED EMPLOYMENT.
No employee shall have any claim or right to receive Awards under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained by the Company or any of its
subsidiaries.
SECTION 4.2 RESTRICTION ON TRANSFER.
The rights of a Participant with respect to Awards under the Plan shall
not be transferable by the Participant to whom such Award is granted, otherwise
than by will or the laws of descent and distribution.
SECTION 4.3 TAX WITHHOLDING.
The Company or a subsidiary thereof, as appropriate, shall have the
right to deduct from all payments made under the Plan to a Participant or to a
Participant's beneficiary or beneficiaries any federal, state or local taxes
required by law to be withheld with respect to such payments.
SECTION 4.4 NO RESTRICTION ON RIGHT OF COMPANY TO EFFECT CHANGES.
The Plan shall not affect in any way the right or power of the Company
or its stockholders to make or authorize any recapitalization, reorganization,
merger, acquisition, divestiture, consolidation, spin-off, combination,
liquidation, dissolution, sale of assets, or other similar corporate transaction
or event involving the Company or a subsidiary thereof or any other event or
series of events, whether of a similar character or otherwise.
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SECTION 4.5 SOURCE OF PAYMENTS.
The Company shall not have any obligation to establish any separate
fund or trust or other segregation of assets to provide for payments under the
Plan. To the extent any person acquires any rights to receive payments hereunder
from the Company, such rights shall be no greater than those of an unsecured
creditor.
SECTION 4.6 AMENDMENT AND TERMINATION.
The Board may at any time and from time to time alter, amend, suspend
or terminate the Plan in whole or in part; PROVIDED, HOWEVER, that no alteration
or amendment will be effective without stockholder approval if such approval is
required by law. No termination or amendment of the Plan may, without the
consent of the Participant to whom an Award has been made, adversely affect the
rights of such Participant in such Award.
SECTION 4.7 GOVERNMENTAL REGULATIONS.
The Plan, and all Awards hereunder, shall be subject to all applicable
rules and regulations of governmental or other authorities.
SECTION 4.8 HEADINGS.
The headings of articles and sections herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of the Plan.
SECTION 4.9 GOVERNING LAW.
The Plan and all rights and Awards hereunder shall be construed in
accordance with and governed by the laws of the State of Delaware without regard
to conflicts of law principles and applicable federal law.
SECTION 4.10 EFFECTIVE DATE.
The Plan became effective upon its adoption by the Board and its
approval by the stockholder of the Company on July 15, 1999.
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Exhibit 10.23
Form
of
PROMOTIONAL SERVICES AND
CUSTOMER DATABASE SERVICES AND LICENSE
AGREEMENT
between
MTV NETWORKS, a division of
VIACOM INTERNATIONAL INC.
and
BLOCKBUSTER INC.
dated as of
_______, 1999
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
SECTION 1. DEFINITIONS........................................................1
SECTION 2. TERM...............................................................1
SECTION 3. PROMOTIONAL SERVICES...............................................1
SECTION 4. LICENSE............................................................2
SECTION 5. CONSIDERATION......................................................3
SECTION 6. MTV OPTION.........................................................3
SECTION 7. TERMINATION........................................................3
SECTION 8. NONEXCLUSIVITY.....................................................4
SECTION 9. NO WARRANTY........................................................4
SECTION 10. OWNERSHIP OF CUSTOMER DATABASE.....................................4
SECTION 11. CONFIDENTIALITY....................................................5
SECTION 12. INJUNCTIVE RELIEF..................................................5
SECTION 13. INDEMNIFICATION....................................................5
SECTION 14. MISCELLANEOUS......................................................6
<PAGE>
Agreement dated as of _______, 1999 between MTV Networks, a division of
Viacom International Inc., a Delaware corporation ("MTV"), and Blockbuster Inc.,
a Delaware corporation ("BLOCKBUSTER").
W I T N E S S E T H:
WHEREAS, Blockbuster desires to grant to MTV a nonexclusive license to
use certain Blockbuster proprietary information, specifically (i) customer names
and addresses within the United States and (ii) demographic data within the
United States unrelated to customer names and addresses (collectively the
"Customer Database"); and
WHEREAS, Blockbuster desires to provide certain promotional services to
MTV;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
SECTION 1. DEFINITIONS. Capitalized terms used and not otherwise
defined herein have the meanings set forth in the Initial Public Offering and
Split-Off Agreement dated the date hereof among Viacom Inc. ("VIACOM"), Viacom
International Inc. and Blockbuster Inc.
SECTION 2. TERM. The term of this Agreement shall commence on the date
hereof and end on June 30, 2000, unless earlier terminated pursuant to Section 7
or extended pursuant to Section 6.
SECTION 3. PROMOTIONAL SERVICES. During the Term, Blockbuster shall
provide MTV with the following promotional services (the "PROMOTIONAL
SERVICES"):
(a) run a thirty-second advertisement furnished by MTV on its
BLOCKBUSTER ENTERTAINMENT NETWORK(R) in all Blockbuster corporate-owned
stores in the United States (the "BLOCKBUSTER STORES"). Blockbuster
shall run such MTV advertisement every fifteen minutes during the
operating hours of the Blockbuster Stores in each cycle included in the
Term.
(b) feature one advertisement banner furnished by MTV and provide a
direct link with an icon to an MTV web site designated by MTV from the
home page of Blockbuster's primary web site, www.blockbuster.com, on
the internet;
(c) run one one-half panel advertisement furnished by MTV in a
Blockbuster direct mail campaign that is distributed to not less than 6
million households during a month mutually agreed upon by Blockbuster
and MTV; and
(d) run one full page advertisement furnished by MTV in the BLOCKBUSTER
Rewards(TM) newsletter that is distributed to the members of
BLOCKBUSTER Rewards(TM) during a month mutually agreed upon by MTV and
Blockbuster.
<PAGE>
SECTION 4. LICENSE.
(a) Blockbuster grants to MTV a nonexclusive license during the Term in
the United States (the "LICENSE") to use internally the Customer
Database as updated by Blockbuster or its duly authorized agent from
time to time, including without limitation, any modifications,
additions or deletions made thereto by Blockbuster or MTV, subject to
any limitations of use contained in any agreement between Blockbuster
and a third party, of which reasonable notice is provided to MTV.
(b) MTV may use the Customer Database only for the purposes of
conducting Blockbuster's current and future business and sublicensing
the Customer Database for internal use only to any Affiliate of Viacom;
PROVIDED that any such use by MTV or an Affiliate of Viacom shall
comply with any applicable license, law or regulation of any
governmental authority, including without limitation, the Video Privacy
Protection Act of 1988, as amended, or any state laws governing video
privacy.
(c) Blockbuster or its duly authorized agent shall make the Customer
Database available to MTV or an Affiliate of Viacom, as the case may
be, at such times, in such format and updated to such times as MTV or
an Affiliate of Viacom, as the case may be, may request, except as may
be limited by law or by instruction of any customer and as may be
reasonably delayed due to technological difficulties or other time
constraints that occur in the ordinary course of business; PROVIDED
that Blockbuster or its duly authorized agent shall make available to
MTV or an Affiliate of Viacom, as the case may be, any portion of such
information that is permitted to be made available. MTV acknowledges
that Blockbuster or its authorized agent shall make available the
information contained in the Customer Database, and not any physical
form of the Customer Database containing such information. MTV shall
pay to Blockbuster, upon 30 days written notice, any reasonable and
incremental out-of-pocket costs incurred by Blockbuster in making the
Customer Database available to MTV or an Affiliate of Viacom, as the
case may be. MTV or an Affiliate of Viacom, as the case may be, in its
sole discretion, may make any modifications, additions or deletions to
the Customer Database, subject to (i) any law or (ii) any license
rights of any third party, of which reasonable notice is provided to
MTV or an Affiliate of Viacom, as the case may be. MTV or an Affiliate
of Viacom, as the case may be, shall provide reasonable notification to
Blockbuster of any such modifications, additions or deletions that are
material, and upon reasonable notice by Blockbuster, MTV or an
Affiliate of Viacom, as the case may be, shall make such revised
Customer Database available to Blockbuster for its use in conducting
its business at no cost to Blockbuster. Subject to Section 10, MTV
acknowledges and agrees that it does not own or have any interest in or
title to the Customer Database, including as modified, added to or
deleted.
SECTION 5. CONSIDERATION. In consideration of the Promotional Services
to be provided and the License granted hereunder, MTV shall pay to Blockbuster
$4.5 million in cash on, or if such date is not a Business Day, on a Business
Day immediately following, each of
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September 10, 1999, December 10, 1999, March 10, 2000 and June 10, 2000 for an
aggregate consideration of $18 million.
SECTION 6. MTV OPTION.
(a) Blockbuster grants to MTV an option (the "MTV OPTION"), exercisable
during the Term upon written notice of five Business Days, to extend
the License in perpetuity (the "PERPETUAL LICENSE") under the terms and
conditions of this Agreement. In consideration of the Perpetual
License, MTV shall (i) pay to Blockbuster $5 million in cash at the
time of exercise and no later than July 10, 2000 and (ii) provide to
Blockbuster for internal use its Leisure Time Studies as long as they
are commissioned by and produced for MTV or an Affiliate of Viacom.
(b) At any time during the Term, or after the exercise of the MTV
Option, Blockbuster may terminate the License and the MTV Option or the
Perpetual License, as the case may be, and any related sublicense, upon
written notice of five Business Days. In consideration of such
termination, Blockbuster shall pay to MTV $25 million in cash (the "MTV
OPTION CONSIDERATION") no later than 5 Business Days after receipt of
such written notice of termination. Upon such termination,
Blockbuster's access to MTV's Leisure Time Studies shall also
terminate.
SECTION 7. TERMINATION.
(a) Either party may terminate this Agreement, upon written notice of
10 Business Days to the other party, if such other party:
(i) defaults in the payment when due of any amount payable by
it under this Agreement and such default continues for a
period of thirty days following written notice and such
default is continuing at the time such notice of termination
is given, PROVIDED that in the event Blockbuster fails to pay
to MTV the MTV Option Consideration, the MTV Option or the
Perpetual License, as the case may be, shall not terminate and
continue in full force and effect pursuant to the terms
hereof;
(ii) defaults in the performance or observance of its other
material obligations under this Agreement and such default
continues for a period of thirty days following written notice
to such defaulting party and such default is continuing at the
time such notice of termination is given;
(iii) takes any action in violation of any video privacy laws;
(iv) makes an assignment for the benefit of its creditors or
files or consents to the filing of a petition in bankruptcy;
(v) has filed against an involuntary petition in bankruptcy
and such petition is not dismissed within sixty days of such
filing; or
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(vi) is appointed a receiver or similar official for such
other party or its business, or if such other party seeks to
take advantage of any legislation relating to insolvency,
arrangement or relief of debtors.
The provisions of this section are in addition to any other
rights and remedies available to any party in the event of the
breach by the other party of any of its obligations under this
Agreement.
(b) Upon termination of this Agreement:
(i) the License and the MTV Option or the Perpetual License,
as the case may be, and any related sublicense, shall
terminate;
(ii) MTV shall cease to use the Customer Database and shall
promptly return to Blockbuster, or destroy, all copies of the
Customer Database, any original files and copies of the
Customer Database as it has been modified, added to or
deleted, and any extracts made from the Customer Database;
(iii) MTV shall execute and deliver to Blockbuster any
document requested by Blockbuster to confirm Blockbuster's
ownership of the Customer Database;
(iv) Blockbuster shall promptly return to MTV, or destroy, all
copies of the Leisure Time Studies; and
(v) this Agreement shall cease except any obligation which
expressly survives the termination of this Agreement shall
continue in full force and effect subsequent to and
notwithstanding such termination.
SECTION 8. NONEXCLUSIVITY. Nothing in this Agreement is intended to
prevent Blockbuster from entering into any license agreement with any other
third party with respect to all or any part of the Customer Database.
SECTION 9. NO WARRANTY. Blockbuster makes no warranty, and MTV makes no
warranty, either express or implied, with respect to the Customer Database, or
the Leisure Time Studies, respectively, including any warranty of
merchantability or fitness for a particular purpose.
SECTION 10. OWNERSHIP OF CUSTOMER DATABASE. All information contained
in the Customer Database, including any copies, translations or compilations of
all or any part thereof, and any revisions, modifications or additions thereto
made by Blockbuster or MTV, or an Affiliate of Viacom, as the case may be, are
and shall remain the sole exclusive property of Blockbuster, except for any
additions thereto which are made solely by MTV, or an Affiliate of Viacom, as
the case may be, which MTV or an Affiliate of Viacom, as the case may be, shall
own and shall make available to Blockbuster for its use in conducting its
business. This Section 10 shall survive the termination of this Agreement.
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SECTION 11. CONFIDENTIALITY. (a) MTV acknowledges that the Customer
Database constitutes valuable, confidential and proprietary information and
trade secrets of Blockbuster. Accordingly, MTV shall not, directly or
indirectly, disclose or divulge to any third party, or permit any third party to
use or have access to, any information contained in the Customer Database
without the prior written consent of Blockbuster.
(b) Blockbuster acknowledges that the Leisure Time Studies constitute
valuable, confidential and proprietary information of MTV. Accordingly,
Blockbuster shall not, directly or indirectly, disclose or divulge to
any third party, or permit any third party to use or have access to,
any information contained in the Leisure Time Studies without prior
written consent of MTV.
(c) This Section 11 shall survive the termination of this Agreement.
SECTION 12. INJUNCTIVE RELIEF. Each party acknowledges that money
damages would not adequately compensate the other party in the event of a breach
by such party of its obligations hereunder and that injunctive relief would be
essential for the other party to adequately protect itself hereunder.
Accordingly, each party agrees that, in addition to any other remedies available
to the other party at law or in equity, the other party shall be entitled to
injunctive relief in the event such party is in breach of any covenant or
agreement contained herein. This Section 12 shall survive the termination of
this Agreement.
SECTION 13. INDEMNIFICATION.
(a) Blockbuster and its successors and assigns agree to indemnify and
hold harmless MTV, its affiliates, subsidiaries, successors and
assigns, and their respective directors, officers, agents and
employees, from and against any and all claims, suits, damages, losses,
liabilities, obligations, fines, penalties, costs and expenses,
including without limitation, legal fees and expenses, incurred by an
indemnified party in any action or proceeding between an indemnifying
party and an indemnified party or between any third party and an
indemnified party (collectively "LOSS"), arising out of or based on any
failure by Blockbuster to perform any of the terms, covenants or
conditions of this Agreement. MTV may participate in the defense of the
claims by counsel of its own choosing, at its cost and expense. An
indemnified party will give prompt notice to an indemnifying party of
any occurrence for which it will seek indemnification.
(b) MTV and its successors and assigns agree to indemnify and hold
harmless Blockbuster, its affiliates, subsidiaries, successors and
assigns, and their respective directors, officers, agents and
employees, from and against any and all Loss, arising out of or based
on any failure by MTV to perform any of the terms, covenants or
conditions of this Agreement. Blockbuster may participate in the
defense of the claims made by counsel of its own choosing, at its cost
and expense. An indemnified party will give prompt notice to an
indemnifying party of any occurrence for which it will seek
indemnification.
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SECTION 14. MISCELLANEOUS.
(a) WAIVER. The observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively
or prospectively) by the party entitle to enforce such term, but such
waiver shall be effective only if it is in writing signed by a duly
authorized officer of the party against which such waiver is to be
asserted. Unless otherwise expressly provided in this Agreement, no
delay or omission on the part of any party in exercising any right or
privilege under this Agreement shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any right or privilege
under this Agreement operate as a waiver of any other right or
privilege under this Agreement, nor shall any single or partial
exercise of any right or privilege preclude any other or future
exercise thereof or the exercise of any other right or privilege under
this Agreement. No failure by either party to take any action or assert
any right or privilege hereunder shall be deemed to be a waiver of such
right or privilege in the event of the continuation or repetition of
the circumstances giving rise to such right unless expressly waived in
writing by the party against whom the existence of such waiver is
asserted.
(b) REFERENCES; CONSTRUCTION. The headings and subheadings contained in
this Agreement are solely for the purpose of reference, are not part of
the agreement of the parties hereto, and shall not in any way affect
the meaning or interpretation of this Agreement. All references to days
or months shall be deemed references to calendar days or months. Unless
the context otherwise requires, any reference to a "Section" shall be
deemed to refer to a section of this Agreement. The words "hereof,"
"herein" and "hereunder" and words of similar import referring to this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. This Agreement shall be construed without
regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing the document to be
drafted.
(c) AMENDMENTS. This Agreement shall not be supplemented, amended or
modified in any manner whatsoever (including without limitation by
course of dealing or of performance or usage of trade) except in
writing signed by the parties.
(d) SUCCESSORS AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement may not be assigned by any party by
operation of law or otherwise without the express written consent of
the other party; PROVIDED that MTV may assign its rights and
obligations under this Agreement to any Affiliate of Viacom; PROVIDED
FURTHER that Blockbuster may assign its rights and obligations under
this Agreement to any party who is fully qualified and capable of
maintaining, updating and providing the Customer Database to MTV at a
level of standard equal to or greater than that with which
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Blockbuster maintained, updated and provided the Customer Database to
MTV immediately prior to such assignment.
(e) SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid
under applicable law. If any portion of this Agreement is declared
invalid for any reason in any jurisdiction, such declaration shall have
no effect upon the remaining portions of this Agreement, which shall
continue in full force and effect as if this Agreement had been
executed with the invalid portions thereof deleted; PROVIDED that the
entirety of this Agreement shall continue in full force and effect in
all other jurisdictions.
(f) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both
written and oral, between the parties with respect to the subject
matter hereof and thereof.
(g) NOTICES. All notices, consents, requests, approvals and other
communications provided for or required herein, and all legal process
in regard thereto, must be in writing and shall be deemed validly
given, made or served, (i) when delivered personally or sent by
telecopy to the facsimile number indicated below with a required
confirmation copy sent in accordance with subsection (iii) below; or
(ii) on the next Business Day after delivery to a nationally-recognized
express delivery service with instructions and payment for overnight
delivery; or (iii) on the fifth day after deposited in any depository
regularly maintained by the United States postal service, postage
prepaid, certified or registered mail, return receipt requested,
addressed to the following addresses or to such other address as the
party to be notified shall have specified to the other party in
accordance with this section:
If to MTV:
1515 Broadway
New York New York 10036
Attention: Michael D. Fricklas, General Counsel of Viacom Inc.
Phone Number: 212-258-6070
Fax Number: 212-258-6099
If to Blockbuster:
Blockbuster Inc.
1201 Elm Street
Dallas, Texas 75270
Attention: Ed Stead, General Counsel
Phone Number: 214-854-3499
Fax Number: 214-854-3677
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(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. This Section 14(h)
shall survive the termination of this Agreement.
(i) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date and year first written above.
MTV NETWORKS, a division of
VIACOM INTERNATIONAL INC.
By: _______________________________
Name:
Title:
BLOCKBUSTER INC.
By: _______________________________
Name:
Title:
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Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
SUBSIDIARY NAME INCORPORATION OR
ORGANIZATION
<S> <C>
2 Day Video, Inc. Texas
2 Day Video, Inc. of Georgia Georgia
Ardnasillagh Limited United Kingdom
Atlantic Associates, Inc. Delaware
Atlantic Home Video Delaware
Big Planet Video, Inc. New Hampshire
Blockbuster Airships, Inc. Delaware
Blockbuster Amphitheater Corporation Delaware
Blockbuster Argentina S. A. Argentina
Blockbuster Australia Pty Ltd. Australia
Blockbuster BEI Taiwan Ltd. Taiwan
Blockbuster Canada Co. Nova Scotia
Blockbuster Canada Inc. Delaware
Blockbuster Computer Systems Corporation Florida
Blockbuster de Mexico, S.A. de C.V. Mexico
Blockbuster Distribution, Inc. Delaware
Blockbuster Entertainment Corporation Delaware
Blockbuster Entertainment (Ireland) Limited Ireland
Blockbuster Entertainment Limited United Kingdom
Blockbuster Holdings Ireland Ireland
Blockbuster Hong Kong Limited Hong Kong
Blockbuster International Spain Inc. Delaware
Blockbuster International (Taiwan) B.V. The Netherlands
Blockbuster Investments LLC Delaware
Blockbuster Mid-America, Inc. Delaware
Blockbuster On-Line Services, Inc. Delaware
Blockbuster Park Lands, Inc. Florida
Blockbuster Park, Inc. Delaware
Blockbuster SC Video Operating Corporation Delaware
Blockbuster Services Inc. Delaware
Blockbuster Technology Holding Corporation Delaware
Blockbuster UK Limited United Kingdom
Blockbuster Uruguay Ltda Uruguay
Blockbuster Video Acquisition Corp. Delaware
Blockbuster Video Danmark A/S Denmark
<PAGE>
SUBSIDIARY NAME STATE OF INCORPORATION
Blockbuster Video Espana, S.L. Spain
Blockbuster Video International Corporation (Chile) Limitada Chile
Blockbuster Video Italy, Inc. Delaware
Blockbuster Video Superstores (Australia) Pty Ltd. Australia
BS Hotel, Inc. Delaware
Charlotte Amphitheater Corporation Delaware
Cityvision Limited United Kingdom
D.E.J. Productions Inc. Delaware
Direcorp, S.A. de C.V. Mexico
Entretenimiento de Baja California, S.A. de C.V. Mexico
Entretenimiento del Caribe, S.A. de C.V. Mexico
Family Entertainment Centers, Inc. Florida
FLC Holding Corp. Florida
Grupo Video de Leon, S.A. de C.V. Mexico
Grupo Video de Monterrey, S.A. de C.V. Mexico
Grupo Videotech, S.A. de C.V. Mexico
Major Video Super Stores, Inc. Nevada
Montgomery Acquisition, Inc. Delaware
Operadora de Videos Dima, S.A. de C.V. Mexico
Sercorp, S.A. de C.V. Mexico
Serle, S.A. de C.V. Mexico
Seryuc, S.A. de C.V. Mexico
Southeastern Home Video, Inc. Delaware
T.V. Factory, Inc., The New York
TS Video, Inc. Louisiana
UI Video Stores Inc. Colorado
Videomedios, S.A. de C.V. Mexico
Video Store (Jersey) Limited Channel Islands
Westside Amphitheater Corporation, The Arizona
Xtra-Vision Limited Ireland
Xtra-Vision Properties Limited Ireland
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated May 4, 1999 relating to the combined financial statements of
Blockbuster Inc., which appears in such Registration Statement. We also consent
to the reference to us under the heading "Experts" in such Registration
Statement.
PricewaterhouseCoopers LLP
Dallas, Texas
July 30, 1999
