EXHIBIT 50
EXCHANGE AGREEMENT
By and Among
USA INTERACTIVE,
LIBERTY MEDIA CORPORATION,
LIBERTY HSN II, INC.
and
LIBERTY HSN, INC.
Dated as of June 27, 2002
EXCHANGE AGREEMENT, dated as of June 27, 2002 (this "Agreement"),
by and among USA Interactive, a Delaware corporation ("USAi"), Liberty Media
Corporation, a Delaware corporation ("Liberty"), Liberty HSN II, Inc., a
Delaware corporation ("Liberty HSN II"), and Liberty HSN, Inc., a Colorado
corporation ("Liberty HSN") (Liberty, Liberty HSN II and Liberty HSN are
sometimes referred to as the "Liberty Parties").
WHEREAS, Liberty HSN and USAi (as successor to Silver King
Communications, Inc.) are parties to that certain Exchange Agreement, dated as
of December 20, 1996 (the "Exchange Agreement"), relating to the Surviving
Common Stock and the Surviving Class B Stock (each as defined in the Exchange
Agreement).
WHEREAS, Liberty HSN II owns 702.66808 issued and outstanding
shares of Surviving Common Stock (the "Liberty HSN Common Shares") and 29.56564
issued and outstanding shares of Surviving Class B Stock (the "Liberty HSN Class
B Shares" and together with the Liberty HSN Common Shares, the "Liberty HSN
Shares");
WHEREAS, each Liberty HSN Common Share is exchangeable for shares
of the common stock, par value $.01 per share, of USAi ("USAi Common Stock"),
and each Liberty HSN Class B Share is exchangeable for shares of the Class B
common stock, par value $.01 per share, of USAi (the "USAi Class B Common
Stock");
WHEREAS, the Boards of Directors of each of USAi and Liberty HSN
II have approved and adopted this Agreement, and Liberty HSN, as the sole
stockholder of Liberty HSN II, has approved and adopted this Agreement;
WHEREAS pursuant to the Exchange Agreement, Liberty HSN II will
exchange (the "Exchange") all of the Liberty HSN Shares for an aggregate of
31,620,063 shares of USAi Common Stock and 1,596,544 shares of USAi Class B
Common Stock (collectively, the "Exchange Shares");
WHEREAS, the Exchange is intended to qualify as a tax-free
reorganization pursuant to Section 368(a)(1)(B) of the Code, and this Agreement
shall constitute a "plan of reorganization" for purposes of Section 368 of the
Code.
NOW, THEREFORE, in consideration of the premises and of the
mutual promises set forth herein, the parties hereby agree as follows:
1. Exchange. Upon the terms contained herein, Liberty HSN II is
exchanging the Liberty HSN Shares for the Exchange Shares. It is intended that
the Exchange constitute a reorganization within the meaning of Section 368(a) of
the Code, and each of Liberty and USAi agrees, and agrees to cause its
Affiliates (as defined in the Investment Agreement, dated as of October 19,
1997, among Universal Studios, Inc. ("Universal"), USAi, Home Shopping Network,
Inc. ("HSN") and Liberty (as amended, the "Investment Agreement")), to treat and
report the Exchange consistently with this intention for all purposes at all
times prior to and following the Closing (as defined herein), except as
otherwise required pursuant to a determination within the meaning of Section
1313(a) of the Code.
2. Time and Place of Closing. The consummation of the Exchange
(the "Closing") shall take place at the offices of Wachtell, Lipton, ▇▇▇▇▇ &
▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ upon the execution and
delivery of this Agreement. At the
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Closing, Liberty HSN II is delivering to USAi certificates representing the
Liberty HSN Shares, duly endorsed or accompanied by documents of assignment, and
USAi is issuing and delivering to Liberty HSN II certificates representing the
Exchange Shares, registered in the name of Liberty HSN II.
3. Representations and Warranties of USAi. USAi hereby
represents and warrants to the Liberty Parties as follows:
a. Organization and Qualification; USAi Shares. USAi (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware; (ii) has all requisite corporate power and authority
to carry on its business as it is now conducted and to own, lease and operate
the properties it now owns, leases or operates at the places currently located
and in the manner currently used and operated and (iii) is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or license necessary, except, in the
case of clauses (ii) and (iii) where the failure to be so qualified or licensed,
or in good standing would not have a material adverse effect on the business,
assets or condition (financial or otherwise) of USAi and its subsidiaries, taken
as a whole. USAi has made available to Liberty true and complete copies of its
certificate of incorporation and by-laws, each as amended to date and currently
in effect (respectively, the "USAi Charter" and the "USAi Bylaws"). The USAi
Charter and the USAi Bylaws are in full force and effect and neither USAi nor
HSN is in violation of its respective certificate of incorporation or bylaws. As
of the date hereof, there are outstanding at least 350 million shares of USAi
Common Stock and 63 million shares of USAi Class B Common Stock.
b. Authorization of this Agreement and the Exchange. The
execution, delivery and performance of this Agreement by USAi, have been duly
authorized by all necessary corporate action on the part of USAi. This Agreement
has been duly executed and delivered by USAi and constitutes the legal, valid
and binding obligation of USAi enforceable against USAi in accordance with its
terms, except to the extent limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting creditors' rights generally
and by general equity principles regardless of whether such enforceability is
considered in a proceeding in equity or at law. The consummation of the Exchange
by USAi has been duly and validly authorized by the board of directors of USAi
and by any necessary action of the USAi stockholders. USAi has full corporate
power and authority to perform its obligations under this Agreement and to
consummate the Exchange. No other corporate proceedings on the part of USAi or
any of its subsidiaries are necessary to authorize the consummation of the
Exchange.
c. Validity of Shares, etc.
(i) The Exchange Shares issued by USAi to Liberty HSN II are
duly authorized, validly issued, fully paid and non-assessable, and are
free of any Encumbrances (as defined herein) (other than those (x)
arising under the Amended and Restated Governance Agreement, dated as of
December 16, 2001, among USA, Vivendi Universal, S.A. ("Vivendi"),
Universal, Liberty and ▇▇▇▇▇ ▇▇▇▇▇▇ (the "Governance Agreement") or the
Amended and Restated Stockholders Agreement, dated as of December 16,
2001, among Universal, Liberty, ▇▇▇▇▇ ▇▇▇▇▇▇ and Vivendi (the
"Stockholders Agreement") (the Governance Agreement and the Stockholders
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Agreement, together with any and all amendments, modifications and
waivers to (x) the Governance Agreement, if executed by USAi and
Liberty, and (y) the Stockholders Agreement, if executed by Liberty and
▇▇▇▇▇ ▇▇▇▇▇▇, are hereinafter referred to collectively as the
"Shareholder Arrangements"), (y) arising under any Federal or state
securities laws, or (z) created by a Liberty Party), are not being
issued in violation of any preemptive rights and vest in Liberty HSN II
full rights with respect thereto, including the right to vote the
Exchange Shares on all matters properly presented to the stockholders of
USAi to the extent set forth in the USAi Charter and subject to the
Shareholder Arrangements. Other than the stock splits affecting the USAi
Common Stock and USAi Class B Common Stock and the reverse stock split
affecting the Exchange Securities, each of which is described in Exhibit
A hereto, neither USAi nor HSN has declared or paid any dividend or made
any distribution (or established a record date for either) or taken any
other action which, pursuant to the Exchange Agreement, would entitle
the holder of Liberty HSN Shares to any adjustment in the applicable
exchange ratio for the Liberty HSN Shares.
(ii) The issuance of the Exchange Shares does not violate the
rules, regulations and requirements of the National Association of
Securities Dealers, Inc. ("NASD") or of the principal exchange or
trading market on which the shares of USAi Common Stock are then quoted
or traded (including, without limitation, the NASD policies set forth in
Section 6(i) and (j) of Part III of Schedule D of the NASD By-Laws and
the Policy of the Board of Governors with respect to Voting Rights set
forth in Part III of Schedule D of the NASD By-Laws or any similar
policies of such other exchange or trading market). The shares of USAi
Common Stock (including the shares of USAi Common Stock issuable upon
conversion of any shares of USAi Class B Common Stock) issued pursuant
to the Exchange are listed for trading on the Nasdaq National Market or
on a national securities exchange (upon official notice of issuance).
The delivery of the Exchange Shares in accordance with this Agreement is
exempt from the registration or qualification requirements of the
Securities Act and applicable state securities laws.
d. No Approvals or Notices Required, No Conflict with
Instruments. The performance by USAi of its obligations under this Agreement and
the consummation of the Exchange, including the issuance of the Exchange Shares,
do not:
(i) conflict with or violate the USAi Charter or the USAi Bylaws
or the organizational documents of HSN or any other subsidiary of USAi,
in each case as amended to date;
(ii) require any consent, approval, order or authorization of or
other action by any court, administrative agency or commission or other
governmental authority or instrumentality, foreign, United States
federal, state or local (each such entity a "Governmental Entity" and
each such action a "Governmental Consent") or any registration,
qualification, declaration or filing with or notice to any Governmental
Entity (a "Governmental Filing"), in each case on the part of or with
respect to USAi or HSN or any other subsidiary of USAi, other than (A)
such as have been obtained or made or (B) the absence or omission of
which would, either individually or in the aggregate, not have a
material adverse effect on the Exchange or on the business, assets,
results of operations or financial condition of USAi and its
subsidiaries, taken as a whole.
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(iii) require, on the part of USAi or HSN or any other subsidiary
of USAi, any consent by approval of (a "Contract Consent") or notice to
(a "Contract Notice") any other person or entity (other than a
Governmental Entity), other than (A) such as have been obtained or made
or (B) the absence or omission of which would, either individually or in
the aggregate, not have a material adverse effect on the Exchange or on
the business, assets, results of operations or financial condition of
USAi and its subsidiaries, taken as a whole;
(iv) conflict with, result in any violation or breach of or
default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or the loss of any material benefit (any such conflict,
violation, breach, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation") under or the creation of
any lien, security interest, pledge, charge, claim, option, right to
acquire, restriction on transfer, voting restriction or agreement, or
any other restriction or encumbrance of any nature whatsoever on any
assets (collectively, "Encumbrance") pursuant to any "Contract" (which
term shall mean and include any note, bond, indenture, mortgage, deed of
trust, lease, franchise, permit, authorization, license, contract,
instrument, employee benefit plan or practice, or other agreement,
obligation, commitment or concession of any nature) to which USAi or HSN
or any other subsidiary of USAi is a party, by which USAi or HSN or any
other subsidiary of USAi or any of their respective assets or properties
is bound or pursuant to which USAi, HSN or any other subsidiary of USAi
is entitled to any rights or benefits, except for such Violations which
would not, either individually or in the aggregate, have a material
adverse effect on the Exchange or on the business, assets, results of
operations or financial condition of USAi and its subsidiaries, taken as
a whole; or
(v) result in a Violation of, under or pursuant to any law, rule,
regulation, order, judgment or decree applicable to USAi or HSN or any
other subsidiary of USAi or by which any of their respective properties
or assets are bound, except for such Violations which would not, either
individually or in the aggregate, have a material adverse effect on the
Exchange.
e. Tax Representations. (i) USAi has not taken any action and
does not know of any fact that is reasonably likely to prevent the
Exchange from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(ii) USAi owns directly shares of HSN representing "control" of
HSN within the meaning of Section 368(c) of the Code. As part of the
same plan as the Exchange, USAi and its Affiliates have not acquired,
either directly or through any transaction, agreement or arrangement
with any other person, shares of capital stock of HSN with consideration
other than voting stock of USAi.
(iii) There are no outstanding options, warrants, rights,
subscriptions, convertible securities, puts, calls, commitments or other
contracts, arrangements or understandings (collectively, "Rights") with
respect to the capital stock of HSN pursuant to which any person could
acquire securities of HSN that, if such Rights were exercised or
converted, would affect USAi's acquisition or retention of "control" of
HSN, as defined in Section 368(c) of the Code.
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(iv) USAi is not an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
f. Certain Communications Act Matters.
(i) Assuming the accuracy of Liberty's representation set forth
in Section 4b(ii), USAi does not own, operate or control or have an
ownership or other interest in any broadcast television station or any
FCC licensee such that Liberty presently has, or immediately following
consummation of the Exchange (and assuming the consummation of USAi's
acquisition of an ownership interest in, and its provision of debt
financing to, an entity which will own certain broadcast television
stations located in the Commonwealth of Puerto Rico and/or FCC licenses
related thereto, pursuant to the Assignment of Limited Liability Company
Interest, dated as of October 11, 2001, by and between USAi and
▇▇▇▇▇▇▇▇▇ Television Holdings, Inc. and the Asset Purchase Agreement,
dated December 13, 2000, among HSN Capital LLC, Southwestern
Broadcasting Corporation and International Broadcasting Corporation, as
amended (collectively, the "▇▇▇▇▇▇▇▇▇ Transaction")), will have an
"attributable interest" in any such broadcast television station or FCC
licensee under the provisions of the Communications Act of 1934, as
amended (and the rules and regulations promulgated thereunder) (the
"Communications Act") and the FCC Regulations (as defined herein). "FCC
Regulations" means as of the applicable date, collectively, all federal
communications statutes and all rules, regulations, orders, decrees and
policies (including the FCC's Memorandum Opinion and Order released
March 11, 1996 and its Memorandum Opinion and Order released June 14,
1996) of the FCC as then in effect, and any interpretations or waivers
thereof or modifications thereto.
(ii) The disposition by USAi of its television stations referred
to in USAi's notice to Liberty with respect to the Exchange, dated
August 28, 2001 (the "USAi Notice") constituted an Issuance Event for
purposes of the Exchange Agreement. Assuming the accuracy of Liberty's
representation set forth in Section 4b(ii), the Exchange will not result
in the creation or imposition of any Restrictive Condition (as defined
in the Exchange Agreement) with respect to Liberty, Liberty HSN or
Liberty HSN II or with respect to the Exchange Shares.
4. Representations and Warranties of Liberty. Liberty, Liberty
HSN and Liberty HSN II hereby represent and warrant to USAi as follows:
a. Authorization of this Agreement. The execution, delivery and
performance of this Agreement by Liberty, Liberty HSN and Liberty HSN II and the
consummation by the Liberty Parties of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action on the part of such
Liberty Party. This Agreement has been duly executed and delivered by each of
Liberty, Liberty HSN and Liberty HSN II and constitutes the legal, valid and
binding obligation of such Liberty Party enforceable against it in accordance
with its terms, except to the extent limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting creditors'
rights generally and by general equity principles regardless of whether such
enforceability is considered in a proceeding in equity or at law. The
consummation of the Exchange by Liberty, Liberty HSN and Liberty HSN II has been
duly and validly authorized by the board of directors of Liberty, Liberty HSN
and Liberty HSN II, as applicable, and by any necessary action of their
respective stockholders. Each of Liberty,applicable, and by any necessary action
of their respective stockholders. Each of Liberty,
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Liberty HSN and Liberty HSN II has full corporate power and authority to perform
its obligations under this Agreement and to consummate the Exchange. No other
corporate proceedings on the part of Liberty, Liberty HSN, Liberty HSN II or any
of their respective subsidiaries are necessary to authorize the consummation of
the Exchange.
b. Ownership and Validity of Liberty HSN Shares.
(i) Liberty HSN II owns, and immediately following the
Exchange, USAi will own all of the Liberty HSN Shares, free and clear of
any Encumbrances (other than those (x) arising under the Shareholder
Arrangements or this Agreement, (y) arising under any Federal or state
securities laws, or (z) created by USAi).
(ii) As of the date hereof and immediately prior to the
Closing, Liberty owns (x) through direct and indirect wholly owned
subsidiaries of Liberty, an aggregate of (i) 6,918,464 shares of USAi
Common Stock and 756,644 shares of USAi Class B Common Stock, and (ii)
702.66808 shares of Surviving Common Stock and 29.56564 shares of
Surviving Class B Stock and (y) through its interest in the BDTV
Entities (assuming that each such BDTV Entity was wholly owned by
Liberty), 44 shares of USAi Common Stock and 48,846,808 shares of USAi
Class B Common Stock.
c. No Approvals or Notices Required; No Conflict with
Instruments. The consummation of the Exchange will not:
(i) conflict with or violate the certificate of
incorporation or the by-laws, as amended to date, of Liberty, Liberty
HSN or Liberty HSN II;
(ii) require any Government Consent or Government Filing, in
each case on the part of or with respect to Liberty, Liberty HSN or
Liberty HSN II, other than (A) such as have been obtained or made or (B)
the absence or omission of which would not, either individually or in
the aggregate, have a material adverse effect on the Exchange;
(iii) require, on the part of any of Liberty, Liberty HSN or
Liberty HSN II any Contract Consent or Contract Notice, other than (A)
such as have been obtained or made or (B) the absence or omission of
which would not, either individually or in the aggregate, have a
material adverse effect on the Exchange;
(iv) conflict with or result in any Violation of any Contract
to which Liberty, Liberty HSN or Liberty HSN II is a party, or by which
any of Liberty, Liberty HSN or Liberty HSN II or any of their respective
assets or properties are bound, except for such Violations which would
not, either individually or in the aggregate, have a material adverse
effect on the Exchange; or
(v) result in a Violation of, under or pursuant to any law,
rule, regulation, order, judgment or decree applicable to any of
Liberty, Liberty HSN or Liberty HSN II or by which any of their
respective properties or assets are bound, except for such Violations
which would not, either individually or in the aggregate, have a
material adverse effect on the Exchange; provided, that with respect to
the matters referred to in clauses (ii) and (v) of this paragraph 4c, no
representation or warranty is made with respect to any Governmental
Consent or Governmental Filing or any Violation, in any case, under the
Communications Act or the FCC Regulations to the extent arising out of
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or to the extent relating to the Exchange or Liberty's beneficial
ownership of the Exchange Shares.
5. Additional Agreements.
a. (i) USAi hereby covenants and agrees that so long as
Liberty (A) does not increase its percentage ownership of USAi's
combined equity and debt (calculated in accordance with the
Communications Act and the FCC Regulations) (other than any such
increase which occurs pursuant to the terms of the Shareholder
Arrangements or any other arrangements to which USAi and Liberty are
parties or as a result of actions taken by USAi or its subsidiaries),
and (B) Beneficially Owns (as defined in the Governance Agreement) at
least two-thirds of the number of Equity Securities (as defined in the
Governance Agreement) Beneficially Owned by it immediately prior to
February 12, 1998 (appropriately adjusted to reflect any stock splits
and the like), it will not (and will not cause or permit any of its
subsidiaries to) take any action in connection with or relating to the
▇▇▇▇▇▇▇▇▇ Transaction that would reasonably be expected to, or fail to
take any action in connection with or relating to the ▇▇▇▇▇▇▇▇▇
Transaction which failure would reasonably be expected to, make the
ownership by Liberty, Liberty HSN or Liberty HSN II of the Exchange
Shares or any other material assets of such persons (including
specifically (but without limiting the foregoing) Liberty's ownership
interest in certain cable television systems and related businesses
located in the Commonwealth of Puerto Rico) unlawful or result in a
violation of any law, rule, regulation, order or decree (including, but
not limited to, the Communications Act and the FCC Regulations) or
impose material additional restrictions or limitations on such person's
full rights of ownership of the Exchange Shares or the ownership of its
other material assets or the operation of its businesses (provided, that
for purposes of this Section 5a(i), to the extent that a condition,
restriction or limitation upon USAi or its subsidiaries, in each case in
connection with or relating to the ▇▇▇▇▇▇▇▇▇ Transaction, relates to or
is based upon or would arise as a result of, any action or the
consummation of a transaction by the Liberty Group, such condition,
restriction or limitation shall be deemed to be such a condition,
restriction or limitation on the Liberty Group (regardless of whether a
member of the Liberty Group (as defined herein) is a party to or
otherwise would be legally obligated thereby) to the extent that the
taking of an action or the consummation of a transaction by the Liberty
Group would result in USAi, any BDTV Entity or any of their respective
subsidiaries being in breach or violation of any law, rule, regulation,
order or decree or otherwise causing such rule, regulation, order or
decree to terminate or expire or would otherwise result in Liberty's
beneficial ownership of the Exchange Shares or any other material assets
being illegal or in violation of any law, rule, regulation, order or
decree); provided, however, that neither USAi nor any of its
subsidiaries shall be required to take any action (or fail to act)
pursuant to this Section 5a(i) if such action (or failure to act) would
not reasonably be expected to have the effects described in this Section
5a(i) (except as a result of the single majority shareholder exception
to the FCC's broadcast attribution rules (47 C.F.R. Section 73.3555 note
2(b)) if such actions (or failure to act) had been taken (or failed to
be taken) on the date hereof.
(ii) USAi hereby covenants and agrees that, so long as
Liberty (A) does not increase its percentage ownership of USAi's
combined equity and debt (calculated in accordance with the
Communications Act and the FCC Regulations) (other than any such
increase which occurs pursuant to the terms of the Shareholder
Arrangements or any
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other arrangements to which USAi and Liberty are parties or as a result
of actions taken by USAi or its subsidiaries), and (B) Beneficially Owns
at least two-thirds of the number of Equity Securities Beneficially
Owned by it immediately prior to February 12, 1998 (appropriately
adjusted to reflect any stock splits and the like), it will not (and
will not cause or permit any of its subsidiaries to) take any action
that would reasonably be expected to make the ownership by Liberty,
Liberty HSN or Liberty HSN II of the Exchange Shares or any other
material assets of such persons result, at the time such action is taken
by USAi, in a violation of the FCC's broadcast-cable cross ownership
rule. Without limiting the generality of the foregoing, the closing by
USAi of a transaction (other than the ▇▇▇▇▇▇▇▇▇ Transaction) otherwise
prohibited by this Section 5a(ii) shall be deemed permissible under this
Section if at the time USAi entered into a binding agreement relating to
such transaction, such transaction would have been permissible under (x)
this Section 5a(ii) (except for the single majority shareholder
exception to the FCC's broadcast attribution rules (47 C.F.R. Section
73.3555 note 2(b)) and (y), if applicable, any revision to the
attribution and/or cable-broadcast cross ownership rule(s) which has
been proposed in a formal notice of proposed rule making that is pending
at such time and publicly released by the FCC prior to such time.
(iii) USAi hereby agrees to reimburse Liberty and the members
of the Liberty Group for their reasonable expenses, including attorneys
fees, incurred in connection with any relevant FCC inquiry or proceeding
to the extent relating to the Exchange or the matters set forth in
Section 5a(i). Any such reimbursement obligation shall be satisfied by
USAi by the delivery to Liberty of shares of USAi Common Stock having an
aggregate value equal to the amount of such reimbursement obligation.
b. (i) Excluding actions specifically contemplated by the
Exchange Agreement and the Merger Agreement (as defined in the Exchange
Agreement), without the prior written consent of Liberty following the
date of this Agreement (which consent will not be unreasonably withheld,
provided that the notice soliciting such consent includes (A) a specific
statement that such consent is given pursuant to this Section 5b(i) and
(B) a reasonably detailed description of each material aspect of the
action, or failure to act, to be consented to), USAi will not (and will
not permit any of its subsidiaries to) take any action that would or
could reasonably be expected to, or fail to take any action which
failure would or could reasonably be expected to, cause the Exchange to
be a taxable transaction to any Liberty Party; provided, however, that
if the Exchange is taxable to any Liberty Party as a result of (1) any
action or failure to act by any Liberty Party (other than due to an
action or inaction by the Liberty Group or such Liberty Party
specifically contemplated or required by the Exchange Agreement, the
Merger Agreement or the Shareholder Arrangements), (2) the laws and
regulations in effect at the effective time of the merger of House
Acquisition Corp. and HSN or (3) any difference in the tax position of
Liberty HSN II relative to the tax position of Liberty HSN, compliance
with the covenant set forth in this Section 5b(i) shall be deemed waived
by the Liberty Parties with respect to the Exchange and provided,
further, that if the taxes applicable to the Exchange would have been
accrued or been payable by Liberty HSN had all the Exchange Shares been
issued to Liberty HSN at the effective time of the merger of House
Acquisition Corp. and HSN, then compliance with the covenant set forth
in this Section 5b(i) shall be deemed waived by the Liberty Parties. The
term "Liberty Group" shall mean Liberty and its controlled Affiliates,
including Liberty HSN and Liberty HSN II.
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(ii) In the event that the Exchange is taxable to Liberty,
Liberty HSN II or any of their respective Affiliates as a result of a
change in law or regulation after the effective time of the merger of
House Acquisition Corp. and HSN, a breach of any of the representations
and warranties set forth in Section 3e or any of the covenants of USAi
set forth in Section 5b(i) and the last sentence of Section 1 or any
action taken by USAi after the effective time of the merger of House
Acquisition Corp. and HSN (other than any tax liability that results
from (x) any breach by Liberty of the covenants set forth in the last
sentence of Section 1 or (y) an action or unreasonable inaction by the
Liberty Group (other than due to an action or inaction specifically
contemplated or required by the Exchange Agreement, the Merger Agreement
or the Shareholder Arrangements)), USAi shall be obligated to issue to
Liberty HSN II a number of additional shares of USAi Common Stock
sufficient on an after-tax basis, to pay any resulting taxes; provided,
however, that USAi shall have no obligation under this -------- -------
Section 5b(ii) to the extent that the Exchange is taxable to Liberty,
Liberty HSN II or any of their respective Affiliates solely as a result
of any difference in the tax position of Liberty HSN II relative to the
tax position of Liberty HSN.
(iii) Any shares of USAi Common Stock deliverable by USAi
pursuant to Section 5a(iii) or 5b shall be valued based on the average
of the daily closing prices (as of 4:00 p.m. eastern time) per share of
USAi Common Stock as reported on the Nasdaq Stock Market (as published
in The Wall Street Journal or, if not published therein or incorrectly
published therein, in another authoritative source mutually selected by
USAi and Liberty) for the ten consecutive trading days ending on the
second trading day prior to the date of the Closing. All such shares of
USAi Common Stock issued pursuant to this Section 5b shall be duly
authorized, fully paid, and non-assessable and shall be deemed for all
purposes hereunder to be Exchange Shares. Whenever it is necessary for
purposes of this Agreement to determine whether the Exchange is taxable
or tax-free, such determination shall be made with respect to the Code,
without regard to any interest imputed under Section 483 of the Code.
For purposes of this Agreement, a Person's "tax position" shall not
include or take into account any offsets against any tax which are
peculiar to such Person (such as tax credits, loss carry-overs, and
current losses).
c. The parties hereto agree that irreparable damage would
occur in the event that the covenants or agreements in this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that, in addition to any other remedy to which they are
entitled at law or in equity, the parties hereto shall be entitled to an
injunction, temporary restraining order or other equitable relief enjoining such
breach and enforcing specifically the terms and provisions hereof; provided,
however, that neither any member of the Liberty Group nor USAi shall seek a
remedy that would cause the Exchange to be a taxable transaction.
6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflict of laws principles thereof. Each party hereto irrevocably
submits to the jurisdiction of any Delaware state court or any federal court
sitting in the State of Delaware in any action arising out of or relating to
this Agreement, and hereby irrevocably agrees that all claims in respect of such
action may be heard and determined in such Delaware state or federal court. Each
party hereto hereby irrevocably waives, to the fullest extent it may effectively
do so, the defense of an inconvenient forum to the maintenance of such action or
proceeding. The parties hereto further agree, to the
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extent permitted by law, that final and unappealable judgment against any of
them in any action or proceeding contemplated above shall be conclusive and may
be enforced in any other jurisdiction within or outside the United States by
suit on the judgment, a certified copy of which shall be conclusive evidence of
the fact and amount of such judgment. Each party hereto waives, to the fullest
extent permitted by applicable laws, any right it may have to a trial by jury in
respect of any action, suit or proceeding arising out of or relating to this
Agreement. Each party hereto certifies that it has been induced to enter into
this Agreement by, among other things, the mutual waivers and certifications set
forth above in this Section 6.
7. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
8. Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, benefits or obligations hereunder may be
assigned by a party without the prior written consent of the other parties
hereto. For purposes of this Agreement, the written consent of Liberty shall
constitute the written consent of each of Liberty, Liberty HSN and Liberty HSN
II. This Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns. Nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
9. Survival. The representations and warranties set forth
in Section 3c(i), 3e, 3f and 4b shall survive the Closing. All other
representations and warranties shall terminate upon the Closing. All of the
covenants and agreements set forth in this Agreement shall survive the Closing
in accordance with their terms.
10. Notices. All notices, requests, demands, waivers and
other communications required or permitted to be made hereunder shall be made in
the manner set forth in the Exchange Agreement.
11. Definitions. Capitalized terms used but not defined
herein shall have the meanings attributed to such terms in the Exchange
Agreement.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be executed as of the date first above written.
USA INTERACTIVE
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
LIBERTY MEDIA CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
LIBERTY HSN II, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
LIBERTY HSN, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
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EXHIBIT A
DETAILS FOR EXCHANGE
Since the Pre-Merger Exchange in December 1996, the only events affecting USAi
or HSN which require adjustments to the Common Exchange Ratio and the Class B
Exchange Ratio are those listed in this Exhibit A. The change in the number of
HSN shares held by Liberty and the change in the Common Exchange Ratio and the
Class B Exchange Ratio since the Pre-Merger Exchange are the result of the March
1998 USAi 2 for 1 stock split, the June 1998 HSN 25,000 to 1 reverse stock split
and the February 2000 USAi 2 for 1 stock split. No other adjustments were made
(or required to be made) to the share numbers or exchange ratios.
HSN Shares USAi Shares
Event Timetable owned by Liberty Exchange Ratio to be received
--------------- ---------------- -------------- --------------
December 1996
Common 17,566,702 0.45 to 1 7,905,015
Class B 739,141 0.54 to 1 399,136
March 1998, USAi 2 for 1
stock split
Common 17,566,702 0.90 to 1 15,810,031
Class B 739,141 1.08 to 1 798,272
June 1998, HSN 25,000 to 1
reverse stock split
Common 702.66808 22,500 to 1 15,810,031
Class B 29.56564 27,000 to 1 798,272
February 2000, USAi 2 for 1
stock split
Common 702.66808 45,000 to 1 31,620,063
Class B 29.56564 54,000 to 1 1,596,544
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