EXHIBIT 99.(d)
VIACOM ENTERS INTO MANAGEMENT AGREEMENT WITH
DISCOVERY ZONE
CHICAGO, April 17 -- Discovery Zone Inc. (NASDAQ:
ZONE) today announced that the Blockbuster Entertainment Group
of Viacom, Inc. (AMEX: VIA, VIA.B) has entered into a five-
year Management Services Agreement with Discovery Zone.
The Company said that Discovery Zone Chairman and
CEO Donald F. Flynn will remain chairman and a member of the
board of directors, and Steven R. Berrard, president and chief
executive officer of Blockbuster has been elected as interim
Discovery Zone chief executive until a replacement is named.
Discovery Zone board members not affiliated with Viacom will
resign effective at closing.
Discovery Zone also announced that the Flynn family
will complete the previously announced exercise of outstanding
warrants to acquire additional shares of Discovery Zone common
stock, investing $26,700,000. Blockbuster Entertainment, in
order to retain its 49.9 percent ownership of Discovery Zone
common stock, will purchase an aggregate of 3,823,647 shares
of Discovery Zone common stock from the Flynn family.
"This management agreement is a major milestone in
the growth and evolution of Discovery Zone," said Flynn.
"Viacom's wealth of brands and Blockbuster's expertise as one
of the premier entertainment retailers in the world will
enrich the overall experience in all of our FunCenters.
Additionally, Viacom's infrastructure and strong position in
the entertainment industry should lead to a reduction in
operating expenses and additional marketing opportunities,
while the grant of the warrants will give Viacom strong
incentives to enhance shareholder value."
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"We have had a long, successful relationship with
Discovery Zone as a shareholder, former franchisee and joint
venture partner," said Berrard. "Don Flynn and Discovery Zone
Management have pioneered the concept of the children's
FunCenter and established the Company as the nationally
recognized leader in children's destination-based
entertainment. Now, with this management agreement we will
have the opportunity to build on its success, further leverage
our assets, improve the Company's operations and increase its
profitability."
The Management Services Agreement is for a term of
five years, with successive one-year extensions. Under the
Management Agreement, Discovery Zone will reimburse
Blockbuster for its costs incurred and will grant to
Blockbuster warrants to acquire an aggregate of up to 473,463
shares of a new class of non-cumulative, convertible,
participating preferred stock. The terms of the agreement
have been approved by an independent committee of Discovery
Zone's Board of Directors.
Each share of preferred stock will be convertible
into 24 shares of Discovery Zone common stock by any holder
who is not affiliated with Blockbuster. The warrants, a Class
A Warrant, a Class B Warrant and a Class C Warrant, will be
exercisable for an equal number of shares of preferred stock
and will vest on the first, second and third anniversaries of
the effective date of the management agreement, with exercise
prices per share of preferred stock of $249.000, $286.344 and
$343.608, respectively.
Blockbuster also will sell its "Block Party"
entertainment centers to Discovery Zone for net book value of
$15 million payable in subordinated notes.
It is anticipated that these transactions, which are
subject to customary closing conditions, will close sometime
during the second quarter.
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Discovery Zone, Inc. is the nation's leading
operator of children's indoor entertainment and fitness
facilities.
Blockbuster Entertainment Group is a unit of Viacom
Inc. with businesses in entertainment retailing, television
and film production, live entertainment and pay cable. The
Group is composed of Blockbuster Video, Blockbuster Music,
Blockbuster International, Spelling Entertainment, Showtime
Networks Inc. and Paramount Parks, as well as Discovery Zone
FunCenters.
Viacom Inc. is a worldwide leader in entertainment
and publishing. In addition to Blockbuster Entertainment,
Viacom's operations include Paramount Pictures, Paramount
Television, MTV Networks, Simon & Shuster, radio and
television stations, cable systems serving approximately 1.1
million customers in the United States and movie theaters in
11 countries.
