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.
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.
"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 Informat ...
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