SEPARATION AND DISTRIBUTION AGREEMENT

 

 

TABLE OF CONTENTS

 

ARTICLE I	INTERPRETATION	2
1.01.	Definitions	2
1.02.	Schedules	19
1.03.	Effective Time; Suspension	20
ARTICLE II	THE SEPARATION	20
2.01.	Separation	20
2.02.	Implementation	21
2.03.	Transfer of Spun Assets; Assumption of Spun Liabilities	21
2.04.	TM Assets	21
2.05.	Interval Assets	22
2.06.	HSN Assets	23
2.07.	Tree Assets	24
2.08.	Deferred Spun Assets	25
2.09.	Excluded Assets	25
2.10.	Liabilities	25
2.11.	Third Party Consents and Government Approvals	27
2.12.	Preservation of Agreements	27
2.13.	Ancillary Agreements	27
2.14.	Resignations	28
2.15.	Cooperation	28
2.16.	Intercompany Accounts Among Groups	28
2.17.	Disclaimer of Representations and Warranties	28
ARTICLE III	DEFERRED SEPARATION TRANSACTIONS	29
3.01.	Deferred Transfer Assets	29
3.02.	Unreleased Liabilities	30
3.03.	No Additional Consideration	30
ARTICLE IV	COVENANTS	31
4.01.	General Covenants	31
4.02.	Covenants of the Spincos	31
4.03.	Spinco Common Stock Escrow Accounts	32
4.04.	Cash Balance True-Ups	33
4.05.	Non-Solicitation	34
ARTICLE V	THE DISTRIBUTION	35
5.01.	Conditions to the Distribution	35
5.02.	Distribution of Spinco Common Stock	36
5.03.	Fractional Shares	37
5.04.	Actions in Connection with the Distributions	37
5.05.	Treatment of Integrated Warrant	38

 

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ARTICLE VI	MUTUAL RELEASES; INDEMNIFICATION	39
6.01.	Release of Pre-Distribution Claims	39
6.02.	Indemnification by Spincos	43
6.03.	Indemnification by IAC	44
6.04.	Procedures for Indemnification of Third Party Claims	44
6.05.	Procedures for Indemnification of Direct Claims	46
6.06.	Adjustments to Liabilities	46
6.07.	Payments	47
6.08.	Contribution	47
6.09.	Remedies Cumulative	47
6.10.	Survival of Indemnities	47
6.11.	Shared Liabilities	47
ARTICLE VII	INSURANCE	48
7.01.	Insurance Matters	48
ARTICLE VIII	EXCHANGE OF INFORMATION; CONFIDENTIALITY	49
8.01.	Agreement for Exchange of Information; Archives	49
8.02.	Ownership of Information	50
8.03.	Compensation for Providing Information	51
8.04.	Record Retention	51
8.05.	Other Agreements Providing for Exchange of Information	51
8.06.	Production of Witnesses; Records; Cooperation	51
8.07.	Confidentiality	52
8.08.	Protective Arrangements	53
8.09.	Disclosure of Third Party Information	53
ARTICLE IX	DISPUTE RESOLUTION	54
9.01.	Interpretation; Agreement to Resolve Disputes	54
9.02.	Dispute Resolution; Mediation	54
9.03.	Arbitration	55
9.04.	Costs	56
9.05.	Continuity of Service and Performance	56
ARTICLE X	FURTHER ASSURANCES	56
10.01.	Further Assurances	56
ARTICLE XI	CERTAIN OTHER MATTERS	57
11.01.	Auditors and Audits; Annual and Quarterly Financial Statements and Accounting	57
ARTICLE XII	SOLE DISCRETION OF IAC; TERMINATION	59
12.01.	Sole Discretion of IAC	59
12.02.	Termination	59
ARTICLE XIII	MISCELLANEOUS	60
13.01.	Limitation of Liability	60

 

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13.02.	Counterparts	60
13.03.	Entire Agreement	60
13.04.	Construction	60
13.05.	Signatures	61
13.06.	Assignability	61
13.07.	Third Party Beneficiaries	61
13.08.	Payment Terms	62
13.09.	Governing Law	62
13.10.	Notices	62
13.11.	Severability	63
13.12.	Publicity	64
13.13.	Survival of Covenants	64
13.14.	Waivers of Default; Conflicts	64
13.15.	Amendments	64

 

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SEPARATION AND DISTRIBUTION AGREEMENT

 

This SEPARATION AND DISTRIBUTION AGREEMENT, dated as of [      ], 2008, is entered into by and among IAC/InterActiveCorp, a Delaware corporation (“ IAC ”), HSN, Inc., a Delaware corporation and wholly owned subsidiary of IAC (“ HSN Spinco ”), Interval Leisure Group, Inc., a Delaware corporation and wholly owned subsidiary of IAC (“ Interval Spinco ”), Ticketmaster, a Delaware corporation and wholly owned subsidiary of IAC (“ TM Spinco ”), and Tree.com, Inc., a Delaware corporation and wholly owned subsidiary of IAC (“ Tree Spinco ”; together with TM Spinco, Interval Spinco and HSN Spinco, the “ Spincos ”; the Spincos and IAC, collectively, the “ Separate-cos ” or “ Parties ”).

 

RECITALS:

 

WHEREAS, IAC, acting through its direct and indirect Subsidiaries, currently conducts a number of businesses, including (i) the Ticketing Business (as defined herein), (ii) the Vacations Business (as defined herein), (iii) the Retailing Business (as defined herein), (iv) the Lending and Real Estate Business (as defined herein) (together with the Ticketing Business, the Vacations Business and the Retailing Business, the “ Spun Businesses ”) and (v) the Remaining Business (as defined herein);

 

WHEREAS, the Board of Directors of IAC (the “ IAC Board ”) has determined that it is appropriate, desirable and in the best interests of IAC and its stockholders to separate IAC into five publicly-traded companies (the “ Separation ”): (i) TM Spinco, which following the Separation will own and conduct, directly or indirectly, the Ticketing Business, (ii) Interval Spinco, which following the Separation will own and conduct, directly or indirectly, the Vacations Business, (iii) HSN Spinco, which following the Separation will own and conduct, directly or indirectly, the Retailing Business, (iv) Tree Spinco, which following the Separation will own and conduct, directly or indirectly, the Lending and Real Estate Business, and (v) IAC, which following the Separation will own and conduct, directly or indirectly, the Remaining Business;

 

WHEREAS, following the merger on                  , 2008 of a wholly owned subsidiary of IAC with and into IAC, the outstanding shares of capital stock of IAC consist solely of common stock, par value $0.001 per share, of IAC (“ IAC Common Stock ”) and Class B common stock, par value $0.001 per share, of IAC (“ IAC Class B Common Stock ”);

 

WHEREAS, in order to effect the Separation, the IAC Board has determined that it is appropriate, desirable and in the best interests of IAC and its stockholders: (i) for IAC and its Subsidiaries to enter into a series of transactions as set forth in the Transactions Memorandum dated of even date herewith (the “ Transactions Memo ”) as a result of which one or more members of each Group (as defined herein) will, collectively, own all of such Group’s Corresponding Assets (as defined herein) and assume (or retain) all of such Group’s Corresponding Liabilities (as defined herein); and, thereafter (ii) for IAC to distribute to the holders of IAC Common Stock and the holders of IAC Class B Common Stock (in each case without consideration being paid by such stockholders), on a pro rata basis, all of the issued and

 

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outstanding shares of Spinco Common Stock (as defined herein) of each Spinco;

 

WHEREAS, each of the Separate-cos has determined that it is necessary and desirable, on or prior to the Effective Time (as defined herein), to allocate and transfer to the applicable Group those Assets, and to allocate and assign to the applicable Group responsibility for those Liabilities, in respect of the activities of the Corresponding Businesses (as defined herein) of such Group;

 

WHEREAS, it is the intention of the Parties that each of the Distributions (as defined herein) qualify as a transaction that is generally tax free for United States federal income tax purposes under Sections 355 and/or 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “ Code ”);

 

WHEREAS, in connection with the Distributions, each of HSN Spinco and/or its Subsidiaries, Interval Spinco and/or its Subsidiaries and TM Spinco and/or its Subsidiaries will, subject to the terms and provisions of this Agreement, enter into separate credit facilities and/or issue new debt securities, all or a portion of the cash proceeds of borrowings under which shall be distributed to IAC;

 

WHEREAS, (a) IAC has entered into an agreement with certain holders of its 7% Senior Notes due 2013 (the “ IAC Notes ”) providing for, among other things, (i) IAC to exchange (the “ Exchange ”) new 9.5% Senior Notes due 2016 of Interval Acquisition Corp. (as defined herein) that it will receive from Interval Acquisition Corp. as set forth in the Transactions Memorandum (the “ Interval Senior Notes ”) and (ii) the simultaneous closing of the Exchange and the cash tender offer being made by IAC for any and all of the outstanding IAC Notes (the “ IAC Notes Tender Offer ”) and (b) it is intended that the issuance of the Interval Senior Notes to IAC and the Exchange, together with the IAC Notes Tender Offer, are in connection with the Interval Distribution and are intended to give rise to a succession event (with Interval as the sole successor to IAC) for credit derivatives purposes; and

 

WHEREAS, the Parties wish to set forth in this Agreement the terms on which, and the conditions subject to which, they intend to implement the measures described above.

 

NOW THEREFORE, in consideration of the mutual agreements, covenants and other provisions set forth in this Agreement, the Parties hereby agree as follows:

 

ARTICLE I
INTERPRETATION

 

1.01.        Definitions .  The capitalized words and expressions and variations thereof used in this Agreement or in its schedules, unless a clearly inconsistent meaning is required under the context, shall have the meanings set forth below:

 

“ 2008 Internal Control Audit and Management Assessments ” has the meaning set forth in Section 11.01(b).

 

“ AAA ” has the meaning set forth in Section 9.03.

 

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“ Accounts Receivable ” means in respect of any Person, (a) all trade accounts and notes receivable and other rights to payment from customers and all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or otherwise disposed of or services rendered to customers, (b) all other accounts and notes receivable and all security for such accounts or notes, and (c) any claim, remedy or other right relating to any of the foregoing.

 

“ Action ” means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by any Person or any Governmental Authority or before any Governmental Authority or any arbitration or mediation tribunal.

 

“ Affiliate ” of any Person means any other Person that, directly or indirectly, controls, is controlled by, or is under common control with such first Person as of the date on which or at any time during the period for when such determination is being made.  For purposes of this definition, “ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract or otherwise, and the terms “ Controlling ” and “ Controlled ” have meanings correlative to the foregoing.

 

“ Agent ” has the meaning set forth in Section 5.02(b).

 

“ Agreement ” means this Separation and Distribution Agreement, including all of the Schedules hereto.

 

“ Ancillary Agreements ” has the meaning set forth in Section 2.13.

 

“ Applicable Law ” means any applicable law, statute, rule or regulation of any Governmental Authority or any outstanding order, judgment, injunction, ruling or decree by any Governmental Authority.

 

“ Appurtenances ” means, in respect of any Land, all privileges, rights, easements, servitudes, hereditaments and appurtenances and similar interests belonging to or for the benefit of such Land, including all easements and servitudes appurtenant to and for the benefit of any Land (a “ Dominant Parcel ”) for, and as the primary means of, access between, the Dominant Parcel and a public way, or for any other use upon which lawful use of the Dominant Parcel for the purposes for which it is presently being used is dependent, and all rights existing in and to any streets, alleys, passages and other rights-of-way included therein or adjacent thereto.

 

“ Asset-Related Claims ” means, in respect of any Asset, all claims of the owner against Third Parties relating to such Asset, whether choate or inchoate, known or unknown, absolute or contingent, disclosed or non-disclosed.

 

“ Assets ” means assets, properties and rights (including goodwill), wherever located (including in the possession of owners or Third Parties or elsewhere), whether real, personal or mixed, tangible or intangible, movable or immovable, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of a Person, including the following:

 

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(a)           Real Property;

 

(b)           Tangible Personal Property;

 

(c)           Inventories;

 

(d)           Accounts Receivable;

 

(e)           Contractual Assets;

 

(f)            Governmental Authorizations;

 

(g)           Business Records;

 

(h)           Intangible Property Rights;

 

(i)            Insurance Benefits;

 

(j)            Asset-Related Claims; and

 

(k)           Deposit Rights.

 

“ Authorized Auditor ” has the meaning set forth in Section 11.01(c)(i).

 

“ Authorizing Spinco ” has the meaning set forth in Section 11.01(c)(i).

 

“ Business Concern ” means any corporation, company, limited liability company, partnership, joint venture, trust, unincorporated association or any other form of association.

 

“ Business Day ” means any day excluding (a) Saturday, Sunday and any other day which, in New York City is a legal holiday or (b) a day on which banks are authorized by Applicable Law to close in New York City.

 

“ Business Records ” means, in respect of any Person, all data and Records relating to such Person, including client and customer lists and Records, referral sources, research and development reports and Records, cost information, sales and pricing data, customer prospect lists, customer and vendor data, production reports and Records, service and warranty Records, equipment logs, operating guides and manuals, financial and accounting Records, personnel Records (subject to Applicable Law), creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and records.

 

“ Claim Notice ” has the meaning set forth in Section 6.04(b).

 

“ Claimant Party ” has the meaning set forth in Section 9.02(a).

 

“ Code ” has the meaning set forth in the recitals hereto.

 

“ Confidential Information ” has the meaning set forth in Section 8.07(a).

 

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“ Consent ” means any approval, consent, ratification, waiver or other authorization.

 

“ Contract ” means any contract, agreement, lease, purchase and/or commitment, license, consensual obligation, promise or undertaking (whether written or oral and whether express or implied) that is legally binding on any Person or any part of its property under Applicable Law, including all claims or rights against any Person, choses in action and similar rights, whether accrued or contingent with respect to any such contract, agreement, lease, purchase and/or commitment, license, consensual obligation, promise or undertaking, but excluding this Agreement and any Ancillary Agreement save as otherwise expressly provided in this Agreement or in any Ancillary Agreement.

 

“ Contractual Asset ” means, in respect of any Person, any Contract of, or relating to, such Person, any outstanding offer or solicitation made by, or to, such Person to enter into any Contract, and any promise or undertaking made by any other Person to such Person, whether or not legally binding.

 

“ Corresponding Annual Report ” has the meaning set forth in Section 11.01(d).

 

“ Corresponding Assets ” (a) with respect to HSN Spinco, any HSN Entity or the HSN Group, means the HSN Assets, (b) with respect to Interval Spinco, any Interval Entity or the Interval Group, means the Interval Assets, (c) with respect to TM Spinco, any TM Entity or the TM Group, means the TM Assets, (d) with respect to Tree Spinco, any Tree Entity or the Tree Group, means the Tree Assets and (e) with respect to IAC or the IAC Group, means the Retained Assets.

 

“ Corresponding Business ”  (a) with respect to HSN Spinco, any HSN Entity or the HSN Group, means the Retailing Business, (b) with respect to Interval Spinco, any Interval Entity or the Interval Group, means the Vacations Business, (c) with respect to TM Spinco, any TM Entity or the TM Group, means the Ticketing Business, (d) with respect to Tree Spinco, any Tree Entity or the Tree Group, means the Lending and Real Estate Business and (e) with respect to IAC or the IAC Group, means the Remaining Business.

 

“ Corresponding Distribution Ratio ” (i) with respect to HSN Spinco, means the HSN Distribution Ratio, (ii) with respect to Interval Spinco, means the Interval Distribution Ratio, (iii) with respect to TM Spinco, means the TM Distribution Ratio and (iv) with respect to Tree Spinco, means the Tree Distribution Ratio.

 

“ Corresponding Escrow Shares ” has the meaning set forth in Section 4.03.

 

“ Corresponding Group ” (a) with respect to the Retailing Business, HSN Spinco or any HSN Entity, means the HSN Group, (b) with respect to the Vacations Business, Interval Spinco or any Interval Entity, means the Interval Group, (c) with respect to the Ticketing Business, TM Spinco or any TM Entity, means the TM Group, (d) with respect to the Lending and Real Estate Business, Tree Spinco or any Tree Entity, means the Tree Group and (e) with respect to the Remaining Business, IAC or any Remaining IAC Entity, means the IAC Group.

 

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“ Corresponding Group Balance Sheet ” (a) with respect to the Retailing Business, HSN Spinco, any HSN Entity or the HSN Group, means the HSN Group Balance Sheet, (b) with respect to the Vacations Business, Interval Spinco, any Interval Entity or the Interval Group, means the Interval Group Balance Sheet, (c) with respect to the Ticketing Business, TM Spinco, any TM Entity or the TM Group, the TM Group Balance Sheet, and (d) with respect to the Lending and Real Estate Business, Tree Spinco, any Tree Entity or the Tree Group, means the Tree Group Balance Sheet.

 

“ Corresponding Liabilities ” (a) with respect to HSN Spinco, any HSN Entity or the HSN Group, means the HSN Liabilities, (b) with respect to Interval Spinco, any Interval Entity or the Interval Group, means the Interval Liabilities, (c) with respect to TM Spinco, any TM Entity or the TM Group, means the TM Liabilities, (d) with respect to Tree Spinco, any Tree Entity or the Tree Group, means the Tree Liabilities and (e) with respect to IAC or the IAC Group, means the Retained Liabilities.

 

“ Corresponding Opening Balance Sheet ” (a) with respect to the R