Exhibit 10.1

 

BLOCKBUSTER INC.

 

150,000 Shares

 

7 1/2% Series A Cumulative Convertible Perpetual Preferred Stock

 

Purchase Agreement

 

New York, New York

November 8, 2005

 

[·]

[·]

As Representatives of the Initial Purchasers

c/o [·]

[·]

[·]

 

Ladies and Gentlemen:

 

Blockbuster Inc., a Delaware corporation (the “Company”), proposes to issue and
sell to the several parties named in Schedule I hereto (the “Initial
Purchasers”), for whom you (the “Representatives”) are acting as
representatives, 150,000 shares of 7 1/2% Series A Cumulative Convertible
Perpetual Preferred Stock (the “Firm Securities”). The Company also proposes to
grant to the Initial Purchasers an option to purchase up to 22,500 shares to
cover over-allotments, if any (the “Option Securities” and, together with the
Firm Securities, the “Securities”). To the extent there are no additional
parties listed on Schedule I other than you, the term Representatives as used
herein shall mean you as the Initial Purchasers, and the terms Representatives
and Initial Purchasers shall mean either the singular or plural as the context
requires. The use of the neuter in this Agreement shall include the feminine and
masculine wherever appropriate. Certain terms used herein are defined in
Section 19 hereof.

 

In connection with the sale of the Securities, the Company has prepared a
Preliminary Offering Memorandum, dated November 8, 2005 (the “Preliminary
Memorandum”), and will prepare an offering memorandum, dated November 8, 2005
(as amended or supplemented at the Execution Time, including any and all
exhibits thereto and any information incorporated by reference therein, the
“Final Memorandum” and, with the Preliminary Memorandum, each a “Memorandum”).
The Final Memorandum sets forth certain information concerning the Company, the
Securities and the Common Stock issuable upon conversion thereof. The Company
hereby confirms that it has authorized the use of each Memorandum, and any
amendment or supplement thereto, in connection with the offer and sale of the
Securities by the Initial Purchasers as described herein. Unless stated to the
contrary, any references herein to the terms “amend”, “amendment” or
“supplement” with respect to the Final Memorandum shall be

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deemed to refer to and include any information filed under the Exchange Act
subsequent to the Execution Time that is incorporated by reference therein.

 

The Securities are convertible into shares of Common Stock at the conversion
price, as set forth in the Final Memorandum, and in the certificate of
designations for the Securities (the “Certificate of Designations”) to be filed
with the Secretary of State of the State of Delaware. The sale of the Securities
to the Initial Purchasers will be made without registration of the Securities or
the shares of Common Stock issuable upon the conversion of the Securities.

 

In connection with the sale of the Securities, the Company also proposes to
enter into a Registration Rights Agreement, to be dated as of the Closing Date
(as defined in Section 3), between the Company and the Initial Purchasers (the
“Registration Rights Agreement”).

 

1. Representations and Warranties. The Company represents and warrants to each
Initial Purchaser as set forth below in this Section 1.

 

(a) Offering Memorandum. The Preliminary Memorandum, as of its date, did not,
and the Final Memorandum, in the form first used by the Initial Purchasers to
confirm sales of the Securities and as of the Closing Date, will not, contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the
Company makes no representation or warranty with respect to any statements or
omissions made in reliance upon and in conformity with information relating to
any Initial Purchaser furnished to the Company in writing by such Initial
Purchaser through the Representatives expressly for use in the Preliminary
Memorandum or the Final Memorandum.

 

(b) Incorporated Documents. The documents incorporated by reference in the
Preliminary Memorandum and the Final Memorandum, when filed with the Commission,
conformed or will conform, as the case maybe, in all material respects to the
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder, and did not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.

 

(c) Financial Statements. The financial statements and the related notes thereto
included or incorporated by reference in the Preliminary Memorandum and the
Final Memorandum present fairly in all material respects the financial position
of the Company and its subsidiaries as of the dates indicated and the results of
their operations and the changes in their cash flows for the periods specified;
such financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered thereby; and the other financial information included or
incorporated by reference in the Preliminary Memorandum and the Final Memorandum
has been derived from the accounting records of the Company and its subsidiaries
and presents fairly in all material respects the information shown thereby.

 

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(d) No Material Adverse Change. Except as otherwise disclosed in the Preliminary
Memorandum and the Final Memorandum, since the date of the most recent financial
statements of the Company included or incorporated by reference in the
Preliminary Memorandum and the Final Memorandum, (i) there has not been any
material change in the capital stock or long-term debt of the Company or any of
its subsidiaries, or any dividend or distribution of any kind declared, set
aside for payment, paid or made by the Company on any class of capital stock, or
any material adverse change, or any development involving a prospective material
adverse change, in or affecting the business, financial position or results of
operations of the Company and its subsidiaries taken as a whole; (ii) neither
the Company nor any of its subsidiaries has entered into any transaction or
agreement that is material to the Company and its subsidiaries taken as a whole
or incurred any liability or obligation, direct or contingent, that is material
to the Company and its subsidiaries taken as a whole; and (iii) neither the
Company nor any of its subsidiaries has sustained any loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor disturbance or dispute or any action,
order or decree of any court or governmental agency, authority or body or any
arbitrator that (x) could reasonably be expected to have a material adverse
effect on the performance of this Agreement, the Registration Rights Agreement,
or the Company’s obligations under the Securities or (y) could reasonably be
expected to have a material adverse effect on the business, financial position
or results of operations of the Company and its subsidiaries, taken as a whole
(a “Material Adverse Effect”).

 

(e) Organization and Good Standing. The Company and each of its subsidiaries
have been duly organized and are validly existing and in good standing under the
laws of their respective jurisdictions of organization, are duly qualified to do
business and are in good standing in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective businesses
requires such qualification, and have all requisite corporate, limited liability
company or limited partnership, as applicable, power and authority necessary to
own or hold their respective properties and to conduct the businesses in which
they are engaged, except where the failure to be so qualified or have such power
or authority would not, individually or in the aggregate, be reasonably expected
to have a Material Adverse Effect.

 

(f) Capitalization. The Company’s authorized and outstanding capitalization is
as set forth in the Final Memorandum, and the capital stock of the Company
conforms in all material respects to the description thereof contained in the
Final Memorandum; the outstanding shares of Common Stock have been duly and
validly authorized and issued and are fully paid and non-assessable; the shares
of Common Stock initially issuable upon conversion of the Securities have been
duly and validly authorized and, when issued upon conversion and in accordance
with the terms of the Certificate of Designations, will be validly issued, fully
paid and non-assessable; the Board of Directors of the Company has duly and
validly adopted resolutions reserving such shares of Common Stock for issuance
upon conversion; the holders of the outstanding shares of capital stock of the
Company are not entitled to any preemptive or other rights to subscribe for the
Securities or the shares of Common Stock issuable upon conversion thereof; and,
except as set forth in the

 

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Final Memorandum, no options, warrants or other rights to purchase, agreements
or other obligations to issue, or rights to convert any obligations into or
exchange any securities for, shares of capital stock of or ownership interests
in the Company are outstanding.

 

(g) Due Authorization. The Company has full right, power and authority to
execute and deliver this Agreement and the Registration Rights Agreement and to
perform its respective obligations hereunder and thereunder; and all action
required to be taken for the due and proper authorization, execution and
delivery of this Agreement and the Registration Rights Agreement and the
consummation of the transactions contemplated thereby has been duly and validly
taken.

 

(h) Purchase and Registration Rights Agreements. This Agreement has been duly
authorized, executed and delivered by the Company and the Registration Rights
Agreement has been duly authorized by the Company and, when duly executed and
delivered in accordance with its terms by each of the parties thereto, will
constitute a valid and legally binding agreement of the Company enforceable
against the Company in accordance with its terms, except to the extent that
enforcement thereof may be limited by (i) the effects of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors’ rights generally and (ii) general equitable
principles (whether considered in a proceeding in equity or at law); and this
Agreement and the Registration Rights Agreement conforms in all material
respects to the descriptions thereof contained in the Preliminary Memorandum and
the Final Memorandum.

 

(i) Securities. The Securities have been duly authorized and, when issued and
delivered to and paid for by the Initial Purchasers in accordance with the terms
of this Agreement, will be validly issued, fully paid and non-assessable and
free of statutory and contractual preemptive rights and similar rights and will
conform in all material respects to the description thereof contained in each
Memorandum; the certificates for the Securities are in due and proper form and
the holders of the Securities and the Common Stock into which the Securities are
convertible will not be subject to personal liability by reason of being such
holders; the Certificate of Designations has been duly approved and adopted by a
resolution of the Board of Directors, which resolution remains in full force and
effect, and will be filed with the Secretary of State of the State of Delaware
on or before the Closing Date; and the Certificate of Designations conforms in
all material respects to the description thereof contained in each Memorandum.

 

(j) No Violation or Default. Neither the Company nor any of its subsidiaries is
(i) in violation of its charter or by-laws or similar organizational documents;
(ii) in default, and no event has occurred that, with notice or lapse of time or
both, would constitute such a default, in the due performance or observance of
any term, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject; or (iii) in violation of any law or
statute or any judgment, order, rule or regulation of any court or arbitrator or
governmental or

 

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regulatory authority, except, in the case of clauses (ii) and (iii) above, for
any such default or violation that would not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect.

 

(k) No Conflicts. The execution, delivery and performance by the Company of this
Agreement and the Registration Rights Agreement, the issuance and sale of the
Securities or the issuance of the Common Stock upon conversion thereof, the
Company’s compliance with the Certificate of Designations and the consummation
of the transactions contemplated by this Agreement and the Registration Rights
Agreement will not (i) conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, (ii) result in any violation
of the provisions of the charter or by-laws or similar organizational documents
of the Company or any of its subsidiaries or (iii) result in the violation of
any law or statute or any judgment, order, rule or regulation of any court or
arbitrator or governmental or regulatory authority, except, in the case of
clauses (i) and (iii) above, for any such conflict, breach or violation that
would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect.

 

(l) No Consents Required. No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority is required for the execution, delivery and performance
by the Company of each of this Agreement and the Registration Rights Agreement,
the issuance and sale of the Securities or the issuance of the Common Stock upon
conversion thereof, the Company’s compliance with the Certificate of
Designations and the consummation of the transactions contemplated by this
Agreement and the Registration Rights Agreement, except for such consents,
approvals, authorizations, orders and registrations or qualifications as may be
required (i) under applicable state securities laws in connection with the
purchase and resale of the Securities by the Initial Purchasers and (ii) with
respect to the Common Stock issuable upon conversion of the Securities and shelf
registration under the Securities Act and applicable state securities laws as
contemplated by the Registration Rights Agreement.

 

(m) Legal Proceedings. Except as described in the Preliminary Memorandum and the
Final Memorandum, there are no legal, governmental or regulatory investigations,
actions, suits or proceeding spending to which the Company or any of its
subsidiaries is or may be a party or to which any property of the Company or any
of its subsidiaries is or may be the subject that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect; and
no such investigations, actions, suits or proceedings are threatened or, to the
knowledge of the Company, contemplated by any governmental or regulatory
authority or threatened by others.

 

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(n) Independent Accountant. PricewaterhouseCoopers LLP, which has certified
certain financial statements of the Company and its subsidiaries, is an
independent registered public accounting firm with respect to the Company and
its subsidiaries within the meaning of Rule 101 of the Code of Professional
Conduct of the American Institute of Certified Public Accountants and its
interpretations and rulings thereunder.

 

(o) Title to Real and Personal Property. The Company and its subsidiaries have
good title to, or valid leasehold interests in, all items of real and personal
property that are material to the business of the Company and its subsidiaries,
taken as a whole, it each case free and clear of all liens, encumbrances, claims
and defects and imperfections of title except those that are disclosed in the
Final Memorandum or would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect.

 

(p) Title to Intellectual Property. The Company and its subsidiaries own or
possess or can acquire on reasonable terms adequate rights to use all patents,
patent applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses and know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) necessary for the conduct of
their respective businesses, except where the failure to own or possess the same
would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect; and the conduct of their respective businesses will not
conflict in any material respect with any such rights of others, and the Company
and its subsidiaries have not received any notice of any claim of infringement
of or conflict with any such rights of others, that, in any such case, if
determined adversely to the Company or any of its subsidiaries would,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect.

 

(q) Investment Company Act. Neither the Company nor any of its subsidiaries is,
and after giving effect to the offering and sale of the Securities and the
application of the proceeds thereof as described in the Final Memorandum none of
them will be, an “investment company” or an entity “controlled” by an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended, and the rules and regulations of the Commission thereunder
(collectively, “Investment Company Act”).

 

(r) Taxes. The Company and its subsidiaries have paid all federal, state, local
and foreign taxes and filed all tax returns required to be paid or filed through
the date hereof except where the failure to pay or file would not, individually
or in the aggregate, be reasonably expected to have a Material Adverse Effect;
and except as otherwise disclosed in the Preliminary Memorandum and the Final
Memorandum, there is no tax deficiency that has been, or could reasonably be
expected to be, asserted against the Company or any of its subsidiaries or any
of their respective properties or assets, except for any deficiency that would
not, individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect.

 

(s) Licenses and Permits. The Company and its subsidiaries possess all licenses,
certificates, permits and other authorizations issued by, and have made all
declarations

 

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and filings with, the appropriate federal, state, local or foreign governmental
or regulatory authorities that are necessary for the ownership or lease of their
respective properties or the conduct of their respective businesses as described
in the Preliminary Memorandum and the Final Memorandum, except where the failure
to possess or make the same would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect; and except as described
in the Preliminary Memorandum and the Final Memorandum, neither the Company nor
any of its subsidiaries has received notice of any revocation or modification of
any such license, certificate, permit or authorization that if determined
adversely to the Company or any of its subsidiaries, would, individually or in
the aggregate, be reasonably expected to have a Material Adverse Effect or has
any reason to believe that any such license, certificate, permit or
authorization will not be renewed in the ordinary course other than such
failures to renew that would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect.

 

(t) No Labor Disputes. No labor disturbance by or dispute with employees of the
Company or any of its subsidiaries exists or, to the best knowledge of the
Company, is contemplated or threatened that, in any such case, would,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect.

 

(u) Compliance With Environmental Laws. The Company and its subsidiaries (i) are
in compliance with any and all applicable federal, state, local and foreign
laws, rules, regulations, decisions and orders relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants (collectively, “Environmental Laws”);
(ii) have received and are in compliance with all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses; and (iii) have not received notice of any actual or
potential liability for the investigation or remediation of any disposal or
release of hazardous or toxic substances or wastes, pollutants or contaminants,
except in any such case for any such failure to comply with, or failure to
receive required permits, licenses or approvals, or liability, as would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect.

 

(v) Compliance With ERISA. Each employee benefit plan, within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), that is maintained, administered or contributed to by the Company or
any of its affiliates for employees or former employees of the Company and its
affiliates has been maintained in compliance with its terms and the requirements
of any applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Internal Revenue Code of 1986, as amended (the “Code”),
except where the failure to so maintain any such plan would not, individually or
in the aggregate, be reasonably expected to have a Material Adverse Effect; no
prohibited transaction, within the meaning of Section 406 of ERISA or
Section 4975 of the Code, has occurred with respect to any such plan excluding
transactions effected pursuant to a statutory or administrative exemption and
except where such transaction or transactions would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect; and for
each such plan, if any, that is subject to the funding rules of Section 412 of
the Code or Section 302 of ERISA,

 

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no “accumulated funding deficiency” as defined in Section 412 of the Code has
been incurred, whether or not waived, and the fair market value of the assets of
each such plan (excluding for these purposes accrued but unpaid contributions)
exceeds the present value of all benefits accrued under such plan determined
using reasonable actuarial assumptions.

 

(w) Accounting Controls. The Company and its subsidiaries maintain systems of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

 

(x) Insurance. The Company and its subsidiaries have insurance covering their
respective properties, operations, personnel and businesses, including business
interruption insurance, which insurance is in amounts and insures against such
losses and risks as are adequate to protect the Company and its subsidiaries and
their respective businesses.

 

(y) Anti-Bribery. Neither the Company nor any of its subsidiaries nor, to the
best knowledge of the Company, any director, officer, agent, employee or other
person associated with or acting on behalf of the Company or any of its
subsidiaries has (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to any political
activity, (ii) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds, (iii) violated or
is in violation of any provision of the Foreign Corrupt Practices Act of 1977,
as amended, or (iv) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.

 

(z) Foreign Assets Control. None of the Company, any of its subsidiaries or, to
the knowledge of the Company, any director, officer, agent, employee or
affiliate (as defined in Rule 501(b) under the Securities Act) of the Company or
any of its subsidiaries is currently subject to any U.S. sanctions administered
by the Office of Foreign Assets Control of the U.S. Department of the Treasury
(“OFAC”). None of the Company, or such of its subsidiaries as are U.S. persons,
engage in any business with or in any country, person, or entity subject to
sanctions under any of the Trading With the Enemy Act, the International
Emergency Economic Powers Act, the United Nations Participation Act, and the
Syria Accountability and Lebanese Sovereignty Act, all as amended, or any of the
foreign assets control regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto (collectively, the “Sanctions Laws and Regulations”), or,
any person or entity in those countries or with those persons, or perform
contracts in support of projects in or for the benefit of those countries or
those persons.

 

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The Company will not use, and will cause each subsidiary not to use, the
proceeds from the offering, directly or indirectly, for any purpose or activity
that would cause any person associated with the offering to violate any of the
Sanctions Laws and Regulations, or in connection with business, operations or
contracts within the countries, or with the governments or with any person or
entity, in each case that are prohibited by the Sanctions Laws and Regulations,
or in connection with contracts in support of projects in or for the benefit of
such countries, governments, persons or entities.

 

(aa) Anti-Money Laundering. Neither the Company nor any of its subsidiaries has
engaged in any financial transactions in order to conceal the identity, source
or destination of the proceeds from any category of offenses designated by the
Financial Action Task Force on Money Laundering’s “The Forty Recommendations” of
June 20, 2003 in violation of the laws or regulations of the United States or
any other jurisdiction in which the Company does business.

 

(bb) Solvency. On and immediately after the Closing Date, the Company (after
giving effect to the issuance of the Securities) will be Solvent. As used in
this paragraph, the term “Solvent” means, with respect to a particular date,
that on such date (i) the present fair market value (or present fair saleable
value) of the assets of the Company is not less than the total amount required
to pay the liabilities of the Company on its total existing debts and
liabilities (including contingent liabilities) as they become absolute and
matured; (ii) the Company is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations and commitments as they mature and
become due in the normal course of business; (iii) assuming consummation of the
issuance of the Securities as contemplated by this Agreement and the Final
Memorandum, the Company is not incurring debts or liabilities beyond its ability
to pay as such debts and liabilities mature; (iv) the Company is not engaged in
any business or transaction, and does not propose to engage in any business or
transaction, for which its property would constitute unreasonably small capital
after giving due consideration to the prevailing practice in the industry in
which the Company is engaged; and (v) the Company is not a defendant in any
civil action that would result in a judgment that the Company is or would become
unable to satisfy.

 

(cc) No Broker’s Fees. Neither the Company nor any of its subsidiaries is a
party to any contract, agreement or understanding with any person (other than
this Agreement) that would give rise to a valid claim against any of them or any
Initial Purchaser for a brokerage commission, finder’s fee or like payment in
connection with the offering and sale of the Securities.

 

(dd) No Integration. Neither the Company nor any of its Affiliates has, directly
or through any agent, sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as defined in the Securities
Act), that is or will be integrated with the sale of the Securities in a manner
that would require registration of the Securities or the Common Stock upon
conversion thereof under the Securities Act.

 

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(ee) No General Solicitation. None of the Company or any of its Affiliates or
any other person acting on its or their behalf (other than the Initial
Purchasers, as to which no representation is made) has solicited offers for, or
offered or sold, the Securities or the Common Stock upon conversion thereof by
means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) of Regulation D or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.

 

(ff) Securities Law Exemptions. Assuming the accuracy of the representations and
warranties of the Initial Purchasers contained in Section 4 and their compliance
with their agreements set forth herein, it is not necessary in connection with
the offer, sale and delivery of the Securities to the Initial Purchasers in the
manner contemplated by this Agreement to register the Securities or the Common
Stock issuable upon the conversion thereof under the Act.

 

(gg) No Stabilization. The Company has not taken, directly or indirectly, any
action designed to or that could reasonably be expected to cause or result in
any stabilization or manipulation of the price of the Securities.

 

(hh) Forward-Looking Statements. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21 E of the Exchange
Act) contained in the Preliminary Memorandum and the Final Memorandum has been
made or reaffirmed without a reasonable basis or has been disclosed other than
in good faith.

 

(ii) Statistical and Market Data. The Company believes that the disclosure of
the statistical and market-related data included or incorporated by reference in
the Preliminary Memorandum and the Final Memorandum is accurate in all material
respects.

 

(jj) Rule 144A. The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Act.

 

(kk) Reporting Requirements. Except as disclosed in the Memorandum, the Company
is subject to and in full compliance with the reporting requirements of
Section 13 or Section 15(d) of the Exchange Act.

 

(ll) Registration Statement. No holder of securities of the Company (other than
the Registrable Securities (as defined in the Registration Rights Agreement))
will be entitled to have such securities registered under the registration
statement required to be filed by the Company pursuant to the Registration
Rights Agreement.

 

Any certificate signed by any officer of the Company and delivered to the
Representatives or counsel for the Initial Purchasers in connection with the
offering of the Securities shall be deemed a representation and warranty by the
Company, as to matters covered thereby, to each Initial Purchaser.

 

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2. Purchase and Sale.

 

(a) Subject to the terms and conditions and in reliance upon the representations
and warranties herein set forth, the Company agrees to sell to each Initial
Purchaser, and each Initial Purchaser agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $967.50 per share, the number
of Firm Securities set forth opposite such Initial Purchaser’s name in Schedule
I hereto.

 

(b) Subject to the terms and conditions and in reliance upon the representations
and warranties herein set forth, the Company hereby grants an option to the
several Initial Purchasers to purchase, severally and not jointly, the Option
Securities at the same purchase price as the Initial Purchasers paid for the
Firm Securities, from the date hereof to the settlement date for the Option
Securities (the “Settlement Date”). The option may be exercised only to cover
over-allotments in the sale of the Firm Securities by the Initial Purchasers.
The option may be exercised in whole or in part at any time (but not more than
once) not less than three Business Days prior to the 30th day after the date of
the Closing Date upon written or telegraphic notice by the Representatives to
the Company setting forth the number of Option Securities as to which the
Initial Purchasers are exercising the option and the Settlement Date. Delivery
of the Option Securities, and payment therefor, shall be made as provided in
Section 3 hereof. The Settlement Date for the Option Securities, if any, shall
not be more than 30 days after the Closing Date. The number of Option Securities
to be purchased by each Initial Purchaser shall be the same percentage as such
Initial Purchaser is purchasing of the Firm Securities, subject to such
adjustments as the Representatives shall deem advisable.

 

(c) 50,000 of the Firm Securities (the “Directed Shares”) will initially be
reserved by the several Initial Purchasers for offer and sale to certain
existing stockholders of the Company specified by the Company (the “Directed
Share Participants”) and any allocation of such Directed Shares among such
persons will be made in accordance with timely directions received by the
Representatives from the Company (the “Directed Share Program”). To the extent
that any Directed Shares are not affirmatively reconfirmed for purchase by any
Directed Share Participant on or immediately after the date of this Agreement,
such Directed Shares may be offered to other investors as part of the offering
contemplated hereby.

 

3. Delivery and Payment. Delivery of and payment for the Firm Securities and the
Option Securities (if the option provided for in Section 2(b) hereof shall have
been exercised on or before the third Business Day prior to the Closing Date)
shall be made at 10:00 A.M., New York City time, on November 15, 2005, or at
such time on such later date (not more than three Business Days after the
foregoing date) as the Representatives shall designate, which date and time may
be postponed by agreement between the Representatives and the Company or as
provided in Section 9 hereof (such date and time of delivery and payment for the
Securities being herein called the “Closing Date”). Delivery of the Securities
shall be made to the Representatives for the respective accounts of the several
Initial Purchasers against payment by the several Initial Purchasers through the
Representatives of the purchase price thereof, to or upon the order of the
Company by wire transfer payable in same-day funds to the account specified by
the Company. Delivery of the Securities shall be made through the facilities of
The Depository Trust Company unless the Representatives shall otherwise
instruct.

 

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If the option provided for in Section 2(b) hereof is exercised after the third
Business Day prior to the Closing Date, the Company will deliver the Option
Securities (at the expense of the Company) to the Representatives on the date
specified by the Representatives (which shall be three Business Days after
exercise of said option), for the respective accounts of the several Initial
Purchasers, against payment by the several Initial Purchasers through the
Representatives of the purchase price thereof to or upon the order of the
Company by wire transfer payable in same-day funds to the account specified by
the Company. If settlement for the Option Securities occurs after the Closing
Date, the Company will deliver to the Representatives on the Settlement Date,
and the obligation of the Initial Purchasers to purchase the Option Securities
shall be conditioned upon receipt of, supplemental opinions, certificates and
letters confirming as of such date the opinions, certificates and letters
delivered on the Closing Date pursuant to Section 6 hereof.

 

4. Offering by Initial Purchasers. Each Initial Purchaser, severally and not
jointly, represents and warrants to and agrees with the Company that:

 

(a) it is a qualified institutional buyer (a “QIB”) within the meaning of
Rule 144A under the Securities Act (“Rule 144A”) and an accredited investor
within the meaning of Rule 501(a) of Regulation D under the Securities Act
(“Regulation D”).

 

(b) neither it nor any of its Affiliates nor any person acting on behalf of it
or any such Affiliate has solicited offers for or offered or sold, and will not
offer or sell, any Securities except to those persons it reasonably believes to
be qualified institutional buyers (as defined in Rule 144A under the Act) and
that, in connection with each such sale, it has taken or will take reasonable
steps to ensure that the purchaser of such Securities is aware that such sale is
being made in reliance on Rule 144A.

 

(c) neither it nor any of its Affiliates nor any person acting on its or their
behalf has made or will make offers or sales of the Securities in the United
States by means of any form of general solicitation or general advertising
(within the meaning of Regulation D) in the United States or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.

 

(d) With respect to resales made in reliance on Rule 144A of any of the
Securities, it shall deliver either with the confirmation of such resale or
otherwise prior to settlement of such resale a notice to the effect that the
resale of such Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.

 

(e) Each Initial Purchaser acknowledges and agrees that the Company and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Sections 6(a) and 6(b), counsel for the Company and counsel for the Initial
Purchasers, respectively, may rely upon the accuracy of the representations and
warranties of the Initial Purchasers, and compliance by the Initial Purchasers
with their agreements, contained in Sections 4(a) through 4(d) inclusive, and
each Initial Purchaser hereby consents to such reliance.

 

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5. Agreements. The Company agrees with each Initial Purchaser that:

 

(a) The Company will furnish to each Initial Purchaser, without charge, during
the period referred to in paragraph (c) below, as many copies of the Final
Memorandum and any amendments and supplements thereto as it may reasonably
request.

 

(b) The Company will file promptly all reports and any definitive proxy or
information statement required to be filed by the Company with the Commission in
order to comply with the Exchange Act during the period referred to in paragraph
(d) below.

 

(c) The Company will not amend or supplement the Final Memorandum, other than by
filing documents under the Exchange Act that are incorporated by reference
therein, without the prior written consent of the Representatives which consent
shall not be unreasonably withheld or delayed; provided, however, that, prior to
the completion of the distribution of the Securities by the Initial Purchasers
(as determined by the Representatives and communicated to the Company), the
Company will not file any document under the Exchange Act that is incorporated
by reference in the Final Memorandum unless the Company has furnished the
Representatives with a copy of such document for their review and the
Representatives have not reasonably objected to the filing of such document.

 

(d) If at any time prior to the completion of the distribution of the Securities
by the Initial Purchasers (as determined by the Representatives and communicated
to the Company), any event occurs as a result of which the Final Memorandum, as
then amended or supplemented, would include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it should be necessary to amend or supplement the Final
Memorandum to comply with applicable law, the Company promptly (i) will notify
the Representatives of any such event; and (ii) subject to the requirements of
paragraph (c) of this Section 5, will prepare an amendment or supplement that
will correct such statement or omission or effect such compliance.

 

(e) The Company will arrange, if necessary, for the qualification of the
Securities for sale by the Initial Purchasers under the laws of such
jurisdictions as the Initial Purchasers may reasonably request and will maintain
such qualifications in effect so long as required for the sale of the
Securities; provided that in no event shall the Company be obligated to
(i) qualify to do business in any jurisdiction where it is not now so qualified,
(ii) take any action that would subject it to service of process in suits in any
jurisdiction where it is not now so subject or (iii) subject itself to taxation
in any jurisdiction if it is not otherwise so subject. The Company will promptly
advise the Representatives of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose.

 

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(f) The Company will not, and will not permit any of its Affiliates to, resell
any Securities or Common Stock issued upon conversion thereof that have been or
may be acquired by any of them except pursuant to an offering registered under
the Act.

 

(g) Except as contemplated by the Registration Rights Agreement, neither the
Company, nor any of its Affiliates, nor any person acting on its or their behalf
(except the Initial Purchasers for which no representation is given) will,
directly or indirectly, make offers or sales of any security, or solicit offers
to buy any security, under circumstances that would require the registration of
the Securities or the Common Stock issuable upon conversion thereof under the
Act.

 

(h) Neither the Company, nor any of its Affiliates, nor any person acting on its
or their behalf will engage in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with any offer or
sale of the Securities in the United States.

 

(i) So long as any of the Securities or Common Stock issued or issuable upon
conversion of the Securities are “restricted securities” within the meaning of
Rule 144(a)(3) under the Act, the Company will, during any period in which it is
not subject to and in compliance with Section 13 or 15(d) of the Exchange Act,
provide to each holder of such restricted securities and to each prospective
purchaser (as designated by such holder) of such restricted securities, upon the
request of such holder or prospective purchaser, any information required to be
provided by Rule 144A(d)(4) under the Act. This covenant is intended to be for
the benefit of each holder, and the prospective purchasers designated by such
holder, from time to time of such restricted securities.

 

(j) Any information provided by the Company to publishers of publicly available
databases about the terms of the Securities shall include a statement that the
Securities have not been registered under the Act and are subject to
restrictions under Rule 144A under the Act.

 

(k) The Company will reserve and keep available at all times, free of
pre-emptive rights, the full number of shares of Common Stock issuable upon
conversion of the Securities.

 

(l) The Company will assist the Representatives in arranging for the Securities
to be eligible for clearance and settlement through The Depository Trust
Company.

 

(m) The Company will not for a period of 90 days following the Execution Time,
without the prior written consent of each of the Representatives, offer, sell,
contract to sell, pledge or otherwise dispose of (or enter into any transaction
which is designed to, or might reasonably be expected to, result in the
disposition (whether by actual disposition or effective economic disposition due
to cash settlement or otherwise) by the Company), directly or indirectly, or
file (or participate in the filing of) a registration statement with the
Commission in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of
Section 16 of the

 

14

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Exchange Act and the rules and regulations of the Commission promulgated
thereunder with respect to, any shares of capital stock of the Company or any
securities convertible or exercisable or exchangeable for such capital stock, or
publicly announce an intention to effect any such transaction; provided,
however, that (i) the Company may issue and sell Common Stock or issue options
for the purchase of its Common Stock, and file related registration statements
pursuant to any employee stock option plan, stock ownership plan, dividend
reinvestment plan or outside director stock incentive plan, of the Company in
effect at the Execution Time; (ii) the Company may issue Common Stock issuable
upon the conversion of securities or the exercise of warrants or options
outstanding at the Execution Time, or hereafter granted under the Company’s
stock incentive plans that exist as of the Execution Time; (iii) the Company may
issue up to 5,720,000 shares of Common Stock as consideration for purchases or
acquisitions of other businesses or entities, provided, however, that any such
Common Stock issued as consideration for any such purchases or acquisitions
entered into during the 90-day period following the Execution Time; (iv) the
Company may issue up to 5,720,000 shares of Common Stock as part of any deferred
payment to be made under and in accordance with any acquisition-related
agreement or any obligation to issue Common Stock in connection with contractual
put or call obligations either existing at the Execution Time or entered into
during the 90-day period following the Execution Time, provided, however, that
Common Stock issued as obligations for any such deferred payment or obligations
entered into during such 90-day period shall be aggregated with any shares
issued under clause (iii) hereof; (v) the Company may pay dividends on its
outstanding securities in shares of Common Stock; and (vi) the Company may issue
the Securities and file registration statements in respect of the Securities and
shares of Common Stock issuable upon conversion of the Securities or delivered
as dividends or make-whole premiums under the terms of the Securities, and may
issue Common Stock upon conversion of such securities of the Company.

 

(n) The Company will not take, directly or indirectly, any action designed to or
which has constituted or which could reasonably be expected to cause or result
in, stabilization or manipulation of the price of the Securities.

 

(o) Between the date hereof and the Closing Date, the Company will not do or
authorize any act or thing that would result in an adjustment of the conversion
price of the Securities.

 

(p) The Company agrees to pay the costs and expenses relating to the following
matters: (i) the preparation, printing or reproduction of each Memorandum and
each amendment or supplement thereto; (ii) the printing (or reproduction) and
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of each Memorandum, and all amendments or supplements
thereto, as may, in each case, be reasonably requested for use in connection
with the offering and sale of the Securities; (iii) the preparation of the
Certificate of Designations and the issuance of the Securities; (iv) the
preparation, printing, authentication, issuance and delivery of certificates for
the Securities, including any stamp or transfer taxes in connection with the
original issuance and sale of the Securities to the Initial Purchasers; (v) the
printing (or

 

15

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reproduction) and delivery of this Agreement and the Registration Rights
Agreement, any blue sky memorandum, the closing documents and all other
agreements or documents printed (or reproduced) and delivered in connection with
the offering of the Securities; (vi) any registration or qualification of the
Securities for offer and sale under the securities or blue sky laws of the
several states and any other jurisdictions specified pursuant to Section 5(e)
(including filing fees and the reasonable fees and expenses of counsel for the
Initial Purchasers relating to such registration and qualification); (vii) the
transportation and other expenses incurred by the Company’s representatives in
connection with presentations to prospective purchasers of the Securities;
(viii) the fees and expenses of the Company’s accountants and the fees and
expenses of counsel (including local and special counsel) for the Company;
(ix) the fees and disbursements of any transfer agent or registrar for the
Securities; and (x) all other costs and expenses incident to the performance by
the Company of its obligations hereunder.

 

(q) The Company will apply the net proceeds from the sale of the Securities in
the manner described in the Final Memorandum.

 

(r) Prior to the completion of the distribution of the Securities, the Company
will promptly notify the Representatives of any material development relating to
any investigation of the Company conducted by the Commission, including the
discovery of any new or additional information that in the opinion of the
Company may reasonably be expected to affect the outcome of such investigation.

 

6. Conditions to the Obligations of the Initial Purchasers. The obligations of
the Initial Purchasers to purchase the Firm Securities and the Option
Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein at
the Execution Time, the Closing Date and any Settlement Date pursuant to
Section 3 hereof, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions:

 

(a) The Company shall have requested and caused Shearman & Sterling LLP, counsel
for the Company, to furnish to the Representatives its opinion and letter, dated
the Closing Date and addressed to the Representatives, to the effect set forth
in Exhibits A and B.

 

(b) The Representatives shall have received from Davis Polk & Wardwell, counsel
for the Initial Purchasers, such opinion or opinions, dated the Closing Date and
addressed to the Representatives, with respect to the issuance and sale of the
Securities, the Final Memorandum (as amended or supplemented at the Closing
Date) and other related matters as the Representatives may reasonably require,
and the Company shall have furnished to such counsel such documents as they
reasonably request for the purpose of enabling it to pass upon such matters.

 

(c) The Company shall have furnished to the Representatives a certificate of the
Company, signed by the chief financial officer of the Company, dated the Closing
Date,

 

16

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to the effect that such officer has carefully examined the Final Memorandum, any
amendment or supplement to the Final Memorandum and, to the knowledge of such
officer, that:

 

(i) the representations and warranties of the Company in this Agreement are true
and correct in all material respects on and as of the Closing Date with the same
effect as if made on the Closing Date, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date; and

 

(ii) since the date of the most recent financial statements included in the
Final Memorandum (exclusive of any amendment or supplement thereto), there has
been no material adverse change in the business, financial condition or results
of operations of the Company and its subsidiaries, taken as a whole, whether or
not arising from transactions in the ordinary course of business, except as set
forth in or contemplated by the Final Memorandum (exclusive of any amendment or
supplement thereto).

 

(d) The Initial Purchasers shall have received on the date hereof and on the
Closing Date a letter, dated the date hereof and the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers, from
PricewaterhouseCoopers LLC, independent public accountants, containing
statements and information of the type ordinarily included in accountants’
“comfort letters” to underwriters with respect to the financial statements and
certain financial information contained in or incorporated by reference into the
Final Memorandum, and such letter shall use a “cut-off date” not earlier than
the date hereof.

 

(e) Subsequent to the Execution Time or, if earlier, the dates as of which
information is given in the Final Memorandum (exclusive of any amendment or
supplement thereto), there shall not have been (i) any material change in the
capital stock (excluding the Securities), or long-term debt of the Company or
any of its subsidiaries with respect to the period subsequent to September 30,
2005 other than as set forth in the letter dated the date hereof referred to in
Section 6(e) hereof; or (ii) any change in or affecting the business, financial
conditions or results of operations of the Company and its subsidiaries, taken
as a whole except as set forth in or contemplated in the Final Memorandum
(exclusive of any amendment or supplement thereto) the effect of which, in any
case referred to in clause (i) or (ii) above, is, in the absolute judgment of
the Representatives, so material and adverse as to make it impractical or
inadvisable to market the Securities as contemplated by the Final Memorandum
(exclusive of any amendment or supplement thereto).

 

(f) Subsequent to the Execution Time, (i) there shall not have been any decrease
in the rating of any of the Company’s debt securities by any “nationally
recognized statistical rating organization” (as defined for purposes of Rule
436(g) under the Act) or (ii) no such organization shall have publicly announced
that it has under surveillance or review, or has changed its outlook with
respect to, its rating of the Securities or of any

 

17

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other debt securities or preferred stock issued or guaranteed by the Company
(other than an announcement with positive implications of a possible upgrading).

 

(g) The Securities shall have been designated as PORTAL-eligible securities in
accordance with the rules and regulations of the NASD, and the Securities shall
be eligible for clearance and settlement through The Depositary Trust Company.

 

(h) The Initial Purchasers shall have received a counterpart of the Registration
Rights Agreement that shall have been executed and delivered by a duly
authorized officer of the Company.

 

(i) On or prior to the Closing Date, the Company shall have caused the
Certificate of Designations to be filed with the Commission and the Secretary of
State of the State of Delaware in a timely manner.

 

(j) On or prior to the Closing Date, the Company shall have furnished to the
Representatives such further information, certificates and documents as the
Representatives may reasonably request.

 

(k) At the Execution Time, the Company shall have furnished to the
Representatives a letter substantially in the form of Exhibit C hereto from each
of the directors and executive officers of the Company identified in Exhibit D
hereto addressed to the Representatives.

 

(l) At the Execution Time, the Company shall have furnished to the
Representatives a letter substantially in the form of Exhibit E hereto from each
of the directors and executive officers of the Company identified in Exhibit F
hereto addressed to the Representatives.

 

If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Initial Purchasers,
this Agreement and all obligations of the Initial Purchasers hereunder may be
cancelled at, or at any time prior to, the Closing Date by the Representatives.
Notice of such cancellation shall be given to the Company in writing or by
telephone or facsimile confirmed in writing.

 

The documents required to be delivered by this Section 6 will be delivered at
the office of counsel for the Initial Purchasers, Davis Polk & Wardwell, 450
Lexington Avenue, New York, New York 10017, prior to 9 A.M. on the Closing Date
and any Settlement Date.

 

7. Reimbursement of Expenses. If the sale of the Securities provided for herein
is not consummated because any condition to the obligations of the Initial
Purchasers set forth in Section 6 hereof is not satisfied, because of any
termination pursuant to Section 10 (i) hereof or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof other than by reason of a default by any of
the Initial

 

18

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Purchasers, the Company will promptly reimburse the Initial Purchasers severally
through [·] for all reasonable out-of-pocket expenses (including fees and
disbursements of counsel) that shall have been incurred by them in connection
with the proposed purchase and sale of the Securities.

 

8. Indemnification and Contribution.

 

(a) The Company agrees to indemnify and hold harmless each Initial Purchaser,
the directors, officers, employees and Affiliates of each Initial Purchaser and
each person who controls any Initial Purchaser within the meaning of either the
Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Preliminary Memorandum, the Final Memorandum (or in any supplement or
amendment thereto), or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in the Preliminary
Memorandum or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any Initial Purchaser through the
Representatives specifically for inclusion therein; provided further, that with
respect to any untrue statement or omission of material fact made in any
Preliminary Memorandum, the indemnity agreement contained in this Section 8(a)
shall not inure to the benefit of any Initial Purchaser from whom the person
asserting any such loss, claim, damage or liability purchased the securities
concerned, to the extent that any such loss, claim, damage or liability of such
Initial Purchaser occurs under the circumstance that (y) the untrue statement or
omission of a material fact contained in the Preliminary Memorandum was
corrected in the Final Memorandum and (z) there was not sent or given to such
person, at or prior to the written confirmation of the sale of such securities
to such person, a copy of the Final Memorandum. This indemnity agreement will be
in addition to any liability that the Company may otherwise have.

 

(b) The Company agrees to indemnify and hold harmless each Initial Purchaser,
the directors, officers, employees and Affiliates of each Initial Purchaser and
each person who controls any Initial Purchaser within the meaning of either the
Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) related to (directly or

 

19

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indirectly), arising out of, or in connection with the Company’s determination
as to which persons are entitled to participate in the Directed Share Program
and the number of shares allocated to any of such Persons (including the
determination of any such allocation), except that this shall not apply to the
extent that such loss, claim, damage or liability is finally judicially
determined to have resulted primarily from the gross negligence or willful
misconduct of the Initial Purchasers.

 

(c) Each Initial Purchaser severally, and not jointly, agrees to indemnify and
hold harmless the Company, each of its directors, each of its officers, and each
person, if any, who controls the Company within the meaning of either the Act or
the Exchange Act, to the same extent as the foregoing indemnity from the Company
to each Initial Purchaser, but only with reference to written information
relating to such Initial Purchaser furnished to the Company by or on behalf of
such Initial Purchaser through the Representatives specifically for inclusion in
the Preliminary Memorandum, the Final Memorandum or in any amendment or
supplement thereto. This indemnity agreement will be in addition to any
liability that any Initial Purchaser may otherwise have. The Company
acknowledges that the statements set forth in the last paragraph of the cover
page regarding delivery of the Securities and, the third paragraph, the fifth
and sixth sentences of the ninth paragraph and the tenth paragraph under the
heading “Plan of Distribution” in the Preliminary Memorandum and the Final
Memorandum, constitute the only information furnished in writing by or on behalf
of the Initial Purchasers for inclusion in the Preliminary Memorandum, the Final
Memorandum or in any amendment or supplement thereto.

 

(d) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a), (b) or (c) above unless and to the extent it has
been materially prejudiced through the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a), (b) or (c) above. If any
action shall be brought against an indemnified party and it shall have notified
the indemnifying party thereof, the indemnifying party shall be entitled to
appoint counsel (including local counsel) of the indemnifying party’s choice at
the indemnifying party’s expense to represent the indemnified party in any
action for which indemnification is sought (in which case the indemnifying party
shall not thereafter be responsible for the fees and expenses of any separate
counsel, other than local counsel if not appointed by the indemnifying party,
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party’s election to appoint
counsel (including local counsel) to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest; (ii) the actual or

 

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potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties that are different from or additional to those
available to the indemnifying party; (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action; or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding and does not include an
admission of fault, culpability or a failure to act, by or on behalf of such
indemnified party.

 

(e) In the event that the indemnity provided in paragraph (a), (b) or (c) of
this Section 8 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, the Company and the Initial Purchasers severally agree, in
lieu of the indemnity provided in paragraph (a), (b) or (c) of this Section 8 to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending any loss, claim, damage, liability or action) (collectively “Losses”)
to which the Company and one or more of the Initial Purchasers may be subject in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and by the Initial Purchasers on the other from the
offering of the Securities; provided, however, that in no case shall any Initial
Purchaser (except as may be provided in any agreement among the Initial
Purchasers relating to the offering of the Securities) be responsible for any
amount in excess of the purchase discount or commission applicable to the
Securities purchased by such Initial Purchaser hereunder. If the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, the Company and the Initial Purchasers severally shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and of the Initial Purchasers
on the other in connection with the statements or omissions that resulted in
such Losses, as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses) received by it, and benefits
received by the Initial Purchasers shall be deemed to be equal to the total
purchase discounts and commissions in each case set forth on the cover of the
Final Memorandum. Relative fault shall be determined by reference to, among
other things, whether any untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information provided by the Company on the one hand or the Initial Purchasers on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or

 

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prevent such untrue statement or omission. The Company and the Initial
Purchasers agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation that does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (e), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls an Initial Purchaser within the meaning of either the Act or the
Exchange Act and each director, officer, employee, Affiliate and agent of an
Initial Purchaser shall have the same rights to contribution as such Initial
Purchaser, and each person who controls the Company within the meaning of either
the Act or the Exchange Act and each officer and director of the Company shall
have the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (e).

 

9. Default by an Initial Purchaser. If any one or more Initial Purchasers shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Initial Purchaser hereunder and such failure to purchase shall constitute a
default in the performance of its or their obligations under this Agreement, the
remaining Initial Purchasers shall be obligated severally to take up and pay for
(in the respective proportions which the principal amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate principal
amount of Securities set forth opposite the names of all the remaining Initial
Purchasers) the Securities which the defaulting Initial Purchaser or Initial
Purchasers agreed but failed to purchase; provided, however, that in the event
that the aggregate principal amount of Securities which the defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase shall exceed 10%
of the aggregate principal amount of Securities set forth in Schedule I hereto,
the remaining Initial Purchasers shall have the right to purchase all, but shall
not be under any obligation to purchase any, of the Securities, and if such
nondefaulting Initial Purchasers do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Initial
Purchaser or the Company. In the event of a default by any Initial Purchaser as
set forth in this Section 9, the Closing Date shall be postponed for such
period, not exceeding five Business Days, as the Representatives shall determine
in order that the required changes in the Final Memorandum or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Initial Purchaser of its liability, if any, to the
Company or any nondefaulting Initial Purchaser for damages occasioned by its
default hereunder.

 

10. Termination. This Agreement shall be subject to termination in the absolute
discretion of the Representatives, by notice given to the Company prior to
delivery of and payment for the Securities, if at any time prior to such time
(i) trading in any of the Company’s securities shall have been suspended by the
Commission or the New York Stock Exchange or trading in securities generally on
the New York Stock Exchange shall have been suspended or materially limited;
(ii) a banking moratorium shall have been declared by federal, Delaware or New
York State authorities; or (iii) there shall have occurred any outbreak or
escalation of hostilities, declaration by the United States of a national
emergency or war or other calamity or crisis the effect of which on financial
markets is such as to make it, in the judgment of the Representatives,
impracticable or inadvisable to proceed with the offering or delivery of the

 

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Securities as contemplated by the Final Memorandum (exclusive of any amendment
or supplement thereto).

 

11. No Fiduciary Duty. The Company hereby acknowledges that the Initial
Purchasers are each acting solely as an initial purchaser in connection with the
purchase and sale of the Securities. The Company further acknowledges that the
Initial Purchasers are acting pursuant to a contractual relationship created
solely by this Agreement entered into on an arm’s length basis and in no event
do the parties intend that the Initial Purchasers act or be responsible as a
fiduciary to the Company, its management, stockholders, creditors or any other
person in connection with any activity that the Initial Purchasers may undertake
or has undertaken in furtherance of the purchase and sale of the Company’s
securities, either before or after the date hereof. The Initial Purchasers
hereby expressly disclaim any fiduciary obligations to the Company, either in
connection with the transactions contemplated by this Agreement or any matters
leading up to such transactions, and the Company hereby confirms its
understanding and agreement to that effect. The Company and the Initial
Purchasers agree that they are each responsible for making their own independent
judgments with respect to any such transactions. The Company and the Initial
Purchasers further agree that any opinions or views expressed by the Initial
Purchasers to the Company regarding such transactions, including but not limited
to any opinions or views with respect to the price or market for the Securities,
do not constitute advice or recommendations to the Company that give rise to a
fiduciary duty to the Company. The Company hereby waives and releases, to the
fullest extent permitted by law, any claims that the Company may have against
the Initial Purchasers with respect to any breach or alleged breach of any
fiduciary duty to the Company in connection with the transactions contemplated
by this Agreement or any matters leading up to such transactions.

 

12. Representations and Indemnities to Survive. The respective agreements,
representations, warranties and indemnities and other statements of the Company
or its officers and of the Initial Purchasers set forth in or made pursuant to
this Agreement or any certificate delivered pursuant hereto will remain in full
force and effect, regardless of any investigation made by or on behalf of the
Initial Purchasers or the Company or any of the indemnified persons referred to
in Section 8 hereof, and will survive delivery of and payment for the
Securities. The provisions of Sections 7 and 8 hereof shall survive the
termination or cancellation of this Agreement.

 

13. Notices. All communications hereunder will be in writing and effective only
on receipt, and, if sent to the Representatives, will be mailed, delivered or
telefaxed to (i) [·] (Fax Number: [·]); and (ii) [·] (Fax Number: [·]); or, if
sent to the Company, will be mailed, delivered or telefaxed to Blockbuster Inc.,
1201 Elm Street, Dallas, Texas 75270 (Fax Number: (212) 854-3677), attention of
General Counsel, with a copy mailed, delivered or telefaxed to John D. Wilson at
Shearman & Sterling LLP, 525 Market Street, San Francisco, California 94105 (Fax
Number: (415) 616-1100).

 

14. Successors. This Agreement will inure to the benefit of and be binding upon
the parties hereto and their respective successors and the indemnified persons
referred to in Section 8

 

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hereof, and, except as expressly set forth in Section 5(i) hereof, no other
person will have any right or obligation hereunder.

 

15. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed within the State of New York.

 

16. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall constitute an original and all of which together shall
constitute one and the same instrument.

 

17. Authority of the Representative. Any action by the Initial Purchasers may be
taken by the Representatives on behalf of such Initial Purchasers and any such
action shall be binding upon the Initial Purchasers.

 

18. Headings. The section headings used herein are for convenience only and
shall not affect the construction hereof.

 

19. Definitions. The terms which follow, when used in this Agreement, shall have
the meanings indicated.

 

“Act” shall mean the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.

 

“Affiliate” shall have the meaning specified in Rule 501(b) of Regulation D.

 

“Business Day” shall mean any day other than a Saturday, a Sunday or a legal
holiday or a day on which banking institutions or trust companies are authorized
or obligated by law to close in The City of New York.

 

“Commission” shall mean the Securities and Exchange Commission.

 

“Common Stock” shall mean the Company’s Class A common stock, par value $0.01
per share.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.

 

“Execution Time” shall mean the date and time that this Agreement is executed
and delivered by the parties hereto.

 

“Investment Company Act” shall mean the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission promulgated thereunder.

 

“NASD” shall mean the National Association of Securities Dealers, Inc.

 

“PORTAL” shall mean the Private Offerings, Resales and Trading through Automated
Linkages system of the NASD.

 

“Regulation D” shall mean Regulation D under the Act.

 

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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
Agreement and your acceptance shall represent a binding agreement between the
Company and the several Initial Purchasers.

 

Very truly yours,

BLOCKBUSTER INC. By:   /S/    LARRY J. ZINE    

Name:

 

Larry J. Zine

   

Title:

 

Executive Vice President,

Chief Financial Officer and

Chief Administrative Officer

 

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The foregoing Agreement is hereby confirmed

and accepted as of the date first above written.

[·] By:   [·]    

Name:

 

[·]

   

Title:

 

Vice President

[·] By:   [·]    

Name:

 

[·]

   

Title:

 

Vice President

For themselves as Representatives

and on behalf of the other several Initial Purchasers

named in Schedule I to the foregoing Agreement

 

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