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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ___)*
Styleclick.com Inc.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
60749P104
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(CUSIP Number)
Thomas J. Kuhn, Esq.
USA Networks, Inc.
152 W. 57th Street
New York, NY 10019
(212) 314-7200
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
January 24, 2000
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e)(3), 13d-1(f) or 13d-1(g), check
the following box [_].
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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CUSIP No. 60749P104 13D 2 of 18
(1) NAME OF REPORTING PERSON
USANi Sub LLC
59-3490972
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(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See instructions) (a) [_]
(b) [X]
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(3) SEC USE ONLY
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(4) SOURCE OF FUNDS
(See instructions)
WC, OO
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(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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(7) SOLE VOTING POWER
1,533,281 (1) (see Item 3 herein)
NUMBER OF
SHARES (8) SHARED VOTING POWER
BENEFICIALLY 3,883,480 (1) (see Item 3 herein)
OWNED BY EACH
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON WITH 1,533,281 (see Item 3 herein)
(10) SHARED DISPOSITIVE POWER
3,883,480 (see Item 3 herein)
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,416,761
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(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(See Instructions)
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(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
51.0%
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(14) TYPE OF REPORTING PERSON
(See Instructions)
OO
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(1) USANi Sub LLC has the right, subject to certain conditions, to
purchase 1,533,281 shares of Styleclick Common Stock (as
defined below) upon exercise of an option granted to USANi Sub
LLC pursuant to an Option Agreement, dated as of January 24,
2000, between Styleclick.com Inc. and USANi Sub LLC. USANi Sub
LLC has also entered into a separate voting agreements, each
dated as of January 24, 2000, with certain stockholders of
Styleclick.com Inc., which provides that the signatory
stockholders will vote their shares of Styleclick Common Stock
in favor of a proposal to adopt the Merger Agreement (as
defined below) and against certain other transactions (if
any). The option is not currently exercisable and USANi Sub
LLC does not have any rights as a stockholder of
Styleclick.com Inc. pursuant to the Option Agreement or the
voting agreements. Accordingly, USANi Sub LLC expressly
disclaims beneficial ownership of all shares subject to said
agreements.
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CUSIP No. 60749P104 13D 3 of 18
(1) NAME OF REPORTING PERSON
USANi LLC
59-3490970
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(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See instructions) (a) [_]
(b) [X]
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(3) SEC USE ONLY
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(4) SOURCE OF FUNDS
(See instructions)
WC, OO
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(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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(7) SOLE VOTING POWER
1,533,281 (1) (see Item 3 herein)
NUMBER OF
SHARES (8) SHARED VOTING POWER
BENEFICIALLY 3,883,480 (1) (see Item 3 herein)
OWNED BY EACH
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON WITH 1,533,281 (see Item 3 herein)
(10) SHARED DISPOSITIVE POWER
3,883,480 (see Item 3 herein)
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,416,761
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(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(See Instructions)
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(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
51.0%
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(14) TYPE OF REPORTING PERSON
(See Instructions)
OO
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(1) USANi Sub LLC has the right, subject to certain conditions, to
purchase 1,533,281 shares of Styleclick Common Stock (as
defined below) upon exercise of an option granted to USANi Sub
LLC pursuant to an Option Agreement, dated as of January 24,
2000, between Styleclick.com Inc. and USANi Sub LLC. USANi Sub
LLC has also entered into a separate voting agreements, each
dated as of January 24, 2000, with certain stockholders of
Styleclick.com Inc., which provides that the signatory
stockholders will vote their shares of Styleclick Common Stock
in favor of a proposal to adopt the Merger Agreement (as
defined below) and against certain other transactions (if
any). The option is not currently exercisable and USANi Sub
LLC does not have any rights as a stockholder of
Styleclick.com Inc. pursuant to the Option Agreement or the
voting agreements. Accordingly, USANi Sub LLC expressly
disclaims beneficial ownership of all shares subject to said
agreements.
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CUSIP No. 60749P104 13D 4 of 18
(1) NAME OF REPORTING PERSON
Home Shopping Network, Inc.
59-2649518
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(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See instructions) (a) [_]
(b) [X]
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(3) SEC USE ONLY
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(4) SOURCE OF FUNDS
(See instructions)
WC, OO
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(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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(7) SOLE VOTING POWER
1,533,281 (1) (see Item 3 herein)
NUMBER OF
SHARES (8) SHARED VOTING POWER
BENEFICIALLY 3,883,480 (1) (see Item 3 herein)
OWNED BY EACH
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON WITH 1,533,281 (see Item 3 herein)
(10) SHARED DISPOSITIVE POWER
3,883,480 (see Item 3 herein)
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,416,761
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(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(See Instructions)
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(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
51.0%
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(14) TYPE OF REPORTING PERSON
(See Instructions)
CO
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(1) USANi Sub LLC has the right, subject to certain conditions, to
purchase 1,533,281 shares of Styleclick Common Stock (as
defined below) upon exercise of an option granted to USANi Sub
LLC pursuant to an Option Agreement, dated as of January 24,
2000, between Styleclick.com Inc. and USANi Sub LLC. USANi Sub
LLC has also entered into a separate voting agreements, each
dated as of January 24, 2000, with certain stockholders of
Styleclick.com Inc., which provides that the signatory
stockholders will vote their shares of Styleclick Common Stock
in favor of a proposal to adopt the Merger Agreement (as
defined below) and against certain other transactions (if
any). The option is not currently exercisable and USANi Sub
LLC does not have any rights as a stockholder of
Styleclick.com Inc. pursuant to the Option Agreement or the
voting agreements. Accordingly, USANi Sub LLC expressly
disclaims beneficial ownership of all shares subject to said
agreements.
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CUSIP No. 60749P104 13D 5 of 18
(1) NAME OF REPORTING PERSON
USA Networks, Inc.
59-2712887
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(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See instructions) (a) [_]
(b) [X]
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(3) SEC USE ONLY
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(4) SOURCE OF FUNDS
(See instructions)
WC, OO
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(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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(7) SOLE VOTING POWER
1,861,365 (1) (2) (see Item 3 herein)
NUMBER OF
SHARES (8) SHARED VOTING POWER
BENEFICIALLY 3,883,480 (1) (see Item 3 herein)
OWNED BY EACH
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON WITH 1,861,365 (see Item 3 herein)
(10) SHARED DISPOSITIVE POWER
3,883,480 (see Item 3 herein)
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,744,845
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(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(See Instructions)
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(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
52.5%
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(14) TYPE OF REPORTING PERSON
(See Instructions)
CO
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(1) USANi Sub LLC has the right, subject to certain conditions, to
purchase 1,533,281 shares of Styleclick Common Stock (as
defined below) upon exercise of an option granted to USANi Sub
LLC pursuant to an Option Agreement, dated as of January 24,
2000, between Styleclick.com Inc. and USANi Sub LLC. USANi Sub
LLC has also entered into a separate voting agreements, each
dated as of January 24, 2000, with certain stockholders of
Styleclick.com Inc., which provides that the signatory
stockholders will vote their shares of Styleclick Common Stock
in favor of a proposal to adopt the Merger Agreement (as
defined below) and against certain other transactions (if
any). The option is not currently exercisable and USANi Sub
LLC does not have any rights as a stockholder of
Styleclick.com Inc. pursuant to the Option Agreement or the
voting agreements. Accordingly, USANi Sub LLC expressly
disclaims beneficial ownership of all shares subject to said
agreements.
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CUSIP No. 60749P104 13D 6 of 18
(2) In addition to the Styleclick Common Stock underlying the
Option Agreement and voting agreements described in footnote
(1), USA Networks, Inc. has the right to purchase 328,084
shares of Styleclick Common Stock upon exercise of a warrant
granted to USA Networks, Inc. pursuant to the Bridge Loan
Warrant Agreement, dated as of January 24, 2000, between
Styleclick.com, Inc. and USA Networks, Inc.
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CUSIP No. 60749P104 13D 7 of 18
Item 1. Security and Issuer
This statement on Schedule 13D (this "Schedule 13D") relates to the
common stock, no par value (the "Styleclick Common Stock"), of Styleclick.com
Inc., a California corporation ("Styleclick"). The address of the principal
executive office of Styleclick is 3861 Sepulveda Blvd., Culver City, CA 90230.
Item 2. Identity and Background
This Schedule 13D is being filed jointly by (i) USANi Sub LLC, a
Delaware limited liability company ("USANi Sub"), (ii) USANi LLC, a Delaware
limited liability company, (iii) Home Shopping Network, Inc., a Delaware
corporation ("HSN") and (iv) USA Networks, Inc., a Delaware corporation
("USAi"). The entities described in clauses (i) through (iv) are affiliated
companies and are collectively referred to herein as "USA" or the "Reporting
Persons". The address of the principal executive office of USA is 152 West 57th
St., New York, NY 10019. USA is engaged in diversified media and electronic
commerce businesses.
Annex A-1 attached to this Schedule 13D contains the following
information concerning each director, executive officer and controlling person
of USAi: (i) the name and residence or business address; (ii) the principal
occupation or employment; and (iii) the name, principal business and address of
any corporation or other organization in which such employment is conducted.
Annex A-1 is incorporated herein by reference. To the knowledge of USAi, each of
the persons listed on Annex A-1 (the "Annex A-1 Persons"), except Samuel
Minzberg, is a United States citizen. Mr. Minzberg is a Canadian citizen. During
the last 5 years, neither USAi nor any of the Annex A-1 Persons (to the
knowledge of USAi) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors). During the last five years, neither
USAi nor any of the Annex A-1 Persons (to the knowledge of USAi) has been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and, as a result of such proceeding, is or was subject to a
judgment, decree or final order enjoining final violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
Annex A-2 attached to this Schedule 13D contains the following
information concerning each director, executive officer and controlling person
of HSN: (i) the name and residence or business address; (ii) the principal
occupation or employment; and (iii) the name, principal business and address of
any corporation or other organization in which such employment is conducted.
Annex A-2 is incorporated herein by reference. To the knowledge of HSN, each of
the persons listed on Annex A-2 (the "Annex A-2 Persons") is a United States
citizen. During the last 5 years, neither HSN nor any of the Annex A-2 Persons
(to the knowledge of HSN) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors). During the last five years, neither
HSN nor any of the Annex A-2 Persons (to the knowledge of HSN) has been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and, as a result of such proceeding, is or was subject to a
judgment, decree or final order enjoining final violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
Annex A-3 attached to this Schedule 13D contains the following
information concerning each member of the Board of Managers, executive officer
and controlling person of USANi LLC: (i) the name and residence or business
address; (ii) the principal occupation or employment; and (iii) the name,
principal business and address of any corporation or other organization in which
such employment is conducted. Annex A-3 is incorporated herein by reference. To
the knowledge of USANi LLC, each of the persons listed on Annex A-3 (the "Annex
A-3 Persons"), except Samuel Minzberg, is a United States citizen. Mr. Minzberg
is a Canadian citizen. During the last 5 years, neither USANi LLC nor any of the
Annex A-3 Persons (to the knowledge of USANi LLC) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
During the last five years, neither USANi LLC nor any of the Annex A-3 Persons
(to the knowledge of USANi LLC) has been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and, as a result of
such proceeding, is or was subject to a judgment, decree or final order
enjoining final violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Annex A-4 attached to this Schedule 13D contains the following
information concerning each member of the Board of Managers, executive officer
and controlling person of USANi Sub: (i) the name and residence or business
address; (ii) the principal occupation or employment; and (iii) the name,
principal business and address of any corporation or other organization in which
such employment is conducted. Annex A-4 is incorporated herein by reference. To
the knowledge of USANi Sub, each of the persons listed on Annex A-4 (the "Annex
A-4 Persons") is a United States citizen. During the last 5 years, neither USANi
Sub nor any of the Annex A-4 Persons (to the knowledge of USANi Sub) has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors). During the last five years, neither USANi Sub nor any of the
Annex A-4 Persons (to the knowledge of USANi Sub) has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and,
as a result of such
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CUSIP No. 60749P104 13D 8 of 18
proceeding, is or was subject to a judgment, decree or final order enjoining
final violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
Barry Diller (the Chairman and Chief Executive Officer of USAi) Liberty
Media Corporation, Universal Studios, Inc., The Seagram Company Ltd. and USAi
are parties to a stockholders agreement (the "Stockholders Agreement") relating
to USAi. Mr. Diller's business address is: c/o USA Networks, Inc., 152 West 57th
Street, New York, NY 10019. Through his own holdings and the Stockholders
Agreement, Mr. Diller has the right, directly or indirectly, to control 73.9% of
the outstanding total voting power of USAi. As a result, except with regard to
certain specified matters, Mr. Diller generally has the ability to control the
outcome of all matters submitted to a vote of USAi's stockholders. Mr. Diller
disclaims beneficial ownership of any shares of Styleclick Common Stock
beneficially owned by USA.
As a result of entering into the Voting Agreements (as defined below),
USANi Sub may be deemed to have formed a "group" with each of the Principal
Stockholders (as defined below) for purposes of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule
13d-5(b)(1) thereunder. USANi Sub expressly declares that the filing of this
Schedule 13D shall not be construed as an admission by it that it has formed any
such group.
Item 3. Source and Amount of Funds or Other Consideration
USANi Sub and Styleclick entered into an Agreement and Plan of Merger,
dated as of January 24, 2000 (the "Merger Agreement"). Pursuant to the Merger
Agreement, (i) USANi Sub will contribute, or cause to be contributed (the
"Contribution"), all of the outstanding limited liability company interests of
Internet Shopping Network LLC, a Delaware limited liability company ("ISN"), to
a Delaware corporation to be formed by USANi Sub ("Newco") and (ii) a California
corporation and a wholly-owned subsidiary of Newco ("Merger Sub") will merge
with and into Styleclick (the "Merger"), with Styleclick as the surviving
corporation. Pursuant to the terms of the Merger Agreement, each issued and
outstanding share of Styleclick Common Stock (other than shares owned or held by
Styleclick) will be exchanged for one share of Class A Common Stock, par value
$0.01 per share, of Newco, and USANi Sub will receive 23,150,790 shares of Class
B Common Stock, par value $0.01 per share, of Newco in exchange for the
Contribution.
The transactions contemplated by the Merger Agreement are subject to
customary closing conditions, including the adoption of the Merger Agreement by
the stockholders of Styleclick, the expiration of the applicable waiting period
under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended, the
receipt of any other required regulatory approvals, and the satisfaction or
waiver of certain other conditions as more fully described in the Merger
Agreement. There can be no assurance that the required approvals will be
obtained in a timely fashion, if at all, or, in the case of regulatory
approvals, if obtained, will not contain certain conditions.
In order to facilitate the consummation of the transactions
contemplated by the Merger Agreement and in consideration thereof, USANi Sub
entered into an Option Agreement, dated as of January 24, 2000, with Styleclick.
Pursuant to the Option Agreement, Styleclick granted USANi Sub an irrevocable
option (the "Option") to purchase up to 1,533,281 shares of Styleclick Common
Stock, subject to adjustment as described below, at a purchase price per share
equal to $17.50. The number of shares of Styleclick Common Stock subject to the
Option will automatically adjust to remain equal to 19.9% of the Styleclick
Common Stock issued and outstanding (or approximately 16.6% of outstanding
Styleclick Common Stock assuming full exercise of the Option). The Option is not
currently exercisable and may only be exercised under certain circumstances
described in the Option Agreement and outlined in this Schedule 13D. The Option
may be exercised for cash in accordance with its terms. USANi Sub anticipates
that any funds to be paid by it upon exercise of the Option would be provided
from its working capital and the working capital of USAi and other affiliates of
USAi. USANi Sub did not pay additional consideration to Styleclick in connection
with execution of the Option Agreement and granting of the Option.
In order to facilitate the consummation of the transactions
contemplated by the Merger Agreement and in consideration thereof, USANi Sub
entered into separate voting agreements (collectively, the "Voting Agreements"),
each dated as of January 24, 2000, with certain stockholders of Styleclick named
therein (collectively, the "Principal Stockholders"), whereby the Principal
Stockholders agreed to vote all of the shares beneficially owned by them in
favor of the approval and adoption of the Merger Agreement and any other action
required in furtherance thereof and against certain other transactions (if any).
In addition, the Principal Stockholders agreed to certain transfer restrictions
with respect to the shares of Styleclick Common Stock and options to purchase
shares of Styleclick Common Stock beneficially owned by them. USANi Sub did not
pay additional consideration to any Principal Stockholder in connection with the
execution and delivery of the Voting Agreements.
USAi entered into a Credit Agreement, dated as of January 24, 2000,
with Styleclick. Pursuant to the Credit
<PAGE>
CUSIP No. 60749P104 13D 9 of 18
Agreement, USAi agreed to loan funds to Styleclick in a principal amount not to
exceed $10 million. In consideration thereof, Styleclick entered into a Bridge
Loan Warrant Agreement (the "Warrant Agreement"), dated January 24, 2000, with
USAi, pursuant to which Styleclick issued USAi warrants (the "Warrants") to
purchase up to 328,084 shares of Styleclick Common Stock, subject to adjustment,
at an exercise price per share equal to $19.05. The number of shares of
Styleclick Common Stock subject to the Warrants currently equals 4.3% of the
outstanding Styleclick Common Stock (or 4.1% of outstanding Styleclick Common
Stock assuming full exercise of the Warrants) and such number will be adjusted
upon certain events as described in the Warrant Agreement. The Warrants are
currently exercisable and may be exercised for cash, pursuant to a cashless
exercise or in exchange for forgiveness of indebtedness. USAi anticipates that
any funds to be paid by it upon exercise of the Warrants would be provided from
its working capital and the working capital of affiliates of USAi.
References to, and descriptions of, the Merger Agreement, the Option
Agreement, the Voting Agreements and the Warrant Agreement as set forth above in
this Item 3 are qualified in their entirety by reference to the copies of the
Merger Agreement, the Option Agreement, the Voting Agreements and the Warrant
Agreement included as Exhibits 1, 2, 3 and 4, respectively, to this Schedule
13D, and are incorporated in this Item 3 in their entirety where such references
and descriptions appear.
Item 4. Purpose of Transaction
The information set forth or incorporated by reference in Items 2 and 3
is hereby incorporated herein by reference.
Upon consummation of the transactions contemplated by the Merger
Agreement: (a) the Articles of Incorporation and Bylaws of Merger Sub will be
the Articles of Incorporation and Bylaws of the surviving corporation of the
Merger, (b) the officers and directors of Merger Sub will be the officers and
directors of the surviving corporation of the Merger, (c) Styleclick Common
Stock will cease to be authorized for listing on the Nasdaq National Market and
(d) Styleclick Common Stock will become eligible for termination of registration
pursuant to the Exchange Act.
Pursuant to the terms and subject to the conditions set forth in the
Option Agreement, USANi Sub may exercise the Option, in whole or in part, at any
time, or from time to time, following the occurrence of one of the following
events and prior to the termination of the Option in accordance with the terms
of the Option Agreement: (i) any person (other than USANi Sub or any of its
subsidiaries and other than any shareholder of USANi Sub that currently owns in
excess of 15% of the outstanding Styleclick Common Stock) shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange
Act or the right to acquire beneficial ownership of, or any "group" (as such
term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, shares of
Styleclick Common Stock aggregating 15% or more of the then outstanding
Styleclick Common Stock, (ii) any person shall have commenced or publicly
announced its intention to commence a tender offer for 15% or more of the
outstanding Styleclick Common Stock or shall have publicly announced its
intention to effect an Alternate Transaction (as defined in the Merger
Agreement), (iii) the Merger Agreement is terminated by USANi Sub due to (x) a
withdrawal, modification or change to the Styleclick Board of Directors
recommendation of the transactions contemplated by the Merger Agreement in a
manner adverse to USANi Sub or (y) a recommendation by the Styleclick Board of
Directors' that the stockholders adopt an Alternate Transaction or a failure to
recommend opposition to an Alternate Transaction, (iv) the Merger Agreement is
terminated by Styleclick due to a determination by the Styleclick Board of
Directors that a failure to so terminate would cause the Board of Directors to
violate its fiduciary duties to the Styleclick stockholders and, on or prior to
such date, Styleclick has executed a definitive agreement with respect to a
Qualified Alternate Transaction Proposal (as defined in the Merger Agreement) or
(v) the Merger Agreement is terminated by USANi Sub or Styleclick due to a
failure to receive the requisite approval of Styleclick stockholders and, at
such time, an Alternate Transaction was publicly announced or an Alternate
Transaction is consummated, or a definitive agreement with respect thereto is
executed by Styleclick, on or prior to the 12 month anniversary of such
termination.
The Option will terminate upon the earlier of (i) the effective time of
the Merger and (ii) the 12 month anniversary of Merger Termination Date (as
defined in the Merger Agreement); provided that, if the Option cannot be
exercised or the shares of Styleclick Common Stock underlying the Option cannot
be delivered to USANi Sub upon such exercise because certain conditions as set
forth in the Option Agreement have not yet been satisfied, the termination date
set forth in clause (ii) shall be extended until 30 days after such impediment
to exercise or delivery has been removed.
In addition, the Option Agreement grants certain registration rights to
USANi Sub with respect to the shares of Common Stock subject to the Option. The
termination of the Option will not affect any rights under the Option Agreement
which by their terms do not terminate or expire prior to or at termination of
the Option Agreement.
The Option is not currently exercisable, and until the Option becomes
exercisable and is exercised, USANi Sub
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CUSIP No. 60749P104 13D 10 of 18
does not have any right to vote (or to direct the vote of) or dispose (or to
direct the disposition of) any shares of Styleclick Common Stock that may be
purchased upon exercise of the Option. Accordingly, USANi Sub expressly
disclaims beneficial ownership of all such shares.
Pursuant to the terms of the Voting Agreements, the Principal
Stockholders have agreed, among other things, (i) to vote all of the shares of
Styleclick Common Stock beneficially owned by them in favor of the approval and
adoption of the Merger Agreement, the Merger and any other action required in
furtherance thereof and (ii) with certain exceptions, not to sell, transfer,
pledge, encumber, assign or otherwise dispose of such shares, unless the shares
of Styleclick Common Stock proposed to be transferred by the Principal
Stockholder are first offered to USANi Sub and, if USANi Sub elects not the
purchase such shares, the transferee party agrees to be bound by the Voting
Agreement to which the transferor was party. The Voting Agreements terminate
upon the earliest to occur of (i) the Closing (as defined in the Merger
Agreement) , (ii) the 12-month anniversary following termination of the Merger
Agreement and (iii) the termination of the Merger Agreement by USANi Sub due to
the failure of the Closing to occur prior to July 31, 2000. The name of each
Stockholder and the number of outstanding shares of Styleclick Common Stock held
by each Stockholder and subject to the Voting Agreement are set forth on the
signature pages and Schedule 1 thereto, respectively, and are incorporated
herein by reference.
USANi Sub is not entitled to any rights as a stockholder of Styleclick
as to the shares of Styleclick Common Stock covered by the Voting Agreements and
expressly disclaims any beneficial ownership of the shares of Styleclick Common
Stock subject to the Voting Agreements.
Pursuant to the terms of the Warrant Agreement, USA Networks was
granted certain registration rights with respect to the shares of Styleclick
Common Stock underlying the Warrants.
The purpose of the Option Agreement and the Voting Agreement is to
facilitate consummation of the Merger.
References to, and descriptions of, the Merger Agreement, the Option
Agreement, the Voting Agreements and the Warrant Agreement as set forth above in
this Item 4 are qualified in their entirety by reference to the copies of the
Merger Agreement, the Option Agreement, the Voting Agreements and the Warrant
Agreement included as Exhibits 1, 2, 3 and 4, respectively, to this Schedule
13D, and are incorporated in this Item 4 in their entirety where such references
and descriptions appear.
Item 5. Interest in Securities of Styleclick.
The information set forth or incorporated by reference in Items 2, 3
and 4 is hereby incorporated herein by reference.
The number of shares of Styleclick Common Stock covered by the Option
is 1,533,281 (representing approximately 19.9% of outstanding Styleclick Common
Stock as of January 24, 2000, as represented by Styleclick in the Merger
Agreement, or 16.6% of outstanding Styleclick Common Stock, assuming full
exercise of the Option).
The Option is not currently exercisable, and until the Option becomes
exercisable and is exercised, USANi Sub does not have any right to vote (or to
direct the vote of) or dispose (or to direct the disposition of) any shares of
Styleclick Common Stock that may be purchased upon exercise of the Option.
Accordingly, USANi Sub expressly disclaims beneficial ownership of all such
shares.
The number of shares of Common Stock covered by the Voting Agreement is
3,883,480 (including options to purchase 1,364,444 shares of Styleclick Common
Stock and representing approximately 50.32% of the voting power of outstanding
Styleclick Common Stock as of November 30, 1999, as represented by Styleclick in
the Merger Agreement, or 33.48% of outstanding Styleclick Common Stock, assuming
full exercise of such options).
By virtue of the Voting Agreements, USANi Sub may be deemed to share
with the Principal Stockholders the power to vote shares of Styleclick Common
Stock subject to the Voting Agreements. However, USANi Sub is not entitled to
any rights as a stockholder of Styleclick as to the shares of Styleclick Common
Stock covered by the Voting Agreement and expressly disclaims any beneficial
ownership of the shares of Styleclick Common Stock subject to the Voting
Agreements.
The number of shares of Styleclick Common Stock underlying the Warrants
is 328,084 (representing approximately 4.3% of the outstanding shares of
Styleclick Common Stock as of January 24, 2000, as represented by Styleclick in
the Merger
<PAGE>
CUSIP No. 60749P104 13D 11 of 18
Agreement, or 4.1% of the outstanding shares of Styleclick Common Stock,
assuming full exercise of the Warrants). The Warrants are currently exercisable
but, until the Warrants are exercised, USANi Sub does not have any right to vote
(or to direct the vote of) or dispose (or to direct the disposition of) any
shares of Styleclick Common Stock that may be purchased upon exercise of the
Warrants.
Other than as set forth in this Schedule 13D, to the best of USA's
knowledge as of the date hereof (i) neither USA nor any subsidiary or affiliate
of USA nor any of USAi, HSN, USANi LLC or USANi Sub's executive officers or
directors, beneficially owns any shares of Styleclick Common Stock, and (ii)
there have been no transactions in the shares of Styleclick Common Stock
effected during the past 60 days by USA, nor to the best of USA's knowledge, by
any subsidiary or affiliate of USA or any of USAi, HSN, USANi LLC or USANi Sub's
executive officers or directors.
No other person is known by USA to have the right to receive or the
power to direct the receipt of dividends from, or the proceeds from the sale of,
the shares of Styleclick Common Stock obtainable by USA upon exercise of the
Option or the Warrants.
Reference to, and descriptions of, the Merger Agreement, Option
Agreement, Voting Agreements and Warrant Agreements as set forth in this Item 5
are qualified in their entirety by reference to the copies of the Merger
Agreement, the Option Agreement, the Voting Agreements and Warrant Agreement
included as Exhibits 1, 2, 3 and 4, respectively, to this Schedule 13D, and
incorporated in this Item 5 in their entirety where such references and
descriptions appear.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of Styleclick.
The information set forth, or incorporated by reference, in Items 3
through 5 is hereby incorporated herein by reference.
Copies of the Merger Agreement, the Option Agreement, the Voting
Agreements and Warrant Agreements are included as Exhibits 1, 2, 3 and 4,
respectively, to this Schedule 13D. In addition to the Voting Agreements, USANi
Sub has entered into separate waiver agreements (collectively, the "Waiver
Agreements") with certain stockholders of Styleclick (the "Waiving
Stockholders") pursuant to which the Waiving Stockholders agree to waive certain
provisions of their existing agreements with Styleclick and agree to certain
transfer restrictions on the shares of Styleclick Common Stock and warrants to
purchase shares of Styleclick Common Stock currently held by the Waiving
Stockholders. USANi Sub has no right to vote or dispose of such shares and,
accordingly, disclaims any beneficial ownership of such shares. To the best of
USA's knowledge, except as described in this Schedule 13D, there are at present
no other contracts, arrangements, understandings or relationships among the
persons named in Item 2 above, and between any such persons and any person, with
respect to any securities of Styleclick.
Item 7. Material to be Filed as Exhibits.
Exhibit Description
1. Agreement and Plan of Merger, dated as of January 24, 2000, between
USANi Sub LLC and Styleclick.com Inc.
2. Option Agreement, dated as of January 24, 2000, between USANi Sub LLC
and Styleclick.com Inc.
3A. Voting Agreement, dated as of January 24, 2000, between USANi Sub LLC
and Joyce Freedman.
3B. Voting Agreement, dated as of January 24, 2000, between USANi Sub LLC
and Lee Freedman.
3C. Voting Agreement, dated as of January 24, 2000, between USANi Sub LLC
and Maurizio Vecchione.
3D. Voting Agreement, dated as of January 24, 2000, among USANi Sub LLC,
Styleclick.com Inc. and Intel Corporation.
4. Bridge Loan Warrant Agreement, dated as of January 24, 2000, between
USA Networks, Inc. and Styleclick.com Inc.
<PAGE>
CUSIP No. 60749P104 13D 12 of 18
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
USANi SUB LLC
By: /s/ Thomas J. Kuhn
----------------------
Name: Thomas J. Kuhn
Title: President
USANi LLC
By: /s/ Thomas J. Kuhn
----------------------
Name: Thomas J. Kuhn
Title: Senior Vice President, General
Counsel and Secretary
HOME SHOPPING NETWORK, INC.
By: /s/ Thomas J. Kuhn
----------------------
Name: Thomas J. Kuhn
Title: Vice President and Assistant
Secretary
USA NETWORKS, INC.
By: /s/ Thomas J. Kuhn
----------------------
Name: Thomas J. Kuhn
Title: Senior Vice President, General
Counsel and Secretary
Dated: February 3, 2000
<PAGE>
CUSIP No. 60749P104 13D 13 of 18
ANNEX A-1
Set forth below is the name, business address, principal occupation or
employment and principal business in which such employment is conducted of each
director and executive officer of USAi. The name of each person who is a
director of USAi is marked with an asterisk. Unless otherwise indicated, the
business address of each person listed below is 152 West 57th Street, New York,
NY 10019.
<TABLE>
<CAPTION>
Name and Business Address Principal Occupation or Employment Principal Business in which such
- ------------------------- ---------------------------------- Employment is Conducted
--------------------------------
<S> <C> <C>
Paul G. Allen* Investor Vulcan Ventures Inc.
110 110th Avenue, N.E. (Venture Capital)
Suite 550
Bellevue, Washington 98004
Barry Baker* President and Chief Operating Officer, USAi
USAi
Edgar Bronfman, Jr.* President and Chief Executive Officer, The Seagram Company Ltd.
375 Park Avenue The Seagram Company Ltd. (Entertainment, Recreation, Spirits and
New York, NY 10152 Wine)
Anne M. Busquet* President, American Express American Express Relationship Services
200 Vesey Street Relationship Services (Service Provider to American Express
New York, NY 10285 Customers)
Barry Diller* Chairman and Chief Executive Officer, USAi
USAi
Michael P. Durney Vice President and Controller, USAi USAi
Victor A. Kaufman* Vice Chairman, USAi USAi
Donald R. Keough* Chairman of the Board, Allen & Co. Inc. Allen & Co. Inc.
711 Fifth Avenue (Investment Banking)
New York, NY 10022
Thomas J. Kuhn Senior Vice President, General Counsel USAi
and Secretary, USAi
Robert W. Matschullat* Vice Chairman, The Seagram Company The Seagram Company Ltd.
375 Park Avenue Ltd. (Entertainment, Recreation, Spirits and
New York, NY 10152 Wine)
Samuel Minzberg* President and Chief Executive Officer, Claridge Inc.
1170 Peel Claridge Inc. (Management)
Montreal, Quebec H3B-4P2
Brian Mulligan* Executive Vice President and Chief The Seagram Company Ltd.
375 Park Avenue Financial Officer, (Entertainment, Recreation, Spirits and
New York, NY 10152 The Seagram Company Ltd. Wine)
William D. Savoy* Vice President, Vulcan Ventures, Inc. Vulcan Ventures Inc.
110 110th Avenue, N.E. (Venture Capital)
Suite 550
Bellevue, Washington 98004
</TABLE>
<PAGE>
CUSIP No. 60749P104 13D 14 of 18
<TABLE>
<CAPTION>
<S> <C>
Gen. H. Norman Schwarzkopf* Retired
400 North Ashley Street
Suite 3050
Tampa, Florida 33602
Michael Sileck Senior Vice President and Chief USAi
Financial Officer, USAi
Diane Von Furstenberg* Chairman, Diane Von Furstenberg Studio Diane Von Furstenberg Studio L.P.
389 West 12th Street L.P. (Fashion Design)
New York, NY 10014
</TABLE>
<PAGE>
CUSIP No. 60749P104 13D 15 of 18
ANNEX A-2
Set forth below is the name, business address, principal occupation or
employment and principal business in which such employment is conducted of each
director and executive officer of HSN. The name of each person who is a director
of HSN is marked with an asterisk. Unless otherwise indicated, the business
address of each person listed below is 152 West 57th Street, New York, NY 10019.
<TABLE>
<CAPTION>
Name and Business Address Principal Occupation or Employment Principal Business in which such
- ------------------------- ---------------------------------- Employment is Conducted
--------------------------------
<S> <C> <C>
Barry Diller Chairman and Chief Executive Officer, USAi
USAi
Michael P. Durney* Vice President and Controller, USAi USAi
James G. Gallagher Executive Vice President and General HSN
1 HSN Drive Counsel, HSN
St. Petersburg, FL 33729
Victor A. Kaufman* Vice Chairman, USAi USAi
Thomas J. Kuhn* Senior Vice President, General Counsel USAi
and Secretary, USAi
Jeb B. Trosper Chief Operating Officer, HSN HSN
1 HSN Drive
St. Petersburg, FL 33729
</TABLE>
<PAGE>
CUSIP No. 60749P104 13D 16 of 18
ANNEX A-3
Set forth below is the name, business address, principal occupation or
employment and principal business in which such employment is conducted of each
member of the Board of Managers and executive officer of USANi LLC. The name of
each person who is a member of the Board of Managers of USANi LLC is marked with
an asterisk. Unless otherwise indicated, the business address of each person
listed below is 152 West 57th Street, New York, NY 10019.
<TABLE>
<CAPTION>
Name and Business Address Principal Occupation or Employment Principal Business in which such
- ------------------------- ---------------------------------- Employment is Conducted
--------------------------------
<S> <C> <C>
Paul G. Allen* Investor Vulcan Ventures Inc.
110 110th Avenue, N.E. (Venture Capital)
Suite 550
Bellevue, Washington 98004
Barry Baker* President and Chief Operating Officer, USAi
USAi
Robert R. Bennett* President and Chief Operating Officer, Liberty Media Corporation
9197 South Peoria Street Liberty Media Corporation
Englewood, CO 80112
Edgar Bronfman, Jr.* President and Chief Executive Officer, The Seagram Company Ltd.
375 Park Avenue The Seagram Company Ltd. (Entertainment, Recreation, Spirits and
New York, NY 10152 Wine)
Anne M. Busquet* President, American Express American Express Relationship Services
200 Vesey Street Relationship Services (Service Provider to American Express
New York, NY 10285 Customers)
Roger Clark Vice President, Investor Relations, USAi USAi
Barry Diller* Chairman and Chief Executive Officer, USAi
USAi
Michael P. Durney Vice President and Controller, USAi USAi
James G. Gallagher Executive Vice President and General HSN
1 HSN Drive Counsel, HSN
St. Petersburg, FL 33729
H. Steven Holtzman Senior Counsel, HSN HSN
1 HSN Drive
St. Petersburg, FL 33729
Victor A. Kaufman* Vice Chairman, USAi USAi
Donald R. Keough* Chairman of the Board, Allen & Co. Inc. Allen & Co. Inc.
711 Fifth Avenue (Investment Banking)
New York, NY 10022
Dara Khosrowshahi President, USA Networks Interactive USA Networks Interactive
Thomas J. Kuhn Senior Vice President, General Counsel USAi
and Secretary, USAi
Dr. John C. Malone* Chairman of the Board, Liberty Media Corporation
9197 South Peoria Street Liberty Media Corporation
Englewood, CO 80112
</TABLE>
<PAGE>
CUSIP No. 60749P104 13D 17 of 18
<TABLE>
<CAPTION>
<S> <C> <C>
Robert W. Matschullat* Vice Chairman, The Seagram Company The Seagram Company Ltd.
375 Park Avenue Ltd. (Entertainment, Recreation, Spirits and
New York, NY 10152 Wine)
Samuel Minzberg* President and Chief Executive Officer, Claridge Inc.
1170 Peel Claridge Inc. (Management)
Montreal, Quebec H3B-4P2
Brian Mulligan* Executive Vice President and Chief The Seagram Company Ltd.
375 Park Avenue Financial Officer, (Entertainment, Recreation, Spirits and
New York, NY 10152 The Seagram Company Ltd. Wine)
William D. Savoy* Vice President, Vulcan Ventures, Inc. Vulcan Ventures Inc.
110 110th Avenue, N.E. (Venture Capital)
Suite 550
Bellevue, Washington 98004
Gen. H. Norman Schwarzkopf* Retired
400 North Ashley Street
Suite 3050
Tampa, Florida 33602
Michael Sileck Senior Vice President and Chief USAi
Financial Officer, USAi
Diane Von Furstenberg* Chairman, Diane Von Furstenberg Studio Diane Von Furstenberg Studio L.P.
389 West 12th Street L.P. (Fashion Design)
New York, NY 10014
</TABLE>
<PAGE>
CUSIP No. 60749P104 13D 18 of 18
ANNEX A-4
Set forth below is the name, business address, principal occupation or
employment and principal business in which such employment is conducted of each
member of the Board of Managers and executive officer of USANi Sub. The name of
each person who is a member of the Board of Managers of USANi Sub is marked with
an asterisk. Unless otherwise indicated, the business address of each person
listed below is 152 West 57th Street, New York, NY 10019.
<TABLE>
<CAPTION>
Name and Business Address Principal Occupation or Employment Principal Business in which such
- ------------------------- ---------------------------------- Employment is Conducted
--------------------------------
<S> <C> <C>
Michael P. Durney Vice President and Controller, USAi USAi
James G. Gallagher* Executive Vice President and General HSN
1 HSN Drive Counsel, HSN
St. Petersburg, FL 33729
Victor A. Kaufman Vice Chairman, USAi USAi
Dara Khosrowshahi President, USA Networks Interactive USA Networks Interactive
Thomas J. Kuhn Senior Vice President, General Counsel USAi
and Secretary, USAi
</TABLE>
================================================================================
AGREEMENT AND PLAN OF MERGER
between
STYLECLICK.COM INC.,
and
USANi Sub LLC
Dated as of January 24, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 THE CONTRIBUTION AND THE MERGER...........................11
1.1 Formation of Newco and Merger Sub.........................11
1.2 The Contribution..........................................11
1.3 The Merger................................................11
1.4 Closing...................................................12
1.5 Effective Time............................................12
1.6 Articles of Incorporation and By-laws.....................12
1.7 Directors and Officers....................................12
1.8 Calculation of Specified Number; Anti-Dilution Adjustment.13
ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES..................................14
2.1 Effect on Capital Stock...................................14
2.2 Exchange of Certificates..................................14
2.3 Appraisal Rights..........................................17
2.4 Treatment of Stock Options and Warrants...................18
2.5 Adjustments...............................................19
2.6 Lost Certificates.........................................19
2.7 Withholding Rights........................................20
ARTICLE 3 REPRESENTATIONS AND WARRANTIES............................20
3.1 Representations and Warranties of the Company.............20
3.2 Representations and Warranties of Parent..................37
ARTICLE 4 COVENANTS.................................................50
4.1 Covenants of the Company..................................50
4.2 Covenants of Parent.......................................51
ARTICLE 5 ADDITIONAL COVENANTS......................................53
5.1 No Solicitation...........................................53
5.2 Directors and Officers Indemnification and Insurance......54
5.3 Notification of Certain Matters...........................55
5.4 Tax Treatment.............................................55
5.5 Company Stockholder Meeting...............................55
5.6 Registration Statement, Proxy Statement/Prospectus........56
5.7 Further Action, Reasonable Efforts........................57
5.8 Public Announcements......................................57
5.9 Blue Sky..................................................58
5.10 NASDAQ....................................................58
5.11 Affiliates................................................58
5.12 Tax Matters...............................................58
i
<PAGE>
Page
ARTICLE 6 CONDITIONS PRECEDENT......................................59
6.1 Conditions to the Obligations of each Party...............59
6.2 Conditions to the Obligations of Parent...................60
6.3 Conditions to the Obligations of the Company..............61
6.4 Frustration of Closing Conditions.........................62
ARTICLE 7 TERMINATION AND AMENDMENT.................................63
7.1 Termination...............................................63
7.2 Effect of Termination.....................................64
ARTICLE 8 GENERAL PROVISIONS........................................64
8.1 Notices...................................................64
8.2 Waivers and Amendments....................................65
8.3 Expenses and Other Payments...............................65
8.4 Newco Common Stock........................................66
8.5 Assignment................................................67
8.6 Non-Survival of Representations and Warranties............67
8.7 Headings..................................................67
8.8 Interpretation............................................67
8.9 Severability of Provisions................................68
8.10 Entire Agreement; No Third Party Beneficiaries............68
8.11 Governing Law.............................................68
8.12 Submission To Jurisdiction; Waivers.......................68
8.13 WAIVERS OF JURY TRIAL.....................................69
8.14 Counterparts..............................................69
Exhibit A -- Form of Stockholders Agreement
Exhibit B -- Form of Registration Rights Agreement
Exhibit C -- Form of Agreement of Merger
Exhibit D -- Form of Newco Charter and By-laws
Exhibit E -- Media Warrant
Exhibit F -- License Agreement
Exhibit G -- Form of Rule 145 Affiliate Agreement
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January
24, 2000, between Styleclick.com Inc., a California corporation (the "Company"),
and USANi Sub LLC, a Delaware limited liability company ("Parent").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), Parent will contribute, or
cause to be contributed, to a Delaware corporation to be formed by Parent prior
to the Effective Time ("Newco"), all of the outstanding limited liability
company interests of Internet Shopping Network LLC, a Delaware limited liability
company ("ISN"), and the Net Cash Amount (as defined below), (the
"Contribution") in exchange for shares of Class B Common Stock, par value $.01
per share of Newco ("Newco Class B Common Stock");
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company and a California corporation and a wholly owned
Subsidiary of Newco to be formed by Newco prior to the Effective Time ("Merger
Sub"), will enter into a business combination transaction pursuant to which
Merger Sub will merge with and into the Company (the "Merger"), whereby each
issued and outstanding share of common stock of the Company, no par value
("Company Common Stock") (other than shares of Company Common Stock that are
owned by the Company or any subsidiary of the Company), will be converted into
the right to receive one share of Class A Common Stock, par value $.01 per
share, of Newco ("Newco Class A Common Stock");
WHEREAS, (a) Newco, Parent and certain individuals named therein
(each such individual, a "Principal Company Stockholder") will, prior to the
Effective Time, enter into a Stockholders Agreement, substantially in the form
of Exhibit A attached hereto (the "Stockholders Agreement"), providing for,
among other things, certain transfer restrictions on the shares of Newco Common
Stock owned by the parties as a result of the Contribution and the Merger, and
(b) Newco, USA Networks, Inc. ("USA") and Parent will enter into a Registration
Rights Agreement substantially in the form of Exhibit B attached hereto (the
"Registration Rights Agreement");
WHEREAS, the Board of Directors of the Company has determined that
the Merger is fair to, and in the best interests of, the Company's stockholders
and has adopted, authorized and approved the execution and delivery of this
Agreement and the other agreements and instruments contemplated hereby and the
consummation of the Merger and the other transactions contemplated hereby;
<PAGE>
WHEREAS, concurrently with the execution of this Agreement and as a
condition to the willingness of the parties to enter into this Agreement, (i)
USA is providing a term loan facility (the "Term Loan Facility") to the Company
in the principal amount of $10 million pursuant to a Credit Agreement, dated as
of the date hereof, between the Company and USA (the "Credit Agreement"); (ii)
Parent is entering into separate Voting Agreements (the "Voting Agreements")
with certain stockholders of the Company, pursuant to which each such
stockholder agrees to, among other things, vote its shares of Company Common
Stock in favor of the Merger and/or waive certain contractual and other rights
in connection with the Transactions; (iii) Parent is entering into separate
Waiver Agreements (the "Waiver Agreements") with certain warrantholders of the
Company, pursuant to which each such warrantholder agrees to waive certain
contractual and other rights in connection with the Transactions; and (iv) the
Company and Parent are executing an Option Agreement (the "Option Agreement")
granting Parent the irrevocable right to purchase shares of Company Common Stock
on the terms and subject to the conditions contained therein;
WHEREAS, for federal income tax purposes, it is intended that the
Contribution and the Merger shall qualify as tax-free events under either or
both of Section 351 and Section 368 of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the "Code"); and
WHEREAS, the Company and Parent wish to make certain
representations, warranties and agreements in connection with the consummation
of the Transactions and to prescribe various conditions to the Transactions.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
DEFINITIONS
Definitions shall apply equally to both the singular and plural
forms of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. All references
herein to Articles, Sections, Exhibits, Annexes and Schedules shall be deemed to
be references to Articles and Sections of, and Exhibits, Annexes and Schedules
to, this Agreement unless the context shall otherwise require. All Exhibits,
Annexes and Schedules attached hereto shall be deemed incorporated herein as if
set forth in full herein and, unless otherwise defined therein, all terms used
in any Exhibit, Annex or Schedule shall have the meaning ascribed to such term
in this Agreement. The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation." The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole
2
<PAGE>
and not to any particular provision of this Agreement. Unless otherwise
expressly provided herein, any agreement, plan, instrument or statute defined or
referred to herein or in any agreement or instrument that is referred to herein
means such agreement, plan, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and instruments
incorporated therein. For the purposes of this Agreement, the following terms
have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, such first Person. The term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agents" means, with respect to any Person, such Person's officers,
directors, employees, attorneys, accountants, investment bankers, financial
advisors or other representatives or agents.
"Agreement of Merger" means the Agreement of Merger, conforming to
the provisions of Section 1101 of California Law, substantially in the form
attached as Exhibit C hereto.
"Alternate Transaction" means (i) a merger, consolidation, share
exchange, business combination, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its Subsidiaries or any
other material corporate transaction (other than the Transactions), the
consummation of which could reasonably be expected to impede, interfere with,
prevent or materially delay the consummation of the Transactions; (ii) a sale,
lease, exchange, transfer or other disposition of 15% or more of the assets of
the Company and its Subsidiaries taken as a whole, in a single transaction or
series of transactions (other than the Transactions); or (iii) the acquisition
by any Person or "group" (as defined in Section 13(d) of the Exchange Act),
other than USA or Parent or any of their respective controlled Affiliates, of
"beneficial ownership" of 15% or more of the issued and outstanding Equity
Securities of the Company whether by tender offer or exchange offer or otherwise
and including a self tender offer.
"April 1999 Warrants" means the warrants identified as such in
Section 3.1(c) of the Company Disclosure Schedule.
"Business Day" means any day other than a day on which (i) banks in
the State of New York are authorized or obligated to be closed or (ii) the New
York Stock Exchange is closed.
3
<PAGE>
"Company Disclosure Schedule" means the disclosure letter delivered
to Parent by the Company concurrently with the execution of this Agreement.
"Company Option Plan" means the Company's 1995 Stock Option Plan, a
copy of which was made available to Parent.
"Company Stock Option" means an option to purchase Company Common
Stock granted pursuant to the Company Option Plan and listed in Section 3.1(c)
of the Company Disclosure Schedule.
"Company Warrant" means a warrant to purchase Company Common Stock
granted pursuant to a Warrant Agreement and listed in Section 3.1(c) of the
Company Disclosure Schedule.
"Contract" means any note, bond, mortgage, indenture, contract,
agreement, commitment, lease, license, permit, franchise, arrangement or other
instrument or obligation whether or not in writing.
"Debt" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money; (ii) all obligations of such
Person evidenced by notes, bonds, debentures or other similar instruments; (iii)
all obligations of such Person as a lessee under a lease that has been or should
be, in accordance with GAAP, recorded as a capital lease; (iv) all obligations,
contingent or otherwise, of such Person under acceptance, letter of credit or
similar facilities; (v) all Debt of others referred to in clauses (i) through
(iv) above guaranteed directly or indirectly in any manner by such Person; and
(vi) all Debt of others referred to in clauses (i) through (v) above secured by
(or for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Debt.
"Equity Securities" has the meaning ascribed to such term in Rule
405 promulgated under the Securities Act as in effect on the date hereof, and in
any event includes any limited partnership interest, any limited liability
company interest and any other interest or security having the attendant right
to vote for directors or similar representatives.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Financial Statements" with respect to the Company, means the
Company's (i) audited balance sheet as of December 31, 1998; (ii) statement of
cash flows and statement of changes in shareholders' equity for the year ended
December 31, 1998; (iii) unaudited balance sheet as of September 30, 1999; and
(iv) unaudited statement of operations for the three month period ended
September 30,
4
<PAGE>
1999, in each case which were provided by the Company to Parent on or prior to
the date hereof; and, with respect to ISN, means ISN's (x) audited balance sheet
as of November 30, 1999 and (y) audited statement of cash flows and statement of
operations for the eleven month period ended November 30, 1999, in each case
which were provided by Parent to the Company on or prior to the date hereof.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Entity" means any foreign, federal, state, municipal
or other governmental or regulatory department, commission, board, bureau,
agency or instrumentality.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Intellectual Property" means all of the following as they exist in
all jurisdictions throughout the world: (i) patents, patent applications and
other patent rights (including any divisions, continuations,
continuations-in-part, substitutions or reissues thereof, whether or not patents
are issued on any such applications and whether or not any such applications are
modified, withdrawn or resubmitted); (ii) trademarks, service marks, trade
dress, trade names, brand names, Internet domain names, designs, logos or
corporate names, whether registered or unregistered, and all registrations and
applications for Registration thereof; (iii) copyrights, including all renewals
and extensions thereof, copyright registrations and applications for
Registration thereof and non-registered copyrights; (iv) trade secrets,
concepts, ideas, designs, research, processes, procedures, techniques, methods,
know-how, data, mask works, discoveries, inventions, modifications, extensions,
improvements and other proprietary rights (whether or not patentable or subject
to copyright, mask work or trade secret protection) (collectively,
"Technology"); and (iv) computer software programs, including all source code,
object code and documentation related thereto (the "Software").
"ISN Option Plan" means the ISN 1999 Stock Option Plan, a copy of
which was made available to the Company.
"ISN Stock Option" means an option to purchase ISN Units granted
pursuant to the ISN Option Plan that is listed in Section 3.2(c) of the Parent
Disclosure Schedule.
"ISN Units" means all of the issued and outstanding limited
liability interests of ISN.
"IRS" means the Internal Revenue Service of the United States of
America.
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"Knowledge" means, with respect to a natural Person, the actual
knowledge of such Person and, with respect to a non-natural Person, the actual
knowledge of such Person's officers and directors (or similar representatives).
"Laws" means any applicable law, statute, rule, regulation or code
of any Governmental Entity.
"Liabilities" means any Debt, liability, claim, loss, or obligation
of any kind, whether accrued or unaccrued, liquidated or unliquidated, secured
or unsecured, absolute, contingent, inchoate or otherwise.
"Material Adverse Change" means, with respect to any Person, a
change, development or effect that, together with all such other changes,
developments or effects, individually or in the aggregate, has had, or is
reasonably likely to have, a Material Adverse Effect on such Person.
"Material Adverse Effect" means, with respect to any Person, any
circumstance (i) that is, or is reasonably likely to be, materially adverse to
the financial condition, business, assets or results of operations of such
Person and its Subsidiaries taken as a whole, or (ii) that adversely affects the
ability of such Person to perform its obligations under this Agreement or to
consummate the Transactions, but in each of clauses (i) and (ii) excluding any
circumstance, fact, change, development, effect, affect or impairment resulting
primarily from (x) events adversely affecting the industry in which such Person
is involved or (y) circumstances, matters or events described on the disclosure
letter delivered by such Person concurrently with execution of this Agreement.
"Media Value" means advertising time on the Network computed on a
net basis at fair market value rates, which shall be determined by taking into
account recent sales by the Network of comparable size, volume and desired times
in similar product categories.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Net Cash Amount" means $40 million less any cash or cash
equivalents owned by ISN at the time of the Contribution.
"Network" means the network of media properties of USA, including
USA Network, SciFi Channel, USA Broadcasting, Ticketmaster, Home Shopping
Network, Sci-Fi.com, USA Networks.com, USA Studios.com and USA Films.com and
others as they may exist from time to time.
"Newco Common Stock" means the Newco Class A Common Stock and the
Newco Class B Common Stock.
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"Officer's Certificate" means a certificate executed by a duly
authorized officer of Merger Sub or the Company, as the case may be, certifying
to the information, and otherwise conforming, to the provisions of Section 1103
of California Law.
"Order" means any applicable order, judgment, injunction, writ or
decree.
"Parent Disclosure Schedule" means the disclosure letter delivered
to the Company by Parent concurrently with the execution of this Agreement.
"Person" means any individual, corporation, partnership, firm, group
(as such term is used in Section 13(d)(3) of the Exchange Act), joint venture,
association, trust, limited liability company, unincorporated organization,
estate, trust or other entity.
"Proprietary Rights Assignment and Non-Disclosure Agreement" means
the form of Employee Confidentiality and Invention Assignment Agreement of the
Company, and any revised versions thereof, in the form provided by the Company
to Parent on or prior to the date hereof, pursuant to which, among other things,
each employee or consultant that is a signatory thereto agrees (i) to
irrevocably assign all right title and interest in any work, invention or
technology developed by such employee or consultant during the term of his
employment or consultancy to the Company, (ii) that any work created by such
employee or consultant during the term of his employment or consultancy to the
Company are work-for-hire and any authorship shall vest in the Company, (iii)
that the employee shall execute any documents necessary for the Company to
perfect its ownership in such works, inventions, or technology, including
without limitation, any patent application, patent assignment forms or copyright
assignment forms and (iv) that they shall not disclose any confidential
information to any third party outside of the Company without the prior written
consent of the Company, except confidential information that is already publicly
disclosed, independently developed, or if so directed by legal process.
"Qualified Alternate Transaction Proposal" means a bona fide written
proposal made by a Third Party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, reorganization, liquidation, dissolution or
similar transaction, in exchange for cash and/or securities, at least 75% of the
outstanding shares of Company Common Stock on terms which the Board of Directors
of the Company determines in good faith (after receipt of a written opinion of a
nationally recognized independent financial advisor, and after taking into
account all legal, financial and regulatory aspects of such proposal, the
identity of the Third Party making the proposal, the strategic benefits to be
derived from the Transactions and the long-term prospects of Newco and its
Subsidiaries) to be (a) more favorable to the Company's stockholders than the
Transactions from a financial point of view, (b) reasonably
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capable of being financed and (c) not subject to any material contingencies
relating to financing.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" of any Person means any corporation, partnership, joint
venture or other legal entity of which such Person (either directly or through
or together with any other Subsidiary of such Person), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or similar governing body of such corporation, partnership, joint venture or
other legal entity.
"Third Party" means any Person other than USA, Parent or the Company
or any of their respective controlled Affiliates.
"Transaction Documents" shall mean this Agreement and each of the
agreements and instruments contemplated hereby or thereby, including the
Agreement of Merger, the Officer's Certificates, the Stockholders Agreement, the
Registration Rights Agreement, the Media Commitment, the Media Warrants, the
License Agreement, the Credit Agreement, the Option Agreement and all documents,
instruments or agreements attached to or contemplated by any of the foregoing.
"Transactions" means, collectively, the transactions contemplated by
this Agreement and the other Transaction Documents.
"Warrant Agreements" means any agreement pursuant to which a Company
Warrant was issued that is listed in Section 3.1(c) of the Company Disclosure
Schedule, in each case in the form provided by the Company to Parent on or prior
to the date hereof.
CROSS-REFERENCES
Each of the following terms shall have the meaning ascribed thereto in the
Section set forth opposite such term:
Term Section
Agreement...................................... Recitals, 1.1(b)
Appraisal Rights............................... 2.3(a)
Black Scholes Option........................... 1.8(a)
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Term Section
- ---- -------
California Law................................. 1.1(a)
Cash Out Elections............................. 1.8(a)
Certificates................................... 2.1(b)
Claim.......................................... 5.2(a)
Closing........................................ 1.4
Closing Date................................... 1.4
Code........................................... Recitals
Company........................................ Recitals
Company Benefit Plans.......................... 3.1(l)(i)
Company Common Stock........................... Recitals
Company Governmental Approvals................. 3.1(g)(i)
Company Permits................................ 3.1(f)
Company Required Consents...................... 3.1(g)(ii)
Company SEC Documents.......................... 3.1(d)
Confidentiality Agreement...................... 8.9
Contribution................................... Recitals
Covered Person................................. 5.2(a)
Credit Agreement............................... Recitals
DGCL........................................... 1.1(a)
Dissenting Shareholders........................ 2.3
Dissenting Shares.............................. 2.3
Effective Time................................. 1.5
Environmental Laws............................. 3.1(o)
ERISA.......................................... 3.1(l)(i)
Exchange Agent................................. 2.2(a)
Exchange Fund.................................. 2.2(a)
Infoseek Litigation............................ 4.2(g)
IP Licenses.................................... 3.1(m)(i)(B)
ISN............................................ Recitals
ISN Benefit Plans.............................. 3.2(l)(i)
ISN Stock Options.............................. 3.2(c)
ISN Permits.................................... 3.2(f)
Key Employee................................... 3.1(y)
License Agreement.............................. 4.2(e)
Liens.......................................... 3.1(a)
Losses......................................... 5.2(a)
Maximum Premium................................ 5.2(c)
Measurement Time............................... 2.3(a)
Media Commitment............................... 4.2(d)
Media Warrant.................................. 4.2(d)
Merger......................................... Recitals
Merger Securities.............................. 2.1(b)
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Term Section
- ---- -------
Merger Sub..................................... Recitals
Merger Sub Common Stock........................ 2.1
Newco.......................................... Recitals
Newco Common Stock............................. Recitals
Option Agreement............................... Recitals
Parent......................................... Recitals
Parent Governmental Approvals.................. 3.2(g)(i)
Parent Required Consents....................... 3.2(g)(ii)
Payment........................................ 3.1(w), 3.2(u)
Principal Company Stockholder.................. Recitals
Proposed Intellectual Property Agreements...... 3.1(m)(i)(D)
Proxy Statement/Prospectus..................... 3.1(t)
Recommendation................................. 3.1(q)
Registration Rights Agreement.................. Recitals
Registration Statement......................... 3.1(t)
Required Shareholder Approval.................. 3.1(e)
Rule 145 Affiliate Agreement................... 5.11
Rule 145 Affiliates............................ 5.11
SARs........................................... 3.1(c)
Software....................................... Recitals
Specified Number............................... 1.8(c)
Stockholders Agreement......................... Recitals
Stockholders' Meeting.......................... 5.5
Surviving Corporation.......................... 1.3
Systems........................................ 3.1(m)(vii)
Tax............................................ 3.1(j)(i)
Tax Return..................................... 3.1(j)(ii)
Technology..................................... Recitals
Term Loan Facility............................. Recitals
Termination Fee................................ 8.3(b)(ii)
USA............................................ Recitals
Voting Agreement............................... Recitals
Waiver Agreement............................... Recitals
WARN........................................... 3.1(l)(xiii)
Year 2000 Compliant............................ 3.1(m)(vii)
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ARTICLE 1
THE CONTRIBUTION AND THE MERGER
Section 1.1 Formation of Newco and Merger Sub. (a) As promptly as
practicable following the execution of this Agreement, Parent shall cause Newco
to be organized as a corporation under the Delaware General Corporation Law (the
"DGCL") and shall cause Merger Sub to be organized as a corporation under the
California General Corporation Law ("California Law"). The Certificate of
Incorporation and By-laws of Newco shall be substantially in the forms attached
hereto as Exhibit D and the Articles of Incorporation and By-laws of Merger Sub
shall be as reasonably agreed to by Parent and the Company prior to the
Effective Time. The officers and directors of Newco and Merger Sub as of the
Effective Time will be determined by Parent subject, with respect to Newco, to
the provisions of the Stockholders Agreement.
(b) As promptly as practicable following the execution of this
Agreement and the organization of Newco and Merger Sub pursuant to Section
1.1(a), Parent shall take all steps necessary (i) to cause the directors of
Newco and Merger Sub to ratify and approve this Agreement, the Agreement of
Merger, the Merger, the Contribution and the other Transactions, (ii) to cause
the Agreement of Merger to be executed on behalf of Newco and Merger Sub, (iii)
to cause Newco, as the sole stockholder of Merger Sub, to adopt and approve this
Agreement, the Agreement of Merger, the Merger, the Contribution and the other
Transactions and (iv) to approve, as the sole stockholder of Newco, the issuance
of Newco Common Stock in connection with the Contribution and the Merger. Unless
the context otherwise requires, the term "Agreement" as used herein refers
collectively to this Agreement and the Agreement of Merger.
Section 1.2 The Contribution. Upon the terms and subject to the
conditions set forth in this Agreement, Parent shall contribute, or cause to be
contributed, to Newco at the Effective Time all of the outstanding ISN Units and
the Net Cash Amount and Newco shall issue to Parent 23,150,790 shares of Newco
Class B Common Stock, plus an additional number of shares of Class B Common
Stock equal to the Specified Number, as calculated pursuant to Section 1.8(c).
Section 1.3 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with California Law, Merger Sub
shall be merged with and into the Company at the Effective Time. Upon and after
the Effective Time, the separate corporate existence of Merger Sub shall cease
and the Company shall be the surviving corporation in the Merger (the "Surviving
Corporation"). In accordance with California Law, all of the rights, privileges,
powers, immunities, purposes and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation and all of the Liabilities and duties of the
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Company and Merger Sub shall become the Liabilities and duties of the Surviving
Corporation.
Section 1.4 Closing. The closing of the Contribution and the Merger
(the "Closing") shall take place at the offices of Paul, Weiss, Rifkind, Wharton
& Garrison at 10:00 a.m. on the first Business Day on which each of the
conditions set forth in Article 5 (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions) have been satisfied or waived by the party entitled
to the benefit of such conditions or at such other place, time and date as the
Company and Parent may agree. The time and date upon which the Closing occurs is
referred to herein as the "Closing Date."
Section 1.5 Effective Time. On the Closing Date (or on such other
date as the Company and Parent may agree), the Company and Parent shall cause
the Merger to be consummated by executing, delivering and filing (or by causing
the execution, delivery and filing) of the Agreement of Merger and a duly
executed Officer's Certificate of each of Merger Sub and the Company
(accompanied by a certificate of satisfaction of the California Franchise Tax
Board (if required) for Merger Sub), with the Secretary of State of the State of
California in accordance with the relevant provisions of California Law and
shall make all other filings or recordings required in connection herewith under
California Law. The Merger shall become effective at such time as the Agreement
of Merger is duly filed, or at such later time as is specified in the Agreement
of Merger and such Officer's Certificate and in accordance with California Law
(the "Effective Time").
Section 1.6 Articles of Incorporation and By-laws. The Articles of
Incorporation of Merger Sub in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until amended in
accordance with its terms and applicable Law; provided, however, that at the
Effective Time, Article I of such articles shall be amended by virtue of this
Agreement to read as follows: "The name of the corporation is Styleclick.com
Inc." The By-laws of Merger Sub in effect at the Effective Time shall be the
By-laws of the Surviving Corporation until amended in accordance with its terms
and applicable law.
Section 1.7 Directors and Officers. The directors and officers of
Merger Sub immediately prior to the Effective Time shall be the directors and
officers, respectively, of the Surviving Corporation as of the Effective Time
and until their successors are duly elected or appointed and qualified in
accordance with applicable law and the Stockholders Agreement.
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Section 1.8 Calculation of Specified Number; Anti-Dilution
Adjustment.
(a) If on or prior to the Effective Time, any holder of an
April 1999 Warrant has exercised its right (each a "Black Scholes Option") to
receive cash in exchange for such April 1999 Warrant as a result of the
Transactions, then the Company shall promptly (and in any event prior to the
Effective Time) notify Parent in writing of each such exercise (the "Cash Out
Elections"), which notice shall include the amount of cash payable to each such
holder. At Closing, the Specified Number shall be calculated in accordance with
the formula set forth in Section 1.8(c).
(b) If at any time following the Effective Time, Newco or the
Surviving Corporation becomes obligated to pay any cash in respect of any
exercise of a Black Scholes Option as a result of the Transactions that was not
reflected in the calculation of the Specified Number pursuant to Section 1.8(a),
then the Specified Number shall be calculated in accordance with the formula set
forth in Section 1.8(c) and Newco shall issue to Parent such additional number
of shares of Newco Class B Common Stock as is equal to the Specified Number so
calculated.
(c) S = (CD/$11.50) * 3
Where, as of any date:
S = the Specified Number as of such date
CD = the aggregate amount of cash paid or payable on or
prior to such date by the Company (and, after the
Merger, Newco or the Surviving Corporation) to holders
of April 1999 Warrants in respect of any Black Scholes
Option, which, in the case of any determination made at
or prior to the Effective Time, shall be the aggregate
amounts set forth in all Cash-Out Elections received by
Parent on or prior to the Effective Time.
(d) The parties shall take all reasonable action necessary to
cause Newco to reserve for issuance a sufficient number of shares of Newco Class
B Common Stock for deliveries required pursuant to this Section 1.8.
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ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of Common Stock of Merger Sub
("Merger Sub Common Stock"):
(a) Effect of Merger on Shares of Merger Sub Common Stock.
Each issued and outstanding share of Merger Sub Common Stock shall be converted
into and become one fully paid and nonassessable share of Common Stock of the
Surviving Corporation and, as converted, shall constitute the only outstanding
shares of capital stock of the Surviving Corporation.
(b) Conversion of Shares of Company Common Stock. Each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Company Common Stock that are owned by the
Company or any Subsidiary of the Company) shall be converted into the right to
receive one share of Newco Class A Common Stock (the "Merger Securities"). At
the Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate that immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (collectively, the
"Certificates") shall cease to have any rights with respect thereto, except the
right to receive the Merger Securities to be issued in consideration therefor
upon surrender of such certificate in accordance with Section 2.2, without
interest.
(c) Cancellation of Company-Owned Stock. Each share of Company
Common Stock that is owned by the Company or any of its Subsidiaries immediately
prior to the Effective Time shall automatically be canceled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
Section 2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company reasonably acceptable to the Company to act as
exchange agent in the Merger (the "Exchange Agent") for purposes of effecting
the exchange for the Merger Securities. At the Effective Time, Parent shall
cause Newco to deposit with the Exchange Agent, for the benefit of the holders
of Certificates, the number of shares of Newco Class A Common Stock issuable
pursuant to Section 2.1(a). For purposes of this Agreement, shares of Newco
Class A Common Stock comprising the Merger Securities and any dividends or
distributions with respect thereto are hereinafter referred to as the "Exchange
Fund." The Exchange
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Agent shall, pursuant to irrevocable instructions, deliver the shares of Newco
Class A Common Stock comprising the Merger Securities in accordance with Section
2.2(b).
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall instruct the Exchange
Agent to mail to each holder of record of a Certificate or Certificates whose
shares were converted into the right to receive the Merger Securities pursuant
to Section 2.1(a) (i) a letter of transmittal specifying that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, in such form and with other
provisions as the Surviving Corporation may reasonably specify and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing the shares of Newco Class A Common Stock
comprising the Merger Securities. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as reasonably may be required by the
Exchange Agent, and acceptance thereof by the Exchange Agent, each holder of a
Certificate shall be entitled to receive in exchange therefor a certificate
representing the shares of Newco Class A Common Stock comprising the Merger
Securities that such holder has the right to receive pursuant to the provisions
of this Article 2, and the Certificate so surrendered shall forthwith be
canceled. The Exchange Agent shall accept such Certificates upon compliance with
such reasonable terms and conditions as the Exchange Agent may impose to effect
an orderly exchange thereof in accordance with normal exchange practices. After
the Effective Time, there shall be no further transfer of Certificates on the
books and records of the Company or its transfer agent and, if such Certificates
are presented to the Company or its transfer agent for transfer, they shall be
canceled against delivery of certificates representing the shares of Newco Class
A Common Stock comprising the Merger Securities that such holder has the right
to receive pursuant to the provisions of this Article 2, and the Certificate so
surrendered shall forthwith be canceled. If any certificates for shares of Newco
Class A Common Stock are to be issued in a name other than that in which the
Certificate surrendered for exchange is registered, it shall be a condition of
such exchange that the Certificate so surrendered shall be properly endorsed,
with the signature guaranteed, or otherwise in proper form for transfer and that
the Person requesting such exchange shall pay to Newco or its transfer agent any
transfer or other taxes required by reason of the issuance of certificates
representing such shares of Newco Class A Common Stock in a name other than that
of the registered holder of the Certificate surrendered, or establish to the
satisfaction of Newco or its transfer agent that such tax has been paid or is
not required to be paid under applicable Law. Until surrendered as contemplated
by this Section 2.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender
certificates representing the shares of Newco Class A Common Stock to which such
holder is entitled and cash and other dividends, distributions or payments as
contemplated by this Section 2.2. Subject to applicable Law, following surrender
of any such Certificate, there shall be paid to the record holder thereof, the
certificates representing the shares of Newco Class A Common Stock issued in
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exchange therefor, as well as, (x) at the time of such surrender, the amount of
dividends or other distributions or payments with a record date after the
Effective Time theretofore paid with respect to such shares of Newco Class A
Common Stock, and (y) at the appropriate payment date, the amount of dividends
or other distributions or payments with a record date after the Effective Time
but prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Newco Class A Common Stock. In no event shall
Persons entitled to receive such dividends, distributions or payments be
entitled to receive any interest thereon.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions or payments declared or made after the
Effective Time with respect to Newco Class A Common Stock, with a record date
after the Effective Time, shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Newco Class A Common Stock represented
thereby until the holder of record of such Certificate has surrendered such
Certificate.
(d) No Further Ownership Rights in Company Common Stock. The
shares of Newco Class A Common Stock comprising the Merger Securities issued
upon the surrender for exchange of Certificates in accordance with the terms of
this Article 2, together with any dividends, distributions or payments
contemplated by Section 2.2(b) shall be deemed to have been issued (and paid) in
full satisfaction of all rights in respect of the shares of Company Common Stock
theretofore represented by such Certificates. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Article
2.
(e) Termination of Exchange Fund. Any portion of the Exchange
Fund, including any shares of Newco Class A Common Stock attributable to
Dissenting Shares, which remains undistributed to the former stockholders of the
Company for six months after the Effective Time shall be delivered to the
Surviving Corporation, upon demand, and any former stockholders of the Company
who have not theretofore complied with this Article 2 shall thereafter look only
to the Surviving Corporation for payment of their claim for any Merger
Securities and any dividends or distributions or other payments with respect to
Company Common Stock. If any Certificates have not been surrendered prior to
five years after the Effective Time (or immediately prior to such earlier date
on which any Merger Securities in respect of such Certificate would otherwise
escheat to or become the property of any Governmental Entity), any amounts
payable in respect of such Certificate shall, to the extent permitted by
applicable Law, become the property of the Surviving Corporation, free and clear
of all claims or interests of any Person previously entitled to such amounts.
(f) No Liability. None of Newco, the Surviving
Corporation, the Exchange Agent or any other Person shall be liable to any
Person in respect of any shares of Newco Class A Common Stock comprising the
Merger
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Securities delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
Section 2.3 Appraisal Rights.
(a) Notwithstanding anything in this Agreement to the
contrary, shares ("Dissenting Shares") of Company Common Stock outstanding
immediately prior to the Effective Time and held by any holder who is entitled
to demand, and who properly demands, appraisal for such shares in accordance
with Section 1300 et. seq. of California Law and is otherwise entitled to the
protections afforded a "dissenting shareholder" as such term is used in such
sections of California Law (collectively, the "Dissenting Shareholders"), shall
not be converted as provided in Section 2.1, unless such holder fails to perfect
or otherwise loses any rights to appraisal of such Dissenting Shares under, and
shall otherwise cease to be a "dissenting shareholder" as provided in, such
sections of California Law. If, after the Effective Time, such holder fails to
perfect or loses any such right to appraisal, such Dissenting Shares shall be
treated as if they had been converted as of the Effective Time into the right to
receive Merger Securities. The Company shall give ISN (i) prompt written notice
of any demands for appraisal or payment, and any withdrawals of such demands,
received by the Company and any other related instruments served pursuant to
California Law and received by the Company, and (ii) the opportunity to direct
all negotiations and proceedings with respect to demands for payment under
California Law. The Company shall not, except with the prior written consent of
ISN, enter into any agreement or settlement with any Dissenting Shareholder or
otherwise make any payment with respect to any demands for appraisal or payment
or negotiate, offer to settle or settle any such demands.
(b) If at any time (the "Measurement Time") following the Effective
Time, Newco or the Surviving Corporation becomes obligated to pay any cash in
respect of any exercise by a Dissenting Shareholder of its appraisal rights
under California Law in respect of any Dissenting Shares as a result of the
Transactions ("Appraisal Rights"), then the Appraisal Number shall be calculated
in accordance with the formula set forth in Section 2.3(c) and Newco shall issue
to Parent such additional number of shares of Newco Class B Common Stock as is
equal to the Appraisal Number so calculated.
(c) A = [(CD/$11.50) - S] * 3
Where, as of a Measurement Time:
A = the Appraisal Number as of such time
CD = the aggregate amount of cash paid or payable as of the
Measurement Time by Newco or the Surviving
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Corporation to Dissenting Shareholders by reason of the
exercise of any Appraisal Right in respect of Dissenting
Shares.
S = the aggregate number of shares purchased from
Dissenting Shareholders.
(d) The parties shall take all reasonable action to cause Newco to
reserve for issuance a sufficient number of shares of Newco Class B Common Stock
for delivery pursuant to Section 2.3(c).
Section 2.4 Treatment of Stock Options and Warrants.
(a) The Company and Parent shall take such actions as are
necessary to provide that at the Effective Time each outstanding Company Stock
Option and Company Warrant that is not canceled in accordance with its terms as
a result of the Merger and Contribution shall be assumed by Newco and converted
into an option or warrant, as the case may be, to purchase the same number of
shares of Newco Class A Common Stock at the same per share exercise price as
applied to the Company Stock Option or Company Warrant, as the case may be,
prior to such conversion. Following the Effective Time, each Company Stock
Option and Company Warrant shall continue to have, and shall be subject to, the
same terms and conditions as set forth in the Company Option Plan, the Warrant
Agreements and any other agreement pursuant to which such Company Stock Option
or Company Warrant was subject immediately prior to the Effective Time, as the
case may be.
(b) The Company and Parent shall take such actions as are
necessary to provide that at the Effective Time each outstanding ISN Stock
Option that is not canceled in accordance with its terms as a result of the
Merger and Contribution shall be assumed by Newco and converted into an option
to purchase .601 shares of Newco Class A Common Stock at a per share exercise
price equal to the product of 1.664 and the per share exercise price of the ISN
Stock Option prior to such conversion. Following the Effective Time, each ISN
Stock Option shall continue to have, and shall be subject to, the same terms and
conditions as set forth in the ISN Option Plan, and any other agreement pursuant
to which such ISN Stock Option was subject immediately prior to the Effective
Time, as the case may be, and as the same may be amended or waived from time to
time in accordance therewith.
(c) As soon as practicable following the date hereof, the
Company shall deliver to the holders of the Company Stock Options and holders of
the Company Warrants appropriate notices setting forth such holders' rights
after giving effect to the Merger and the provisions set forth above. At or
prior to the Effective Time, the Company shall make such amendments and take
such other actions, if any, to the Company Option Plan, the Warrant Agreements
or such other agreements pursuant to which the Company Stock Options or the
Company Warrants
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were issued as shall be necessary to permit the assumption and adjustment
referred to in this Section 2.4, subject in each case to the approval of Parent.
(d) As soon as practicable following the date hereof, Parent
shall deliver, or cause to be delivered, to the holders of the ISN Stock Options
appropriate notices setting forth such holders' rights after giving effect to
the Merger and the provisions set forth above. At or prior to the Effective
Time, Parent shall make, or cause to be made, such amendments and take, or cause
to be taken such other actions, if any, to the ISN Option Plan or any agreements
pursuant to which the ISN Stock Options were issued as shall be necessary to
permit the assumption and adjustment referred to in this Section 2.4.
(e) It is the intention of the parties that, to the extent any
Company Stock Option or ISN Stock Option constituted an incentive stock option
immediately prior to the Effective Time, such option shall continue to qualify
as an incentive stock option to the maximum extent permitted by Section 422 of
the Code, and that the assumption of the Company Stock Options and ISN Stock
Options provided by this Section 2.4 satisfy the conditions set forth in Section
424(a) of the Code. Newco shall comply with the terms of the Company Option Plan
and ensure, to the extent required by, and subject to the provisions of such
Company Option Plan, that the Company Stock Options and ISN Stock Options that
qualified as incentive stock options prior to the Effective Time continue to
qualify as incentive stock options after the Effective Time.
(f) Newco shall take all corporate action necessary to
establish a stock option plan and to reserve for issuance thereunder a
sufficient number of shares of Newco Class A Common Stock for delivery upon
exercise of the Company Stock Options, the Company Warrants and the ISN Stock
Options at and after the Effective Time and such additional shares for future
option grants as shall be determined by the Board of Directors of Newco.
Section 2.5 Adjustments. If, prior to the Effective Time, any change
in the number of outstanding shares of Company Common Stock shall occur,
including by reason of any reclassification, recapitalization, stock dividend,
stock split or combination, exchange or readjustment of shares of Company Common
Stock, or any stock dividend thereon with a record date prior to the Effective
Time, the Merger Securities and any other amounts payable pursuant to this
Agreement, as the case may be, shall be appropriately adjusted.
Section 2.6 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will pay,
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in exchange for such affidavit claiming such Certificate is lost, stolen or
destroyed, the Merger Securities to be paid in respect of the shares of Company
Common Stock represented by such Certificate, as contemplated by this Article 2.
Section 2.7 Withholding Rights. Each of Newco, the Surviving
Corporation and the Exchange Agent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock such amounts as Newco, the Surviving Corporation
or the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Newco, the
Surviving Corporation or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
a Certificate in respect of which such deduction and withholding was made by
Newco, the Surviving Corporation or the Exchange Agent.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Company. The
Company represents and warrants to Parent as follows:
(a) Organization, Standing and Corporate Power; Subsidiaries.
The Company and each of its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, and is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure so to qualify would not have a Material Adverse Effect with respect to
the Company. Section 3.1(a) of the Company Disclosure Schedule sets forth, as of
the date hereof, a true and complete list of all of the Company's Subsidiaries,
including (x) the jurisdiction of incorporation of each such Subsidiary and (y)
the percentage of each such Subsidiary's outstanding capital stock, and the
nature of such capital stock, owned by the Company and/or another Subsidiary of
the Company, as the case may be. All of the outstanding shares of capital stock
in each of the Subsidiaries of the Company are duly authorized, validly issued,
fully paid and nonassessable and, except as set forth in Section 3.1(a) of the
Company Disclosure Schedule, are owned (of record and beneficially) by the
Company and/or by another Subsidiary of the Company, as the case may be, free
and clear of all pledges, claims, options, rights of first refusal, liens,
charges, encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"), and are not subject to preemptive rights created by
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statute, such Subsidiary's Articles of Incorporation or By-laws (or similar
constituent documents) or any agreement to which such Subsidiary is a party or
by which such Subsidiary is bound. Other than as set forth in Section 3.1(a) of
the Company Disclosure Schedule, the Company does not directly or indirectly own
any Equity Securities in any Person.
(b) Articles of Incorporation and By-laws. Complete and
correct copies of the Articles of Incorporation and By-laws, each as amended to
date, of the Company and each of its Subsidiaries have been delivered to Parent.
The Articles of Incorporation and By-laws of the Company and each of its
Subsidiaries are in full force and effect. Neither the Company nor any of its
Subsidiaries is in violation of any provision of its Articles of Incorporation
or By-laws.
(c) Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 15,000,000 shares of Company Common
Stock, of which (i) 7,716,930 shares are issued and outstanding, all of which
are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights, whether created by statute, the Articles of
Incorporation or By-Laws of the Company or any agreement to which the Company is
party or bound or otherwise, (ii) 2,500,000 shares are reserved for future
issuance pursuant to the Company Option Plan, (iii) 2,386,269 shares are
reserved for future issuance pursuant to the Warrant Agreements; and (iv) no
shares are held in the treasury of the Company or by its Subsidiaries.
Section 3.1(c) of the Company Disclosure Schedule sets forth, (v)
the Persons to whom Company Stock Options or Company Warrants have been granted,
(w) the exercise price for the Company Stock Options or the Company Warrants
held by each such Person, (x) whether such the Company Stock Options or the
Company Warrants are subject to vesting and, if subject to vesting, the dates on
which each such Company Stock Option or the Company Warrant vest, (y) the
agreement pursuant to which such Company Stock Option or Company Warrant was
issued and (z) whether any such Company Stock Options or Company Warrants are
subject to adjustment in the exercise price thereof or subject to rights of the
holders thereof to receive any property (including cash) other than (A) prior to
the Effective Time, shares of Company Common Stock and (B) following the
Effective Time, shares of Newco Class A Common Stock. Section 3.1(c) of the
Company Disclosure Schedule also identifies which Company Warrants are April
1999 Warrants. Except as set forth in Section 3.1(c) of the Company Disclosure
Schedule, none of the Company Stock Options or the Company Warrants which are
subject to vesting will vest as a result of the consummation of the
Transactions. Except as described in this Section 3.1(c) of the Company
Disclosure Schedule, no shares of capital stock or other Equity Securities of
the Company are authorized, issued or outstanding, or reserved for any other
purpose, and there are no options, warrants or other rights (including
Registration rights), agreements, arrangements or commitments of any character
to which the Company or any of its Subsidiaries is a party relating to the
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issued or unissued capital stock or other Equity Securities or ownership
interests of the Company or any of its Subsidiaries or with respect to any stock
appreciation right or similar derivative security or instrument ("SARs"), or
obligating the Company or any of its Subsidiaries to grant, issue or sell any
Equity Securities or any SARs of the Company or any of its Subsidiaries, by
sale, lease, license or otherwise. Other than pursuant to or as contemplated by
the Credit Agreement, there is no outstanding Debt of the Company, except up to
$0.5 million of Debt incurred in the ordinary course of business, and none of
the Debt provides the holders with the right to vote or is otherwise convertible
into or exercisable for securities having the right to vote with the
stockholders of the Company on any matter. Other than as contemplated by this
Agreement or as set forth in Section 3.1(c) of the Company Disclosure Schedule,
there are no outstanding contractual obligations, commitments, understandings or
arrangements of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire or make any payment in respect of any shares of capital stock
or other equity securities or ownership interests or SARs of the Company or any
of its Subsidiaries.
(d) SEC Documents; Financial Statements. The Company has made
available to Parent a true and complete copy of each form, report, schedule,
registration statement and definitive proxy statement filed by the Company with
the SEC since January 1, 1997 (as such documents have since the time of their
filing been amended or supplemented, the "Company SEC Documents"), which are all
of the documents that the Company was required to file with the SEC since
January 1, 1997. Except as set forth in Section 3.1(d) of the Company Disclosure
Schedule, as of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the Company SEC Documents (including
all financial statements included therein and all exhibits and schedules thereto
and documents incorporated by reference therein) contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Financial
Statements delivered by the Company to Parent comply as to form in all material
respects with applicable accounting requirements and with the rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of the unaudited Financial
Statements, as permitted by Exchange Act Form 10-Q) and fairly present (subject,
in the case of the unaudited Financial Statements, to normal, recurring audit
adjustments that, individually and in the aggregate, were not material) the
financial position of the Company and its Subsidiaries as at the dates thereof
and the results of each of their operations and cash flows for the periods then
ended. There are no Liabilities of any kind required to be disclosed under GAAP
that are not disclosed, reflected or reserved against in the Financial
Statements of the Company, except for such Liabilities incurred in the ordinary
course of business consistent with past practice since the date of the Company's
most recent audited Financial Statements or as set
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forth in Section 3.1(d) of the Company Disclosure Schedule or as would not have
a Material Adverse Effect with respect to the Company.
(e) Authority. The Company has all requisite corporate power
and authority to enter into this Agreement and each of the other Transaction
Documents to which it is party, to perform its obligations hereunder and
thereunder and to consummate the Transactions. The execution and delivery of
this Agreement and each of the other Transaction Documents to which it is party
and the consummation of the Transactions have been duly and validly authorized
by all necessary corporate action on the part of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or the other Transaction Documents to which the Company is party or to
consummate the Transactions, subject, in the case of the Merger, to the approval
thereof by the shareholders of a majority of the issued and outstanding Company
Common Stock (the "Required Shareholder Approval") and the filing and
recordation of the Agreement of Merger, in each case in accordance with the
requirements of California Law. This Agreement and each of the other Transaction
Documents to which the Company is party have been duly and validly executed and
delivered by the Company and constitute a valid and binding obligation of the
Company enforceable against the Company in accordance with their terms, subject,
in the case of the Merger, to the Required Shareholder Approval and the filing
and recordation of the Agreement of Merger, in each case in accordance with the
requirements of California Law. To the Knowledge of the Company, as of the date
hereof, the Principal Company Stockholders and Intel Corporation collectively
own of record 32.65% of the issued and outstanding shares of Company Common
Stock.
(f) Compliance with Applicable Laws. Each of the Company and
its Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities, except where any such failure so to
hold, individually and in the aggregate, would not have a Material Adverse
Effect with respect to the Company (the "Company Permits"). The Company and its
Subsidiaries are in compliance with the terms of the Company Permits in all
material respects. The businesses of the Company and its Subsidiaries are not
being conducted in violation of any material Law. No investigation or review by
any Governmental Entity with respect to the Company or any of its Subsidiaries
is pending or, to the Knowledge of the Company, threatened, nor, to the
Knowledge of the Company, has any Governmental Entity indicated an intention to
conduct the same.
(g) Government Approvals; Required Consents.
(i) No consent, approval, authorization or action of,
declaration or filing with, or notice to, any Governmental Entity on the part of
the Company is required in connection with the execution or delivery by the
Company of this Agreement or any of the other Transaction Documents to which the
Company is party, the consummation by the Company of the Transactions or
compliance by the
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Company with the terms hereof or thereof, other than (A) filing the Agreement of
Merger in accordance with the requirements of California Law, (B) filings with
the SEC and NASDAQ, (C) filings under state securities or "Blue Sky" laws, (D)
filings under the HSR Act, (any such consents, approvals, authorizations,
declarations, filings or notices specified in clauses (A) through (D) being
referred to as the "Company Governmental Approvals") and (F) such consents,
approvals, authorizations, declarations, filings or notices that, individually
and in the aggregate, would not have a Material Adverse Effect with respect to
the Company.
(ii) No consent, approval, authorization or action of,
filing with, or notice to, any Person (other than a Governmental Entity) shall
be required in connection with the execution or delivery by the Company of this
Agreement or any of the other Transaction Documents to which the Company is
party, consummation by the Company of the Transactions or compliance by the
Company with the terms hereof or thereof, other than (A) as set forth in Section
3.1(g)(ii) or Section 3.1(h) of the Company Disclosure Schedule (the "Company
Required Consents") or (B) such consents, approvals, actions, filings or notices
that, individually and in the aggregate, would not have a Material Adverse
Effect with respect to the Company.
(h) Non-Contravention. The execution, delivery and performance
by the Company of this Agreement and the other Transaction Documents to which
the Company is party and the consummation of the Transactions do not and will
not (i) contravene or conflict with or result in any violation or breach of any
provision of the Articles of Incorporation or By-laws of the Company or any of
its Subsidiaries, (ii) assuming all Company Governmental Approvals and Company
Required Consents have been made or obtained, contravene or conflict with or
result in a violation or breach of any provision of any Law or order binding
upon or applicable to the Company or any of its Subsidiaries or any of their
respective assets, (iii) require any consent or other action by any Person
under, constitute a default under or give rise to a right of termination,
cancellation, change of any right or obligation, or acceleration of any right or
obligation or to the loss of any benefit or adverse modification of the effect
(including an increase in the price paid by, or cost to, the Company or any of
its Subsidiaries) of, or under any provision of any agreement or other
instrument to which the Company is a party or that is binding upon the Company
or any of its Subsidiaries or their properties or assets or any license,
franchise, permit or other similar authorization held by the Company or any of
its Subsidiaries or (iv) result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries, except with respect to clauses
(iii) and (iv) as set forth in Section 3.1(h) of the Company Disclosure
Schedule; provided, however, that clauses (ii) through (iv) above address only
those matters that, individually or in the aggregate, would have a Material
Adverse Effect with respect to the Company.
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(i) Litigation. As of the date of this Agreement, except as
set forth in Section 3.1(i) of the Company Disclosure Schedule, there is no
suit, claim, action or proceeding pending, or, to the Knowledge of the Company,
threatened against the Company or any of its Affiliates that, individually or in
the aggregate, would have a Material Adverse Effect with respect to the Company,
nor is there any Order of any Governmental Entity outstanding against the
Company or any of its Affiliates that, individually or in the aggregate, would
have a Material Adverse Effect with respect to the Company.
(j) Taxes and Related Tax Matters.
(i) Other than Taxes that individually and in the
aggregate are not material (A) all federal, state, county, local, foreign and
other taxes (including, without limitation, income, profits, premium, estimated,
excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance,
capital levy, production, transfer, withholding, employment, unemployment
compensation, payroll related and property taxes, import duties and other
governmental charges and assessments), whether or not measured in whole or in
part by net income, and including deficiencies, interest, additions to tax or
interest, penalties with respect thereto and expenses associated with contesting
any proposed adjustment related to any of the foregoing (hereinafter "Taxes" or,
individually, a "Tax") required to be paid on or before the date hereof by or
with respect to the Company and its Subsidiaries (or any of them) have been
timely paid, and (B) any Taxes required to be paid by or with respect to the
Company and its Subsidiaries (or any of them) after the date hereof and on or
before the Effective Time shall be timely paid.
(ii) All material returns and reports required to be
filed (hereinafter "Tax Returns" or, individually, a "Tax Return") by or with
respect to the Company and its Subsidiaries (or any of them) with respect to
Taxes on or before the date hereof have been timely filed. All material Tax
Returns required to be filed by or with respect to the Company and its
Subsidiaries (or any of them) after the date hereof and on or before the
Effective Time shall be prepared and timely filed, in a manner consistent with
prior years and applicable laws and regulations. No penalties or other charges
in a material amount are or will become due with respect to the late filing of
any Tax Return of the Company or any of its Subsidiaries or payment of any Tax
of the Company or any of its Subsidiaries, required to be filed or paid on or
before the Effective Time.
(iii) With respect to all Tax Returns filed by or with
respect to the Company and any of its Subsidiaries, except as set forth in
Section 3.1(j) of the Company Disclosure Schedule, (A) the statute of
limitations for the assessment of Taxes has expired with respect to all periods
ending on or before August 31, 1995; (B) no audit is in progress and no
extension of time has been executed with respect to any date on which any Tax
Return was or is to be filed and no waiver or agreement has been executed for
the extension of time for the
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assessment or payment of any Tax; and (C) there is no unassessed deficiency
proposed or threatened against the Company or any of its Subsidiaries.
(iv) Neither the Company, nor any of its Subsidiaries
or Affiliates (or any of them) has taken, or agreed to take any action, that
would prevent the Contribution and Merger from qualifying as tax-free events
under Section 351 or Section 368 of the Code.
(v) Except as set forth in Section 3.1(j) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has
been or is a party to any tax sharing agreement or similar arrangement.
(vi) Except as set forth in Section 3.1(j) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has
been part of a group of affiliated corporations that has filed a consolidated
federal income tax return.
(k) Certain Agreements. Except for this Agreement and as set
forth in Section 3.1(k) and/or Section 3.1(l) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to any oral
or written (i) union or collective bargaining agreement, (ii) agreement with any
executive officer or other key employee of the Company or any of its
Subsidiaries the benefits of which are contingent, or the terms of which would
be materially altered, upon the consummation of the Transactions, (iii)
agreement with respect to any executive officer of the Company providing any
term of employment or compensation guarantee extending beyond December 31, 2000
or for the payment of in excess of $200,000 per annum (excluding any signing
bonuses, performance-based or other discretionary bonuses or expense
reimbursements provided under a plan disclosed in Section 3.1(l) of the Company
Disclosure Schedule) or (iv) plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
would be accelerated, by the occurrence of any of the Transactions or the value
of any of the benefits of which will be calculated on the basis of any of the
Transactions.
(l) Employee Benefit Plans; Employee Relations. The following
representations and warranties contained in this Section 3.1(l) are qualified by
such exceptions which, individually and in the aggregate, would not have a
Material Adverse Effect with respect to the Company:
(i) Section 3.1(l)(i) of the Company Disclosure
Schedule contains a true and complete list of each "employee benefit plan"
(within the meaning of section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), including multiemployer plans within the
meaning of ERISA section 3(37)), stock purchase, stock option, severance,
employment, change-in- control, fringe benefit, welfare benefit, collective
bargaining, bonus, incentive,
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deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA
(including any funding mechanism therefor now in effect or required in the
future as a result of the Transactions contemplated by this Agreement or
otherwise), whether formal or informal, oral or written, legally binding or not,
under which any employee or former employee of the Company has any present or
future right to benefits or under which the Company has any present or future
liability. All such plans, agreements, programs, policies and arrangements shall
be collectively referred to as the "Company Benefit Plans." Where appropriate
all references to the "Company" in this Section 3.1(l) refer to the Company and
any member of its "controlled group" within the meaning of Section 414 of the
Code.
(ii) The Company has, with respect to each Company
Benefit Plan, if applicable, delivered or made available to the Purchaser true
and complete copies of: (i) all plan texts and agreements and related trust
agreements (or other funding vehicles); (ii) the most recent summary plan
descriptions and material employee communications; (iii) the most recent annual
report (including all schedules thereto); (iv) the most recent annual audited
financial statement and opinion; (v) if the plan is intended to qualify under
Code section 401(a), the most recent determination letter received from the IRS;
and (vi) all material communications with any governmental entity or agency
(including the PBGC and the IRS) given or received within the past three years.
(iii) Except as set forth in Section 3.1(l)(iii) of the
Company Disclosure Schedule, all amounts properly accrued as liabilities to or
expenses of any Company Benefit Plan have been properly reflected on the
Company's most recent financial statements to the extent required by GAAP. Since
the date of the Company's most recent financial statements, there has been no
amendment or change in interpretation by the Company relating to any Company
Benefit Plan which would materially increase the cost thereof.
(iv) No Company Benefit Plan is subject to either
Code section 412 or Title IV of ERISA.
(v) Each Company Benefit Plan is in material
compliance with all applicable Laws. Each Company Benefit Plan which is intended
to qualify under Code section 401(a) has been issued a favorable determination
letter by the IRS and has not been amended in a manner, and no event has
occurred since such date, which would cause any such plan to fail to remain so
qualified. Each Company Benefit Plan that requires registration with a relevant
government body has been so registered.
(vi) Except as set forth in Section 3.1(l)(vi) of the
Company Disclosure Schedule, there are no actions, liens, suits or claims
pending or, to Company's Knowledge, threatened (other than routine claims for
benefits) with
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respect to any Company Benefit Plan as to which the Company has or could
reasonably be expected to have any direct or indirect actual or contingent
material liability.
(vii) Each Company Benefit Plan which is a "group
health plan" (as defined in ERISA section 607(1)) is in material compliance with
the provisions of COBRA (within the meaning of Code section 4980B), Health
Insurance Portability and Accountability Act and any other applicable federal,
state or local Law.
(viii) There are no (i) Company Benefit Plans
maintained by the Company pursuant to which welfare benefits are provided to
current or former employees beyond their retirement or other termination of
service, other than coverage mandated by COBRA, the cost of which is fully paid
by the current or former employees or their dependents; or (ii) unfunded Company
Benefit Plan obligations with respect to any employee of the Company which are
not fairly reflected by reserves shown on the Financial Statements of the
Company.
(ix) Except as set forth in Section 3.1(l)(ix) of the
Company Disclosure Schedule, the consummation of the Transactions will not (i)
entitle any current or former employee of the Company to severance pay,
unemployment compensation or any similar payment or (ii) accelerate the time of
payment or vesting, or increase the amount of any compensation due to, any
current or former employee of the Company.
(x) No Company Benefit Plan is a "multiemployer
plan" or "multiple employer plan" within the meaning of the Code or ERISA or the
regulations promulgated thereunder.
(xi) Neither the Company nor any Company Benefit
Plan, or to the Company's Knowledge any "disqualified person" (as defined in
Code section 4975) or any "party in interest" (as defined in ERISA section
3(18)), has engaged in any non-exempt prohibited transaction (within the meaning
of Code section 4975 or ERISA section 406) which could reasonably be expected to
result in any material liability to any of the Company.
(xii) None of the Company's employees is represented
by a union, and to Company's Knowledge no union organizing efforts have been
conducted within the last five years or are now being conducted. The Company
does not currently have, nor to Company's Knowledge, is there now threatened, a
strike, picket, work stoppage, work slowdown or other organized labor dispute.
The Company has not as of the date hereof incurred any liability or obligation
under the Worker Adjustment and Retraining Notification Act, as it may have been
amended from time to time ("WARN") or any similar state law.
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(m) Intellectual Property.
(i) Disclosure.
(A) Section 3.1(m)(i)(A) or Section 3.1(m)(i)(B) of
the Company Disclosure Schedule sets forth all United States and foreign
patents and patent applications, trademark and service mark registrations
and applications, Internet domain name registrations and applications and
copyright registrations and applications owned or licensed by the Company
or any of its Subsidiaries specifying as to each item, as applicable; the
nature of the item, including the title; the owner of the item; the
jurisdictions in which the item is issued or registered or in which an
application for issuance or registration has been filed; and the issuance,
registration, or application numbers and dates.
(B) Section 3.1(m)(i)(B) of the Company Disclosure
Schedule sets forth all material licenses, sublicenses and other
agreements or permissions ("IP Licenses") under which the Company or any
of its Subsidiaries is a licensor or licensee or otherwise is authorized
to use or practice any Intellectual Property.
(C) Except as set forth in Section 3.1(m)(i)(C) of
the Company Disclosure Schedule, all Intellectual Property that is
material to the business or development of the Company has been developed
by employees of the Company and all such employees have executed a
Proprietary Rights Assignment and Non-Disclosure Agreement.
(D) Section 3.1(m)(i)(D) of the Company Disclosure
Schedule sets forth and describes the status of any material agreements
involving Intellectual Property currently in negotiation or proposed
("Proposed Intellectual Property Agreements") by the Company or any of its
Subsidiaries.
(ii) Ownership. The Company and its Subsidiaries
own, free and clear of all Liens, and have the unrestricted right to use, sell
or license, all Intellectual Property in their possession, except for failures
to own free and clear or to have the unrestricted right to use, sell, or license
that, individually and in the aggregate, would not have a Material Adverse
Effect with respect to the Company and except for technology licensed to the
Company and listed on Section 3.1(m)(i)(B) of the Company Disclosure Schedule.
Notwithstanding the foregoing, the Company currently possesses free and clear of
all liens or assignments, all Intellectual Property rights necessary in order
for the Company to continue operating its current business.
(iii) Claims. Except as set forth in Section 3.2(m)(ii)
of the Company Disclosure Schedule, the Company and its Affiliates have not been
a
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party to any Claim, nor, to the Company's Knowledge, is any such Claim
threatened, that challenges the validity, enforceability, ownership, or right to
use, sell or license, any Intellectual Property in the possession of the Company
or any of its Subsidiaries. To the Company's Knowledge, no third party is
infringing upon any such Intellectual Property.
(iv) Administration and Enforcement. The Company
and its Subsidiaries have taken all necessary and desirable actions to maintain
and protect each item of Intellectual Property owned by the Company or its
Subsidiaries, as the case may be, except for failures to take such actions that,
individually and in the aggregate, would not have a Material Adverse Effect with
respect to the Company.
(v) Protection of Trade Secrets and Technology. The
Company and its Subsidiaries have taken all reasonable precautions to protect
the secrecy, confidentiality and value of their respective trade secrets and the
proprietary nature and value of their respective Technology, including requiring
all employees and contractors to execute a Proprietary Rights Assignment and
Non-Disclosure Agreement.
(vi) Software. All material Software used by the
Company and its Subsidiaries performs in conformance with its documentation,
except for failures to perform that, individually and in the aggregate, would
not have a Material Adverse Effect with respect to the Company. The Transactions
will not require any third party consents under the terms of the documentation
related to the Software other than (A) as set forth in Section 3.1(m)(vi) of the
Company Disclosure Schedule or (B) such consents that, individually and in the
aggregate, would not have a Material Adverse Effect with respect to the Company.
(vii) Year 2000 Compliance. All Software, hardware,
databases and embedded control systems (collectively, the "Systems") used by the
Company and its Subsidiaries are Year 2000 Compliant, except for failures to be
Year 2000 Compliant that, individually and in the aggregate, would not have a
Material Adverse Effect with respect to the Company. As used herein, the term
"Year 2000 Compliant" means that the Systems (i) accurately process date and
time data (including calculating, comparing and sequencing) from, into and
between the twentieth and twenty-first centuries, the years 1999 and 2000 and
leap year calculations and (ii) operate accurately with other software and
hardware that use standard date format (4 digits) for representation of the
year.
(viii) Effect of Transaction. The Company and its
Subsidiaries are not, nor, as a result of the execution and delivery of this
Agreement, the consummation of the Transactions or the performance of the
Company's obligations hereunder, will be, in violation of any agreement relating
to any Intellectual Property, except for violations that, individually and in
the aggregate,
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would not have a Material Adverse Effect with respect to the Company. Upon
consummation of the transactions, the Surviving Corporation will own all right,
title and interest in and to or have a license to use all Intellectual Property
on identical terms and conditions as the Company or its Subsidiaries, as the
case may be, enjoyed immediately prior to such Transactions, except for failures
to own or have available for use that would not have a Material Adverse Effect
with respect to the Company.
(n) Contracts. Except as set forth on Section 3.1(n) of the
Company Disclosure Schedule, all material Contracts of the Company and its
Subsidiaries have been filed with the SEC (whether or not required to have been
filed) and the Company is not, and to the Knowledge of the Company no other
parties thereto are, in default, breach or violation of any such Contracts,
except for such defaults, breaches or violations that, individually and in the
aggregate, would not have a Material Adverse Effect with respect to the Company.
Except as set forth in Section 3.1(n) of the Company's Disclosure Schedule,
neither the Company nor any of its Subsidiaries is a party to or bound by any
Contract (i) restricting the ability of the Company or any of its Subsidiaries
(or after the Merger, Newco or any of its Subsidiaries) to compete in or conduct
any line of business or to engage in any business in any geographic area, (ii)
containing any covenants of any other person not to compete in any material
respect with the Company or any of its Subsidiaries, (iii) containing any
so-called "most favored nation" provisions or any similar provision requiring
the Company or any of its Subsidiaries (or after the Merger, Newco or any of its
Subsidiaries) to offer a third party terms or concessions at least as favorable
as offered to one or more other parties.
(o) Environmental Matters. (i) the Company and each of its
Subsidiaries has obtained and is in material compliance with the terms and
conditions of all permits, licenses and other authorizations required under
applicable federal, state, local and foreign laws, regulations and codes as
currently in effect relating to pollution and protection of the environment
("Environmental Laws"); (ii) no asbestos in a friable condition or equipment
containing polychlorinated biphenyls or leaking underground or above-ground
storage tanks are contained in or located at any facility owned, leased or
controlled by the Company or any of its Subsidiaries; (iii) the Company and each
of its Subsidiaries is in material compliance with all applicable Environmental
Laws, and has fully disclosed all known material past and present non-
compliance with Environmental Laws, and all known past discharges, emissions,
leaking or releases known to the Company of any substance or waste regulated
under or defined by Environmental Laws that could reasonably be expected to form
the basis of any claim, action, suit, proceeding, hearing or investigation under
any applicable Environmental Laws; and (iv) neither the Company nor any of its
Subsidiaries has received notice of any past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans that have
resulted in or threaten to result in any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation under any applicable Environmental Laws; provided, however, that
clauses (i) through (iv) above address
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only those matters that, individually or in the aggregate, would have a Material
Adverse Effect with respect to the Company.
(p) Absence of Certain Changes. Except as disclosed in
Section 3.1(p) of the Company Disclosure Schedule, since the date of the
Company's most recent audited Financial Statements:
(i) there has not been any Material Adverse Change
with respect to the Company;
(ii) there has not been any declaration, setting aside
or payment of any dividend or other distribution with respect to any shares of
capital stock of the Company, or any repurchase, redemption or other acquisition
by the Company or any of its Subsidiaries of any outstanding shares of capital
stock or other securities of, or other ownership interests in, the Company or
any of its Subsidiaries or any split, combination or reclassification of any of
the Company's capital stock or issuance or authorization relating to the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of the Company's capital stock;
(iii) there has not been any amendment to, or change
in, the Articles of Incorporation or By-laws of the Company or any of its
Subsidiaries or modification through merger, liquidation, reorganization,
restructuring or in any other fashion to the corporate structure or ownership of
any Subsidiary of the Company;
(iv) there has not been any incurrence, creation or
assumption by the Company or any of its Subsidiaries of any Debt or any Lien on
any material asset , and the Company has not issued or sold any debt securities
or warrants or other rights to acquire any debt securities of the Company or
entered into any "keep well" or other agreement to maintain any financial
statement condition of another Person or entered into any arrangement having the
economic effect of any of the foregoing;
(v) there has not been any change in any method of
accounting or accounting practice by the Company or any of its Subsidiaries,
except for any such change required by reason of a concurrent change in GAAP or
to conform a Subsidiary's accounting policies and practices to those of the
Company;
(vi) there has not been any sale or transfer by the
Company of any of material assets of the Company or any of its Subsidiaries,
cancellation of any Debt or claims or waiver of any material rights by the
Company or any of its Subsidiaries;
(vii) the Company has not made any loans, advances
or capital contributions to or investments in, any other Person, other than
travel and
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entertainment advances to employees of the Company in the ordinary course of
business consistent with past practices;
(viii) except for this Agreement and any other
Transaction Documents, the Company has not entered into any material transaction
or incurred any material expenditure other than in the ordinary course of
business consistent with past practice;
(ix) there has not been any adverse change in a
material customer or material supplier relationship, including any cancellation
or termination or written notice of cancellation or termination by any material
customer or material supplier of its relationship or a material portion of its
relationship with the Company or any of its Subsidiaries or any material
decrease in the usage or purchase of the products or services of the Company or
any of its Subsidiaries by any such customer or any material decrease or
limitation of services or supplies of the products or services to the Company or
any of its Subsidiaries by any such supplier which would have, individually or
in the aggregate, a Material Adverse Effect with respect to the Company;
(x) there has not been any waiver or release of any
material right of claim of the Company or any of its Subsidiaries, including any
write-off or other compromise of any account receivable of the Company or any
Subsidiary, other than in the ordinary course of business and consistent with
past practices;
(xi) there has not been, to the Knowledge of the
Company, any assertion by any advertiser, subscriber and/or customer of the
Company, or any of its Subsidiaries, which, if substantiated, would have a
Material Adverse Effect with respect to the Company;
(xii) there has not been any material change in the
policies under which the Company or any of its Subsidiaries extends discounts,
credits or warranties to customers or otherwise deals with its customers;
(xiii) there has not been any grant of exclusive
promotion or sponsorship with respect to any portion of any website of the
Company or any of its Subsidiaries;
(xiv) the Company has not authorized for issuance,
issued, delivered, sold or agreed or committed to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), pledge or otherwise encumber
any shares of capital stock or other Equity Securities of the Company or any of
its Subsidiaries;
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(xv) except with respect to annual bonuses made in the
ordinary course of business consistent with past practice, the Company has not
adopted or amended in any material respect any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
pension, retirement, employment or other employee benefit agreement, trust, plan
or other arrangement for the benefit or welfare of any director, officer or
employee of the Company or any of its Subsidiaries or increase in any manner the
compensation or fringe benefits of any director, officer or employee of the
Company or any of its Subsidiaries or pay any benefit not required by any
existing agreement or place any assets in any trust for the benefit of any
director, officer or employee of the Company or any of its Subsidiaries (in each
case, except with respect to employees in the ordinary course of business
consistent with past practice);
(xvi) there has not been any grant or transfer of any
rights of value or modify or change in any material respect any existing
material license, lease, Contract or other document;
(xvii) the Company has not adopted a plan of complete
or partial liquidation or resolutions providing for or authorizing such a
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or reorganization other than as is necessary in order to effect
the Transactions;
(xviii) the Company has not settled or compromised any
shareholder derivative suits arising out of the transactions contemplated hereby
or any other litigation (whether or not commenced prior to the date of this
Agreement) or settled, paid or compromised any claims not required to be paid,
individually in an amount in excess of $100,000 and in the aggregate in an
amount in excess of $1,000,000, other than in consultation and cooperation with
Parent, and, with respect to any such settlement, with the prior written consent
of Parent;
(xix) the Company has not entered into any transaction
or series of transactions with any Affiliate of the Company (other than a
wholly- owned Subsidiary of the Company) or otherwise that would be required to
be disclosed pursuant to Item 404 of Regulation S-K other than on terms and
conditions substantially as favorable to the Company or such Subsidiary as would
be obtainable by the Company or such Subsidiary at the time of such transaction
with a Person that is not an Affiliate of the Company.
(xx) there has not been any acquisition or agreement to
acquire (x) by merging or consolidating with, or by purchasing a substantial
portion of the stock or assets of, or by any other manner, any business or any
other Person or (y) any assets that are material, individually or in the
aggregate, to the Company and its Subsidiaries taken as a whole, except
purchases of inventory in the ordinary course of business consistent with past
practice; and
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(xxi) there has been no agreement by the Company,
whether written or oral, to do any of the foregoing.
(q) Recommendation of Board of Directors; Vote Required. The
Board of Directors of the Company has unanimously approved this Agreement and
the other Transaction Documents to which the Company is party and the
consummation of the Merger and the other Transactions and has recommended that
the stockholders of the Company vote in favor of the adoption and approval of
this Agreement and consummation of the Merger (the "Recommendation"). The
Required Stockholder Approval is the only vote of the holders of any Equity
Securities of the Company necessary to approve the Merger and the other
Transactions.
(r) Anti-takeover Plan; State Takeover Statutes. Neither the
Company nor any of its Subsidiaries has in effect any shareholder rights plan or
similar device or arrangement, commonly or colloquially known as a "poison pill"
or "anti-takeover" plan or any similar plan, device or arrangement and the Board
of Directors of the Company has not adopted or authorized the adoption of such a
plan, device or arrangement. To the best of the Company's Knowledge, no state
takeover or "fair price" or "interested party" statute or similar statute or
regulation applies or purports to apply to the Merger, this Agreement or any of
the Transactions.
(s) Opinion of Financial Advisor. The Company has received the
opinions of Paine Webber Incorporated and ING Baring Furman Selz LLC, dated the
date hereof, to the effect that, as of such date, the consideration to be paid
in the Merger is fair to the Company's stockholders from a financial point of
view, a copy of which opinion has been delivered to Parent.
(t) Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in (i)
the registration statement on Form S-4 to be filed with the SEC by Newco in
connection with the issuance of the Merger Securities (together with any
amendments thereof or supplements thereto, the "Registration Statement") and
(ii) the proxy statement to be filed with the SEC by the Company in connection
with the Stockholders' Meeting (together with any amendments thereof or
supplements thereto, the "Proxy Statement/Prospectus") will, at the time the
Registration Statement is filed with the SEC, at any time it is amended or
supplemented, or at the time it becomes effective under the Securities Act or at
the time the Proxy Statement/Prospectus is mailed to the Company's stockholders,
as the case may be, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
(u) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other Person retained by or on behalf of the Company is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the Transactions, except PaineWebber
Incorporated and
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ING Baring Furman Selz LLC, whose fees and expenses will be paid by the Company
in accordance with the Company's agreement with such firm (a copy of which
agreement has been delivered by the Company to Parent prior to the date of this
Agreement).
(v) Insurance. The Company maintains, and has maintained,
without interruption, during its existence, policies or binders of insurance
covering such risk and events, including personal injury, property damage and
general liability, in amounts the Company reasonably believes adequate for its
business and operations and, except as set forth in Section 3.1(v) of the
Company Disclosure Schedule, such policies shall not terminate as a result of
the consummation of the Transactions.
(w) Absence of Sensitive Payments. To the Company's Knowledge,
none of the Company, or any of its Subsidiaries or Affiliates, acting alone or
together, has performed any of the following acts: (i) the making of any
contribution, payment, remuneration, gift or other form of economic benefit (a
"Payment") to or for the private use of any governmental official, employee or
agent where the Payment or the purpose of the Payment was illegal under the laws
of the United States or the jurisdiction in which such payment was made, (ii)
the establishment or maintenance of any unrecorded fund, asset or liability for
any purpose or the making of any false or artificial entries on its books, (iii)
the making of any Payment to any Person or the receipt of any Payment with the
intention or understanding that any part of the Payment was to be used for any
purpose other than that described in the documents supporting the Payment, or
(iv) the giving of any Payment to, or the receipt of any Payment from, any
Person who was or could have been in a position to help or hinder the business
of the Company or any of its Subsidiaries in connection with any actual or
proposed transaction which (A) would reasonably have been expected to subject
the Company or any of its Subsidiaries or Affiliates to any damage or penalty in
any civil, criminal or governmental litigation or proceeding, (B) if not given
in the past, would have had a Material Adverse Effect on the Company or (C) if
it had not continued in the future, would have had a Material Adverse Effect
with respect to the Company.
(x) Affiliate Transactions. Except to the extent disclosed in
any Company SEC Report, there are no other transactions, agreements,
arrangements or understandings between the Company or any of its Subsidiaries,
on the one hand, and the Company's Affiliates (other than wholly-owned
Subsidiaries of the Company) or other Persons, on the other hand, that would be
required to be disclosed under Item 404 of Regulation S-K under the Securities
Act.
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Section 3.2 Representations and Warranties of Parent. Parent
represents and warrants to the Company as follows:
(a) Organization, Standing and Power; Subsidiaries. Each of
Parent and ISN is a limited liability company duly organized, validly existing
and in good standing under the laws of Delaware and has all requisite limited
liability company power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. ISN is duly qualified and
in good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure so to qualify
would not have a Material Adverse Effect with respect to ISN. ISN has no
Subsidiaries. As of the Effective Time, each of Newco and Merger Sub will be a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, will have all requisite corporate (or
similar) power and authority to own, lease and operate its properties and to
carry on its business as then being conducted and will be duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties make such qualification
necessary, other than in such jurisdictions where the failure so to qualify
would not have a Material Adverse Effect with respect to such entity.
(b) Certificate of Formation and Limited Liability Company
Agreement. Complete and correct copies of the Certificate of Formation and
Limited Liability Company Agreement, each as amended to date, of ISN have been
delivered to the Company. The Certificate of Formation and Limited Liability
Company Agreement of ISN are in full force and effect. ISN is not in violation
of any provision of its Certificate of Formation or Limited Liability Company
Agreement. Complete and correct copies of the Certificate of Incorporation or
Articles of Incorporation (as applicable) and By-laws of Newco and Merger Sub
will be delivered to the Company as soon as they are available but in no event
later than ten (10) Business Days prior to the Effective Time. As of the
Effective Time, such Certificate of Incorporation or Articles of Incorporation
(as applicable) and By-laws will be in full force and effect and Newco and
Merger Sub will not be in violation of any provision thereof.
(c) Capitalization. As of the date hereof, all of the
outstanding ISN Units are owned, directly and indirectly, by Parent, which is a
controlled Affiliate of USA. Immediately prior to the Effective Time, all of the
issued and outstanding capital stock of Merger Sub will be owned by Newco.
Section 3.2(c) of the Parent Disclosure Schedule sets forth, (i) the
Persons to whom ISN Stock Options have been granted, (ii) the exercise price for
the ISN Stock Options held by each such Person, (iii) whether the ISN Stock
Options are subject to vesting and, if subject to vesting, the dates on which
each such ISN Stock Option vest and (iv) the agreement pursuant to which each
such ISN Stock Option was
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issued. None of the ISN Stock Options are subject to being cashed-out or will
vest as a result of the transactions contemplated hereby. Except as described in
this Section 3.2(c) or in Section 3.2(c) of the Parent Disclosure Schedule, no
ISN Units or other equity securities of ISN are authorized, issued or
outstanding, or reserved for any other purpose, and there are no options,
warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which ISN is a party relating to
the issued or unissued ISN Units or with respect to any SAR or obligating ISN to
grant, issue or sell any ISN Units, by sale, lease, license or otherwise. Except
as set forth in Section 3.2(c) of the Parent Disclosure Schedule, ISN has no
share purchase agreements, rights plans or agreements containing similar
provisions and no agreements containing anti-dilution provisions. No
anti-dilution provisions will be triggered as a result of any of the
transactions contemplated under this Agreement. ISN has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote or which are convertible into or exercisable for securities having the
right to vote with the members of ISN on any matter. The only outstanding Debt
of ISN is listed in Section 3.2(c) of the Parent Disclosure Schedule, all of
which will be satisfied and discharged prior to the Effective Time. Other than
as contemplated by this Agreement or as set forth in Section 3.2(c) of the
Parent Disclosure Schedule, there are no outstanding contractual obligations,
commitments, understandings or arrangements of ISN to repurchase, redeem or
otherwise acquire or make any payment in respect of any ISN Units or SARs of
ISN. At the Effective Time, Newco and Merger Sub will not have conducted any
business or have any assets or liabilities other than pursuant to this Agreement
or in connection with such entity's formation or qualification.
(d) Financial Statements. The Financial Statements of ISN have
been prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto), and fairly
present the financial position of ISN as at the dates thereof and the results of
its operations and cash flows for the periods then ended. There are no
Liabilities of any kind required to be disclosed under GAAP that are not
disclosed, reflected or reserved against in the Financial Statements of ISN,
except for such Liabilities incurred in the ordinary course of business
consistent with past practice since the date of ISN's most recently audited
Financial Statements, or as set forth in Section 3.2(d) of the ISN Disclosure
Schedule or as would not have a Material Adverse Effect with respect to ISN.
(e) Authority. Parent has all requisite limited liability
company power and authority to enter into this Agreement and each of the other
Transaction Documents to which it is party, to perform its obligations hereunder
and thereunder and to consummate the Transactions. The execution and delivery of
this Agreement and each of the other Transaction Documents to which it is party
and the consummation of the Transactions hereunder and thereunder have been duly
and validly authorized by all necessary action on the part of Parent and no
other
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proceedings on the part of Parent are necessary to authorize this Agreement or
the other Transaction Documents to which Parent is party or to consummate the
Transactions. This Agreement and each of the other Transaction Documents to
which Parent is party have been duly and validly executed and delivered by
Parent and constitute a valid and binding obligation of Parent enforceable
against Parent in accordance with their terms.
(f) Compliance with Applicable Laws. ISN holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities, except where any such failure so to hold, individually and in the
aggregate, would not have a Material Adverse Effect with respect to ISN (the
"ISN Permits"). ISN is in compliance with the terms of the ISN Permits in all
material respects. The business of ISN is not being conducted in violation of
any material Law. Except as set forth in Section 3.2(f) of the Parent Disclosure
Schedule, no investigation or review by any Governmental Entity with respect to
ISN is pending or, to the Knowledge of Parent, threatened, nor, to the Knowledge
of Parent, has any Governmental Entity indicated an intention to conduct the
same.
(g) Government Approvals; Required Consents.
(i) No consent, approval, authorization or action of,
declaration or filing with or notice to, any Governmental Entity on the part of
Parent or ISN is required in connection with the execution or delivery by Parent
of this Agreement or any of the other Transaction Documents to which Parent is
party, the consummation by Parent of the Transactions or compliance with the
terms hereof or thereof, other than (A) filing the Agreement of Merger in
accordance with the requirements of California Law, (B) filings with the SEC and
NASDAQ, (C) filings under state securities or "Blue Sky" laws, (D) filings under
the HSR Act, (E) as otherwise set forth in Section 3.2(g)(i) of the Parent
Disclosure Schedule (any such consents, approvals, authorizations, declarations,
filings or notices specified in clauses (A) through (E) being referred to as the
"Parent Governmental Approvals") and (F) such consents, approvals,
authorizations, declarations, filings or notices that, individually and in the
aggregate, would not have a Material Adverse Effect with respect to ISN.
(ii) No consent, approval, authorization or action of,
filing with or notice to, any Person (other than a Governmental Entity) shall be
required in connection with the execution or delivery by Parent of this
Agreement or any of the other Transaction Documents to which Parent is party,
the consummation by Parent of the Transactions or compliance by Parent with the
terms hereof or thereof other than (A) as set forth in Section 3.2(g)(ii) or
Section 3.1(h) of the Parent Disclosure Schedule (the "Parent Required
Consents") or (B) such consents, approvals, actions, filings or notices that,
individually and in the aggregate, would not have a Material Adverse Effect on
ISN.
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(h) Non-Contravention. The execution, delivery and performance
by Parent of this Agreement and the other Transaction Documents to which Parent
is party and the consummation of the Transactions do not and will not (i)
contravene or conflict with or result in any violation or breach of any
provision of the Certificate of Formation or Limited Liability Company Agreement
of Parent or ISN or, as of the Effective Time, any provision of the Certificate
of Incorporation or Articles of Incorporation (as applicable) or By-laws of
Newco or Merger Sub; (ii) assuming all Parent Governmental Approvals and Parent
Required Consents have been made or obtained, contravene or conflict with or
result in a violation or breach of any provision of any Law, order or decree
binding upon or applicable to Parent or ISN or any of their respective assets,
(iii) require any consent or other action by any Person under, constitute a
default under or give rise to a right of termination, cancellation, change of
any right or obligation, or acceleration of any right or obligation or to the
loss of any benefit or adverse modification of the effect (including an increase
in the price paid by, or cost to, ISN) of, or under any provision of any
agreement or other instrument to which ISN is a party or that is binding upon
ISN or its properties or assets or any license, franchise, permit or other
similar authorization held by ISN or (iv) result in the creation or imposition
of any Lien on any assets of ISN, except with respect to clauses (iii) and (iv)
as set forth in Section 3.2(h) of the Parent Disclosure Schedule; provided,
however, that clauses (ii) through (iv) above address only those matters that,
individually or in the aggregate, would have a Material Adverse Effect with
respect to ISN.
(i) Litigation. As of the date of this Agreement, except as
set forth in Section 3.2(i) of the Parent Disclosure Schedule, there is no suit,
claim, action or proceeding pending, or, to the Knowledge of Parent, threatened
against ISN or an Affiliate of ISN that, individually or in the aggregate, would
have a Material Adverse Effect on ISN, nor is there any Order of any
Governmental Entity outstanding against ISN or an Affiliate of ISN that,
individually or in the aggregate, would have a Material Adverse Effect with
respect to ISN.
(j) Taxes and Related Tax Matters.
(i) Other than Taxes that, individually and in the
aggregate, are not material (A) all Taxes required to be paid on or before the
date hereof by ISN have been timely paid, and (B) any Taxes required to be paid
by ISN after the date hereof and on or before the Effective Time shall be timely
paid.
(ii) All Tax Returns required to be filed by or with
respect to ISN with respect to Taxes on or before the date hereof have been
timely filed. All material Tax Returns required to be filed by or with respect
to ISN after the date hereof and on or before the Effective Time shall be
prepared and timely filed, in a manner consistent with prior years and
applicable laws and regulations. No penalties or other charges in a material
amount are or will become due with respect to
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the late filing of any Tax Return of ISN or payment of any Tax required to be
paid by ISN or required to be filed or paid on or before the Effective Time.
(iii) With respect to all Tax Returns filed by or with
respect to ISN, except as set forth in Section 3.2(j) of the Parent Disclosure
Schedule, (A) the statute of limitations for the assessment of Taxes has expired
with respect to all periods ending on or before August 31, 1995; (B) no audit is
in progress and no extension of time has been executed with respect to any date
on which any Tax Return was or is to be filed and no waiver or agreement has
been executed for the extension of time for the assessment or payment of any
Tax; and (C) there is no unassessed deficiency proposed or threatened against
ISN.
(iv) Neither Parent, ISN, nor any of their Affiliates
has taken, or agreed to take, any action that would prevent the Contribution and
Merger from qualifying as tax-free events under Section 351 or Section 368 of
the Code.
(v) Except as set forth in Section 3.2(j) of the
Parent Disclosure Schedule, neither Parent nor ISN is or has been a party to any
tax sharing agreement or similar arrangement.
(vi) Except as set forth in Section 3.2(j) of the
Parent Disclosure Schedule, neither Parent nor ISN has been a part of a group of
affiliated corporations that has filed a consolidated federal income tax return.
(k) Certain Agreements. Except for this Agreement and as set
forth in Section 3.2(k) and/or Section 3.2(l) of the Parent Disclosure Schedule,
ISN is not a party to any oral or written (i) union or collective bargaining
agreement, (ii) agreement with any executive officer or other key employee of
ISN the benefits of which are contingent, or the terms of which would be
materially altered, upon the consummation of the Transactions, (iii) agreement
with respect to any executive officer of ISN providing any term of employment or
compensation guarantee extending for a period longer than two years after the
Closing Date and for the payment of in excess of $200,000 per annum or (iv)
plan, including any stock option plan, stock appreciation right plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which would be accelerated, by the
occurrence of any of the Transactions or the value of any of the benefits of
which will be calculated on the basis of any of the Transactions.
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(l) Employee Benefit Plans; Employee Relations. The following
representations and warranties contained in this Section 3.2(l) are qualified by
such exceptions which, individually and in the aggregate, would not have a
Material Adverse Effect with respect to ISN.
(i) Section 3.2(l)(i) of the Parent Disclosure Schedule
contains a true and complete list of each "employee benefit plan" (within the
meaning of section 3(3) of ERISA, including multiemployer plans within the
meaning of ERISA section 3(37)), stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, welfare benefit, collective
bargaining, bonus, incentive, deferred compensation and all other employee
benefit plans, agreements, programs, policies or other arrangements, whether or
not subject to ERISA (including any funding mechanism therefor now in effect or
required in the future as a result of the transaction contemplated by this
Agreement or otherwise), whether formal or informal, oral or written, legally
binding or not, under which any employee or former employee of ISN has any
present or future right to benefits or under which ISN has any present or future
liability. All such plans, agreements, programs, policies and arrangements shall
be collectively referred to as the "ISN Benefit Plans." Where appropriate all
references to the "ISN" in this Section 3.2(l) refer to ISN and any member of
its "controlled group" within the meaning of Section 414 of the Code.
(ii) ISN has, with respect to each ISN Benefit Plan, if
applicable, delivered or made available to the Company true and complete copies
of: (i) all plan texts and agreements and related trust agreements (or other
funding vehicles); (ii) the most recent summary plan descriptions and material
employee communications; (iii) the most recent annual report (including all
schedules thereto); (iv) the most recent annual audited financial statement and
opinion; (v) if the plan is intended to qualify under Code section 401(a), the
most recent determination letter received from the IRS; and (vi) all material
communications with any governmental entity or agency (including the PBGC and
the IRS) given or received within the past three years.
(iii) Except as set forth in Section 3.2(l)(iii) of the
Parent Disclosure Schedule, all amounts properly accrued as liabilities to or
expenses of any ISN Benefit Plan have been properly reflected on ISN's Financial
Statements to the extent required by GAAP. Since the date of ISN's Financial
Statements, there has been no amendment or change in interpretation by ISN
relating to any ISN Benefit Plan which would materially increase the cost
thereof.
(iv) No ISN Benefit Plan is subject to either Code
section 412 or Title IV of ERISA.
(v) Each ISN Benefit Plan is in material compliance
with all applicable laws and regulations. Each ISN Benefit Plan which is
intended to qualify under Code section 401(a) has been issued a favorable
determination letter by
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the IRS and has not been amended in a manner, and no event has occurred since
such date, which would cause any such plan to fail to remain so qualified. Each
ISN Benefit Plan that requires registration with a relevant government body has
been so registered.
(vi) Except as set forth in Section 3.2(l)(vi) of the
Parent Disclosure Schedule, there are no actions, liens, suits or claims pending
or, to ISN's Knowledge, threatened (other than routine claims for benefits) with
respect to any ISN Benefit Plan as to which ISN has or could reasonably be
expected to have any direct or indirect actual or contingent material liability.
(vii) Each ISN Benefit Plan which is a "group health
plan" (as defined in ERISA section 607(1)) is in material compliance with the
provisions of COBRA (within the meaning of Code section 4980B), Health Insurance
Portability and Accountability Act and any other applicable federal, state or
local Law.
(viii) There are no (i) ISN Benefit Plans maintained by
ISN pursuant to which welfare benefits are provided to current or former
employees beyond their retirement or other termination of service, other than
coverage mandated by COBRA, the cost of which is fully paid by the current or
former employees or their dependents; or (ii) unfunded ISN Benefit Plan
obligations with respect to any employee of ISN which are not fairly reflected
by reserves shown on the Financial Statements.
(ix) Except as set forth in Section 3.2(l)(ix) of the
Parent Disclosure Schedule, the consummation of the Transactions will not (i)
entitle any current or former employee of ISN to severance pay, unemployment
compensation or any similar payment or (ii) accelerate the time of payment or
vesting, or increase the amount of any compensation due to, any current or
former employee of ISN.
(x) Neither ISN nor any ISN Benefit Plan, or to
ISN's Knowledge any "disqualified person" (as defined in Code section 4975) or
any "party in interest" (as defined in ERISA section 3(18)), has engaged in any
non- exempt prohibited transaction (within the meaning of Code section 4975 or
ERISA section 406) which could reasonably be expected to result in any material
liability to any of ISN.
(xi) None of ISN's employees is represented by a
union, and to ISN's Knowledge no union organizing efforts have been conducted
within the last five years or are now being conducted. ISN does not currently
have, nor to ISN's Knowledge, is there now threatened, a strike, picket, work
stoppage, work slowdown or other organized labor dispute. ISN has not as of the
date hereof incurred any liability or obligation under WARN or any similar state
law.
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(m) Intellectual Property.
(i) Disclosure.
(A) Section 3.2(m)(i)(A) or
Section 3.2(m)(i)(B) of the Parent Disclosure Schedule sets forth all
United States and foreign patents and patent applications, trademark and
service mark registrations and applications, Internet domain name
registrations and applications and copyright registrations and
applications owned or licensed by ISN specifying as to each item, as
applicable; the nature of the item, including the title; the owner of the
item; the jurisdictions in which the item is issued or registered or in
which an application for issuance or registration has been filed; and the
issuance, registration, or application numbers and dates.
(B) Section 3.2(m)(i)(B) of the Parent
Disclosure Schedule sets forth all IP Licenses under which ISN is a
licensor or licensee or otherwise is authorized to use or practice any
Intellectual Property.
(C) Section 3.2(m)(i)(C) of the Parent
Disclosure Schedule sets forth and describes the status of any Proposed
Intellectual Property Agreements of ISN.
(ii) Ownership. ISN owns, free and clear of all Liens,
and has the unrestricted right to use, sell or license, all Intellectual
Property in its possession, except for failures to own free and clear or to have
the unrestricted right to use, sell, or license that would not, individually or
in the aggregate, have a Material Adverse Effect on ISN, and except for
technology licensed to Parent and listed on Section 3.2(m)(i)(B) of the Parent
Disclosure Schedule. Notwithstanding the foregoing, ISN currently possesses free
and clear of all Liens or assignments, all Intellectual Property rights
necessary in order for ISN to continue operating its current business.
(iii) Claims. Except as set forth in Section 3.2(m)(iii)
of the Parent Disclosure Schedule, neither ISN nor any of its Affiliates has
been a party to any such Claim, nor, to Parent's Knowledge, is any Claim
threatened, that challenges the validity, enforceability, ownership, or right to
use, sell or license, any Intellectual Property in ISN's possession. Except as
set forth in Section 3.2(m)(iii) of the Parent Disclosure Schedule, to Parent's
Knowledge, no third party is infringing upon any such Intellectual Property.
(iv) Administration and Enforcement. Except as set
forth in Section 3.2(m) (iv) of the Parent Disclosure Schedule, ISN has taken
all reasonably necessary and desirable actions to maintain and protect each item
of Intellectual Property owned by ISN, except for failures to take such actions
that,
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individually or in the aggregate, would not have a Material Adverse Effect with
respect to ISN.
(v) Protection of Trade Secrets and Technology. ISN
has taken all reasonable precautions to protect the secrecy, confidentiality,
and value of their respective trade secrets and the proprietary nature and value
of their respective Technology, except for failures to take such precautions
that would not have a Material Adverse Effect on ISN.
(vi) Software. Except as set forth in
Section 3.2(m)(vi) of the Parent Disclosure Schedule, all material Software used
by ISN performs in conformance with its documentation, except for failures to
perform that would not have a Material Adverse Effect with respect to ISN. The
transactions contemplated by this Agreement will not require any third party
consents under the terms of the documentation related to the Software other than
(A) as set forth in Section 3.2(m)(vi) of the Parent Disclosure Schedule or (B)
such consents that, individually and in the aggregate, would not have a Material
Adverse Effect on ISN.
(vii) Year 2000 Compliance. All Systems used by ISN
is Year 2000 Compliant, except for failures to be Year 2000 Compliant that,
individually or in the aggregate, would not have a Material Adverse Effect with
respect to ISN.
(viii)Effect of Transaction. Parent and ISN are not,
nor, as a result of the execution and delivery of this Agreement, the
consummation of the Transactions or the performance of Parent's obligations
hereunder, will be, in violation of any agreement relating to any Intellectual
Property, except for violations that, individually or in the aggregate, would
not have a Material Adverse Effect on ISN. Upon consummation of the
Transactions, the Surviving Corporation will own all right, title and interest
in and to or have a license to use all Intellectual Property on identical terms
and conditions as ISN enjoyed immediately prior to such Transactions, except for
failures to own or have available for use that, individually or in the
aggregate, would not have a Material Adverse Effect with respect to ISN.
(n) Contracts. Except as set forth in Section 3.2(i) of the
Parent Disclosure Schedule, ISN is not, and to the knowledge of Parent, no other
parties thereto are, in default, breach or violation of any material Contracts
of ISN, except for such defaults, breaches or violations that, individually or
in the aggregate, would not have a Material Adverse Effect with respect to ISN.
Except as set forth in Section 3.2(n) of Parent's Disclosure Schedule, ISN is
not a party to or bound by any Contract (i) restricting the ability of ISN (or
after the Merger, Newco or any of its Subsidiaries) to compete in or conduct any
line of business or to engage in any business in any geographic area, (ii)
containing any covenants of any other person not to compete in any material
respect with ISN, (iii) containing any so-called "most favored nation"
provisions or any similar provision requiring ISN (or after the
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Merger, Newco or any of its Subsidiaries) to offer a third party terms or
concessions at least as favorable as offered to one or more other parties.
(o) Environmental Matters. (i) ISN has obtained and is in
material compliance with the terms and conditions of all permits, licenses and
other authorizations required under applicable Environmental Laws; (ii) no
asbestos in a friable condition or equipment containing polychlorinated
biphenyls or leaking underground or above-ground storage tanks is contained in
or located at any facility owned, leased or controlled by ISN; (iii) ISN is in
material compliance with all applicable Environmental Laws, and has fully
disclosed all known material past and present non-compliance with Environmental
Laws, and all known past discharges, emissions, leaking or releases known to ISN
of any substance or waste regulated under or defined by Environmental Laws that
could reasonably be expected to form the basis of any claim, action, suit,
proceeding, hearing or investigation under any applicable Environmental Laws;
and (iv) ISN has not received notice of any past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans that have
resulted in or threaten to result in any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation under any applicable Environmental Laws; provided, however, that
clauses (i) through (iv) above address only those matters that, individually or
in the aggregate, would have a Material Adverse Effect with respect to ISN.
(p) Absence of Certain Changes. Except as disclosed in
Section 3.2(p) of the Parent Disclosure Letter, since the date of ISN's most
recent audited Financial Statements:
(i) there has not been any Material Adverse Change
with respect to ISN;
(ii) there has not been any declaration, setting aside
or payment of any non-cash dividend or other non-cash distribution with respect
to any ISN Units (except as provided under Section 4.2(g)) or any repurchase,
redemption or other acquisition by ISN of any outstanding ISN Units or any
split, combination or reclassification of any ISN Units or issuance or
authorization relating to the issuance of any ISN Units, in lieu of or in
substitution for ISN Units;
(iii) there has not been any amendment to, or change
in, the Certificate of Formation or Limited Liability Company Agreement of ISN;
(iv) there has not been any incurrence, creation or
assumption by ISN of any Debt or any Lien on any material asset, and ISN has not
issued or sold any debt securities or warrants or other rights to acquire any
debt securities of ISN or entered into any "keep well" or other agreement to
maintain any financial statement condition of another Person or entered into any
arrangement
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having the economic effect of any of the foregoing, except, in each case, to the
extent that such Debt or other obligation is satisfied or discharged prior to
the Closing;
(v) there has not been any change in any method of
accounting or accounting practice by ISN;
(vi) there has not been any sale or transfer by ISN of
any of its material assets, cancellation of any Debt or claims or waiver of any
material rights by ISN;
(vii) ISN has not made any loans, advances or capital
contributions to or investments in, any other Person, other than travel and
entertainment advances to employees of ISN in the ordinary course of business
consistent with past practices;
(viii)except for this Agreement and any other
Transaction Documents, ISN has not entered into any material transaction or
incurred any material expenditure other than in the ordinary course of business
consistent with past practice;
(ix) there has not been any adverse change in a
material customer or material supplier relationship, including any cancellation
or termination or written notice of cancellation or termination by any material
customer or material supplier of its relationship or a material portion of its
relationship with ISN or any material decrease in the usage or purchase of the
products or services of ISN by any such customer or any material decrease or
limitation of services or supplies of the products or services to ISN by any
such supplier that, individually or in the aggregate, would have a Material
Adverse Effect with respect to ISN;
(x) there has not been any waiver or release of any
material right of claim of ISN, including any write-off or other compromise of
any account receivable of ISN, other than in the ordinary course of business and
consistent with past practices;
(xi) there has not been, to the Knowledge of Parent,
any assertion by any advertiser, subscriber and/or customer of ISN, that, if
substantiated, would have a Material Adverse Effect with respect to ISN;
(xii) there has not been any material change in the
policies under which ISN extends discounts, credits or warranties to customers
or otherwise deals with its customers;
(xiii) there has not been any grant of exclusive
promotion or sponsorship with respect to any portion of any website of ISN;
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(xiv) ISN has not authorized for issuance, issued,
delivered, sold or agreed or committed to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), pledge or otherwise encumber
any ISN Units or any other Equity Securities of ISN;
(xv) except with respect to annual bonuses made in the
ordinary course of business consistent with past practice, ISN has not adopted
or amended in any material respect any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, pension,
retirement, employment or other employee benefit agreement, trust, plan or other
arrangement for the benefit or welfare of any director, officer or employee of
ISN or increase in any manner the compensation or fringe benefits of any
director, officer or employee of ISN or pay any benefit not required by any
existing agreement or place any assets in any trust for the benefit of any
director, officer or employee of ISN (in each case, except with respect to
employees in the ordinary course of business consistent with past practice);
(xvi) there has not been any grant or transfer any
rights of value or modify or change in any material respect any existing
material license, lease, Contract or other document;
(xvii) ISN has not adopted a plan of complete or partial
liquidation or resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization other than as is necessary in order to effect the Transactions;
(xviii) Except with respect to the Infoseek Litigation,
ISN has not settled or compromised any shareholder derivative suits arising out
of the transactions contemplated hereby or any other litigation (whether or not
commenced prior to the date of this Agreement) or settled, paid or compromised
any claims not required to be paid, individually in an amount in excess of
$100,000 and in the aggregate in an amount in excess of $1,000,000, other than
in consultation and cooperation with the Company, and, with respect to any such
settlement, with the prior written consent of the Company;
(xix) ISN has not entered into any transaction or series
of transactions with any Affiliate of ISN (other than a wholly-owned Subsidiary
of ISN) or otherwise that would be required to be disclosed pursuant to Item 404
of Regulation S-K other than on terms and conditions substantially as favorable
to ISN as would be obtainable by ISN at the time of such transaction with a
Person that is not an Affiliate of ISN;
(xx) there has not been any acquisition or agreement to
acquire (x) by merging or consolidating with, or by purchasing a substantial
portion of the stock or assets of, or by any other manner, any business or any
other Person or
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(y) any assets that are material, individually or in the aggregate, to ISN and
its Subsidiaries taken as a whole, except purchases of inventory in the ordinary
course of business consistent with past practice; and
(xxi) there has been no agreement by ISN, whether
written or oral, to do any of the foregoing.
(q) Anti-takeover Plan; State Takeover Statutes. ISN does not
have in effect any shareholder rights plan or similar device or arrangement,
commonly or colloquially known as a "poison pill" or "anti-takeover" plan or any
similar plan, device or arrangement and ISN has not adopted or authorized the
adoption of such a plan, device or arrangement. To the best of Parent's
Knowledge, no state takeover or "fair price" of "interested party" statute or
similar statute or regulation applies or purports to apply to the Merger, this
Agreement or any of the Transactions.
(r) Information Supplied. The information supplied or to be
supplied by Parent or ISN for inclusion or incorporation by reference in (i) the
Registration Statement and (ii) the Proxy Statement/Prospectus will, at the time
the Registration Statement is filed with the SEC, at any time it is amended or
supplemented, or at the time it becomes effective under the Securities Act or at
the time the Proxy Statement/Prospectus is mailed to the Company's stockholders,
as the case may be, will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not materially misleading.
(s) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other Person retained by or on behalf of Parent is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the Transactions.
(t) Insurance. ISN maintains, and has maintained, without
interruption, during its existence, policies or binders of insurance covering
such risk and events, including personal injury, property damage and general
liability, in amounts that ISN reasonably believes adequate for its business and
operations and, except as set forth in Section 3.2(t) of the Parent Disclosure
Schedule, such policies shall not terminate as a result of the consummation of
the Transactions.
(u) Absence of Sensitive Payments. To Parent's Knowledge, none
of ISN or any of its Affiliates, acting alone or together, has performed any of
the following acts: (i) the making of any contribution, payment, remuneration,
gift or other form of economic benefit (a "Payment") to or for the private use
of any governmental official, employee or agent where the Payment or the purpose
of the Payment was illegal under the laws of the United States or the
jurisdiction in which such payment was made, (ii) the establishment or
maintenance of any unrecorded
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fund, asset or liability for any purpose or the making of any false or
artificial entries on its books, (iii) the making of any Payment to any Person
or the receipt of any Payment with the intention or understanding that any part
of the Payment was to be used for any purpose other than that described in the
documents supporting the Payment, or (iv) the giving of any Payment to, or the
receipt of any Payment from, any Person who was or could have been in a position
to help or hinder the business of ISN in connection with any actual or proposed
transaction which (A) would reasonably have been expected to subject ISN or any
of its Affiliates to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (B) if not given in the past, would have
had a Material Adverse Effect on ISN or (C) if it had not continued in the
future, would have had a Material Adverse Effect on ISN.
(v) Affiliate Transactions. Except in the ordinary course of
business or as disclosed elsewhere herein and except for the Media Commitment,
there were no transactions, agreements or arrangements that created any
continuing obligation or liability of ISN, on the one hand, to Parent or any of
its Affiliates, on the other hand, that will be in effect following the
Contribution. Upon consummation of the Contribution at the Closing, ISN will owe
no Debt to Parent or any Affiliate of Parent.
ARTICLE 4
COVENANTS
Section 4.1 Covenants of the Company. During the period from the
date of this Agreement and continuing until the Closing Date, the Company agrees
that, except as expressly contemplated or permitted by this Agreement or to the
extent that Parent shall otherwise consent in writing (which consent may not be
unreasonably withheld or delayed):
(a) Access to Information. Upon reasonable notice, the Company
shall, and shall cause its Subsidiaries to, afford to Parent and its Agents,
access, during normal business hours during the period prior to the Closing
Date, to all properties, books, Contracts, commitments and records of the
Company and its Subsidiaries and, during such period, the Company shall, and
shall cause its Subsidiaries to, promptly furnish or otherwise make available to
Parent (i) a copy of each report, schedule, registration statement and other
document filed or received by the Company or any of its Subsidiaries during such
period pursuant to the requirements of Federal securities laws and (ii) all
other information concerning the business, properties and personnel of the
Company or any of its Subsidiaries as Parent may reasonably request.
(b) Ordinary Course. The Company shall, and shall cause
its Subsidiaries to, carry on their respective businesses in the usual, regular
and
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ordinary course in substantially the same manner as heretofore conducted and use
commercially reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers, directors
and employees and preserve their relationships with customers, suppliers,
contractors, distributors, licensors, licensees and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
not be impaired in any material respect at the Closing Date. Without limiting
the generality of the foregoing, and except or as contemplated by this Agreement
or as otherwise required by law, neither the Company nor any of its Subsidiaries
shall take any action or omit to take any action that, if taken or omitted
immediately prior to the execution hereof, would have been required to have been
disclosed in the Company Disclosure Schedule pursuant to Section 3.1(p).
(c) Compliance with Laws. The Company agrees to conduct its
business and cause the businesses of its Subsidiaries to be conducted in
compliance with all Laws.
(d) Transaction Documents. The Company shall execute all
Transaction Documents to be executed by the Company, and shall cause the
Principal Company Stockholders and any warrantholder of the Company to execute
all Transaction Documents to which they are parties, prior to the Effective
Time.
Section 4.2 Covenants of Parent. During the period from the date of
this Agreement and continuing until the Closing Date, Parent agrees that, except
as expressly contemplated or permitted by this Agreement, or to the extent that
the Company shall otherwise consent in writing (which consent may be withheld in
its sole discretion):
(a) Access to Information. Upon reasonable notice, Parent
shall cause ISN to afford to the Company and its Agents access, during normal
business hours during the period prior to the Closing Date, to all properties,
books, Contracts, commitments and records of ISN or Parent and, during such
period, Parent shall cause ISN to promptly furnish or otherwise make available
to the Company (i) a copy of each report, schedule, registration statement and
other document filed or received by ISN or Parent during such period pursuant to
the requirements of Federal securities laws and (ii) all other information
concerning the businesses, properties and personnel of ISN as the Company may
reasonably request.
(b) Ordinary Course. Parent shall cause ISN to carry on its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and use commercially reasonable efforts to
preserve intact its current business organizations, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers, contractors, distributors, licensors, licensees and others
having business dealings with it to the end that its goodwill and ongoing
businesses shall not be impaired in any material respect
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at the Closing Date. Without limiting the generality of the foregoing, and
except as required by law, Parent shall cause ISN not to take any action or omit
to take any action that, if taken or omitted immediately prior to the execution
hereof would have been required to be disclosed in the Parent Disclosure
Schedule pursuant to Section 3.2(p).
(c) Compliance with Laws. Parent agrees to cause ISN to
conduct its business in compliance with all applicable Laws.
(d) Media Commitment. At or prior to the Effective Time, USA
will enter into a definitive agreement ("Media Commitment") with ISN pursuant to
which USA will commit to provide to ISN $10 million of Media Value from the
Network over a period ending on the third anniversary of the Closing Date. The
Media Commitment will, to the extent reasonably practical, be made available in
equal annual amounts over the term. The Media Commitment shall require USA to
use its reasonable best efforts to place the advertising to the satisfaction of
ISN (or, following the Contribution, Newco); provided, however, that USA will
determine, in its sole discretion, the actual placement of all commercial
advertising time purchased by ISN, based on, among things, available inventory.
The Media Commitment shall remain in effect following the Contribution and, at
the Effective Time, Newco shall issue a warrant substantially in the form of
Exhibit E hereto (the "Media Warrant") to USA to purchase 12,539,788 shares of
Newco Class B Common Stock.
(e) License Agreement. On the Closing Date, Newco, the
Company, ISN and USA shall enter into a license agreement substantially in the
form of Exhibit F hereto (the "License Agreement").
(f) Transaction Documents. Parent shall execute all
Transaction Documents to which it is a party, and shall cause ISN and USA to
execute all Transaction Documents to which they are parties, prior to the
Effective Time.
(g) Infoseek Litigation. Parent shall cause ISN to distribute
or otherwise transfer to Parent or an Affiliate of Parent the rights associated
with the litigation captioned Internet Shopping Network LLC v. Infoseek
Corporation (the "Infoseek Litigation") (including the right to any awards
received), and Parent or an Affiliate of Parent shall assume all liabilities
associated with such litigation (including all of ISN's costs related thereto).
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ARTICLE 5
ADDITIONAL COVENANTS
Section 5.1 No Solicitation.
(a) From the date hereof until the termination of this
Agreement in accordance herewith, the Company shall not, and shall cause its
Subsidiaries and Agents not to, directly or indirectly, (i) solicit, initiate,
encourage (including by way of furnishing information, except as required by
applicable Law) or take any other action to facilitate, any inquiry or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any Alternate Transaction or agree to or endorse any Alternate Transaction,
(ii) propose, enter into or participate in any discussions or negotiations
regarding any of the foregoing or, except as required by applicable Law, furnish
any information relating to the Company or any of its Subsidiaries or their
respective assets or businesses, or (iii) otherwise cooperate in anyway with, or
assist or participate in, facilitate or encourage, any effort or attempt by any
other Person to do or seek any of the foregoing (including, without limitation,
through the grant of waivers in respect of any obligations to the Company). The
Company will immediately notify Parent after receipt of any inquiry or proposal
for an Alternate Transaction or any indication that any Person is considering
making any such inquiry or proposal or any request for nonpublic information
relating to the Company or any of its Subsidiaries or for access to the
properties, books or records of the Company or any of its Subsidiaries by any
Person that may be considering making, or has made, any such inquiry or proposal
or that the Company intends to engage in negotiations with, or to provide
information to any such Person. The Company shall immediately provide Parent
with the identity of such Person and a reasonable description of such inquiry or
proposal and, if available, a copy of such inquiry or proposal. The Company
shall, and shall cause its Subsidiaries and Agents to, immediately cease and
cause to be terminated, any existing solicitation, activity, discussions or
negotiations with any Third Parties conducted heretofore by the Company or any
of its representatives with respect to any proposal for an Alternate
Transmission.
(b) Notwithstanding the foregoing, nothing contained in this
Agreement shall prevent the Company from (x) furnishing information pursuant to
an appropriate confidentiality letter concerning the Company and its businesses,
properties or assets to any Third Party who has made a Qualified Alternate
Transaction Proposal, (y) engaging in discussions or negotiations with such
Third Party, or (z) following receipt of such a Qualified Alternate Transaction
Proposal, taking and disclosing to the Company's stockholders a position
contemplated by Rule 14e-2(a) under the Exchange Act, but in each case referred
to in the foregoing clauses (x) through (z) only after the Board of Directors of
the Company concludes in good faith, which with respect to clauses (y) and (z)
is made following receipt of an opinion from the Company's outside counsel, that
such action is reasonably necessary
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for the Board of Directors of the Company to comply with its fiduciary
obligations to the Company's stockholders under California Law and, in each case
referred to in clauses (x) through (z), only following written notice to Parent.
If the Board of Directors of the Company receives any inquiry or proposal for an
Alternate Transaction, then the Company shall immediately inform Parent of the
terms and conditions of such inquiry or proposal and the identity of the Person
making such inquiry or proposal and shall keep Parent fully informed of the
status and details of any such inquiry or proposal and of all steps the Company
is taking in response to such inquiry or proposal.
(c) The Company's Board of Directors will not withdraw or
modify (or propose to withdraw or modify) in any manner adverse to Parent, or
otherwise fail to make the Recommendation and will not approve, recommend, or
propose to approve or recommend, or fail to oppose, an Alternate Transaction, in
each case except in response to a Qualified Alternate Transaction Proposal, and
then only upon or after termination of this Agreement pursuant to Section
7.1(f).
Section 5.2 Directors and Officers Indemnification and Insurance.
(a) From and after the Effective Time, Newco shall cause the
Surviving Corporation to and the Surviving Corporation shall indemnify, defend
and hold harmless the present and former officers, directors, employees and
agents of the Company and ISN (each a "Covered Person") against all losses,
expenses, claims, damages, liabilities or amounts ("Losses") that are paid in
settlement (provided that, with respect to amounts paid in settlement, such
settlement has been approved by Newco, such approval not to be unreasonably
withheld or delayed) of, or otherwise in connection with, any claim, action,
suit, proceeding or investigation (a "Claim") based in whole or in part on the
fact that such person is or was a director, officer, employee or agent of the
Company or ISN, as applicable, and arising out of actions or omissions occurring
at or prior to the Effective Time, in each case to the full extent permitted
under applicable Law and the Company's Articles of Incorporation and By-laws or
ISN's Certificate of Formation and Limited Liability Company Agreement, as
applicable, as in effect on the date of this Agreement. The Surviving
Corporation shall pay, when and as such expenses are incurred by a Covered
Person, any expenses in advance of the final disposition of any such Claim to
each Covered Person to the fullest extent permitted under applicable Law upon
receipt from the Covered Person to whom expenses are advanced of any undertaking
to repay such advances required under applicable Law. The Surviving Corporation
shall cooperate in the defense of any such matter.
(b) Newco shall cause the Surviving Corporation to keep in
effect provisions in its certificate of incorporation and by-laws providing for
exculpation of director liability, advancement of expenses prior to disposition
of any Claim and indemnification of the Covered Persons, in each case to the
fullest extent permitted under applicable Law, which provisions shall not be
amended except as
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required by applicable Law or except to make changes permitted by Law that would
enlarge the right of indemnification of the Covered Persons.
(c) For a period of six (6) years after the Effective Time,
Newco shall cause the Surviving Corporation to maintain in effect the current
policies of directors and officers liability insurance (or similar policies)
maintained by the Company and ISN covering persons who are currently covered by
any such policies with respect to actions or omissions occurring at or prior to
the Effective Time to the extent that such policies are available; provided,
that policies of at least the same coverage containing terms and conditions
which are no less advantageous to the insureds may be substituted therefor,
provided, further, that in no event shall the Surviving Corporation be required
to expend amounts for premiums per annum in excess of 150% of the combined
annual premiums of the Company and ISN prevailing during the twelve-month period
ended November 30, 1999 (such annual premiums, the "Maximum Premium") to
maintain or procure insurance coverage pursuant to this Section 5.2, or, if the
cost of such coverage exceeds the Maximum Premium, the maximum amount of
coverage that can be purchased for the Maximum Premium.
(d) The provisions of this Section 5.2 shall survive the
consummation of the Merger and are expressly intended to benefit each of the
Covered Persons.
Section 5.3 Notification of Certain Matters. Parent shall give
prompt notice to the Company, and the Company shall give prompt notice to
Parent, of (a) the occurrence or nonoccurrence of any event, the occurrence or
nonoccurrence of which would be reasonably likely to cause any covenant,
condition or agreement contained in this Agreement not to be complied with or
satisfied, (b) any failure of ISN or the Company, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder and (c) the commencement of any litigation or claim
against such party; provided, however, that the delivery of any notice pursuant
to this Section 5.3 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 5.4 Tax Treatment. Each of Parent, the Company and their
Affiliates shall take such actions, or refrain from taking such actions, as may
be reasonably necessary so that the Contribution and the Merger will qualify as
tax-free events under either or both of Section 351 or Section 368 of the Code
and the conditions to closing described in Sections 6.2(d) and 6.3(e) will be
met.
Section 5.5 Company Stockholder Meeting. The Company shall, as
promptly as practicable following the date of this Agreement, duly call, give
notice of and convene and hold a meeting of its stockholders (the "Stockholder
Meeting") for the purpose of considering and voting upon the adoption of this
Agreement and obtaining the Required Stockholder Approval. Without limiting the
generality of the
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foregoing, the Company agrees that, unless this Agreement is terminated in
accordance with Section 7.1(f), its obligations pursuant to the first sentence
of this Section 5.5 shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company of any Alternate Transaction
(including any Qualified Alternate Transaction Proposal). The Company will,
through its Board of Directors, recommend to its stockholders the adoption of
this Agreement, except to the extent that the Board of Directors of the Company
shall have withdrawn or modified its approval or recommendation of this
Agreement or the Merger and terminated this Agreement in accordance with
Sections 5.1(c) and 7.1(f).
Section 5.6 Registration Statement, Proxy Statement/Prospectus.
(a) As promptly as practicable after the execution of this
Agreement, (i) the Company shall prepare and file the Proxy Statement/Prospectus
with the SEC and (ii) Parent shall cause Newco to prepare and file the
Registration Statement with the SEC in which the Proxy Statement/Prospectus
shall be included as a prospectus, in connection with the registration under the
Securities Act of the shares of Newco Class A Common Stock to be issued pursuant
to the Merger. Each of Parent and the Company (i) shall cause the Proxy
Statement/Prospectus and the Registration Statement to comply as to form in all
material respects with the applicable provisions of the Securities Act, the
Exchange Act and the rules and regulations thereunder, (ii) shall use
commercially reasonable efforts to have or cause the Registration Statement to
become effective as promptly as practicable and (iii) shall take any and all
action required under any applicable federal or state securities laws in
connection with the issuance of shares of Newco Class A Common Stock in
connection with the Merger. The Company and Parent shall furnish to the other
all information concerning the Company, Parent, ISN and Newco as the other may
reasonably request in connection with the preparation of the documents referred
to herein. As promptly as practicable after the Registration Statement shall
have become effective, Parent and the Company shall mail the Proxy
Statement/Prospectus to stockholders of the Company.
(b) The information supplied by each of the Company and Parent
for inclusion in the Registration Statement and the Proxy Statement/Prospectus
shall not, at (i) the time the Registration Statement is declared effective,
(ii) the time the Proxy Statement/Prospectus (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of the Company, (iii)
the time of the Stockholders Meeting, or (iv) the Effective Time, contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein not
materially misleading. If, at any time prior to the Effective Time, any event or
circumstance relating to the Company, Parent, ISN, or their respective
Subsidiaries, officers or directors, should be discovered by such party which
should be set forth in an amendment or a supplement to the Registration
Statement or Proxy Statement/Prospectus, such party shall promptly inform the
other thereof and take appropriate action in respect thereof.
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(c) Each party shall confer on a regular and frequent basis
with the other, report on operational matters and promptly advise the other
orally and in writing of (i) any material notice or other communication from any
Third Party alleging that the consent of such Third Party is or may be required
in connection with the Transactions; (ii) any material notice or other
communication from any regulatory authority, NASDAQ or national securities
exchange in connection with the Transactions; (iii) any claims, actions,
proceedings or investigations commenced or, to the best of such party's
Knowledge, threatened, involving or affecting such party or any of its
Subsidiaries, or any of its property or assets, or, to the best of such party's
Knowledge, any employee, consultant, director or officer, in his or her capacity
as such, if any party or any of its Subsidiaries, which, if pending on the date
hereof, would have been required to have been disclosed in the Company
Disclosure Schedule or the Parent Disclosure Schedule, as the case may be, or
which relates to the consummation of the Transactions; and (iv) any change or
event that would have a Material Adverse Effect with respect to such party. Each
party shall promptly provide the other party (or its counsel) copies of all
filings made by such party with any Governmental Entity in connection with this
Agreement and the Transactions.
Section 5.7 Further Action, Reasonable Efforts.
(a) Upon the terms and subject to the conditions hereof, each
of the parties hereto shall use commercially reasonable efforts to (i) promptly
make its respective filings, and thereafter make any other required submissions,
under the HSR Act with respect to the transactions contemplated hereby, and (ii)
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable Laws and
regulations to consummate and make effective the Transactions in the most
expeditious manner practicable, including using commercially reasonable efforts
to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Entities, making all filings and
required submissions with Governmental Entities, including foreign filings and
submissions, obtaining all consents and approvals from Third Parties to
Contracts with the Company and Parent and their respective Subsidiaries as are
necessary for the consummation of the Merger and the other Transactions and
defending any lawsuit or legal challenges, whether judicial or administrative,
challenging this Agreement or the transactions contemplated hereby. In case at
any time after the Effective Time any other action is necessary or desirable to
carry out the purposes of this Agreement, each party to this Agreement shall use
their reasonable efforts to take all such action.
(b) Without limiting any covenant or agreement herein, each
party shall use reasonable commercial efforts not to take any action, or enter
into any transaction, which would result in a breach of any covenant made by
such party in this Agreement.
Section 5.8 Public Announcements. The Company and Parent shall
and shall cause their respective Affiliates to, consult with each other before
issuing
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any press release or otherwise making any public statements with respect to this
Agreement or any of the transactions contemplated hereby and shall not issue any
such press release or make any such public statement without the prior consent
of the other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that a party or its Affiliates may, without the prior consent
of the other party, issue such press release or make such public statement as
may be required by Law or any listing agreement or arrangement to which the
Company or Parent, or any of their respective Affiliates, is a party with NASDAQ
a national securities exchange if it has used all reasonable efforts to consult
with the other party and to obtain such party's consent but has been unable to
do so in a timely manner.
Section 5.9 Blue Sky. Parent shall cause Newco to use its best
efforts to obtain prior to the Effective Time all approvals or permits required
to carry out the transactions contemplated hereby under applicable "Blue Sky"
laws in connection with the issuance of shares of Newco Class A Common Stock in
connection with the Merger and as contemplated by this Agreement; provided,
however, that with respect to such qualifications neither Parent, Newco nor the
Company shall be required to register or qualify as a foreign corporation or to
take any action which would subject it to general service of process or taxation
in any jurisdiction where any such entity is not now so subject.
Section 5.10 NASDAQ. Parent shall cause Newco to promptly prepare
and submit to the NASDAQ National Market System, NASD applications covering the
shares of Newco Class A Common Stock to be issued in connection with the Merger
and Contribution (including pursuant to Sections 1.8 and 2.3), and shall use
commercially reasonable efforts to cause such shares to be approved for listing
on the NASDAQ prior to the Effective Time, subject to official notice of
issuance.
Section 5.11 Affiliates. Within 30 days after the date of this
Agreement, (a) the Company shall deliver to Parent a letter identifying all
persons who may be deemed to be affiliates of the Company under Rule 145 of the
Securities Act as of the record date for the Stockholders Meeting, including,
without limitation, all of its directors and executive officers (the "Rule 145
Affiliates") and (b) the Company shall advise the persons identified in such
letter of the resale restrictions imposed by applicable securities laws and
shall obtain from each person identified in such letter a written agreement,
substantially in the form of Exhibit G hereto (a "Rule 145 Affiliate
Agreement").
Section 5.12 Tax Matters. The parties hereto agree to (i) prepare or
cause to be prepared all Tax Returns or other governmental filings, reports,
applicable books and records in accordance with the treatment of the Merger and
the Contribution as tax-free events under either or both of Section 351 and
Section 368 of the Code, unless otherwise required by Law, and (ii) take such
other actions, or refrain from taking any action, as may be reasonably necessary
so that the Merger and the Contribution will qualify for such treatment;
provided, however, that such
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actions or inactions must be consistent with the terms of this Agreement. Parent
agrees to indemnify Newco from and against any Material Adverse Effect that
Newco may suffer resulting from, arising out of, relating to, in the nature of,
or caused by any Liability of ISN for Taxes of any Person other than ISN under
Reg. 1-1502-6 promulgated under the Code.
ARTICLE 6
CONDITIONS PRECEDENT
Section 6.1 Conditions to the Obligations of each Party. The
respective obligations of each party to effect the Contribution and the Merger
and to consummate the other Transactions shall be subject to the satisfaction,
on or prior to the Closing Date, of the following conditions:
(a) Stockholder Approval. The Required Stockholder Approval
shall have been obtained and be in full force and effect and Parent shall have
received reasonably satisfactory evidence of same.
(b) Registration Statement. The Registration Statement
shall have become effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order.
(c) Blue Sky Laws. Newco shall have received all state
securities or "Blue Sky" permits and other authorizations necessary to issue in
the shares of Newco Common Stock.
(d) Listing. The Newco Class A Common Stock to be issued in
the Merger and the Newco Class A Common Stock issuable upon conversion of Newco
Class B Common Stock issued in connection with the Contribution (including
pursuant to Sections 1.8 and 2.3) shall have been authorized for quotation on
the NASDAQ listing or on any other national securities exchange or automated
quotation system approved by the Company and Parent, subject to official notice
of issuance.
(e) No Injunctions or Restraints. No Law or Order shall have
been enacted, entered, promulgated or enforced (and not repealed, superseded,
lifted or otherwise made inapplicable), by any court of competent jurisdiction
or Government Entity which restrains, enjoins or otherwise prohibits the
consummation of the Transactions.
(f) HSR Act. All HSR Act waiting periods applicable to the
transactions contemplated under this Agreement shall have expired or been
terminated.
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(g) Governmental and Regulatory Consents. All filings required
to be made prior to the Effective Time with, and all consents, approvals,
permits and authorizations required to be obtained prior to the Effective Time
from, Governmental Entities in connection with the execution and delivery of
this Agreement and the consummation of the Transactions shall have been made or
obtained.
Section 6.2 Conditions to the Obligations of Parent. The obligations
of Parent under this Agreement to consummate the Transactions are subject to the
satisfaction of the following conditions on or prior to Closing, the imposition
of which is solely for the benefit of Parent and any one of more of which may be
expressly waived by Parent, in its sole discretion, except as otherwise required
by law:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Company contained herein shall have been
true and correct (except that any representation or warranty qualified by
materiality shall be true and correct in all respects taking into account such
qualification) when made and as of the Closing Date (except to the extent that
any such representation and warranty is by its terms made as of a specific date
in which case such representation and warranty shall have been true and correct
(or true and correct in all material respects, as applicable) as of such
specific date).
(b) Performance of Agreements. The Company shall have
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants contained in this Agreement or any
other Transaction Document to be performed and complied with by the Company at
or prior to the Closing Date.
(c) No Material Adverse Change. Since the date hereof,
there shall have been no Material Adverse Change with respect to the Company.
(d) Appraisal Rights. Holders of not more than 10% of the
shares of Company Common Stock outstanding immediately prior to the Effective
Time shall have demanded appraisal rights for their shares of Company Common
Stock.
(e) Tax Opinion. Concurrently with the execution of this
Agreement, Parent received an opinion of Paul, Weiss, Rifkind, Wharton &
Garrison, counsel to Parent, to the effect that the Contribution and the Merger
should qualify as tax-free events under Section 351 or Section 368 of the Code.
Nothing has occurred since the date of that opinion that would prevent such
counsel from delivering an opinion to the same effect on the Closing Date.
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(f) Affiliate Letters. Parent shall have received from each
Rule 145 Affiliate of the Company an executed copy of a Rule 145 Affiliate
Agreement from each Rule 145 Affiliate as contemplated by Section 5.11 hereof.
(g) Transaction Documents. Each of the Transaction
Documents shall have been executed and delivered by each party thereto (other
than USA or Parent).
(h) Vecchione Employment Agreement. An employment agreement
between Maurizio Vecchione and Newco shall have been executed in form and
substance satisfactory to Parent, and such employment agreement shall be valid
and binding on the Closing Date. Maurizio Vecchione shall be a full-time
employee of the Company immediately prior to the Closing Date and of Newco as of
the Closing Date.
(i) Freedman Security Interests. Joyce Freedman and Lee
Freedman shall have released all of the security interests they hold in the
assets of the Company and shall have filed appropriate documentation of such
release with the United States Patent and Trademark Office.
(j) Certificate. Parent shall have received a certificate,
dated as of the Closing Date, executed by an officer of the Company certifying
as to the satisfaction of the conditions in Section 6.2(a), (b), (c) and (d).
Section 6.3 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Transactions are subject to the
satisfaction of the following conditions on or prior to Closing, the imposition
of which is solely for the benefit of the Company and any one or more of which
may be expressly waived by the Company, in its sole discretion, except as
otherwise required by Law:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Parent contained herein shall have been true
and correct (except that any representation or warranty qualified by materiality
shall be true and correct in all respects taking into account such
qualification) when made and as of the Closing Date (except to the extent that
any such representation and warranty is by its terms made as of a specific date,
in which case such representation and warranty shall have been true and correct
(or true and correct in all material respects, as applicable) as of such
specific date).
(b) Performance of Agreements. Parent shall have performed in
all material respects all obligations and agreements and complied in all
material respects with all covenants contained in this Agreement or any other
Transaction Document to be performed and complied with by Parent at or prior to
the
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Closing Date, and the Required Stockholder Approval shall have been obtained and
be in full force and effect.
(c) No Material Adverse Change. Since the date hereof,
there shall have been no Material Adverse Change with respect to ISN.
(d) Ownership of Merger Sub. Immediately prior to the
Effective Time, (i) 100% of the issued and outstanding capital stock of Newco
shall be owned by Parent, (ii) 100% of the issued and outstanding capital stock
of Merger Sub shall be owned by Newco, and (iii) except as contemplated by this
Agreement or the other Transaction Documents (x) there shall be no options,
warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character relating to the capital stock of
Newco or Merger Sub or obligating Newco or Merger Sub to grant, issue or sell
any shares of its capital stock or other equity securities, other than pursuant
to the Transactions (including the Media Warrants) and (y) there shall be no
outstanding Contracts requiring Newco or Merger Sub to repurchase, redeem or
otherwise acquire or make any payment in respect of shares of its capital stock.
(e) Tax Opinion. Concurrently with the execution of this
Agreement, the Company received an opinion of Coudert Brothers, counsel to the
Company, to the effect that the Merger should qualify as a tax-free event under
Section 351 or Section 368 of the Code. Nothing has occurred since the date of
that opinion that would prevent such counsel from delivering an opinion to the
same effect on the Closing Date.
(f) Transaction Documents. Each of the Transaction
Documents shall have been executed and delivered by each party thereto (other
than the Company).
(g) Certificate. The Company shall have received a
certificate, dated as of the Closing Date, executed by an officer of each of
Parent and ISN, certifying as to the satisfaction of the conditions in Section
6.3(a), (b) and (c).
Section 6.4 Frustration of Closing Conditions. Neither Parent nor
the Company may rely on the failure of any condition set forth in Section 6.1,
6.2 or 6.3, as the case may be, to be satisfied if such failure is due to the
failure of such party to perform or observe its covenants hereunder, including
its obligations to use reasonable best efforts to consummate the Transactions.
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ARTICLE 7
TERMINATION AND AMENDMENT
Section 7.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time whether before or after approval by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if there has been a
material breach of any representation, warranty or covenant in this Agreement on
the part of the Company, on the one hand, or Parent, on the other hand, as the
case may be, which breach has not been cured within twenty (20) Business Days
following receipt by the party committing such breach of written notice of such
breach; provided that the terminating party has not materially breached any of
its representations, warranties or covenants herein;
(c) by either Parent or the Company if the Closing shall not
have occurred on or before July 31, 2000 (or such later date as may be agreed to
by Parent and the Company); provided, however, that neither party may terminate
this Agreement under this Section 7.1(c) if such failure has been caused by such
party's material breach of its obligations under this Agreement;
(d) by either Parent or the Company, if this Agreement shall
fail to receive the Required Stockholder Approval at the Stockholders' Meeting
or any adjournment thereof.
(e) by Parent, if (i) the Board of Directors of the Company
shall withdraw, modify or change the Recommendation in a manner adverse to
Parent or shall have resolved to do any of the foregoing or (ii) the Board of
Directors of the Company shall have recommended to the stockholders of the
Company any Alternate Transaction, or failed to recommend opposition to any such
Alternate Transaction, or shall have resolved to do any of the foregoing;
provided that a termination by Parent pursuant to this Section 7.1(e) shall not
affect the right of Parent to receive payments from the Company under Section
8.3;
(f) by the Company, if the Board of Directors of the Company
shall, following advice of outside counsel (who may be the Company's regularly
engaged independent legal counsel), determine that failure to so terminate would
cause the Board of Directors of the Company to breach its fiduciary duties under
California Law and, on or prior to such date, the Company has executed a
definitive agreement with respect to a Qualified Alternate Transaction Proposal;
provided, however, that the Company may not terminate this Agreement pursuant to
this Section 6.1(f) until five Business Days have elapsed following delivery to
Parent
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of written notice of such determination of the Company (which written notice
will inform Parent of the material terms and conditions of the Qualified
Alternate Transaction Proposal) and the Company has offered Parent the
opportunity during such period to alter the terms and conditions of the
Transactions to prevent the Qualified Alternate Transaction Proposal from
qualifying as such; provided, further, that such termination under this Section
7.1(f) shall not be effective until the Company has made payment to Parent of
the amounts required to be paid pursuant to Section 8.3; or
(g) by Parent or the Company if a court or other Governmental
Entity of competent jurisdiction shall have issued an Order or taken any other
action restraining, enjoining or otherwise prohibiting the consummation of the
Contribution, the Merger or any other Transaction and such Order or other action
shall have become final and nonappealable.
Section 7.2 Effect of Termination. In the event this Agreement is
terminated pursuant to Section 7.1, all further obligations of the parties
hereunder shall terminate except that the obligations set forth in this Section
7.2 and Article 8 shall survive; provided that, if this Agreement is so
terminated by a party because one or more of the conditions to such party's
obligations hereunder is not satisfied as a result of the other party's willful
or knowing failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies for breach of contract or
otherwise, including damages relating thereto, shall also survive such
termination unimpaired.
ARTICLE 8
GENERAL PROVISIONS
Section 8.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered personally, upon a
receipt of a transmittal confirmation if sent by facsimile or like transmission,
and on the next Business Day when sent by Federal Express, Express Mail or
similar overnight courier service to the parties at the following addresses or
facsimile numbers (or at such other address or facsimile number for a party as
shall be specified by like notice):
(i) If to the Company, to:
The Company
3861 Sepulveda Blvd.
Culver City, CA 90230
Attention: Maurizio Vecchione
Facsimile: (310) 751-2122
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with a copy to:
Coudert Brothers
950 17th St., 18th Fl.
Denver, CO 80202
Attention: John A. St. Clair
Facsimile: (303) 607-1080
(ii) If to Parent, to:
USANi Sub LLC
Carnegie Hall Tower
152 West 57th Street, 42nd Floor
New York, NY 10019
Attention: Tom Kuhn
Facsimile: 212-314-7329
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Robert B. Schumer
Facsimile: (212) 757-3990
Section 8.2 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by written instruments signed by the parties to this Agreement, or in the
case of a waiver, by the party waiving compliance. Except where a specific
period for action or inaction is provided herein, no delay on the part of a
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof. Neither any waiver on the part of a party of any such right,
power or privilege, nor any single or partial exercise of any such right, power
or privilege, shall preclude any further exercise thereof or the exercise of any
other such right, power or privilege.
Section 8.3 Expenses and Other Payments.
(a) The parties to this Agreement shall, except as otherwise
specifically provided herein, bear their respective costs expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the consummation of the Transactions, including, without limitation, all fees
and expenses of their respective Agents.
65
<PAGE>
(b) The Company agrees that if this Agreement shall be
terminated pursuant to:
(i) Section 7.1(d) and either (A) an Alternate
Transaction was publicly announced prior to such termination or (B) an Alternate
Transaction is consummated, or a definitive agreement with respect thereto is
executed, by the Company or any of its Affiliates following such termination and
on or prior to the 12 month anniversary of such termination; or
(ii) Section 7.1(e) or 7.1(f);
then the Company shall pay to ISN $5,545,809 (the "Termination Fee") and shall
reimburse each of Parent and its Affiliates for all of their respective costs
and expenses incurred in connection with the preparation, execution and
performance of this Agreement, the other Transaction Documents and the
Transactions, including all fees and expenses of each of their respective
Agents.
(c) Any payment required to be made pursuant to Section 8.3(b)
shall be made concurrently with the termination of this Agreement and shall be
made by wire transfer of immediately available funds to an account designated by
ISN, except that any payment to be made solely as the result of Section
8.3(b)(i)(B) shall be made upon the earlier to occur of the consummation of the
Alternate Transaction or the execution of the definitive agreement providing for
the Alternate Transaction. The Company acknowledges that the agreements
contained in Section 8.3 are an integral part of the transaction contemplated by
this Agreement, and that, without these agreements, Parent would not have
entered into this Agreement. Accordingly, if the Company fails to pay promptly
any amounts due pursuant to Section 8.3 and, in order to obtain such payment,
Parent commences a suit which results in a judgment against the Company for the
fee or expense reimbursement set forth in this Section 8.3, the Company shall
pay to Parent its cost and expenses (including attorneys' fees) in connection
with such suit, together with interest from the date of termination of this
Agreement on the amounts so owed at the prime rate of Chase Manhattan Bank in
effect from time to time during such period plus four percent (4%).
Section 8.4 Newco Common Stock. If the Nasdaq Stock Market, Inc.
("NSMI") does not approve the listing of Newco Class A Common Stock, or if the
NSMI or SEC commence or threaten to commence an action seeking to delist the
Company Common Stock, in each case, as a result of the dual class structure of
Newco Common Stock contemplated hereby, all reference to Newco Class A Common
Stock, Newco Class B Common Stock and Newco Common Stock contained herein and
terms of similar meaning contained in the Transaction Documents or in any
Exhibit hereto, including without limitation Exhibit D, shall automatically be
deemed to mean one class of common stock, par value $.01 per share, of Newco. In
such event, (x) the parties shall negotiate expeditiously and agree in good
faith to such
66
<PAGE>
changes to this Agreement and the Transaction Documents and Exhibits hereto to
enable the parties to achieve the benefits of the dual class structure
contemplated hereby, without any material harm to the other benefits intended to
be provided hereunder to the parties hereto and (y) if alternative arrangements
satisfactory to Parent are not effected prior to or at the Closing, the parties
shall amend Exhibit D to provide that if Newco issues any shares of Newco Common
Stock or securities convertible into shares of Newco Common Stock (an
"Issuance"), Newco shall concurrently offer Parent the right to purchase an
amount of Newco Common Stock at its then fair market value to enable Parent to
maintain an equity ownership position in Newco equal to the equity ownership
position prior to the completion of such issuance (taking into account such
issuance and any exercise by Parent of its rights under this clause (y));
provided, that the right contained in this clause (y) will not be made available
to Parent upon the issuance of employee stock options approved by the board of
directors of Newco or any committee thereof or the issuance of Newco Common
Stock upon exercise of such employee stock options.
Section 8.5 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party; provided, that from and after the Effective
Time, Parent shall be permitted to assign its rights under Section 1.8 or 2.3 to
any of USA or its controlled Affiliates. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
Section 8.6 Non-Survival of Representations and Warranties. The
representations and warranties made in this Agreement or in any instrument
delivered pursuant to this Agreement shall not survive Closing.
Section 8.7 Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
Section 8.8 Interpretation. The parties acknowledge and agree that:
(a) each party and its counsel reviewed and negotiated the terms and provisions
of this Agreement and have contributed to its revision; (b) the rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (c) the terms and provisions of this Agreement shall be construed fairly as
to all parties hereto, regardless of which party was generally responsible for
the preparation of this Agreement.
67
<PAGE>
Section 8.9 Severability of Provisions. The provisions of this
Agreement shall be deemed severable and the invalidity or unenforceability of
any provision shall not affect the validity or enforceability or the other
provisions of this Agreement. If any provision of this Agreement, or the
application of that provision to any person or any circumstance, is invalid or
unenforceable, (a) a suitable and equitable provision shall be substituted for
that provision in order to carry out, so far as may be valid and enforceable,
the intent and purpose of the invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of the provision to other
persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of the provision, or the application of that
provision, in any other jurisdiction.
Section 8.10 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein) and
the Confidentiality Agreement, dated October 4, 1999 between the Company and
Parent (the "Confidentiality Agreement") (a) constitute the entire agreement,
and supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and (b) other than
Sections 1.8, 2.3(b), 2.3(d), 4.2(d), 4.2(e) and 5.2 of this Agreement, are not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder. The Confidentiality Agreement shall survive execution of
this Agreement and shall terminate upon the earlier of expiration of such
agreement by its terms and the Effective Time.
Section 8.11 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such state.
Section 8.12 Submission To Jurisdiction; Waivers. Each of the
parties hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Transaction Documents to
which it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the Courts of the
State of New York, the courts of the United States of America for the Southern
District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
68
<PAGE>
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, in accordance
with Section 8.1; and
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction.
Section 8.13 WAIVERS OF JURY TRIAL. THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND FOR
ANY COUNTERCLAIM THEREIN.
Section 8.14 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original and all of which, when
taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Parent have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first above written.
STYLECLICK.COM INC.
By: /s/ M. Vecchione
--------------------
Name: M. Vecchione
Title: President and Co-CEO
USANi Sub LLC
By: /s/ Dara Khosrowshahi
-------------------------
Name: Dara Khosrowshahi
Title: Vice President
69
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Agreement") is entered into as of January
24, 2000, by and between USANi Sub LLC, a Delaware limited liability company
(the "Grantee"), and Styleclick.com Inc., a California corporation (the
"Grantor").
(a) The Grantee and the Grantor are entering into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"),which provides
for, among other things, the merger of Grantor (the "Merger") with a wholly
owned subsidiary of a newly formed Delaware corporation ("Newco") and the
concurrent contribution (the "Contribution") by Grantee to Newco of all of the
outstanding limited liability interests of Internet Shopping Network LLC, a
Delaware limited liability company (the Merger and the Contribution, along with
the other transactions contemplated by the Merger Agreement are referred to
herein as the "Transactions").
(b) As a condition and inducement to Grantee's willingness to enter
into the Merger Agreement, the Grantee has requested that the Grantor grant to
the Grantee an option to purchase up to 1,533,281 shares of Common Stock, no par
value, of the Grantor (the "Common Stock"), upon the terms and subject to the
conditions hereof.
(c) In order to induce the Grantee to enter into the Merger Agreement,
the Grantor is willing to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings ascribed thereto in the Merger
Agreement.
2. The Option; Exercise; Adjustments; Payment of Spread.
(a) Subject to the other terms and conditions set forth
herein, the Grantor hereby grants to the Grantee an irrevocable option (the
"Option") to purchase up to 1,533,281 (such number subject to adjustment as
provided herein) shares of Common Stock (the "Shares") at a cash purchase price
equal to $17.50 per share (the "Purchase Price"). The Option may be exercised by
the Grantee, in whole or in part, at any time, or from time to time, following
the occurrence of one of the events set forth in Section 3(d) hereof, and prior
to the termination of the Option in accordance with the terms of this Agreement.
<PAGE>
(b) In the event the Grantee wishes to exercise the Option,
the Grantee shall send a written notice to the Grantor (the "Stock Exercise
Notice") specifying a date for the closing of such purchases not later than 10
Business Days and not earlier than three Business Days following the date such
notice is given; provided such period shall be extended as may be necessary to
meet any regulatory requirements, including expiration or termination of any
applicable waiting periods under the HSR Act. In the event of any change in the
Common Stock issued and outstanding by reason of a distribution,
reclassification stock dividend, split-up (including a reverse stock split),
combination, recapitalization, exchange of shares or similar transaction, the
type and number of shares or securities subject to the Option, and the Exercise
Price therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction so that the Grantee shall
receive upon exercise of the Option the same class and number of outstanding
shares or other securities or property that Grantee would have received upon
exercise of the Option if the Option had been exercised immediately prior to
such event or the record date therefor, as applicable. Without limiting the
parties' relative rights and obligations under the Merger Agreement, if any
additional shares of Common Stock are issued after the date of this Option
Agreement (other than pursuant to an event described in the first sentence of
this Section 2(b)), the number of shares of Common Stock then remaining subject
to the Option shall be adjusted so that, after such issuance of additional
shares, such number of shares then remaining subject to the Option, together
with any shares theretofore issued pursuant to the Option, equals 19.9% of the
number of shares of Common Stock then issued and outstanding. Notwithstanding
anything in this Agreement, the number of Shares subject to this Option shall
never exceed 19.9% of the outstanding shares of Common Stock of the Grantor.
3. Conditions to Delivery of Shares. The Grantor's obligation to
deliver Shares upon exercise of the Option is subject only to the conditions
that:
(a) no preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the United
States prohibiting the delivery of the Shares shall be in effect;
(b) any applicable waiting periods under the HSR Act shall
have expired or been terminated;
(c) any other consent, approval, order, notification or
authorization, the failure of which to obtain or make would make the issuance of
the Shares illegal, shall have been obtained or made and be in full force and
effect; and
(d) (i) any person (other than Grantee or any of its
subsidiaries and other than any shareholder of Grantee that currently owns in
excess of 15% of the outstanding Common Stock) shall have acquired beneficial
ownership (as such term is defined in Rule 13d-3 under the Exchange Act or the
right to acquire beneficial ownership of, or any "group" (as such term is
defined under the Exchange
<PAGE>
Act) shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, shares of Common Stock aggregating 15% or more of the
then outstanding Common Stock, (ii) any person shall have commenced or publicly
announced its intention to commence a tender offer for 15% or more of the
outstanding Common Stock or shall have publicly announced its intention to
effect an Alternative Transaction, (iii) the Merger Agreement is terminated
pursuant to Section 7.1(e) or 7.1(f), or (iv) the Merger Agreement is terminated
pursuant to Section 7.1(d) and at such time an Alternative Transaction was
publicly announced prior to such termination or an Alternative Transaction is
consummated, or a definitive agreement with respect thereto is executed by the
Company or any of its affiliates following such termination and on or prior to
the 12 month anniversary of such termination
4. The Closing.
(a) Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice, at 9:30 a.m., local time,
at the offices of the Company, if the conditions set forth in Section 3(a), (b)
or (c) have not then been satisfied, on the second Business Day following the
satisfaction of such conditions, or at such other time and place as the parties
hereto may agree (the "Closing Date"). On the Closing Date, the Grantor will
deliver to the Grantee a certificate or certificates, representing the Shares in
the denominations designated by the Grantee in its Stock Exercise Notice and the
Grantee will purchase such Shares from the Grantor at the price per Share equal
to the Purchase Price. Any payment made by the Grantee to the Grantor shall be
made by wire transfer to a bank designated by the party receiving such funds.
(b) The certificates representing the Shares shall bear an
appropriate legend relating to the fact that such Shares have not been
registered under the Securities Act.
5. Representations and Warranties of the Grantor. The Grantor
represents and warrants to the Grantee that (a) the Grantor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and has the requisite corporate power and authority to enter
into and perform this Agreement; (b) the execution and delivery of this
Agreement by the Grantor and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
Grantor and this Agreement has been duly executed and delivered by a duly
authorized officer of the Grantor and constitutes a valid, binding and
enforceable obligation of the Grantor; (c) the Grantor has taken all necessary
corporate action to authorize and reserve the Shares issuable upon exercise of
the Option and the Shares, when issued and delivered by the Grantor upon
exercise of the Option and paid for by Grantee as contemplated hereby, will be
duly authorized, validly issued, fully paid and non-assessable and free of
preemptive rights; (d) the execution and delivery of this Agreement by the
Grantor and, except as otherwise required by the HSR Act and for such filings as
are required by NASDAQ and under
<PAGE>
any applicable federal security laws and regulations, the consummation by it of
the transactions contemplated hereby do not require the consent, waiver,
approval or authorization of or any filing with any person or public authority
and will not violate, result in a breach of or the acceleration of any
obligation under, or constitute a default under, any provision of Grantor's
Articles of Incorporation or By- laws, or any material indenture, mortgage,
lien, lease, agreement, contract, instrument, order, law, rule, regulation,
judgment, ordinance, decree or restriction by which the Grantor or any of its
Subsidiaries or any of their respective properties or assets is bound; (e) no
"fair price," "moratorium," "control share acquisition," "interested
shareholder" or other form of antitakeover statute or regulation, or similar
provision contained in the Articles of Incorporation or By-laws of Grantor, is
or shall be applicable to any of the transactions contemplated by this
Agreement, and the Board of Directors of Grantor has taken all action to approve
the transactions contemplated hereby to the extent necessary to avoid any such
application (including the Board of Directors of Grantor having determined that
the purchase price under Sections 8 and 9 hereof will not violate any rights of
any holder of the Company's Equity Securities or require any shareholder vote or
any other consent or waiver by any holders of the Company's Equity Securities,
in each case that have not been waived or obtained).
6. Representations And Warranties of the Grantee. The Grantee
represents and warrants to the Grantor that (a) the execution and delivery of
this Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary limited liability
company action on the part of the Grantee and this Agreement has been duly
executed and delivered by a duly authorized officer of the Grantee and
constitutes a valid and binding obligation of Grantee; and (b) the Grantee is
acquiring the Option and, if and when it exercises the Option, will be acquiring
the Shares issuable upon the exercise thereof for its own account and not with a
view to distribution or resale in any manner which would be in violation of the
Securities Act or the NASDAQ rules.
7. Listing of Shares; Filings; Governmental Consents. Subject to
applicable law and the rules and regulations of the National Association of
Securities Dealers ("NASD"), when the Option becomes exercisable hereunder, the
Grantor will promptly file an application to list the Shares on the NASDAQ and
will use all reasonable best efforts to obtain approval of such listing and to
effect all necessary filings by the Grantor under the HSR Act; provided,
however, that if the Grantor is unable to effect such listing on the NASDAQ by
the Closing Date, the Grantor will nevertheless be obligated to deliver the
Shares upon the Closing Date. Each of the parties hereto will use its reasonable
best efforts to obtain consents of all third parties and governmental
authorities, if any, necessary to the consummation of the transactions
contemplated.
8. Registration Rights.
(a) In the event that the Grantee shall desire to sell any of
the Shares within three years after the purchase of such Shares pursuant hereto,
and such sale requires, in the opinion of counsel to the Grantee, which opinion
shall be reasonably satisfactory to the Grantor and its counsel, registration of
such Shares under the Securities Act, the Grantor will cooperate with the
Grantee and any underwriters in registering such Shares for resale, including
promptly filing a registration statement which complies with the requirements of
applicable federal and state securities laws, and entering into an underwriting
agreement with such underwriters upon such terms and conditions as are
customarily contained in underwriting agreements with respect to secondary
distributions; provided that the Grantor shall not be required to have declared
effective more than two registration statements hereunder and shall be entitled
to delay the filing or effectiveness of any registration statement for up to 90
days if the offering would, in the judgment of the Board of Directors of the
Grantor, require premature disclosure of any material corporate development or
material transaction involving the Grantor or interfere with any previously
planned securities offering by the Grantor.
(b) If the Common Stock is registered pursuant to the
provisions of this Section 8, the Grantor agrees (i) to furnish copies of the
registration statement and the prospectus relating to the Shares covered thereby
in such numbers as the Grantee may from time to time reasonably request and (ii)
if any event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least 90 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish
the Grantee such numbers of copies of the registration statement and prospectus,
as amended or supplemented, as may reasonably be requested. The Grantor shall
bear the cost of the registration, including all registration and filing fees,
printing expenses, and fees and disbursements of counsel and accountants for the
Grantor, except that the Grantee shall pay the fees and disbursements of its
counsel, and the underwriting fees and selling commissions applicable to the
shares of Common Stock sold by the Grantee. The Grantor shall indemnify and hold
harmless (x) Grantee, its affiliates and its officers and directors and each
person who controls Grantee within the meaning of the Securities Act or Exchange
Act and (y) each underwriter and each person who controls any underwriter within
the meaning of the Securities Act or the Exchange Act (collectively, the
"Underwriters") ((x) and (y) being referred to as "Indemnified Parties") against
any losses, claims, damages, liabilities or expenses, to which the Indemnified
Parties may become subject, insofar as such losses, claims, damages, liabilities
(or actions in respect thereof) and expenses arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained or
incorporated by reference in any registration statement or prospectus filed
pursuant to this paragraph, 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
<PAGE>
statements therein not misleading; provided, however, that the Grantor will not
be liable in any such case to the extent that any such loss, liability, claim,
damage or expense arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from any such documents in
reliance upon and in conformity with written information furnished to the
Grantor by the Indemnified Parties expressly for use or incorporation by
reference therein.
(c) The Grantee and the Underwriters shall indemnify and hold
harmless the Grantor, its affiliates and its officers and directors and each
person who controls Grantor within the meaning of the Securities Act or Exchange
Act against any losses, claims, damages, liabilities or expenses to which the
Grantor, its affiliates and its officers and directors may become subject,
insofar as such losses, claims, damages, liabilities (or actions in respect
thereof) and expenses arise out of or are based upon any untrue statement of any
material fact contained or incorporated by reference in any registration
statement filed pursuant to this paragraph, 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 not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Grantor by the
Grantee or the Underwriters, as applicable, specifically for use or
incorporation by reference therein.
9. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
10. Specific Performance. The Grantor acknowledges that if the Grantor
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists.
11. Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally, upon a receipt of a
transmittal confirmation if sent by facsimile or like transmission, and on the
next Business Day when sent by Federal Express, Express Mail or similar
overnight courier service to the parties at the following addresses or facsimile
numbers (or at such other address or facsimile number for a party as shall be
specified by like notice):
<PAGE>
If to the Grantee:
USANi Sub LLC
Carnegie Hall Tower
152 West 57th Street, 42nd Floor
New York, NY 10019
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Robert B. Schumer
Facsimile: (212) 757-3990
If to the Grantor:
The Company
3861 Sepulveda Blvd.
Culver City, CA 90230
Attention: Maurizio Vecchione
Facsimile: (310) 751-2122
with a copy to:
Coudert Brothers
950 17th St., 18th Fl.
Denver, CO 80202
Attention: John A. St. Clair
Facsimile: (303) 607-1080
12. Parties in Interest. This Agreement shall inure to the benefit of
and be binding upon the parties named herein and their respective successors and
assigns. Nothing in this Agreement, express or implied, is intended to confer
upon any person other than the Grantor or the Grantee, or their successors or
assigns, any rights or remedies under or by reason of this Agreement.
13. Entire Agreement; Amendments. This Agreement, together with the
Merger Agreement and the other documents contemplated thereby, contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be changed
only by an agreement in writing signed by the party against whom any waiver,
change, amendment, modification or discharge may be sought.
<PAGE>
14. Assignment. No party to this Agreement may assign any of its rights
or obligations under this Agreement without the prior written consent of the
other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any of its direct or indirect wholly owned
subsidiaries, but no such transfer shall relieve the Grantee of its obligations
hereunder if such transferee does not perform such obligations.
15. Headings. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such state.
18. Termination of Option. The right to exercise the Option granted
pursuant to this Agreement shall terminate at the earlier of (i) the Effective
Time and (ii) the 12 month anniversary of Merger Termination Date; provided
that, if the Option cannot be exercised or the Shares cannot be delivered to
Grantee upon such exercise because the conditions set forth in Section 3(a), (b)
or (c) hereof have not yet been satisfied, the termination date set forth in
clause (ii) shall be extended until 30 days after such impediment to exercise or
delivery has been removed. All representations and warranties contained in this
Agreement shall survive delivery of and payment for the Shares.
19. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement or
the Merger Agreement, in no event shall the Grantee's Total Profit (as
hereinafter defined) exceed $5,545,809 and, if it otherwise would exceed such
amount, the Grantee shall repay such excess amount to Grantor in cash (or the
purchase price for purposes of Section 8, shall be reduced) so that Grantee's
Total Profit shall not exceed $5,545,809 after taking into account the foregoing
actions.
(b) Notwithstanding any other provision of this Agreement,
this Option may not be exercised for a number of Shares as would, as of the date
of the Stock Exercise Notice, result in a Notional Total Profit (as defined
below) of more than $5,545,809 and, if exercise of the Option otherwise would
exceed such amount, the Grantee, at its discretion, may increase the Purchase
Price for that number of Shares set forth in the Stock Exercise Notice so that
the Notional Total Profit shall not exceed $5,545,809; provided, that nothing in
this sentence shall restrict any exercise of the
<PAGE>
Option permitted hereby on any subsequent date at the Purchase Price set forth
in Section 2(a) hereof.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) (x) the amount of the cash
Termination Fee received by Grantee pursuant to Section 8.3(b) of the Merger
Agreement and Section 2(c) hereof, less (y) any repayment of such cash to
Grantor, (ii) (x) the net cash amounts received by Grantee pursuant to the sale
of Shares (or any other securities into or for which such Shares are converted
or exchanged) to any unaffiliated party, less (y) the Grantee's purchase price
for such Shares.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of Shares as to which Grantee may propose to exercise this
Option shall be the Total Profit determined as of the date of the Stock Exercise
Notice assuming that this Option were exercised on such date for such number of
Shares and assuming that such Shares, together with all other Shares acquired
upon exercise of the Option and held by Grantee and its affiliates as of such
date, were sold for cash at the closing market price for the Common Stock as of
the close of business on the preceding trading day (less customary brokerage
commissions).
20. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
<PAGE>
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
USANi SUB LLC
By: /s/ Dara Khosrowshahi
-------------------------
Name: Dara Khosrowshahi
Title: Vice President
STYLECLICK.COM INC.
By: /s/ M. Vecchione
--------------------
Name: M. Vecchione
Title: President and Co-CEO
VOTING AND FIRST OFFER AGREEMENT
VOTING AND FIRST OFFER AGREEMENT, dated as of January 24, 2000 (this
"Agreement"), between Joyce Freedman (the "Principal Stockholder") and USANi Sub
LLC, a Delaware limited liability company ("Parent").
WHEREAS, Styleclick.com Inc., a California corporation (the "Company"),
and Parent propose to enter into an Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), which provides for, among other
things, the merger of the Company (the "Merger") with a wholly owned subsidiary
of a newly formed Delaware corporation ("Newco") and the concurrent contribution
by Parent to Newco of all of the outstanding limited liability interests of
Internet Shopping Network LLC, a Delaware limited liability company ("ISN");
WHEREAS, the Principal Stockholder is the owner of one or more of the
following securities: (a) shares of common stock of the Company, no par value
("Company Common Stock") and (b) options to acquire Company Common Stock; and
WHEREAS, in order to induce Parent to enter into the Merger Agreement,
the Principal Stockholder has agreed to enter into this Agreement with respect
to all the shares of Company Common Stock now owned, whether beneficially or of
record, and which may hereafter be acquired by the Principal Stockholder and any
shares of Company Common Stock over which the Principal Stockholder has
investment power or voting power, each within the meaning of Rule 13d-3(a) of
the Securities Exchange Act of 1934, as amended (the "Shares"), and all options
to acquire Shares now owned and which may hereafter be acquired (the "Options").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE 1
Section 1.1 Voting Agreement. The Principal Stockholder hereby agrees
that during the Restricted Period (as defined below) at any meeting of the
stockholders of the Company, however called, and in any action by consent of the
stockholders of the Company, the Principal Stockholder shall vote her Shares or
shall cause her Shares to be voted: (a) in favor of the Merger, the Merger
Agreement (as amended from time to time) and the transactions contemplated by
the Merger Agreement (the "Proposed Transactions") and (b) against any proposal
(other than in respect of the Proposed Transaction) for any: (i) merger,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any
other material corporate transaction, the
<PAGE>
2
consummation of which could reasonably be expected to impede, interfere with,
prevent or materially delay the Proposed Transactions; (ii) a sale, lease,
exchange, transfer or other disposition of 20% or more of the assets of the
Company in a single transaction or series of transactions; or (iii) the
acquisition by any person or "group" (as defined in Section 13(d) of the
Exchange Act) other than Parent or its affiliates (herein, a "third party"), of
"beneficial ownership" of 15% or more of the Company's voting stock whether by
tender offer or exchange offer or otherwise and including a self tender offer,
merger, sale of assets or other business combination between the Company and any
person or entity or any other action or agreement that would result in a breach
of any covenant, representation or warranty or any other obligation or agreement
of the Company under the Merger Agreement or which could result in any of the
conditions to the Company's obligations under the Merger Agreement not being
fulfilled. For purposes of this Agreement, the term "Restricted Period" shall
mean the time during which the Merger Agreement remains in effect and for 12
months thereafter.
Section 1.2 Acknowledgment. The Principal Stockholder acknowledges
receipt and review of a copy of the Merger Agreement.
Section 1.3 Waiver of Dissenters' Rights. The Principal Stockholder
hereby irrevocably and forever waives any rights the Principal Stockholder may
have, as a result of the Merger, to demand payment for any Shares beneficially
owned by the Principal Stockholder pursuant to Section 1300 et. seq. of
California Law or to otherwise qualify as a "dissenting shareholder" as such
term is used in such sections of California Law.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL STOCKHOLDER
The Principal Stockholder hereby represents and warrants to Parent as
follows:
Section 2.1 Authority Relative to This Agreement. The Principal
Stockholder has all necessary power and authority to execute and deliver this
Agreement, to perform her obligations hereunder and to consummate the
transactions contemplated hereby and no other proceedings on the part of the
Principal Stockholder are necessary to authorize this Agreement or to consummate
such transactions. This Agreement has been duly and validly executed and
delivered by the Principal Stockholder and, assuming the due authorization,
execution and delivery by Parent, constitutes a legal, valid and binding
obligation of the Principal Stockholder, enforceable against the Principal
Stockholder in accordance with its terms.
<PAGE>
3
Section 2.2 No Conflict. (a) The execution and delivery of this
Agreement by the Principal Stockholder do not, and the performance of this
Agreement by the Principal Stockholder will not, (i) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to the Principal
Stockholder or by which the Shares or the Options are bound or affected or (ii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien (as defined below) on any of the Shares or the Options
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Principal Stockholder is a party or by which the Principal Stockholder or the
Shares or the Options are bound or affected, except for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
delay the performance by the Principal Stockholder of her obligations under this
Agreement.
(b) The execution and delivery of this Agreement by the
Principal Stockholder do not, and the performance of this Agreement by the
Principal Stockholder will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any court or arbitrator or any
governmental body, agency or official except for applicable requirements, if
any, of the Securities Exchange Act of 1934, as amended, and except where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay the performance
by the Principal Stockholder of her obligations under this Agreement.
Section 2.3 Title to the Shares. As of the date hereof, the Principal
Stockholder is the record and beneficial owner of, or has voting power or
investment power over, the Shares, and is the record and beneficial owner of the
Options, listed on Schedule 1. Such Shares and Options are all the securities of
the Company owned, either of record or beneficially, by the Principal
Stockholder or in which the Principal Stockholder has voting or investment power
and the Principal Stockholder owns no other rights or interests exercisable for
or convertible into any securities of the Company. Except as identified on
Schedule 2, all of the Shares and Options referred to above are owned free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreement, limitations on the Principal Stockholder's voting
rights, charges and other encumbrances of any nature whatsoever (collectively,
"Liens") except, with respect to the Options, the Company Option Plan and any
agreements executed pursuant thereto pursuant to which such Options were issued.
The Principal Stockholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to the Shares.
<PAGE>
4
ARTICLE 3
COVENANTS OF THE PRINCIPAL STOCKHOLDER
Section 3.1 No Inconsistent Agreement. The Principal Stockholder hereby
covenants and agrees that she shall not enter into any agreement or grant a
proxy or power of attorney with respect to the Shares or Options which is
inconsistent with this Agreement.
Section 3.2 Transfer Restriction.
(a) The Principal Stockholder hereby covenants and agrees that
she shall not sell, give, assign, hypothecate, pledge, encumber, grant a
security interest in or otherwise dispose of, whether by operation of law or by
agreement or otherwise (each a "Transfer"), from the date hereof until the
termination of the Merger Agreement, any Shares or Options, or any right, title
or interest therein or thereto.
(b) Notwithstanding the foregoing, the Principal Stockholder
may Transfer any Shares or Options, or any right, title or interest therein or
thereto, to any trust which is established, and which remains, solely for the
benefit of the Principal Stockholder or her spouse, siblings, children or
grandchildren (a "Trust"), provided, that, prior to such Transfer, the Trust
shall execute and deliver an agreement by which it shall become a party to and
be bound by the applicable terms and provisions of this Agreement, in form and
substance reasonably satisfactory to Parent.
(c) Notwithstanding the foregoing, if Parent permits any
stockholder that is a party to an agreement containing restrictions on transfer
of the type contained herein (the "Transferring Stockholder") to Transfer any
Shares, Options or warrants to purchase Company Common Stock (the "Warrants")
after the date hereof and prior to the termination of the Merger Agreement,
which Transfer would otherwise be prohibited by such agreement, then Parent
shall permit the Principal Stockholder, upon her request, to Transfer a number
of Shares or Options equal to the product of (i) the number of Shares, Options
or Warrants Transferred by the Transferring Stockholder divided by the number of
Shares, Options or Warrants owned by the Transferring Stockholder as of the date
of such Transfer, and (ii) the number of Shares or Options owned by the
Principal Stockholder as of the date of such Transfer, in each case, treating
all Options and Warrants as Shares on an as- converted basis (without giving
effect to restrictions or limitations on the exercise of such Options or
Warrants).
Section 3.3 Right of First Offer. The Principal Stockholder hereby
covenants and agrees that, following the termination of the Merger Agreement and
during the remainder of the Restricted Period, the Principal Stockholder shall
not Transfer any Shares or Options except pursuant to the following provisions:
<PAGE>
5
(a) Offering Notice. If the Principal Stockholder wishes to
Transfer (other than pursuant to the Merger) all or any portion of her Shares or
Options to any person or entity (a "Third Party Purchaser"), the Principal
Stockholder shall first offer such Shares or Options to Parent, by sending
written notice (an "Offering Notice") to Parent, which shall state (i) the
number of Shares or Options proposed to be transferred (the "Offered
Securities"); (ii) whether such sale (with respect to Shares only) will be
effected in an open market transaction that complies with Rule 144(f) of the
Securities Act of 1933 (a "Public Sale") or otherwise (a "Private Sale"), (iii)
the proposed purchase price for the Offered Securities, which price must be in
cash and, with respect to a Public Sale, may not be at a per share price in
excess of the closing price of shares of Company Common Stock on the NASDAQ for
the trading day immediately prior to the date on which the Offering Notice is
given (the "Offer Price"); and (iv) with respect to a Private Sale, the terms
and conditions of such sale, which terms and conditions must be customary and
reasonable for a transaction of such type. Upon delivery of the Offering Notice,
such offer shall be irrevocable unless and until the rights of first offer
provided for herein shall have been waived or shall have expired;
(b) Parent Option. For a period of five days after the giving
of the Offering Notice pursuant to Section 3.3(a) (the "Option Period"), Parent
shall have the right (the "Option") but not the obligation to purchase all (but
not less than all) of the Offered Securities at a purchase price equal to the
Offer Price and, with respect to a Private Sale, upon the terms and conditions
set forth in the Offering Notice. The right of Parent to purchase any or all of
the Offered Securities under this Section 3.3(b) shall be exercisable by
delivering written notice of the exercise thereof (the "Acceptance"), prior to
the expiration of the Option Period, to the Principal Stockholder, which notice
shall state the number of Offered Securities proposed to be purchased by Parent.
The failure of Parent to respond within the Option Period shall be deemed to be
a waiver of the Option; provided that Parent may waive its rights under this
Section 3.3(b) prior to the expiration of the Option Period by giving written
notice to the Principal Stockholder (the date any such written waiver is
received by the Principal Stockholder or, if no notice is given, the last date
of the Option Period is referred to as the "Waiver Date");
(c) Closing. The closing of the purchase of Offered Securities
subscribed for by Parent under Section 3.3(b) shall be held at the executive
offices of Parent at 11:00 a.m., local time, on the later of (i) the 10th day
after the Acceptance pursuant to Section 3.3(b) and (ii) two days following the
date on which all governmental or regulatory approvals (including the expiration
of any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act)
with respect to such transaction, if any, have been obtained or at such other
time and place as the parties to the transaction may agree. At such closing, the
Principal Stockholder shall deliver certificates representing the Offered
Securities, duly endorsed for transfer and accompanied by all requisite transfer
taxes, if any, and such Offered Securities shall be free and clear of any Liens
(other than those arising hereunder) and the Principal Stockholder shall so
represent and warrant, and shall further represent and warrant
<PAGE>
6
that she is the sole beneficial and record owner of such Offered Securities.
Parent shall deliver at the closing payment in full in immediately available
funds for the Offered Securities purchased. In connection with such sale the
parties to the transaction shall execute such additional documents and take all
reasonable steps as are otherwise necessary or appropriate to effectuate such
transaction; and
(d) Sale to a Third Party Purchaser. If Parent does not elect
to purchase all of the Offered Securities under Section 3.3(b), the Principal
Stockholder may sell all, but not less than all, of the Offered Securities that
Parent elected not to purchase (i) with respect to a Private Sale to a Third
Party Purchaser on terms and conditions no less favorable to the Principal
Stockholder than those set forth in the Offering Notice; provided, however, that
such sale is bona fide and not undertaken for the purpose of avoiding the
Principal Stockholder's obligations hereunder and made pursuant to a contract
entered into within 10 days after the Waiver Date and (ii) with respect to a
Public Sale, such sale is effected within five days following the Waiver Date at
the market price in effect at the time of such sale. If such sale is not
consummated within five days after the Waiver Date with respect to a Public Sale
or 45 days after the Waiver Date with respect to a Private Sale, then the
restrictions provided for herein shall again become effective, and no transfer
of such Offered Securities may be made thereafter by the Principal Stockholder
without again offering the same to Parent in accordance with this Section 3.3.
Section 3.4 Security Interests. Within 30 days following the date of
this Agreement, the Principal Stockholder hereby agrees to release all of the
security interests she holds (either in her own name or jointly with another
party) in the assets of the Company and file appropriate documentation of such
release, in form and substance reasonably satisfactory to Parent, with the
United States Patent and Trademark Office.
Section 3.5 Stockholders Agreement. Prior to the Closing of the Merger,
the Principal Stockholder hereby agrees to execute the Stockholders Agreement,
substantially in the form attached as Exhibit A to the Merger Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1 Authority Relative to this Agreement. Parent has full
right, power and authority to enter into and perform this Agreement and this
Agreement has been duly authorized, executed and delivered by Parent and is a
valid and binding agreement of Parent and enforceable against Parent in
accordance with its terms.
<PAGE>
7
Section 4.2 No Conflict. (a) The execution and delivery of this
Agreement by Parent do not, and the performance of this Agreement by Parent will
not, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent.
(b) The execution and delivery of this Agreement by Parent do not, and
the performance of this Agreement by Parent will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
court or arbitrator or any governmental body, agency or official except for
applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended, and except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Parent of its obligations under this
Agreement.
ARTICLE 5
MISCELLANEOUS
Section 5.1 Termination. This Agreement shall terminate upon the
earliest to occur of (i) the Closing, (ii) the 12-month anniversary following
termination of the Merger Agreement and (iii) the termination of the Merger
Agreement by Parent pursuant to Section 7.1(c) of such Agreement; provided that
the representations and warranties contained herein shall survive the
termination hereof.
Section 5.2 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
Section 5.3 Definitions. Unless otherwise defined herein, all
capitalized terms shall have the definitions assigned to such terms in the
Merger Agreement.
Section 5.4 Entire Agreement. This Agreement constitutes the entire
agreement among Parent and the Principal Stockholder with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
Section 5.5 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
Section 5.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless
<PAGE>
8
remain in full force and effect so long as the economic or legal substance of
this Agreement is not affected in any manner materially adverse to any party.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible to the fullest extent permitted by applicable law in a
mutually acceptable manner in order that the terms of this Agreement remain as
originally contemplated.
Section 5.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
Section 5.8 Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
shall be brought in the courts of the State of New York and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconvenient forum.
<PAGE>
9
IN WITNESS WHEREOF, Parent and the Principal Stockholder have caused
this Agreement to be duly executed as of the date first above written.
USANi SUB LLC
By: /s/ Dara Khosrowshahi
-------------------------
Name: Dara Khosrowshahi
Title: Vice President
/s/ Joyce Freedman
------------------
Joyce Freedman
<PAGE>
Schedule 1
Number of Shares
owned beneficially Number of
or of record (1) Options owned
------------- -------------
369,292 237,227
1,136,955 (2)
- -------------------------
1/ Other than Shares issuable upon exercise of Options, which are listed
in the next column.
2/ Shares owned jointly with Lee Freedman.
<PAGE>
Schedule 2
Liens
-----
None.
VOTING AND FIRST OFFER AGREEMENT
VOTING AND FIRST OFFER AGREEMENT, dated as of January 24, 2000 (this
"Agreement"), between Lee Freedman (the "Principal Stockholder") and USANi Sub
LLC, a Delaware limited liability company ("Parent").
WHEREAS, Styleclick.com Inc., a California corporation (the "Company"),
and Parent propose to enter into an Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), which provides for, among other
things, the merger of the Company (the "Merger") with a wholly owned subsidiary
of a newly formed Delaware corporation ("Newco") and the concurrent contribution
by Parent to Newco of all of the outstanding limited liability interests of
Internet Shopping Network LLC, a Delaware limited liability company ("ISN");
WHEREAS, the Principal Stockholder is the owner of one or more of the
following securities: (a) shares of common stock of the Company, no par value
("Company Common Stock") and (b) options to acquire Company Common Stock; and
WHEREAS, in order to induce Parent to enter into the Merger Agreement,
the Principal Stockholder has agreed to enter into this Agreement with respect
to all the shares of Company Common Stock now owned, whether beneficially or of
record, and which may hereafter be acquired by the Principal Stockholder and any
shares of Company Common Stock over which the Principal Stockholder has
investment power or voting power, each within the meaning of Rule 13d-3(a) of
the Securities Exchange Act of 1934, as amended (the "Shares"), and all options
to acquire Shares now owned and which may hereafter be acquired (the "Options").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE 1
Section 1.1 Voting Agreement. The Principal Stockholder hereby agrees
that during the Restricted Period (as defined below) at any meeting of the
stockholders of the Company, however called, and in any action by consent of the
stockholders of the Company, the Principal Stockholder shall vote his Shares or
shall cause his Shares to be voted: (a) in favor of the Merger, the Merger
Agreement (as amended from time to time) and the transactions contemplated by
the Merger Agreement (the "Proposed Transactions") and (b) against any proposal
(other than in respect of the Proposed Transaction) for any: (i) merger,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar
<PAGE>
2
transaction involving the Company or any other material corporate transaction,
the consummation of which could reasonably be expected to impede, interfere
with, prevent or materially delay the Proposed Transactions; (ii) a sale, lease,
exchange, transfer or other disposition of 20% or more of the assets of the
Company in a single transaction or series of transactions; or (iii) the
acquisition by any person or "group" (as defined in Section 13(d) of the
Exchange Act) other than Parent or its affiliates (herein, a "third party"), of
"beneficial ownership" of 15% or more of the Company's voting stock whether by
tender offer or exchange offer or otherwise and including a self tender offer,
merger, sale of assets or other business combination between the Company and any
person or entity or any other action or agreement that would result in a breach
of any covenant, representation or warranty or any other obligation or agreement
of the Company under the Merger Agreement or which could result in any of the
conditions to the Company's obligations under the Merger Agreement not being
fulfilled. For purposes of this Agreement, the term "Restricted Period" shall
mean the time during which the Merger Agreement remains in effect and for 12
months thereafter.
Section 1.2 Acknowledgment. The Principal Stockholder acknowledges
receipt and review of a copy of the Merger Agreement.
Section 1.3 Waiver of Dissenters' Rights. The Principal Stockholder
hereby irrevocably and forever waives any rights the Principal Stockholder may
have, as a result of the Merger, to demand payment for any Shares beneficially
owned by the Principal Stockholder pursuant to Section 1300 et. seq. of
California Law or to otherwise qualify as a "dissenting shareholder" as such
term is used in such sections of California Law.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL STOCKHOLDER
The Principal Stockholder hereby represents and warrants to Parent as
follows:
Section 2.1 Authority Relative to This Agreement. The Principal
Stockholder has all necessary power and authority to execute and deliver this
Agreement, to perform his obligations hereunder and to consummate the
transactions contemplated hereby and no other proceedings on the part of the
Principal Stockholder are necessary to authorize this Agreement or to consummate
such transactions. This Agreement has been duly and validly executed and
delivered by the Principal Stockholder and, assuming the due authorization,
execution and delivery by Parent,
<PAGE>
3
constitutes a legal, valid and binding obligation of the Principal Stockholder,
enforceable against the Principal Stockholder in accordance with its terms.
Section 2.2 No Conflict. (a) The execution and delivery of this
Agreement by the Principal Stockholder do not, and the performance of this
Agreement by the Principal Stockholder will not, (i) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to the Principal
Stockholder or by which the Shares or the Options are bound or affected or (ii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien (as defined below) on any of the Shares or the Options
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Principal Stockholder is a party or by which the Principal Stockholder or the
Shares or the Options are bound or affected, except for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
delay the performance by the Principal Stockholder of his obligations under this
Agreement.
(b) The execution and delivery of this Agreement by the
Principal Stockholder do not, and the performance of this Agreement by the
Principal Stockholder will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any court or arbitrator or any
governmental body, agency or official except for applicable requirements, if
any, of the Securities Exchange Act of 1934, as amended, and except where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay the performance
by the Principal Stockholder of his obligations under this Agreement.
Section 2.3 Title to the Shares. As of the date hereof, the Principal
Stockholder is the record and beneficial owner of, or has voting power or
investment power over, the Shares, and is the record and beneficial owner of the
Options, listed on Schedule 1. Such Shares and Options are all the securities of
the Company owned, either of record or beneficially, by the Principal
Stockholder or in which the Principal Stockholder has voting or investment power
and the Principal Stockholder owns no other rights or interests exercisable for
or convertible into any securities of the Company. Except as identified on
Schedule 2, all of the Shares and Options referred to above are owned free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreement, limitations on the Principal Stockholder's voting
rights, charges and other encumbrances of any nature whatsoever (collectively,
"Liens") except, with respect to the Options, the Company Option Plan and any
agreements executed pursuant thereto pursuant to which such Options were issued.
The Principal Stockholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to the Shares.
<PAGE>
4
ARTICLE 3
COVENANTS OF THE PRINCIPAL STOCKHOLDER
Section 3.1 No Inconsistent Agreement. The Principal Stockholder hereby
covenants and agrees that he shall not enter into any agreement or grant a proxy
or power of attorney with respect to the Shares or Options which is inconsistent
with this Agreement.
Section 3.2 Transfer Restriction.
(a) The Principal Stockholder hereby covenants and agrees that
he shall not sell, give, assign, hypothecate, pledge, encumber, grant a security
interest in or otherwise dispose of, whether by operation of law or by agreement
or otherwise (each a "Transfer"), from the date hereof until the termination of
the Merger Agreement, any Shares or Options, or any right, title or interest
therein or thereto.
(b) Notwithstanding the foregoing, the Principal Stockholder
may Transfer any Shares or Options, or any right, title or interest therein or
thereto, to any trust which is established, and which remains, solely for the
benefit of the Principal Stockholder or his spouse, siblings, children or
grandchildren (a "Trust"), provided, that, prior to such Transfer, the Trust
shall execute and deliver an agreement by which it shall become a party to and
be bound by the applicable terms and provisions of this Agreement, in form and
substance reasonably satisfactory to Parent.
(c) Notwithstanding the foregoing, if Parent permits any
stockholder that is a party to an agreement containing restrictions on transfer
of the type contained herein (the "Transferring Stockholder") to Transfer any
Shares, Options or warrants to purchase Company Common Stock (the "Warrants")
after the date hereof and prior to the termination of the Merger Agreement,
which Transfer would otherwise be prohibited by such agreement, then Parent
shall permit the Principal Stockholder, upon his request, to Transfer a number
of Shares or Options equal to the product of (i) the number of Shares, Options
or Warrants Transferred by the Transferring Stockholder divided by the number of
Shares, Options or Warrants owned by the Transferring Stockholder as of the date
of such Transfer, and (ii) the number of Shares or Options owned by the
Principal Stockholder as of the date of such Transfer, in each case, treating
all Options and Warrants as Shares on an as- converted basis (without giving
effect to restrictions or limitations on the exercise of such Options or
Warrants).
Section 3.3 Right of First Offer. The Principal Stockholder hereby
covenants and agrees that, following the termination of the Merger Agreement and
<PAGE>
5
during the remainder of the Restricted Period, the Principal Stockholder shall
not Transfer any Shares or Options except pursuant to the following provisions:
(a) Offering Notice. If the Principal Stockholder wishes to
Transfer (other than pursuant to the Merger) all or any portion of his Shares or
Options to any person or entity (a "Third Party Purchaser"), the Principal
Stockholder shall first offer such Shares or Options to Parent, by sending
written notice (an "Offering Notice") to Parent, which shall state (i) the
number of Shares or Options proposed to be transferred (the "Offered
Securities"); (ii) whether such sale (with respect to Shares only) will be
effected in an open market transaction that complies with Rule 144(f) of the
Securities Act of 1933 (a "Public Sale") or otherwise (a "Private Sale"), (iii)
the proposed purchase price for the Offered Securities, which price must be in
cash and, with respect to a Public Sale, may not be at a per share price in
excess of the closing price of shares of Company Common Stock on the NASDAQ for
the trading day immediately prior to the date on which the Offering Notice is
given (the "Offer Price"); and (iv) with respect to a Private Sale, the terms
and conditions of such sale, which terms and conditions must be customary and
reasonable for a transaction of such type. Upon delivery of the Offering Notice,
such offer shall be irrevocable unless and until the rights of first offer
provided for herein shall have been waived or shall have expired;
(b) Parent Option. For a period of five days after the giving
of the Offering Notice pursuant to Section 3.3(a) (the "Option Period"), Parent
shall have the right (the "Option") but not the obligation to purchase all (but
not less than all) of the Offered Securities at a purchase price equal to the
Offer Price and, with respect to a Private Sale, upon the terms and conditions
set forth in the Offering Notice. The right of Parent to purchase any or all of
the Offered Securities under this Section 3.3(b) shall be exercisable by
delivering written notice of the exercise thereof (the "Acceptance"), prior to
the expiration of the Option Period, to the Principal Stockholder, which notice
shall state the number of Offered Securities proposed to be purchased by Parent.
The failure of Parent to respond within the Option Period shall be deemed to be
a waiver of the Option; provided that Parent may waive its rights under this
Section 3.3(b) prior to the expiration of the Option Period by giving written
notice to the Principal Stockholder (the date any such written waiver is
received by the Principal Stockholder or, if no notice is given, the last date
of the Option Period is referred to as the "Waiver Date");
(c) Closing. The closing of the purchase of Offered Securities
subscribed for by Parent under Section 3.3(b) shall be held at the executive
offices of Parent at 11:00 a.m., local time, on the later of (i) the 10th day
after the Acceptance pursuant to Section 3.3(b) and (ii) two days following the
date on which all governmental or regulatory approvals (including the expiration
of any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act)
with respect to such transaction, if any, have been obtained or at such other
time and place as the parties to
<PAGE>
6
the transaction may agree. At such closing, the Principal Stockholder shall
deliver certificates representing the Offered Securities, duly endorsed for
transfer and accompanied by all requisite transfer taxes, if any, and such
Offered Securities shall be free and clear of any Liens (other than those
arising hereunder) and the Principal Stockholder shall so represent and warrant,
and shall further represent and warrant that he is the sole beneficial and
record owner of such Offered Securities. Parent shall deliver at the closing
payment in full in immediately available funds for the Offered Securities
purchased. In connection with such sale the parties to the transaction shall
execute such additional documents and take all reasonable steps as are otherwise
necessary or appropriate to effectuate such transaction; and
(d) Sale to a Third Party Purchaser. If Parent does not elect
to purchase all of the Offered Securities under Section 3.3(b), the Principal
Stockholder may sell all, but not less than all, of the Offered Securities that
Parent elected not to purchase (i) with respect to a Private Sale to a Third
Party Purchaser on terms and conditions no less favorable to the Principal
Stockholder than those set forth in the Offering Notice; provided, however, that
such sale is bona fide and not undertaken for the purpose of avoiding the
Principal Stockholder's obligations hereunder and made pursuant to a contract
entered into within 10 days after the Waiver Date and (ii) with respect to a
Public Sale, such sale is effected within five days following the Waiver Date at
the market price in effect at the time of such sale. If such sale is not
consummated within five days after the Waiver Date with respect to a Public Sale
or 45 days after the Waiver Date with respect to a Private Sale, then the
restrictions provided for herein shall again become effective, and no transfer
of such Offered Securities may be made thereafter by the Principal Stockholder
without again offering the same to Parent in accordance with this Section 3.3.
Section 3.4 Security Interests. Within 30 days following the date of
this Agreement, the Principal Stockholder hereby agrees to release all of the
security interests he holds (either in his own name or jointly with another
party) in the assets of the Company and file appropriate documentation of such
release, in form and substance reasonably satisfactory to Parent, with the
United States Patent and Trademark Office.
Section 3.5 Stockholders Agreement. Prior to the Closing of the Merger,
the Principal Stockholder hereby agrees to execute the Stockholders Agreement,
substantially in the form attached as Exhibit A to the Merger Agreement.
<PAGE>
7
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1 Authority Relative to this Agreement. Parent has full
right, power and authority to enter into and perform this Agreement and this
Agreement has been duly authorized, executed and delivered by Parent and is a
valid and binding agreement of Parent and enforceable against Parent in
accordance with its terms.
Section 4.2 No Conflict. (a) The execution and delivery of this
Agreement by Parent do not, and the performance of this Agreement by Parent will
not, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent.
(b) The execution and delivery of this Agreement by Parent do
not, and the performance of this Agreement by Parent will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any court or arbitrator or any governmental body, agency or official except
for applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended, and except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Parent of its obligations under this
Agreement.
ARTICLE 5
MISCELLANEOUS
Section 5.1 Termination. This Agreement shall terminate upon the
earliest to occur of (i) the Closing, (ii) the 12-month anniversary following
termination of the Merger Agreement and (iii) the termination of the Merger
Agreement by Parent pursuant to Section 7.1(c) of such Agreement; provided that
the representations and warranties contained herein shall survive the
termination hereof.
Section 5.2 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
Section 5.3 Definitions. Unless otherwise defined herein, all
capitalized terms shall have the definitions assigned to such terms in the
Merger Agreement.
<PAGE>
8
Section 5.4 Entire Agreement. This Agreement constitutes the entire
agreement among Parent and the Principal Stockholder with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
Section 5.5 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
Section 5.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in a mutually acceptable manner in order that the terms of this Agreement remain
as originally contemplated.
Section 5.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
Section 5.8 Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
shall be brought in the courts of the State of New York and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconvenient forum.
<PAGE>
9
IN WITNESS WHEREOF, Parent and the Principal Stockholder have caused
this Agreement to be duly executed as of the date first above written.
USANi SUB LLC
By: /s/ Dara Khosrowshahi
-------------------------
Name: Dara Khosrowshahi
Title: Vice President
/s/ Lee Freedman
----------------
Lee Freedman
<PAGE>
Schedule 1
Number of Shares
owned beneficially Number of
or of record (1) Options owned
------------- -------------
139,952 75,000
1,136,955 (2)
- -------------------------
1/ Other than Shares issuable upon exercise of Options, which are listed
- - in the next column.
2/ Shares owned jointly with Joyce Freedman.
- -
<PAGE>
Schedule 2
Liens
-----
None.
VOTING AND FIRST OFFER AGREEMENT
VOTING AND FIRST OFFER AGREEMENT, dated as of January 24, 2000 (this
"Agreement"), between Maurizio Vecchione (the "Principal Stockholder") and USANi
Sub LLC, a Delaware limited liability company ("Parent").
WHEREAS, Styleclick.com Inc., a California corporation (the "Company"),
and Parent propose to enter into an Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), which provides for, among other
things, the merger of the Company (the "Merger") with a wholly owned subsidiary
of a newly formed Delaware corporation ("Newco") and the concurrent contribution
by Parent to Newco of all of the outstanding limited liability interests of
Internet Shopping Network LLC, a Delaware limited liability company ("ISN");
WHEREAS, the Principal Stockholder is the owner of one or more of the
following securities: (a) shares of common stock of the Company, no par value
("Company Common Stock") and (b) options to acquire Company Common Stock; and
WHEREAS, in order to induce Parent to enter into the Merger Agreement,
the Principal Stockholder has agreed to enter into this Agreement with respect
to all the shares of Company Common Stock now owned, whether beneficially or of
record, and which may hereafter be acquired by the Principal Stockholder and any
shares of Company Common Stock over which the Principal Stockholder has
investment power or voting power, each within the meaning of Rule 13d-3(a) of
the Securities Exchange Act of 1934, as amended (the "Shares"), and all options
to acquire Shares now owned and which may hereafter be acquired (the "Options").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE 1
Section 1.1 Voting Agreement. The Principal Stockholder hereby agrees
that during the Restricted Period (as defined below) at any meeting of the
stockholders of the Company, however called, and in any action by consent of the
stockholders of the Company, the Principal Stockholder shall vote his Shares or
shall cause his Shares to be voted: (a) in favor of the Merger, the Merger
Agreement (as amended from time to time) and the transactions contemplated by
the Merger Agreement (the "Proposed Transactions") and (b) against any proposal
(other than in respect of the Proposed Transaction) for any: (i) merger,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar
<PAGE>
2
transaction involving the Company or any other material corporate transaction,
the consummation of which could reasonably be expected to impede, interfere
with, prevent or materially delay the Proposed Transactions; (ii) a sale, lease,
exchange, transfer or other disposition of 20% or more of the assets of the
Company in a single transaction or series of transactions; or (iii) the
acquisition by any person or "group" (as defined in Section 13(d) of the
Exchange Act) other than Parent or its affiliates (herein, a "third party"), of
"beneficial ownership" of 15% or more of the Company's voting stock whether by
tender offer or exchange offer or otherwise and including a self tender offer,
merger, sale of assets or other business combination between the Company and any
person or entity or any other action or agreement that would result in a breach
of any covenant, representation or warranty or any other obligation or agreement
of the Company under the Merger Agreement or which could result in any of the
conditions to the Company's obligations under the Merger Agreement not being
fulfilled. For purposes of this Agreement, the term "Restricted Period" shall
mean the time during which the Merger Agreement remains in effect and for 12
months thereafter.
Section 1.2 Acknowledgment. The Principal Stockholder acknowledges
receipt and review of a copy of the Merger Agreement.
Section 1.3 Waiver of Dissenters' Rights. The Principal Stockholder
hereby irrevocably and forever waives any rights the Principal Stockholder may
have, as a result of the Merger, to demand payment for any Shares beneficially
owned by the Principal Stockholder pursuant to Section 1300 et. seq. of
California Law or to otherwise qualify as a "dissenting shareholder" as such
term is used in such sections of California Law.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL STOCKHOLDER
The Principal Stockholder hereby represents and warrants to Parent as
follows:
Section 2.1 Authority Relative to This Agreement. The Principal
Stockholder has all necessary power and authority to execute and deliver this
Agreement, to perform his obligations hereunder and to consummate the
transactions contemplated hereby and no other proceedings on the part of the
Principal Stockholder are necessary to authorize this Agreement or to consummate
such transactions. This Agreement has been duly and validly executed and
delivered by the Principal Stockholder and, assuming the due authorization,
execution and delivery by Parent,
<PAGE>
3
constitutes a legal, valid and binding obligation of the Principal Stockholder,
enforceable against the Principal Stockholder in accordance with its terms.
Section 2.2 No Conflict. (a) The execution and delivery of this
Agreement by the Principal Stockholder do not, and the performance of this
Agreement by the Principal Stockholder will not, (i) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to the Principal
Stockholder or by which the Shares or the Options are bound or affected or (ii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien (as defined below) on any of the Shares or the Options
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Principal Stockholder is a party or by which the Principal Stockholder or the
Shares or the Options are bound or affected, except for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
delay the performance by the Principal Stockholder of his obligations under this
Agreement.
(b) The execution and delivery of this Agreement by the
Principal Stockholder do not, and the performance of this Agreement by the
Principal Stockholder will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any court or arbitrator or any
governmental body, agency or official except for applicable requirements, if
any, of the Securities Exchange Act of 1934, as amended, and except where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay the performance
by the Principal Stockholder of his obligations under this Agreement.
Section 2.3 Title to the Shares. As of the date hereof, the Principal
Stockholder is the record and beneficial owner of, or has voting power or
investment power over, the Shares, and is the record and beneficial owner of the
Options, listed on Schedule 1. Such Shares and Options are all the securities of
the Company owned, either of record or beneficially, by the Principal
Stockholder or in which the Principal Stockholder has voting or investment power
and the Principal Stockholder owns no other rights or interests exercisable for
or convertible into any securities of the Company. Except as identified on
Schedule 2, all of the Shares and Options referred to above are owned free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreement, limitations on the Principal Stockholder's voting
rights, charges and other encumbrances of any nature whatsoever (collectively,
"Liens") except, with respect to the Options, the Company Option Plan and any
agreements executed pursuant thereto pursuant to which such Options were issued.
The Principal Stockholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to the Shares.
<PAGE>
4
ARTICLE 3
COVENANTS OF THE PRINCIPAL STOCKHOLDER
Section 3.1 No Inconsistent Agreement. The Principal Stockholder hereby
covenants and agrees that he shall not enter into any agreement or grant a proxy
or power of attorney with respect to the Shares or Options which is inconsistent
with this Agreement.
Section 3.2 Transfer Restriction.
(a) The Principal Stockholder hereby covenants and agrees that
he shall not sell, give, assign, hypothecate, pledge, encumber, grant a security
interest in or otherwise dispose of, whether by operation of law or by agreement
or otherwise (each a "Transfer"), from the date hereof until the termination of
the Merger Agreement, any Shares or Options, or any right, title or interest
therein or thereto.
(b) Notwithstanding the foregoing, the Principal Stockholder
may Transfer any Shares or Options, or any right, title or interest therein or
thereto, to any trust which is established, and which remains, solely for the
benefit of the Principal Stockholder or his spouse, siblings, children or
grandchildren (a "Trust"), provided, that, prior to such Transfer, the Trust
shall execute and deliver an agreement by which it shall become a party to and
be bound by the applicable terms and provisions of this Agreement, in form and
substance reasonably satisfactory to Parent.
(c) Notwithstanding the foregoing, if Parent permits any
stockholder that is a party to an agreement containing restrictions on transfer
of the type contained herein (the "Transferring Stockholder") to Transfer any
Shares, Options or warrants to purchase Company Common Stock (the "Warrants")
after the date hereof and prior to the termination of the Merger Agreement,
which Transfer would otherwise be prohibited by such agreement, then Parent
shall permit the Principal Stockholder, upon his request, to Transfer a number
of Shares or Options equal to the product of (i) the number of Shares, Options
or Warrants Transferred by the Transferring Stockholder divided by the number of
Shares, Options or Warrants owned by the Transferring Stockholder as of the date
of such Transfer, and (ii) the number of Shares or Options owned by the
Principal Stockholder as of the date of such Transfer, in each case, treating
all Options and Warrants as Shares on an as- converted basis (without giving
effect to restrictions or limitations on the exercise of such Options or
Warrants).
Section 3.3 Right of First Offer. The Principal Stockholder hereby
covenants and agrees that, following the termination of the Merger Agreement and
<PAGE>
5
during the remainder of the Restricted Period, the Principal Stockholder shall
not Transfer any Shares or Options except pursuant to the following provisions:
(a) Offering Notice. If the Principal Stockholder wishes to
Transfer (other than pursuant to the Merger) all or any portion of his Shares or
Options to any person or entity (a "Third Party Purchaser"), the Principal
Stockholder shall first offer such Shares or Options to Parent, by sending
written notice (an "Offering Notice") to Parent, which shall state (i) the
number of Shares or Options proposed to be transferred (the "Offered
Securities"); (ii) whether such sale (with respect to Shares only) will be
effected in an open market transaction that complies with Rule 144(f) of the
Securities Act of 1933 (a "Public Sale") or otherwise (a "Private Sale"), (iii)
the proposed purchase price for the Offered Securities, which price must be in
cash and, with respect to a Public Sale, may not be at a per share price in
excess of the closing price of shares of Company Common Stock on the NASDAQ for
the trading day immediately prior to the date on which the Offering Notice is
given (the "Offer Price"); and (iv) with respect to a Private Sale, the terms
and conditions of such sale, which terms and conditions must be customary and
reasonable for a transaction of such type. Upon delivery of the Offering Notice,
such offer shall be irrevocable unless and until the rights of first offer
provided for herein shall have been waived or shall have expired;
(b) Parent Option. For a period of five days after the giving
of the Offering Notice pursuant to Section 3.3(a) (the "Option Period"), Parent
shall have the right (the "Option") but not the obligation to purchase all (but
not less than all) of the Offered Securities at a purchase price equal to the
Offer Price and, with respect to a Private Sale, upon the terms and conditions
set forth in the Offering Notice. The right of Parent to purchase any or all of
the Offered Securities under this Section 3.3(b) shall be exercisable by
delivering written notice of the exercise thereof (the "Acceptance"), prior to
the expiration of the Option Period, to the Principal Stockholder, which notice
shall state the number of Offered Securities proposed to be purchased by Parent.
The failure of Parent to respond within the Option Period shall be deemed to be
a waiver of the Option; provided that Parent may waive its rights under this
Section 3.3(b) prior to the expiration of the Option Period by giving written
notice to the Principal Stockholder (the date any such written waiver is
received by the Principal Stockholder or, if no notice is given, the last date
of the Option Period is referred to as the "Waiver Date");
(c) Closing. The closing of the purchase of Offered Securities
subscribed for by Parent under Section 3.3(b) shall be held at the executive
offices of Parent at 11:00 a.m., local time, on the later of (i) the 10th day
after the Acceptance pursuant to Section 3.3(b) and (ii) two days following the
date on which all governmental or regulatory approvals (including the expiration
of any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act)
with respect to such transaction, if any, have been obtained or at such other
time and place as the parties to
<PAGE>
6
the transaction may agree. At such closing, the Principal Stockholder shall
deliver certificates representing the Offered Securities, duly endorsed for
transfer and accompanied by all requisite transfer taxes, if any, and such
Offered Securities shall be free and clear of any Liens (other than those
arising hereunder) and the Principal Stockholder shall so represent and warrant,
and shall further represent and warrant that he is the sole beneficial and
record owner of such Offered Securities. Parent shall deliver at the closing
payment in full in immediately available funds for the Offered Securities
purchased. In connection with such sale the parties to the transaction shall
execute such additional documents and take all reasonable steps as are otherwise
necessary or appropriate to effectuate such transaction; and
(d) Sale to a Third Party Purchaser. If Parent does not elect
to purchase all of the Offered Securities under Section 3.3(b), the Principal
Stockholder may sell all, but not less than all, of the Offered Securities that
Parent elected not to purchase (i) with respect to a Private Sale to a Third
Party Purchaser on terms and conditions no less favorable to the Principal
Stockholder than those set forth in the Offering Notice; provided, however, that
such sale is bona fide and not undertaken for the purpose of avoiding the
Principal Stockholder's obligations hereunder and made pursuant to a contract
entered into within 10 days after the Waiver Date and (ii) with respect to a
Public Sale, such sale is effected within five days following the Waiver Date at
the market price in effect at the time of such sale. If such sale is not
consummated within five days after the Waiver Date with respect to a Public Sale
or 45 days after the Waiver Date with respect to a Private Sale, then the
restrictions provided for herein shall again become effective, and no transfer
of such Offered Securities may be made thereafter by the Principal Stockholder
without again offering the same to Parent in accordance with this Section 3.3.
Section 3.4 Stockholders Agreement. Prior to the Closing of the Merger,
the Principal Stockholder hereby agrees to execute the Stockholders Agreement,
substantially in the form attached as Exhibit A to the Merger Agreement.
Section 3.5 Employment Agreement. Prior to the Closing of the Merger,
the Principal Stockholder hereby agrees to execute an employment agreement,
between the Principal Stockholder and Newco, substantially in the form agreed to
by the Principal Stockholder and Parent prior to the execution hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1 Authority Relative to this Agreement. Parent has full
right, power and authority to enter into and perform this Agreement and this
Agreement
<PAGE>
7
has been duly authorized, executed and delivered by Parent and is a valid and
binding agreement of Parent and enforceable against Parent in accordance with
its terms.
Section 4.2 No Conflict. (a) The execution and delivery of this
Agreement by Parent do not, and the performance of this Agreement by Parent will
not, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent.
(b) The execution and delivery of this Agreement by Parent do
not, and the performance of this Agreement by Parent will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any court or arbitrator or any governmental body, agency or official except
for applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended, and except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Parent of its obligations under this
Agreement.
ARTICLE 5
MISCELLANEOUS
Section 5.1 Termination. This Agreement shall terminate upon the
earliest to occur of (i) the Closing, (ii) the 12-month anniversary following
termination of the Merger Agreement and (iii) the termination of the Merger
Agreement by Parent pursuant to Section 7.1(c) of such Agreement; provided that
the representations and warranties contained herein shall survive the
termination hereof.
Section 5.2 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
Section 5.3 Definitions. Unless otherwise defined herein, all
capitalized terms shall have the definitions assigned to such terms in the
Merger Agreement.
Section 5.4 Entire Agreement. This Agreement constitutes the entire
agreement among Parent and the Principal Stockholder with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
<PAGE>
8
Section 5.5 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
Section 5.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in a mutually acceptable manner in order that the terms of this Agreement remain
as originally contemplated.
Section 5.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
Section 5.8 Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
shall be brought in the courts of the State of New York and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconvenient forum.
<PAGE>
9
IN WITNESS WHEREOF, Parent and the Principal Stockholder have caused
this Agreement to be duly executed as of the date first above written.
USANi SUB LLC
By: /s/ Dara Khosrowshahi
-------------------------
Name: Dara Khosrowshahi
Title: Vice President
/s/ Maurizio Vecchione
----------------------
Maurizio Vecchione
<PAGE>
Schedule 1
Number of Shares
owned beneficially Number of
or of record (1) Options owned
------------- -------------
417,619 237,227
- -------------------------
1/ Other than Shares issuable upon exercise of Options, which are listed
in the next column.
<PAGE>
Schedule 2
Liens
-----
None.
VOTING AND FIRST OFFER AGREEMENT
VOTING AND FIRST OFFER AGREEMENT, dated as of January 24, 2000 (this
"Agreement"), among Intel Corporation, a Delaware corporation (the "Principal
Stockholder"), USANi Sub LLC, a Delaware limited liability company ("Parent")
and Styleclick.com Inc., a California corporation (the "Company").
WHEREAS, the Company and Parent propose to enter into an Agreement
and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which
provides for, among other things, the merger of the Company (the "Merger") with
a wholly owned subsidiary of a newly formed Delaware corporation ("Newco") and
the concurrent contribution by Parent to Newco of all of the outstanding limited
liability interests of Internet Shopping Network LLC, a Delaware limited
liability company;
WHEREAS, the Principal Stockholder is (a) the owner of one or more
of the following securities: (i) shares of common stock of the Company, no par
value ("Company Common Stock") and (ii) warrants to acquire Company Common
Stock, in each case listed on Schedule 1, and (b) party to certain agreements
with the Company identified on Schedule 2 (the "Company Agreements"); and
WHEREAS, in order to induce Parent to enter into the Merger
Agreement, the Principal Stockholder has agreed to enter into this Agreement
with respect to (a) all the shares of Company Common Stock now owned, whether
beneficially or of record, and which may hereafter be acquired by the Principal
Stockholder and any shares of Company Common Stock over which the Principal
Stockholder has investment power or voting power, each within the meaning of
Rule 13d-3(a) of the Securities Exchange Act of 1934, as amended (the "Shares"),
and all warrants to acquire Shares now owned and which may hereafter be acquired
(the "Warrants"), and (b) the Company Agreements to which the Principal
Stockholder is a party.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE 1
Section 1.1 Voting Agreement. The Principal Stockholder hereby
agrees that during the Restricted Period (as defined below) at any meeting of
the stockholders of the Company, however called, and in any action by consent of
the stockholders of the Company, the Principal Stockholder shall vote its Shares
or shall cause its Shares to be voted: (a) in favor of the Merger, the Merger
Agreement (as amended from time to time) and the transactions contemplated by
the Merger Agreement (the "Proposed Transactions") and (b) against any proposal
(other than in
<PAGE>
2
respect of the Proposed Transaction) for any: (i) merger, consolidation, share
exchange, business combination, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any other material corporate
transaction, the consummation of which could reasonably be expected to impede,
interfere with, prevent or materially delay the Proposed Transactions; (ii) a
sale, lease, exchange, transfer or other disposition of 20% or more of the
assets of the Company in a single transaction or series of transactions; or
(iii) the acquisition by any person or "group" (as defined in Section 13(d) of
the Exchange Act) other than Parent or its affiliates (herein, a "third party"),
of "beneficial ownership" of 15% or more of the Company's voting stock whether
by tender offer or exchange offer or otherwise and including a self tender
offer, merger, sale of assets or other business combination between the Company
and any person or entity or any other action or agreement that would result in a
breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement or which could result in any
of the conditions to the Company's obligations under the Merger Agreement not
being fulfilled. For purposes of this Agreement, the term "Restricted Period"
shall mean the time during which the Merger Agreement remains in effect and for
12 months thereafter.
Section 1.2 Acknowledgment. The Principal Stockholder acknowledges
receipt and review of a copy of the Merger Agreement.
Section 1.3 Waiver of Company Agreements. Subject to the terms and
conditions hereof, the Principal Stockholder hereby irrevocably and forever
waives, and agrees to the modifications of its rights under, the provisions of
the Company Agreements identified on Schedule 2 and as limited and qualified by
Schedule 2 and Schedule 4 which are incorporated herein by reference.
Section 1.4 Waiver of Dissenters' Rights. The Principal Stockholder
hereby irrevocably and forever waives any rights the Principal Stockholder may
have, as a result of the Merger, to demand payment for any Shares beneficially
owned by the Principal Stockholder pursuant to Section 1300 et. seq. of
California Law or to otherwise qualify as a "dissenting shareholder" as such
term is used in such sections of California Law.
Section 1.5 Termination of Waivers. Notwithstanding the foregoing,
the waivers and modifications effected in Sections 1.3 and 1.4 shall be of no
further force and effect and shall be treated as if they had never been granted
if: (a) the Merger Agreement is not executed prior to February 15, 2000; (b) the
Merger is not consummated prior to July 31, 2000; (c) the Merger Agreement is
amended in a manner materially adverse to the Principal Stockholder; (d) any
party materially breaches its obligations under the Merger Agreement and such
breach has a material adverse effect on the Principal Stockholder; or (e) the
Merger Agreement is otherwise terminated pursuant to its terms prior to the
consummation of the Merger.
<PAGE>
3
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL STOCKHOLDER
The Principal Stockholder hereby represents and warrants to Parent
as follows:
Section 2.1 Authority Relative to This Agreement. The Principal
Stockholder has all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby and no other proceedings on the part of the
Principal Stockholder are necessary to authorize this Agreement or to consummate
such transactions. This Agreement has been duly and validly executed and
delivered by the Principal Stockholder and, assuming the due authorization,
execution and delivery by Parent and the Company, constitutes a legal, valid and
binding obligation of the Principal Stockholder, enforceable against the
Principal Stockholder in accordance with its terms.
Section 2.2 No Conflict. (a) The execution and delivery of this
Agreement by the Principal Stockholder do not, and the performance of this
Agreement by the Principal Stockholder will not, (i) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to the Principal
Stockholder or by which the Shares or the Warrants are bound or affected or (ii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien (as defined below) on any of the Shares or the Warrants
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Principal Stockholder is a party or by which the Principal Stockholder or the
Shares or the Warrants are bound or affected, except for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
delay the performance by the Principal Stockholder of its obligations under this
Agreement.
(b) The execution and delivery of this Agreement by the Principal
Stockholder do not, and the performance of this Agreement by the Principal
Stockholder will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any court or arbitrator or any governmental
body, agency or official except for applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended, and except where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay the performance by the
Principal Stockholder of its obligations under this Agreement.
<PAGE>
4
Section 2.3 Title to the Shares. As of the date hereof, the
Principal Stockholder is the record and beneficial owner of, or has voting power
or investment power over, the Shares, and is the record and beneficial owner of
the Warrants, listed on Schedule 1. Such Shares and Warrants are all the
securities of the Company owned, either of record or beneficially, by the
Principal Stockholder or in which the Principal Stockholder has voting or
investment power and the Principal Stockholder owns no other rights or interests
exercisable for or convertible into any securities of the Company. Except as
identified on Schedule 3, all of the Shares and Warrants referred to above are
owned free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreement, limitations on the Principal Stockholder's
voting rights, charges and other encumbrances of any nature whatsoever, in each
case as imposed by or through the Principal Stockholder but excluding standard
margin rules applicable to the Shares (collectively, "Liens") except, with
respect to the Warrants, the Warrant Agreements pursuant to which such Warrants
were issued. The Principal Stockholder has not appointed or granted any proxy,
which appointment or grant is still effective, with respect to the Shares.
Section 2.4 Other Company Agreements. To the best knowledge of
Intel's management, the Principal Stockholder is not, as of the date hereof, a
party to any agreement or arrangement with the Company containing provisions
similar to those described on Schedule 2 other than the agreements listed on
Schedule 2.
ARTICLE 3
COVENANTS OF THE PRINCIPAL STOCKHOLDER
Section 3.1 No Inconsistent Agreement. The Principal Stockholder
hereby covenants and agrees that it shall not enter into any agreement or grant
a proxy or power of attorney with respect to the Shares or Warrants which is
inconsistent with this Agreement.
Section 3.2 Transfer Restriction.
(a) The Principal Stockholder hereby covenants and
agrees that it shall not sell, give, assign, hypothecate, pledge, encumber,
grant a security interest in or otherwise dispose of, whether by operation of
law or by agreement or otherwise (each a "Transfer"), from the date hereof until
the termination of the Merger Agreement, any Shares or Warrants, or any right,
title or interest therein or thereto; provided, however, that, notwithstanding
the foregoing, the Principal Stockholder may engage in ordinary course hedging
transactions.
(b) Notwithstanding the foregoing, the Principal
Stockholder may Transfer any Shares or Warrants, or any right, title or interest
therein or thereto, to any of its subsidiaries or controlled affiliates;
provided that, prior to such Transfer, any transferee thereof shall execute and
deliver an agreement
<PAGE>
5
by which it shall become a party to and be bound by the applicable terms and
provisions of this Agreement, in form and substance reasonably satisfactory to
Parent.
(c) Notwithstanding the foregoing, if Parent permits
Joyce Freedman, Maurizio Vecchione, Lee Freedman, Castle Creek Partners, L.L.C.,
Marshall Capital Management, Inc., or Winfield Capital Corp. (each, a
"Transferring Stockholder") to Transfer any Shares, Warrants or options to
purchase Company Common Stock (the "Options") after the date hereof and prior to
the termination of the Merger Agreement, which Transfer would otherwise be
prohibited by an agreement between such Transferring Stockholder and Parent
containing transfer restrictions similar to the restrictions contained herein,
then Parent shall permit the Principal Stockholder, upon its request to Transfer
a number of Shares or Warrants equal to the product of (i) the number of Shares,
Warrants or Options Transferred by the Transferring Stockholder divided by the
number of Shares, Warrants or Options owned by the Transferring Stockholder as
of the date of such Transfer, and (ii) the number of Shares or Warrants owned by
the Principal Stockholder as of the date of such Transfer, in each case,
treating all Options and Warrants as Shares on an as- converted basis (without
giving effect to restrictions or limitations on the exercise of such Options or
Warrants).
Section 3.3 Right of First Offer. The Principal Stockholder hereby
covenants and agrees that following the termination of the Merger Agreement and
during the remainder of the Restricted Period, it shall not Transfer any Shares
or Warrants except pursuant to the following provisions:
(a) Offering Notice. If the Principal Stockholder wishes to
Transfer (other than pursuant to the Merger) all or any portion of its Shares or
Warrants to any person or entity (a "Third Party Purchaser"), the Principal
Stockholder shall first offer such Shares or Warrants to Parent, by sending
written notice (an "Offering Notice") to Parent, which shall state (i) the
number of Shares or Warrants proposed to be transferred (the "Offered
Securities"); (ii) whether such sale (with respect to Shares only) will be
effected in an open market transaction that complies with Rule 144(f) of the
Securities Act of 1933 (a "Public Sale") or otherwise (a "Private Sale") and
(iii) the proposed purchase price for the Offered Securities (the "Offer Price")
which, with respect to a Public Sale, may not be at a per share price in excess
of the closing price of shares of Company Common Stock on the NASDAQ for the
trading day immediately prior to the date on which the Offering Notice is given.
Upon delivery of the Offering Notice, such offer shall be irrevocable unless and
until the rights of first offer provided for herein shall have been waived or
shall have expired;
(b) Parent Option. For a period of three business days after
the giving of the Offering Notice pursuant to Section 3.3(a) (the "Option
Period"), Parent shall have the right (the "Option") but not the obligation to
purchase all (but not less than all) of the Offered Securities at a purchase
price equal to the Offer Price. If the consideration to be paid pursuant to such
Private Sale is not in the form
<PAGE>
6
of cash, Parent may, at its election, exercise the Option by paying cash in the
amount equal to the fair market value of the consideration to be paid to the
Principal Stockholder. The parties, each acting through one or more senior
officers of the rank of Vice President or higher as its representative, shall
negotiate in good faith and alone (except for one assistant for each party) to
determine such fair market value. If no agreement can be reached by such senior
managers, then such fair market value shall be determined by a neutral
arbitrator under the Commercial Arbitration Rules of the American Arbitration
Association. No sale may be made until a determination as to such fair value is
reached, and such determination shall be made within 30 days of the Offering
Notice. The right of Parent to purchase any or all of the Offered Securities
under this Section 3.3(b) shall be exercisable by delivering written notice of
the exercise thereof (the "Acceptance"), prior to the expiration of the Option
Period, to the Principal Stockholder, which notice shall state the number of
Offered Securities proposed to be purchased by Parent. The failure of Parent to
respond within the Option Period shall be deemed to be a waiver of the Option;
provided that Parent may waive its rights under this Section 3.3(b) prior to the
expiration of the Option Period by giving written notice to the Principal
Stockholder (the date any such written waiver is received by the Principal
Stockholder or, if no written waiver is given, the last date of the Option
Period is referred to as the "Waiver Date");
(c) Closing. The closing of the purchase of Offered Securities
subscribed for by Parent under Section 3.3(b) shall be held at the executive
offices of Parent at 11:00 a.m., local time, on the later of (i) the 10th day
after the Acceptance pursuant to Section 3.3(b) and (ii) two days following the
date on which all governmental or regulatory approvals (including the expiration
of any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act)
with respect to such transaction, if any, have been obtained or at such other
time and place as the parties to the transaction may agree. At such closing, the
Principal Stockholder shall deliver certificates representing the Offered
Securities, duly endorsed for transfer and accompanied by all requisite transfer
taxes, if any, and such Offered Securities shall be free and clear of any Liens
(other than those arising hereunder) and the Principal Stockholder shall so
represent and warrant, and shall further represent and warrant that it is the
sole beneficial and record owner of such Offered Securities. Parent shall
deliver at the closing payment in full in immediately available funds for the
Offered Securities purchased. In connection with such sale the parties to the
transaction shall execute such additional documents and take all reasonable
steps as are otherwise necessary or appropriate to effectuate such transaction;
and
(d) Sale to a Third Party Purchaser. If Parent does not elect
to purchase all of the Offered Securities under Section 3.3(b), the Principal
Stockholder may sell all, but not less than all, of the Offered Securities that
Parent elected not to purchase (i) with respect to a Private Sale to a Third
Party Purchaser on terms and conditions no less favorable to the Principal
Stockholder than those set forth in the Offering Notice; provided, however, that
such sale is bona fide and not undertaken for the purpose of avoiding the
Principal Stockholder's obligations hereunder and made pursuant to a contract
entered into within 10 days after the
<PAGE>
7
Waiver Date and (ii) with respect to a Public Sale, such sale is effected within
five days following the Waiver Date at the market price in effect at the time of
such sale. If such sale is not consummated within five days after the Waiver
Date with respect to a Public Sale or 45 days after the Waiver Date with respect
to a Private Sale, then the restrictions provided for herein shall again become
effective, and no transfer of such Offered Securities may be made thereafter by
the Principal Stockholder without again offering the same to Parent in
accordance with this Section 3.3.
(e) Notwithstanding the foregoing, the provisions of this
Section 3.3 shall be of no further force and effect if: (a) the Merger Agreement
is not executed prior to February 15, 2000; (b) any party materially breaches
its obligations under the Merger Agreement and such breach has a material
adverse effect on the Principal Stockholder; or (c) the Merger Agreement is
amended in a manner materially adverse to the Principal Stockholder.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE COMPANY
Section 4.1 Authority Relative to this Agreement. Each of Parent and
the Company has full right, power and authority to enter into and perform this
Agreement and this Agreement has been duly authorized, executed and delivered by
each of Parent and the Company and is a valid and binding agreement of each of
Parent and the Company and enforceable against each of Parent and the Company in
accordance with its terms.
Section 4.2 No Conflict. (a) The execution and delivery of this
Agreement by each of Parent and the Company do not, and the performance of this
Agreement by each of Parent and the Company will not, (i) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Parent or the Company, as applicable or (ii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien
(as defined below) pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Parent or the Company is a party or by which the Parent or the
Company are bound or affected, except for any such conflicts, violations,
breaches, defaults or other occurrences which would not prevent or delay the
performance by the Parent or the Company of their obligations under this
Agreement.
(b) The execution and delivery of this Agreement by each of Parent
and the Company do not, and the performance of this Agreement by each of Parent
and the Company will not, require any consent, approval, authorization or permit
of,
<PAGE>
8
or filing with or notification to, any court or arbitrator or any governmental
body, agency or official except for applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended, and except where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay the performance by Parent
or the Company, as applicable, of its obligations under this Agreement.
Section 4.3 Other Agreements. Concurrently with the execution
hereof, Parent and the Company are entering into separate agreements with Joyce
Freedman, Lee Freedman and Maurizio Vecchione containing restrictions on voting
and transfer similar to the restrictions contained herein. The restrictions on
voting and transfer contained in such agreements are not materially more
favorable to such other parties than the restrictions on voting and transfer
applicable to the Principal Stockholder hereunder. Concurrently with the
execution hereof, Parent is entering into separate waiver agreements with Castle
Creek Partners, L.L.C., Marshall Capital Management, Inc. and Winfield Capital
Corp. waiving certain provisions of agreements between such parties and the
Company similar to the waivers contained in Schedule 2. Such waivers are not
materially more favorable to such other parties than the waivers applicable to
the Principal Stockholder hereunder. Following the date hereof, neither Parent
nor the Company shall enter into an agreement (or amend an existing agreement)
containing waivers similar to the waivers contained in Schedule 2 that are more
favorable to the other party (when taken as a whole) than those applicable to
the Principal Stockholder hereunder, unless Parent and the Company also offer
such more favorable terms to the Principal Stockholder.
ARTICLE 5
MISCELLANEOUS
Section 5.1 Termination. This Agreement shall terminate upon the
earliest to occur of (i) the Closing, (ii) the 12-month anniversary following
termination of the Merger Agreement and (iii) the termination of the Merger
Agreement by Parent pursuant to Section 7.1(c) of such Agreement; provided that
(x) the representations and warranties contained herein shall survive the
termination hereof and (y) subject to Section 1.5, Section 1.3 hereof shall
survive the consummation of the Merger; provided, further, that the agreements
of the Company and Parent set forth in Schedule 2 and 4 hereof, respectively
relating to the extension of the Warrants and cashless exercise shall survive
the termination hereof or the consummation of the Merger as the case may be.
Section 5.2 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
<PAGE>
9
Section 5.3 Definitions. Unless otherwise defined herein, all
capitalized terms shall have the definitions assigned to such terms in the
Merger Agreement.
Section 5.4 Entire Agreement. This Agreement constitutes the entire
agreement among Parent, the Company and the Principal Stockholder with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
Section 5.5 Amendment. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
Section 5.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in a mutually acceptable manner in order that the terms of this Agreement remain
as originally contemplated.
Section 5.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
Section 5.8 Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
shall be brought in the courts of the State of New York and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconvenient forum.
<PAGE>
10
IN WITNESS WHEREOF, Parent and the Principal Stockholder have caused
this Agreement to be duly executed on the date hereof.
USANi SUB LLC
By: /s/ Dara Khosrowshahi
-------------------------
Name: Dara Khosrowshahi
Title: Vice President
INTEL CORPORATION
By: /s/ Arvind Sodhani
----------------------
Name: Arvind Sodhani
Title: Vice President and Treasurer
STYLECLICK.COM INC.
By: /s/ M. Vecchione
--------------------
Name: M. Vecchione
Title: President and Co-CEO
<PAGE>
Schedule 1
Number of Shares
owned beneficially Number of
or of record 1/ Warrants Owned
------------ --------------
455,218 664,990
- --------
1/ Other than Shares issuable upon exercise of Warrants, which are listed in
the next column.
<PAGE>
Schedule 2
<TABLE>
<CAPTION>
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Intel Corporation Stock and Warrant ss.7(b) Company covenants to use N/A 2/
("Intel") Purchase and Investor best efforts to limit number
Rights Agreement, of directors to nine and
dated as of April require a majority of
7, 1999, between outside directors.
Intel and the
Company
ss.7(c)(ii)(D) Company covenants to N/A. See Schedule 4.
maintain effectiveness of
registration statement for
certain period of time.
ss.7(c)(ii)(F) Put right if sales of all N/A. See Schedule 4.
Registrable Securities
cannot be made pursuant
to the registration
statement for more than 30
days in any 12-month
period.
ss.7(c)(ii)(H) Penalty for each day on N/A. See Schedule 4.
which sales of Registrable
Securities cannot be made
pursuant to the registration
statement.
- -------------------------
2/ "N/A" means the provision shall have no further force or effect and any and all claims arising under such provision
(whether before or after the date of this Voting and First Offer Agreement) are hereby expressly waived, subject in each
case to the provisions of Section 1.3 and Section 1.5 of this Voting and First Offer Agreement.
* Description may not be complete. Entire provision is incorporated herein by reference.
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
ss. 7(c)(v) Indemnification Provision waived only with
provisions. respect to claims against the
Company known to Intel's
management (e.g., VPs,
divisional heads, their
seniors and others with
supervisory authority
with respect to this
investment) on or before
the date of the Merger
Agreement for which
indemnification may be
sought.
ss.7(c)(vi) Company agrees not to N/A. See Schedule 4.
grant more favorable
registration rights.
ss.7(e) Right to have observer N/A, except that Intel shall
attend Board and retain such right for so long as
Committee meetings. it owns, beneficially or of
record, Shares and
Warrants equal to
(assuming full exercise
of such Warrants) at
least 2.5% of all Company
Common Stock on a
fully-diluted basis.
ss.7(f) Right to participate on a N/A
pro rata basis in certain
issuances of new
securities.
- -------------------------
* Description may not be complete. Entire provision is incorporated herein by reference.
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
ss.7(g) Company agrees to N/A, except that (i) the
maintain listing on Company will maintain its
NASDAQ or other listing or authorization for
exchange until 4/7/2002. trading on NASDAQ until
consummation of the
Merger and (ii) Parent
will cause Newco to
maintain its listing or
authorization for trading
on NASDAQ or other
exchange from
consummation of the
Merger until termination
of the Warrants, provided
that, this provision, as
so modified by clause
(ii), shall not prohibit
Newco from consummating a
merger or other "going
private" transaction.
ss.7(j) Prohibition on certain N/A, except that this provision
issuances of discounted or will continue to apply to
variable priced equity or issuances by the Company prior
equity-like securities. to Closing of the Merger other
than issuances
contemplated by the
Merger Agreement or the
Credit Agreement.
ss.7(m) Penalty upon certain N/A
dispositions of the
Company Common Stock
by Vecchione.
- -------------------------
* Description may not be complete. Entire provision is incorporated herein by reference.
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
ss.8 Indemnification Provision waived only with
provisions. respect to claims against the
Company known to Intel's
management (e.g., VPs,
divisional heads, their
seniors and others with
supervisory authority
with respect to this
investment) on or prior
to the date of the Merger
Agreement for which
indemnification may be
sought.
- -------------------------
* Description may not be complete. Entire provision is incorporated herein by reference.
</TABLE>
<PAGE>
5
<TABLE>
<CAPTION>
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Intel Each of the warrants, Exercise price of the If, at any time following the
dated April 7, 1999, warrants. consummation of the Merger
issued by the and prior to 4/7/2001, Intel
Company to Intel desires in good faith to sell
shares of Newco Common
Stock issuable upon
exercise of the warrants,
and, at such time a
registration statement
permitting the sale of
such shares is not
effective, Intel may
request Newco to effect a
demand registration of
such shares and, if a
registration statement is
not effective within 30
days of such demand, and
Intel exercises its
warrants within five days
following such 30 day
period, and commits to
sell the underlying
shares into the market
pursuant to Rule 144 as
soon as reasonably
practicable following
such exercise, the
exercise price of the
warrants so exercised
shall be reduced by $1.00
per underlying share.
- -------------------------
* Description may not be complete. Entire provision is incorporated herein by reference.
</TABLE>
<PAGE>
6
<TABLE>
<CAPTION>
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
ss.3(c) Company agrees to N/A, except that (i) the
maintain listing on Company will maintain its
NASDAQ or other listing or authorization for
exchange until 4/7/2002. trading on NASDAQ until
consummation of the
Merger and (ii) Parent
will cause Newco to
maintain its listing or
authorization for trading
on NASDAQ or other
exchange from
consummation of the
Merger until termination
of the Warrants; provided
that, this provision, as
so modified by clause
(ii), shall not prohibit
Newco from consummating a
merger or other "going
private" transaction.
- -------------------------
* Description may not be complete. Entire provision is incorporated herein by reference.
</TABLE>
<PAGE>
7
<TABLE>
<CAPTION>
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
ss.4(a) Anti-dilution adjustment Provision waived with respect
to exercise price and to any of the following
number of shares upon transactions to the extent that
below-market issuances. such transaction would
otherwise require an
adjustment under Section
4(a): (i) any issuance
(or deemed issuance) of
securities contemplated
by the Merger Agreement
or the Credit Agreement;
or (ii) any issuance (or
deemed issuance) of
securities by Newco as
consideration in an
acquisition of or from a
third party or in
connection with a merger
with a third party
anytime after the
Effective Time of the
Merger; provided that,
with respect to clause
(ii), the principal
purpose of which is not
to raise capital, and
such third party is not a
controlled affiliate of
Newco or such transaction
(a) has been approved by
a special committee of
the Board of Directors
comprised solely of
independent directors and
such special committee
has recommended that the
- -------------------------
* Description may not be complete. Entire provision is incorporated herein by reference.
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
stockholders of Newco
vote in favor thereof and
(b) Newco has received
from a nationally
recognized investment
banking firm a written
opinion addressed to such
special committee, for
inclusion in the proxy
statement to be delivered
to the stockholders,
substantially to the
effect that such
transaction is fair to
Newco or to Newco's
stockholders (other than
any stockholder that,
together with its
affiliates, beneficially
owns equity securities
representing more than
50% of the combined
voting power of all
outstanding equity
securities of Newco
ordinarily entitled to
vote in the election of
directors) from a
financial point of view.
ss.4(e)(b)(ii) Right to receive 125% N/A
of Black-Scholes
Amount upon a Major
Transaction (as defined
in each warrant).
- -------------------------
* Description may not be complete. Entire provision is incorporated herein by reference.
</TABLE>
<PAGE>
9
<TABLE>
<CAPTION>
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
ss.4(l) Adjustment to exercise N/A
price and number of
shares upon certain
dispositions of the
Company Common Stock by
Vecchione.
Intel Each of the warrants, ss.2 Period of Exercise The Exercise Period of the
dated April 7, 1999, warrants shall be extended to
issued by the 4/7/2002.
Company to Intel and
terminating on
April 7, 2000 and
July 7, 2000.
Intel The warrant, dated Clause (2) Warrant exercisable for N/A
November 13, 1997, of the additional shares upon
issued by the preamble reaching certain hurdles.
Company to Intel.
Intel ss.1.7 (of Indemnification by Provision waived only with
Exhibit 3) Company with respect to respect to claims against the
the registration rights Company known to Intel on or
granted to Intel. prior to the date of the Merger
Agreement for which
indemnification may be
sought.
- -------------------------
* Description may not be complete. Entire provision is incorporated herein by reference.
</TABLE>
<PAGE>
10
Schedule 3
Liens
-----
None
<PAGE>
11
Schedule 4
Registration Rights
-------------------
Immediately upon effectiveness of Newco's S-4 until consummation of
the Merger, the Company will take all reasonable action to reinstate the
effectiveness of the S-3 registration statement pursuant to which the Principal
Stockholder's Warrant Shares are registered until the Closing.
Immediately following consummation of the Merger, Newco will provide
the existing outside warrantholders of the Company, including the Principal
Stockholder and any of its permitted assignees, (collectively, the
"Warrantholders") with a total of six demand registrations and piggyback
registration rights provided that the Principal Stockholder shall be entitled to
at least two such demands. Newco will use its best efforts to keep each such
registration in effect for the earlier of (i) 90 days following the effective
time of such registration statement and (ii) the time when all shares subject to
such registration statement have been sold (the "Effectiveness Period"). No
demand may be made within 90 days following the Effectiveness Period.
Demand registrations are subject to suspensions at any time for
periods not to exceed 90 days (which right Newco may not exercise more than
twice in any 12-month period) if such registration would interfere with any
financing, acquisition or other material transaction involving Newco or any of
its affiliates or would otherwise require disclosure of material non-public
information which Newco reasonably believes would be harmful to disclose at such
time. The terms of the Warrants held by the Warrantholders shall be extended for
(a) the period of time between signing of the Merger Agreement and the
effectiveness of the registration statement on Form S-4 relating to the Merger
and (b) the aggregate periods of time following effectiveness of such
registration statement for which all such suspensions are in effect and (without
duplication) for which an effective registration statement is not effective
following a demand therefor and for such periods of time when the Warrantholder
is not permitted to make a demand for registration.
Newco will not be required to register shares following a demand
unless at least 250,000 shares (as adjusted for stock splits and stock
combinations), including shares to be included pursuant to piggyback
registrations, or, if lower, a number of shares equal to the number of shares
then beneficially owned by the Warrantholders requested such demand (not below
100,000 shares) are included in such registration statement.
Newco will use its best efforts to cause registered shares to be
qualified for sale under all applicable blue sky laws unless such qualification
would require Newco to qualify to do business in any state or if it would
subject Newco to additional taxation.
Registration rights obligations with respect to the Shares will end
upon the earlier of (i) the date on which all of the Shares have been sold and
(ii) the date
<PAGE>
12
on which all of the Shares (in the reasonable opinion of counsel to the
Warrantholder) may be immediately sold to the public, whether pursuant to Rule
144 or otherwise. On or following April 7, 2000, the Company will permit
cashless exercise of the Warrants upon request of any Warrantholders if, at such
time, the S-3 registration statement pursuant to which such Warrantholder's
Shares are registered would not permit the sale of such Shares or, if no such
registration statement is then effective. Following consummation of the Merger,
Newco will agree to permit cashless exercise of Warrants upon request of any
Warrantholders.
All expenses incurred in connection with a registration (other than
(i) fees and disbursements of counsel to the selling stockholder and (ii)
underwriting discounts and commissions, if any) shall be borne by Newco.
The registration rights set forth herein are subject to the
condition that the selling stockholder shall provide Newco with such information
with respect to shares of common stock to be registered, the plans for the
proposed distribution thereof and such other information as, in the reasonable
opinion of Newco is necessary to enable Newco to include in such registration
statement all material facts required to be disclosed with respect to such
offering.
BRIDGE LOAN WARRANT AGREEMENT
between
STYLECLICK.COM INC.,
as Issuer,
and
USA NETWORKS, INC.,
as Warrantholder
----------------------------
Dated as of January 24, 2000
----------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Definitions.......................................1
SECTION 2. The Warrants......................................5
SECTION 3. Exercise..........................................5
SECTION 4. Payment of Taxes..................................6
SECTION 5. Replacement Warrant...............................6
SECTION 6. Reservation of Common Stock and Other Covenants...7
SECTION 7. Antidilution Provisions...........................8
SECTION 8. No Dilution or Impairment........................15
SECTION 9. Transfers of the Warrant.........................15
SECTION 10. Registration Rights.............................16
SECTION 11. Survival of Provisions..........................18
SECTION 12. Delays, Omissions and Indulgences...............18
SECTION 13. Rights of Transferees...........................18
SECTION 14. Captions........................................18
SECTION 15. Notices.........................................18
SECTION 16. Successors and Assigns..........................19
SECTION 17. Severability....................................19
SECTION 18. Governing Law...................................19
SECTION 20. Entire Agreement; Amendment.....................20
SECTION 21. Rules of Construction...........................20
i
<PAGE>
BRIDGE LOAN WARRANT AGREEMENT
BRIDGE LOAN WARRANT AGREEMENT, dated as of January 24, 2000, between
Styleclick.com Inc., a California corporation (the "Company"), and USA Networks,
Inc., a Delaware corporation (the "Warrantholder").
W I T N E S S E T H:
WHEREAS, the Company and USANi Sub LLC, a Delaware limited liability
company ("Parent"), are entering into an Agreement and Plan of Merger, dated as
of the date hereof (the "Merger Agreement"), which provides for, among other
things, the merger of the Company (the "Merger") with a wholly owned subsidiary
of a Delaware corporation to be formed by Parent ("Newco"), and the concurrent
contribution by Parent to Newco of all of the outstanding limited liability
interests of Internet Shopping Network LLC, a Delaware limited liability
company;
WHEREAS, the Company and the Warrantholder are entering into a Credit
Agreement, dated as of the date hereof (the "Credit Agreement"), pursuant to
which the Warrantholder commits to make a loan to the Company in a principal
amount not to exceed $10 million and the Company agrees to issue to the
Warrantholder a promissory note (the "Note") in a principal amount equal to the
principal amount of such loan;
WHEREAS, as a condition to the willingness of the parties to enter
into the Merger Agreement and the Credit Agreement, the Company has agreed to
issue a warrant (the "Warrant") to purchase shares of Common Stock (as defined
below) to the Warrantholder;
WHEREAS, the Company proposes to issue a certificate evidencing the
Warrant (such warrant certificate issued pursuant to this Agreement being
hereinafter referred to as the "Warrant Certificate"); and
WHEREAS, the Company and the Warrantholder desire to set forth in
this Agreement, among other things, the form and provisions of the Warrant
Certificate and the terms and conditions under which it may be issued,
transferred, exchanged, replaced and surrendered in connection with the exercise
of the Warrant.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto hereby agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall
have the following meanings.
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by,
<PAGE>
2
or is under common control with, such first Person. The term "control" means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Aggregate Exercise Price" has the meaning assigned thereto in
Section 3(b).
"Black-Scholes Amount" means an amount determined by calculating the
"Black-Scholes" value of an option to purchase one share of Common Stock on the
applicable page on the Bloomberg online page, using the following variable
values: (i) the current market price of the Common Stock equal to the closing
trade price on the last trading day before the date of the Notice of the Major
Transaction; (ii) volatility of the Common Stock equal to the volatility of the
Common Stock during the 100 trading day period preceding the date of the Notice
of the Major Transaction; (iii) a risk free rate equal to the interest rate on
the United States treasury bill or treasury note with a maturity corresponding
to the remaining term of this Warrant on the date of the Notice of the Major
Transaction; and (iv) an exercise price equal to the Exercise Price on the date
of the Notice of the Major Transaction. In the event such calculation function
is no longer available utilizing the Bloomberg online page, the Warrantholder
shall calculate such amount in its sole discretion using the closest available
alternative mechanism and variable values to those available utilizing the
Bloomberg online page for such calculation function.
"Business Day" means any day other than a day on which (i) banks in
the State of New York are authorized or obligated to be closed or (ii) the New
York Stock Exchange is closed.
"Board of Directors" means the Board of Directors of the Company.
"Capital Stock" means (a) in the case of a corporation, capital
stock, (b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (c) in the case of a partnership, partnership interests (whether
general or limited), (d) in the case of a limited liability company, membership
interests and (e) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cashless Exercise" has the meaning assigned thereto in Section 3(c).
"Charter Documents" means the Certificate of Incorporation and the
Bylaws of the Company, as amended or supplemented from time to time.
"Common Stock" means (a) the common stock of the Company, no par
value per share, (b) any other Capital Stock into which such Common Stock is
reclassified or reconstituted and (c) in the case of any reorganization,
reclassification, consolidation,
<PAGE>
3
merger, or sale of the character referred to in Section 7(e) hereof, the stock
or other securities or property provided for in such Section.
"Common Stock Deemed Outstanding" shall mean the number of shares of
Common Stock actually outstanding (not including shares of Common Stock held in
the treasury of the Company), plus (x) in case of any adjustment required by
Section 7(a) resulting from the issuance of any Options, the maximum total
number of shares of Common Stock issuable upon the exercise of the Options for
which the adjustment is required (including any Common Stock issuable upon the
conversion of Convertible Securities issuable upon the exercise of such
Options), and (y) in the case of any adjustment required by Section 7(a)
resulting from the issuance of any Convertible Securities, the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of the Convertible Securities for which the adjustment is required, as
of the date of issuance of such Convertible Securities, if any.
"Convertible Securities" means evidences of indebtedness, shares of
stock or other securities which are directly or indirectly convertible or
exchangeable, with or without payment of additional consideration in cash or
property, for shares of Common Stock, either immediately or upon the onset of a
specified date or the happening of a specified event.
"Distribution" has the meaning assigned thereto in Section 7(g).
"Election to Purchase" has the meaning assigned thereto in Section
3(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exercise Amount" has the meaning assigned thereto in Section 3(a).
"Exercise Price" has the meaning assigned thereto in Section 2.
"Expiration Date" means the tenth (10th) anniversary of the date
hereof.
"Market Price" as of any date, (i) means the average of the daily
closing bid prices for the shares of Common Stock as reported to The Nasdaq
National Market for the trading day immediately preceding such date, or (ii) if
The Nasdaq National Market is not the principal trading market for the Common
Stock, the average of the last reported bid prices on the principal trading
market for the Common Stock during the same period, or, if there is no bid price
for such period, the last reported sales price for such period, or (iii) if
market value cannot be calculated as of such date on any of the foregoing bases,
the Market Price shall be the average fair market value as reasonably determined
by an investment banking firm selected by the Company and reasonably acceptable
to the Holders of a majority in
<PAGE>
4
interest of the Warrants, with the costs of the appraisal to be borne by the
Company. The manner of determining the Market Price of the Common Stock set
forth in the foregoing definition shall apply with respect to any other security
in respect of which a determination as to market value must be made hereunder.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Person" means any individual, corporation, partnership, firm, group
(as such term is used in Section 13(d)(3) of the Exchange Act), joint venture,
asso ciation, trust, limited liability company, unincorporated organization,
estate, trust or other entity.
"Principal Office" means the Company's principal office as set forth
in Section 14 hereof or such other principal office of the Company in the United
States of America the address of which first shall have been set forth in a
notice to the Warrantholder.
"Regulatory Requirement" has the meaning assigned thereto in Section
6(c).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Significant Stockholder" means any stockholder of the Company that,
together with its Affiliates, beneficially owns more than 50% of the then
outstanding voting securities of the Company.
"Subsidiary" of any Person means any corporation, partnership, joint
venture or other legal entity of which such Person (either directly or through
or together with any other Subsidiary of such Person), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or similar governing body of such corporation, partnership, joint venture or
other legal entity.
"Warrant Shares" means (a) the shares of Common Stock issued or
issuable upon exercise of the Warrant in accordance with its terms and (b) all
other shares of the Company's capital stock issued with respect to such shares
by way of stock dividend, stock split or other reclassification or in connection
with any merger, consolidation, recapitalization or other reorganization
affecting the Company's Capital Stock.
<PAGE>
5
SECTION 2. The Warrants.
Subject to the terms and conditions of this Agreement, the Company
hereby issues and delivers to the Warrantholder a warrant, substantially in the
form of Exhibit A hereto, to purchase 328,084 shares of fully paid and
nonassessable Common Stock at a price per share equal to $19.05 (the "Exercise
Price").
SECTION 3. Exercise.
(a) Method of Exercise. From time to time on or before the
Expiration Date, the Warrantholder, in accordance with the terms hereof, may
exercise the Warrant, in whole or in part. The Warrantholder shall effect any
such exercise by delivering the Warrant to the Company during normal business
hours on any Business Day at the Company's Principal Office, together with the
Election to Purchase, substantially in the form of Exhibit B hereto (the
"Election to Purchase"), duly executed, and payment, in accordance with Section
3(b), of the Exercise Price for the number of Warrant Shares (the "Exercise
Amount") to be so purchased, as specified in the Election to Purchase. If the
Expiration Date is not a Business Day, then the Warrant may be exercised on the
next succeeding Business Day.
(b) Payment of Exercise Price. Payment of the Aggregate Exercise
Price (as defined below) shall be made to the Company in cash or other
immediately available funds or as provided in Sections 3(c) or 3(d), or a
combination thereof, with respect to any exercise of the Warrant. In the case of
payment of all or a portion of the Aggregate Exercise Price pursuant to Sections
3(c) or 3(d), the direction by the Warrantholder to make a Cashless Exercise or
Note Exercise, respectively, shall serve as accompanying payment for such
portion of the Aggregate Exercise Price. The amount to be paid (the "Aggregate
Exercise Price") shall equal the product of (a) the Exercise Amount multiplied
by (b) the Exercise Price.
(c) Cashless Exercise. The Warrantholder shall have the right,
but no obligation, to pay all or a portion of the Aggregate Exercise Price by
making a cashless exercise pursuant to this Section 3(c) (a "Cashless
Exercise"), in which case the portion of the Aggregate Exercise Price to be so
paid shall be deemed paid in full by the reduction of the number of Warrant
Shares otherwise issuable pursuant to the Election to Purchase by that number of
Warrant Shares equal to the quotient obtained by dividing (x) the value of the
Warrant at the time of exercise (determined by subtracting (a) the Aggregate
Exercise Price in effect immediately prior to exercise from (b) the aggregate
Market Price immediately prior to exercise) by (y) the Market Price immediately
prior to exercise.
(d) Note Exercise. The Warrantholder shall have the right, but
no obligation, to pay all or a portion of the Aggregate Exercise Price by making
a note exercise pursuant to this Section 3(d) (a "Note Exercise"), in which case
the portion of the Aggregate Exercise Price to be so paid shall be deemed paid
in full by reducing the
<PAGE>
6
principal amount due under the Note by an amount equal to the portion of the
Aggregate Exercise Price to be so paid.
(e) Issuance of Shares of Common Stock. Upon receipt by the
Company of the Warrant at its Principal Office in proper form for exercise, and
accompanied by payment of the Aggregate Exercise Price as aforesaid and, in the
case of any payment pursuant to Section 3(d) above, accompanied by reasonably
satisfactory evidence of such reduced principal amount due under the Note, the
Warrantholder shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that certificates
representing such shares of Common Stock may not then be actually delivered.
Upon surrender of the Warrant and payment of the Aggregate Exercise Price as
aforesaid, the Company shall issue and cause to be delivered with all reasonable
dispatch to, or upon the written order of, the Warrantholder (and in such name
or names as the Warrantholder may designate) a certificate or certificates for
the Exercise Amount, subject to any reduction as provided in Section 3(c) for a
Cashless Exercise.
(f) Fractional Shares. The Company shall not be required to
deliver fractions of shares of Common Stock upon exercise of the Warrant. If any
fraction of a share of Common Stock would be deliverable upon exercise of the
Warrant, the Company may, in lieu of delivering such fraction of a share of
Common Stock, make a cash payment to the Warrantholder in an amount equal to the
same fraction of the Market Price determined as of the Business Day immediately
preceding the date of exercise of the Warrant.
(g) Partial Exercise. In the event of a partial exercise of the
Warrant, the Company shall issue to the Warrantholder a Warrant in like form for
the unexercised portion thereof.
SECTION 4. Payment of Taxes.
The Company shall pay all stamp taxes attributable to the initial
issuance of shares or other securities issuable upon the exercise of the Warrant
or issuable pursuant to Section 7 hereof, excluding any tax or taxes which may
be payable because of the transfer involved in the issuance or delivery of any
certificates for shares of Common Stock or other securities in a name other than
that of the Warrantholder in respect of which such shares or securities are
issued.
SECTION 5. Replacement Warrant.
If the Warrant is mutilated, lost, stolen or destroyed, the Company
shall issue and deliver in exchange and substitution for and upon cancellation
of the mutilated Warrant, or in lieu of and in substitution for the Warrant
lost, stolen or destroyed, a new Warrant of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or
<PAGE>
7
destruction of such Warrant and upon receipt of indemnity reasonably
satisfactory to the Company.
SECTION 6. Reservation of Common Stock and Other Covenants.
(a) Reservation of Authorized Common Stock. The Company shall at
all times reserve and keep available out of the aggregate of its authorized but
unissued shares, free of preemptive rights, such number of its duly authorized
shares of Common Stock, or other stock or securities deliverable pursuant to
Section 7 hereof, as shall be sufficient to enable the Company at any time to
fulfill all of its obligations under this Agreement and the Warrant.
(b) Affirmative Actions to Permit Exercise and Realization of
Benefits. If any shares of Common Stock reserved or to be reserved for the
purpose of exercise of the Warrant, or any shares or other securities reserved
or to be reserved for the purpose of issuance pursuant to Section 7 hereof,
require registration with or approval (other than as a result of a Regulatory
Requirement contemplated by Section 6(c)) of any governmental authority under
any federal or state law (including approvals or expirations of waiting periods
required under the Hart-Scott-Rodino Antitrust Improvements Act, but excluding
the Securities Act and any state securities or "blue sky" laws) before such
shares or other securities may be validly delivered upon exercise of the
Warrant, then the Company and the Warrantholder shall cooperate with each other
so that each may prepare and file notification and report forms in compliance
with such law and shall otherwise fully comply with the requirements of such
law, to the extent required in connection with the exercise of the Warrant. The
Company shall bear all expenses in connection with the filing of such forms.
(c) Regulatory Requirements and Restrictions. In the event of
any reasonable determination by the Warrantholder that, by reason of any
existing or future federal or state law, statute, rule, regulation, guideline,
order, court or administrative ruling, request or directive (whether or not
having the force of law and whether or not failure to comply therewith would be
unlawful) (a "Regulatory Requirement"), the Warrantholder is effectively
restricted or prohibited from holding the Warrant or the related Warrant Shares
(including any shares of capital stock or other securities distributable to the
Warrantholder in any merger, reorganization, readjustment or other
reclassification), or otherwise realize upon or receive the benefits intended
under the Warrant, the Company shall, and shall use its commercially reasonable
efforts to have its stockholders, take such action as the Warrantholder may deem
reasonably necessary to permit the Warrantholder to comply with such Regulatory
Requirement. The costs of taking such action shall be shared equally by the
Company and the Warrantholder. Such action to be taken may include the Company's
authorization of one or more new classes of capital stock for which the Warrant
may be exercised or the adoption of such modifications and amendments to the
Charter Documents, this Agreement, the Warrant or any other documents and
instruments related to or executed in connection herewith or with the Warrant as
may be deemed reasonably necessary by the Warrantholder. The Warrantholder shall
give written notice to the Company of any such determination and the
<PAGE>
8
action or actions necessary to comply with such Regulatory Requirement, which
notice and determination shall be conclusive absent manifest error, and the
Company shall take all commercially reasonable steps necessary to comply with
such determination as expeditiously as possible.
(d) Validly Issued Shares. The Company covenants that all shares
of Common Stock or other securities that may be delivered upon exercise of the
Warrant (including those issued pursuant to Section 7 hereof) shall, upon
delivery by the Company, be duly authorized and validly issued, fully paid and
nonassessable, free from all taxes, liens and charges with respect to the issue
or delivery thereof and otherwise free of all other security interests,
encumbrances and claims of any nature whatsoever.
SECTION 7. Antidilution Provisions. Prior to the Expiration Date or
until the Warrant is fully exercised, the Exercise Price and the number of
Warrant Shares shall be subject to adjustment from time to time as provided in
this Section 7. In the event that any adjustment of the Exercise Price as
required herein results in a fraction of a cent, such Exercise Price shall be
rounded up or down to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon
Issuance of Common Stock. Except as otherwise provided in Section 7(c) and 7(e)
hereof, if and whenever after the initial issuance of this Warrant, the Company
issues or sells, or in accordance with Section 7(b) hereof is deemed to have
issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Market Price on the date of issuance (a
"Dilutive Issuance"), then effective immediately upon the Dilutive Issuance, the
Exercise Price will be adjusted in accordance with the following formula:
E' = (E) (O + P/M) / (CSDO)
where:
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price;
O = the number of shares of Common Stock outstanding immediately
prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in
Section 7(b) hereof, received by the Company upon such Dilutive
Issuance; and
CSDO = the total number of shares of Common Stock Deemed Outstanding
immediately after the Dilutive Issuance.
(b) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 7(a) hereof, the following
will be applicable:
(i) Issuance of Rights or Options. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
<PAGE>
9
immediately exercisable, to subscribe for or to purchase Common Stock or
other securities exercisable, convertible into or exchangeable for Common
Stock ("Convertible Securities"), but not to include the grant or exercise
of any stock or options which may hereafter be granted or exercised under
any employee or director benefit plan of the Company now existing or to be
implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose (such warrants, rights and options
to purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options"), and the price per share for which Common Stock
is issuable upon the exercise of such Options is less than the Market
Price on the date of issuance ("Below Market Options"), then the maximum
total number of shares of Common Stock issuable upon the exercise of all
such Below Market Options (assuming full exercise, conversion or exchange
of Convertible Securities, if applicable) will, as of the date of the
issuance or grant of such Below Market Options, be deemed to be
outstanding and to have been issued and sold by the Company for such price
per share. For purposes of the preceding sentence, the price per share for
which Common Stock is issuable upon the exercise of such Below Market
Options is determined by dividing (A) the total amount, if any, received
or receivable by the Company as consideration for the issuance or granting
of such Below Market Options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise
of all such Below Market Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Below Market Options, the
minimum aggregate amount of additional consideration payable upon the
exercise, conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by (B)
the maximum total number of shares of Common Stock issuable upon the
exercise of all such Below Market Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Below Market Options or upon the exercise,
conversion or exchange of Convertible Securities issuable upon exercise of
such Below Market Options.
(ii) Issuance of Convertible Securities.
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other
than where the same are issuable upon the exercise of Options) and
the price per share for which Common Stock is issuable upon such
exercise, conversion or exchange (as determined pursuant to Section
7(b)(ii)(B) if applicable) is less than the Market Price on the date
of issuance, then the maximum total number of shares of Common Stock
issuable upon the exercise, conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such
Convertible Securities, be deemed to be outstanding and to have been
issued and sold by the Company for such
<PAGE>
10
price per share. For the purposes of the preceding sentence, the
price per share for which Common Stock is issuable upon such
exercise, conversion or exchange is determined by dividing (I) the
total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by
(II) the maximum total number of shares of Common Stock issuable upon
the exercise, conversion or exchange of all such Convertible
Securities. No further adjustment to the Exercise Price will be made
upon the actual issuances of such Common Stock upon exercise,
conversion or exchange of such Convertible Securities.
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise
price or exchange ratio (a "Variable Rate Convertible Security"),
then the price per share for which Common Stock is issuable upon such
exercise, conversion or exchange for purposes of the calculation
contemplated by Section 7(b)(ii)(A) shall be deemed to be the lowest
price per share which would be applicable assuming that (I) all
holding period and other conditions to any discounts contained in
such Convertible Security have been satisfied, and (II) the Market
Price on the date of issuance of such Convertible Security was 80% of
the Market Price on such date (the "Assumed Variable Market Price").
(iii) Change in Option Price or Conversion Rate. Except for the
grant or exercise of any stock or options which may hereafter be granted
or exercised under any employee or director benefit plan of the Company
now existing or to be implemented in the future, so long as the issuance
of such stock or options is approved by a majority of the non-employee
members of the Board of Directors of the Company or a majority of the
members of a committee of non- employee directors established for such
purpose, if there is a change at any time in (A) the amount of additional
consideration payable to the Company upon the exercise of any Options; (B)
the amount of additional consideration, if any, payable to the Company
upon the exercise, conversion or exchange or any Convertible Securities;
or (C) the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock (other than under or by reason of
provisions designed to protect against dilution), the Exercise Price in
effect at the time of such change will be readjusted to the Exercise Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock
issuable
<PAGE>
11
upon exercise of any Options or upon exercise, conversion or exchange of
any Convertible Securities is not, in fact, issued and the rights to
exercise such option or to exercise, convert or exchange such Convertible
Securities shall have expired or terminated, the Exercise Price then in
effect will be readjusted to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Options or
Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination (other than in respect of the actual number
of shares of Common Stock issued upon exercise or conversion thereof),
never been issued.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be
the amount received by the Company therefor, before deduction of
reasonable commissions, underwriting discounts or allowances or other
reasonable expenses paid or incurred by the Company in connection with
such issuance, grant or sale. In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration part or all
of which shall be other than cash, the amount of the consideration other
than cash received by the Company will be the fair market value of such
consideration except where such consideration consists of freely-
tradeable securities, in which case the amount of consideration received
by the Company will be the Market Price thereof as of the date of receipt.
The fair market value of any consideration other than cash or securities
will be determined in the good faith reasonable business judgment of the
Board of Directors.
(vi) Exceptions to Adjustment of Exercise Price. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities issued and outstanding on the date
hereof in accordance with the terms of such securities as of such date;
(ii) upon the grant or exercise of any stock or options which may
hereafter be granted or exercised under any employee or director benefit
plan of the Company now existing or to be implemented in the future, so
long as the issuance of such stock or options is approved by a majority of
the non-employee members of the Board of Directors or a majority of the
members of a committee of non-employee directors established for such
purpose; or (iii) upon the exercise of the Warrants.
(c) Subdivision or Combination of Common Stock. If the Company,
at any time after the initial issuance of this Warrant, subdivides (by any stock
split, stock dividend, recapitalization, reorganization, reclassification or
otherwise) its shares of Common Stock into a greater number of shares, then,
after the date of record for effecting such subdivision, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced. If
the Company, at any time after the initial issuance of this Warrant, combines
(by reverse stock split, recapitalization, reorganization, reclassification or
otherwise) its shares of Common Stock into a smaller number of shares, then,
after the date of record for effecting such combination, the Exercise Price in
effect immediately prior to such combination will be proportionately increased.
<PAGE>
12
(d) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 7, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) Major Transactions. If the Company shall consolidate or
merge with any other corporation or entity (other than a merger in which the
Company is the surviving or continuing entity and its capital stock is unchanged
and unissued in such transaction (except for Common Stock constituting less than
twenty percent (20%) of the Company's Common Stock then outstanding)) or any
subsidiary of the Company shall be a party to a merger or consolidation or other
extraordinary transaction and the Company issues twenty percent (20%) or more of
its Common Stock in any such merger, consolidation or other transaction or there
shall occur any share exchange pursuant to which all of the outstanding shares
of Common Stock are converted into other securities or property or any
reclassification or change of the outstanding shares of Common Stock (each of
the foregoing being a "Major Transaction"), then the Warrantholder may
thereafter, at its option, be entitled, at its election, either to (a) in the
event that the Common Stock remains outstanding or holders of Common Stock
receive any common stock or substantially similar equity interest, in each of
the foregoing cases which is publicly traded, retain its Warrant and the Warrant
shall continue to apply to such Common Stock or shall apply, as nearly as
practicable, to such other common stock or equity interest, as the case may be,
or (b) regardless of whether (a) applies, receive consideration, in exchange for
the Warrant, equal to the greater of, as determined in the sole discretion of
the Warrantholder, (i) the number of shares of stock or securities or property
of the Company, or of the entity resulting from such Major Transaction (the
"Major Transaction Consideration"), to which a holder of the number of shares of
Common Stock delivered upon the exercise of the Warrant would have been entitled
upon such Major Transaction had the Warrantholder exercised the Warrant (without
regard to any limitations on conversion or elsewhere contained) on the trading
date immediately preceding the public announcement of the transaction resulting
in such Major Transaction and had such Common Stock been issued and outstanding
and had the Warrantholder been the holder of record of such Common Stock at the
time of the consummation of such Major Transaction, and (ii) cash paid by the
Company in immediately available funds, in an amount equal to one hundred and
twenty-five percent (125%) of the Black-Scholes Amount times the number of
shares of Common Stock for which this Warrant was exercisable (without regard to
any limitations on exercise herein contained); and the Company shall make lawful
provision for the foregoing as a part of such Major Transaction. No sooner than
ten Business Days nor later than five Business Days prior to the consummation of
the Major Transaction, but not prior to the public announcement of such Major
Transaction, the Company shall deliver written notice ("Notice of Major
Transaction") to the Warrantholder, which Notice of Major Transaction shall be
deemed to have been delivered one Business Day after the Company's sending such
notice by telecopy (provided that the Company sends a confirming copy of such
notice on the same
<PAGE>
13
day by overnight courier) of such Notice of Major Transaction. Such Notice of
Major Transaction shall indicate the amount and type of the Major Transaction
Consideration which the Warrantholder would receive under this Section. If the
Major Transaction Consideration does not consist entirely of United States
currency, such holder may elect to receive United States currency in an amount
equal to the value of the Major Transaction Consideration in lieu of the Major
Transaction Consideration by delivering notice of such election to the Company
within five Business Days of such holder's receipt of the Notice of Major
Transaction.
(f) Effect of Merger. (i) If, pursuant to clause (a) of Section
7(e), the Warrantholder elects to retain the Warrant with the Warrant continuing
to apply to the Common Stock or applying, as nearly as practicable, to other
common stock or equity interest received by the stockholders of the Company in
connection with the Merger, then (A) Section 7(b)(vi) shall be amended to
include the following clause (iv): "(iv) upon the issuance of Common Stock or
other Capital Stock of the Company as consideration in an acquisition of or from
a third party or in connection with a merger with a third party; provided that,
with respect to clause (iv), such third party is not a controlled Affiliate of
the Company or such transaction (A) has been approved by a special committee of
the Board of Directors comprised solely of independent directors and such
special committee has recommended that the stockholders of the Company vote in
favor thereof and (B) the Company has received from a nationally recognized
investment banking firm a written opinion addressed to such special committee,
for inclusion in the proxy statement to be delivered to the stockholders,
substantially to the effect that such transaction is fair to the Company or to
the Company's stockholders (other than any Significant Stockholder) from a
financial point of view" and (B) Section 7(e) shall be amended to delete clause
(b)(ii) thereof.
(ii) Notwithstanding anything to the contrary contained herein,
if the Warrantholder elects, pursuant to clause (a) of Section 7(e), to retain
the Warrant following the Merger, then the Warrant shall automatically be
amended to become exercisable for a number of shares of Class B Common Stock,
par value $0.01 per share, of Newco equal to the number of shares of Common
Stock for which the Warrant was exercisable immediately prior to the Merger.
(g) Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, by way of return of capital
or otherwise (including any dividend or distribution to the Company's
shareholders of cash or shares (or rights to acquire shares) of capital stock of
a subsidiary) (a "Distribution"), at any time after the initial issuance of this
Warrant, then the Warrantholder shall be entitled upon exercise of this Warrant
for the purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets (or rights) which would have been payable to
the Warrantholder had the Warrantholder been the holder of such shares of Common
Stock on the record date for the determination of shareholders entitled to such
Distribution.
<PAGE>
14
(h) Notices of Adjustment. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the Warrantholder, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.
(i) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(j) No Fractional Shares. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock; provided that in the event that sufficient funds are not
legally available for the payment of such cash adjustment any fractional shares
of Common Stock shall be rounded up to the next whole number.
(k) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution to
the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all of its assets
to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the Warrantholder (a) notice
of the date on which the books of the Company shall close or a record shall be
taken for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the holders of
Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation,
<PAGE>
15
merger, sale, dissolution, liquidation or winding-up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take place.
Such notice shall also specify the date on which the holders of Common Stock
shall be entitled to receive such dividend, distribution, or subscription rights
or to exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least 30 days prior to the record date or the date on which
the Company's books are closed in respect thereto, but in no event earlier than
public announcement of such proposed transaction or event. Failure to give any
such notice or any defect therein shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
SECTION 8. No Dilution or Impairment.
The Company will not, by amendment of its Charter Documents or
through any reorganization, recapitalization, transfer of assets, consolidation,
merger, share exchange, dissolution or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of the Warrant,
including the adjustments required under Section 7 hereof, and will at all times
in good faith assist in the carrying out of all such terms and in taking of all
such action as may be necessary or appropriate to protect the rights of the
Warrantholder against dilution or other impairment. Without limiting the
generality of the foregoing and notwithstanding any other provision of the
Warrant to the contrary (including by way of implication), the Company (a) will
not increase the par value of any shares of Common Stock receivable on the
exercise of the Warrant above the amount payable therefor on such exercise and
(b) will take all such corporate action as may be necessary or appropriate so
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock on the exercise of the Warrant.
SECTION 9. Transfers of the Warrant.
(a) Transfer and Exchanges. The Company shall initially record
the Warrant on a register to be maintained by the Company with its other stock
books and, subject to Section 9(b) hereof, from time to time thereafter shall
record a transfer of the Warrant on such register when the Warrant is: (i)
surrendered for transfer in accordance with the terms hereof, (ii) properly
endorsed and accompanied by appropriate instructions, and (iii) accompanied by
payment in cash or by check, bank draft or money order payable to the order of
the Company, in United States currency, of an amount equal to any stamp or other
tax or governmental charge or fee required to be paid in connection with the
transfer thereof. Upon any such transfer, a new Warrant or Warrants shall be
issued to the transferee and the Warrantholder (in the event that the Warrant is
only partially transferred) and the surrendered Warrant shall be canceled. Each
such transferee shall succeed to all of the rights of the transferring
Warrantholder under this Agreement or in the event that the Warrant is only
partially transferred, the transferring Warrantholder and such transferee shall,
simultaneously, hold rights hereunder in proportion to their
<PAGE>
16
respective percentage interests of the original Warrant. The Warrant may be
exchanged at the option of the Warrantholder, when surrendered at the Principal
Office of the Company, for another Warrant or other Warrants of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock, subject to adjustment as more fully set forth herein.
(b) Transfers Subject to Securities Laws. Subject to the
restrictions set forth in this Section 9, the Warrantholder may at any time and
from time to time freely transfer the Warrant and the Warrant Shares in whole or
in part. The Warrant has not been, and the Warrant Shares at the time of their
issuance may not be, registered under the Securities Act, and nothing herein
contained shall be deemed to require the Company to so register the Warrant or
Warrant Shares. The Warrant and the Warrant Shares are issued or issuable
subject to the provisions and conditions contained herein and the Warrantholder
by accepting the Warrant agrees with the Company to such provisions and
conditions, and represents to the Company that the Warrant has been acquired and
the Warrant Shares will be acquired for the account of the Warrantholder for
investment and not with a view to or for sale in connection with any
distribution thereof.
(c) Transfers to Non-Affiliates. Notwithstanding the foregoing,
upon any transfer of this Warrant to a transferee that is not an Affiliate of
the Warrantholder, this Warrant shall automatically be amended to (i) provide
that such transferee shall not be entitled to pay the Aggregate Exercise Price
by a Note Exercise pursuant to Section 3(d), (ii) delete Section 7(f)(ii), if
the Warrant is exercisable for shares of Common Stock of the Company at the time
of such transfer and (iii) become exercisable for shares of Class A Common
Stock, par value $0.01 per share, of Newco, if the Warrant has become
exercisable for shares of Class B Common Stock, par value $0.01 per share, of
Newco pursuant to Section 4(f)(ii).
SECTION 10. Registration Rights.
(a) Demand Registration Rights. In the event that the
Warrantholder shall desire to sell any of the Warrant Shares, and such sale
requires, in the opinion of counsel to the Warrantholder, which opinion shall be
reasonably satisfactory to the Company and its counsel, registration of such
Warrant Shares under the Securities Act, the Company will cooperate with the
Underwriter and any underwriters in registering such Warrant Shares for resale,
including promptly filing a registration statement which complies with the
requirements of applicable federal and state securities laws, and entering into
an underwriting agreement with such underwriters upon such terms and conditions
as are customarily contained in underwriting agreements with respect to
secondary distributions; provided that the Company shall not be required to have
declared effective more than two registration statements hereunder and shall be
entitled to delay the filing or effectiveness of any registration statement for
up to 90 days if the offering would, in the judgment of the Board of Directors
of the Company, require premature disclosure of any material corporate
development or material transaction involving the Company or interfere with any
previously planned securities offering by the Company.
<PAGE>
17
(b) Maintenance of Registration Statement; Indemnification of
Warrantholder. If the Warrant Shares are registered pursuant to the provisions
of this Section 10, the Company agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Warrant Shares covered thereby in
such numbers as the Warrantholder may from time to time reasonably request and
(ii) if any event shall occur as a result of which it becomes necessary to amend
or supplement any registration statement or prospectus, to prepare and file
under the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least 90 days a prospectus covering the
Warrant Shares meeting the requirements of such securities laws, and to furnish
the Warrantholder such numbers of copies of the registration statement and
prospectus, as amended or supplemented, as may reasonably be requested. The
Company shall bear the cost of the registration, including all registration and
filing fees, printing expenses, and fees and disbursements of counsel and
accountants for the Company, except that the Warrantholder shall pay the fees
and disbursements of its counsel, and the underwriting fees and selling
commissions applicable to the shares of Common Stock sold by the Warrantholder.
The Company shall indemnify and hold harmless (x) the Warrantholder, its
affiliates and its officers and directors and each person who controls the
Warrantholder within the meaning of the Securities Act or Exchange Act and (y)
each underwriter and each person who controls any underwriter within the meaning
of the Securities Act or the Exchange Act (collectively, the "Underwriters")
((x) and (y) being referred to as "Indemnified Parties") against any losses,
claims, damages, liabilities or expenses, to which the Indemnified Parties may
become subject, insofar as such losses, claims, damages, liabilities (or actions
in respect thereof) and expenses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained or
incorporated by reference in any registration statement or prospectus filed
pursuant to this paragraph, 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 not misleading; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, liability, claim, damage or expense arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged omission
from any such documents in reliance upon and in conformity with written
information furnished to the Company by the Indemnified Parties expressly for
use or incorporation by reference therein.
(c) Indemnification of the Company. The Warrantholder and the
Underwriters shall indemnify and hold harmless the Company, its affiliates and
its officers and directors and each person who controls the Company within the
meaning of the Securities Act or Exchange Act against any losses, claims,
damages, liabilities or expenses to which the Company, its affiliates and its
officers and directors may become subject, insofar as such losses, claims,
damages, liabilities (or actions in respect thereof) and expenses arise out of
or are based upon any untrue statement of any material fact contained or
incorporated by reference in any registration statement filed pursuant to this
paragraph, 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 not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance
<PAGE>
18
upon and in conformity with written information furnished to the Company by the
Warrantholder or the Underwriters, as applicable, specifically for use or
incorporation by reference therein.
SECTION 11. Survival of Provisions.
The provisions of this Agreement and the Warrant shall survive until
the earlier of (a) the full exercise by of the Warrant or (b) the Expiration
Date.
SECTION 12. Delays, Omissions and Indulgences.
No delay or omission to exercise any right, power or remedy accruing
to the Warrantholder upon any breach or default of the Company hereunder or
under the Warrant shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach or default, or any acquiescence
therein, or of or in any similar breach or default thereafter occurring, nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the Warrantholder's part of any
breach or default hereunder or under the Warrant, or any waiver on the
Warrantholder's part of any provisions or conditions hereof or of the Warrant
must be in writing and that all remedies, either hereunder, under the Warrant or
by law or otherwise afforded to the Warrantholder, shall be cumulative and not
alternative.
SECTION 13. Rights of Transferees.
Subject to Section 9(c), the rights granted to the Warrantholder
hereunder and under the Warrant shall pass to and inure to the benefit of all
subsequent transferees of all or any portion of the Warrant until extinguished
pursuant to the terms hereof; provided that the Warrantholder and any transferee
shall hold such rights in proportion to their respective ownership of the
Warrant and Warrant Shares.
SECTION 14. Captions.
The titles and captions of the Sections and other provisions hereof
are for convenience of reference only and are not to be considered in construing
this Agreement.
SECTION 15. Notices.
All notices, demands and other communications provided for or
permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested, telecopy, overnight
courier service or personal delivery:
<PAGE>
19
(a) if to the Company:
Styleclick.com Inc.
3861 Sepulveda Blvd.
Culver City, CA 90230
Attention: Maurizio Vecchione
Facsimile: (310) 751-2122
(b) if to the Warrantholder:
USA Networks, Inc.
Carnegie Hall Tower
152 West 57th Street, 42nd Floor
New York, NY 10019
Attention: Tom Kuhn
Facsimile: (212) 314-7329
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
SECTION 16. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, provided that the
Company shall have no right to assign its rights, or to delegate its
obligations, hereunder without the prior written consent of the Warrantholder.
SECTION 17. Severability.
If any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
SECTION 18. Governing Law.
THIS AGREEMENT AND THE WARRANT IS TO BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE.
<PAGE>
20
SECTION 19. Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
shall be brought in the courts of the State of New York and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconvenient forum.
SECTION 20. Entire Agreement; Amendment.
This Agreement, the Warrant, the Merger Agreement, the Credit
Agreement and the other agreements and documents referenced in the Merger
Agreement and the Credit Agreement are intended by the parties as a final
expression of their agreement and are intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement or of the Warrant
may be amended or modified only by an instrument in writing signed by the
Company and the Warrantholder.
SECTION 21. Rules of Construction.
Unless the context otherwise requires "or" is not exclusive, and
references to sections or subsections refer to sections or subsections of this
Agreement. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
* * *
<PAGE>
21
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
duly executed as of the date first above written.
STYLECLICK.COM INC.
By: /s/ M. Vecchione
--------------------
Name: M. Vecchione
Title: President and Co-CEO
USA NETWORKS, INC.
By: /s/ Dara Khosrowshahi
-------------------------
Name: Dara Khosrowshahi
Title: Assistant Secretary
<PAGE>
22
EXHIBIT A
FORM OF WARRANT
THIS COMMON STOCK PURCHASE WARRANT AND THE SHARES THAT MAY BE PURCHASED
HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY STATE. THIS COMMON STOCK PURCHASE WARRANT HAS BEEN
ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION, AND THIS
COMMON STOCK PURCHASE WARRANT AND THE SHARES THAT MAY BE PURCHASED HEREUNDER MAY
NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AND REGISTRATION OR QUALIFICATION
UNDER APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL THAT THE
PROPOSED TRANSACTION DOES NOT VIOLATE THE SECURITIES ACT OF 1933, AND APPLICABLE
STATE SECURITIES LAWS.
THIS WARRANT IS SUBJECT TO THE TERMS OF A WARRANT AGREEMENT, DATED AS OF JANUARY
24, 2000, BETWEEN STYLECLICK.COM INC. AND USA NETWORKS, INC.
STYLECLICK.COM INC.
COMMON STOCK PURCHASE WARRANT
Number _____
THIS IS TO CERTIFY that USA Networks, Inc., a Delaware corporation,
and its transferees, successors and assigns (the "Warrantholder"), for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, is entitled to purchase from Styleclick.com Inc., a California
corporation (the "Company"), at a price per share equal to the Exercise Price,
328,084 shares of fully paid and nonassessable Common Stock of the Company,
subject to the terms and conditions of the Warrant Agreement, dated as of
January 24, 2000, between the Company and the Warrantholder (as amended or
otherwise modified, the "Warrant Agreement"). The number of shares of Common
Stock subject to this Warrant is subject to adjustment or reduction as set forth
in Section 7 of the Warrant Agreement. Capitalized terms used herein shall have
the meanings ascribed to such terms in the Warrant Agreement.
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23
Payment of the Exercise Price may be made as set forth in Section 3
of the Warrant Agreement.
If this Warrant is not exercised on or before 5:00 p.m., Pacific
Standard time on the Expiration Date, this Warrant shall become void and all
rights hereunder shall cease as of such time, except as provided in the Warrant
Agreement.
This Warrant is issued pursuant to the Warrant Agreement and is
subject to, and entitled to the benefits of, all of the terms, provisions and
conditions of the Warrant Agreement, which Warrant Agreement is hereby
incorporated by reference herein and made a part hereof. The Warrant Agreement
sets forth a full description of the rights, limitations of rights, obligations,
duties and immunities of the Company and the Warrantholder with respect to this
Warrant. Copies of the Warrant Agreement are on file at the Principal Office of
the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
in its name by its duly authorized officer, as of the 24th day of January, 2000.
STYLECLICK.COM INC.
By:_______________________________
Name:
Title:
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24
EXHIBIT B
FORM OF NOTICE OF EXERCISE
------------- ---, -----
To: [______________]
[______________]
[______________]
[______________]
Attention:[______________]
Telecopy: [______________]SS
1. The undersigned, pursuant to the provisions of the attached
Warrant, hereby elects to exercise such Warrant with respect to ________ shares
of Common Stock (the "Exercise Amount"). Capitalized terms used but not
otherwise defined herein have the meanings ascribed thereto in the attached
Warrant.
2. The undersigned herewith tenders payment for such shares in the
following manner (please check type, or types, of payment and indicate the
portion of the Exercise Price to be paid by each type of payment):
____ Exercise for Cash
____ Cashless Exercise
____ Note Exercise
3. Please issue a certificate or certificates representing the shares
issuable in respect hereof under the terms of the attached Warrant, as follows:
(Name of Record Warrantholder/Transferee)
and deliver such certificate or certificates to the following address:
(Address of Record Warrantholder/Transferee)
4. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for
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25
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.
5. If the Exercise Amount is less than all of the shares of Common
Stock purchasable hereunder, please issue a new warrant representing the
remaining balance of such shares, as follows:
(Name of Record Warrantholder/Transferee)
and deliver such warrant to the following address:
(Address of Record Warrantholder/Transferee)
In witness whereof, the undersigned Warrantholder has caused this
Notice of Exercise to be executed as of this _____ day of __________, ______.
(Name of Warrantholder)
By: ______________________________________
Name:
Title:
