10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

Commission File Number 000-51447

EXPEDIA, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-2705720
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3150 139^th Avenue SE

Bellevue, WA 98005

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code: (425) 679-7200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨  No x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨  No x

The number of shares outstanding of the registrant’s stock as of October 31, 2005 was 343,036,862 consisting of 317,436,018 of common stock, 25,599,998 Class B common stock and 846 Series A preferred stock.

Expedia, Inc.

Form 10-Q

For the Quarter Ended September 30, 2005

Contents

	Page
Part I – Financial Information
Item 1. Financial Statements
Consolidated Financial Statements:
Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2005 and 2004 (unaudited)	3
Consolidated Balance Sheets as of September 30, 2005 (unaudited), and December 31, 2004	4
Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income for the Nine Months Ended September 30, 2005 (unaudited)	5
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004 (unaudited)	6
Notes to Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures about Market Risk	49
Item 4. Controls and Procedures	51
Part II – Other Information
Item 1. Legal Proceedings	52
Item 5. Other Information	58
Item 6. Exhibits	59
Signatures	61

Expedia, Inc.

Part I. Financial Information

Item 1. Financial Statements

EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2005			2004			2005			2004
Revenue	$	584,653		$	503,793		$	1,624,706		$	1,404,014
Cost of revenue		128,072			104,722			360,474			293,952
Gross profit		456,581			399,071			1,264,232			1,110,062
Operating expenses:
Selling and marketing		185,421			177,863			542,173			523,999
General and administrative		58,895			39,154			146,209			113,976
Technology and content		28,741			22,444			81,349			61,686
Amortization of non-cash distribution and marketing		5,138			3,256			9,055			13,027
Amortization (benefit) of non-cash compensation		(1,009	)		44,350			79,899			134,394
Amortization of intangibles		30,756			31,743			94,204			92,520
Operating income		148,639			80,261			311,343			170,460
Other income (expense):
Interest income:
Interest income from IAC/InterActiveCorp		15,316			7,656			40,089			17,407
Other, net		2,652			1,647			7,390			6,204
Write-off of long-term investment		(23,426	)		—			(23,426	)		—
Other		7,379			5,398			11,889			2,906
Total other income, net		1,921			14,701			35,942			26,517
Earnings before income taxes and minority interest		150,560			94,962			347,285			196,977
Income tax expense		(69,026	)		(37,455	)		(143,895	)		(77,737	)
Minority interest in loss of consolidated subsidiaries		501			585			106			113
Net income	$	82,035		$	58,092		$	203,496		$	119,353
Net earnings per share available to common stockholders:
Basic	$	0.24		$	0.17		$	0.61		$	0.36
Diluted	$	0.23		$	0.17		$	0.59		$	0.35
Shares used in computing earnings per share:
Basic		336,409			335,540			335,833			335,540
Diluted		353,351			340,549			344,819			340,549

See notes to consolidated financial statements.

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Expedia, Inc.

Part I. Financial Information

Item 1. Financial Statements

CONTINUED

EXPEDIA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	September 30, 2005			December 31, 2004
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	227,875		$	154,957
Restricted cash and cash equivalents		32,800			600
Marketable securities		25			1,000
Accounts and notes receivable, net of allowance of $4,026 and $2,338		180,622			143,905
Receivables from IAC/InterActiveCorp and subsidiaries		—			1,874,745
Deferred income taxes		8,874			8,696
Prepaid merchant bookings		52,868			28,151
Prepaid expenses		61,640			33,803
Total current assets		564,704			2,245,857
Property and equipment, net		85,866			81,426
Long-term investments and other		45,717			140,432
Intangible assets, net		1,204,757			1,279,361
Goodwill		5,875,132			5,790,111
TOTAL ASSETS	$	7,776,176		$	9,537,187
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, merchant	$	650,536		$	429,739
Accounts payable, trade		127,908			98,666
Deferred merchant bookings		559,051			361,199
Deferred revenue		7,847			5,353
Income tax payable		7,716			421
Other current liabilities		88,148			86,801
Total current liabilities		1,441,206			982,179
Deferred income taxes		381,463			333,696
Derivative liabilities		91,407			12,812
Other long-term liabilities		38,450			37,436
Minority interest		71,070			18,435
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock $.001 par value		—			—
Authorized shares: 100,000,000
Shares issued and outstanding: 846
Common stock $.001 par value		318			—
Authorized shares: 1,600,000,000
Shares issued: 318,252,719
Shares outstanding: 317,069,443
Class B common stock $.001 par value		26			—
Authorized shares: 400,000,000
Shares issued and outstanding: 25,599,998
Invested capital		—			8,118,961
Additional paid-in capital		5,737,478			—
Treasury stock - Common stock, at cost
Shares: 1,183,276		(25,178	)		—
Retained earnings		39,744			—
Accumulated other comprehensive income		192			33,668
Total stockholders’ equity		5,752,580			8,152,629
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	7,776,176		$	9,537,187

See notes to consolidated financial statements.

4

Expedia, Inc.

Part I. Financial Information

Item 1. Financial Statements

CONTINUED

EXPEDIA, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(in thousands, except share data)

(unaudited)

	Invested Equity			Preferred Stock			Common Stock			Class B Common Stock			Additional Paid-In Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income			Total
				Shares	Amount		Shares	Amount		Shares	Amount
Balance as of December 31, 2004	$	8,118,961		—	$	—	—	$	—	—	$	—	$	—		$	—		$	—	$	33,668		$	8,152,629
Comprehensive income:
Net income prior to Spin-Off		163,752																							163,752
Net income after Spin-Off																				39,744					39,744
Net loss on derivative contracts																						(2,195	)		(2,195	)
Reversal of unrealized gains on available for sale security upon a business acquisition																						(27,182	)		(27,182	)
Currency translation adjustment																						(4,099	)		(4,099	)
Total comprehensive income																									170,020
Contribution from IAC/InterActiveCorp, net of extinguishment of intercompany amounts		(2,487,136	)																						(2,487,136	)
Capitalization as a result of the Spin-Off from IAC/InterActive Corp		(5,795,577	)											5,795,577											—
Issuance of preferred stock, common stock and Class B common stock at Spin-Off				846		—	315,140,609		315	25,599,998		26		(341	)										—
Initial recognition of derivative liability to IAC/InterActiveCorp														(101,600	)										(101,600	)
Proceeds from exercise of equity instruments							3,112,110		3					19,901											19,904
Treasury stock activity related to exercise of equity instruments																	(25,178	)							(25,178	)
Amortization of non-cash compensation														23,941											23,941
Balance as of September 30, 2005	$	—		846	$	—	318,252,719	$	318	25,599,998	$	26	$	5,737,478		$	(25,178	)	$	39,744	$	192		$	5,752,580

See notes to consolidated financial statements.

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Expedia, Inc.

Part I. Financial Information

Item 1. Financial Statements

CONTINUED

EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2005			2004
Cash flows from operating activities
Net income	$	203,496		$	119,353
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		37,869			32,701
Amortization of non-cash distribution and marketing		9,055			13,027
Amortization of non-cash compensation		79,899			134,394
Amortization of intangibles		94,204			92,520
Amortization of premium on investment securities		—			161
Deferred income taxes		29,948			(25,563	)
Unrealized gain on derivative instruments		(12,000	)		—
Equity in income of unconsolidated affiliates		(870	)		(116	)
Minority interest in loss of consolidated subsidiaries		(106	)		(113	)
Write-off of long-term investment		23,426			—
Other		690			—
Changes in current assets and current liabilities:
Accounts and notes receivable		(28,468	)		10,355
Prepaid merchant bookings and prepaid expenses		(39,047	)		(32,502	)
Accounts payable and accrued liabilities		345,909			203,461
Deferred merchant bookings		197,154			167,421
Deferred revenue		2,494			(3,108	)
Other, net		—			2,549
Net cash provided by operating activities		943,653			714,540
Cash flows provided by (used in) investing activities
Acquisitions, net of cash acquired		11,515			(261,312	)
Capital expenditures		(40,859	)		(37,499	)
Purchase of marketable securities		(30	)		(5,015	)
Proceeds from sale of marketable securities		1,000			722,646
Increase in long-term investments and deposits		(2,379	)		(56,580	)
Transfers to IAC/InterActiveCorp, net		(766,760	)		(1,496,467	)
Other, net		(2,937	)		(5,080	)
Net cash used in investing activities		(800,450	)		(1,139,307	)
Cash flows provided by (used in) financing activities
Proceeds from exercise of stock options including subsidiaries		20,458			—
Changes in restricted cash and cash equivalents		(36,462	)		—
Contribution from (distribution to) IAC/InterActiveCorp, net		(52,844	)		401,888
Other, net		(2,601	)		(1,108	)
Net cash provided by (used in) financing activities		(71,449	)		400,780
Effect of exchange rate changes on cash and cash equivalents		1,164			(2,425	)
Net increase (decrease) in cash and cash equivalents		72,918			(26,412	)
Cash and cash equivalents at beginning of period		154,957			188,639
Cash and cash equivalents at end of period	$	227,875		$	162,227

See notes to consolidated financial statements.

6

Expedia, Inc.

Part I. Financial Information

Item 1. Financial Statements

CONTINUED

Notes to Consolidated Financial Statements

Note 1 – Organization and Basis of Presentation

Portfolio of Brands

Expedia, Inc. and its subsidiaries provide travel products and services to leisure and corporate travelers in the United States (“U.S.”) and abroad. These travel products and services are offered through a diversified portfolio of brands including: Expedia-branded websites, Hotels.com, Hotwire.com, our private label programs (Worldwide Travel Exchange and Interactive Affiliate Network), Classic Vacations, Expedia Corporate Travel, eLong, Inc. (“eLong”) and TripAdvisor, Inc. We refer to Expedia, Inc. and its subsidiaries collectively as “Expedia,” the “Company,” “us,” “we” and “our” in these interim unaudited consolidated financial statements.

Basis of Presentation

On December 21, 2004, IAC/InterActiveCorp (“IAC”) announced its plan to separate into two independent public companies to allow each company to focus on its individual strategic objectives. We refer to this transaction as the “Spin-Off.” A new company, Expedia, Inc., was incorporated under Delaware law in April 2005, to hold substantially all of IAC’s travel and travel-related businesses.

On August 9, 2005, the Spin-Off was completed and Expedia, Inc. shares began trading on The Nasdaq Stock Market, Inc. (“NASDAQ”) under the symbol “EXPE.” In conjunction with the Spin-Off, we completed the following transactions: (1) extinguished all intercompany receivable balances from IAC, which totaled $2.5 billion by recording a non-cash distribution to IAC, (2) recapitalized the invested equity balance with common stock, Class B common stock and Series A convertible preferred stock (“preferred stock”), whereby holders of IAC stock received shares of Expedia stock based on a formula as described in our Registration Statement on Form S-4, as amended (Commission file number 333-124303-01), filed with the Securities and Exchange Commission (“SEC”), (3) recorded a non-cash contribution from IAC of a joint ownership interest in an airplane, with a fair value of $17.4 million, and (4) transferred to IAC all cash in excess of $100 million, excluding the cash held by eLong. For additional information about the recapitalization, see Note 2, Recapitalization.

These interim unaudited consolidated financial statements present our results of operations, financial position, stockholders’ equity and comprehensive income, and cash flows on a combined basis up through the Spin-Off on August 9, 2005, and on a consolidated basis thereafter. We prepared these interim unaudited financial statements relating to periods prior to the Spin-Off on a combined basis because there was no direct ownership relationship among the businesses that now comprise Expedia.

We have prepared the interim unaudited combined financial statements from the historical results of operations and historical bases of the assets and liabilities of Expedia with the exception of income taxes. We have computed income taxes using our stand-alone tax rate. Our income tax payable as well as deferred tax assets and liabilities represent the estimated impact of filing a consolidated income tax return with IAC through the Spin-Off, and filing a standalone consolidated income tax return thereafter. We have eliminated all significant intercompany transactions and accounts.

We believe that the assumptions underlying our interim unaudited consolidated financial statements are reasonable. However, these interim unaudited consolidated financial statements do not present our future financial position, the results of our future operations and cash flows, nor do they present what our historical financial position, results of operations and cash flows would have been prior to Spin-Off had we been a stand-alone company.

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Expedia, Inc.

Part I. Financial Information

Item 1. Financial Statements

CONTINUED

Until the Spin-Off, we recorded expense allocations from IAC, which consisted of certain IAC general corporate overhead expenses based on the ratio of our revenue as a percentage of IAC’s total revenue. The general corporate overhead allocations primarily include expenses relating to accounting, treasury, legal, tax, corporate support, human resource functions and internal audit. Since the Spin-Off, we have been performing these functions using our own resources or purchased services.

You should read these interim unaudited consolidated financial statements and notes in conjunction with our audited combined financial statements and notes for the year ended December 31, 2004, which are included in Annex D of our Registration Statement on Form S-4, as amended (Commission file number 333-124303-01), filed with the SEC.

In our opinion, we have included all adjustments necessary for a fair presentation of these interim unaudited consolidated financial statements. These adjustments consist of normal recurring items. Our interim unaudited financial statements are not indicative of results for a full year, and our notes do not contain certain information included in our audited combined financial statements and notes.

Seasonality

We generally experience seasonal fluctuations in the demand for our travel products and services. For example, traditional leisure travel bookings are typically the highest in the first and second quarter as travelers plan and book their spring and summer travel. The number of bookings flattens in the third and fourth quarter. Because revenue in the merchant business is generally recognized when the travel takes place rather than when it is booked, revenue typically lags bookings by a month or longer. As a result, revenue is typically the lowest in the first quarter and highest in the third quarter. Our merchant business cash flows fluctuate because there is a time lag between the receipt of cash from customers and the payment to suppliers. As a result, cash flow is generally higher during the first half of the year.

NOTE 2 – Recapitalization

Upon the Spin-Off, IAC common stockholders received one share of Expedia common stock for each share of IAC common stock they held, and IAC Class B common stockholders received one share of Expedia Class B common stock for each share of IAC Class B common stock they held. Substantially all of the IAC Series A preferred stock holders elected to receive $50.00 in cash per share, plus accrued and unpaid dividends; the remaining stockholders elected to receive one share of Expedia preferred stock for each share of IAC Series A preferred stock they held.

Common Stock and Class B Common Stock

We have two classes of common stock: common stock and Class B common stock. Both classes of common stock qualify for dividends, if declared by our board of directors, and generally vote together on all matters. Common stock carries one vote per share and Class B common stock carries 10 votes per share. Holders of common stock, voting as a single, separate class are entitled to elect 25% of the total number of directors. Class B common stockholders may, at any time, convert their shares into common stock, on a one for one share basis. Upon conversion, the Class B common stock is retired and is not available for reissue. In the event of liquidation, dissolution, distribution of assets or winding-up of the Company, the holders of both classes of common stock have equal rights to receive all the assets of the Company after the rights of the holders of the preferred stock have been satisfied.

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Expedia, Inc.

Part I. Financial Information

Item 1. Financial Statements

CONTINUED

Preferred Stock

Our preferred stock has a face value of $22.23 per share; each share is entitled to an annual dividend of 1.99%. Each preferred stockholder is entitled to two votes per share. Preferred stockholders may, at certain times through 2017, elect to have their shares redeemed or elect to convert their shares into common stock based upon formulas described in the related Certificate of Designations of Series A Cumulative Convertible Preferred Stock of Expedia, Inc. Beginning February 4, 2012, we may redeem the preferred stock for cash or common stock. On February 4, 2022, all outstanding shares of preferred stock automatically convert into common stock.

NOTE 3 – Reclassifications

We have reclassified certain amounts relating to the prior periods’ results to conform to our current presentation. The reclassifications did not affect our financial position, cash flows, revenue, operating income or net income for any period.

The following tables present a summary of the amounts as reported and as reclassified for the three and nine months ended September 30, 2004.

	Three months ended September 30, 2004				Nine months ended September 30, 2004
	As reported		As reclassified		As reported		As reclassified
(in thousands)
Revenue	$	503,793	$	503,793	$	1,404,014	$	1,404,014
Cost of revenue		110,618		104,722		311,795		293,952
Gross profit		393,175		399,071		1,092,219		1,110,062
Operating expenses:
Selling and marketing		165,660		177,863		489,395		523,999
General and administrative		59,608		39,154		169,349		113,976
Technology and content		—		22,444		—		61,686
Amortization of non-cash distribution and marketing		3,256		3,256		13,027		13,027
Amortization of non-cash compensation		44,350		44,350		134,394		134,394
Amortization of intangibles		31,743		31,743		92,520		92,520
Depreciation		8,297		—		23,074		—
Operating income	$	80,261	$	80,261	$	170,460	$	170,460

Effective January 1, 2005, we aligned our accounting policy for agency commission expense across the Company. As a result, we reclassified agency commission expense from cost of revenue to selling and marketing for all periods presented.

We reclassified certain personnel expense from general and administrative to selling and marketing, technology and content, and cost of revenue to align our accounting policies across the Company. We allocated depreciation to selling and marketing, general and administrative, and technology and content to report the depreciation associated with each of these operating activities. In addition, we are reporting technology and content as a separate item on our consolidated statements of income. Technology and content consists of research and development, representing primarily product development expenses such as personnel-related costs, expenses for customizing our websites, and amortization of website and internal software development costs.

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Expedia, Inc.

Part I. Financial Information

Item 1. Financial Statements

CONTINUED

NOTE 4 – Significant Accounting Policies

Consolidation

The accompanying interim unaudited consolidated financial statements include Expedia, Inc., our wholly owned subsidiaries, and entities we control. We record our investments in entities that we do not control, but have the ability to exercise significant influence over operating and financial policies, using the equity method. We record our investments in entities over which we do not have the ability to exercise significant influence using the cost method. We have eliminated significant intercompany transactions and accounts.

Revenue Recognition

We offer travel products and services on a stand-alone and package basis primarily through two separate business models: the merchant model and the agency model.

Under the merchant model, we facilitate the booking of hotel rooms, airline seats, car rentals and destination services from our travel suppliers and we are the merchant of record for such bookings. We record merchant revenue when the customer uses the travel product or service and deduct from that revenue the amount paid to the travel suppliers.

Under the agency model, we act as the agent in the transaction, passing reservations booked by our customers to the relevant travel provider. We receive commissions or ticketing fees from the travel supplier and/or customer. For agency airline, hotel and car transactions, we also receive fees from global distribution systems partners that control the computer systems through which these reservations are booked. We record agency revenue at the time the customer books a reservation.

We determined the gross versus net presentation of revenue based principally on Staff Accounting Bulletin (“SAB”) No. 101 “Revenue Recognition in Financial Statements,” and Emerging Issues Task Force (“EITF”) Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent.” In addition, we considered the relevant qualitative factors regarding our relationship with our customer, and the extent of our pricing latitude and inventory risk. Our principal factor in determining gross versus net presentation was the consideration of our relationship with the traveler. Although we provide extensive customer service and support for our travelers, our services are not the same as the services provided by the supplier. We believe that the supplier is principally liable to our customers in all situations. If the products and services are not available, or are not of the general caliber described in the promotional materials, we provide customer service support to help resolve issues, even though such traveler support could typically involve issues for which we are not principally liable.

Merchant Hotel

Our customers pay us for merchant hotel transactions prior to departing on their trip, generally when they book the reservation. We record the payment in deferred merchant bookings until the stay occurs, at which point we record the revenue. In certain non-refundable, non-changeable transactions where we have no significant post-delivery obligations, we record revenue when the traveler completes the transaction on our website. We record a reserve for chargebacks and cancellations at the time of the transaction based on historical experience.

In the case of our merchant hotel business, we generally have the ability to establish and change prices charged to customers, subject to certain limitations, but we generally do not assume inventory risk.

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Expedia, Inc.

Part I. Financial Information

Item 1. Financial Statements

CONTINUED

We generally contract in advance with lodging providers to obtain access to room allotments at wholesale rates. Certain contracts specifically identify the number of potential rooms and the negotiated rate of the rooms to which we may have access over the terms of the contracts, which generally range from one to three years. Other contracts are not specific with respect to the number of rooms and the rates of the rooms to which we may have access over the terms of the contracts. We may return unbooked hotel room allotments with no obligation to the lodging providers within a period specified in each contract; however, we bear the risk of loss for all rooms cancelled by a traveler subsequent to that period. We have mitigated our risk of loss, principally by charging the traveler a cancellation fee, and to date, our losses have been insignificant.

Merchant Air

We generate merchant air transactions when we are the merchant of record. Generally, we determine the ticket price for these transactions. We transmit the cost of the airline ticket within two weeks after the traveler completes the transaction. We record cash paid by the traveler as deferred merchant bookings and the cost of the airline ticket as prepaid merchant bookings. When the flight occurs, we record the difference between the deferred merchant bookings and the prepaid merchant bookings as revenue on a net basis.

If we have nonrefundable and generally noncancelable merchant air transactions, with no significant post-delivery obligations, we record revenue upon booking. We record a reserve for chargebacks and cancellations at the time of the transaction based on historical experience.

Agency Air, Hotel, Car and Cruise

Our agency revenue comes from airline ticket transactions, certain hotel transactions as well as cruise and car rental reservations. We record agency revenue on air transactions when the traveler completes the transaction and secures it with a credit card. We record an allowance for cancellations on this revenue based on historical experience. We record agency revenue on hotel reservations, cruise and car rental reservations either on an accrual basis for payments from a commission clearinghouse or on receipt of commissions from an individual supplier. We do not record an allowance for cancellations on this revenue based on historical experience. We record override commissions at the end of each period based upon our attainment of a certain target level.

Click-Through Fees

We record revenue from click-through fees charged to our travel partners for traveler leads sent to the travel partners’ websites. We record revenue from click-through fees after the traveler makes the click-through to the related travel partners’ websites.

Other

We record revenue from all other sources upon either delivery or when we provide the service.

Cash and Cash Equivalents

Our cash and cash equivalents include cash and liquid financial instruments with maturities of 90 days or less when purchased.

11

Expedia, Inc.

Part I. Financial Information

Item 1. Financial Statements

CONTINUED

Restricted Cash and Cash Equivalents

Our restricted cash primarily relates to merchant air revenue transactions, for which we have collected the payment from the customer but have not settled the related payment with an outsourced party who in turn submits payment to the supplier. In addition, we also have restricted cash that relates to amounts held in escrow that we recorded as part of the investment agreement for our acquisition of eLong.

In addition, we have $9.5 million of cash held by the counterparties as collateral for our cross-currency swaps. We have recorded this amount in other assets on our consolidated balance sheets.

Long-Lived Assets

We review the carrying value of our long-lived assets and intangibles annually, and more frequently if the facts and circumstances suggest that they may be impaired. If our review indicates that the carrying value will not be recoverable, as determined based on the projected undiscounted future cash flows or similar valuation methodology, we reduce the carrying value to its estimated fair value.

Investments

We record investments using the cost basis when our ownership interest in the investee is less than 20%. We record investments using the equity method, either due to ownership interest of 20% or more but less than 50%, or due to our ability to exercise significant influence over the investee’s operations. We periodically evaluate the recoverability of investments and record a write-down if a decline in value is determined to be other-than-temporary.

Property and Equipment

We record property and equipment, including capitalized website development and significant leasehold improvements, at cost, net of accumulated depreciation and amortization. We record depreciation and amortization on a straight-line basis over the estimated useful lives of the assets.

We capitalize certain direct costs incurred related to the development of internal use software in accordance with Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,” and EITF No. 00-02, “Accounting for Website Development Costs.”

Intangibles Assets and Goodwill

We amortize intangibles with definite lives including distribution agreements, customer lists, supplier relationships, technology and non-compete agreements over their respective lives of two to ten years. Trade names and trademarks have indefinite estimated lives. We do not amortize goodwill and purchased intangibles with indefinite lives.

Income Taxes

We record income taxes under the liability method. We determine deferred tax assets and liabilities based on differences in accounting methods and timing between financial statement and income tax reporting. We measure our tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when we expect the differences to reverse. We provide a valuation allowance when necessary to reduce deferred tax assets to their estimated realizable value.

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Part I. Financial Information

Item 1. Financial Statements

CONTINUED

Minority Interest

We record minority interest in our interim unaudited consolidated financial statements to recognize the minority ownership interest in our consolidated subsidiaries.

Foreign Currency Translation and Transaction Gains and Losses

Our foreign operations use the related local currency as their functional currency. We translate revenue and expenses at average rates of exchange during the period, we translate assets and liabilities at the rates of exchange as of the balance sheets date. We include foreign currency translation gains or losses as a component of accumulated other comprehensive income. We record transaction gains and losses in our consolidated statements of income.

Stock-Based Compensation

In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation Transition and Disclosure,” (“SFAS 148”), which amends SFAS No. 123, “Accounting for Stock-Based Compensation,” (“SFAS 123”). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS 123. We adopted the expense recognition provision of SFAS 123, and we record expense for stock-based compensation for grants made on or after January 1, 2003, on a prospective basis as provided by SFAS 148. During 2004 and 2005, we recorded expense for all unvested equity awards, net of estimated forfeitures, issued in prior years pursuant to SFAS 123 and SFAS 148. We have recorded stock-based compensation in accordance with SFAS 123 and SFAS 148 for all periods presented in our consolidated statements of income.

We measure the value of restricted stock units issued at the grant date at fair value and we amortize it ratably as non-cash compensation expense over the vesting term. We measure the value of stock options and warrants issued since 2003, including unvested options assumed in acquisitions, on the grant date (or acquisition date, if applicable) at fair value, using the Black-Scholes option valuation model and we amortize the fair value over the remaining vesting term. As of September 30, 2005, we recorded all stock-based compensation in accordance with SFAS 123 and SFAS 148.

Earnings Per Share

We compute basic earnings per share by taking net income available to common shareholders divided by the weighted average number of common and Class B common shares outstanding during the period. We compute diluted earnings per share using the treasury stock or as if converted methods, as applicable.

Derivative Instruments

We record derivative instruments at fair value on our consolidated balance sheets in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (“SFAS 133”). We record the changes in the fair value of derivatives that are not hedges in other income in our consolidated statements of income. We record the changes in the fair value of a derivative that we designate and which qualifies as a cash flow hedge, to the extent that the hedge is effective, in other comprehensive income, until earnings are affected by the variability of cash flows of the hedged transaction. We reclassify amounts recorded in other comprehensive income to other income during the period in which the hedged transaction affects earnings. We report the ineffective portion of a derivatives change in fair value immediately in other income or expense in our

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Item 1. Financial Statements

CONTINUED

consolidated statements of income. We report the change in the fair value of derivatives that are not hedges in other income or expense in our consolidated statements of income.

Accounting Estimates

We make certain estimates and assumptions during the preparation of the interim unaudited consolidated financial statements in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the interim unaudited consolidated financial statements. They also affect the reported amount of net income during any period. Our actual financial results could differ from these estimates. Our significant estimates underlying the accompanying interim unaudited consolidated financial statements include revenue allowances, allowance for uncollectible and doubtful accounts, recoverability of intangibles, carrying amounts of long-term investments, stock-based compensation, derivative instruments, income taxes (including valuation allowances) and various other operating allowances and accruals, such as accruals for contingent occupancy tax.

NOTE 5 – New Accounting Pronouncements

Stock-Based Compensation

In December 2004, the FASB issued SFAS No. 123(R) “Share-Based Payment,” (“SFAS 123(R)”) which is a revision of SFAS 123. SFAS 123(R) supersedes Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees” and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS 123(R) is similar to the approach described in SFAS 123; however, SFAS 123(R) requires that companies record all share-based payments to employees, including grants of employee stock options, in the statement of income based on their fair values. SFAS 123(R) also requires the benefits of tax deductions in excess of recorded compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature.

We expect to continue using the Black-Scholes option valuation model upon the required adoption of SFAS 123(R) on January 1, 2006.

In March 2005, the SEC issued Staff Accounting Bulletin No.107 (“SAB 107”), which provides additional guidance related to the implementation of SFAS 123(R), including guidance regarding valuation methods and related assumptions, classification of compensation expense and income tax effects of share-based payment arrangements.

We are assessing the impact of these pronouncements; however, we do not expect the adoption of SFAS 123(R), SAB 107 and related pronouncement to have a material effect on our results of operations, financial position or cash flows.

Exchanges of Nonmonetary Assets

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets – An Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions,” (“SFAS 153”). SFAS 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of Accounting Principles Bulletin Opinion No. 29, “Accounting for Nonmonetary Transactions,” and replaces it with an exception for exchanges that do not have commercial substance. SFAS 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change

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CONTINUED

significantly as a result of the exchange. SFAS 153 is effective for fiscal periods beginning after June 15, 2005. We do not expect the adoption of SFAS 153 to have a material impact on our current financial position or results of operations.

NOTE 6 – Business Acquisitions

eLong

In August 2004, we invested $59 million in cash in eLong, a Cayman Island company, whose principal business is the operation of an internet-based travel business in the People’s Republic of China. We recorded our 30% investment in eLong using the equity method from August 2004 to December 2004. Concurrent with the original investment, eLong issued a warrant to us to acquire additional eLong shares as would be necessary to provide us with a minimum aggregate investment of 52% of eLong shares on a fully diluted basis for approximately $6.21 per share. eLong’s American Depositary Shares (“ADS”) trade on the NASDAQ under the symbol “LONG.” Each ADS is equivalent to two shares of eLong capital stock.

In December 2004, we notified eLong of our intent to exercise our warrant to acquire additional eLong shares. We completed this transaction in January 2005; and, as of September 30, 2005, we owned 52% of eLong on a fully diluted basis, which accounts for approximately 96% of the total voting rights of eLong.

Our aggregate purchase price of $171 million included our initial investment, exercise of the stock warrant and related transaction costs. Of the consideration paid for the exercise of the warrant, we used $53 million to purchase shares from existing eLong shareholders. We accounted for the transaction under the purchase method and consolidated the operating results of eLong beginning January 2005. We obtained an independent valuation of the identifiable intangible assets acquired to support our preliminary allocation of the purchase price to intangible assets. This preliminary valuation identified $19 million of intangible assets other than goodwill. We allocated the excess of consideration over net assets acquired of $80 million to goodwill. We amortize intangibles with definite lives including distribution agreements, customer lists, supplier relationships, technology and non-compete agreements over their respective useful lives of three to four years. Trade names and trademarks have indefinite estimated lives. We do not amortize goodwill and purchased intangibles with indefinite lives.

Other

In February 2005, we acquired a destinations services provider, whose principal business is selling tickets to travelers for local activities and attractions. Total consideration for this acquisition was $6.7 million, which included $0.8 million of net tangible assets, $3.6 million of goodwill and $2.3 million of contingent consideration that we will pay if certain financial performance objectives are achieved.

NOTE 7 – Write-off of Long-Term Investment

During the three months ended September 30, 2005, we received information regarding the deteriorating financial condition of our long-term investment in a leisure travel company based on this information we have determined that it is not likely we will recover any of our investment and that the decline in its value is other-than-temporary; as a result, in the three months ending September 30, 2005, we recorded a loss related to this impairment of $23.4 million, which consisted of $22.5 million of preferred stock and $0.9 million of stock warrants in our consolidated statements of income.

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Part I. Financial Information

Item 1. Financial Statements

CONTINUED

NOTE 8 – Derivative Instruments

We record derivative instruments in our consolidated financial statements in accordance with SFAS 133.

Cross-Currency Swaps

On November 26, 2003, we entered into a ten-year cross-currency swap with a notional amount of Euro 39 million, which matures on October 30, 2013, and is used to hedge against the change in value of assets denominated in a currency other than the subsidiary’s functional currency. This swap enables us to pay Euro at a rate of the three-month EURIBOR plus 0.50% on Euro 39 million. In exchange, we receive 4.9% interest on $46.4 million in U.S. dollars. In addition, on April 14, 2004, we entered into a cross-currency swap with a notional amount of Euro 38.2 million, which matures on April 7, 2014, and is used to hedge against the change in value of an asset in a similar manner to the swap described above. This swap enables us to pay Euro at a rate of the six-month EURIBOR plus 0.90% on Euro 38.2 million. In exchange, we receive 5.47% interest on $45.9 million U.S. dollars. At the respective dates of maturity, these agreements call for the exchange of notional amounts. We have designated these derivative contracts as cash flow hedges for accounting purposes. We record foreign exchange re-measurement gains and losses related to these contracts and assets, which are offsetting, in each period in our consolidated statements of income in other income.

In addition, because these derivatives are perfectly effective, we record the net gain and loss in other comprehensive income and reclassify the gains and losses into other income or expense when we extinguish the hedged items. There was no ineffectiveness related to these cash flow hedges reported in our consolidated statements of income for the three and nine months ended September 30, 2005 and 2004. The changes in fair value of the cross-currency swaps resulted in a derivative liability balance of $1.8 million and $12.8 million as of September 30, 2005 and December 31, 2004, which we recorded in derivative liabilities on our consolidated balance sheets.

Ask Jeeves Convertible Subordinated Notes

Under the terms of the Spin-Off, we are obligated to issue shares of Expedia common stock to the holders of the Ask Jeeves convertible subordinated notes (“Ask Jeeves Notes”), assumed by IAC in its acquisition of Ask Jeeves in July 2005, upon the conversion thereof. We estimate that we may be required to issue up to 4.3 million shares of Expedia common stock (or pay cash in equal value, in lieu of issuing such shares, at our option) upon conversion of the Ask Jeeves Notes.

Because the number of our shares to be issued is not indexed solely to our common stock, this obligation represents a derivative instrument that we record at fair value on our consolidated balance sheets with any changes in fair value recorded in our consolidated statements of income. As of September 30, 2005, the estimated fair value of this derivative instrument was $88.2 million and is included in derivative liabilities on our consolidated balance sheets. The estimated fair value of this liability fluctuates based on changes in the price of our common stock. For the three and nine months ended September 30, 2005, we recorded an unrealized gain of $11.5 million in other income in our consolidated statements of income. The Ask Jeeves Notes are due June 1, 2008; upon maturity of these notes, our obligation to issue Expedia common stock ceases.

Warrants

In connection with prior transactions, IAC assumed a number of stock warrants that were adjusted to become exercisable into IAC common stock. As of September 30, 2005, there are approximately 200,000 of these stock warrants outstanding with expiration dates through May 2010. IAC remains the obligated party with

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Item 1. Financial Statements

CONTINUED

respect to these stock warrants. In addition, IAC is potentially obligated to issue an additional 509,000 stock warrants to a vendor upon the vendor meeting certain performance targets. Each stock warrant represents the right to receive upon exercise by the holders the number of shares of IAC common stock and Expedia common stock that the stock warrant holder would have received had the holder exercised the stock warrant immediately prior to the Spin-Off. Under the Separation Agreement between IAC and Expedia, we have assumed the obligation to deliver our common stock to these stock warrant holders upon exercise and will receive a portion of the proceeds from exercise. This obligation represents a derivative instrument that we record at fair value on our consolidated balance sheets with any changes in value recorded in our consolidated statements of income. As of September 30, 2005, the estimated fair value of this derivative instrument was $1.4 million and is included in derivative liabilities on our consolidated balance sheets. The estimated fair value of this liability fluctuates based on changes in the price of our common stock. For the three and nine months ended September 30, 2005, we recorded an unrealized gain of $0.5 million in other income in our consolidated statements of income.

NOTE 9 – Retirement and Savings Plan

Until the Spin-Off, our employees participated in IAC’s retirement and savings plan in the U.S. that qualified under Section 401(k) of the Internal Revenue Code. Upon Spin-Off, IAC transferred the assets of our participating employees into the Expedia Retirement and Savings Plan that qualifies under Section 401(k) of the Internal Revenue Code. Participating employees may contribute up to 16% of their pretax salary, but not more than statutory limits. We contribute fifty cents for each dollar a participant contributes in this plan, with a maximum contribution of 3% of a participant’s earnings. The investment options in the plan include our common stock, but neither participant nor our matching contributions are required to be invested in our common stock. Our matching contribution was $1.7 million and $1.2 million for the three months ended September 30, 2005 and 2004, and $4.6 million and $3.2 million for the nine months ended September 30, 2005 and 2004.

NOTE 10– Stock-Based Awards and Other Equity Instruments

We can grant restricted stock units (“RSU”), stock options and other stock-based awards to officers, employees, directors and consultants under the Expedia, Inc. 2005 Stock and Annual Incentive Plan. RSUs are our primary form of stock-based awards.

RSUs are awards in the form of phantom shares or units that are denominated in a hypothetical equivalent number of shares of our common stock. At the time of grant, we determine if we will settle the RSUs in cash, stock or both. The value to the holder of the RSU is based upon the market value of our stock when the RSUs vests. Our RSUs are generally subject to service-based vesting where a specific period of continued employment must pass before an award vests. Typically, a portion of the RSUs granted vest periodically over term of the grant. We grant stock options at exercise prices not less than the fair market value of the stock on the grant date. The terms and conditions upon which the stock options become exercisable vary among grants

We have stock warrants outstanding related to compensation awards, vendor agreements and other financial transactions of IAC prior to the Spin-Off. Some of these stock warrants trade on the NASDAQ under the symbols “EXPEW” and “EXPEZ.” Almost all of these stock warrants are vested; expiration dates range through February 2012. Each stock warrant is exercisable for a certain number of shares of our common stock or a fraction thereof.

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Item 1. Financial Statements

CONTINUED

As of September 30, 2005, we had approximately 12.0 million shares of common stock reserved for new grants under the 2005 Stock and Annual Incentive Plan.

Modification of Stock-Based Compensation Awards

In connection with the Spin-Off, all existing IAC stock-based compensation awards, which included RSUs, stock options and warrants, were modified as follows:

• each vested stock option to purchase shares of IAC common stock converted into an option to purchase shares of IAC common stock and an option to purchase shares of Expedia common stock,

• each unvested stock option to purchase shares of IAC common stock converted into a stock option to purchase shares of common stock of the applicable company for which the employee works following the Spin-Off,

• all RSUs converted into RSUs of the applicable company for which the applicable employee works following the Spin-Off, and

• each vested and unvested warrant converted into a warrant to purchase shares of IAC common stock and a warrant to purchase shares of Expedia common stock.

The adjustments to the number of shares subject to each option and the option exercise prices were based on the relative market capitalization of IAC and Expedia following the Spin-Off. These modifications resulted in a one-time expense of $5.4 million due to the increase in the estimated fair value of vested stock options. Expenses related to incremental value due to modification of warrants, RSUs and unvested stock options were not material.

Evaluation of Estimated Equity Award Forfeitures

During the three months ended September 30, 2005, we completed an assessment of the assumptions related to forfeiture rates we used to determine the fair value of stock-based compensation expense. Our assessment, which included an analysis of the actual number of instruments that vested or were forfeited to date compared to prior estimates and an evaluation of future estimated forfeitures, indicated an increase in the estimated forfeiture rate. The change in estimated forfeiture rate resulted in a decrease in the amount of non-cash compensation expense. As a result, we recorded a cumulative benefit from the change in estimate of $35.3 million, which reduces non-cash compensation expense ($22.5 million, net of income tax expense) in the consolidated statements of income for the three and nine months ended September 30, 2005.

The effect of the change in estimated forfeiture rate on basic earnings per share was $0.07 per share, after tax, for the three and nine months ended September 30, 2005, and the effect on diluted earnings per share was $0.06 per share, after tax, for the three months ended September 30, 2005, and $0.07 per share, after tax, for the nine months ended September 30, 2005.

NOTE 11 – Income Taxes

We determine our tax provision for interim periods using an estimate of our annual effective rate, with the cumulative effect of a change to the estimated annual rate recorded in the interim period when we made a change, and discrete tax items that are accounted for in the interim period in which they occur.

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Part I. Financial Information

Item 1. Financial Statements

CONTINUED

Our effective tax rate was 46% and 41% for the three and nine months ended September 30, 2005. Our effective tax rate remains higher than the 35% statutory rate primarily due to a loss from our write-off of a long-term investment that is not deductible for tax purposes, state taxes and non-deductible amortization of non-cash compensation expense. Our effective tax rate of 39% for the three and nine months ended September 30, 2004, which was higher than the 35% statutory rate, was primarily due to state taxes, foreign losses, for which no tax benefit was recognized, and non-deductible amortization of non-cash compensation expense.

For the period January 1, 2005, through the Spin-Off date, we were a member of the IAC consolidated tax group. Accordingly, we will file a federal income tax return and certain state income tax returns on a combined basis for this period. IAC will settle the income tax liability related to these filings; as such, these amounts are not included in income taxes payable. We intend to record any change in the estimated pre-spin tax payable amount related to the federal and combined state filings as an adjustment to additional paid-in capital. As of September 30, 2005, our current income tax payable represents amounts that we will settle with the Internal Revenue Service and other tax authorities based on our income taxes after the Spin-Off.

In addition, we have a tax allocation agreement with the Microsoft Corporation and a Tax Sharing Agreement with IAC. For additional information about these agreements, see Note 14, Related Party Transactions.

NOTE 12 –Earnings Per Share

We compute earnings per share in accordance with SFAS No. 128, “Earnings Per Share.” We compute basic earnings per share amount using the weighted average number of common and Class B common shares outstanding for the period. We compute diluted earnings per share using the treasury stock method, which includes the weighted average number of common shares outstanding, excluding restricted stock, for the period plus the potential dilution that could occur if various equity awards to issue common stock were exercised or restricted equity awards were vested resulting in the issuance of common stock that could share in our earnings.

Basic Earnings Per Share

For the three and nine months ended September 30, 2005, we computed basic earnings per share using the number of shares of common stock and Class B common stock outstanding immediately following the Spin-Off, as if such shares were outstanding for the entire period prior to the Spin-Off, plus the weighted average of such shares outstanding following the Spin-Off date through September 30, 2005.

For the three and nine months ended September 30, 2004, we computed basic earnings per share using the number of shares of common stock and Class B common stock outstanding immediately following the Spin-Off, as if such shares were outstanding for the entire period.

Diluted Earnings Per Share

For the three and nine months ended September 30, 2005, we computed diluted earnings per share using (i) the number of shares of common stock and Class B common stock outstanding immediately following the Spin-Off, (ii) the weighted average of such shares outstanding following the Spin-Off date through September 30, 2005, (iii) if dilutive, the incremental common stock that we would issue upon the assumed exercise of stock options and stock warrants and the vesting of restricted stock units using the treasury stock method, and (iv) the shares we are contractually obligated to issue associated with the Ask Jeeves Notes, if converted, and certain stock warrants.

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Part I. Financial Information

Item 1. Financial Statements

CONTINUED

For the three and nine months ended September 30, 2004, we computed diluted earnings per share using (i) the number of shares of common stock and Class B common stock outstanding immediately following the Spin-Off, and (ii) if dilutive, the incremental common stock that we would issue upon exercise of potentially dilutive securities if the terms of the agreement under which the securities were issued obligate us to issue the instrument as of the Spin-Off. Some of the stock warrant agreements meet this requirement, but options to purchase common stock and other potentially dilutive securities do not. We treated all the other securities as if they were granted as of the Spin-Off and we include them in our diluted earnings per share calculation for the three and nine months ended September 30, 2005, based on the number of days they were outstanding.

The following table presents our basic and diluted earnings per share:

	Three months ended September 30,				Nine months ended September 30,
	2005		2004		2005		2004
(in thousands, except per share data)
Net income	$	82,035	$	58,092	$	203,496	$	119,353
Net earnings per share available to common stockholders:
Basic	$	0.24	$	0.17	$	0.61	$	0.36
Diluted	$	0.23	$	0.17	$	0.59	$	0.35
Weighted average number of shares outstanding:
Basic		336,409		335,540		335,833		335,540
Dilutive effect of:
Options to purchase common stock		9,022		—		3,007		—
Warrants to purchase common stock		4,872		5,009		4,963		5,009
Other potentially dilutive securities		3,048		—		1,016		—
Diluted		353,351		340,549		344,819		340,549

NOTE 13 – Commitments and Contingencies

Revolving Credit Facility

On July 11, 2005, we entered into a $1.0 billion five-year unsecured revolving credit facility with a group of lenders, which was effective as of the Spin-Off. Certain Expedia subsidiaries have unconditionally guaranteed Expedia, Inc.’s obligation under the revolving credit facility. The revolving credit facility bears interest based on our financial leverage, and as of September 30, 2005, was equal to LIBOR plus .50%. The revolving credit facility also contains financial covenants consisting of a leverage ratio and a minimum net worth. The amount available to us under the revolving credit facility is reduced by the amount of stand-by letters of credit issued under the revolving credit facility. As of September 30, 2005, there were $50.4 million of outstanding stand-by letters of credit issued under the revolving credit facility. We capitalized $3.5 million in financing costs related to the revolving credit facility, and we will amortize these costs to interest expense over the revolving credit facility’s five-year life. The annual fee to maintain the revolving credit facility is 10 basis points on the unused portion of the revolving credit facility, or approximately $1.0 million if all of the revolving credit facility is unused. As of September 30, 2005, there were no outstanding balances on the revolving credit facility.

Letters of Credit, Purchase Obligations and Guarantees

We have funding commitments that include letters of credit (“LOC”), purchase obligations, and guarantees, which could potentially require our payment in the event of demands by third parties or contingent events.

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CONTINUED

Our LOCs consist of standby LOCs, underwritten by a group of lenders, which we primarily issue to certain hotel properties to secure our payment for hotel room transactions. There were no claims made against any standby LOCs during the three and nine months ended September 30, 2005. As of September 30, 2005, we had standby LOCs outstanding totaling $50.4 million.

We have purchase obligations primarily with three national telecommunications companies related to data transmission lines and telephones. As of September 30, 2005, the amount related to these purchase obligations totaled $6.0 million.

We have guarantees primarily related to a specific country aviation authority for the potential non-delivery by us, of packaged travel sold in that country. The authority also requires that a portion of the total amount of packaged travel sold be bonded. As of September 30, 2005, the amount related to these bonds was approximately $80.8 million.

Legal Proceedings

In the ordinary course of business, we are a party to various lawsuits. In our opinion, the ultimate outcome of these lawsuits should not have a material impact on our liquidity, results of operations or financial condition. We do not believe that the amount of liability that could be reasonably possible with respect to these matters would have a material adverse effect on our financial results. We believe that the claims in these lawsuits lack merit and we intend to continue to defend vigorously against them.

NOTE 14 – Related Party Transactions

Expense Allocations from IAC

Prior to Spin-Off, our operating expenses include allocations from IAC for accounting, treasury, legal, tax, corporate support, human resource functions and internal audit. Expense allocations from IAC were $0.9 million and $1.9 million for the three months ended September 30, 2005 and 2004, and $5.0 million and $5.7 million for the nine months ended September 30, 2005 and 2004, and are included in general and administrative expense in our consolidated statements of income. The expense allocations from IAC ceased upon Spin-Off on August 9, 2005.

Interest Income from IAC

The majority of the interest income recorded in our interim consolidated statements of income arose from intercompany receivable balances from IAC. The interest income from IAC ceased upon Spin-Off on August 9, 2005.

Airplane

In accordance with the Spin-Off, we entered into a joint ownership and cost sharing agreement with IAC, under which IAC transferred to us 50% ownership in an airplane, at a fair value of $17.4 million, which is available for use by both companies. We will share in capital costs evenly; operating costs will be pro-rated based on actual usage. We have recorded the airplane in other assets on our consolidated balance sheets. The airplane is currently being refurbished; we will begin depreciating the airplane when it is placed in service.

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Item 1. Financial Statements

CONTINUED

Relationship Between IAC and Expedia, Inc. after the Spin-Off

We entered into agreements with IAC that govern our ongoing relationships with IAC. These agreements include the following:

• the Separation Agreement that sets forth the arrangements between IAC and Expedia with respect to the principal corporate transactions necessary to complete the Spin-Off, and a number of other principles governing the relationship between IAC and Expedia following the Spin-Off. Under the Separation Agreement, Expedia retained rights to media time, with a fair value of $17.1 million, in IAC’s present and former media channels. The media time expires in July 2007. We have recorded it in prepaid expenses, which we recognize as expense as we use the media time;

• the Tax Sharing Agreement that governs the respective rights, responsibilities and obligations of IAC and Expedia after the Spin-Off with respect to tax liabilities and benefits, tax attributes, tax contests and other matters regarding income taxes, other taxes and related tax returns;

• the Employee Matters Agreement that governs a wide range of compensation and benefit issues, including the allocation between IAC and Expedia of responsibility for the employment and benefit obligations and liabilities of each company’s current and former employees (and their dependents and beneficiaries); and

• the Transition Services Agreement that governs the provision of transition services from IAC to Expedia.

Commercial Agreements

We continue to work with some of the businesses that comprise IAC after the Spin-Off pursuant to a variety of commercial relationships. These commercial agreements generally include (i) distribution agreements, pursuant to which certain subsidiaries of IAC distribute their respective products and services via arrangements with Expedia, and vice versa, (ii) services agreements, pursuant to which certain subsidiaries of IAC provide Expedia with various services and vice versa and (iii) office space lease agreements. The distribution agreements typically involve the payment of fees, usually on a fixed amount-per-transaction, revenue share or commission basis, from the party seeking distribution of the product or service to the party that is providing the distribution.

Agreements with Microsoft Corporation

We have agreements with Microsoft Corporation (“Microsoft”), a stockholder, including an agreement that maintains our presence as the provider of travel shopping services on MSN.com and several international MSN websites. We recorded selling and marketing expense in our consolidated statements of income under these agreements of $5.3 million and $3.2 million for the three months ended September 30, 2005 and 2004, and $12.0 million and $10.1 million for the nine months ended September 30, 2005 and 2004. Amounts payable related to these agreements was $4.5 million and $3.4 million as of September 30, 2005, and December 31, 2004.

We have a tax allocation agreement where we must pay Microsoft for a portion of the tax savings resulting from the exercise of certain stock options. We have recorded $36.3 million in other long-term liabilities on our consolidated balance sheets as of September 30, 2005, and December 31, 2004, related to this agreement. We will pay Microsoft under this agreement when we realize the tax savings on our tax return. As of September 30, 2005, we have not realized the tax savings related to the exercise of certain stock options.

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Part I. Financial Information

Item 1. Financial Statements

CONTINUED

NOTE 15 – Segment Information

We determine our operating segments based on how our chief operating decision maker manages our businesses, including making operating decisions and evaluating operating performance. Although we operate in several operating segments, which consist of our brands, due to the similarities of the operations of the operating segments, there is only one reportable segment. The significant operating segments exhibit similar economic characteristics and meet the aggregation criteria pursuant to SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” and as such, we have aggregated them for reporting purposes. Each of the significant operating segments is a supplier of travel services whether by a merchant model or as an agency model.

Since the completion of the Spin-Off, our chief operating decision maker has been assessing our operations to determine how we will manage and report the financial results of our business as a new independent company. Once that is decided, we can determine our reportable segments, which may differ from our current reporting.

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Part I. Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the views of our management regarding current expectations and projections about future events and are based on currently available information. Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, but not limited to, those discussed in the section entitled “Risk Factors” as well as those discussed elsewhere in this report. Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition and results of operations. Accordingly, readers should not place undue reliance on these forward-looking statements. The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements. However, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. We are not under any obligation and do not intend to publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Please carefully review and consider the various disclosures made in this report and in our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.

Management Overview

Summary of the Spin-Off from IAC/InterActiveCorp

On December 21, 2004, IAC/InterActiveCorp (“IAC”) announced its plan to separate into two independent public companies to allow each company to focus on its individual strategic objectives. We refer to this transaction as the “Spin-Off.” A new company, Expedia, Inc., was incorporated under Delaware law in April 2005, to hold substantially all of IAC’s travel and travel-related businesses.

On August 9, 2005, the Spin-Off was completed and Expedia, Inc. shares began trading on The Nasdaq Stock Market, Inc. under the symbol “EXPE.” In conjunction with the Spin-Off, we completed the following transactions: (1) extinguished all intercompany receivable balances from IAC, which totaled $2.5 billion by recording a non-cash distribution to IAC, (2) recapitalized the invested equity balance with common stock, Class B common stock and preferred stock, whereby holders of IAC stock received shares of Expedia stock based on a formula as described in our Registration Statement on Form S-4, as amended (Commission file number 333-124303-01), filed with the Securities and Exchange Commission (“SEC”), (3) recorded a non-cash contribution from IAC of a joint ownership interest in an airplane, with a fair value of $17.4 million, and (4) transferred to IAC all cash in excess of $100 million, excluding the cash held by eLong, Inc. (“eLong”).

General Description of our Business

We make available through our brands a wide selection of travel products and services, from simple, discounted travel to more complex, luxury travel. Our products primarily consist of air, hotel, car rental and activities and attractions. Our brands target the needs of different travelers, including those who are price

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sensitive and those who seek a wide selection of products and quality of services. Through our differentiated brands, we help a broad range of leisure and corporate travelers to research, plan and book travel.

Portfolio of Brands

We have created a global travel marketplace used by a broad range of leisure and corporate travelers and travel agents. Our marketplace allows travelers to research, plan and purchase travel products and services from travel suppliers and allows these travel suppliers to reach and provide travel products and services to travelers. We make available, on a stand-alone and package basis, travel products and services provided by numerous airlines, lodging properties, car rental companies, cruise lines and destination service providers. We use a portfolio approach for our brands to target a broad range of travelers looking for different travel options.

Our portfolio of brands, which are described below, include: Expedia-branded websites, Hotels.com, Hotwire.com, Worldwide Travel Exchange (“WWTE”) and Interactive Affiliate Network (“IAN”), Classic Vacations, Destination Services, Expedia Corporate Travel, eLong and TripAdvisor, Inc. (“TripAdvisor”).

Expedia. Our Expedia-branded websites make a large variety of travel products and services available directly to travelers through our U.S.-based website, www.expedia.com, as well as through localized versions of our website in Canada, France, Germany, Italy, Netherlands and United Kingdom. We also operate www.anyway.com, a leading online travel company in France. Expedia-branded websites also serve as the travel channel on MSN.com, Microsoft’s online services network in the United States, as well as certain international MSN sites. Expedia-branded websites target many different types of consumers, from families booking a summer vacation to individual travelers arranging a quick weekend getaway. Travelers can search for, compare information about (including pricing and availability) and book travel products and services on Expedia-branded websites, including airline tickets, lodging, car rentals, cruises and many destination services, such as attractions and tours, from a large number of suppliers, on a stand-alone or package basis.

Hotels.com. This website makes available a large variety of lodging options to travelers, who can plan, shop for and book lodging accommodations, from traditional hotels to vacation rentals. Hotels.com seeks to provide travelers with premium content and service through our U.S.-based website, www.hotels.com (as well as localized versions in the Americas, Europe, Asia Pacific and South Africa), our vacation rentals website at www.vacationspot.com and our call centers. Through Hotels.com, we are pursuing a strategy focused on differentiating our service offerings by positioning ourselves as a hotel expert with premium content about lodging properties, while simultaneously broadening our focus to include other travel products and services.

Hotwire.com. Our discount travel website makes available airline tickets, hotel rooms, rental cars, cruises and vacation packages. Hotwire.com’s approach matches the needs of two groups: price-sensitive travelers willing to be flexible to save money and suppliers who have excess seats, rooms and cars they wish to fill without affecting the public’s perception of their brands through our U.S.-based website, www.hotwire.com. Hotwire.com travelers enjoy significant discounts by electing to book travel services “opaquely,” without knowing certain itinerary details such as brand, time of departure and exact hotel location, while suppliers create value from excess inventory without diluting their core brand-loyal traveler base. Hotwire.com works with many domestic and international airlines, including United States full-service major network airlines, top hotels in hundreds of cities and resort destinations in the United States, Europe, Canada, Mexico and the Caribbean and major car rental companies in the United States.

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WWTE and IAN. Our private label programs make travel products and services available to travelers through third party company-branded websites via our industry leading technology platform. The products and services made available through our websites, www.wwte.com and www.ian.com, are based on those made available on Expedia-branded and Hotels.com-branded websites. We generally compensate participants in the WWTE and IAN private label programs on a revenue-share basis.

Classic Vacations. We offer individually tailored vacations that we provide primarily through a national network of retail travel agents. We deliver a full line of premium vacation components – air, hotels, car rentals, activities and private transportation – to create customized luxury vacations in Hawaii, the Caribbean, Mexico, Costa Rica, Europe and Tahiti. Travel agents and customers can preview our product offering through our websites, www.classicforagents.com and www.classicvacations.com.

Destination Services. Our network of in-destination travel desks located at hotels and resorts in Florida, Hawaii and Mexico makes available to travelers the opportunity to obtain tours, attractions, airport transfer services and other travel-related services. Our network expanded through our acquisition of Activity Information Center, Inc. (also known as “Activity World”), a destination service provider in Hawaii in 2004, and our 2005 acquisition of Premier Getaways, Inc., a destination service provider in Florida.

Expedia Corporate Travel (“ECT”). Our full-service travel management company makes travel products and services available to corporate customers in the United States and Europe. In 2004, we established ECT Europe, which includes Egencia and World Travel Management, which were acquired in March 2004 and August 2004, respectively. ECT provides, among other things, centralized booking tools for employees of our corporate customers, support of negotiated airfares and consolidated reporting aimed at small- and mid-sized businesses. ECT charges corporate client companies sign-up and set-up fees, as well as transactional fees for making or changing bookings. In addition, ECT provides on-site agents to some corporate clients in order to support the account.

eLong. Our online travel service company, based in Beijing, People’s Republic of China (“China”), specializes in travel products and services in China, including corporate travel services. eLong provides customers with consolidated travel information and the ability to access hotel reservations at discounted rates at almost 3,000 hotels in major cities across China. Travelers can access travel products and services through the websites, www.elong.com and www.elong.net.

TripAdvisor. Our comprehensive online travel search engine and directory aggregates unbiased articles, guidebook reviews and user comments on cities, hotels and activities in a variety of given destinations from a number of online sources through our website, www.tripadvisor.com. In addition to travel-related information, TripAdvisor’s destination-specific search results provide links to the websites of TripAdvisor’s travel partners (travel service providers and marketers) through which travelers can make related travel arrangements.

Basis of Presentation

Our interim unaudited consolidated financial statements present our results of operations, financial position, stockholders’ equity and cash flows on a combined basis up through the Spin-Off on August 9, 2005, and on a consolidated basis thereafter. The interim unaudited financial statements relating to periods prior to August 9, 2005, were prepared on a combined basis because there was no direct ownership relationship among the businesses that now comprise Expedia, Inc.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

We believe that the assumptions underlying our interim unaudited consolidated financial statements are reasonable. However, these interim unaudited consolidated financial statements do not present our future financial position, or the results of our future operations and cash flows, nor do they present what our historical financial position, results of operations and cash flows would have been prior to Spin-Off had we been a stand-alone company.

Reclassifications

As previously disclosed in our Form 8-K/A filed with the SEC on October 25, 2005, we have reclassified certain expense amounts relating to our prior periods’ results to conform to our 2005 presentation of results. The reclassifications did not affect our financial position, cash flows, revenue, operating income, operating income before amortization or net income for any periods.

Revenue

We earn revenue through the merchant and agency business models for airline tickets, hotels, car rental, cruises and destination services.

Our merchant revenue comes from transactions for which we are the merchant of record. We generally, subject to certain limitations, have the ability to determine the price charged to the traveler on merchant revenue transactions. We report substantially all merchant revenue on a net basis, which represents the amount we charge to the customer less the amount we pay to the supplier. However, we report a portion of our destination services on a gross basis because we maintain inventory and carry inventory risk associated with the travel products and services we offer. In these circumstances, we record the amount paid by the traveler as revenue, and the amount we pay to the supplier as cost of revenue. Gross profit is the same under the net and gross basis of recording revenue.

Under the merchant model, we facilitate the booking of hotel rooms, airline seats, car rentals and destination services from our suppliers and we are the merchant of record for such bookings. We record merchant revenue when the customer uses the travel product or service and deduct from that revenue the amounts paid to the suppliers. In certain non-refundable, non-changeable transactions where we have no significant post-delivery obligations, we record revenue when the traveler completes the transaction on our website. We record a reserve for chargebacks and cancellations at the time of the transaction based on historical experience.

Under the agency model, we act as the agent in the transaction, passing reservations booked by our customers to the relevant supplier. We receive commissions or ticketing fees from airline, hotel and car transactions from the supplier and/or customer. For agency airline transactions, we also receive fees from global distribution systems partners that control the computer systems through which reservations are booked. We record agency revenue at the time the customer books a reservation and we record an allowance for cancellations on this revenue based on historical experience.

For a discussion of our revenue recognition accounting policies, see Note 4, Significant Accounting Policies, in our notes to consolidated financial statements.

Seasonality

We generally experience seasonal fluctuations in the demand for our travel products and services. For example, traditional leisure travel bookings are typically the highest in the first and second quarter as travelers plan and book their spring and summer travel. The number of bookings flattens in the third and fourth quarter.

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Because revenue in the merchant business is generally recognized when the travel takes place rather than when it is booked, revenue typically lags bookings by a month or longer. As a result, revenue is typically the lowest in the first quarter and highest in the third quarter. Our merchant business cash flows fluctuate because there is a time lag between the receipt of cash from customers and the payment to suppliers. As a result, cash flow is generally higher during the first half of the year.

Seasonal fluctuations in the travel products and services made available by our travel suppliers to travelers booking through our businesses could affect our operating results. For instance, during seasonal periods when the demand for travel products and services is high, suppliers may impose blackout periods that prohibit us from making those products and services available to travelers during such periods.

Cost of Revenue

Cost of revenue consists primarily of (1) credit card merchant fees, (2) fees paid to our fulfillment vendors for issuing airline tickets and related customer services, (3) reserves and related payments for product and services purchased with fraudulent credit cards, (4) costs for the operation of our data center and call centers that includes personnel-related costs and (5) cost paid to suppliers for destination service inventory.

Selling and Marketing Expense

Selling and marketing expense consists primarily of advertising and distribution expense as well as personnel-related costs. We market and offer our products and services directly to travelers primarily through our branded websites. We have made, and expect to continue to make, substantial investments in online and offline advertising to build our brands and drive traffic to our websites. Our distribution channels include internet portals, search engines and our private label and affiliate programs. We pay to market and distribute the products and services of our travel suppliers on third party distribution channels. We manage affiliate programs, pursuant to which we pay commissions and fees to third parties based on revenue earned from customers. In many cases, these distribution channels also offer their own products and services, as well as those of other third parties, that compete with those made available and offered by us.

General and Administrative Expense

General and administrative expense consists primarily of (1) personnel-related costs for support functions that include our executive leadership, finance, legal, tax and human resources and (2) fees for professional services that include legal, tax and accounting.

Technology and Content Expense

Technology and content expense consists of research and development representing primarily product development expenses such as personnel-related costs, expenses for customizing our websites, and amortization of website and internal software development costs.

Amortization of Non-Cash Compensation Expense

Amortization of non-cash compensation expense consists primarily of the amortization of unvested stock-based compensation expense recorded over the remaining vesting period of the related equity.

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Amortization of Intangibles

Amortization of intangibles consists primarily of amortization of intangible assets with definite lives that were recorded from business acquisitions.

Results of Operations for the Three and Nine Months Ended September 30, 2005 and 2004

Revenue

	Three months ended September 30,						Nine months ended September 30,
	2005		2004		% Change		2005		2004		% Change
	(in thousands)						(in thousands)
Revenue	$	584,653	$	503,793	16	%	$	1,624,706	$	1,404,014	16	%

Total worldwide revenue increased by $80.9 million and $220.7 million, or 16%, for the three and nine months ended September 30, 2005, compared to the same periods in 2004. These increases were primarily due to an increase in worldwide merchant hotel revenue, acquisitions, increase in worldwide air revenue and growth in our car rental business. Our results were negatively affected by the hurricane season and terrorist activities during the quarter. The effects of the hurricane season continue to impact our results in the fourth quarter.

Worldwide merchant hotel revenue increased 15% and 11% for the three and nine months ended September 30, 2005, compared to the same periods in 2004. These increases were primarily due to increases in hotel room nights stayed and revenue per room night. For the same periods year-over-year, merchant hotel room nights stayed, including rooms delivered as a component of packages, increased by 13% and 8%, reflecting continued growth in demand from our websites and overall strengthening of the worldwide lodging market. For the same periods year-over-year, revenue per room night increased by 2% and 3%, resulting from an increase in average daily rates. Our U.S. merchant hotel business continues to operate in a challenging environment. This is primarily due to increased competition from third party distributors, supplier websites and higher overall occupancy rates. This may result in decreased availability to obtain access to wholesale inventory. We expect these trends to continue.

Worldwide air revenue increased 3% and 8%, for the three and nine months ended September 30, 2005, compared to the same periods in 2004. For the same periods year-over-year the number of air tickets sold increased by 13% and 20% primarily due to the growth in domestic ticket sales, partially offset by a decrease in air revenue per ticket of 9% and 10% primarily due to continued pressure from the airlines to reduce distribution costs and record airline load factors. We expect these trends to continue.

In addition, other revenue increased by 48% and 58% for the three and nine months ended September 30, 2005, compared to the same periods in 2004, primarily due to acquisitions and growth in car rental business.

Revenue generated from international sources increased by 43% and 55%, for the three and nine months ended September 30, 2005, compared to the same periods in 2004. These increases were primarily due to growth in the hotel and air businesses as well as acquisitions. During the third quarter of 2005, the challenging macroeconomic and travel environments in Europe, particularly in the United Kingdom and German markets, negatively affected international revenue. We expect these conditions to continue in the fourth quarter of 2005.

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CONTINUED

Cost of Revenue and Gross Profit

	Three months ended September 30,								Nine months ended September 30,
	2005			2004			% Change		2005			2004			% Change
	(in thousands)								(in thousands)
Cost of revenue	$	128,072		$	104,722		22	%	$	360,474		$	293,952		23	%
% of revenue		22	%		21	%				22	%		21	%
Gross profit	$	456,581		$	399,071		14	%	$	1,264,232		$	1,110,062		14	%
% of revenue		78	%		79	%				78	%		79	%

Cost of revenue increased by $23.4 million and $66.5 million, or 22% and 23%, for the three and nine months ended September 30, 2005, compared to the same periods in 2004. These increases were due to acquisitions and costs associated with the increase in transaction volumes.

Gross profit increased primarily as a result of the increase in transaction volume, while gross profit as a percentage of revenue remained consistent for the three and nine months ended September 30, 2005, compared to the same periods in 2004.

Selling and Marketing

	Three months ended September 30,								Nine months ended September 30,
	2005			2004			% Change		2005			2004			% Change
	(in thousands)								(in thousands)
Selling and marketing	$	185,421		$	177,863		4	%	$	542,173		$	523,999		3	%
% of revenue		32	%		35	%				33	%		37	%

Selling and marketing expense increased $7.6 million and $18.2 million, or 4% and 3%, for the three and nine months ended September 30, 2005, compared to the same periods in 2004. The increase is primarily due to headcount growth, driven by acquisitions and continued expansion of our account management footprint, offset by a slight decline in direct marketing spend as a result of improved effectiveness. During the second quarter of 2004, we reversed $6.4 million of selling and marketing expense associated with the resolution of a contractual dispute. Selling and marketing expenses as a percentage of revenue decreased reflecting increasing selling and marketing effectiveness.

We expect an increase in selling and marketing expense in the fourth quarter of 2005, due to increased direct marketing spend as well as higher headcount costs, with continued improvement in marketing effectiveness. While we focus on optimizing the effectiveness of our sales and marketing channels, we expect the absolute amounts we spend on sales and marketing to increase over time due to continued expansion of our international businesses, as well as increases in search-related costs, higher marketing volume and costs of traffic acquisition online.

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CONTINUED

General and Administrative

	Three months ended September 30,								Nine months ended September 30,
	2005			2004			% Change		2005			2004			% Change
	(in thousands)								(in thousands)
General and administrative	$	58,895		$	39,154		50	%	$	146,209		$	113,976		28	%
% of revenue		10	%		8	%				9	%		8	%

General and administrative expense increased by $19.7 million and $32.2 million, or 50% and 28%, for the three and nine months ended September 30, 2005, compared to the same periods in 2004. These increases were primarily due to acquisitions, an increase in our use of professional services and costs to build our executive teams and supporting staff levels, which we expect to continue, largely in connection with becoming a stand-alone public company. In addition, we incurred one-time expenses specifically related to the Spin-Off.

We expect absolute amounts spent on corporate personnel and professional services to increase over time as we add headcount and continue incurring incremental costs as a stand-alone public company.

Technology and Content

	Three months ended September 30,								Nine months ended September 30,
	2005			2004			% Change		2005			2004			% Change
	(in thousands)								(in thousands)
Technology and content	$	28,741		$	22,444		28	%	$	81,349		$	61,686		32	%
% of revenue		5	%		4	%				5	%		4	%

Technology and content expense increased by $6.3 million and $19.7 million, or 28% and 32%, for the three and nine months ended September 30, 2005, compared to the same periods in 2004. These increases were primarily due to an increase in the number of personnel involved in our research and development activities consisting of product development expenses such as payroll and related expenses for customizing our websites, as well as amortization of website development costs and acquisitions. Given the increasing complexity of our business, geographic expansion, initiatives in corporate travel, increased supplier integration, service-oriented architecture improvements and other initiatives, we expect absolute amounts spent on technology and content expenses to increase over time.

Amortization (Benefit) of Non-Cash Compensation

	Three months ended September 30,								Nine months ended September 30,
	2005			2004			% Change		2005			2004			% Change
	(in thousands)								(in thousands)
Amortization (benefit) of non-cash compensation	$	(1,009	)	$	44,350		-102	%	$	79,899		$	134,394		-41	%
% of revenue		0	%		9	%				5	%		10	%

Amortization of non-cash compensation expense decreased by $45.4 million and $54.5 million, or 102% and 41%, for the three and nine months ended September 30, 2005, compared to the same periods in 2004. Non-cash compensation related primarily to the options assumed from IAC related to the Expedia.com and Hotels.com mergers as well as expense related to the restricted stock units grants to employees for compensation purposes. For the three months ended September 30, 2005, we recorded amortization of non-cash compensation of $28.7 million primarily relating to stock options and restricted stock units. Assuming, among other things, that our stock price does not vary widely from present levels, we anticipate the quarterly

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amortization of non-cash compensation expense will decrease from current levels as higher value options are amortized and replaced by lower value restricted stock unit expense.

During the three months ended September 30, 2005, we completed an assessment of the estimated forfeiture rates we used in the determination of stock-based compensation expense. Our assessment, which included an analysis of the actual number of instruments that vested to date compared to prior estimates and an evaluation of future estimated forfeitures, indicated an increase in the forfeiture rate over our previous estimates. As a result, we recorded a cumulative benefit from the change in estimate of $35.3 million, which reduces non-cash compensation expense ($22.5 million, net of income tax expense) in the consolidated statements of income for the three and nine months ended September 30, 2005. The effect of the change in estimated forfeiture rate on basic earnings per share was $0.07 per share, after tax, for the three and nine months ended September 30, 2005, and the effect on diluted earnings per share was $0.06 per share, after tax, for the three months ended September 30, 2005, and $0.07 per share, after tax, for the nine months ended September 30, 2005.

In connection with the Spin-Off, we modified all existing stock-based compensation awards, which resulted in a one-time expense of $5.4 million due to the increase in the estimated fair value of these options due to modifications.

The effect of the change in estimated forfeiture rate and modification of stock-based compensation awards more than offset the $28.7 million expense relating to equity awards, resulting in a net benefit to non-cash compensation of $1.0 million for the three months ended September 30, 2005.

Amortization of Intangibles

	Three months ended September 30,								Nine months ended September 30,
	2005			2004			% Change		2005			2004			% Change
	(in thousands)								(in thousands)
Amortization of intangibles	$	30,756		$	31,743		-3	%	$	94,204		$	92,520		2	%
% of revenue		5	%		6	%				6	%		7	%

Amortization of intangibles decreased by $1.0 million, or 3%, for the three months ended September 30, 2005, compared to the same period in 2004, and increased by $1.7 million, or 2%, for the nine months ended September 30, 2005, compared to the same period in 2004. For the three months ended September 30, 2005, compared to the same period in 2004, the decrease in the amortization in intangibles was due to effect of fully amortized intangible assets. For the nine months ended September 30, 2005, compared to the same period in 2004, the increase in the amortization for intangibles was due to new acquisitions.

Operating Income

	Three months ended September 30,								Nine months ended September 30,
	2005			2004			% Change		2005			2004			% Change
	(in thousands)								(in thousands)
Operating income	$	148,639		$	80,261		85	%	$	311,343		$	170,460		83	%
% of revenue		25	%		16	%				19	%		12	%

Operating income increased by $68.4 million and $140.9 million, or 85% and 83%, for the three and nine months ended September 30, 2005, compared to the same periods in 2004. Operating income increased primarily due to increased revenue and operational efficiencies from economies of scale, which contributed to a higher gross profit, and a decrease in non-cash compensation due to a change in the estimated forfeiture rates

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used to determine stock-based compensation, offset by increases in selling and marketing, general and administrative, and technology and content expense.

For the three and nine months ended September 30, 2005, operating income included a $35.3 million decrease to non-cash compensation expense related to the change in estimated forfeiture rates used to determine stock-based compensation, offset by a $5.4 million increase related to the modification of existing stock-based compensation awards.

For the nine months ended September 30, 2004, operating income included the reversal of $6.4 million of selling and marketing expense associated with the resolution of a contractual dispute. For the three and nine months ended September 30, 2004, operating income included a benefit of $4.4 million net adjustment primarily for the reversal of an excise tax reserve.

Operating Income Before Amortization (“OIBA”)

	Three months ended September 30,								Nine months ended September 30,
	2005			2004			% Change		2005			2004			% Change
	(in thousands)								(in thousands)
OIBA	$	183,524		$	159,610		15	%	$	494,501		$	410,401		20	%
% of revenue		31	%		32	%				30	%		29	%

Operating Income Before Amortization (“OIBA,” see definition below under heading “Definition of OIBA”) increased by $23.9 million and $84.1 million, or 15% and 20%, for the three and nine months ended September 30, 2005, compared to the same periods in 2004. These increases were primarily due to increases in revenue and operational efficiencies from economies of scale, which contributed to a higher gross profit, offset by increases in selling and marketing, general and administrative, and technology and content expense.

For the nine months ended September 30, 2004, OIBA included the reversal of $6.4 million of selling and marketing expense associated with the resolution of a contractual dispute. For the three and nine months ended September 30, 2004, OIBA included a benefit of $4.4 million net adjustment primarily for the reversal of an excise tax reserve.

Definition of OIBA

We define OIBA as operating income plus: (1) amortization of non-cash distribution and marketing (2) amortization of non-cash compensation, (3) amortization of intangibles and goodwill impairment, if applicable and (4) certain one-time items, if applicable. We believe that this measure is useful to investors because it represents the operating results from our businesses, taking into account depreciation, which we believe is an ongoing cost of doing business, but excludes the effects of certain other non-cash expenses. OIBA has certain limitations in that it does not take into account the impact to our statements of income of certain expenses, including non-cash compensation, non-cash payments to partners, and acquisition-related accounting. We endeavor to compensate for the limitations of the non-GAAP measure presented by providing the comparable generally accepted accounting principles (“GAAP”) measure with equal or greater prominence and descriptions of the reconciling items and adjustments, including quantifying such items, to derive the non-GAAP measure.

We report OIBA as a supplemental measure to GAAP. This measure is one of the primary metrics by which we evaluate the performance of our businesses, by which we base our internal budgets, and by which we compensate management. We believe that investors should generally have access to the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared

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in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. We provide and encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measure presented below.

Reconciliation of Operating Income to OIBA

The following table presents a reconciliation of OIBA to operating income and net income for the three and nine months ended September 30, 2005 and 2004:

	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2005			2004			2005			2004
OIBA	$	183,524		$	159,610		$	494,501		$	410,401
Amortization of non-cash distribution and marketing		(5,138	)		(3,256	)		(9,055	)		(13,027	)
Amortization (recovery) of non-cash compensation		1,009			(44,350	)		(79,899	)		(134,394	)
Amortization of intangibles		(30,756	)		(31,743	)		(94,204	)		(92,520	)
Operating Income		148,639			80,261			311,343			170,460
Net interest income		17,968			9,303			47,479			23,611
Write-off of long-term investment		(23,426	)		—			(23,426	)		—
Other		7,379			5,398			11,889			2,906
Income tax expense		(69,026	)		(37,455	)		(143,895	)		(77,737	)
Minority interest in loss of consolidated subsidiaries		501			585			106			113
Net Income	$	82,035		$	58,092		$	203,496		$	119,353

Interest Income, Net

	Three months ended September 30,								Nine months ended September 30,
	2005			2004			% Change		2005			2004			% Change
	(in thousands)								(in thousands)
Interest Income:
Interest income from IAC/InterActiveCorp	$	15,316		$	7,656		100	%	$	40,089		$	17,407		130	%
Other, net		2,652			1,647		61	%		7,390			6,204		19	%
Interest Income, net	$	17,968		$	9,303		93	%	$	47,479		$	23,611		101	%
% of revenue		3	%		2	%				3	%		2	%

Interest income, net increased by $8.7 million and $23.9 million, or 93% and 101%, for the three and nine months ended September 30, 2005, compared to the same periods in 2004. These increases were primarily due to growth in intercompany receivable balances due from IAC through the Spin-Off date when the intercompany receivable balances were extinguished, as well as higher interest rates earned on those balances, in each case, pursuant to cash management arrangements with IAC. Because we extinguished our intercompany receivable balances with IAC at Spin-Off, we expect our future interest income to decrease significantly.

Write-Off of Long-Term Investment

	Three months ended September 30,							Nine months ended September 30,
	2005			2004			% Change	2005			2004			% Change
	(in thousands)							(in thousands)
Write-off of long-term investment	$	23,426		$	—		n/a	$	23,426		$	—		n/a
% of revenue		4	%		0	%			1	%		0	%

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Part I. Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

During the three months ended September 30, 2005, we received information regarding the deteriorating financial condition of our long-term investment in a leisure travel company based on this information we have determined that it is not likely we will recover any of our investment and that the decline in its value is other-than-temporary; as a result, in the three months ending September 30, 2005, we recorded a loss related to this impairment of $23.4 million, which consisted of $22.5 million of preferred stock and $0.9 million of stock warrants in our consolidated statement of income. The effect of the write-off on basic and diluted earnings per share was $0.07 cents per share, after tax, for the three and nine months ended September 30, 2005.

Other

	Three months ended September 30,								Nine months ended September 30,
	2005			2004			% Change		2005			2004			% Change
	(in thousands)								(in thousands)
Other	$	7,379		$	5,398		37	%	$	11,889		$	2,906		309	%
% of revenue		1	%		1	%				1	%		0	%

The increase for the three and nine months ended September 30, 2005, compared to the same period in 2004, was primarily due to a $12.0 million unrealized gain in the fair value of derivative instruments related to the Ask Jeeves convertible subordinated notes (“Ask Jeeves Notes”) and certain stock warrants. This increase was partially offset by a negative impact from the fluctuation in foreign exchange rates. For additional information about our derivative instruments, see Note 8, Derivatives Instrument, and for additional information about the write-off of our long-term investment, see Note 7, Long-Term Investments, in the notes to consolidated financial statements.

Foreign exchange rates fluctuated contributing to transaction losses of $4.7 million for the three months ended September 30, 2005, compared to gains of $5.3 million for the same period in 2004, and gains of $1.5 million and $4.2 million for the nine months ended September 30, 2005 and 2004, respectively.

Income Tax Expense

	Three months ended September 30,								Nine months ended September 30,
	2005			2004			% Change		2005			2004			% Change
	(in thousands)								(in thousands)
Income tax expense	$	69,026		$	37,455		84	%	$	143,895		$	77,737		85	%
% of revenue		12	%		7	%				9	%		6	%

Income tax expense increased by $31.6 million and $66.2 million, or 84% and 85% for the three and nine months ended September 30, 2005, compared to the same periods in 2004. The effective tax rate was 46% and 41% for the three and nine months ended September 30, 2005, compared to 39% for the same periods in 2004. For the three and nine months ended September 30, 2005 and 2004, our effective tax rate remains higher than the 35% statutory rate primarily due to state taxes and non-deductible amortization of non-cash compensation expense. In addition, for the three and nine months ended September 30, 2005, our effective tax rate was affected by a loss from our write-off of our long-term investment that is not deductible for tax purposes.

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Expedia, Inc.

Part I. Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

Financial Position, Liquidity and Capital Resources

Financial Position

In conjunction with the Spin-Off, we completed the following transactions: (1) extinguished all intercompany receivable balances from IAC totaling $2.5 billion by recording a non-cash distribution to IAC, (2) recapitalized the invested equity balance with common stock, Class B common stock and preferred stock, whereby holders of IAC stock received shares of Expedia stock, as described in our Registration Statement on Form S-4, as amended (Commission file number 333-124303-01), filed with the SEC, (3) recorded a non-cash contribution from IAC of an airplane, which we own jointly with IAC, with a fair value of $17.4 million and (4) we transferred to IAC all cash in excess of $100 million, excluding the cash held by eLong.

Sources of Cash

As of September 30, 2005, our cash and cash equivalents totaled $227.9 million. In connection with the Spin-Off, we transferred to IAC all cash in excess of $100 million, excluding the cash held by eLong. On July 11, 2005, we entered into a $1.0 billion revolving credit facility. As of October 31, 2005, our outstanding balance on the revolving credit facility was $94.0 million, which consisted of short-term borrowings. As of October 31, 2005, we complied with our financial covenants for the revolving credit facility.

In our opinion, available cash, internally generated funds and available borrowings, in the form of the revolving credit facility, will provide sufficient capital resources to meet our foreseeable liquidity needs. Our credit facility arrangement requires that we comply with certain financial covenants with which we are in compliance.

Cash Flows

Net cash provided by operating activities was $943.7 million and $714.5 million for the nine months ended September 30, 2005 and 2004. Cash flows from the merchant hotel business contributed significantly to the cash provided by operating activities. The increase in working capital cash flow was $478.0 million and $348.2 million for the nine months ended September 30, 2005 and 2004, primarily due to the changes in accounts payable and accrued expenses, deferred merchant bookings, prepaid merchant bookings and expenses, accounts and notes receivable, and deferred revenue.

Cash flows provided by the increases in deferred merchant bookings were $197.2 million and $167.4 million for the nine months ended September 30, 2005 and 2004. The increase in cash flows from the merchant bookings was primarily due to the increase in merchant hotel business. In the merchant business, we receive cash from travelers at the time of booking and we record these amounts on our consolidated balance sheets as deferred merchant bookings. We pay our suppliers related to these bookings approximately one week after completing the transaction for air travel and, for all other merchant bookings, after the travelers use and subsequent billing from the supplier. Therefore, especially for the hotel business, which represents the majority of our merchant bookings, there is generally some amount of time from the receipt of the cash from the travelers to the payment to the suppliers.

As long as the merchant hotel businesses continue to grow, as they have historically, and our business model does not change, we expect that the change in working capital will continue to be positive. If these businesses decline or if the model changes, it would negatively affect our working capital. Seasonal fluctuations in our merchant bookings affect our cash flows. During the first half of the year, hotel bookings have

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

traditionally exceeded stays, resulting in much higher cash flow related to working capital. During the second half of the year, this pattern reverses. While we expect the impact of seasonal fluctuations to continue, changes in the rate of growth of merchant bookings may affect working capital, which might counteract or intensify the anticipated seasonal fluctuations.

Cash used in investing activities was $800.5 million and $1.1 billion for the nine months ended September 30, 2005 and 2004. For the nine months ended September 30, 2005, cash used by investing activities was primarily due to transfers to IAC of $766.8 million and capital expenditures of $40.9 million. For the nine months ended September 30, 2004, cash used in investing activities was primarily due to transfers to IAC of $1.5 billion, cash used for acquisitions of $261.3 million, offset partially by net proceeds of $722.6 million generated from the sale of marketable securities. These net transfers to IAC were primarily due to the transfer of our excess cash to centralize investment management. These activities ceased upon Spin-Off.

Cash used in financing activities was $71.4 million for the nine months ended September 30, 2005, and cash provided by financing activities was $400.8 million for the nine months ended September 30, 2004. For the nine months ended September 30, 2005, cash used in financing activities was primarily due to distributions to IAC of $52.8 million and changes in the restricted cash and cash equivalents balance of $36.5 million. For the nine months ended September 30, 2004, cash provided by financing activities was primarily due to contributions from IAC of $401.9 million.

We anticipate that we will continue to invest in the development and expansion of our operations. In the event we have acquisitions, this may reduce our cash balance and increase our debt.

Contractual Obligations and Commercial Commitments

We did not have any material changes to our pre-existing contractual obligations or commercial commitments during the three and nine months ended September 30, 2005. In connection with the Spin-Off, we entered into a revolving credit facility. See Note 13, Commitments and Contingencies in our notes to consolidated financial statements, for additional information about the revolving credit facility.

Critical Accounting Policies and Estimates

We have had no material changes to critical accounting policies and estimates during the three and nine months ended September 30, 2005. We are required to make certain estimates and assumptions during the preparation of these consolidated financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also affect the reported amount of net earnings during any period. Actual results could differ from those estimates. Because of the size of the financial statement elements to which they relate, some of our accounting policies and estimates have a more significant impact on the consolidated financial statements than others. What follows is a discussion of some of our more significant accounting policies and estimates.

Revenue Recognition. We primarily record revenue on the net basis. The principal factor we use to determine this presentation is our relationship with the traveler as the primary obligor. Although we provide extensive customer service and support for our travelers, our services are not the same as the services provided by the supplier. We believe that the supplier is principally liable to our merchant customers in all situations. If the merchant products and services are not available, or is not of the general caliber described in

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

the promotional materials, we provide customer service support to help resolve issues, even though such traveler support could typically involve issues for which we are not principally liable.

The accounting guidance applied with respect to the presentation of revenue on a gross versus a net basis is contained in Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements,” and Emerging Issues Task Force No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent (EITF 99-19).” The consensus of this literature is that the presentation of revenue as “the gross amount billed to a customer because it has earned revenue from the sale of goods or services or the net amount retained (that is, the amount billed to a customer less the amount paid to a supplier) because it has earned a commission or fee,” is a matter of judgment that depends on the relevant facts and circumstances. If the conclusion drawn is that we perform as an agent or a broker without assuming the risks and rewards of ownership of goods, revenue should be reported on a net basis. In making an evaluation of this issue, some of the factors that should be considered are: what our relationship with our customer is in the arrangement (strong indicator); whether we have general inventory risk (before customer order is placed or upon customer return) (strong indicator); and whether we have latitude in establishing price. EITF 99-19 clearly indicates that the evaluations of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity. The position we have taken reflects our interpretation of their respective fact patterns as well as the qualitative weighing of the indicators outlined in EITF 99-19. For additional information on revenue recognition, see Note 4, Significant Accounting Policies, in the notes to consolidated financial statements.

Recoverability of Long-Lived and Intangible Assets and Goodwill. We review the carrying value of our long-lived assets and intangibles annually, and more frequently if the facts and circumstances suggest that they may be impaired. If our review indicates that the carrying value will not be recoverable, as determined based on the projected undiscounted future cash flows or similar valuation methodology, we reduce the carrying value to its estimated fair value. We amortize intangibles with definite lives including distribution agreements, customer lists, supplier relationships, technology and non-compete agreements over their respective lives of two to ten years. Trade names and trademarks have indefinite estimated lives. We do not amortize goodwill and purchased intangibles with indefinite lives.

As of September 30, 2005, our consolidated balance sheets included $7.1 billion of goodwill and intangible assets, net of amortization, and $85.9 million of property and equipment, net of depreciation and amortization. We updated our analysis of goodwill, intangible assets and long-lived assets during the fourth quarter of 2004, and determined that the carrying value of such assets was not impaired. We assess our annual assessment for impairment of goodwill and indefinite-lived intangible assets during the fourth quarter of the calendar year.

Deferred Income Tax Estimates. We determine deferred tax assets and liabilities based on differences in accounting methods and timing between financial statement and income tax reporting. We measure the tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when we expect the differences to reverse. We assess the realizable value of our deferred tax assets and provide a valuation allowance when necessary. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience by jurisdiction, expectations of future taxable income, the carryforward periods available to us for tax reporting purposes, as well as other relevant factors. Actual income taxes could vary from these estimates due to future changes in income tax law, operating results that vary significantly from budgets, or upon review of our tax returns by relevant tax authorities.

Stock-Based Compensation. We account for stock-based compensation issued to employees in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based

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CONTINUED

Compensation Transition and Disclosure,” (“SFAS 148”), which amends SFAS No. 123, “Accounting for Stock-Based Compensation,.” (“SFAS 123”). This statement provides alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. We adopted the expense recognition provision of SFAS 123 as of January 1, 2003, and we provide expense for stock-based compensation for grants on and after that date on a prospective basis in accordance with SFAS 148.

We measure the value of restricted stock units issued at the grant date at fair value and we amortize it ratably as non-cash compensation over the vesting term. We measure the value of stock options and warrants issued since 2003, including unvested options assumed in acquisitions, on the grant date (or acquisition date, if applicable) at fair value using the Black-Scholes option valuation model and we amortize the fair value over the remaining vesting term. As of September 30, 2005, we record all stock-based compensation in accordance with SFAS 123 and SFAS 148. Option valuation models require the input of highly subjective assumptions including the expected stock price volatility and estimated life of the award.

We consider many factors when estimating the expected forfeiture rates, including the type of award, employee class and historical experience. Actual results and future changes in estimates may differ substantially from our current estimates.

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123(R) “Share-Based Payment,” (“SFAS 123(R)”) which is a revision of SFAS 123. SFAS 123(R) supersedes Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees” and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS 123(R) is similar to the approach described in SFAS 123; however, SFAS 123(R) requires that companies record all share-based payments to employees, including grants of employee stock options, in the statement of income based on their fair values. SFAS 123(R) also requires the benefits of tax deductions in excess of recorded compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. We expect to continue using the Black-Scholes option valuation model upon adoption of SFAS 123(R) on January 1, 2006.

In March 2005, the SEC issued SAB No.107 (“SAB 107”), which provides additional guidance related to the implementation of SFAS 123(R), including guidance regarding valuation methods and related assumptions, classification of compensation expense and income tax effects of share-based payment arrangements.

We are assessing the impact of these pronouncements; however, we do not expect the adoption of SFAS 123(R), SAB 107 and related guidance to have a material effect on our results of operations, financial position or cash flows.

Accounting for Derivatives. We record derivatives at fair value on our consolidated balance sheets in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” We record the changes in the fair value of a derivative that we designate which qualifies as a cash flow hedge, to the extent that the hedge is effective, in other comprehensive income, until earnings are affected by the variability of cash flows of the hedged transaction. We reclassify amounts recorded in other comprehensive income to other income during the period in which the hedged transaction affects earnings. We report the ineffective portion of a derivatives change in fair value immediately in other income or expense in our consolidated statements of income. We report the change in the fair value of derivatives that are not hedges in other income or expense in our consolidated statements of income.

39

Expedia, Inc.

Part I. Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

We record the estimated fair value of our obligation related to the Ask Jeeves Notes and certain stock warrants as derivative liabilities. We record the change in the estimated fair values of these obligations in other income in our consolidated statements of income.

Accounting for Deferred Merchant Bookings. We accrue the cost of merchant revenue based on the amount we expect will be invoiced to us by our suppliers. If we do not receive an invoice within a certain period, or the invoice is less than the amount we accrued, we may reverse a portion of the accrued cost, thus, increasing revenue. We determine the amounts that we will record to revenue based on our estimates of invoices suppliers may send us after six months following the travel date, and our analysis of reasons underlying the unbilled amounts.

Risk Factors

You should carefully consider each of the following risks and uncertainties associated with our company and the ownership of our securities. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations.

Mr. Diller currently controls Expedia. If Mr. Diller ceases to control the company, Liberty Media Corporation may effectively control the company.

Subject to the terms of a stockholders agreement, Mr. Diller effectively controls the outcome of all matters submitted to a vote or for the consent of our stockholders (other than with respect to the election by the holders of common stock of 25% of the members of the Board of Directors and matters as to which Delaware law requires a separate class vote). Upon Mr. Diller’s permanent departure from Expedia, Liberty Media Corporation (“Liberty”) may effectively control the voting power of our capital stock.

Pursuant to the stockholders agreement referred to above, until the time of Mr. Diller’s departure from Expedia, Mr. Diller will generally have the right to vote all of the shares of our common stock and our Class B common stock held by Liberty and each of BDTV Inc., BDTV II Inc., BDTV III Inc. and BDTV IV Inc. (collectively, the “BDTV Entities”). As a result, Mr. Diller, through shares he owns as well as those subject to proxy, controls approximately 55% of the combined voting power of the outstanding Expedia capital stock.

In addition, under a governance agreement, each of Mr. Diller and Liberty generally has the right to consent to limited matters in the event that our ratio of total debt to EBITDA, as defined in the governance agreement, equals or exceeds 4:1 over a continuous 12-month period. We cannot assure you that Mr. Diller and Liberty will consent to any such matter at a time when we are highly leveraged, in which case we would not be able to engage in such transactions or take such actions.

As a result of Mr. Diller’s ownership interests and voting power, and Liberty’s ownership interests and voting power upon Mr. Diller’s permanent departure from us, Mr. Diller or Liberty, as the case may be, will be in a position to control or influence significant corporate actions, including, corporate transactions such as mergers, business combinations or dispositions of assets and determinations with respect to our significant business direction and policies. This concentrated control could discourage others from initiating any potential merger, takeover or other change of control transaction that may otherwise be beneficial to us. As a result, the market price of our securities could be adversely affected.

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Expedia, Inc.

Part I. Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

We rely on the performance of highly skilled personnel and, if we are unable to retain or motivate key personnel or hire qualified personnel, our business will be harmed.

Our performance is largely dependent on the talents and efforts of highly skilled individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. In particular the contributions of Barry Diller, our Chairman and senior executive, and Dara Khosrowshahi, our Chief Executive Officer, are critical to the overall management of the company. Neither Mr. Diller nor Mr. Khosrowshahi has an employment agreement with Expedia. Mr. Diller does own options to purchase a substantial number of shares of Expedia common stock; however, a substantial majority of such options expire prior to November 2007.

In addition, our future success will depend on the performance of our senior management and key employees, a number of whom joined Expedia recently in connection with the Spin-Off. Expedia cannot ensure that it will be able to retain the services of Mr. Diller, Mr. Khosrowshahi or any other member of our senior management or key employees, the loss of which could seriously harm our business. In addition, competition for well-qualified employees in all aspects of our business, including software engineers and other technology professionals, is intense. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees. If we do not succeed in attracting well-qualified employees or retaining or motivating existing employees, our business would be adversely affected.

Actual or potential conflicts of interest may develop between our management and directors, on the one hand, and the management and directors of IAC, on the other.

Mr. Diller serves as our Chairman of the Board of Directors and senior executive, while retaining his role as Chairman and Chief Executive Officer of IAC, and Mr. Kaufman serves as Vice Chairman of both Expedia and IAC. The fact that Messrs. Diller and Kaufman hold positions with both companies and own both IAC and Expedia capital stock could create, or appear to create, potential conflicts of interest for each of Messrs. Diller and Kaufman when he faces decisions that may affect both IAC and Expedia. Both Messrs. Diller and Kaufman may also face conflicts of interest with regard to the allocation of their time between IAC and Expedia.

Our certificate of incorporation provides that no officer or director of Expedia who is also an officer or director of IAC will be liable to Expedia or its stockholders for breach of any fiduciary duty by reason of the fact that any such individual directs a corporate opportunity to IAC instead of Expedia, or does not communicate information regarding a corporate opportunity to Expedia because the officer or director has directed the corporate opportunity to IAC. This corporate opportunity provision may have the effect of exacerbating the risk of conflicts of interest between IAC and Expedia because the provision effectively shields an overlapping director/executive officer from liability for breach of fiduciary duty in the event that such director or officer chooses to direct a corporate opportunity to IAC instead of Expedia.

Many of our businesses operate on separate financial and other systems that we are in the process of integrating.

Expedia is composed of multiple business units that previously were unaffiliated companies which were acquired by IAC. Certain of these multiple business units use disparate systems, processes and personnel to support operations, including accounting operations, tax filings and back office support. In addition, certain of the business units rely on manual procedures for various financial processes. We have in the past and continue to expend significant capital resources to integrate and automate the disparate systems into an efficient, effective and unified operation. If we are not able to successfully implement the changes necessary to operate a unified system, then we may not be able to take advantage of efficiencies of scale, we may incur excess costs that could affect our margins or may lose partners due to inefficiencies with our current systems.

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Expedia, Inc.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

If any of these events were to occur, it could have a material adverse effect on our reputation or results of operations.

Our success depends on maintaining the integrity of our systems and infrastructure. System interruption and the lack of integration and redundancy in our information systems may affect our businesses.

A fundamental requirement for online commerce and communications is the secure transmission of confidential information, such as credit card numbers or other personal information, over public networks. Our security measures may be inadequate and, if any compromise of security were to occur, it could have a detrimental effect on our reputation and adversely affect our ability to maintain and/or attract new customers. We may experience occasional system interruptions that make some or all systems unavailable or prevent us from efficiently fulfilling orders or providing services to third parties. We rely on our affiliates’ and third party computer systems and service providers to facilitate and process a portion of our transactions. Any interruptions, outages or delays in our systems or third party providers’ systems, or deterioration in their performance, could impair each company’s ability to process transactions for its customers and the quality of service that we can offer to our customers. Fire, flood, power loss, telecommunications failure, break-ins, earthquakes, acts of war or terrorism, acts of God, computer viruses, physical or electronic break-ins and similar events or disruptions may damage or interrupt computer or communications systems at any time. Any of these events could cause system interruption, delays and loss of critical data, and could prevent us from providing services to third parties. While we have backup systems for certain aspects of our operations, our systems are not fully redundant and disaster recovery planning may not be sufficient for all eventualities. In addition, we may have inadequate insurance coverage or insurance limits to compensate for losses from a major interruption. If any of these adverse events were to occur, it could damage our reputation and be costly to remedy.

Our expansion places a significant strain on our management, operational and financial resources

We have rapidly and significantly expanded our operations both domestically and internationally and will continue to expand further to pursue growth of our product and service offerings and customer base. Such expansion increases the complexity of our business and places a significant strain on our management, operations, technical performance, financial resources and internal financial control and reporting functions, and there can be no assurance that we will be able to manage it effectively. Our current and planned personnel, systems, procedures and controls may not be adequate to support and effectively manage our future operations, especially as we employ personnel in multiple geographic locations. We may not be able to hire, train, retain, motivate and manage required personnel, which may limit our growth. If any of this were to occur, it could damage our reputation, limit our growth, negatively affect our operating results and harm our business.

We may experience operational and financial risks in connection with any acquisitions. In addition, some of the businesses acquired by us may incur significant losses from operations or experience impairment of carrying value.

Our future growth may depend, in part, on acquisitions. To the extent that we grow through acquisitions, we may face the operational and financial risks that commonly accompany that strategy. We would also face operational risks, such as failing to assimilate the operations and personnel of the acquired businesses, disrupting its ongoing businesses, impairing management resources and its relationships with employees and

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

customers of acquired businesses as a result of changes in ownership and management. Some acquisitions may not be successful and their performances may result in the impairment of their carrying value.

Changing laws, rules and regulations and legal uncertainties may adversely affect our business, financial condition and results of operations.

Unfavorable changes in or interpretations of existing, or the promulgation of new, laws, rules and regulations applicable to us and our businesses, including those relating to the Internet and online commerce, consumer protection and privacy, escheat and sales, use, occupancy, value-added and other taxes, could decrease demand for products and services, increase costs and/or subject us to additional liabilities, which could adversely affect our business, financial condition and results of operations. For example, there is, and will likely continue to be, an increasing number of laws and regulations pertaining to the Internet and online commerce, which may relate to liability for information retrieved from or transmitted over the Internet, user privacy, taxation and the quality of products and services. Furthermore, the growth and development of online commerce may prompt calls for more stringent consumer protection laws that may impose additional burdens on online businesses generally.

In addition, the application of various domestic and international sales, use, occupancy, value-added and other tax laws, rules and regulations to our historical and new products and services is subject to interpretation by the applicable taxing authorities. While we believe that we are compliant with these tax provisions, there can be no assurances that taxing authorities will not take a contrary position, or that such positions will not have an adverse effect on our businesses, financial condition and results of operations. If the tax laws, rules and regulations were amended or if current interpretations of the laws were to change adversely to us, particularly with respect to occupancy or value-added taxes, the results could have an adverse affect on our businesses, financial condition and results of operations.

Our results of operations are difficult to predict and may fluctuate substantially from the estimates of securities analysts or expectations of our investors.

In the event that our operating results fall below the expectations of securities analysts or investors, the trading price of our securities may decline significantly. In addition to the risks identified herein, our business is sensitive to general economic conditions, the health of the worldwide travel industry, consumer confidence, consumer retail spending, trends in technology, competition, levels of personal discretionary income, weather, acts of war or terrorism, safety concerns and acts of God. Our business is also subject to the effects of seasonality with revenues typically lowest in the first quarter of the year and highest in the third quarter.

In addition, the stock market in general, and the market for technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to operating performance. These broad market and industry factors may seriously harm the market price of our securities, regardless of our actual operating performance. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

We depend on our relationships with travel suppliers and any adverse changes in these relationships could adversely affect our business, financial condition and results of operations.

An important component of our business success depends on our ability to maintain our existing, as well as build new, relationships with travel suppliers and global distribution system (GDS) partners. Adverse changes

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CONTINUED

in existing relationships, or our inability to enter into new arrangements with these parties on favorable terms, if at all, could reduce the amount, quality and breadth of attractively priced travel products and services that we are able to offer, which could adversely affect our business, financial condition and results of operations.

Travel suppliers are increasingly seeking to lower their travel distribution costs by promoting direct online bookings through their own websites. In some cases, supplier direct channels offer advantages to consumers, such as loyalty programs or lower transaction fees. In addition, travel suppliers may choose not to make their travel products and services available through our distribution channels. For example, in the case of our merchant hotel business, we experienced a compressed lodging supply environment in 2004 due to higher overall occupancy rates as compared to prior periods. We expect that these trends will continue. To the extent that consumers increase the percentage of their travel purchases through supplier direct websites and/or if travel suppliers choose not to make their products and services available to us, our business may suffer.

Over the last several years, travel suppliers have generally reduced or eliminated commissions and payments to travel agents and other travel intermediaries; these reductions could adversely affect our business, financial condition and results of operations.

A portion of our agency revenues is derived from compensation paid by travel suppliers and GDS partners for bookings made through our websites. We generally negotiate these commissions and fees with our travel suppliers and GDS partners. Over the last several years, travel suppliers have generally reduced or eliminated commissions and payments to travel agents and other travel intermediaries. No assurances can be given that GDS partners or travel suppliers will not reduce current industry compensation or our compensation, either of which could reduce our agency revenues and margins thereby adversely affecting our business, financial condition and results of operations.

Our failure to attract and retain customers in a cost-effective manner could adversely affect our business, financial condition and results of operations.

Our long-term success depends on our continued ability to increase the overall number of customer transactions in a cost-effective manner. In order to increase the number of customer transactions, we must attract new visitors to our websites and other distribution channels, convert these visitors into paying customers and capture repeat business from existing customers. Similarly, our corporate travel business is dependent on enlisting new corporate customers and attracting their travel booking activity online to our corporate travel websites. One manner in which we cost-effectively attract customers to our websites is through affiliate programs. If the number of customers being driven to our websites through affiliates participating in these programs were to decrease significantly, costs relating to our sales and marketing commitments could increase. In addition, we believe that rates for desirable advertising and marketing placements are likely to increase in the foreseeable future. No assurances can be provided that we will be successful in acquiring new customers in a cost-effective manner.

Declines or disruptions in the travel industry, such as those caused by terrorism, war, inclement weather, health concerns, bankruptcies and/or general economic downturns, could adversely affect our business, financial condition and results of operations.

Our business, financial condition and results of operations are affected by the health of the worldwide travel industry. Accordingly, downturns or weaknesses in the travel industry could adversely affect our business. Travel expenditures are sensitive to business and personal discretionary spending levels and tend to decline during general economic downturns. Events or weakness in the travel industry that could negatively affect our

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

business include price escalation in the airline industry or other travel-related industries, airline or other travel related strikes and fuel price escalation. Additionally, our business is sensitive to safety concerns, and thus may decline after incidents of terrorism, during periods of political instability or geopolitical conflict in which travelers become concerned about safety issues, as a result of inclement weather such as the hurricanes that recently affected the markets around the Gulf of Mexico or when travel might involve health-related risks, such as avian flu, one or more of which could result in a protracted decrease in demand for our travel services. This decrease in demand, depending on its scope and duration, together with any future issues affecting travel safety, could significantly and adversely affect our business, financial condition and results of operations over the short and long-term. In addition, the disruption of the existing travel plans of a significant number of customers upon the occurrence of certain events, such as terrorist activity or war, could result in the incurrence of significant additional costs if we provide relief to affected customers by not charging cancellation fees or by refunding the price of otherwise non-refundable unused tickets.

We compete with a variety of companies with respect to each product or service we offer.

We face competition from established and emerging online and offline travel companies and suppliers. Some of our competitors, including travel suppliers such as airlines and hotels, may offer services and products on more favorable terms and with unique access to loyalty programs, such as points and miles. In addition, the introduction of new technologies and the expansion of existing technologies, such as metasearch products, may increase competitive pressures. Increased competition may result in reduced operating margins, as well as loss of customers, transactions and brand recognition. We cannot assure you that we will be able to compete successfully against current, emerging and future competitors or provide differentiated products and services to our customer base. Competitive pressures faced by us could have a material adverse effect on our business, operating results and financial condition.

We may not be able to engage in desirable strategic transactions and equity issuances due to our tax-sharing arrangements.

Our ability to engage in significant stock transactions could be limited or restricted to preserve the tax free nature of our Spin-Off from IAC. Current federal income tax law creates a presumption that the Spin-Off would be taxable to IAC, but not to its stockholders, if either IAC or we enter into a transaction that would result in a 50% or greater change, by vote or value, in IAC’s or our stock ownership during the four-year period that begins two years before the date of the Spin-Off, unless it is established that the transaction is not pursuant to a plan or series of transactions related to the Spin-Off. Treasury regulations currently in effect generally provide that whether an acquisition transaction and a Spin-Off are part of a plan is determined based on all of the facts and circumstances, including, but not limited to, specific factors described in the regulations. In addition, the regulations provide several “safe harbors” for acquisition transactions that are not considered to be part of a plan. These restrictions may prevent us from entering into transactions which might be advantageous to our stockholders, such as issuing equity securities to satisfy financing needs or acquiring businesses or assets with equity securities.

Under the tax sharing agreement with IAC, there are restrictions on our ability to take actions that could cause the Spin-Off to fail to qualify as a tax free transaction, including redeeming equity securities and selling or otherwise disposing of a substantial portion of our assets, in each case, for a period of 25 months following the spin-off. We would be required to indemnify IAC against the taxes described in the preceding sentence if such tax is incurred by a breach of our covenants under the tax sharing agreement.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

Our international opportunities and investments involve risks relating to travel patterns and practices and Internet-based commerce.

We operate in a number of jurisdictions abroad, such as through our investment in eLong, whose business operations are in China, and intend to continue to expand our international presence. In order to achieve widespread acceptance in the countries and markets we enter, we must continue to successfully tailor our services to the unique customs and cultures of such countries and markets. Learning the customs and cultures of various countries, particularly with respect to travel patterns and practices, can be difficult and costly and our failure to do so could slow our international growth.

In addition, we expect to continue to face additional risks in international operations. These risks include political instability, acts of terrorism, unexpected changes in regulatory requirements, increased risk and limits on our ability to enforce intellectual property rights, exchange rate fluctuations, slower adoption of the Internet as an advertising and commerce medium in those markets as compared to the United States and difficulties in managing operations due to distance, language and cultural differences, including issues associated with establishing management systems and infrastructures and staffing and managing foreign operations.

Our investment in eLong creates risks and uncertainties relating to the laws of the People’s Republic of China.

The success of our investment in eLong, a Cayman Island company, whose principal business is the operation of an internet-based travel business in China, is subject to risks and uncertainties regarding the interpretation of China laws and regulations. The China legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have limited value as precedent. The lack of precedent causes the interpretation and enforcement of China law to involve uncertainties that could limit the available legal protections. In addition, we cannot predict the effect of future developments in the China legal system, particularly with respect to the travel industry or the Internet, including the introduction of new laws, changes to existing laws or the interpretation or enforcement of current or future laws and regulations, or the preemption of local regulations by national laws. In addition, the laws and regulations of China restrict foreign investment in the air-ticketing, travel agency, Internet content provision and advertising businesses. Such laws and regulations require that we establish effective control through a series of agreements with eLong’s affiliated Chinese entities and could restrict our ability to engage in desirable strategic transactions. Finally, China does not have treaties with the United States or most other western countries providing for the reciprocal recognition and enforcement of judgment of courts. As a result, court judgments obtained in jurisdictions with which China does not have treaties on reciprocal recognition of judgment and in relation to any matter not subject to a binding arbitration provision may be difficult or impossible to be enforced in China.

Our processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.

In the processing of our customer transactions, we receive and store a large volume of personally identifiable data. This data is increasingly subject to legislation and regulations in numerous jurisdictions around the world. This government action is typically intended to protect the privacy of personal data that is collected, processed and transmitted in or from the governing jurisdiction. We could be adversely affected if legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business, financial condition and results of operations. As privacy and data protection have become more sensitive issues, we

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

may also become exposed to potential liabilities as a result of differing views on the privacy of travel data. These and other privacy developments that are difficult to anticipate could adversely affect our business, financial condition and results of operations.

The Internet as a medium for commerce is subject to uncertainty.

Consumer use of the Internet as a medium for commerce is subject to uncertainty. While the number of Internet users has been rising, the Internet infrastructure may not expand fast enough to meet the increased levels of demand. In particular, the expected benefits from our international operations may be reduced if Internet usage does not continue to grow in our overseas markets or grows at significantly lower rates compared to expected trends. In addition, activities that diminish the experience for Internet users, such as spyware, spoof emails, viruses and spam directed at Internet users, as well as viruses and “denial of service” attacks directed at Internet companies and service providers, may discourage people from using the Internet, including for commerce. If consumer use diminishes or grows at a slower rate, then our business and results of operations could be adversely affected.

We may be found to have infringed on intellectual property rights of others that could expose us to substantial damages and restrict our operations.

We could face claims that we have infringed the patents, copyrights or other intellectual property rights of others. In addition, we may be required to indemnify travel suppliers for claims made against them. Any claims against us could require us to spend significant time and money in litigation, delay the release of new products or services, pay damages, develop new intellectual property or acquire licenses to intellectual property that is the subject of the infringement claims. These licenses, if required, may not be available on acceptable terms or at all. As a result, intellectual property claims against us could have a material adverse effect on our business, operating results and financial condition.

Our websites rely on intellectual property, and we cannot be sure that this intellectual property is protected from copy or use by others, including potential competitors.

We regard much of our content and technology as proprietary and try to protect our proprietary technology by relying on trademarks, copyrights, trade secret laws and confidentiality agreements. In connection with our license agreements with third parties, we seek to control access to and distribution of our technology, documentation and other proprietary information. Even with all of these precautions, it is possible for someone else to copy or otherwise obtain and use our proprietary technology without our authorization or to develop similar technology independently. Effective trademark, copyright and trade secret protection may not be available in every country in which our services are made available through the Internet, and policing unauthorized use of our proprietary information is difficult and expensive. We cannot be sure that the steps we have taken will prevent misappropriation of our proprietary information. This misappropriation could have a material adverse effect on our business. In the future, we may need to go to court to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. This litigation might result in substantial costs and diversion of resources and management attention.

We currently license from third parties some of the technologies incorporated into our websites. As we continue to introduce new services that incorporate new technologies, we may be required to license additional technology. We cannot be sure that such technology licenses will be available on commercially reasonable terms, if at all.

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Part I. Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONTINUED

New Accounting Pronouncements

For a discussion of new accounting pronouncements, see Note 5, New Accounting Pronouncements, in the notes to consolidated financial statements.

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Part I. Financial Information

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

On July 11, 2005, we entered into a $1.0 billion revolving credit facility. Because we did not have any borrowings outstanding under the revolving credit facility as of September 30, 2005, an increase or decrease in interest rates would not likely have a significant impact on our financial position. As of October 31, 2005, our outstanding balance on the revolving credit facility was $94.0 million, which consisted of short-term borrowings.

Foreign Exchange Risk

We conduct business in certain foreign markets, primarily in Canada, China, United Kingdom and European Union. Our primary exposure to foreign currency risk relates to transacting in foreign currency and recording the activity in US dollars. However, we partially mitigate this exposure by maintaining natural hedges between our foreign currency denominated current assets and current liabilities.

As of September 30, 2005, we had a net current liability denominated in foreign currencies, primarily Euro and British Pound Sterling, of approximately $110.0 million. Because we transferred all cash in excess of $100 million, excluding the cash held by eLong, to IAC in connection with the Spin-Off, our cash denominated in foreign currencies as of September 30, 2005, was less than what we typically maintain as a natural hedge against foreign currency denominated liabilities. Changes in exchange rates between U.S. dollar and these other currencies will result in a transaction gain or loss, which we will recognize in our consolidated statements of income.

As we increase our operations in international markets, our exposure to potentially volatile movements in currency exchange rates increases. The economic impact of currency exchange rate movements on us is linked to variability in real growth, inflation, interest rates, governmental actions and other factors. These changes, if material, could cause us to adjust our financing and operating strategies.

As currency exchange rates change, translation of the income statements of our international businesses into U.S. dollars affects year-over-year comparability of operating results. Historically, we have not hedged translation risks because we generally reinvested cash flows from international operations locally. However, we periodically review our strategy for hedging transaction risks. Our goal in managing our foreign exchange risk is to minimize our potential exposure to the changes that exchange rates might have on our earnings, cash flows and financial position.

During the fourth quarter of 2003, we entered into a cross-currency swap with a notional amount of Euro 39 million, which matures on October 30, 2013, and is used to hedge against the change in value of an asset denominated in a currency other than the subsidiary’s functional currency. This swap enables us to pay Euro at a rate of the three-month EURIBOR plus 0.50% on Euro 39 million. In exchange, we receive 4.9% interest on $46.4 million. In addition, on April 14, 2004, we entered into a cross-currency swap with a notional amount of Euro 38.2 million, which matures on April 7, 2014, and is used to hedge against the change in value of an asset in a similar manner to the swap described above. This swap enables us to pay Euro at a rate of the six-month EURIBOR plus 0.90% on Euro 38.2 million. In exchange, we receive 5.47% interest on $45.9 million. Upon maturity, these agreements call for the exchange of notional amounts.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

CONTINUED

Equity Price Risk

We do not make significant investments in equity securities as part of our current marketable securities investment strategy.

Ask Jeeves Convertible Subordinated Notes

Under the terms of the Spin-Off, we are obligated to issue shares of Expedia common stock to the holders of the Ask Jeeves convertible subordinated notes (“Ask Jeeves Notes”) assumed by IAC in its acquisition of Ask Jeeves, Inc. in July 2005, upon the conversion thereof. We estimate that we may be required to issue up to 4.3 million shares of Expedia common stock (or pay cash in equal value, in lieu of issuing such shares, at our option) upon conversion of the Ask Jeeves Notes.

Because the number of our shares to be issued is not indexed solely to our common stock, this obligation represents a derivative instrument that we record at fair value on our consolidated balance sheets with any changes in fair value recorded in our consolidated statements of income. The estimated fair value of this liability fluctuates based on changes in the price of our common stock.

Warrants

In connection with prior transactions, IAC assumed a number of stock warrants that were adjusted to become exercisable into IAC common stock. As of September 30, 2005, there are approximately 200,000 of these stock warrants outstanding with expiration dates through May 2010. IAC remains the obligated party with respect to these stock warrants. In addition, IAC is potentially obligated to issue an additional 509,000 stock warrants to a vendor upon the vendor meeting certain performance targets. Each stock warrant represents the right to receive upon exercise by the holders the number of shares of IAC common stock and Expedia common stock that the stock warrant holder would have received had the holder exercised the stock warrant immediately prior to the Spin-Off.

Under the Separation Agreement between IAC and Expedia, we have assumed the obligation to deliver our common stock to these stock warrant holders upon exercise and will receive a portion of the proceeds from exercise. This obligation represents a derivative instrument that we record at fair value on our consolidated balance sheets with any changes in value recorded in our consolidated statements of income. The estimated fair value of this liability fluctuates based on changes in the price of our common stock

Impact on Derivative Liabilities

The fair value of the above derivative instruments are primarily influenced by the market price of our common stock, each $1.00 fluctuation in our common stock will result in approximately $4.5 million change in the aggregate fair value. An increase in our common stock price will result in an increase in our liability with a commensurate change to our consolidated statements of income for the period. A decrease in our common stock price would have the opposite effect.

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Item 4. Controls and Procedures

We monitor and evaluate on an ongoing basis our disclosure controls and internal control over financial reporting in order to improve the overall effectiveness. In the course of this evaluation, we modify and refine our internal processes as conditions warrant.

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our Chairman, Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined by Rule 13a-15(e) and 15d-15(e) under the Exchange Act).

Based upon that evaluation, our Chairman, Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective in providing reasonable assurance that information we are required to disclose in our filings with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and Forms, and include controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(d) of the Exchange Act, we, under the supervision and with the participation of management, including the Chairman, Chief Executive Officer and Chief Financial Officer, also evaluated whether any changes occurred to our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, such control. In the past six months, we have hired a new financial management team including our chief financial officer and chief accounting officer. Since the Spin-Off on August 8, 2005, we are responsible for certain processes that previously were handled by IAC, including equity transactions, income taxes, derivatives, treasury functions, and periodic reporting in accordance with SEC rules and regulations. Additionally, we are in the process of evaluating how to best integrate the systems, policies and procedures of our subsidiaries. Because of all these factors, our internal controls have materially changed and we expect them to continue to do so as we go forward for the near future. We believe that the changes have resulted in enhanced internal control over financial reporting.

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Part II Other Information

Item 1. Legal Proceedings

In the ordinary course of business, Expedia and its subsidiaries are parties to litigation involving property, personal injury, contract and other claims. The amounts that may be recovered in such matters may be subject to insurance coverage.

Rules of the Securities and Exchange Commission require the description of material pending legal proceedings, other than ordinary, routine litigation incident to the registrant’s business, and advise that proceedings ordinarily need not be described if they primarily involve damages claims for amounts (exclusive of interest and costs) not exceeding 10% of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of management, none of the pending litigation matters which the Company and its subsidiaries are defending, including those described below, involves or is likely to involve amounts of that magnitude. The litigation matters described below involve issues or claims that may be of particular interest to the our stockholders, regardless of whether any of these matters may be material to our financial position or operations based upon the standard set forth in the SEC’s rules. We believe that the claims in all of these litigations lack merit and we intend to continue to defend vigorously against them.

Securities Class Action Litigation against IAC.

This litigation, In re IAC/InterActiveCorp Securities Litigation, is pending in the United States District Court for the Southern District of New York and arises out of IAC’s August 4, 2004 announcement of its earnings for the second quarter of 2004. The consolidated amended complaint, filed on May 20, 2005, generally alleges that the value of IAC’s stock was artificially inflated by pre-announcement statements about its financial results and forecasts that were false and misleading due to the defendants’ alleged failure to disclose various problems faced by IAC’s travel businesses. The plaintiffs seek to represent a class of shareholders who purchased IAC common stock between March 31, 2003 and August 3, 2004. The defendants are IAC and fourteen current or former officers or directors of IAC or its former travel business. Expedia is not a party to this litigation, however, under the terms of its Separation Agreement with IAC, Expedia has generally agreed to bear a portion of the costs and liabilities, if any, associated with any securities law litigation relating to conduct prior to the Spin-Off of the businesses or entities that comprise Expedia following the Spin-Off. The complaint purports to assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, as well as Sections 11 and 15 of the Securities Act of 1933, and seeks damages in an unspecified amount.

The two related shareholder derivative actions (Garber and Butler) have been consolidated with the securities class action for pre-trial purposes. The consolidated shareholder derivative complaint, filed on July 5, 2005 against IAC (as a nominal defendant) and sixteen current or former officers or directors of IAC or its former travel business, is based upon factual allegations similar to those in the securities class action and purports to assert claims for breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, unjust enrichment, violation of Section 14(a) of the Exchange Act, and contribution and indemnification. The complaint seeks an order voiding the election of the IAC’s current Board of Directors, as well as damages in an unspecified amount, various forms of equitable relief, restitution, and disgorgement of remuneration received by the individual defendants from IAC.

On September 15, 2005, IAC and the other defendants filed motions to dismiss both the securities class action and the shareholder derivative suits. The plaintiffs’ responses to the motions are scheduled to be filed by November 15, 2005.

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Part II Other Information

Item 1. Legal Proceedings

CONTINUED

Litigation Relating to the IAC/Hotels.com Merger Agreement

A putative class action on behalf of Hotels.com stockholders was filed in the Delaware Chancery Court against Hotels.com, IAC, and members of the board of directors of Hotels.com on April 10, 2003, the day of the announcement of the IAC/Hotels.com merger agreement. See Michael Garvey, on Behalf of Himself and All Others Similarly Situated v. Jonathan F. Miller et al., No. 20248-NC (New Castle County). Also on April 10, 2003, the plaintiff in a purported shareholder derivative action on behalf of Hotels.com against certain officers and directors of Hotels.com, which was pending in Texas state court prior to the announcement of the merger transaction and had originally asserted derivative claims relating to Hotels.com’s pre-merger earnings guidance (which claims are described more fully in a separate section below), filed an amended complaint to include class allegations regarding the merger transaction. See Alex Solodovnikov, Derivatively on Behalf of Hotels.com v. Robert Diener et al., No. 03-02663 (District Court, 160th Judicial District, Dallas County). In addition, on April 17, 2003, the plaintiffs in a consolidated action pending in the Delaware Chancery Court, which had consolidated a number of putative class actions filed against Hotels.com, IAC and members of the board of directors of Hotels.com as a result of IAC’s announcement in June 2002 of its intention to enter into a Hotels.com acquisition transaction, filed a consolidated and amended class-action complaint. See In re Hotels.com Shareholders Litigation, No. 16662-NC (New Castle County). Pursuant to an agreement among the parties, the defendants’ time to respond to this complaint and to the complaint in the Garvey case has been adjourned indefinitely. The complaints in these three actions allege, in essence, that the defendants breached their fiduciary duties to Hotels.com’s public shareholders by entering into and/or approving the merger agreement, which allegedly did not reflect the true value of Hotels.com. The complaints sought to enjoin consummation of the transaction or, in the alternative, to rescind the transaction, as well as damages in unspecified amounts. On June 23, 2003, the IAC/Hotels.com merger transaction closed.

Litigation Relating to Hotels.com’s Guidance for the Fourth Quarter of 2002

Securities Class Action. On January 10, 2003, a putative class action, Daniel Taubenfeld et al., on Behalf of Themselves and All Others Similarly Situated v. Hotels.com et al., No. 3:03-CV-0069-N, was filed in the United States District Court for the Northern District of Texas, arising out of Hotels.com’s downward revision of its guidance for the fourth quarter of 2002. Three other substantially similar securities class actions were filed in the same court shortly thereafter and were later consolidated with the Taubenfeld action. The lead plaintiffs in this action filed a consolidated class-action complaint on August 18, 2003. The complaint alleges that the defendants, Hotels.com and three of its former executives, violated the federal securities laws during the period from October 23, 2002 to January 6, 2003 (the “Class Period”) by allegedly knowingly making materially false and misleading public statements with respect to the anticipated performance of Hotels.com during the fourth quarter of 2002 and concealed from the investing public material events and developments that were likely to render that anticipated performance unattainable. The individual defendants are further alleged to have profited from the rise in Hotels.com’s share price caused by their public statements through sales of Hotels.com stock during the Class Period. The lawsuit further alleges that as a result of Hotels.com’s announcement, on January 6, 2003, of a downward revision of its guidance for the fourth quarter of 2002, its share price declined by 25%. The lawsuit seeks certification of a class of all non-defendant purchasers of Hotels.com stock during the Class Period and seeks damages in an unspecified amount. On September 27, 2004, the district court dismissed all of the plaintiffs’ claims with prejudice, with the exception of two claims involving statements by analysts. On August 10, 2005 the United States Court of Appeals for the Fifth Circuit entered an order dismissing the plaintiffs’ appeal of the district court’s ruling with prejudice.

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Part II Other Information

Item 1. Legal Proceedings

CONTINUED

Shareholder Derivative Suit. The action In re Hotels.com Derivative Litigation, No. 3:03-CV-501-K, pending in United States District Court for the Northern District of Texas arises out of the same events as the Taubenfeld action and consolidated two shareholder derivative actions, Anita Pomilo Wilson, Derivatively on Behalf of Nominal Defendant Hotels.com v. Elan J. Blutinger et al., No. 3:03-CV-0501-K, and Alex Solodovnikov, Derivatively on Behalf of Hotels.com v. Robert Diener et al., No. 3:03-CV-0812-K originally filed in Texas state court on January 14, 2003 and March 14, 2003, respectively. On April 26, 2004, the lead plaintiff filed a consolidated amended complaint against Hotels.com (as a nominal defendant only) and sixteen current or former directors of Hotels.com. The amended complaint alleges that the individual defendants who, during the period from October 25, 2002 to December 3, 2002, sold Hotels.com stock, breached their fiduciary duty to Hotels.com by misappropriating, and trading and profiting on the basis of, proprietary, material non-public information concerning the financial condition and growth prospects of Hotels.com. The complaint also alleges that all of the individual defendants aided and abetted the selling defendants’ breaches of fiduciary duty by concealing from the market the information on the basis of which the selling defendants allegedly traded and profited. The complaint alleges breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment. The lawsuits seek damages, restitution and disgorgement of profits in an unspecified amount and imposition of a constructive trust in favor of Hotels.com on the profits obtained by the selling defendants on their sales of Hotels.com stock during the period referred to above. The complaint also alleges that certain of the individual defendants caused Hotels.com to enter into the IAC/Hotels.com merger transaction in order, among other self-interested reasons, to procure the dismissal of the previously filed derivative actions. In this respect, the amended complaint seeks a judicial declaration, on behalf of all pre-merger public stockholders of Hotels.com stock, that the IAC/Hotels.com merger agreement, which resulted in the IAC/Hotels.com merger transaction that closed on June 23, 2003, is unlawful and unenforceable. On March 7, 2005, the district court issued orders staying the case until further notice and directing that the case be administratively closed pending a decision in the appeal of the Taubenfeld action.

Litigation Relating to Hotel Occupancy Taxes

Hotels.com. On June 20, 2003, a purported class action was filed in Texas state court against certain Hotels.com-affiliated entities. See Nora J. Olvera, Individually and on Behalf of All Others Similarly Situated v. Hotels.com, Inc., No. DC-03-259 (District Court, 229th Judicial District, Duval County). The complaint and subsequent amended complaints filed August 12, 2003 and May 6, 2004, allege that Hotels.com collects “excess” hotel occupancy taxes from consumers (i.e., allegedly charges consumers more for occupancy taxes than it pays to the hotels for the hotels’ use in satisfying their obligations to the taxing authorities). The complaint sought certification of a nationwide class of all persons who have purchased hotel accommodations from Hotels.com since June 20, 1999, as well as restitution of, disgorgement of, and the imposition of a constructive trust upon all “excess” occupancy taxes allegedly collected by Hotels.com. On September 25, 2003, the plaintiff filed with the American Arbitration Association in Dallas, Texas, a demand for arbitration containing substantially the same factual allegations as the Olvera lawsuit. On January 24, 2004, Hotels.com filed a motion to stay the class-action litigation pending the outcome of the arbitration proceeding. On May 6, 2004, Hotels.com filed a motion to dismiss the arbitration claim for lack of subject-matter jurisdiction, on the grounds that under Texas law the tax-based nature of the claim requires that it be adjudicated in a state administrative proceeding. On September 2, 2004, the arbitrator issued a final award granting the motion and dismissing the arbitration claim.

On May 6, 2003, a purported class action was filed in Texas state court against Hotels.com, L.P. (“Hotels.com”), Mary Canales, Individually and on Behalf of All Others Similarly Situated v. Hotels.com, L.P., No. DC-03-162 (District Court, 229th Judicial District, Duval County). The complaint, as amended, alleges that

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Item 1. Legal Proceedings

CONTINUED

Hotels.com charges customers “taxes” that exceed the amount required by or paid to the applicable taxing authorities and that Hotels.com charges customers “fees” that do not correspond to any specific services provided. The complaint sought restitution of, disgorgement of, and the imposition of a constructive trust upon all “excess” occupancy taxes allegedly collected by Hotels.com. The complaint also alleges breach of contract and seeks damages in an unspecified amount and seeks class certification of a nationwide class of all persons who purchased hotel accommodations from Hotels.com since June 20, 1999. On April 29, 2005, the court issued an order granting the plaintiff’s motion for class certification. On May 18, 2005, Hotels.com filed an interlocutory appeal with the Texas Court of Appeals for the Fourth District from the district court order and oral argument was held on August 10, 2005. A ruling has not been rendered.

Expedia. On February 18, 2005, three actions filed against Expedia, Inc. (“Expedia”) – C. Michael Nielsen et al. v. Expedia, Inc. et al., No. 05-2-02060-1 (Superior Court, King County), Bruce Deaton et al., v. Expedia, Inc. et al., No. 05-2-02062-8 (Superior Court, King County), each of which was filed January 10, 2005 and Jose Alba, on Behalf of Himself and All Others Similarly Situated v. IAC/InterActiveCorp et al., No. 05-2-04533-7 (Superior Court, King County) filed February 3, 2005 – were consolidated and now are pending under the caption In re Expedia Hotel Taxes and Fees Litigation, No. 05-2-02060-1, pending in King County Superior Court. The consolidated complaint alleges that Expedia is improperly charging and/or failing to pay hotel occupancy taxes and engaging in other deceptive practices in charging customers for taxes and fees. The complaints seek certification of a nationwide class of all persons who were assessed a charge for “taxes/fees” when booking rooms through Expedia. The complaint alleges violation of the Washington Consumer Protection Act and common-law conversion and seeks imposition of a constructive trust on monies received from the plaintiff class, as well as damages in an unspecified amount, disgorgement, restitution, interest and penalties. Expedia filed a motion to dismiss on September 20, 2005.

Hotwire. On April 19, 2005, three actions filed against Hotwire, Inc. – Bruce Deaton, on Behalf of Himself and All Others Similarly Situated v. Hotwire, Inc. et al., No. 05-437631 filed January 10, 2005, Jana Sneddon, on Behalf of Herself and All Others Similarly Situated v. Hotwire, Inc. et al., No. 05-437701 filed January 13, 2005 and Ashley Salisbury, on Behalf of Herself and All Others Similarly Situated and the General Public v. Hotwire, Inc. et al., No. 05-438781 filed February 17, 2005 against Hotwire and IAC – were consolidated and now are pending under the caption Bruce Deaton v. Hotwire, Inc. et al., Case No. CGC-05-437631, pending in the Superior Court of the State of California, County of San Francisco. The gravamen of this suit is that Hotwire is improperly charging and/or failing to pay hotel occupancy taxes and engaging in other deceptive practices in charging customers for taxes and fees. The complaints seek certification of a nationwide class of all persons who were assessed a charge for “taxes/fees” when booking rooms through Hotwire. The complaints allege violation of Section 17200 of the California Business and Professions Code, violation of the California Consumer Legal Remedies Act, and common-law conversion. The complaints seek imposition of a constructive trust on monies received from the plaintiff class, as well as damages in an unspecified amount, disgorgement, restitution, interest and penalties.

Consumer Case against Various Internet Travel Companies. On February 17, 2005, a purported class action was filed in California state court against a number of Internet travel companies, including Expedia, Hotels.com, Priceline.com and Travelocity.com. See Ronald Bush et al. v. CheapTickets, Inc. et al., No. BC329021 (Superior Court, Los Angeles County). The complaint alleges that the defendants are improperly charging and/or failing to pay hotel occupancy taxes and engaging in other deceptive practices in charging customers for taxes and fees. The complaint seeks certification of a statewide class of all California residents who were assessed a charge for “taxes/fees” when booking rooms through the defendants and alleges violation of Section 17200 of the California Business and Professions Code and common-law conversion. The

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CONTINUED

complaint seeks the imposition of a constructive trust on monies received from the plaintiff class, as well as damages in an unspecified amount, disgorgement, restitution and injunctive relief.

City of Los Angeles Litigation. On December 30, 2004, the city of Los Angeles filed a purported class action in California state court against a number of Internet travel companies, including Hotels.com, Expedia and Hotwire. City of Los Angeles, California, on Behalf of Itself and All Others Similarly Situated v. Hotels.com, L.P. et al., No. BC326693 (Superior Court, Los Angeles County). The complaint alleges that the defendants are improperly charging and/or failing to pay hotel occupancy taxes. The complaint seeks certification of a statewide class of all California cities and counties that have enacted uniform transient occupancy-tax ordinances effective on or after December 30, 1990. The complaint alleges violation of those ordinances, violation of section 17200 of the California Business and Professions Code, and common-law conversion. The complaint seeks imposition of a constructive trust on all monies owed by the defendants to the government, as well as disgorgement, restitution, interest and penalties. On September 26, 2005, the court sustained a demurrer on the basis of misjoinder and granted plaintiff leave to amend its complaint. The plaintiff has not yet filed any such amendment.

City of Philadelphia, Pennsylvania Litigation. On July 12, 2005, the city of Philadelphia filed an action in Pennsylvania state court against a number of Internet travel companies, including Hotels.com, Hotwire and Expedia. City of Philadelphia v. Hotels.com, et al., No. 000860 (Court of Common Pleas, Philadelphia County, Pennsylvania). The complaint alleges that the defendants have failed to pay to the city hotel occupancy taxes as required by municipal ordinance. The complaint purports to assert claims for violation of that ordinance, common-law conversion, imposition of a constructive trust, and an accounting. The complaint seeks imposition of a constructive trust, damages in an unspecified amount, restitution and disgorgement.

City of Bellingham, Washington Litigation. On September 20, 2005, the city of Bellingham, Washington filed a purported state wide class action in state court against a number of Internet travel companies, including Hotels.com, Hotwire and Expedia. See City of Bellingham, individually and on behalf of other entities similarly situated v. Hotels.com LP., et al., No. 05-2-02183 (Superior Court of Washington for Whatcom County.) The complaint alleges that the defendants have failed to pay to the city hotel occupancy taxes as required by municipal ordinance. The complaint purports to assert claims for violation of that ordinance, violation of the consumer protection act, conversion and unjust enrichment. The complaint seeks damages and other relief in an unspecified amount.

City of Fairview Heights, Illinois Litigation. On October 5, 2005, the city of Fairview Heights, Illinois filed a purported state wide class action in state court against a number of Internet travel companies, including Hotels.com, Hotwire and Expedia. City of Fairview Heights, individually and on behalf of all others similarly situated v. Orbitz, Inc., et al., No. 05L0576 (Circuit Court for the Twelfth Judicial District, St. Clair County). The complaint alleges that the defendants have failed to pay to the city hotel occupancy taxes as required by municipal ordinance. The complaint purports to assert claims for violation of that ordinance, violation of the consumer protection act, conversion and unjust enrichment. The complaint seeks damages and other relief in an unspecified amount.

City of Findlay, Ohio Litigation. On October 25, 2005, the city of Findlay, Ohio filed a purported state wide class action in state court against a number of Internet travel companies, including Hotels.com, Hotwire and Expedia. City of Findlay v. Hotels.com, L.P., et al., No. 2005-CV-673 (Court of Common Pleas of Hancock County, Ohio). The complaint alleges that the defendants have failed to pay to the city hotel occupancy taxes as required by municipal ordinance. The complaint purports to assert claims for violation of that ordinance, violation of the consumer protection act, conversion imposition of a constructive trust and declaratory relief. The complaint seeks damages and other relief in an unspecified amount.

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Item 1. Legal Proceedings

CONTINUED

City of Chicago Litigation. On November 1, 2005, the City of Chicago, Illinois filed an action in state court against a number of Internet travel companies, including Hotels.com, Hotwire and Expedia. City of Chicago, Illinois v. Hotels.com, L.P., et al., No. 2005 L051003 (Circuit Court of Cook County). The complaint alleges that the defendants have failed to pay to the city the hotel accommodations taxes as required by municipal ordinance. The complaint purports to assert claims for violation of that ordinance, conversion, imposition of a constructive trust and demand for a legal accounting. The complaint seeks damages and other relief in an unspecified amount.

French Competition Council Complaint

Expedia is party to a joint venture with Societe Nationale des Chemins de Fer Francais (SNCF), the state-owned railway group in France, which operates www.voyages-sncf.com, a leading online site for e-tourism in France. On July 6, 2004, Lastiminute.com filed with the French Competition Council a claim against the joint venture, SNCF and Expedia alleging that the joint venture violates applicable competition laws and is an abuse of dominant position by SNCF, a public monopoly, and an attempt to improperly eliminate competition in the online travel sector. Lastminute.com’s request for interim relief was denied by the Council on October 13, 2004.

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Part II Other Information

Item 5. Other Information

Our next annual meeting of stockholders is currently anticipated to be scheduled for May 23, 2006. An eligible stockholder who wishes to have its qualifying stockholder proposal considered for inclusion in Expedia’s proxy materials for such meeting must send a qualifying stockholder proposal to our Corporate Secretary at our executive offices at the address below no later than December 26, 2005. To qualify as an eligible stockholder with regard to making a stockholder proposal, a stockholder must, among other things, have continuously held at least $2,000 in market value or 1%, of our outstanding capital stock (which stock may have included IAC capital stock for that period prior to our spin-off from IAC) for at least one year by the date of submission of the stockholder proposal, and must continue to own that amount of stock through the date of the annual meeting.

Corporate Secretary

3150 139th Avenue SE

Bellevue, WA 98005

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Expedia, Inc.

Part II. Other Information

Item 6. Exhibits

Exhibit Number	Description
2.1	Separation Agreement by and between Expedia, Inc. and IAC/InterActiveCorp, dated as of August 9, 2005
3.1	Amended and Restated Certificate of Incorporation of Expedia, Inc. (1)
3.2	Series A Cumulative Convertible Preferred Stock Certificate of Designation (1)
3.3	Amended and Restated Bylaws of Expedia, Inc. (1)
4.1	Specimen Expedia, Inc. Common Stock Certificate (2)
4.2	Equity Warrant Agreement for Warrants to Purchase up to 14,590,514 Shares of Common Stock expiring February 4, 2009, by and between Expedia, Inc. and The Bank of New York, dated as of August 9, 2005 (3)
4.3	Stockholder Equity Warrant Agreement for Warrants to Purchase up to 11,450,182 Shares of Common Stock, by and between Expedia, Inc. and Mellon Investor Services LLC, dated as of August 9, 2005 (3)
4.4	Optionholder Equity Warrant Agreement for Warrants to Purchase up to 1,558,651 Shares of Common Stock, by and between Expedia, Inc. and Investor Services LLC, dated as of August 9, 2005 (3)
10.1	Employment Agreement by and between Mark Gunning and Expedia, Inc., effective as of July 14, 2005 (1)
10.2	Separation Agreement by and between Chris Bellairs and Expedia, Inc., effective as of August 12, 2005 (1)
10.3	Expedia, Inc. Deferred Compensation Plan for Non-Employee Directors (2)
10.4	Expedia, Inc. 2005 Stock and Annual Incentive Plan (4)
10.5	Summary of Expedia, Inc. Non-Employee Director Compensation Arrangements (2)
10.6	Governance Agreement, by and among Expedia, Inc., Liberty Media and Barry Diller, dated as of August 9, 2005
10.7	Stockholders Agreement, by and between Liberty Media Corporation and Barry Diller, dated as of August 9, 2005
10.8	Form of Restricted Stock Unit Agreement (employees)
10.9	Form of Restricted Stock Unit Agreement (directors)
10.10	Tax Sharing Agreement by and between Expedia, Inc. and IAC/InterActiveCorp, dated as of August 9, 2005
10.11	Employee Matters Agreement by and between Expedia, Inc. and IAC/InterActiveCorp, dated as of August 9, 2005

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Item 6. Exhibits

CONTINUED

10.12	Transition Services Agreement by and between Expedia, Inc. and IAC/InterActiveCorp, dated as of August 9, 2005
31.1	Certification of the Chairman and Senior Executive pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
31.3	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
32.1	Certification of the Chairman and Senior Executive pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
32.2	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
32.3	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act

(1) Incorporated by reference to Expedia, Inc.’s Current Report on Form 8-K dated as of August 15, 2005.

(2) Incorporated by reference to Expedia, Inc.’s Registration Statement on Form S-4 (File No. 333-124303-01), filed on June 13, 2005, as amended.

(3) Incorporated by reference to Expedia, Inc.’s Registration Statement on Form 8-A12G, filed on July 19, 2005, as amended.

(4) Incorporated by reference to Expedia, Inc.’s Registration Statement on Form S-8 (File No. 333-127324) filed on August 9, 2005.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

November 14, 2005	Expedia, Inc.
	By:	/s/ Mark S. Gunning
		Mark S. Gunning
		Chief Financial Officer

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EX-2.1

Exhibit 2.1

EXECUTION COPY

SEPARATION AGREEMENT

by and between

IAC/INTERACTIVECORP

and

EXPEDIA, INC.

Dated as of August 9, 2005

TABLE OF CONTENTS

ARTICLE I	INTERPRETATION	S-2
1.01.	Definitions	S-2
1.02.	Schedules	S-14
1.03.	Exhibits	S-14
ARTICLE II	THE SEPARATION	S-14
2.01.	Separation	S-14
2.02.	Transfer of Separated Assets; Assumption of Assumed Liabilities	S-14
2.03.	Separated Assets	S-14
2.04.	Deferred Separated Assets	S-15
2.05.	Excluded Assets	S-15
2.06.	Liabilities	S-16
2.07.	Third Party Consents and Government Approvals	S-17
2.08.	Preservation of Agreements	S-17
2.09.	Ancillary Agreements	S-17
2.10.	Resignations	S-18
2.11.	Cooperation	S-18
2.12.	Intercompany Accounts Between IAC Group and Expedia Group	S-18
2.13.	Disclaimer of Representations and Warranties	S-18
ARTICLE III	DEFERRED SEPARATION TRANSACTIONS	S-19
3.01.	Deferred Transfer Assets	S-19
3.02.	Unreleased Liabilities	S-20
3.03.	No Additional Consideration	S-21
ARTICLE IV	TREATMENT OF OLD IAC SERIES A PREFERRED STOCK AND OLD IAC WARRANTS IN THE SEPARATION	S-21
4.01.	Old IAC Series A Preferred Stock	S-21
4.02.	Old IAC Severable Warrants	S-21
4.03.	Old IAC Integrated Warrants	S-22
4.04.	Stock Certificates and Related Matters	S-22
ARTICLE V	COVENANTS	S-23
5.01.	General Covenants	S-23
5.02.	Covenants of Expedia	S-23
5.03.	Certain Corporate Contracts	S-24
5.04.	Expedia Common Stock Escrow Account	S-24
5.05.	Cash Balance True Up	S-27
ARTICLE VI	CONDITIONS	S-27
6.01.	Actions Prior to the Completion of the Separation	S-27
ARTICLE VII	MUTUAL RELEASES; INDEMNIFICATION	S-28
7.01.	Release of Pre-Separation Claims	S-28
7.02.	Indemnification by Expedia	S-31

-i-

7.03.	Indemnification by IAC	S-31
7.04.	Procedures for Indemnification of Third Party Claims	S-31
7.05.	Procedures for Indemnification of Direct Claims	S-33
7.06.	Adjustments to Liabilities	S-33
7.07.	Payments	S-34
7.08.	Contribution	S-34
7.09.	Remedies Cumulative	S-34
7.10.	Survival of Indemnities	S-34
7.11.	Shared Litigation Liabilities	S-34
ARTICLE VIII	INSURANCE	S-35
8.01.	Insurance Matters	S-35
ARTICLE IX	EXCHANGE OF INFORMATION; CONFIDENTIALITY	S-36
9.01.	Agreement for Exchange of Information; Archives	S-36
9.02.	Ownership of Information	S-37
9.03.	Compensation for Providing Information	S-37
9.04.	Record Retention	S-38
9.05.	Other Agreements Providing for Exchange of Information	S-38
9.06.	Production of Witnesses; Records; Cooperation	S-38
9.07.	Confidentiality	S-39
9.08.	Protective Arrangements	S-40
9.09.	Disclosure of Third Party Information	S-40
ARTICLE X	DISPUTE RESOLUTION	S-40
10.01.	Agreement to Resolve Disputes	S-40
10.02.	Dispute Resolution; Mediation	S-41
10.03.	Arbitration	S-42
10.04.	Costs	S-42
10.05.	Continuity of Service and Performance	S-42
ARTICLE XI	FURTHER ASSURANCES	S-42
11.01.	Further Assurances	S-42
ARTICLE XII	CERTAIN OTHER MATTERS	S-43
12.01.	Auditors and Audits; Annual and Quarterly Financial Statements and Accounting	S-43
ARTICLE XIII	SOLE DISCRETION OF IAC; TERMINATION	S-45
13.01.	Sole Discretion of IAC	S-45
13.02.	Termination	S-45
ARTICLE XIV	MISCELLANEOUS	S-46
14.01.	Limitation of Liability	S-46
14.02.	Counterparts	S-46
14.03.	Entire Agreement	S-46
14.04.	Construction	S-46

-ii-

14.05.	Signatures	S-47
14.06.	Assignability	S-47
14.07.	Third Party Beneficiaries	S-47
14.08.	Payment Terms	S-48
14.09.	Governing Law	S-48
14.10.	Notices	S-48
14.11.	Severability	S-49
14.12.	Publicity	S-49
14.13.	Survival of Covenants	S-49
14.14.	Waivers of Default; Conflicts	S-49
14.15.	Amendments	S-49
14.16.	Controlling Documents	S-50

Exhibit A	Employee Matters Agreement
Exhibit B	Tax Sharing Agreement
Exhibit C	Transition Services Agreement

-iii-

SEPARATION AGREEMENT

This SEPARATION AGREEMENT, dated as of August 9, 2005, is entered into by and between IAC/InterActiveCorp, a Delaware corporation (“IAC”), and Expedia, Inc., a Delaware corporation and wholly owned Subsidiary of IAC (“Expedia”).

RECITALS:

WHEREAS, the Board of Directors of IAC (“IAC Board”) has determined it is appropriate and desirable to separate IAC and Expedia into two publicly-traded companies by separating IAC’s principal travel and travel-related businesses, and related assets and liabilities, and contributing them to Expedia and effecting a reclassification of the capital stock of IAC pursuant to the Charter Amendments (as defined below);

WHEREAS, the IAC Board has adopted a resolution approving an amendment to IAC’s restated certificate of incorporation (the “Reverse Stock Split Charter Amendment”) and recommended that the holders of common stock, par value $0.01 per share, of IAC (“Old IAC Common Stock”), holders of Class B common stock, par value $0.01 per share, of IAC (“Old IAC Class B Common Stock”), and holders of Series A Cumulative Convertible preferred stock, par value $0.01 per share, of IAC (“Old IAC Series A Preferred Stock,” and together with Old IAC Common Stock and Old IAC Class B Common Stock, the “Old IAC Capital Stock”) approve and adopt the Reverse Stock Split Charter Amendment in conformity with Section 242 of the General Corporation Law of the State of Delaware (the “DGCL”), pursuant to which IAC will effectuate a one-for-two reverse stock split with respect to Old IAC Common Stock and Old IAC Class B Common Stock (the “Reverse Stock Split”);

WHEREAS, the IAC Board has adopted a resolution approving amendments to IAC’s restated certificate of incorporation (the “Spin-Off Charter Amendments,” and together with the Reverse Stock Split Charter Amendment, the “Charter Amendments”) and recommended that the holders of Old IAC Capital Stock approve and adopt the Spin-Off Charter Amendments in conformity with Section 242 of the DGCL, whereby, among other matters, the Old IAC Common Stock and the Old IAC Class B Common Stock will be reclassified (the “Reclassification”) as follows:

Each then issued and outstanding share of Old IAC Common Stock will be reclassified into (a) one share of common stock, par value $0.001 per share, of IAC (“New IAC Common Stock”) and (b) 1/100th of a share of Series 1 Mandatory Exchangeable preferred stock, par value $0.01 per share, of IAC (the “New IAC Series 1 Preferred Stock”), which 1/100th of a share of New IAC Series 1 Preferred Stock shall, pursuant to its terms, automatically and immediately exchange into one share of common stock, par value $0.001 per share, of Expedia (“Expedia Common Stock”);

Each then issued and outstanding share of Old IAC Class B Common Stock will be reclassified into (a) one share of Class B common stock, par value $0.001 per share, of IAC and (b) 1/100th of a share of Series 2 Mandatory Exchangeable preferred stock, par value $0.01 per share, of IAC (the “New IAC Series 2 Preferred Stock”), which 1/100th of a share of New IAC Series 2 Preferred Stock shall, pursuant to its terms, automatically and immediately exchange

S-1

into one share of Class B common stock, par value $0.001 per share, of Expedia (“Expedia Class B Common Stock”);

WHEREAS, at IAC’s Annual Meeting of Stockholders held on July 19, 2005, the holders of Old IAC Capital Stock approved the Charter Amendments by the requisite votes required under the DGCL (and otherwise);

WHEREAS, in connection with the Reclassification, holders of Old IAC Series A Preferred Stock will receive one of the following, at the holder’s option, in respect of each share of Old IAC Series A Preferred Stock: (a) $50.00 in cash plus accrued and unpaid dividends, (b) the securities that the holder would have received had the share of Old IAC Series A Preferred Stock been converted based upon the applicable conversion ratio into shares of Old IAC Common Stock immediately prior to the Reverse Stock Split and the Reclassification or (c) one share of Series A Convertible preferred stock, par value $0.001 per share, of Expedia (“Expedia Series A Preferred Stock”) and one share of Series B Convertible preferred stock, par value $0.01 per share, of IAC (“New IAC Series B Preferred Stock”);

WHEREAS, pursuant to their terms, the warrants to purchase shares of Old IAC Common Stock set forth on Schedule 1.01(a) (the “Old IAC Severable Warrants”) will be converted into (a) warrants to purchase shares of New IAC Common Stock (“New IAC Unitary Warrants”) and (b) warrants to purchase shares of Expedia Common Stock (“Expedia Warrants”);

WHEREAS, pursuant to their terms, the warrants to purchase shares of Old IAC Common Stock set forth on Schedule 1.01(b) (the “Old IAC Integrated Warrants,” and together with the Old IAC Severable Warrants, the “Old IAC Warrants”) will be converted into warrants to purchase shares of New IAC Common Stock and shares of Expedia Common Stock (“New IAC Integrated Warrants”);

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; and

WHEREAS, IAC and Expedia intend that the Separation (as defined below) and the Reclassification will qualify for United States federal income tax purposes as transactions that are generally tax free under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”) and hereby adopt the Agreement as a “plan of reorganization.”

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

S-2

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:

“2005 Internal Control Audit and Management Assessments” has the meaning set forth in Section 12.01(b).

“AAA” has the meaning set forth in Section 10.03.

“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.

“Adjusted Exercise Price” has the meaning set forth in Section 4.03(a)(ii).

“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 4.04.

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

“Ancillary Agreements” has the meaning set forth in Section 2.09.

“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.

S-3

“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:

(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.

“Assumed Liabilities” has the meaning set forth in Section 2.06.

“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.

“Charter Amendments” shall have the meaning set forth in the recitals hereto.

“Claim Notice” has the meaning set forth in Section 7.04(b).

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

“Confidential Information” has the meaning set forth in Section 9.07(a).

“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.

“Corporate Contract” has the meaning set forth in Section 5.03.

“Corporate Contracts” has the meaning set forth in Section 5.03.

“Deferred Beneficiary” has the meaning set forth in Section 3.01(b).

“Deferred Excluded Asset” has the meaning set forth in Section 3.01(a).

“Deferred Separated Asset” has the meaning set forth in Section 3.01(a).

“Deferred Transactions” has the meaning set forth in Section 11.01(a)(ii).

“Deferred Transfer Asset” has the meaning set forth in Section 3.01(a).

“Deposit Rights” means rights relating to deposits and prepaid expenses, claims for refunds and rights of set-off in respect thereof.

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

“Disclosing Party” has the meaning set forth in Section 9.08.

“Dispute” has the meaning set forth in Section 10.02(a).

“Dispute Notice” has the meaning set forth in Section 10.02(a).

“Effective Date” means August 9, 2005.

“Effective Date Cash Balance” has the meaning set forth in Section 5.05.

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“Effective Time” means 9:15 a.m., New York City time, on the Effective Date.

“EHS Liabilities” means any Liability arising from or under any Environmental Law or Occupational Health and Safety Law.

“Employee Matters Agreement” means the Employee Matters Agreement attached hereto as Exhibit A.

“Encumbrance” means, with respect to any asset, mortgages, liens, hypothecations, pledges, charges, security interests or encumbrances of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under Applicable Law.

“Environmental Law” means any Applicable Law from any Governmental Authority (a) relating to the protection of the environment (including air, water, soil and natural resources) or (b) the use, storage, handling, release or disposal of Hazardous Substances.

“Escrow Agent” has the meaning set forth in Section 5.04(a).

“Escrow Agreement” has the meaning set forth in Section 5.04(a).

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

“Excluded Assets” has the meaning set forth in Section 2.05(a).

“Expedia” has the meaning set forth in the preamble hereto.

“Expedia Annual Report” has the meaning set forth in Section 12.01(d).

“Expedia’s Auditors” has the meaning set forth in Section 12.01(a).

“Expedia Claims” has the meaning set forth in Section 7.01(a).

“Expedia Class B Common Stock” has the meaning set forth in the recitals hereto.

“Expedia Common Stock” has the meaning set forth in the recitals hereto.

“Expedia Common Stock Escrow Account” has the meaning set forth in Section 5.04(a).

“Expedia Conversion Obligations” has the meaning set forth in Section 5.04(c).

“Expedia Escrow Shares” has the meaning set forth in Section 5.04(a).

“Expedia Group” means the Separated Entities, the domestic and international businesses, Subsidiaries and investments owned, operated and/or managed thereby and the assets and liabilities contained therein.

“Expedia Group Balance Sheet” means the combined balance sheet of “Expedia Group” as of June 30, 2005, substantially in the form attached as Schedule 1.01(c).

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“Expedia Indemnified Parties” has the meaning set forth in Section 7.03.

“Expedia Opening Balance Sheet” has the meaning set forth in Section 2.03(e).

“Expedia Parties” has the meaning set forth in Section 7.01(b).

“Expedia Releasors” has the meaning set forth in Section 7.01(a).

“Expedia Series A Preferred Stock” has the meaning set forth in the recitals hereto.

“Expedia Warrant Factor” means 0.88933, which equals (x) $22.50, the closing per-share price of Expedia Common Stock in the “when issued market” on August 8, 2005, as listed on the NASDAQ as of 4:00 P.M. Eastern Daylight time, divided by (y) $25.30, the closing per-share price of Old IAC Common Stock trading “regular way” on August 8, 2005, as listed on the NASDAQ as of 4:00 P.M. Eastern Daylight time.

“Expedia Warrants” has the meaning set forth in the recitals hereto.

“GAAP” has the meaning set forth in Section 2.03(d).

“Governmental Authority” means any local, state, national or supranational court, arbitration panel, governmental or regulatory authority, agency, stock exchange, commission or body in any jurisdiction in or outside of the United States.

“Governmental Authorization” means any Consent, license, certificate, franchise, registration or permit issued, granted, given or otherwise made available by, or under the authority of, any Governmental Authority or pursuant to any Applicable Law.

“Ground Lease” means any long-term lease (including any emphyteotic lease) of Land in which most of the rights and benefits comprising ownership of the Land and the Improvements thereon or to be constructed thereon, if any, and the Appurtenances thereto for the benefit thereof, are transferred to the tenant for the term thereof.

“Ground Lease Property” means, in respect of any Person, any Land, Improvement or Appurtenance of such Person that is subject to a Ground Lease.

“Group” means IAC Group or Expedia Group, as the context requires.

“Hazardous Substance” means any substance to the extent presently listed, defined, designated or classified as hazardous, toxic or radioactive under any applicable Environmental Law, including petroleum and any derivative or by-products thereof.

“IAC” has the meaning set forth in the preamble hereto.

“IAC’s Auditors” has the meaning set forth in Section 12.01(a).

“IAC Board” has the meaning set forth in the recitals hereto.

“IAC Businesses” means the Separated Businesses and the Remaining IAC Businesses.

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“IAC Claims” has the meaning set forth in Section 7.01(b).

“IAC Group” means IAC, its Subsidiaries (other than any member of Expedia Group) and their respective domestic and international businesses, assets and liabilities.

“IAC Indemnified Parties” has the meaning set forth in Section 7.02.

“IAC Parties” has the meaning set forth in Section 7.01(a).

“IAC Releasors” has the meaning set forth in Section 7.01(b).

“IAC Warrant Factor” means 1.11067, which equals (x) $28.10, the closing per-share price of New IAC Common Stock in the “when issued market” on August 8, 2005, as listed on the NASDAQ as of 4:00 P.M. Eastern Daylight time, divided by (y) $25.30, the closing per-share price of Old IAC Common Stock trading “regular way” on August 8, 2005, as listed on the NASDAQ as of 4:00 P.M. Eastern Daylight time.

“Improvements” means, in respect of any Land, all buildings, structures, plants, fixtures and improvements located on such Land, including those under construction.

“Indemnified Party” has the meaning set forth in Section 7.04(a).

“Indemnifying Party” has the meaning set forth in Section 7.04(b).

“Indenture” has the meaning set forth in Section 5.04(b).

“Information” means any information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, test procedures, research, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, manufacturing techniques, manufacturing variables, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, products, product plans, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer information, customer services, supplier information, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data.

“Insurance Benefits” means, in respect of any Asset or Liability, all insurance benefits, including rights to Insurance Proceeds, arising from or relating to such Asset or Liability.

“Insurance Proceeds” means those monies (in each case net of any costs or expenses incurred in the collection thereof and net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments)):

(a) received by an insured from an insurance carrier; or

(b) paid by an insurance carrier on behalf of the insured.

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“Intangible Property Rights” means, in respect of any Person, all intangible rights and property of such Person, including IT Assets, going concern value and goodwill.

“Intercompany Accounts” means all balances related to indebtedness, including any intercompany indebtedness, loan, guaranty, receivable, payable or other account between a member of IAC Group, on the one hand, and a member of Expedia Group, on the other hand.

“Inventories” means, in respect of any Person, all inventories of such Person wherever located, including all finished goods, (whether or not held at any location or facility of such Person or in transit to or from such Person), work in process, raw materials, spare parts and all other materials and supplies to be used or consumed by the Person in production of finished goods.

“IT Assets” means computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, all other information technology equipments and all associated documentation.

“Jeeves” has the meaning set forth in Section 5.04(b).

“Jeeves Notes” has the meaning set forth in Section 5.04(a).

“Jeeves Supplemental Indenture” has the meaning set forth in Section 5.04(b).

“Land” means, in respect of any Person, all parcels and tracts of land in which the Person has an ownership interest.

“Liability” means, with respect to any Person, any and all losses, claims, charges, debts, demands, actions, causes of action, suits, damages, obligations, payments, costs and expenses, sums of money, accounts, reckonings, bonds, specialties, indemnities and similar obligations, exoneration covenants, contracts, controversies, agreements, promises, doings, omissions, variances, guarantees, make whole agreements and similar obligations, and other liabilities and requirements, including all contractual obligations, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, joint or several, whenever arising, and including those arising under any Applicable Law, Action, threatened or contemplated Action (including the costs and expenses of demands, assessments, judgments, settlements and compromises relating thereto and attorneys’ fees and any and all costs and expenses, whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened or contemplated Actions) or Order of any Governmental Authority or any award of any arbitrator or mediator of any kind, and those arising under any contract, commitment or undertaking, in each case, whether or not recorded or reflected or otherwise disclosed or required to be recorded or reflected or otherwise disclosed, on the books and records or financial statements of any Person, including any Specified Financial Liability, EHS Liability or Liability for Taxes.

“NASDAQ” means the National Association of Securities Dealers Inc. Automated Quotation System.

“New IAC Common Stock” has the meaning set forth in the recitals hereto.

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“New IAC Integrated Warrants” has the meaning set forth in the recitals hereto.

“New IAC Series 1 Preferred Stock” has the meaning set forth in the recitals hereto.

“New IAC Series 2 Preferred Stock” has the meaning set forth in the recitals hereto.

“New IAC Series B Preferred Stock” has the meaning set forth in the recitals hereto.

“New IAC Unitary Warrants” has the meaning set forth in the recitals hereto.

“Notice Period” has the meaning set forth in Section 7.04(b).

“Occupational Health and Safety Law” means any Applicable Law designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (such as those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions.

“Old IAC Capital Stock” has the meaning set forth in the recitals hereto.

“Old IAC Class B Common Stock” has the meaning set forth in the recitals hereto.

“Old IAC Common Stock” has the meaning set forth in the recitals hereto.

“Old IAC Series A Preferred Stock” has the meaning set forth in the recitals hereto.

“Old IAC Integrated Warrants” has the meaning set forth in the recitals hereto.

“Old IAC Severable Warrants” has the meaning set forth in the recitals hereto.

“Old IAC Warrants” has the meaning set forth in the recitals hereto.

“Order” means any order, injunction, judgment, decree, ruling, assessment or arbitration award of any Governmental Authority or arbitrator.

“Ordinary Course of Business” means any action taken by a Person that is in the ordinary course of the normal, day-to-day operations of such Person and is consistent with the past practices of such Person.

“Parties” together and each “Party” individually, means the parties to this Agreement and, in the singular, means either of them.

“Person” means any individual, Business Concern or Governmental Authority.

“Potential Contributor” has the meaning set forth in Section 7.06(a).

“Prime Rate” means the rate which JPMorgan Chase & Co. (or any successor thereto or other major money center commercial bank agreed to by the Parties hereto) announces from time to time as its prime lending rate, as in effect from time to time.

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“Providing Party” has the meaning set forth in Section 9.08.

“Real Property” means any Land and Improvements and all Appurtenances thereto and any Ground Lease Property.

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

“Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

“Registered Securities” means the shares of New IAC Common Stock, the shares of New Expedia Common Stock, the shares of New IAC Series B Preferred Stock, the shares of Expedia Series A Preferred Stock, certain of the New IAC Unitary Warrants and certain of the Expedia Warrants.

“Registration Statement” means the registration statement on Form S-4 first filed by IAC and Expedia with the SEC on April 25, 2005 (together with all amendments thereto) in connection with the registration under the Securities Act of the Registered Securities.

“Regulation S-K” means Regulation S-K of the General Rules and Regulations promulgated by the SEC pursuant to the Securities Act.

“Remaining IAC Businesses” means all IAC Businesses other than the Separated Businesses.

“Remaining IAC Entity” means any Business Concern that is a member of IAC Group on and after the Effective Time.

“Representatives” means, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants or attorneys.

“Requesting Party” has the meaning set forth in Section 9.01(a).

“Response” has the meaning set forth in Section 10.02(a).

“Retained Liabilities” has the meaning set forth in Section 2.06.

“Retaining Person” has the meaning set forth in Section 3.01(b).

“Reverse Stock Split” has the meaning set forth in the recitals hereto.

“Reverse Stock Split Charter Amendment” has the meaning set forth in the recitals hereto.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the United States Securities Act of 1933, as amended.

“Senior Party Representatives” has the meaning set forth in Section 10.02(a).

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“Separated Assets” has the meaning set forth in Section 2.03.

“Separated Businesses” means those domestic and international travel and travel-related businesses, Subsidiaries and investments owned, operated and/or managed by the Separated Entities.

“Separated Entities” means those Business Concerns which are identified on Schedule 2.03(b) and which on and after the Effective Time shall form part of Expedia Group.

“Separation” means the transfer of the Separated Entities and Separated Businesses, directly or indirectly, from IAC to Expedia.

“Services” has the meaning ascribed thereto in the Transition Services Agreement.

“Shared Litigation Liability” means any Liability from, relating to, arising out of, or derivative of any matter, claim or litigation, whether actual or potential, associated with any securities law litigation relating to any public disclosure (or absence of public disclosure) with respect to the Separated Businesses or the Separated Entities made by IAC prior to the Effective Time, including the fees and expenses of outside counsel retained by IAC in connection with the defense and/or settlement of any such matter. For purposes of this definition, the phrase “securities law litigation” shall include claims alleging any untrue statement of material fact or omission to state a material fact in alleged violation of the Securities Act, the Exchange Act or any similar state law and any claims premised on, related to or derivative of such alleged statements, omissions or violations, whether payable to any current, past or future holders of IAC or Expedia securities, to any of the co-defendants in such action or to any Governmental Authority. For the avoidance of doubt, Shared Litigation Liability shall include those matters set forth on Schedule 2.06(c). Notwithstanding anything in Section 7.06 to the contrary, the amount of any Shared Litigation Liability shall be net of any Insurance Proceeds actually recovered by or on behalf of any member of IAC Group or any member of Expedia Group.

“Specified Financial Liabilities” or “SFLS” mean, in respect of any Person, all liabilities, obligations, contingencies, instruments and other Liabilities of a financial nature with Third Parties of, or relating to, such Person, including any of the following:

(a) foreign exchange contracts;

(b) letters of credit;

(c) guarantees of Third Party loans;

(d) surety bonds (excluding surety for workers’ compensation self-insurance);

(e) interest support agreements on Third Party loans;

(f) performance bonds or guarantees issued by Third Parties;

(g) swaps or other derivatives contracts;

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(h) recourse arrangements on the sale of receivables or notes; and

(i) indemnities for damages for any breach of, or any inaccuracy in, any representation or warranty or any breach of, or failure to perform or comply with, any covenant, undertaking or obligation.

“Spin-Off Charter Amendments” has the meaning set forth in the recitals hereto.

“Subsidiary” of any Person means any corporation, partnership, limited liability entity, joint venture or other organization, whether incorporated or unincorporated, of which a majority of the total voting power of capital stock or other interests entitled (without the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof, is at the time owned or controlled, directly or indirectly, by such Person.

“Tangible Personal Property” means, in respect of any Person, all machinery, equipment, tools, furniture, office equipment, supplies, materials, vehicles and other items of tangible personal or movable property (other than Inventories and IT Assets) of every kind and wherever located that are owned or leased by the Person, together with any express or implied warranty by the manufacturers, sellers or lessors of any item or component part thereof and all maintenance Records and other documents relating thereto.

“Tax” has the meaning set forth in the Tax Sharing Agreement.

“Tax Sharing Agreement” means the Tax Sharing Agreement attached hereto as Exhibit B.

“Third Party” means a Person that is not a Party to this Agreement, other than a member of IAC Group or a member of Expedia Group, and that is not an Affiliate thereof.

“Third Party Claim” has the meaning set forth in Section 7.04(b).

“Third Party Consent” has the meaning set forth in Section 2.07.

“Transfer Impediment” has the meaning set forth in Section 3.01(a).

“Transition Service Schedule” has the meaning set forth in the Transition Services Agreement.

“Transition Services Agreement” means the Transition Services Agreement attached hereto as Exhibit C.

“Trustee” has the meaning set forth in Section 5.04(b).

“Unreleased Liabilities” has the meaning set forth in Section 3.02.

“Unreleased Person” has the meaning set forth in Section 3.02.

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1.02. Schedules. The following schedules are attached to this Agreement and form a part hereof:

Schedule 1.01(a)	Old IAC Severable Warrants
Schedule 1.01(b)	Old IAC Integrated Warrants
Schedule 1.01(c)	Expedia Group Balance Sheet
Schedule 2.03(a)	Separated Assets
Schedule 2.03(b)	Separated Entities
Schedule 2.06(a)	Assumed Liabilities
Schedule 2.06(b)	Retained Liabilities
Schedule 2.06(c)	Shared Litigation Liabilities

1.03. Exhibits. The following exhibits are attached to this Agreement and form a part hereof:

Exhibit A	Employee Matters Agreement
Exhibit B	Tax Sharing Agreement
Exhibit C	Transition Services Agreement

ARTICLE II

THE SEPARATION

2.01. Separation. To the extent not already complete, IAC and Expedia agree to implement the Separation and to cause the Separated Businesses to be transferred to Expedia and its Subsidiaries and the Remaining IAC Businesses to be held by IAC and its Subsidiaries (other than Expedia or its Subsidiaries) as of the Effective Time, on the terms and subject to the conditions set forth in this Agreement. The Parties acknowledge that the Separation is intended to result in Expedia, directly or indirectly, operating the Separated Businesses, owning the Separated Assets and assuming the Assumed Liabilities as set forth in this Article II.

2.02. Transfer of Separated Assets; Assumption of Assumed Liabilities. On the terms and subject to the conditions set forth in this Agreement, and in furtherance of the Separation, with effect as of the Effective Time:

(a) To the extent not already complete, IAC agrees to cause the Separated Assets to be contributed, assigned, transferred, conveyed and delivered, directly or indirectly, to Expedia and Expedia agrees to accept from IAC all of the Separated Assets and all of IAC’s rights, title and interest in and to all Separated Assets, except with respect to the Deferred Separated Assets and Unreleased Liabilities, if any.

(b) Expedia agrees to accept, assume and faithfully perform, discharge and fulfill all of the Assumed Liabilities in accordance with their respective terms.

2.03. Separated Assets. For the purposes of this Agreement, “Separated Assets” shall mean, without duplication, those Assets whether now existing, used or contemplated to be used or held for use exclusively or primarily in the ownership, operation or conduct of the Separated Businesses or relating exclusively or primarily to the Separated Businesses or to a Separated Entity including the following:

(a) all Assets expressly identified in this Agreement or in any Ancillary Agreement or in any Schedule hereto or thereto, including those listed on Schedule 2.03(a), as Assets to be transferred to, or retained by, Expedia or any other member of Expedia Group;

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(b) the outstanding capital stock, units or other equity interests of the Separated Entities (including the Assets owned by such Separated Entities), as listed on Schedule 2.03(b);

(c) all Assets properly reflected on the Expedia Group Balance Sheet (Schedule 1.01(c)), excluding Assets disposed of by IAC or any other Subsidiary or entity controlled by IAC subsequent to the date of the Expedia Group Balance Sheet;

(d) all Assets that have been written off, expensed or fully depreciated by IAC or any Subsidiary or entity controlled by IAC that, had they not been written off, expensed or fully depreciated, would have been reflected on the Expedia Group Balance Sheet in accordance with accounting principles generally accepted in the United States (“GAAP”);

(e) all Assets acquired by IAC or any Subsidiary or entity controlled by IAC after the date of the Expedia Group Balance Sheet and that would be reflected on the balance sheet of Expedia as of the Effective Date (the “Expedia Opening Balance Sheet”), if such balance sheet were prepared in accordance with GAAP; and

(f) all Assets transferred to Expedia or any member of the Expedia Group pursuant to Section 11.01(a); provided, however, that any such transfer shall take effect under Section 11.01(a) and not under this Section 2.03.

Notwithstanding the foregoing, there shall be excluded from the definition of Assets under this Section 2.03 Business Records to the extent they are included in or primarily relate to any Excluded Asset or Retained Liability or Remaining IAC Business or their transfer is prohibited by Applicable Law or pursuant to agreements between IAC or any other member of IAC Group and Third Parties or otherwise would subject IAC or any other member of IAC Group to liability for such transfer. Access to such excluded Business Records shall be governed by Article IX.

2.04. Deferred Separated Assets. Notwithstanding anything to the contrary contained in Section 2.03 or elsewhere in this Agreement, Separated Assets shall not include the Deferred Separated Assets. The transfer to Expedia (or any other member of the Expedia Group) of any such Deferred Separated Asset shall only be completed at the time, in the manner and subject to the conditions set forth in Article III.

2.05. Excluded Assets. (a) Notwithstanding anything to the contrary contained in Section 2.03 or elsewhere in this Agreement, the following Assets of IAC or of any other relevant member of IAC Group shall not be transferred to Expedia (or any other member of Expedia Group), shall not form part of the Separated Assets and shall remain the exclusive property of IAC or the relevant member of IAC Group on and after the Effective Time (the “Excluded Assets”):

(i) any Asset referred to in Section 2.05(b); and

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(ii) any Asset transferred to IAC or to any other relevant member of IAC Group pursuant to Section 11.01(a); provided, however, that any such transfers shall take effect under Section 11.01(a) and not under this Section 2.05.

(b) Notwithstanding anything to the contrary in this Agreement, Excluded Assets shall not include the Deferred Excluded Assets. The transfer to IAC (or to the relevant member of IAC Group) of any such Asset shall be completed at the time, in the manner and subject to the conditions set forth in Article III.

2.06. Liabilities. For the purposes of this Agreement, Liabilities shall be identified as “Assumed Liabilities” or as “Retained Liabilities” under the following principles:

(a) any Liability which is expressly identified on Schedule 2.06(a) is an Assumed Liability;

(b) any Liability which is expressly identified on Schedule 2.06(b) is a Retained Liability;

(c) 50% of any Shared Litigation Liability shall be an Assumed Liability and 50% of any Shared Litigation Liability shall be a Retained Liability;

(d) any Liability of a Separated Entity, whether arising or accruing prior to, on or after the Effective Time and whether the facts on which it is based occurred on, prior to or after the Effective Time and whether or not reflected on the Expedia Group Balance Sheet or on the Expedia Opening Balance Sheet, is an Assumed Liability, unless it is expressly identified in this Agreement (including on Schedule 2.06(b) or any other Schedule) or in any Ancillary Agreement as a Liability to be assumed or retained by IAC or any other member of IAC Group, in which case it is a Retained Liability;

(e) any Liability relating to, arising out of, or resulting from the conduct of, a Separated Business (as conducted at any time prior to, on or after the Effective Time) or relating to a Separated Asset or a Deferred Separated Asset (including any Asset of a Separated Entity) and whether arising or accruing prior to, on or after the Effective Time and whether the facts on which it is based occurred on, prior to or after the Effective Time and whether or not reflected on the Expedia Balance Sheet or the Expedia Opening Balance Sheet, is an Assumed Liability, unless it is expressly identified in this Agreement (including on Schedule 2.06(b) or any other Schedule) or in any Ancillary Agreement as a Liability to be assumed or retained by IAC or any other member of IAC Group, in which case it is a Retained Liability;

(f) any Liability which is reflected or otherwise disclosed as a liability or obligation of Expedia Group on the Expedia Group Balance Sheet is an Assumed Liability;

(g) any Liability which would be reflected or otherwise disclosed on the Expedia Group Balance Sheet, if such balance sheet were prepared under GAAP, is an Assumed Liability;

(h) any Liability pursuant to contracts entered into by IAC, any member of the IAC Group and/or any IAC Affiliate (i) in connection with the acquisition by IAC and/or any member

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of the IAC Group of any Separated Entity and/or Separated Business or (ii) otherwise relating primarily to a Separated Entity and/or the conduct of a Separated Business;

(i) any Liability of a Remaining IAC Entity, whether arising or accruing prior to, on or after the Effective Time and whether the facts on which it is based occurred on, prior to or after the Effective Time, is a Retained Liability, unless it is determined to be an Assumed Liability pursuant to clause (a), (c), (d), (e), (f), (g) or (h) above, in which case it is an Assumed Liability;

(j) any Liability relating to, arising out of, or resulting from the conduct of, a Remaining IAC Business (as conducted at any time prior to, on or after the Effective Time) or relating to an Excluded Asset (including any Asset of a Remaining IAC Entity) and whether arising or accruing prior to, on or after the Effective Time and whether the facts on which it is based occurred on, prior to or after the Effective Time, is a Retained Liability, unless it is determined to be an Assumed Liability pursuant to clause (a), (c), (d), (e), (f), (g) or (h) above, in which case it is an Assumed Liability; and

(k) any Liability of Expedia or any other member of Expedia Group under this Agreement or any Ancillary Agreement is an Assumed Liability and any Liability of IAC or any other member of IAC Group under this Agreement or any Ancillary Agreement is a Retained Liability.

2.07. Third Party Consents and Government Approvals. To the extent that the Separation or any transaction contemplated thereby requires a Consent from any Third Party (a “Third Party Consent”) or any Governmental Authorization, the Parties will use commercially reasonable efforts to obtain all such Third Party Consents and Governmental Authorizations prior to the Effective Time. If the Parties fail to obtain any such Third Party Consent or Governmental Authorization prior to the Effective Time, the matter shall be dealt with in the manner set forth in Article III.

2.08. Preservation of Agreements. Expedia and IAC agree that all written agreements, arrangements, commitments and understandings between any member or members of Expedia Group, on the one hand, and any member or members of IAC Group, on the other hand, shall remain in effect in accordance with their terms from and after the Effective Time, unless otherwise terminated by the Parties.

2.09. Ancillary Agreements. On or prior to the Effective Date, the Parties shall execute and deliver or, as applicable, cause the appropriate members of their respective Groups to execute and deliver, each of the following agreements (collectively, the “Ancillary Agreements”):

(a) the Employee Matters Agreement;

(b) the Tax Sharing Agreement;

(c) the Transition Services Agreement; and

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(d) such other agreements and instruments as may relate to or be identified in any of the foregoing agreements.

2.10. Resignations. (a) IAC agrees to cause each Person who is a director or an officer of any Separated Entity and who will not be or become an employee of Expedia Group (or any member thereof) on the Effective Date to resign from such position with effect as of the Effective Date.

(b) Expedia agrees to cause each Person who is a director or an officer of a Remaining IAC Entity and who will become an employee of Expedia Group (or any member thereof) on the Effective Date to resign from such position with effect as of the Effective Date; provided, however, that this Section 2.10(b) shall not apply to Messrs. Barry Diller and Victor A. Kaufman.

(c) Each of IAC and Expedia agrees to obtain all such letters of resignation or other evidence of such resignations as may be necessary or desirable in performing their respective obligations under this Section 2.10.

2.11. Cooperation. The Parties shall cooperate in all aspects of the Separation and shall sign all such documents and perform all such other acts as may be necessary or desirable to give full effect to the Separation; and each of IAC and Expedia shall cause each other member of its respective Group to do likewise.

2.12. Intercompany Accounts Between IAC Group and Expedia Group. From and after the Effective Time, Expedia agrees to cause any Intercompany Account payable by any member of Expedia Group to any member of the IAC Group to be satisfied in full when due. From and after the Effective Time, IAC agrees to cause any Intercompany Account payable by any member of IAC Group to any member of the Expedia Group to be satisfied in full when due.

2.13. Disclaimer of Representations and Warranties. (a) Each of the Parties (on behalf of itself and each other member of its respective Group) understands and agrees that, except as expressly set forth herein or in any Ancillary Agreement, no Party to this Agreement, any Ancillary Agreement or any other agreement or document contemplated by this Agreement, any Ancillary Agreement or otherwise, makes any representation or warranty, express or implied, regarding any of the Separated Assets, Separated Entities, Separated Businesses, Excluded Assets, Assumed Liabilities or Retained Liabilities including any warranty of merchantability or fitness for a particular purpose, or any representation or warranty regarding any Consents or Governmental Authorizations required in connection therewith or their transfer, regarding the value or freedom from Encumbrances of, or any other matter concerning, any Separated Asset or Excluded Asset, or regarding the absence of any defense or right of setoff or freedom from counterclaim with respect to any claim or other Separated Asset or Excluded Asset, including any Account Receivable of either Party, or as to the legal sufficiency of any assignment, document or instrument delivered hereunder to convey title to any Separated Asset or Excluded Asset upon the execution, delivery and filing hereof or thereof.

(b) Except as may expressly be set forth herein or in any Ancillary Agreement, all Separated Assets and Excluded Assets are being transferred on an “as is, where is” basis, at the

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risk of the respective transferees without any warranty whatsoever on the part of the transferor, formal or implicit, legal, statutory or conventional (and, in the case of any Real Property, by means of a quitclaim or similar form deed or conveyance).

ARTICLE III

DEFERRED SEPARATION TRANSACTIONS

3.01. Deferred Transfer Assets. (a) If the transfer to, or retention by, Expedia Group of any Asset that would otherwise constitute a Separated Asset (a “Deferred Separated Asset”) or the transfer to, or retention by, IAC Group (or the relevant member thereof) (that would otherwise constitute an Excluded Asset or the relevant member thereof) of any Asset (a “Deferred Excluded Asset,” and together with a Deferred Separated Asset, a “Deferred Transfer Asset”) cannot be accomplished without giving rise to a violation of Applicable Law, or without obtaining a Third Party Consent or a Governmental Authorization (collectively, a “Transfer Impediment”) and any such Third Party Consent or Governmental Authorization has not been obtained prior to the Effective Time, then such Asset shall be dealt with in the manner described in this Section 3.01.

(b) Pending removal of such Transfer Impediment, the Person holding the Deferred Transfer Asset (the “Retaining Person”) shall hold such Deferred Transfer Asset for the use and benefit, insofar as reasonably possible, of the Party to whom the transfer of such Asset could not be made at the Effective Time (the “Deferred Beneficiary”). The Retaining Person shall use commercially reasonable efforts to preserve such Asset and its right, title and interest therein and take all such other action as may reasonably be requested by the Deferred Beneficiary (in each case, at such Deferred Beneficiary’s expense) in order to place such Deferred Beneficiary, insofar as reasonably possible, in the same position as it would be in if such Asset had been transferred to it or retained by it with effect as of the Effective Time and so that, subject to the standard of care set forth above, all the benefits and burdens relating to such Deferred Transfer Asset, including possession, use, risk of loss, potential for gain, enforcement of rights against third parties and dominion, control and command over such Asset, are to inure from and after the Effective Time to such Deferred Beneficiary and the members of the Group to which it belongs. The provisions set forth in this Article III contain all the obligations of the Retaining Person vis-à-vis the Deferred Beneficiary with respect to the Deferred Transfer Asset and the Retaining Person shall not be bound vis-à-vis the Deferred Beneficiary by any other obligations under Applicable Law.

(c) The Parties shall continue on and after the Effective Time to use commercially reasonable efforts to remove all Transfer Impediments; provided, however, that neither Party shall be required to make any unreasonable payment or assume any material obligations therefor. As and when any Transfer Impediment is removed, the relevant Deferred Transfer Asset shall forthwith be transferred to its Deferred Beneficiary at no additional cost and in a manner and on terms consistent with the relevant provisions of this Agreement and the Ancillary Agreements, including Section 2.13(b) hereof, and any such transfer shall take effect as of the date of its actual transfer.

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(d) Notwithstanding the foregoing or any provision of Applicable Law, a Retaining Person shall not be obligated, in connection with the foregoing, to expend any money in respect of a Deferred Transfer Asset unless the necessary funds are advanced by the Deferred Beneficiary of such Deferred Transfer Asset, other than reasonable attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by the Deferred Beneficiary of such Deferred Transfer Asset.

3.02. Unreleased Liabilities. If at any time on or after the Effective Time, any member of the IAC Group shall remain obligated to any Third Party in respect of any Assumed Liability or any member of Expedia Group shall remain obligated to any Third Party in respect of any Retained Liability, the following provisions shall apply. The Liabilities referred to in this Section 3.02 are hereinafter referred to as the “Unreleased Liabilities” and the Person remaining obligated for such Liability in a manner contrary to what is intended under this Agreement is hereinafter referred to as the “Unreleased Person.”

(a) Each Unreleased Person shall remain obligated to Third Parties for such Unreleased Liability as provided in the relevant Contract, Applicable Law or other source of such Unreleased Liability and shall pay and perform such Liability as and when required, in accordance with its terms.

(b) IAC shall indemnify, defend and hold harmless each Expedia Indemnified Party that is an Unreleased Person against any Liabilities arising in respect of each Unreleased Liability of such Person; and Expedia shall indemnify, defend and hold harmless each IAC Indemnified Party that is an Unreleased Person against any Liabilities arising in respect of each Unreleased Liability of such Person. IAC and Expedia shall take, and shall cause the members of their respective Groups to take, such other actions as may be reasonably requested by the other in accordance with the provisions of this Agreement in order to place IAC and Expedia, insofar as reasonably possible, in the same position as they would be in if such Unreleased Liability had been fully contributed, assigned, transferred, conveyed, and delivered to, and accepted and assumed or retained, as applicable, by the other Party (or any relevant member of the Group to which it belongs) with effect as of the Effective Time and so that all the benefits and burdens relating to such Unreleased Liability, including possession, use, risk of loss, potential for gain, and dominion, control and command over such Unreleased Liability, are to inure from and after the Effective Time to the member or members of IAC Group or Expedia Group, as the case may be.

(c) The Parties shall continue on and after the Effective Time to use commercially reasonable efforts to cause each Unreleased Person to be released from each of its Unreleased Liabilities.

(d) If, as and when it becomes possible to delegate, novate or extinguish any Unreleased Liability in favor of an Unreleased Person, the Parties shall promptly sign all such documents and perform all such other acts, and shall cause each member of their respective Groups, as applicable, to sign all such documents and perform all such other acts, as may be necessary or desirable to give effect to such delegation, novation, extinction or other release without payment of any further consideration by the Unreleased Person.

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3.03. No Additional Consideration. For the avoidance of doubt, the transfer or assumption of any Assets or Liabilities under this Article III shall be effected without any additional consideration by either Party hereunder.

ARTICLE IV

TREATMENT OF OLD IAC SERIES A PREFERRED STOCK

AND OLD IAC WARRANTS IN THE SEPARATION

4.01. Old IAC Series A Preferred Stock. Following the Effective Time, a former holder of Old IAC Series A Preferred Stock will receive one of the following forms of consideration, at the holder’s election, in respect of each share of Old IAC Series A Preferred Stock held by such Person prior to the Effective Time: (i) $50.00 in cash per share, plus accrued and unpaid dividends to the Effective Date, payable by IAC, (ii) the securities that the holder would have received had the share of Old IAC Preferred Stock been converted based upon the applicable conversion ratio into shares of Old IAC Common Stock immediately prior to the Reverse Stock Split and the Reclassification, or (iii) one share of New IAC Series B Preferred Stock and one share of Expedia Series A Preferred Stock, each having the terms set forth in its respective certificate of designation filed with the Secretary of State of the State of Delaware on August 9, 2005. Holders of Old IAC Series A Preferred Stock that did not make an affirmative election by July 11, 2005 are deemed to have elected to receive $50.00 in cash per share, plus accrued and unpaid dividends to the Effective Date, payable by IAC. Schedule 4.01 sets forth the final elections, including default elections, by holders of Old IAC Preferred Stock, as of the Effective Time.

4.02. Old IAC Severable Warrants.

(a) At the Effective Time, the Old IAC Severable Warrants will be adjusted based upon the following principles:

(i) the number of shares of New IAC Common Stock subject to each New Unitary IAC Warrant will equal one half the number of shares of Old IAC Common Stock underlying the Old IAC Severable Warrant immediately prior to the Reverse Stock Split and the Reclassification;

(ii) the per share exercise price of the New IAC Unitary Warrant (rounded up to the nearest whole cent) will equal the per share exercise price of the Old IAC Severable Warrant prior to the Reverse Stock Split and the Reclassification multiplied by the IAC Warrant Factor.

(iii) the number of shares of Expedia Common Stock subject to the Expedia Warrant will equal one half the number of shares of Old IAC Common Stock underlying the Old IAC Severable Warrant immediately prior to the Reverse Stock Split and the Reclassification; and

(iv) the per share exercise price of the Expedia Warrant (rounded up to the nearest whole cent) will equal the per share exercise price of the Old IAC Severable

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Warrant prior to the Reverse Stock Split and the Reclassification multiplied by the Expedia Warrant Factor.

(b) IAC shall be responsible for all obligations with respect to the New IAC Unitary Warrants. Expedia shall be responsible for all obligations with respect to the Expedia Warrants. The warrant agreements, if any, that currently govern the Old IAC Severable Warrants shall continue to govern the New IAC Unitary Warrants, as adjusted in accordance with the terms hereof and IAC shall be responsible for the obligations arising thereunder. To the extent necessary to memorialize and satisfy its obligations hereunder, Expedia shall enter into warrant agreements with respect to the Expedia Warrants with the holders (or the agent(s) therefor) of such Expedia Warrants and Expedia shall be responsible for the obligations arising under any such agreements. The failure of Expedia to enter into any such agreements shall not relieve Expedia of its obligations with respect to the Expedia Warrants.

4.03. Old IAC Integrated Warrants.

(a) Immediately following the Effective Time:

(i) each Old IAC Integrated Warrant shall become a New IAC Integrated Warrant which will represent the right to receive (x) a number of shares of New IAC Common Stock equal to one half the number of shares of Old IAC Common Stock subject to the Old IAC Integrated Warrant immediately prior to the Reverse Stock Split and the Reclassification; and (y) a number of shares of Expedia Common Stock equal to one half the number of shares of Old IAC Common Stock subject to the Old IAC Integrated Warrant immediately prior to the Reverse Stock Split and the Reclassification; and

(ii) the exercise price of the New IAC Integrated Warranted, expressed as an amount per share of New IAC Common Stock and Expedia Common Stock, taken together (rounded up to the nearest whole cent), will equal two times per share exercise price per of the Old IAC Warrant prior to the Reverse Stock Split and the Reclassification (such exercise price, as adjusted, the “Adjusted Exercise Price”).

(b) From and after the Effective Time, as soon as reasonably practicable following receipt of the Adjusted Exercise Price in connection with the exercise of a New IAC Integrated Warrant, IAC shall remit to Expedia an amount in cash equal to the product of (i) the aggregate amount of the Adjusted Exercise Price, (ii) the Expedia Warrant Factor and (iii) 0.5, such amount to be determined by IAC in good faith in its sole discretion.

4.04. Stock Certificates and Related Matters. Subject to the terms of this Agreement and the satisfaction or waiver of the conditions set forth in Article VI hereof, IAC and Expedia (as applicable) shall deliver to the applicable agent or depositary (such agent or depositary, as the case may be, the “Agent”) cash and securities (either in certificated or electronic book-entry form at the option of IAC) representing all of the securities to be issued in connection with the Reclassification and the transactions contemplated by Sections 4.01 through 4.03 (except to the extent that IAC determines in its sole discretion that currently outstanding certificates representing Old IAC Capital Stock and/or Old IAC Warrants shall, following the Effective

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Time, shall represent the securities into which such Old IAC Capital Stock and/or Old IAC Warrants are convertible in the Reclassification and related transactions), and shall instruct the Agent to distribute, on or as soon as practicable following the Effective Date, such cash and/or securities (as applicable) to holders of record of Old IAC Capital Stock and Old IAC Warrants on the Effective Date. Expedia agrees to provide all share certificates or other similar documentation and any information that the Agent shall require in order to effect the distributions contemplated by this Section 4.04. All securities of IAC and Expedia issued in connection with the Reclassification shall be duly authorized, validly issued, fully paid and nonassessable. IAC and/or Expedia may require that holders of Old IAC Capital Stock and/or Old IAC Warrants return any certificates or instruments representing such securities prior to IAC and/or Expedia issuing new certificates or instruments (if any) representing the new securities or cash consideration into which such Old IAC Capital Stock and/or Old IAC Warrants are convertible in the Reclassification and related transactions.

ARTICLE V

COVENANTS

5.01. General Covenants. Each Party covenants with and in favor of the other Party that it shall, subject, in the case of IAC, to Article XIII:

(a) do and perform all such acts and things, and execute and deliver all such agreements, assurances, notices and other documents and instruments as may reasonably be required of it to facilitate the carrying out of the intent and purpose of this Agreement;

(b) cooperate with and assist the other Party, both before and after the Effective Date, in dealing with transitional matters relating to or arising from the Separation, the Reclassification, this Agreement or the Ancillary Agreements; and

(c) cooperate in preparing and filing all documentation (i) to effect all necessary applications, notices, petitions, filings and other documents; and (ii) to obtain as promptly as reasonably practicable all Consents and Governmental Authorizations necessary or advisable to be obtained from any Third Party and/or any Governmental Authority in order to consummate the transactions contemplated by this Agreement (including all approvals required under applicable antitrust laws).

5.02. Covenants of Expedia. In addition to the covenants of Expedia provided for elsewhere in this Agreement, Expedia covenants and agrees with and in favor of IAC that it shall:

(a) use commercially reasonable efforts and do all things reasonably required of it to cause the Separation and the Reclassification to be completed, including cooperating with IAC to obtain: the approval for the listing of the Expedia Common Stock and certain Expedia Warrants on the Nasdaq or such other securities exchange or inter-dealer quotation system as is reasonably acceptable to IAC;

(b) use its commercially reasonable efforts to take all such action as may be necessary or desirable under applicable state securities and blue sky laws of the United States

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(and any comparable laws under any foreign jurisdictions) in connection with the Reclassification;

(c) (i) use its commercially reasonable efforts to cause any member of the IAC Group to be released, as soon as reasonably practicable, from any guarantees given by any member of the IAC Group for the benefit of any Separated Entity and (to the extent necessary to secure such releases) to cause itself or one or more members of the Expedia Group to be substituted in all respects for any member of the IAC Group in respect of such guarantees, provided, that in the event that, notwithstanding the commercially reasonable efforts of Expedia, Expedia is unable to obtain such guarantee releases, Expedia hereby agrees to indemnify and hold IAC and the other members of the IAC Group harmless from and against all Liabilities incurred by them in connection with, arising out of or resulting from such guarantees; and

(d) perform and, as applicable, cause each member of Expedia Group to perform each of its and their respective obligations under each Ancillary Agreement.

5.03. Certain Corporate Contracts. Each of the Parties hereto agrees to use its commercially reasonable efforts to permit the other Party hereto to obtain the benefits of contracts with nationally-based vendors and suppliers utilized by both IAC Group and Expedia Group prior to the Effective Date until the expiration of the primary term of such contracts (each such contract, individually, a “Corporate Contract” and, collectively, the “Corporate Contracts”). Each Party hereby agrees to cooperate with respect to obtaining favorable prices under such Corporate Contracts by combining or consolidating orders made under such Corporate Contracts during the remainder of the primary term of such Corporate Contracts. IAC shall administer these Corporate Contracts and Expedia shall be responsible for the portions attributable to Expedia Group of any order or delivery of goods and services received under each Corporate Contract (including costs of administration). Any arrangement under any of the Corporate Contracts relating to employee matters shall be governed by the terms of the Employee Matters Agreement.

5.04. Expedia Common Stock Escrow Account.

(a) Immediately following the Effective Time, Expedia shall deposit 5,019,125 shares of Expedia Common Stock (the “Expedia Escrow Shares”) into an escrow account (the “Expedia Common Stock Escrow Account”) to be established by Expedia and IAC with The Bank of New York (the “Escrow Agent”) to be held by the Escrow Agent pursuant to the terms of an escrow agreement in customary form to be agreed upon by IAC, Expedia and the Escrow Agent prior to the Effective Time (the “Escrow Agreement”). The Expedia Common Stock Escrow Account will serve as a source of shares of Expedia Common Stock deliverable by Expedia upon (i) the exercise of New IAC Integrated Warrants, and (ii) the conversion of the Ask Jeeves, Inc. Zero Coupon Convertible Notes Due June 1, 2008 (the “Jeeves Notes”). Under the terms of the Escrow Agreement, any shares of Expedia Common Stock designated for delivery upon conversion of the Jeeves Notes that are not delivered to converting holders of notes shall be returned to Expedia at the maturity of the Jeeves Notes and any shares of Expedia Common Stock designated for delivery upon exercise of the New IAC Integrated Warrants shall be returned to Expedia upon the expiration of the New IAC Integrated Warrants in accordance with their terms. IAC and Expedia acknowledge that IAC’s obligation to issue shares of Old IAC

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Common Stock to holders of Old IAC Integrated Warrants or to holders of the Jeeves Notes relates to the businesses that were conducted by the IAC Group and the Expedia Group prior to the Effective Time. Accordingly, from and after the Effective Time, upon an exercise of New IAC Integrated Warrants or a conversion of the Jeeves Notes, as between IAC and Expedia, Expedia will exclusively bear the obligation to deliver shares of Expedia Common Stock or cash in lieu of shares of Expedia Common Stock (including with respect to the matters contemplated by Section 5.04(b) and (c)). The issuance and delivery by Expedia of the Expedia Escrow Shares to the Expedia Common Stock Escrow Account is intended to further Expedia’s satisfaction of such obligations following the Separation and the Reclassification; provided, however, that if for any reason the Expedia Common Stock Escrow Account does not satisfy such obligations, the transfer to the Expedia Common Stock Escrow Account under this Section 5.04 is not in substitution of the obligations of Expedia under the immediately preceding sentence to deliver shares of Expedia Common Stock. For the avoidance of doubt, any obligations with respect to the delivery of Expedia Common Stock (or cash in lieu of Expedia Common Stock) on account of the New IAC Integrated Warrants or the Jeeves Notes, including any Liabilities resulting from Expedia’s determinations or calculations contemplated by this Section 5.04 shall be an Assumed Liability. If, at any time or from time to time following the Effective Time,

(X) IAC reasonably determines in good faith (which determination, absent manifest error, shall be final and binding) in its sole discretion that the Expedia Escrow Shares are insufficient to satisfy the obligations with respect to the New IAC Integrated Warrants and the Jeeves Notes, IAC shall provide to Expedia written notice indicating the number of additional shares of Expedia Common Stock necessary to satisfy the obligations pursuant to the New IAC Integrated Warrants and the Jeeves Notes and Expedia shall promptly deposit into the Expedia Common Stock Escrow Account the number of shares of Expedia Common Stock indicated in the written notice from IAC; or

(Y) Expedia undertakes any action, or any event shall occur, that either (i) results in an adjustment to the number of shares of Expedia Common Stock (A) into which Jeeves Notes are convertible or (B) with respect to which New IAC Integrated Warrants are exercisable or (ii) causes (A) that portion of the Jeeves Notes that would otherwise have been convertible into Expedia Common Stock to become convertible into another form of consideration or (B) that portion of the New IAC Integrated Warrants that would otherwise have been exercisable for shares of Expedia Common Stock to become exercisable into another form of consideration (in the case of each of clauses (A) or (B), including, without limitation, in conjunction with a merger of Expedia or reclassification of the Expedia Common Stock), then, in each case, Expedia shall promptly deposit into the Expedia Common Stock Escrow Account the number of additional shares of Expedia Common Stock and/or the other consideration into which the Jeeves Notes are convertible under the Indenture (as defined below) and/or with respect to which the New IAC Integrated Warrants are exercisable.

(b) In connection with the Separation and the Reclassification and in respect of the Jeeves Notes, IAC, Ask Jeeves, Inc. (“Jeeves”) and The Bank of New York (as indenture trustee, the “Trustee”)) entered into that certain Second Supplemental Indenture, dated as of August 9, 2005

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(the “Jeeves Supplemental Indenture”) to the Indenture dated as of June 4, 2003 between Jeeves and the Trustee (as amended and supplemented from time to time, including pursuant to the Jeeves Supplemental Indenture, the “Indenture”). Pursuant to the Jeeves Supplemental Indenture, holders of Jeeves Notes shall be entitled to receive shares of New IAC Common Stock and/or Expedia Common Stock and/or cash on the terms, and subject to the conditions, set forth in the Indenture upon the conversion of the Jeeves Notes. The Indenture provides for, among other things, adjustments to the number of shares of New IAC Common Stock and Expedia Common Stock issuable and the type of consideration issuable upon conversion of the Jeeves Notes in the event of certain transactions, including extraordinary distributions on either or both of New IAC Common Stock and/or Expedia Common Stock, a reclassification of either or both of the New IAC Common Stock or Expedia Common Stock and a merger of either IAC or Expedia with another entity. If and to the extent that Expedia undertakes any action, or any event shall occur, pursuant to which holders of Jeeves Notes shall be entitled upon conversion of such Jeeves Notes to receive additional shares of Expedia Common Stock or to receive another form of consideration in lieu of Expedia Common Stock under the terms of the Indenture, prior to such action or event Expedia shall provide written notice to IAC of such action or event, including a (i) description of such action or event, (ii) the expected timing of the record date in respect of such action or event and the expected timing of its completion and (iii) an estimate of the number of additional shares of Expedia Common Stock (or the type and amount of any other form of consideration, as applicable) issuable upon conversion of the Jeeves Notes on account of such action or event, including a certificate signed on behalf of Expedia by a senior executive officer to the effect that such estimate is reasonable and was made in good faith. In the event that such action or event results in the distribution of capital stock or other securities, evidences of indebtedness or other non-cash assets, Expedia shall also include in its notice a good faith estimate of the fair market value of such securities, evidences of indebtedness or other non-cash assets as of the record date of such distribution.

(c) Pursuant to the terms of the Indenture, IAC may, at its option, settle the conversion of Jeeves Notes in whole or in part in cash. IAC hereby extends to Expedia the option, upon Expedia’s timely election pursuant to the terms hereof, of delivering cash in lieu of Expedia Common Stock in respect of the portion of any Jeeves Notes that would have otherwise been settled in Expedia Common Stock upon conversion of such Jeeves Notes (such portion, the “Expedia Conversion Obligations”). Expedia shall be entitled to deliver written election notices pursuant to this Section 5.04(c) on a quarterly basis, beginning on September 30, 2005, and on each December 30, March 31, June 30 and September 30, thereafter. The election indicated by Expedia in such notice shall specify the proportion of the Expedia Conversion Obligations to be settled in cash and the proportion to be settled in Expedia Common Stock and such election shall govern until such time as Expedia makes an alternative election in accordance with this Section 5.04(c). If at any time Expedia elects to settle the Expedia Conversion Obligations in cash in lieu of shares of Expedia Common Stock (whether in whole or in part), then Expedia shall, at IAC’s direction from time to time, promptly deposit into the Expedia Common Stock Escrow Account cash in amounts sufficient to satisfy such settlement obligations. Absent any affirmative election on the part of Expedia pursuant to the terms hereof to settle the Expedia Conversion Obligations in cash in lieu of shares of Expedia Common Stock, or if Expedia shall fail to timely deposit cash in respect of such settlement in accordance with the immediately preceding sentence, IAC is expressly permitted to settle any Expedia Conversion Obligations with shares of Expedia Common Stock from the Expedia Common Stock Escrow Account.

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(d) Notwithstanding the foregoing, in lieu of issuing fractional shares of Expedia Common Stock upon the exercise of a New IAC Integrated Warrant or conversion of a Jeeves Note, Expedia shall promptly deposit into the Expedia Common Stock Escrow Account cash in lieu of such fractional shares in an amount computed in accordance with the terms of such New IAC Integrated Warrant or Jeeves Note, as applicable.

5.05. Cash Balance True-Up. In the event that, after review and reconciliation, the amount of cash and cash equivalents reflected on the Expedia Opening Balance Sheet plus the balance as of the Effective Time of any note or notes of any member of the IAC Group held by any member of the Expedia Group less the balance as of the Effective Time of any note or notes of any member of the Expedia Group held by any member of the IAC Group (the “Effective Date Cash Balance”) is greater than $100,000,000.00, Expedia shall make one or more payments to IAC as promptly as practicable after the Effective Date, but in no event more than ninety (90) days after the Effective Date, totaling an amount equal to the excess of the Effective Date Cash Balance over $100,000,000.00. In the event that, after review and reconciliation, the Effective Date Cash Balance is less than $100,000,000.00, IAC shall make one or more payments to Expedia as promptly as practicable after the Effective Date, but in no event more than ninety (90) days after the Effective Date, totaling an amount equal to the excess of $100,000,000.00 over the Effective Date Cash Balance. Notwithstanding Section 14.08, payments pursuant to this Section 5.05 shall not bear any interest. For the avoidance of doubt, for purposes of determining the Effective Date Cash Balance, the Parties shall not take into account cash and/or cash equivalents that belong to eLong, Inc. or its Subsidiaries, even if such amounts are reflected on the Expedia Group Balance Sheet.

ARTICLE VI

CONDITIONS

6.01. Actions Prior to the Completion of the Separation. (a) In addition to, and without in any way limiting, IAC’s rights under Section 13.1, completion of the Separation and the Reclassification is subject to the fulfillment of each of the following conditions:

(i) no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened by the SEC;

(ii) the Expedia Common Stock, Expedia Series A Preferred Stock and the Expedia Warrants to be distributed pursuant to the Reclassification and related transactions shall have been accepted for listing on the Nasdaq or such other securities exchange or inter-dealer quotation system as is reasonably acceptable to IAC subject to compliance with applicable listing requirements;

(iii) the Nasdaq shall have confirmed that the New IAC Common Stock and New IAC Unitary Warrants will continue trading in the same manner as the Old IAC Common Stock and Old IAC Severable Warrants, respectively, following the Effective Date;

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(iv) no Order or other legal restraint or prohibition preventing the consummation of the Separation, the Reclassification or any of the transactions contemplated by this Agreement or any Ancillary Agreement shall be threatened, pending or in effect;

(v) any Consents and Governmental Authorizations necessary to complete the Separation and the Reclassification shall have been obtained and be in full force and effect;

(vi) the IAC Board shall have approved the Separation and Reclassification and shall not have abandoned, deferred or modified the Separation or the Reclassification at any time prior to the Effective Date;

(vii) each of the Ancillary Agreements shall have been duly executed and delivered by the parties thereto and shall be in effect;

(viii) the IAC Board shall have received a written solvency opinion in a form acceptable to the IAC Board from Duff & Phelps, LLC regarding the Separation and other transactions contemplated hereby, which opinion shall not have been withdrawn or modified;

(ix) the IAC Board shall have received an opinion of Wachtell, Lipton, Rosen & Katz, in form and substance satisfactory to the IAC Board, to the effect that the Separation and the Reclassification will qualify as transactions that are generally tax free under Sections 355 and 368(a)(1)(D) of the Code;

(x) the IAC Board shall have received such other opinions or reports as the IAC Board may reasonably request in form and substance reasonably satisfactory to the IAC Board; and

(xi) this Agreement will not have been terminated as provided herein.

(b) The foregoing conditions are for the sole benefit of IAC and shall not give rise to or create any duty on the part of IAC or the IAC Board to waive or not to waive such conditions or in any way limit IAC’s right to terminate this Agreement as set forth in Article XIII or alter the consequences of any such termination from those specified in such Article XIII. Any determination made by IAC prior to the Separation and the Reclassification concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 6.01 shall be final and conclusive.

ARTICLE VII

MUTUAL RELEASES; INDEMNIFICATION

7.01. Release of Pre-Separation Claims. (a) Except as provided in Section 7.01(c), effective as of the Effective Time, Expedia does hereby, on behalf of itself and each other member of Expedia Group, their respective Affiliates (other than any member of IAC Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been

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stockholders (other than any member of IAC Group), directors, officers, agents or employees of any member of Expedia Group (in each case, in their respective capacities as such) (the “Expedia Releasors”), unequivocally, unconditionally and irrevocably release and discharge each of IAC, the other members of IAC Group, their respective Affiliates (other than any member of Expedia Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of IAC Group (in each case, in their respective capacities as such), and their respective heirs, executors, trustees, administrators, successors and assigns (the “IAC Parties”), from any and all Actions, causes of action, choses in action, cases, claims, suits, debts, dues, damages, judgments and liabilities, of any nature whatsoever, in law, at equity or otherwise, whether direct, derivative or otherwise, which have been asserted against an IAC Party or which, whether currently known or unknown, suspected or unsuspected, fixed or contingent, and whether or not concealed or hidden, the Expedia Releasors ever could have asserted or ever could assert, in any capacity, whether as partner, employer, agent or otherwise, either for itself or as an assignee, heir, executor, trustee, administrator, successor or otherwise for or on behalf of any other Person, against the IAC Parties, relating to any claims or transactions or occurrences whatsoever, up to but excluding the Effective Time, including in connection with the transactions and all activities to implement the Separation and the Reclassification (the “Expedia Claims”); and the Expedia Releasors hereby unequivocally, unconditionally and irrevocably agree not to initiate proceedings with respect to, or institute, assert or threaten to assert, any Expedia Claim.

(b) Except as provided in Section 7.01(c), effective as of the Effective Time, IAC does hereby, on behalf of itself and each other member of IAC Group, their respective Affiliates (other than any member of Expedia Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of IAC Group (in each case, in their respective capacities as such) (the “IAC Releasors”), unequivocally, unconditionally and irrevocably release and discharge each of Expedia, the other members of Expedia Group, their respective Affiliates (other than any member of IAC Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders (other than any member of IAC Group), directors, officers, agents or employees of any member of Expedia Group (in each case, in their respective capacities as such), and their respective heirs, executors, trustees, administrators, successors and assigns (the “Expedia Parties”), from any and all Actions, causes of action, choses in action, cases, claims, suits, debts, dues, damages, judgments and liabilities, of any nature whatsoever, in law, at equity or otherwise, whether direct, derivative or otherwise, which have been asserted against an Expedia Party or which, whether currently known or unknown, suspected or unsuspected, fixed or contingent, and whether or not concealed or hidden, the IAC Releasors ever could have asserted or ever could assert, in any capacity, whether as partner, employer, agent or otherwise, either for itself or as an assignee, heir, executor, trustee, administrator, successor or otherwise for or on behalf of any other Person, against the Expedia Parties, relating to any claims or transactions or occurrences whatsoever, up to but excluding the Effective Time including in connection with the transactions and all activities to implement the Separation and the Reclassification (the “IAC Claims”); and the IAC Releasors hereby unequivocally, unconditionally and irrevocably agree not to initiate proceedings with respect to, or institute, assert or threaten to assert, any IAC Claim.

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(c) Nothing contained in Section 7.01(a) or 7.01(b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement, any agreement, arrangement, commitment or understanding that is contemplated by Section 2.08 or any other agreement, arrangement, commitment or understanding that is entered into after the Effective Date between any member of the Expedia Group, on the one hand, and any member of the IAC Group, on the other hand, nor shall anything contained in those sections be interpreted as terminating as of the Effective Time any rights under any such agreements, contracts, commitments or understandings. For purposes of clarification, nothing contained in Section 7.01(a) or 7.01(b) shall release any Person from:

(i) any Liability provided in or resulting from this Agreement or any of the Ancillary Agreements;

(ii) any Liability provided in or resulting from any agreement among any members of IAC Group or Expedia Group that is contemplated by Section 2.08 (including for greater certainty, any Liability resulting or flowing from any breaches of such agreements that arose prior to the Effective Time);

(iii) any Liability provided in or resulting from any other agreement, arrangement, commitment or understanding that is entered into after the Effective Date between any member of the Expedia Group, on the one hand, and any member of the IAC Group, on the other hand;

(iv) (A) with respect to Expedia, any Assumed Liability and (B) with respect to IAC, any Retained Liability;

(v) any Liability that the Parties may have with respect to indemnification or contribution pursuant to Article III of this Agreement or this Article VII for Third Party Claims;

(vi) any Liability for unpaid Intercompany Accounts; or

(vii) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 7.01.

In addition, nothing contained in Section 7.01(a) or (b) hereof shall release any Party from honoring its existing obligations to indemnify any director, officer or employee of either Group who was a director, officer or employee of such Party on or prior to the Effective Time, to the extent that such director, officer or employee becomes a named defendant in any litigation involving such Party and was entitled to such indemnification pursuant to then existing obligations.

(d) Expedia shall not make, and shall not permit any other member of Expedia Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against IAC or any member of the IAC Group or any other Person released pursuant to Section 7.01(a), with respect to any Liabilities released pursuant to Section 7.01(a). IAC shall not make, and shall not permit any other member of IAC Group to make, any claim or demand, or commence any Action asserting

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any claim or demand, including any claim of contribution or any indemnification, against Expedia or any other member of Expedia Group or any other Person released pursuant to Section 7.01(b), with respect to any Liabilities released pursuant to Section 7.01(b).

7.02. Indemnification by Expedia. Except as provided in Sections 7.04 and 7.05 and subject to Section 14.01, Expedia shall, and shall cause the other members of Expedia Group to, fully indemnify, defend and hold harmless IAC, each other member of IAC Group and each of their respective current and former directors, officers and employees, and each of the heirs, executors, trustees, administrators, successors and assigns of any of the foregoing (collectively, the “IAC Indemnified Parties”), from and against any and all Liabilities of the IAC Indemnified Parties relating to, arising out of or resulting from any of the following items (without duplication):

(a) any Separated Business, any Separated Entity, any Separated Asset, any Assumed Liability or, subject to Article III, any Deferred Separated Asset;

(b) any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of, this Agreement or any of the Ancillary Agreements, by Expedia or any other member of Expedia Group; and

(c) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent relating to the Expedia Group contained in the Registration Statement or any other filings made with the SEC in connection with the Separation.

7.03. Indemnification by IAC. Except as provided in Sections 7.04 and 7.05 and subject to Section 14.01, IAC shall indemnify, defend and hold harmless Expedia, each other member of Expedia Group and each of their respective current and former directors, officers and employees, and each of the heirs, executors, trustees, administrators, successors and assigns of any of the foregoing (collectively, the “Expedia Indemnified Parties”), from and against any and all Liabilities of the Expedia Indemnified Parties relating to, arising out of or resulting from any of the following items (without duplication):

(a) any Remaining IAC Business or any Retained Liability;

(b) any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of, this Agreement or any of the Ancillary Agreements, by IAC or any other member of IAC Group; and

(c) except to the extent set forth in Section 7.02(c), any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading contained in the Registration Statement.

7.04. Procedures for Indemnification of Third Party Claims. (a) All claims for indemnification relating to a Third Party Claim by any indemnified party (an “Indemnified Party”) hereunder shall be asserted and resolved as set forth in this Section 7.04.

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(b) In the event that any written claim or demand for which an indemnifying party (an “Indemnifying Party”) may have liability to any Indemnified Party hereunder, is asserted against or sought to be collected from any Indemnified Party by a Third Party (a “Third Party Claim”), such Indemnified Party shall promptly, but in no event more than ten (10) days following such Indemnified Party’s receipt of a Third Party Claim, notify the Indemnifying Party in writing of such Third Party Claim, the amount or the estimated amount of damages sought thereunder to the extent then ascertainable (which estimate shall not be conclusive of the final amount of such Third Party Claim), any other remedy sought thereunder, any relevant time constraints relating thereto and, to the extent practicable, and any other material details pertaining thereto (a “Claim Notice”); provided, however, that the failure to timely give a Claim Notice shall affect the rights of an Indemnified Party hereunder only to the extent that such failure has a material prejudicial effect on the defenses or other rights available to the Indemnifying Party with respect to such Third Party Claim. The Indemnifying Party shall have thirty (30) days (or such lesser number of days set forth in the Claim Notice as may be required by court proceeding in the event of a litigated matter) after receipt of the Claim Notice (the “Notice Period”) to notify the Indemnified Party whether it desires to defend the Indemnified Party against such Third Party Claim.

(c) In the event that the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against a Third Party Claim, the Indemnifying Party shall have the right to defend the Indemnified Party by appropriate proceedings and shall have the sole power to direct and control such defense, with counsel reasonably satisfactory to the Indemnified Party at its expense. Once the Indemnifying Party has duly assumed the defense of a Third Party Claim, the Indemnified Party shall have the right, but not the obligation, to participate in any such defense and to employ separate counsel of its choosing. The Indemnified Party shall participate in any such defense at its expense unless (i) the Indemnifying Party and the Indemnified Party are both named parties to the proceedings and the Indemnified Party shall have reasonably concluded that representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them, or (ii) the Indemnified Party assumes the defense of a Third Party Claim after the Indemnifying Party has failed to diligently defend a Third Party Claim it has assumed the defense of, as provided in the first sentence of this Section 7.04(c). The Indemnifying Party shall not, without the prior written consent of the Indemnified Party, settle, compromise or offer to settle or compromise any Third Party Claim on a basis that would result in (i) the imposition of a consent order, injunction or decree that would restrict the future activity or conduct of the Indemnified Party or any of its Affiliates, (ii) a finding or admission of a violation of Applicable Law or violation of the rights of any Person by the Indemnified Party or any of its Affiliates or (iii) a finding or admission that would have an adverse effect on other claims made or threatened against the Indemnified Party or any of its Affiliates.

(d) If the Indemnifying Party (i) elects not to defend the Indemnified Party against a Third Party Claim, whether by not giving the Indemnified Party timely notice of its desire to so defend or otherwise or (ii) after assuming the defense of a Third Party Claim, fails to take reasonable steps necessary to defend diligently such Third Party Claim within ten (10) days after receiving written notice from the Indemnified Party to the effect that the Indemnifying Party has so failed, the Indemnified Party shall have the right but not the obligation to assume its own defense; it being understood that the Indemnified Party’s right to indemnification for a Third Party Claim shall not be adversely affected by assuming the defense of such Third Party Claim.

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The Indemnified Party shall not settle a Third Party Claim without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld.

(e) The Indemnified Party and the Indemnifying Party shall cooperate in order to ensure the proper and adequate defense of a Third Party Claim, including by providing access to each other’s relevant business records and other documents, and employees; it being understood that the reasonable costs and expenses of the Indemnified Party relating thereto shall be Liabilities, subject to indemnification.

(f) The Indemnified Party and the Indemnifying Party shall use commercially reasonable efforts to avoid production of confidential information (consistent with Applicable Law), and to cause all communications among employees, counsel and others representing any party to a Third Party Claim to be made so as to preserve any applicable attorney-client or work-product privileges.

7.05. Procedures for Indemnification of Direct Claims. Any claim for indemnification made directly by the Indemnified Party against the Indemnifying Party that does not result from a Third Party Claim shall be asserted by written notice from the Indemnified Party to the Indemnifying Party specifically claiming indemnification hereunder. Such Indemnifying Party shall have a period of 45 days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such 45-day period, such Indemnifying Party shall be deemed to have accepted responsibility to make payment and shall have no further right to contest the validity of such claim. If such Indemnifying Party does respond within such 45-day period and rejects such claim in whole or in part, such Indemnified Party shall be free to pursue resolution as provided in Article X.

7.06. Adjustments to Liabilities. (a) If an Indemnified Party receives any payment from an Indemnifying Party in respect of any Liabilities and the Indemnified Party could have recovered all or a part of such Liabilities from a Third Party (a “Potential Contributor”) based on the underlying claim or demand asserted against such Indemnifying Party, such Indemnified Party shall, to the extent permitted by Applicable Law, assign such of its rights to proceed against the Potential Contributor as are necessary to permit such Indemnifying Party to recover from the Potential Contributor the amount of such payment.

(b) If notwithstanding Section 7.06(a) an Indemnified Party receives an amount from a Third Party in respect of a Liability that is the subject of indemnification hereunder after all or a portion of such Liability has been paid by an Indemnifying Party pursuant to this Agreement, the Indemnified Party shall promptly remit to the Indemnifying Party the excess (if any) of (i) the amount paid by the Indemnifying Party in respect of such Liability, plus the amount received from the Third Party in respect thereof, over (ii) the full amount of the Liability.

(c) An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other Third Party shall be entitled to a “wind-fall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions hereof.

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7.07. Payments. The Indemnifying Party shall pay all amounts payable pursuant to this Article VII by wire transfer of immediately available funds, promptly following receipt from an Indemnified Party of a bill, together with all accompanying reasonably detailed backup documentation, for a Liability that is the subject of indemnification hereunder, unless the Indemnifying Party in good faith disputes the Liability, in which event it shall so notify the Indemnified Party. In any event, the Indemnifying Party shall pay to the Indemnified Party, by wire transfer of immediately available funds, the amount of any Liability for which it is liable hereunder no later than three (3) days following any final determination of such Liability and the Indemnifying Party’s liability therefor. A “final determination” shall exist when (a) the parties to the dispute have reached an agreement in writing, (b) a court of competent jurisdiction shall have entered a final and non-appealable order or judgment, or (c) an arbitration or like panel shall have rendered a final non-appealable determination with respect to disputes the parties have agreed to submit thereto.

7.08. Contribution. If the indemnification provided for in this Article VII shall, for any reason, be unavailable or insufficient to hold harmless the Indemnified Party hereunder in respect of any Liability, then each Indemnifying Party shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such Liability, in such proportion as shall be sufficient to place the Indemnified Party in the same position as if such Indemnified Party were indemnified hereunder, the Parties intending that their respective contributions hereunder be as close as possible to the indemnification under Sections 7.02 and 7.03. If the contribution provided for in the previous sentence shall, for any reason, be unavailable or insufficient to put the Indemnified Party in the same position as if it were indemnified under Section 7.02 or 7.03, as the case may be, then the Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party as a result of such Liability, in such proportion as shall be appropriate to reflect the relative benefits received by and the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other hand with respect to the matter giving rise to the Liability.

7.09. Remedies Cumulative. The remedies provided in this Article VII shall be cumulative and, subject to the provisions of Article X, shall not preclude assertion by any Indemnified Party of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

7.10. Survival of Indemnities. The rights and obligations of each of IAC and Expedia and their respective Indemnified Parties under this Article VII shall survive the distribution, sale or other transfer by any Party of any Assets or the delegation or assignment by it of any Liabilities.

7.11. Shared Litigation Liabilities. Notwithstanding anything to the contrary contained in this Agreement:

(a) In order to facilitate the defense of any Shared Litigation Liability, the Parties agree that (i) the Parties shall cooperate in the defense of any Shared Litigation Liability; (ii) each Party shall be responsible for the costs of its own in-house counsel and other internal personnel in the defense of any Shared Litigation Liability; (iii) IAC shall be entitled to control the defense and/or settlement of any Shared Litigation Liability, although Expedia shall be

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entitled to observe with counsel of its own selection and at its own expense; provided, however, that after the Effective Time IAC shall not settle all or any portion of any Shared Litigation Liability unless any remaining Liability of Expedia and its Affiliates and their respective current and former officers and directors relating to the Shared Litigation Liability will be fully released as a result of such settlement.

(b) The Parties agree to act in good faith and to use their reasonable best efforts to preserve and maximize the insurance benefits due to be provided under all policies of insurance and to cooperate with one another as necessary to permit each other to access or obtain the benefits under those policies; provided, however, that nothing hereunder shall be construed to prevent any party or any other Person from asserting claims for insurance benefits or accepting insurance benefits provided by the policies. The Parties agree to exchange information upon reasonable request of the other Party regarding requests that they have made for insurance benefits, notices of claims, occurrences and circumstances that they have submitted to the insurance companies or other entities managing the policies, responses they have received from those insurance companies or entities, including any payments they have received from the insurance companies and any agreements by the insurance companies to make payments, and any other information that the Parties may need to determine the status of the insurance policies and the continued availability of benefits thereunder.

(c) If any Party receives notice or otherwise learns of the assertion by any person or entity (including a Governmental Authority) of a Shared Litigation Liability, that Party shall give the other Party written notice of such Shared Litigation Liability, providing notice of such Shared Litigation Liability in reasonable detail. The failure to give notice under this subsection shall not relieve any Party of its Liability for any Shared Litigation Liability except to the extent the Party is actually prejudiced by the failure to give such notice. IAC and Expedia shall be deemed to be on notice of any Shared Litigation Liability pending prior to the Effective Time.

ARTICLE VIII

INSURANCE

8.01. Insurance Matters. (a) Expedia does hereby, for itself and each other member of Expedia Group, agree that no member of IAC Group or any IAC Indemnified Party shall have any liability whatsoever as a result of the insurance policies and practices of IAC and its Affiliates as in effect at any time prior to the Effective Time, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise.

(b) IAC agrees to use its reasonable best efforts to cause the interest and rights of Expedia and the other members of Expedia Group as of the Effective Time as insureds or beneficiaries or in any other capacity under occurrence-based insurance policies and programs (and under claims-made policies and programs to the extent a claim has been submitted prior to the Effective Time) of IAC or any other member of IAC Group in respect of periods prior to the Effective Time to survive the Effective Time for the period for which such interests and rights would have survived without regard to the transactions contemplated hereby to the extent

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permitted by such policies, and IAC shall continue to administer such policies and programs on behalf of Expedia and the other members of Expedia Group, subject to Expedia’s reimbursement to IAC and the other relevant members of IAC Group for the actual out-of-pocket costs of such ongoing administration and the internal costs (based on the proportion of the amount of time actually spent on such matter to such employee’s normal working time) of any employee or agent of IAC of any other relevant member of IAC Group who will be required to spend at least ten percent of his or her normal working time over any ten (10) Business Days working with respect to any such matter. Any proceeds received by IAC or any other member of IAC Group after the Effective Time under such policies and programs in respect of Expedia and the other members of Expedia Group shall be for the benefit of Expedia and the other members of Expedia Group.

(c) This Agreement is not intended as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of any member of IAC Group in respect of any insurance policy or any other contract or policy of insurance.

(d) Nothing in this Agreement shall be deemed to restrict any member of Expedia Group from acquiring at its own expense any other insurance policy in respect of any Liabilities or covering any period.

ARTICLE IX

EXCHANGE OF INFORMATION; CONFIDENTIALITY

9.01. Agreement for Exchange of Information; Archives. (a) Without limiting any rights or obligations under any Ancillary Agreement between the Parties and/or any other member of their respective Groups relating to confidentiality, each of IAC and Expedia agrees to provide, and to cause its Representatives, its Group members and its respective Group members’ Representatives to provide, to the other Group and any member thereof (a “Requesting Party”), at any time before, on or after the Effective Date, subject to the provisions of Section 9.04 and as soon as reasonably practicable after written request therefor, any Information within the possession or under the control of such Party or one of such Persons which the Requesting Party reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on the Requesting Party (including under applicable securities laws) by a Governmental Authority having jurisdiction over the Requesting Party, (ii) for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation or similar requirements of the Requesting Party, in each case other than claims or allegations that one Party to this Agreement or any of its Group members has or brings against the other Party or any of its Group members, or (iii) subject to the foregoing clause (ii) above, to comply with its obligations under this Agreement or any Ancillary Agreement; provided, however, that in the event that any Party determines that any such provision of Information could be commercially detrimental, violate any Applicable Law or agreement, or waive any attorney-client privilege, the Parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence. More particularly, and without limitation to the generality of the foregoing sentence, the Parties agree

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that the provisions of the Tax Sharing Agreement shall govern with respect to the sharing of Information relating to Tax.

(b) After the Effective Time, Expedia and the other members of Expedia Group shall have access during regular business hours (as in effect from time to time), and upon reasonable advance notice, to the documents and objects of historic significance that relate to the Separated Businesses, the Separated Assets or the Separated Entities and that are located in archives retained or maintained by IAC or any other member of IAC Group. Expedia and the other members of Expedia Group may obtain copies (but not originals) of documents for bona fide business purposes and may obtain objects for exhibition purposes for commercially reasonable periods of time if required for bona fide business purposes, provided that Expedia shall cause any such objects to be returned promptly, at Expedia’s expense, in the same condition in which they were delivered to Expedia or any other member of Expedia Group and Expedia and the other members of Expedia Group shall comply with any rules, procedures or other requirements, and shall be subject to any restrictions (including prohibitions on removal of specified objects), that are then applicable to IAC or such other member of IAC Group. In any event, the foregoing shall not be deemed to restrict the access of IAC or any other member of IAC Group to any such documents or objects. Nothing herein shall be deemed to impose any Liability on IAC or any other member of IAC Group if documents or objects referred to in this Section 9.01 are not maintained or preserved by IAC or any other member of IAC Group. Alternatively, IAC, acting reasonably, may request from Expedia and any other member of Expedia Group that they provide it, with reasonable advance notice, with a list of the requested Information that relates to the Separated Businesses, the Separated Assets or the Separated Entities and IAC shall use, and shall cause the other members of IAC Group who are in possession of the Information requested to use, commercially reasonable efforts to locate all requested Information that is owned or possessed by IAC or any of its Group members or Representatives. IAC will make available all such Information for inspection by Expedia or any other relevant member of Expedia Group during normal business hours at the place of business reasonably designated by IAC. Subject to such confidentiality or security obligations as IAC or the other relevant members of its Group may reasonably deem necessary, Expedia and the other relevant members of Expedia Group may have all requested Information duplicated. Alternatively, IAC or the other relevant members of IAC Group may choose to deliver to Expedia, at Expedia’s expense, all requested Information in the form reasonably requested by Expedia or any other member of Expedia Group. At IAC’s request, Expedia shall cause such Information when no longer needed to be returned to IAC at Expedia’s expense.

9.02. Ownership of Information. Any Information owned by a Party or any of its Group members and that is provided to a Requesting Party pursuant to Section 9.01 shall be deemed to remain the property of the providing party. Unless specifically set forth herein or in any Ancillary Agreement, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Information.

9.03. Compensation for Providing Information. The Party requesting Information agrees to reimburse the other Party for the reasonable costs, if any, of creating, gathering and copying such Information, to the extent that such costs are incurred for the benefit of the Requesting Party. Except as may be otherwise specifically provided elsewhere in this Agreement, in the Ancillary Agreements, or in any other agreement between the Parties, such

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costs shall be computed in accordance with the providing Party’s standard methodology and procedures.

9.04. Record Retention. To facilitate the possible exchange of Information pursuant to this Article IX and other provisions of this Agreement after the Effective Time, the Parties agree to use commercially reasonable efforts to retain, and to cause the members of their respective Group to retain, all Information in their respective possession or control on the Effective Date in accordance with the policies of IAC Group as in effect on the Effective Date or such other policies as may be reasonably adopted by the appropriate Party after the Effective Date. No Party will destroy, or permit any member of its Group to destroy, any Information which the other Party or any member of its Group may have the right to obtain pursuant to this Agreement prior to the fifth (5th) anniversary of the Effective Date without first using commercially reasonable efforts to notify the other Party of the proposed destruction and giving the other Party the opportunity to take possession of such Information prior to such destruction.

9.05. Other Agreements Providing for Exchange of Information. The rights and obligations granted or created under this Article IX are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange, retention or confidential treatment of Information set forth in any Ancillary Agreement.

9.06. Production of Witnesses; Records; Cooperation. (a) After the Effective Time, but only with respect to a Third Party Claim, each Party hereto shall use commercially reasonable efforts to, and shall cause the other relevant members of its Group to use commercially reasonable efforts to, make available to the other Party or any member of the Group to which the other Party belongs, upon written request, its then former and current Representatives (and the former and current Representatives of its respective Group members) as witnesses and any books, records or other documents within its control (or that of its respective Group members) or which it (or its respective Group members) otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such Representatives) or books, records or other documents may reasonably be required in connection with any Action in which the Requesting Party may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder. The Requesting Party shall bear all costs and expenses in connection therewith.

(b) If a Party, being entitled to do so under this Agreement, chooses to defend or to seek to settle or compromise any Third Party Claim, the other Party shall use commercially reasonable efforts to make available to such Party, upon written request, its then former and current Representatives and those of its respective Group members as witnesses and any books, records or other documents within its control (or that of its respective Group members) or which it (or its respective Group members) otherwise has the ability to make available, to the extent that any such Person (giving consideration to business demands of such Representatives) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, as the case may be, and shall otherwise cooperate in such defense, settlement or compromise, as the case may be.

(c) Without limiting the foregoing, the Parties shall cooperate and consult, and shall cause their respective Group members to cooperate and consult, to the extent reasonably

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necessary with respect to any Actions (except in the case of an Action by one Party against the other).

(d) The obligation of the Parties to provide witnesses pursuant to this Section 9.06 is intended to be interpreted in a manner so as to facilitate cooperation and shall include the obligation to provide as witnesses inventors and other employees without regard to whether the witness or the employer of the witness could assert a possible business conflict (subject to the exception set forth in the first sentence of Section 9.06(a)).

(e) In connection with any matter contemplated by this Section 9.06, the Parties will enter into, and shall cause all other relevant members of their respective Groups to enter into, a mutually acceptable joint defense agreement so as to maintain to the extent practicable any applicable attorney-client privilege or work-product privileges of any member of any Group.

9.07. Confidentiality. (a) Subject to Section 9.08, each of IAC and Expedia shall hold, and shall cause its respective Group members and its respective Affiliates (whether now an Affiliate or hereafter becoming an Affiliate) and its Representatives to hold, in strict confidence, with at least the same degree of care that applies to IAC’s confidential and proprietary Information pursuant to policies in effect as of the Effective Date, all confidential and proprietary Information concerning the other Group (or any member thereof) that is either in its possession (including Information in its possession prior to the date hereof) or furnished by the other Group (or any member thereof) or by any of its Affiliates (whether now an Affiliate or hereafter becoming an Affiliate) or their respective Representatives at any time pursuant to this Agreement or any Ancillary Agreement or the transactions contemplated hereby or thereby (any such Information referred to herein as “Confidential Information”), and shall not use, and shall cause its respective Group members, Affiliates and Representatives not to use, any such Confidential Information other than for such purposes as shall be expressly permitted hereunder or thereunder. Notwithstanding the foregoing, Confidential Information shall not include Information that is or was (i) in the public domain other than by the breach of this Agreement or by breach of any other agreement relating to confidentiality between or among the Parties and/or their respective Group members, their respective Affiliates or Representatives, (ii) lawfully acquired by such Party (or any member of the Group to which such Party belongs or any of such Party’s Affiliates) from a Third Party not bound by a confidentiality obligation, or (iii) independently generated or developed by Persons who do not have access to, or descriptions of, any such confidential or proprietary Information of the other Party (or any member of the Group to which such Party belongs).

(b) Each Party shall maintain, and shall cause its respective Group members to maintain, policies and procedures, and develop such further policies and procedures as will from time to time become necessary or appropriate, to ensure compliance with Section 9.07(a).

(c) Each Party agrees not to release or disclose, or permit to be released or disclosed, any Confidential Information to any other Person, except its Representatives who need to know such Confidential Information (who shall be advised of their obligations hereunder with respect to such Confidential Information), except in compliance with Section 9.08. Without limiting the foregoing, when any Information furnished by the other Party after the Effective Time pursuant to this Agreement or any Ancillary Agreement is no longer needed for the purposes

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contemplated by this Agreement or any Ancillary Agreement, each Party will promptly, after request of the other Party and at the election of the Party receiving such request, return to the other Party all such Information in a printed or otherwise tangible form (including all copies thereof and all notes, extracts or summaries based thereon) and destroy all Information in an electronic or otherwise intangible form and certify to the other Party that it has destroyed such Information (and such copies thereof and such notes, extracts or summaries based thereon). Notwithstanding the foregoing, the Parties agree that to the extent some Information to be destroyed or returned is retained as data or records for the purpose of business continuity planning or is otherwise not accessible in the Ordinary Course of Business, such data or records shall be destroyed in the Ordinary Course of Business in accordance, if applicable, with the business continuity plan of the applicable Party.

9.08. Protective Arrangements. In the event that any Party or any member of its Group or any Affiliate of such Party or any of their respective Representatives either determines that it is required to disclose any Confidential Information (the “Disclosing Party”) pursuant to Applicable Law or receives any demand under lawful process or from any Governmental Authority to disclose or provide Confidential Information of the other Party (or any member of the Group to which such Party belongs) (the “Providing Party”), the Disclosing Party shall, to the extent permitted by Applicable Law, promptly notify the other Party prior to the Disclosing Party disclosing or providing such Confidential Information and shall use commercially reasonable efforts to cooperate with the Providing Party so that the Providing Party may seek any reasonable protective arrangements or other appropriate remedy and/or waive compliance with this Section 9.08. All expenses reasonably incurred by the Disclosing Party in seeking a protective order or other remedy will be borne by the Providing Party. Subject to the foregoing, the Disclosing Party may thereafter disclose or provide such Confidential Information to the extent (but only to the extent) required by such Applicable Law (as so advised by legal counsel) or by lawful process or by such Governmental Authority and shall promptly provide the Providing Party with a copy of the Confidential Information so disclosed, in the same form and format as disclosed, together with a list of all Persons to whom such Confidential Information was disclosed.

9.09. Disclosure of Third Party Information. Expedia acknowledges that it and the other members of Expedia Group may have in its or their possession confidential or proprietary Information of Third Parties that was received under confidentiality or non-disclosure agreements with such Third Party while part of IAC Group. Expedia will hold, and will cause the other members of its Group and its and their respective Representatives to hold, in strict confidence the confidential and proprietary Information of Third Parties to which Expedia or any other member of Expedia Group has access, in accordance with the terms of any agreements entered into prior to the Effective Time between one or more members of IAC Group (whether acting through, on behalf of, or in connection with, the Separated Businesses) and such Third Parties.

ARTICLE X

DISPUTE RESOLUTION

10.01. Agreement to Resolve Disputes. Except as otherwise specifically provided in any Ancillary Agreement, the procedures for discussion, negotiation and dispute resolution set forth

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in this Article X shall apply to all disputes, controversies or claims (whether sounding in contract, tort or otherwise) that may arise out of or relate to, or arise under or in connection with this Agreement or any Ancillary Agreement, or the transactions contemplated hereby or thereby (including all actions taken in furtherance of the transactions contemplated hereby or thereby on or prior to the date hereof), or the commercial or economic relationship of the Parties relating hereto or thereto, between or among any member of IAC Group on the one hand and Expedia Group on the other hand. Each Party agrees on behalf of itself and each member of its respective Group that the procedures set forth in this Article X shall be the sole and exclusive remedy in connection with any dispute, controversy or claim relating to any of the foregoing matters and irrevocably waives any right to commence any Action in or before any Governmental Authority, except as otherwise required by Applicable Law.

10.02. Dispute Resolution; Mediation.

(a) Either Party may commence the dispute resolution process of this Section 10.02 by giving the other Party written notice (a “Dispute Notice”) of any controversy, claim or dispute of whatever nature arising out of or relating to this Agreement or the breach, termination, enforceability or validity thereof (a “Dispute”) which has not been resolved in the normal course of business. The Parties shall attempt in good faith to resolve any Dispute by negotiation between executives of each Party hereto (“Senior Party Representatives”) who have authority to settle the Dispute and who are at a higher level of management than the persons who have direct responsibility for the administration of this Agreement. Within 15 days after delivery of the Dispute Notice, the receiving Party shall submit to the other a written response (the “Response”). The Dispute Notice and the Response shall include (i) a statement setting forth the position of the Party giving such notice and a summary of arguments supporting such position and (ii) the name and title of such Party’s Senior Party Representative and any other persons who will accompany the Senior Party Representative at the meeting at which the Parties will attempt to settle the Dispute. Within 30 days after the delivery of the Dispute Notice, the Senior Party Representatives of both Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the Dispute. The Parties shall cooperate in good faith with respect to any reasonable requests for exchanges of information regarding the Dispute or a Response thereto.

(b) If the Dispute has not been resolved within 60 days after delivery of the Dispute Notice, or if the Parties fail to meet within 30 days after delivery of the Dispute Notice as hereinabove provided, the Parties shall make a good faith attempt to settle the Dispute by mediation pursuant to the provisions of this Section 10.02 before resorting to arbitration contemplated by Section 10.03 or any other dispute resolution procedure that may be agreed by the Parties.

(c) All negotiations, conferences and discussions pursuant to this Section 10.02 shall be confidential and shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations, conferences and discussions that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future arbitration.

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(d) Unless the Parties agree otherwise, the mediation shall be conducted in accordance with the CPR Institute for Dispute Resolution Model Procedure for Mediation of Business Disputes in effect on the date of this Agreement by a mediator mutually selected by the Parties.

(e) Within 30 days after the mediator has been selected as provided above, both Parties and their respective attorneys shall meet with the mediator for one mediation session of at least four hours, it being agreed that each Party representative attending such mediation session shall be a Senior Party Representative with authority to settle the Dispute. If the Dispute cannot be settled at such mediation session or at any mutually agreed continuation thereof, either Party may give the other and the mediator a written notice declaring the mediation process at an end.

10.03. Arbitration. If the Dispute has not been resolved by the dispute resolution process described in Section 10.02, the Parties agree that any such Dispute shall be settled by binding arbitration before the American Arbitration Association (“AAA”) in Wilmington, Delaware pursuant to the Commercial Rules of the AAA. Any arbitrator(s) selected to resolve the Dispute shall be bound exclusively by the laws of the State of Delaware without regard to its choice of law rules. Any decisions of award of the arbitrator(s) will be final and binding upon the Parties and may be entered as a judgment by the Parties hereto. Any rights to appeal or review such award by any court or tribunal are hereby waived to the extent permitted by law.

10.04. Costs. The costs of any mediation or arbitration pursuant to this Article X shall be shared equally between the Parties.

10.05. Continuity of Service and Performance. Unless otherwise agreed in writing, the Parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article X with respect to all matters not subject to such dispute, controversy or claim.

ARTICLE XI

FURTHER ASSURANCES

11.01. Further Assurances. (a) Except as provided in Section 13.1, each Party covenants with and in favor of the other Party as follows:

(i) prior to, on and after the Effective Time, each Party hereto shall, and shall cause the other relevant members of its Group to, cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party, to execute, acknowledge and deliver, or use commercially reasonable efforts to cause to be executed and delivered, all instruments, assurances or documents, including instruments of conveyance, assignments and transfers, and to make all filings with, and to obtain all consents, approvals or authorizations of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument (including any Consents or Governmental Authorizations), and to take all such other actions as such Party may reasonably be requested to take by the other Party hereto (or any member of its Group) from time to time, consistent with the terms of this Agreement and the Ancillary

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Agreements, in order to give effect to the provisions, obligations and purposes of this Agreement and the Ancillary Agreements and the transfers of the Separated Businesses and of the Separated Assets and the assignment and assumption of the Assumed Liabilities and the other transactions contemplated hereby and thereby; and

(ii) to the extent that IAC or Expedia discovers at any time following the Effective Time any Asset that was intended to be transferred to Expedia or any other member of Expedia Group pursuant to this Agreement was not so transferred at the Effective Time, IAC shall, or shall cause the other relevant members of its Group to promptly, assign and transfer to Expedia or any other member of Expedia Group reasonably designated by Expedia such Asset and all right, title and interest therein in a manner and on the terms consistent with the relevant provisions of this Agreement, including, without limitation, Section 2.13(b). Similarly, to the extent that IAC or Expedia discovers at any time following the Effective Time any Asset that was intended to be retained by IAC or any other member of IAC Group was not so retained at the Effective Time, Expedia shall, or shall cause the other relevant members of its Group to promptly to, assign and transfer to IAC or any other member of IAC Group reasonably designated by IAC such Asset and all right, title and interest therein in a manner and on the terms consistent with the relevant provisions of this Agreement, including, without limitation, Section 2.13(b). For the avoidance of doubt, the transfer of any Assets under this paragraph (a) shall be effected without any additional consideration by either Party hereunder (such deferred transfers being referred to as “Deferred Transactions”).

(b) On or prior to the Effective Time, IAC and Expedia, in their respective capacities as direct and indirect parent companies of the members of their respective Groups, shall each approve or ratify any actions of the members of their respective Groups as may be necessary or desirable to give effect to the transactions contemplated by this Agreement and the Ancillary Agreements.

(c) Prior to the Effective Time, if a Party identifies any commercial or other service that is needed to assure a smooth and orderly transition of the businesses in connection with the consummation of the transactions contemplated hereby, and that is not otherwise governed by the provisions of this Agreement or any Ancillary Agreement, the Parties will cooperate in determining whether there is a mutually acceptable arms’ length basis on which the other Party can provide such service.

ARTICLE XII

CERTAIN OTHER MATTERS

12.01. Auditors and Audits; Annual and Quarterly Financial Statements and Accounting. Each Party agrees that during the one hundred and eighty (180) days following the Effective Time and in any event solely with respect to the preparation and audit of each of IAC’s and Expedia’s financial statements for the year ended December 31, 2005, the printing, filing and public dissemination of such financial statements, the audit of IAC’s internal control over financial reporting and management’s assessment thereof and management’s assessment of IAC’s disclosure controls and procedures, in each case made as of December 31, 2005:

(a) Date of Auditors’ Opinion. Expedia shall use commercially reasonable efforts to enable Expedia’s auditors (“Expedia’s Auditors”) to complete their audit such that they will date their opinion on Expedia’s audited annual financial statements on the same date that IAC’s auditors (“IAC’s Auditors”) date their opinion on IAC’s audited annual financial statements, and to enable IAC to meet its timetable for the printing, filing and public dissemination of IAC’s annual financial statements.

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(b) Annual Financial Statements. Each Party shall provide to the other Party on a timely basis all Information reasonably required to meet its schedule for the preparation, printing, filing, and public dissemination of its annual financial statements and for management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K and its auditor’s audit of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the SEC’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder (such assessments and audit being referred to as the “2005 Internal Control Audit And Management Assessments”). Without limiting the generality of the foregoing, Expedia will provide all required financial and other Information with respect to Expedia and its Subsidiaries to Expedia’s Auditors in a sufficient and reasonable time and in sufficient detail to permit Expedia’s Auditors to take all steps and perform all reviews necessary to provide sufficient assistance to IAC’s Auditors with respect to Information to be included or contained in IAC’s annual financial statements and to permit IAC’s Auditors and IAC’s management to complete the 2005 Internal Control Audit and Management Assessments. Similarly, IAC shall provide to Expedia on a timely basis all Information that Expedia reasonably requires to meet its schedule for the preparation, printing, filing, and public dissemination of Expedia’s annual financial statements. Without limiting the generality of the foregoing, IAC will provide all required financial Information with respect to IAC and its Subsidiaries to IAC’s Auditors in a sufficient and reasonable time and in sufficient detail to permit IAC’s Auditors to take all steps and perform all reviews necessary to provide sufficient assistance to Expedia’s Auditors with respect to Information to be included or contained in Expedia’s annual financial statements.

(c) Access to Personnel and Books and Records. Expedia shall authorize Expedia’s Auditors to make available to IAC’s Auditors both the personnel who performed or are performing the annual audits of Expedia and work papers related to the annual audits of Expedia, in all cases within a reasonable time prior to Expedia’s Auditors’ opinion date, so that IAC’s Auditors are able to perform the procedures they consider necessary to take responsibility for the work of Expedia’s Auditors as it relates to IAC’s Auditors’ report on IAC’s financial statements, all within sufficient time to enable IAC to meet its timetable for the printing, filing and public dissemination of IAC’s annual financial statements. Similarly, IAC shall authorize IAC’s Auditors to make available to Expedia’s Auditors both the personnel who performed or are performing the annual audits of IAC and work papers related to the annual audits of IAC, in all cases within a reasonable time prior to IAC’s Auditors’ opinion date, so that Expedia’s Auditors are able to perform the procedures they consider necessary to take responsibility for the work of IAC’s Auditors as it relates to Expedia’s Auditors’ report on Expedia’s financial statements, all within sufficient time to enable Expedia to meet its timetable for the printing, filing and public dissemination of Expedia’s annual financial statements. Expedia shall make available to IAC’s Auditors and IAC’s management Expedia’s personnel and Expedia books and records in a

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reasonable time prior to IAC’s Auditors’ opinion date and IAC’s management’s assessment date so that IAC’s Auditors and IAC’s management are able to perform the procedures they consider necessary to conduct the 2005 Internal Control Audit and Management Assessments.

(d) Expedia Annual Report. Expedia will deliver to IAC a substantially final draft, as soon as the same is prepared, of the first report to be filed with the SEC that includes Expedia’s audited financial statements for the year ended December 31, 2005 (the “Expedia Annual Report”); provided, however, that Expedia may continue to revise such Expedia Annual Report prior to the filing thereof, which changes will be delivered to IAC as soon as reasonably practicable; provided, further, that IAC’s and Expedia’s personnel will actively consult with each other regarding any changes which Expedia may consider making to the Expedia Annual Report and related disclosures prior to the anticipated filing with the SEC, with particular focus on any changes which would have an effect upon IAC’s financial statements or related disclosures.

Nothing in this Section 12.01 shall require either party to violate any agreement with any Third Party regarding the confidentiality of confidential and proprietary Information relating to that Third Party or its business; provided, however, that in the event that a Party is required under this Section 12.01 to disclose any such Information, such Party shall use commercially reasonable efforts to seek to obtain such Third Party Consent to the disclosure of such Information.

ARTICLE XIII

SOLE DISCRETION OF IAC; TERMINATION

13.01. Sole Discretion of IAC. Notwithstanding any other provision of this Agreement, until the occurrence of the Effective Time, IAC shall have the sole and absolute discretion:

(a) to determine whether to proceed with all or any part of the Separation or the Reclassification, and to determine the timing of and any and all conditions to the completion of the Separation and the Reclassification or any part thereof or of any other transaction contemplated by this Agreement; and

(b) to amend or otherwise change, delete or supplement, from time to time, any term or element of the Separation or the Reclassification or any other transaction contemplated by this Agreement.

13.02. Termination. This Agreement and all Ancillary Agreements may be terminated and the transactions contemplated hereby may be amended, supplemented, modified or abandoned at any time prior to the Effective Date by and in the sole and absolute discretion of IAC without the approval of Expedia or of the stockholders of IAC. In the event of such termination, no Party shall have any liability of any kind to the other Party or any other Person. After the Effective Date, this Agreement may not be terminated except by an agreement in writing signed by the Parties.

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ARTICLE XIV

MISCELLANEOUS

14.01. Limitation of Liability. In no event shall any member of IAC Group or Expedia Group be liable to any member of the other Group for any special, consequential, indirect, collateral, incidental or punitive damages or lost profits or failure to realize expected savings or other commercial or economic loss of any kind, however caused and on any theory of liability (including negligence) arising in any way out of this Agreement, whether or not such Person has been advised of the possibility of any such damages; provided, however, that the foregoing limitations shall not limit either Party’s indemnification obligations for Liabilities with respect to Third Party Claims as set forth in Article VII. The provisions of Article X shall be the Parties’ sole recourse for any breach hereof or any breach of the Ancillary Agreements.

14.02. Counterparts. This Agreement and each Ancillary Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties thereto and delivered to the other party or parties.

14.03. Entire Agreement. This Agreement, the Ancillary Agreements, and the Schedules and Exhibits hereto and thereto and the specific agreements contemplated hereby or thereby contain the entire agreement between the Parties with respect to the subject matter hereof and supersede all previous agreements, oral or written, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter. No agreements or understandings exist between the Parties other than those set forth or referred to herein or therein.

14.04. Construction. In this Agreement and each of the Ancillary Agreements, unless a clear contrary intention appears:

(a) the singular number includes the plural number and vice versa;

(b) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement or the relevant Ancillary Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

(c) reference to any gender includes each other gender;

(d) reference to any agreement, document or instrument means such agreement, document or instrument as amended, modified, supplemented or restated, and in effect from time to time in accordance with the terms thereof subject to compliance with the requirements set forth herein or in the relevant Ancillary Agreement;

(e) reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Applicable Law means that provision of such Applicable Law from time to time

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in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

(f) “herein,” “hereby,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement or to the relevant Ancillary Agreement as a whole and not to any particular article, section or other provision hereof or thereof;

(g) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term;

(h) the Table of Contents and headings are for convenience of reference only and shall not affect the construction or interpretation hereof or thereof;

(i) with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding;” and

(j) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

14.05. Signatures. Each Party acknowledges that it and the other Party (and the other members of their respective Groups) may execute certain of the Ancillary Agreements by facsimile, stamp or mechanical signature. Each Party expressly adopts and confirms each such facsimile, stamp or mechanical signature made in its respective name (or that of the applicable member of its Group) as if it were a manual signature, agrees that it will not assert that any such signature is not adequate to bind such Party to the same extent as if it were signed manually and agrees that at the reasonable request of the other Party at any time it will as promptly as reasonably practicable cause each such Ancillary Agreement to be manually executed (any such execution to be as of the date of the initial date thereof).

14.06. Assignability. Except as set forth in any Ancillary Agreement, this Agreement and each Ancillary Agreement shall be binding upon and inure to the benefit of the Parties hereto and thereto, respectively, and their respective successors and assigns; provided, however, that except as specifically provided in any Ancillary Agreement, no Party hereto or thereto may assign its respective rights or delegate its respective obligations under this Agreement or any Ancillary Agreement without the express prior written consent of the other parties hereto or thereto.

14.07. Third Party Beneficiaries. Except for the indemnification rights under this Agreement of any IAC Indemnified Party or any Expedia Indemnified Party in their respective capacities as such and for the release under Section 7.01 of any Person provided therein and except as specifically provided in any Ancillary Agreement, (a) the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the parties hereto and thereto and their respective successors and permitted assigns and are not intended to confer upon any Person, except the parties hereto and thereto and their respective successors and permitted assigns, any rights or remedies hereunder and (b) there are no third party beneficiaries of this Agreement or any Ancillary Agreement; and neither this Agreement nor any Ancillary Agreement shall provide any Third Party with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.

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14.08. Payment Terms. (a) Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount to be paid or reimbursed by one Party to the other under this Agreement shall be paid or reimbursed hereunder within thirty (30) days after presentation of an invoice or a written demand therefor and setting forth, or accompanied by, reasonable documentation or other reasonable explanation supporting such amount.

(b) Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement (and any amount billed or otherwise invoiced or demanded and properly payable that is not paid within thirty (30) days of such bill, invoice or other demand) shall bear interest at a rate per annum equal to the Prime Rate plus 2% (or the maximum legal rate, whichever is lower), calculated for the actual number of days elapsed, accrued from the date on which such payment was due up to the date of the actual receipt of payment.

14.09. Governing Law. Except as set forth in Article X, this Agreement and each Ancillary Agreement, shall be governed by and construed and interpreted in accordance with the internal laws of the State of Delaware, irrespective of the choice of laws principles of the State of Delaware, as to all matters, including matters of validity, construction, effect, enforceability, performance and remedies.

14.10. Notices. All notices or other communications under this Agreement and, unless expressly provided therein, each Ancillary Agreement, shall be in writing and shall be deemed to be duly given when delivered in person or successfully transmitted by facsimile, addressed as follows:

If to IAC, to:

IAC/InterActiveCorp

152 West 57th Street

New York, NY 10019

Attention: General Counsel

Telecopier: (212) 632-9642

with a copy to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, NY 10019

Attention: Pamela S. Seymon, Esq.

Telecopier: (212) 403-2000

If to Expedia, to:

Expedia, Inc.

3150 139th Avenue SE

Bellevue, WA 98005

Attention: General Counsel

Telecopier: (425) 679-7251

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Any Party may, by notice to the other Party as set forth herein, change the address or fax number to which such notices are to be given.

14.11. Severability. If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby or thereby, as the case may be, is not affected in any manner adverse to any party hereto or thereto. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

14.12. Publicity. Prior to the Effective Date, IAC shall be responsible for issuing any press releases or otherwise making public statements with respect to this Agreement, the Separation, the Reclassification or any of the other transactions contemplated hereby and thereby, and Expedia shall not make such statements without the prior written consent of IAC. Prior to the Effective Date, IAC and Expedia shall each consult with the other prior to making any filings with any Governmental Authority with respect thereto.

14.13. Survival of Covenants. Except as expressly set forth in this Agreement or any Ancillary Agreement, any covenants, representations or warranties contained in this Agreement and each Ancillary Agreement shall survive the Separation and Reclassification and shall remain in full force and effect.

14.14. Waivers of Default; Conflicts. (a) Waiver by any Party of any default by the other Party of any provision of this Agreement or any Ancillary Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

(b) Each Party acknowledges that each of the Parties and each member of their respective Group are all currently represented by members of IAC’s legal department and IAC’s outside counsel. Each of IAC (on behalf of itself and every member of its Group), on the one hand, and Expedia (on behalf of itself and every member of its Group), on the other hand, waives any conflict with respect to such common representation that may arise before, at or after the Effective Date.

14.15. Amendments. This Agreement may be amended, supplemented, modified or abandoned at any time prior to the Effective Date by and in the sole and absolute discretion of IAC without the approval of Expedia or of the stockholders of IAC. After the Effective Time, no provisions of this Agreement or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified by any Party, unless such waiver, amendment, supplement or

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modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

14.16. Controlling Documents. To the extent that the provisions of the Employee Matters Agreement, Tax Sharing Agreement or Transition Services Agreement conflict with the provisions of this Agreement, the provisions of such other agreement or agreements shall govern.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.]

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IN WITNESS WHEREOF, the Parties have caused this Separation Agreement to be executed by their duly authorized representatives.

IAC/INTERACTIVECORP
By:	/s/ GREGORY R. BLATT
	Name:	Gregory R. Blatt
	Title:	Executive Vice President
EXPEDIA, INC.
By:	/s/ KEENAN M. CONDER
	Name:	Keenan M. Conder
	Title:	Senior Vice President

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EX-10.6

Exhibit 10.6

EXECUTION COPY

GOVERNANCE AGREEMENT

among

EXPEDIA, INC.,

LIBERTY MEDIA CORPORATION,

and

BARRY DILLER

DATED AS OF AUGUST 9, 2005

TABLE OF CONTENTS

		Page
	ARTICLE I
	TRANSFEREES
	ARTICLE II
	BOARD OF DIRECTORS AND RELATED MATTERS
Section 2.01.	Board of Directors	1
Section 2.02.	Management of the Business	2
Section 2.03.	Contingent Matters	2
Section 2.04.	Notice of Events	4
	ARTICLE III
	PREEMPTIVE RIGHTS
Section 3.01.	Liberty Preemptive Rights	4
	ARTICLE IV
	REPRESENTATIONS AND WARRANTIES
Section 4.01.	Representations and Warranties of the Company	5
Section 4.02.	Representations and Warranties of the Stockholders	5
	ARTICLE V
	DEFINITIONS
Section 5.01.	“Affiliate”	6
Section 5.02.	“BDTV Entities”	6
Section 5.03.	“Beneficial Ownership”	6
Section 5.04.	“Chairman”	7
Section 5.05.	“Chairman Termination Date”	7
Section 5.06.	“Commission”	7
Section 5.07.	“Company”	7
Section 5.08.	“Company Common Shares”	7
Section 5.09.	“Company Class B Stock”	7
Section 5.10.	“Company Common Stock”	7
Section 5.11.	“Consenting Party”	7
Section 5.12.	“Demand Registration”	7
Section 5.13.	“Disabled”	7
Section 5.14.	“EBITDA”	7
Section 5.15.	“Equity Securities”	7
Section 5.16.	“Exchange Act”	7
Section 5.17.	“Excluded Issuance”	8
Section 5.18.	“Fair Market Value”	8
Section 5.19.	“IAC Governance Agreement”	8

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Section 5.20.	“Issue Price”	8
Section 5.21.	“Liberty Director”	8
Section 5.22.	“Liberty Holdco”	9
Section 5.23.	“Ownership Percentage”	9
Section 5.24.	“Permitted Transferee”	9
Section 5.25.	“Person”	9
Section 5.26.	“Sale Transaction”	9
Section 5.27.	“Securities Act”	9
Section 5.28.	“Stockholders”	9
Section 5.29.	“Stockholders Group”	9
Section 5.30.	“Stockholders Agreement”	9
Section 5.31.	“Subsidiary”	9
Section 5.32.	“Third Party Transferee”	10
Section 5.33.	“Total Debt”	10
Section 5.34.	“Total Debt Ratio”	10
Section 5.35.	“Total Equity Securities”	10
Section 5.36.	“Transfer”	10
Section 5.37.	“Voting Securities”	10
	ARTICLE VI
	MISCELLANEOUS
Section 6.01.	Notices	11
Section 6.02.	Amendments; No Waivers	12
Section 6.03.	Successors And Assigns	12
Section 6.04.	Governing Law; Consent To Jurisdiction	13
Section 6.05.	Counterparts	13
Section 6.06.	Specific Performance	13
Section 6.07.	Registration Rights	13
Section 6.08.	Termination	14
Section 6.09.	Severability	14
Section 6.10.	Cooperation	14
Section 6.11.	Adjustment Of Share Numbers	15
Section 6.12.	Effective Time	15
Section 6.13.	Entire Agreement	15
Section 6.14.	Interpretation	15
Section 6.15.	Headings	15

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EXECUTION COPY

Governance Agreement

Governance Agreement, dated as of August 9, 2005, among Expedia, Inc., a Delaware corporation (“Expedia,” or the “Company”), Liberty Media Corporation, for itself and on behalf of the members of its Stockholder Group (“Liberty”) and Mr. Barry Diller (“Mr. Diller”) for himself and on behalf of the members of his Stockholder Group.

WHEREAS, the Company, Liberty and Mr. Diller desire to establish in this Agreement certain provisions concerning Liberty’s and Mr. Diller’s relationships with the Company.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the Company, Liberty and Mr. Diller hereby agree as follows:

ARTICLE I

TRANSFEREES

No Third Party Transferee shall have any rights or obligations under this Agreement, except as specifically provided for in this Agreement and except that if such Third Party Transferee shall acquire Beneficial Ownership of more than 5% of the outstanding Total Equity Securities upon consummation of any Transfer or series of related Transfers from a Stockholder, to the extent such Stockholder has the right to Transfer a Demand Registration and assigns such right in connection with a Transfer, such Third Party Transferee shall have the right to initiate one or more Demand Registrations pursuant to Section 6.07 or any registration rights agreement that replaces or supersedes Section 6.07 (and shall be entitled to such other rights that a Stockholder would have applicable to such Demand Registration), subject to the obligations of such Stockholder applicable to such demand (and the number of Demand Registrations to which such Stockholder is entitled under Section 6.07 hereof shall be correspondingly decreased).

ARTICLE II

BOARD OF DIRECTORS AND RELATED MATTERS

Section 2.01. Board of Directors.

(a) Liberty shall have the right to nominate up to two Liberty Directors so long as Liberty Beneficially Owns at least 33,651,963 Equity Securities (so long as the Ownership Percentage of Liberty is at least equal to 15% of the Total Equity Securities. Liberty shall have the right to nominate one Liberty Director so long as Liberty Beneficially Owns at least 22,434,642 Equity Securities (so long as Liberty’s Ownership Percentage is at least equal to 5% of the Total Equity Securities). As of the date hereof, the Liberty Directors are John C. Malone and Robert R. Bennett.

(b) The Company shall cause each Liberty Director to be included in the slate of nominees recommended by the Board of Directors to the Company’s stockholders for election as directors at each annual meeting of the stockholders of the Company and shall use all

reasonable efforts to cause the election of each Liberty Director, including soliciting proxies in favor of the election of such persons.

(c) Within a reasonable time prior to the filing with the Commission of its proxy statement or information statement with respect to each meeting of stockholders at which directors are to be elected, the Company shall, to the extent Liberty is entitled to representation on the Company’s Board of Directors in accordance with this Agreement, provide Liberty with the opportunity to review and comment on the information contained in such proxy or information statement applicable to the director nominees designated by Liberty.

(d) In the event that a vacancy is created at any time by the death, disability, retirement, resignation or removal (with or without cause) of any Liberty Director, Liberty shall have the right to designate a replacement Liberty Director to fill such vacancy, and the Company agrees to use its best efforts to cause such vacancy to be filled with the replacement Liberty Director so designated. Upon the written request of Liberty, each Stockholder shall vote (and cause each of the members of its Stockholder Group to vote, if applicable), or act by written consent with respect to, all Equity Securities Beneficially Owned by it and otherwise take or cause to be taken all actions necessary to remove the director designated by Liberty and to elect any replacement director designated by Liberty as provided in the first sentence of this Section 2.01(d).

Section 2.02. Management of the Business. Except as indicated in Section 2.03 below or as required by Delaware law or the Certificate of Incorporation of the Company and the By-Laws and the agreements contemplated thereby, Mr. Diller, so long as he is Chairman and has not become Disabled, will continue to have full authority to operate the day-to-day business affairs of the Company to the same extent as prior to the date hereof. The Company shall use its reasonable best efforts to cause one Liberty Director designated by Liberty for such purpose to be appointed as a member of a committee of the Board of Directors and, to the extent such person qualifies under applicable law (including stock exchange or NASDAQ requirements, as applicable, and tax laws) and Section 16(b) under the Exchange Act or other similar requirements, all committees and subcommittees of the Board of Directors that make determinations relating to the compensation of executives of the Company.

Section 2.03. Contingent Matters. So long as Liberty or Mr. Diller Beneficially Owns, in the case of Liberty, at least 29,912,856 Equity Securities (including all Equity Securities held by the BDTV Entities) (so long as such Ownership Percentage equals at least 5% of the Total Equity Securities), or, in the case of Mr. Diller, at least five million Company Common Shares with respect to which he has a pecuniary interest and the Chairman Termination Date (as defined in the Stockholders Agreement and not as defined in this Agreement) has not occurred and Mr. Diller has not become Disabled, neither the Company nor any Subsidiary shall take any of the following actions (any such action, a “Contingent Matter”) without the prior approval of Mr. Diller and/or Liberty, whichever (or both) satisfy the foregoing Beneficial Ownership requirements:

(a) any transaction not in the ordinary course of business, launching new or additional channels or engaging in any new field of business, in any case, that will result in, or will have a reasonable likelihood of resulting in, Liberty or Mr. Diller or any Affiliate thereof

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being required under law to divest itself of all or any part of its Beneficial Ownership of Company Common Shares, or interests therein, or any other material assets of such Person, or that will render such Person’s continued ownership of such securities, shares, interests or assets illegal or subject to the imposition of a fine or penalty or that will impose material additional restrictions or limitations on such Person’s full rights of ownership (including, without limitation, voting) thereof or therein. This Contingent Matter will be applied based only on the Beneficial Ownership of Company Common Shares, interests therein or other material assets of Liberty or Mr. Diller or any Affiliate thereof as of the date hereof; or

(b) if the Total Debt Ratio continuously equals or exceeds 4:1 over a twelve-month period, then, for so long as the Total Debt Ratio continues to equal or exceed 4:1:

(i) any acquisition or disposition (including pledges), directly or indirectly, by the Company or any of its Subsidiaries of any assets (including debt and/or equity securities) or business (by merger, consolidation or otherwise), the grant or issuance of any debt or equity securities of the Company or any of its Subsidiaries (other than, in the case of any of the foregoing, as contemplated by Section 3.01 of this Agreement), the redemption, repurchase or reacquisition of any debt or equity securities of the Company or any of its Subsidiaries, by the Company or any such Subsidiary, or the incurrence of any indebtedness, or any combination of the foregoing, in any such case, in one transaction or a series of transactions in a six-month period, with a value of 10% or more of the market value of the Total Equity Securities at the time of such transaction, provided that the prepayment, redemption, repurchase or conversion of prepayable, callable, redeemable or convertible securities in accordance with the terms thereof shall not be a transaction subject to this paragraph;

(ii) voluntarily commencing any liquidation, dissolution or winding up of the Company or any material Subsidiary;

(iii) any material amendments to the Certificate of Incorporation or Bylaws of the Company (including the issuance of preferred stock pursuant to the “blank check” authorization in the Certificate of Incorporation, having super voting rights (more than 1 vote per share) or entitled to vote as a class on any matter (except to the extent such class vote is required by Delaware law or to the extent the holder of such preferred stock may have the right to elect directors upon the occurrence of a default in payment of dividends or redemption price));

(iv) engagement by the Company in any line of business other than online and offline travel services and products and related businesses, or other businesses engaged in by the Company as of the date of determination of the Total Debt Ratio;

(v) adopting any stockholder rights plan (or any other plan or arrangement that could reasonably be expected to disadvantage any stockholder on the basis of the size or voting power of its shareholding) that would adversely affect Liberty or Mr. Diller; and

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(vi) entering into any agreement with any holder of Equity Securities in such stockholder’s capacity as such, which grants such stockholder approval rights similar in type and magnitude to those set forth in this Section 2.03.

Section 2.04. Notice of Events. In the event that (a) the Company intends to engage in a transaction of a type that is described in Section 2.03, and (b) the Company does not intend to seek consent from Liberty and/or Mr. Diller, whichever (or both) are required to consent to a Contingent Matter (a “Consenting Party”) due to the Company’s good faith belief that the specific provisions of Section 2.03 do not require such consent but that reasonable people acting in good faith could differ as to whether consent is required pursuant to such Section, the Company shall notify the Consenting Parties as to the material terms of the transaction (including the Company’s estimate of the timing thereof) by written notice (including a statement of the Total Debt Ratio) delivered as far in advance of engaging in such transaction as is reasonably practicable unless such transaction was previously publicly disclosed.

ARTICLE III

PREEMPTIVE RIGHTS

Section 3.01. Liberty Preemptive Rights. (a) In the event that after the date hereof, the Company issues or proposes to issue (other than to the Company and its Affiliates or Liberty and its Affiliates, and other than pursuant to an Excluded Issuance) any Company Common Shares (including Company Common Shares issued upon exercise, conversion or exchange of options, warrants and convertible securities (other than shares of Company Common Stock issued upon conversion of shares of Company Class B Stock) and such issuance, together with any prior issuances aggregating less than 1% with respect to which Liberty’s preemptive right has not become exercisable, shall be in excess of 1% of the total number of Company Common Shares outstanding after giving effect to such issuance (an “Additional Issuance”), the Company shall give written notice to Liberty not later than five business days after the issuance, specifying the number of Company Common Shares issued or to be issued and the Issue Price (if known) per share. To the extent that, as of the date hereof, Common Shares (as such term is defined in the Amended and Restated Stockholders Agreement, of even date herewith, between Liberty and Diller with respect to IAC/InterActiveCorp) have been issued aggregating less than 1% with respect to which Liberty’s preemptive right has not become exercisable under the IAC Governance Agreement, such prior issuances shall be included in calculating the threshold applicable to issuances of Company Common Shares hereunder on the same basis as the exercisability of preemptive rights under the IAC Governance Agreement. Liberty shall have the right (but not the obligation) to purchase or cause one or more of the Liberty Holdcos to purchase for cash a number (but not less than such number) of Company Common Shares (allocated between Company Common Stock and Company Class B Stock in the same proportion as the issuance or issuances giving rise to the preemptive right hereunder (including any such prior issuances by IAC/InterActiveCorp), except to the extent that Liberty opts to receive Company Common Stock in lieu of Company Class B Common Stock), so that Liberty and the Liberty Holdcos shall collectively maintain the identical percentage equity Beneficial Ownership interest in the Company that Liberty and the Liberty Holdcos collectively owned immediately prior to the notice from the Company to Liberty described in the first sentence of

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this paragraph (but not in excess of 20.01% of the outstanding Total Equity Securities) after giving effect to such Additional Issuance and to shares of Company Common Stock that are to be issued to Liberty and the Liberty Holdcos pursuant to this Section 3.01 by sending an irrevocable written notice to the Company not later than fifteen business days after receipt of such notice (or, if later, two business days following the determination of the Issue Price) from the Company that it elects to purchase or to cause one or more of the Liberty Holdcos to purchase all of such Company Common Shares (the “Additional Shares”). The closing of the purchase of Additional Shares shall be the later of ten business days after the delivery of the notice of election by Liberty and five business days after receipt of any necessary regulatory approvals.

(b) The purchase or redemption of any Company Common Shares by the Company or any of its Affiliates shall not result in an increase in the percentage of Company equity that Liberty may be entitled to acquire pursuant to the preemptive right in paragraph 3.01(a) above.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.01. Representations and Warranties of the Company. The Company represents and warrants to Mr. Diller and Liberty that (a) the Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunder, (b) the execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly 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 any of the transactions contemplated hereby, (c) this Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, and, assuming this Agreement constitutes a valid and binding obligation of each Stockholder, is enforceable against the Company in accordance with its terms, (d) neither the execution, delivery or performance of this Agreement by the Company constitutes a breach or violation of or conflicts with the Company’s Certificate of Incorporation or By-laws or any material agreement to which the Company is a party and (e) none of such material agreements would impair in any material respect the ability of the Company to perform its obligations hereunder.

Section 4.02. Representations and Warranties of the Stockholders. Each Stockholder, severally as to itself (and, in the case of Mr. Diller, as applicable), represents and warrants to the Company and the other Stockholder that (a) it is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and he or it, as the case may be, has the power and authority (corporate or otherwise) to enter into this Agreement and to carry out his or its obligations hereunder, (b) the execution and delivery of this Agreement by such Stockholder and the consummation by such Stockholder of the transactions contemplated hereby have been duly authorized by all necessary action on the part of such Stockholder and no other proceedings on the part of such Stockholder are necessary to authorize this Agreement or any of the transactions contemplated hereby, (c) this Agreement has been duly executed and

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delivered by such Stockholder and constitutes a valid and binding obligation of such Stockholder, and, assuming this Agreement constitutes a valid and binding obligation of the Company, is enforceable against such Stockholder in accordance with its terms, (d) neither the execution, delivery or performance of this Agreement by such Stockholder constitutes a breach or violation of or conflicts with its certificate of incorporation or by-laws (or similar governing documents) or any material agreement to which such Stockholder is a party and (e) none of such material agreements would impair in any material respect the ability of such Stockholder to perform its obligations hereunder.

ARTICLE V

DEFINITIONS

For purposes of this Agreement, the following terms shall have the following meanings:

Section 5.01. “Affiliate” shall have the meaning set forth in Rule 12b-2 under the Exchange Act (as in effect on the date of this Agreement). For purposes of this definition, (i) natural persons shall not be deemed to be Affiliates of each other, (ii) none of Mr. Diller, Liberty or any of their respective Affiliates shall be deemed to be an Affiliate of the Company or its Affiliates, (iii) none of the Company, Liberty or any of their respective Affiliates shall be deemed to be an Affiliate of Mr. Diller or his Affiliates, (iv) none of the Company, Mr. Diller or any of their respective Affiliates shall be deemed to be an Affiliate of Liberty or its Affiliates, and (v) the Company shall not be deemed to be an Affiliate of IAC/InterActiveCorp based upon the common control of the Company and IAC/InterActiveCorp by the Stockholders.

Section 5.02. “BDTV Entities” shall have the meaning specified in the Stockholders Agreement.

Section 5.03. “Beneficial Ownership” or “Beneficially Own” shall have the meaning given such term in Rule 13d-3 under the Exchange Act and a Person’s Beneficial Ownership of Company Common Shares shall be calculated in accordance with the provisions of such Rule; provided, however, that for purposes of Beneficial Ownership, (a) a Person shall be deemed to be the Beneficial Owner of any Equity Securities which may be acquired by such Person (disregarding any legal impediments to such Beneficial Ownership), whether within 60 days or thereafter, upon the conversion, exchange or exercise of any warrants, options (which options held by Mr. Diller shall be deemed to be exercisable), rights or other securities issued by the Company or any Subsidiary thereof, (b) no Person shall be deemed to Beneficially Own any Equity Securities solely as a result of such Person’s execution of this Agreement (including by virtue of holding a proxy with respect to any Equity Securities), or the Stockholders Agreement, or with respect to which such Person does not have a pecuniary interest, and (c) Liberty shall be deemed to be the Beneficial Owner of all of the Company Common Shares held by each BDTV Entity.

Section 5.04. “Chairman” shall mean the Chairman of the Board of Directors of the Company or any successor entity.

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Section 5.05. “Chairman Termination Date” shall mean the date that Mr. Diller no longer serves as Chairman.

Section 5.06. “Commission” shall mean the Securities and Exchange Commission.

Section 5.07. “Company” shall have the meaning set forth in the Recitals to this Agreement.

Section 5.08. “Company Common Shares” shall mean shares of Company Common Stock and Company Class B Stock.

Section 5.09. “Company Class B Stock” shall mean class B common stock, $0.001 par value per share, of the Company.

Section 5.10. “Company Common Stock” shall mean common stock, $0.001 par value per share, of the Company.

Section 5.11. “Consenting Party” shall have the meaning set forth in Section 2.03 of this Agreement.

Section 5.12. “Demand Registration” shall have the meaning set forth in Section 6.07(b) of this Agreement.

Section 5.13. “Disabled” shall mean the disability of Mr. Diller after the expiration of more than 180 consecutive days after its commencement which is determined to be total and permanent by a physician selected by Liberty and reasonably acceptable to Mr. Diller, his spouse or a personal representative designated by Mr. Diller; provided that Mr. Diller shall be deemed to be disabled only following the expiration of 90 days following receipt of a written notice from the Company and such physician specifying that a disability has occurred if within such 90-day period he fails to return to managing the business affairs of the Company. Total disability shall mean mental or physical incapacity that prevents Mr. Diller from managing the business affairs of the Company.

Section 5.14. “EBITDA” shall mean, for any period, for the Company and its Subsidiaries, on a combined consolidated basis: net income plus (to the extent reflected in the determination of net income) (i) provision for income taxes, (ii) minority interest, (iii) interest income and expense, (iv) depreciation and amortization, (v) amortization of cable distribution fees, and (vi) amortization of non-cash distribution and marketing expense and non-cash compensation expense.

Section 5.15. “Equity Securities” shall mean the equity securities of the Company calculated on a Company Common Stock equivalent basis, including the Company Common Shares and those shares issuable upon exercise, conversion or redemption of other securities of the Company not otherwise included in this definition.

Section 5.16. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

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Section 5.17. “Excluded Issuance” shall mean any issuance of Company Common Shares (i) in a Sale Transaction, or (ii) which is “restricted stock” or the ownership of which is otherwise subject to forfeiture (“Restricted Stock”), provided that for purposes of this definition and Section 3.01 of this Agreement any stock covered by the provisions of clause (ii) shall be deemed to have been issued for purposes of Section 3.01 of this Agreement on the date (the “Lapse Date”) the restrictions on such stock lapse or on which the stock is no longer subject to forfeiture.

Section 5.18. “Fair Market Value” for a security publicly traded in the over-the-counter market (on either NASDAQ-NMS or NASDAQ) or on a recognized exchange shall be the average closing price of such security for the three trading days ending on the applicable day (or, if such day is not a trading day, the trading day immediately preceding the applicable day), and for all other securities or property “Fair Market Value” shall be determined, by a nationally recognized investment banking firm which has not been engaged by the Company or Liberty or their respective Affiliates (including with respect to the Company, for so long as Mr. Diller is Chief Executive Officer of IAC/InterActiveCorp, IAC/InterActiveCorp) for the prior three years, selected by (i) the Company and (ii) Liberty; provided that, if the Company and Liberty cannot agree on such an investment banking firm within 10 business days, such investment banking firm shall be selected by a panel designated in accordance with the rules of the American Arbitration Association. The fees, costs and expenses of the American Arbitration Association and the investment banking firm so selected shall be borne equally by the Company and Liberty.

Section 5.19. “IAC Governance Agreement” shall mean the Amended and Restated Governance Agreement, of even date herewith, among IAC/InterActiveCorp, Liberty and Mr. Diller.

Section 5.20. “Issue Price” shall mean the price per share equal to (i) in connection with an underwritten offering of Company Common Shares, the initial price at which the stock is offered to the public or other investors, (ii) in connection with other sales of Company Common Shares for cash, the cash price paid for such stock, (iii) in connection with the deemed issuances of Restricted Stock, the Fair Market Value of the stock on the Lapse Date (as defined in the definition of “Excluded Issuance” above), (iv) in connection with the issuance of Company Common Shares as consideration in an acquisition by the Company, the average of the Fair Market Value of the stock for the five trading days ending on the third trading day immediately preceding (a) the date upon which definitive agreements with respect to such acquisition were entered into if the number of Company Common Shares issuable in such transaction is fixed on that date, or (b) such later date on which the consideration, or remaining portion thereof, issuable in such transaction becomes fixed, (v) in connection with a compensatory issuance of shares of Company Common Shares, the Fair Market Value of the Company Common Stock, and (vi) in all other cases, including, without limitation, in connection with the issuance of Company Common Shares pursuant to an option, warrant or convertible security (other than in connection with issuances described in clause (v) above), the Fair Market Value of the Company Common Shares on the date of issuance.

Section 5.21. “Liberty Director” shall mean (a) any executive officer or director of Liberty designated by Liberty to serve on the Company’s Board of Directors, provided that the Company’s Board of Directors is not unable, in the exercise of its fiduciary responsibilities, to

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recommend that the Company’s stockholders elect such individual to serve on the Company’s Board of Directors, or (b) any other Person designated by Liberty who is reasonably acceptable to the Company.

Section 5.22. “Liberty Holdco” shall mean any holding company wholly owned by Liberty and reasonably acceptable to the Company, formed solely for the purpose of acquiring and holding an equity interest in the Company.

Section 5.23. “Ownership Percentage” means, with respect to any Stockholder, at any time, the ratio, expressed as a percentage, of (i) the Equity Securities Beneficially Owned by such Stockholder (disregarding any legal impediments to such Beneficial Ownership) and its Affiliates to (ii) the sum of (x) the Total Equity Securities and (y) with respect to such Stockholder, any Company Common Shares included in clause (i) that are issuable upon conversion, exchange or exercise of Equity Securities that are not included in clause (x).

Section 5.24. “Permitted Transferee” shall mean Liberty or Mr. Diller and the members of their respective Stockholder Groups.

Section 5.25. “Person” shall mean any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization, government or department or agency of a government.

Section 5.26. “Sale Transaction” shall mean the consummation of a merger, consolidation or amalgamation between the Company and another entity (other than an Affiliate of the Company) in which the Company is acquired by such other entity or a Person who controls such entity, or a sale of all or substantially all of the assets of the Company to another entity, other than a Subsidiary of the Company.

Section 5.27. “Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

Section 5.28. “Stockholders” shall mean Liberty and Mr. Diller.

Section 5.29. “Stockholder Group” shall mean (a) in respect of Liberty, the Liberty Stockholder Group (as defined in the Stockholders Agreement) and (b) in respect of Mr. Diller, the Diller Stockholder Group (as defined in the Stockholders Agreement).

Section 5.30. “Stockholders Agreement” shall mean the stockholders agreement dated as of the date hereof between Liberty and Mr. Diller.

Section 5.31. “Subsidiary” shall mean, as to any Person, any corporation or other Person at least a majority of the shares of stock or other ownership interests of which having general voting power under ordinary circumstances to elect a majority of the Board of Directors or similar governing body of such corporation or other entity (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency) is, at the time as of which the determination is being made, owned by such Person, or one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries.

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Section 5.32. “Third Party Transferee” shall have the meaning ascribed to such term in the Stockholders Agreement.

Section 5.33. “Total Debt” shall mean all obligations of the Company and its Subsidiaries for money borrowed, at such time (including all long-term senior and subordinated indebtedness, all short-term indebtedness, the stated amount of all letters of credit issued for the account of the Company or any of its Subsidiaries and (without duplication) all unreimbursed draws thereunder (but excluding trade letters of credit)), net of cash (other than working capital) or cash equivalent securities, as shown on the consolidated quarterly or annual financial statements, including the notes thereto, of the Company and its Subsidiaries included in the Company’s filings under the Exchange Act for such period, determined in accordance with GAAP, provided, however, that Total Debt shall not include hedging, pledging, securitization or similar transactions involving securities owned by the Company or its Subsidiaries to monetize the underlying securities, to the extent such securities are the sole means of satisfying such obligations and otherwise the fair value thereof.

Section 5.34. “Total Debt Ratio” shall mean, at any time, the ratio of (i) Total Debt of the Company and its Subsidiaries on a combined consolidated basis as of such time to (ii) EBITDA for the four fiscal quarter period ending as of the last day of the most recently ended fiscal quarter as of such time.

Section 5.35. “Total Equity Securities” at any time shall mean, subject to the next sentence, the total number of the Company’s outstanding equity securities calculated on a Company Common Stock equivalent basis. Any Equity Securities Beneficially Owned by a Person that are not outstanding Voting Securities but that, upon exercise, conversion or exchange, would become Voting Securities, shall be deemed to be outstanding for the purpose of computing Total Equity Securities and the percentage of Equity Securities owned by such Person but shall not be deemed to be outstanding for the purpose of computing Total Equity Securities and the percentage of the Equity Securities owned by any other Person.

Section 5.36. “Transfer” shall mean, directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Company Common Shares Beneficially Owned by such Stockholder or any interest in any Company Common Shares Beneficially Owned by such Stockholder, provided, however, that, a merger or consolidation in which a Stockholder is a constituent corporation shall not be deemed to be the Transfer of any Company Common Shares Beneficially Owned by such Stockholder (provided, that a significant purpose of any such transaction is not to avoid the provisions of this Agreement). For purposes of this Agreement, the conversion of Company Class B Stock into Company Common Stock shall not be deemed to be a Transfer.

Section 5.37. “Voting Securities” shall mean at any particular time the shares of any class of capital stock of the Company which are then entitled to vote generally in the election of directors.

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ARTICLE VI

MISCELLANEOUS

Section 6.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy) and shall be given, if to Liberty Media Corporation, to:

Liberty Media Corporation

12300 Liberty Boulevard

Englewood, Colorado 80112

Attention: General Counsel

Facsimile: (720) 875-5382

with a copy to:

Baker Botts L.L.P.

30 Rockefeller Plaza

44^th Floor New York,

New York 10112

Attention: Frederick H. McGrath

Facsimile: (212) 408-2501

if to Mr. Diller, to:

Barry Diller

Chairman

Expedia, Inc.

c/o IAC/InterActiveCorp

Carnegie Hall Tower

152 West 57th Street

New York, New York 10019

Facsimile: (212) 632-9642

with a copy to:

Expedia, Inc.

3150 139th Avenue SE

Bellevue, WA 98005

Attention: General Counsel

Facsimile: (425) 679-7251

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with a copy to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Attention: Pamela S. Seymon

                 Andrew J. Nussbaum

Facsimile: (212) 403-2000

if to the Company, to:

Expedia, Inc.

3150 139th Avenue SE

Bellevue, WA 98005

Attention: General Counsel

Facsimile: (425) 679-7251

with a copy to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Attention: Pamela S. Seymon

                 Andrew J. Nussbaum

Facsimile: (212) 403-2000

or such address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective when delivered personally, telegraphed, or telecopied, or, if mailed, five business days after the date of the mailing.

Section 6.02. Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the party whose rights or obligations hereunder are affected by such amendment, or in the case of a waiver, by the party or parties against whom the waiver is to be effective. Any amendment or waiver by the Company shall be authorized by a majority of the Board of Directors (excluding for this purpose any director who is a Liberty Director as provided for in this Agreement).

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 6.03. Successors And Assigns. Except as provided in Article I, neither this Agreement nor any of the rights or obligations under this Agreement shall be assigned, in whole or in part (except by operation of law pursuant to a merger of Liberty with another Person a

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significant purpose of which is not to avoid the provisions of this Agreement), by any party without the prior written consent of the other parties hereto. Subject to the foregoing, the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

Section 6.04. Governing Law; Consent To Jurisdiction. This Agreement shall be construed in accordance with and governed by the internal laws of the State of Delaware, without giving effect to the principles of conflicts of laws. Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the non-exclusive jurisdiction of the courts of the State of Delaware, for any action, proceeding or investigation in any court or before any governmental authority (“Litigation”) arising out of or relating to this Agreement and the transactions contemplated hereby and further agrees that service of any process, summons, notice or document by U.S. mail to its respective address set forth in this Agreement shall be effective service of process for any Litigation brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of this Agreement or the transactions contemplated hereby in the courts of the State of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum. Each of the parties irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any and all rights to trial by jury in connection with any Litigation arising out of or relating to this Agreement or the transactions contemplated hereby.

Section 6.05. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

Section 6.06. Specific Performance. The Company, Mr. Diller and Liberty each acknowledges and agrees that the parties’ respective remedies at law for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and, in recognition of that fact, agrees that, in the event of a breach or threatened breach by the Company or Liberty of the provisions of this Agreement, in addition to any remedies at law, Mr. Diller, Liberty and the Company, respectively, without posting any bond shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.

Section 6.07. Registration Rights. (a) Liberty and Mr. Diller shall be entitled to customary registration rights relating to Company Common Stock owned by them as of the date hereof or acquired from the Company (including upon conversion of Company Class B Stock) in the future (including the ability to transfer registration rights as set forth in this Agreement in connection with the sale or other disposition of Company Common Stock).

(b) If requested by a Stockholder, the Company shall be required promptly to cause the Company Common Stock owned by such Stockholder or its Affiliates to be registered under the Securities Act in order to permit such Stockholder or such Affiliate to sell such shares in one or more (but not more than (i) in the case of Liberty, four and (ii) in the case of Mr. Diller, three) registered public offerings (each, a “Demand Registration”). Each Stockholder shall also

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be entitled to customary piggyback registration rights. If the amount of shares sought to be registered by a Stockholder and its Affiliates pursuant to any Demand Registration is reduced by more than 25% pursuant to any underwriters’ cutback, then such Stockholder may elect to request the Company to withdraw such registration, in which case, such registration shall not count as one of such Stockholder’s Demand Registrations. If a Stockholder requests that any Demand Registration be an underwritten offering, then such Stockholder shall select the underwriter(s) to administer the offering, provided that such underwriter(s) shall be reasonably satisfactory to the Company. If a Demand Registration is an underwritten offering and the managing underwriter advises the Stockholder initiating the Demand Registration in writing that in its opinion the total number or dollar amount of securities proposed to be sold in such offering is such as to materially and adversely affect the success of such offering, then the Company will include in such registration, first, the securities of the initiating Stockholder, and, thereafter, any securities to be sold for the account of others who are participating in such registration (as determined on a fair and equitable basis by the Company). In connection with any Demand Registration or inclusion of a Stockholder’s or its Affiliate’s shares in a piggyback registration, the Company, such Stockholder and/or its Affiliates shall enter into an agreement containing terms (including representations, covenants and indemnities by the Company and such Stockholder), and shall be subject to limitations, conditions, and blackout periods, customary for a secondary offering by a selling stockholder. The costs of the registration (other than underwriting discounts, fees and commissions) shall be paid by the Company. The Company shall not be required to register such shares if a Stockholder would be permitted to sell the Company Common Stock in the quantities proposed to be sold at such time in one transaction under Rule 144 of the Securities Act or under another comparable exemption therefrom.

(c) If the Company and a Stockholder cannot agree as to what constitutes customary terms within ten days of such Stockholder’s request for registration (whether in a Demand Registration or a piggyback registration), then such determination shall be made by a law firm of national reputation mutually acceptable to the Company and such Stockholder.

Section 6.08. Termination. Except as otherwise provided in this Agreement, this Agreement shall terminate (a) as to Liberty, at such time that Liberty Beneficially Owns Equity Securities representing less than 5% of the Total Equity Securities and (b) as to Mr. Diller, at such time that the Chairman Termination Date has occurred or at such time as he becomes Disabled. In respect of “Contingent Matters,” such provisions shall terminate as to Mr. Diller and Liberty as set forth therein.

Section 6.09. 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, provided that the parties hereto shall negotiate in good faith to attempt to place the parties in the same position as they would have been in had such provision not been held to be invalid, void or unenforceable.

Section 6.10. Cooperation. Each of Liberty and Mr. Diller covenants and agrees with the other to use its reasonable best efforts to cause the Company to fulfill the Company’s obligations under this Agreement.

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Section 6.11. Adjustment Of Share Numbers and Prices. If, after the effective time of this Agreement, there is a subdivision, split, stock dividend, combination, reclassification or similar event with respect to any of the shares of capital stock referred to in this Agreement, then, in any such event, the numbers and types of shares of such capital stock referred to in this Agreement and, if applicable, the prices of such shares, shall be adjusted to the number and types of shares of such capital stock that a holder of such number of shares of such capital stock would own or be entitled to receive as a result of such event if such holder had held such number of shares immediately prior to the record date for, or effectiveness of, such event, and the prices for such shares shall be similarly adjusted.

Section 6.12. Effective Time. This Agreement shall become effective as of the date hereof.

Section 6.13. Entire Agreement. Except as otherwise expressly set forth herein, this Agreement and the Stockholders Agreement, and as provided in Section 5.1 of the Stockholders Agreement, the 1997 IAC Stockholders Agreement (as defined in the Stockholders Agreement) embody the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way (including, without limitation, effective upon the date hereof, all stockholders agreements relating to the Company (other than the Stockholders Agreement) between Liberty and Mr. Diller).

Section 6.14. Interpretation. References in this Agreement to Articles and Sections shall be deemed to be references to Articles and Sections of this Agreement unless the context shall otherwise require. 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 and not to any particular provision of such agreement or instrument.

Section 6.15. Headings. The titles of Articles and Sections of this Agreement are for convenience only and shall not be interpreted to limit or otherwise affect the provisions of this Agreement.

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IN WITNESS WHEREOF, the parties hereto have caused this Governance Agreement to be duly executed as of the day and year first above written.

EXPEDIA, INC.
By	/s/ KEENAN M. CONDER
	Name: Keenan M. Conder
	Title: Senior Vice President

LIBERTY MEDIA CORPORATION
By	/s/ CHARLES Y. TANABE
	Name: Charles Y. Tanabe
	Title: Senior Vice President

/s/ BARRY DILLER

BARRY DILLER

[SIGNATURE PAGE TO GOVERNANCE AGREEMENT]

EX-10.7

Exhibit 10.7

EXECUTION COPY

STOCKHOLDERS AGREEMENT

between

LIBERTY MEDIA CORPORATION

and

BARRY DILLER

Dated as of August 9, 2005

EXPEDIA, INC.

TABLE OF CONTENTS

	PAGE
ARTICLE I     DEFINITIONS	1
Section 1.1. Certain Defined Terms	1
Section 1.2. Other Defined Terms	6
Section 1.3. Other Definitional Provisions	7
ARTICLE II     RESERVED	7
ARTICLE III     CORPORATE GOVERNANCE	7
Section 3.1. Voting on Certain Matters	7
Section 3.2. Restrictions on Other Agreements	8
Section 3.3. Irrevocable Proxy of Liberty	8
Section 3.4. Cooperation	9
ARTICLE IV     TRANSFER OF COMMON SHARES	10
Section 4.1. Restrictions on Transfer by Liberty and Diller	10
Section 4.2. Tag-Along for Diller and Liberty for Transfers by the Other	11
Section 4.3. Right of First Refusal Between Liberty and Diller	14
Section 4.4. Transfers of Class B Shares	16
Section 4.5. Transferees	17
Section 4.6. Notice of Transfer	18
Section 4.7. Compliance with Transfer Provisions	18
ARTICLE V     BDTV ENTITY ARRANGEMENTS	18
Section 5.1. Management	18
Section 5.2. Changes to BDTV Structures	19
Section 5.3. Transfers of BDTV Interests	19
ARTICLE VI     MISCELLANEOUS	20
Section 6.1. Conflicting Agreements	20
Section 6.2. Duration of Agreement	20
Section 6.3. Further Assurances	20
Section 6.4. Amendment and Waiver	20
Section 6.5. Severability	20
Section 6.6. Effective Time	21
Section 6.7. Entire Agreement	21
Section 6.8. Successors and Assigns	21
Section 6.9. Counterparts	21
Section 6.10. Liabilities Under Federal Securities Laws	21
Section 6.11. Remedies	21
Section 6.12. Notices	21
Section 6.13. Adjustment of Shares Numbers	22
Section 6.14. Governing Law; Consent to Jurisdiction	23
Section 6.15. Interpretation	23

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STOCKHOLDERS AGREEMENT, dated as of August 9, 2005, between Liberty Media Corporation, a Delaware corporation (“Liberty”), for itself and on behalf of the members of the Liberty Stockholder Group and Mr. Barry Diller (“Diller”), for himself and on behalf of the members of the Diller Stockholder Group.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Certain Defined Terms. As used herein, the following terms shall have the following meanings:

“1997 IAC Stockholders Agreement” means the Stockholders Agreement, dated as of October 19, 1997, among Universal Studios, Inc., Liberty, Diller and The Seagram Company Ltd., as in effect as of such date and without giving effect to any termination of such agreement (including in connection with the execution of any agreement intended to supersede such agreement).

“Affiliate” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such specified Person, for so long as such Person remains so associated to the specified Person. For purposes of this definition, natural persons shall not be deemed to be Affiliates of each other, and none of Liberty, Diller or the Company shall be deemed to be Affiliates of any of the others. In addition, for purposes of this definition, IAC/InterActiveCorp and the Company shall not be deemed Affiliates of one another as a result of such entities being under the common control of the Stockholders.

“Agreement” means this Stockholders Agreement as it may be amended, supplemented, restated or modified from time to time.

“BDTV I” means BDTV, Inc., a Delaware corporation.

“BDTV II” means BDTV II, Inc., a Delaware corporation.

“BDTV III” means BDTV III, Inc., a Delaware corporation.

“BDTV IV” means BDTV IV, Inc., a Delaware corporation.

“BDTV Entities” means, collectively, the BDTV Limited Entities and the BDTV Unrestricted Entities.

“BDTV Limited Entities” means, collectively, BDTV I and BDTV II.

“BDTV Unrestricted Entities” means BDTV III, BDTV IV and each other BDTV Entity that may be formed subsequent to the date hereof; provided that each of Liberty and Diller

acknowledges and agrees that any corporation, partnership, limited liability company or other business association hereafter formed by Diller and Liberty to hold Common Shares will be a BDTV Unrestricted Entity and will be a corporation, partnership, limited liability company or other business association having a capital structure and governance rights substantially similar to that of BDTV III.

“beneficial owner” or “beneficially own” has the meaning given such term in Rule 13d-3 under the Exchange Act and a Person’s beneficial ownership of Common Shares or Voting Securities shall be calculated in accordance with the provisions of such Rule; provided, however, that for purposes of determining beneficial ownership, (i) a Person shall be deemed to be the beneficial owner of any Equity which may be acquired by such Person (disregarding any legal impediments to such beneficial ownership), whether within 60 days or thereafter, upon the conversion, exchange or exercise of any warrants, options (which options held by Diller shall be deemed to be exercisable), rights or other securities issued by the Company, (ii) no Person shall be deemed to beneficially own any Equity solely as a result of such Person’s execution of this Agreement (including by virtue of holding a proxy with respect to any shares) or the Governance Agreement, and (iii) Liberty shall be deemed to be the beneficial owner of all of the Common Shares owned by each BDTV Entity, other than for purposes of Articles III and V of this Agreement. Notwithstanding the foregoing, for purposes of calculating the Minimum Stockholder Amount, a Person shall be deemed to be the beneficial owner only of Common Shares which are issued and outstanding.

“Board” means the Board of Directors of the Company.

“Business Day” shall mean any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the City of New York.

“Capital Stock” means, with respect to any Person at any time, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of capital stock, partnership interests (whether general or limited) or equivalent ownership interests in or issued by such Person.

“Cause” means (i) the conviction of, or pleading guilty to, any felony, or (ii) the willful, continued and complete failure to attend to managing the business affairs of the Company, after written notice of such failure from the Board and reasonable opportunity to cure.

“Chairman” means the Chairman of the Board.

“Chairman Termination Date” means the later of (i) such time as Diller no longer serves as Chairman and (ii) such time as Diller no longer holds the Liberty Proxy (other than suspension of such proxy pursuant to Section 3.3(e)).

“Class B Common Stock” means the Class B common stock, par value $0.001 per share, of the Company and any securities of the Company issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization (other than Common Stock issued upon conversion of Class B Common Stock).

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“Commission” means the Securities and Exchange Commission, and any successor commission or agency having similar powers.

“Common Shares” means, collectively, the Common Stock and the Class B Common Stock.

“Common Stock” means the common stock, par value $0.001 per share, of the Company and any securities of the Company issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization.

“Company” means Expedia, Inc., a Delaware corporation, and any successor by merger, consolidation, or other business combination.

“Contingent Matters” shall have the meaning ascribed to such term in the Governance Agreement.

“control” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

“Daily Hedging Limit” means a number of shares of Common Stock not to exceed on any single day 25% of the average daily trading volume of the Common Stock during the three full calendar months preceding the date of determination (disregarding any sales by Liberty).

“Diller Interest Purchase Price” means the cash amount (or cash value of shares of capital stock of IAC/InterActiveCorp) contributed by Diller to a BDTV Entity plus interest on such amount, from the date of such contribution to the date of purchase of Diller’s Interest in such BDTV Entity by a member of the Liberty Stockholder Group, at the rate of interest per annum in effect from time to time and publicly announced by The Bank of New York as its prime rate of interest, compounded annually. For purposes of BDTV I, BDTV II, BDTV III and BDTV IV, the cash amount (or cash value of capital stock) initially contributed by Diller was $100 in each such BDTV Entity.

“Diller Stockholder Group” means (i) Diller and (ii) any Affiliate of Diller which (A) Diller controls and (B) in which Diller owns, directly or indirectly, 90% or more of the outstanding Capital Stock or other ownership interests, which such Affiliate holds Equity subject to this Agreement.

“Director” means any member of the Board.

“Disabled” means the disability of Diller after the expiration of more than 180 consecutive days after its commencement which is determined to be total and permanent by a physician selected by Liberty and reasonably acceptable to Diller, his spouse or a personal representative designated by Diller; provided that Diller shall be deemed to be disabled only following the expiration of 90 days following receipt of a written notice from the Company and

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such physician specifying that a disability has occurred if within such 90-day period he fails to return to managing the business affairs of the Company. A total disability shall mean mental or physical incapacity that prevents Diller from managing the business affairs of the Company.

“Eligible Stockholder Amount” means, in the case of Diller, the equivalent of 2,200,000 Common Shares and, in the case of Liberty (including, in the case of Liberty, all of the Common Shares owned by the BDTV Entities), 2,000,000 shares of Common Stock, in each case determined on a fully diluted basis (taking into account, in the case of Diller, all unexercised Options, whether or not then exercisable).

“Equity” means any and all shares of Capital Stock of the Company, securities of the Company convertible into, or exchangeable for, such shares, and options, warrants or other rights to acquire such shares.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fair Market Value” means, as to any securities or other property, the cash price at which a willing seller would sell and a willing buyer would buy such securities or property in an arm’s-length negotiated transaction without time constraints.

“FCC” means the Federal Communications Commission or its successor.

“FCC Regulations” means, as of any date, all federal communications statutes and all rules, regulations, orders, decrees and policies of the FCC as then in effect, and any interpretations or waivers thereof or modifications thereto.

“Governance Agreement” means the Governance Agreement, among the Company, Diller and Liberty, of even date herewith, as it may be amended, supplemented, restated or modified from time to time hereafter.

“Group” shall have the meaning assigned to it in Section 13(d)(3) of the Exchange Act.

“Hedging Transaction” means any (i) short sale, (ii) any purchase, sale or grant of any right (including, without limitation, any put or call option), or (iii) any forward sale (whether for a fixed or variable number of shares or at a fixed or variable price) of or with respect to, or any non-recourse loan secured by, Common Stock or any security (other than a broad-based market basket or index) that includes, relates to or derives any significant part of its value from Common Stock, and such term includes (a) the pledge of Common Stock in connection with any of the foregoing to secure the obligations of the pledgor under a Hedging Transaction and (b) the pledge of a Hedging Transaction itself to secure any extension of credit to a party based, in whole or part, on the value thereof.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Independent Investment Banking Firm” means an investment banking firm of nationally recognized standing that is, in the reasonable judgment of the Person engaging such firm, qualified to perform the task for which it has been engaged.

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“Liberty Stockholder Group” means Liberty and those Subsidiaries of Liberty that, from time to time, hold Equity subject to this Agreement.

“Market Sale” means a “brokers’ transaction” within the meaning of Section 4(4) of the Securities Act.

“Minimum Stockholder Amount” means Common Shares representing at least 50.1% of the outstanding voting power of the outstanding Common Shares.

“Options” means options to acquire Capital Stock of the Company granted by the Company to Diller and outstanding from time to time.

“Permitted Designee” means any Person designated by a Stockholder, who shall be reasonably acceptable to the other Stockholder, to exercise such Stockholder’s rights pursuant to Section 4.3.

“Permitted Transferee” means (i) with respect to Liberty, any member of the Liberty Stockholder Group, and (ii) with respect to Diller, any member of the Diller Stockholder Group. In addition, each of Liberty and Diller shall be a Permitted Transferee of its respective Permitted Transferees.

“Person” means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivisions thereof or any Group comprised of two or more of the foregoing.

“Public Stockholder” means any Person that, together with its Affiliates (a) has sole or shared voting power with respect to Voting Securities representing no more than 10% of the voting power of the outstanding Voting Securities or (b) has sole or shared power to dispose of Equity representing no more than 10% of the Equity to be tendered or exchanged in any applicable tender or exchange offer, as the case may be.

“Reference Rate” means, for any day, a fixed rate per annum equal to the yield, expressed as a percentage per annum, obtained at the official auction of 90-day United States Treasury Bills most recently preceding the date thereof plus 100 basis points.

“Related Hedging Transactions” means a series of Hedging Transactions between members of the Liberty Stockholder Group on the one hand, and the same counterparty or its Affiliates, on the other hand, which Hedging Transactions each have specified maturity dates occurring within a period of thirty days.

“Securities Act” means the Securities Act of 1933, as amended.

“Stockholder” means each of Liberty and Diller.

“Stockholder Group” means one or more of the Diller Stockholder Group and the Liberty Stockholder Group. For purposes of this Agreement, (i) prior to the time that Liberty acquires Diller’s interest in a BDTV Entity, each BDTV Entity shall be deemed to be a member of the

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Liberty Stockholder Group except as otherwise expressly set forth herein and (ii) a Stockholder’s Permitted Designee shall be deemed to be a member of the designating Stockholder’s Stockholder Group (other than for purposes of Section 4.1(a)(w)).

“Subsidiary” means, with respect to any Person, any corporation or other entity of which at least a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.

“Third Party Transferee” means any Person to whom a Stockholder (including a Third Party Transferee subject to this Agreement pursuant to Sections 4.5(b) and 4.5(c)) or a Permitted Transferee Transfers Common Shares, other than a Permitted Transferee of such Stockholder or a member of another Stockholder Group.

“Transfer” means, directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Common Shares beneficially owned by a Stockholder or any interest in any Common Shares beneficially owned by a Stockholder, provided, however, that a merger or consolidation in which a Stockholder is a constituent corporation shall not be deemed to be the Transfer of any Common Shares beneficially owned by such Stockholder (provided, that a significant purpose of any such transaction is not to avoid the provisions of this Agreement).

“Voting Securities” means at any time shares of any class of Capital Stock of the Company which are then entitled to vote generally in the election of Directors.

Section 1.2. Other Defined Terms. The following terms shall have the meanings defined for such terms in the Sections set forth below:

Term	Section
Appraisal	Section 4.3(c)
Diller	Preamble
Diller Termination Date	Section 6.2(b)
Exchange Notice	Section 4.4(a)
IAC Shares	Section 5.2
Initiating Party	Section 4.2(a)
L/D Offer Notice	Section 4.3(b)
L/D Offer Price	Section 4.3(c)
L/D Other Party	Section 4.3(b)
L/D Transferring Party	Section 4.3(a)
Liberty	Preamble
Liberty Lending Limit	Section 4.3(f)
Liberty Proxy	Section 3.3(a)
Liberty Proxy Shares	Section 3.3(a)
Liberty Termination Date	Section 6.2(a)
Litigation	Section 6.14
Non-Transferring Stockholder	Section 4.4(a)

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Term	Section
Settlement Threshold	Section 4.2(e)
Stock Lending Transaction	Section 4.2(f)
Tag-Along Notice	Section 4.2(a)
Tag-Along Sale	Section 4.2(a)
Tag-Along Shares	Section 4.2(a)
Tag Party	Section 4.2(a)
Transferring Stockholders	Section 4.4(a)

Section 1.3. Other Definitional Provisions. (a) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article and Section references are to this Agreement unless otherwise specified.

(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

(c) For purposes of calculating the amount of outstanding Common Shares or Equity as of any date and the number of Common Shares or Equity beneficially owned by any Person as of any date, any Common Shares held in the Company’s treasury or owned by any Subsidiaries of the Company shall be disregarded.

ARTICLE II

RESERVED

ARTICLE III

CORPORATE GOVERNANCE

Section 3.1. Voting on Certain Matters. (a) In the event that Section 2.03 of the Governance Agreement is applicable, in connection with any vote or action by written consent of the stockholders of the Company relating to any matter that constitutes a Contingent Matter, Liberty and Diller agree (and each agrees to cause each member of its Stockholder Group, if applicable), with respect to any Common Shares with respect to which it or he has the power to vote (whether by proxy, the ownership of voting securities of a BDTV Entity or otherwise) (including all Common Shares held by any BDTV Entity), (x) to vote against (and not act by written consent to approve) such Contingent Matter (including causing each BDTV Entity to vote all Common Shares held by it against approval of such Contingent Matter and not executing any written consents with respect to such Common Shares held by any BDTV Entity) unless Liberty and Diller (or, if either such Stockholder’s consent is no longer required pursuant to the Governance Agreement, the Stockholder whose consent is then required) have consented to such Contingent Matter in accordance with the provisions of the Governance Agreement and (y) to take or cause to be taken all other reasonable actions required, to the extent permitted by law, to prevent the taking of any action by the Company with respect to a Contingent Matter without the consent of Liberty and/or Diller (as applicable).

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(b) Each Stockholder agrees to vote (and cause each member of its or his Stockholder Group to vote, if applicable), or act by written consent with respect to, any Common Shares with respect to which it or he has the power to vote (whether by proxy, the ownership of voting securities of a BDTV Entity or otherwise) (including all Common Shares held by any BDTV Entity) in favor of each of the Director designees of Liberty which Liberty has a right to designate pursuant to the Governance Agreement.

(c) Upon the written request of Liberty, Diller, in his capacity as a stockholder only, agrees to vote (and cause each member of the Diller Stockholder Group to vote, if applicable), or act by written consent, with respect to any Common Shares with respect to which it or he has the power to vote (whether by proxy, the ownership of voting securities of a BDTV Entity or otherwise) (including all shares held by any BDTV Entity) and otherwise take or cause to be taken all actions necessary to remove any Director designated by Liberty and to elect any replacement Director designated by Liberty as provided in the Governance Agreement. Unless Liberty and Diller otherwise agree, neither Diller nor any member of the Diller Stockholder Group, shall take any action to cause the removal of any Director designated by Liberty except upon the written request of Liberty.

(d) Liberty will not be deemed to be in violation of paragraphs (a), (b) or (c) of this Section 3.1 as a result of any action by Diller (including actions taken by a BDTV Entity as a result of an action by Diller) that is not within Liberty’s control.

Section 3.2. Restrictions on Other Agreements. No Stockholder or any of its or his Permitted Transferees shall enter into or agree to be bound by any stockholder agreements or arrangements of any kind with any Person with respect to any Equity (including, without limitation, the deposit of any Common Shares in a voting trust or forming, joining or in any way participating in or assisting in the formation of a Group with respect to any Common Shares, other than any such Group consisting exclusively of Liberty and Diller and any of their respective Affiliates, Permitted Designees and Permitted Transferees and, to the extent contemplated by Section 4.5, any Third Party Transferee) and no Stockholder (other than Liberty or any of its Permitted Transferees) or any of its or his Permitted Transferees shall enter into or agree to be bound by any agreements or arrangements of any kind with any Person to incur indebtedness for purposes of purchasing Equity (other than to exercise Options or to purchase Common Shares pursuant to Section 4.3 of this Agreement), except (i) for such agreements or arrangements as are now in effect, (ii) in connection with a proposed sale of BDTV Entity securities or Common Shares otherwise permitted hereunder, (iii) for such agreements or arrangements with a Permitted Designee as are reasonably acceptable to the other Stockholder and not inconsistent with or for the purpose of evading the terms of this Agreement, (iv) agreements between a Stockholder and its Permitted Transferee that are reasonably acceptable to the other Stockholder and not inconsistent with this Agreement or (iv) for Hedging Transactions as contemplated by Section 4.2(e).

Section 3.3. Irrevocable Proxy of Liberty. (a) Subject to paragraphs (b) and (c) below, until the earlier of the date that (x) Diller is no longer Chairman or (y) Diller is Disabled, Diller shall be entitled to exercise voting authority and authority to act by written consent over all Common Shares beneficially owned by each member of the Liberty Stockholder Group (the “Liberty Proxy Shares”), on all matters submitted to a vote of the Company’s stockholders or by

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which the Company’s stockholders may act by written consent, pursuant to a conditional proxy (which proxy is irrevocable and coupled with an interest for purposes of Section 212 of the Delaware General Corporation Law) (the “Liberty Proxy”); provided, that in the event that Diller is removed by the Board as Chairman for any reason other than Cause, Diller shall be deemed to continue to be Chairman for purposes of this Agreement and shall be entitled to the Liberty Proxy set forth herein until the earlier of (A) such time as he has abandoned efforts to cause his reinstatement as Chairman and (B) the next stockholders meeting of the Company at which he had an adequate opportunity to nominate and elect his slate of directors (unless at such stockholders meeting Diller’s slate of directors is elected and Diller is promptly thereafter reinstated as Chairman).

(b) Notwithstanding the foregoing, the Liberty Proxy shall not be valid with respect to any of the Liberty Proxy Shares (and Diller will have no right to vote the Liberty Proxy Shares) in connection with any vote on (or consent to approve) any matter that is a Contingent Matter with respect to which Liberty’s consent is required pursuant to the terms of the Governance Agreement with respect to which Liberty has not consented.

(c) The Liberty Proxy shall terminate as provided for in Section 3.3(a) or, if earlier, (i) immediately upon a material breach by Diller of the terms of Section 3.1(a), Section 3.1(b), Section 3.1(c) or Section 3.3(b) of this Agreement, (ii) at such time as Diller has been convicted of, or has pleaded guilty to, any felony involving moral turpitude or (iii) at such time as Diller ceases to beneficially own 5,000,000 Common Shares with respect to which he has a pecuniary interest; provided, in the case of clauses (ii) and (iii) above, that Liberty sends notice of such termination to Diller within 30 days after receiving notice of the event giving rise to such termination, in which case the Liberty Proxy shall terminate immediately upon the receipt of such notice.

(d) Notwithstanding anything to the contrary set forth herein, the Liberty Proxy is personal to Diller and may not be assigned by Diller by operation of law or otherwise and shall not inure to Diller’s successors without the prior written consent of Liberty.

(e) Notwithstanding the foregoing, and without affecting the termination of the Liberty Proxy pursuant to Section 3.3 hereof, the Liberty Proxy will be suspended during any period in which Diller has suffered a mental or physical disability preventing Diller from voting or acting by written consent with respect to the Liberty Proxy Shares, and during such period of disability, Liberty will be entitled to vote or consent in writing with respect to all Liberty Proxy Shares. The Liberty Proxy will be reinstated (unless sooner terminated in accordance with Section 3.3) upon Diller ceasing to be so disabled.

Section 3.4. Cooperation. Each Stockholder shall vote (or act or not act by written consent with respect to) all of its Common Shares (and any Common Shares with respect to which it has the power to vote (whether by proxy or otherwise) and shall, as necessary or desirable, attend all meetings in person or by proxy for purposes of obtaining a quorum, and execute all written consents in lieu of meetings, as applicable, to effectuate the provisions of this Article III.

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ARTICLE IV

TRANSFER OF COMMON SHARES

Section 4.1. Restrictions on Transfer by Liberty and Diller. (a) Until the Chairman Termination Date or such time as Diller becomes Disabled, subject to the other provisions of this Agreement, neither Liberty nor Diller shall Transfer or otherwise dispose of (including pledges), directly or indirectly, any Common Shares beneficially owned by its Stockholder Group other than (v) Transfers of Common Shares by Diller in order to pay taxes arising from the granting, vesting and/or exercise of the Options, (w) Transfers of Common Shares by Liberty to members of the Liberty Stockholder Group or by Diller to members of the Diller Stockholder Group, (x) a pledge or grant of a security interest in vested Common Shares (other than the pledge of certain Common Shares pursuant to prior arrangements between Diller and the Company) or pledges by a member of the Liberty Stockholder Group of securities of a BDTV Entity that Liberty is entitled to Transfer under (b)(ii) below in connection with bona fide indebtedness in which the pledgee of the applicable Common Shares (or securities of such BDTV Entity) agrees that, upon any default or exercise of its rights under such pledge or security arrangement, it will offer to sell the pledged Common Shares (or securities of such BDTV Entity) to the non-pledging Stockholder (or its or his designee) for an amount equal to the lesser of the applicable amount of such indebtedness and the fair market value of such pledged Common Shares (or securities of such BDTV Entity), (y) Transfers of Options or Common Shares to the Company by Diller or his Affiliates in connection with a “cashless” exercise of the Options (including Options granted to Diller heretofore or in the future), and (z) Transfers of Common Shares made pursuant to Sections 4.2, 4.3 and 4.4. The restrictions on Transfer by Liberty provided in this Section 4.1 shall be for the sole benefit of Diller and the restrictions on Transfer by Diller provided in this Section 4.1 shall be for the sole benefit of Liberty.

(b) Notwithstanding the restrictions contained in subsection (a) above (and in addition to the foregoing exceptions, but subject to the right of first refusal described in Section 4.3 on behalf of Diller (or his designee) with respect to Transfers by members of the Liberty Stockholder Group and to a right of first refusal on behalf of Liberty (or its designee) with respect to Transfers by members of the Diller Stockholder Group (which rights shall be assignable)): (i) either Liberty or Diller may Transfer all or any portion of the Common Shares beneficially owned by its Stockholder Group (and, in the case of Liberty only, its entire interest in the BDTV Entities) to an unaffiliated third party, provided, however, that a Transfer by either Liberty or Diller of Common Shares to a third party shall be subject to the tag-along right pursuant to Section 4.2, after, in the case of any Transfer of Class B Common Stock, compliance with the right of first refusal described in Section 4.3 and the swap provisions described in Section 4.4, and (ii) either Liberty or Diller may Transfer any portion of the Common Shares (including, in the case of Liberty, all or a portion of a BDTV Entity interest) held by its Stockholder Group to an unaffiliated third party; provided that, (a) following such Transfer such Stockholder Group retains its Eligible Stockholder Amount of Common Shares and (b) in the case of the Transfer of an interest in or Common Shares held by a BDTV Limited Entity as of the date hereof, following such Transfer, the Liberty Stockholder Group and the Diller Stockholder Group collectively beneficially own the Minimum Stockholder Amount. Notwithstanding the previous sentence and the restrictions contained in paragraph (a) above and subject to the requirement, with respect to a Transfer by Liberty of an interest in or Common

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Shares held by a BDTV Limited Entity as of the date hereof, that the Stockholders and their respective Stockholder Groups collectively beneficially own the Minimum Stockholder Amount, either Liberty or Diller may transfer any of its Common Shares in one or more transactions that comply with the requirements of Rule 144 or 145 (as applicable) under the Securities Act.

Section 4.2. Tag-Along for Diller and Liberty for Transfers by the Other. (a) If either Diller or Liberty shall desire to Transfer to any unaffiliated third party any of the Common Shares beneficially owned by him or it or any member of his or its Stockholder Group (other than the Transfers referred to in paragraphs (e) and (f) below), in one transaction or a series of related transactions (the “Tag-Along Sale”), Diller or Liberty, as applicable (the “Initiating Party), shall give prior written notice to the other (the “Tag Party”) of such intended Transfer. Such notice (the “Tag-Along Notice”) shall set forth the terms and conditions of such proposed Transfer, including the number of Common Shares proposed to be Transferred (the “Tag-Along Shares”), the purchase price per Common Share proposed to be paid therefor and the payment terms and type of Transfer to be effectuated.

(b) Within ten days after delivery of the Tag-Along Notice, the Tag Party will have the opportunity and right (exercisable by such Tag Party by written notice to the Initiating Party not later than the end of such ten day period) to sell to the acquiring Person in such proposed Tag-Along Sale (upon the same terms and conditions as the Initiating Party), subject to the following sentence, up to that number of Common Shares beneficially owned by it (including, in the case of Liberty, all of the Common Shares held by the BDTV Entities) as shall equal the product of (x) a fraction, the numerator of which is the number of Tag-Along Shares and the denominator of which is the aggregate number of Common Shares beneficially owned as of the date of the Tag-Along Notice by the Initiating Party (including all of the Common Shares held by the BDTV Entities if Liberty is the Initiating Party), multiplied by (y) the number of Common Shares beneficially owned by the Tag Party (including all of the Common Shares held by the BDTV Entities if Liberty is the Tag Party) as of the date of the Tag-Along Notice. The number of Common Shares that Diller or Liberty may sell to an unaffiliated third party pursuant to Section 4.2(a) shall be determined by multiplying the maximum number of Tag-Along Shares that such third party is willing to purchase on the terms set forth in the Tag-Along Notice by a fraction, the numerator of which is the number of Common Shares that such Stockholder proposes to sell hereunder (subject to the maximum amount for Diller or Liberty, as applicable, calculated pursuant to the preceding sentence) and the denominator of which is the aggregate number of Common Shares that Diller and Liberty propose to sell hereunder.

(c) At the closing of any proposed Transfer in respect of which a Tag-Along Notice has been delivered, the Tag Party shall deliver, free and clear of all liens (other than liens caused by the acquiring Person in the Tag-Along Sale), to such third party certificates evidencing the Common Shares to be sold thereto duly endorsed with Transfer powers and shall receive in exchange therefore the consideration to be paid by such third party in respect of such Common Shares as described in the Tag-Along Notice. No transferee shall be required to purchase shares of a BDTV Entity in connection with the Tag-Along Sale and each of Liberty and Diller shall cooperate so that any transferee will be able to purchase directly any Common Shares held by a BDTV Entity and not the shares of any BDTV Entity.

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(d) Neither Diller and the members of his Stockholder Group, on the one hand, nor Liberty and the members of its Stockholder Group, on the other hand, shall effect any Transfer or Transfers constituting a Tag-Along Sale absent compliance with this Section 4.2.

(e) This Section 4.2 shall not be applicable to the Transfer by Diller or any member of his Stockholder Group (i) of an aggregate of not more than 2,000,000 Common Shares within any rolling twelve-month period, (ii) pursuant to Section 4.1(a)(v) or 4.1(a)(y), (iii) in a Market Sale, or (iv) following such time as Diller is no longer Chairman other than any Transfer made in connection with Diller ceasing to be Chairman. This Section 4.2 shall not be applicable to (i) the Transfer of Common Stock by the Liberty Stockholder Group in a Market Sale, provided that the total volume of sales effected on any single day shall not exceed the Daily Hedging Limit, or (ii) the entry into, maintenance of, performance of obligations under and unwinding of Hedging Transactions effected by the Liberty Stockholder Group, including, without limitation, the Transfer of Common Stock in connection therewith through the delivery of Common Stock to a third party in connection with the settlement or satisfaction of a Hedging Transaction or the foreclosure and sale by a secured party of any Common Stock pledged to secure the obligations of a party under a Hedging Transaction or in respect of any extension of credit to a party based, in whole or part, on the value of such Hedging Transaction; provided, that: (A) no Hedging Transaction shall, prior to the settlement of such Hedging Transaction, impair Diller’s right to vote any shares of the Common Stock pursuant to Section 3.3 (it being understood that a settlement of a Hedging Transaction may result in a disposition of the shares subject to such Hedging Transaction and that, upon such disposition, Diller will not have the right to vote such shares); provided, that such right shall not be deemed to be impaired to the extent that a counterparty to a Hedging Transaction to whom Common Stock has been pledged has obtained the right to vote or take consensual action with respect to the Common Stock so pledged as a result of an event of default or termination event with respect to the Liberty Stockholder Group under the Hedging Transaction; provided, further, that the terms of such pledging arrangement shall permit the Liberty Stockholder Group to exercise voting rights and to take consensual action with respect to the Common Stock so pledged in circumstances where no event of default or termination event has occurred; (B) a significant purpose of Liberty’s engaging in the Hedging Transaction shall not be the circumvention of Diller’s tag along rights under Section 4.2 of this Agreement (and there shall be a rebuttable presumption that no such purpose exists if the Hedging Transaction is effected with a financial institution and neither Liberty nor its Affiliates have any oral or written understanding or agreement with the financial institution relating to the subsequent Transfer to any Person or group, if any, of the shares of Common Stock subject to the Hedging Transaction); (C) if pursuant to a Hedging Transaction or Related Hedging Transactions, a number of shares of Common Stock representing 5% or more of the outstanding shares of such class (determined as of the date the Hedging Transaction or the date of the initial Hedging Transaction in any series of Related Hedging Transactions is effected) (such 5% amount, the “Settlement Threshold”), could be Transferred by the Liberty Stockholder Group to such counterparty in connection with the settlement of such Hedging Transaction or Related Hedging Transactions, then Liberty shall cause such members of the Liberty Stockholder Group to settle or satisfy the obligations with respect to such Hedging Transaction or Related Hedging Transactions in such a manner so that the number of shares delivered to such counterparty in connection with the settlement of such Hedging Transaction or Related Hedging Transactions does not exceed the Settlement Threshold unless the counterparty has indicated to Liberty and Diller (if requested by Diller) that it will utilize such shares of Common Stock to fill a

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preexisting short position in the shares of Common Stock; (D) for each twelve-month period beginning on the date hereof and each anniversary of the date hereof, Liberty shall ensure that the Liberty Stockholder Group shall not enter into Hedging Transactions with respect to more than one third (1/3) of the shares of Common Stock that the Liberty Stockholder Group owns (including all shares of Common Stock owned by the BDTV Entities) on the first day of such twelve-month period; (E) Liberty will advise Diller (which may be oral) that it is contemplating entering into a Hedging Transaction (including a brief description of the general structure of the Hedging Transaction contemplated and the potential timing of such Hedging Transaction) as far in advance as reasonably practicable prior to effecting such Hedging Transaction, but in no event more than ten Business Days prior to effecting such Hedging Transaction, and, if Diller (i) has determined in good faith that such Hedging Transaction would adversely affect a contemplated significant corporate transaction (including financing) of the Company, and uses his reasonable best efforts to make such a determination as soon as practicable (but in no event later than 10:00 a.m. New York City time on the second Business Day immediately following the date of the giving of such notice by Liberty) and requests that the Liberty Stockholder Group delay any such Hedging Transaction because of the matters referred to in clause (i) above, then Liberty shall cause the Liberty Stockholder Group to delay such Hedging Transaction for a period not to exceed ten Business Days commencing on the Business Day after the date Diller has been advised that Liberty is contemplating a Hedging Transaction, and after such ten Business Day period, if any, Liberty shall be entitled to effect such Hedging Transaction; and (F) Liberty shall ensure that all sales or short sales in connection with establishing the initial hedge with respect to one or more Hedging Transactions shall not, taking all such sales or short sales during a particular day in the aggregate, exceed the Daily Hedging Limit.

(f) During the term of this Agreement, the Liberty Stockholder Group will be entitled to engage in Stock Lending Transactions from time to time (which Stock Lending Transactions will be deemed not to impair the proxy granted pursuant to Section 3.3) with respect to the Common Stock subject to the following limitations: (i) the maximum number of shares of Common Stock Beneficially Owned by the Liberty Stockholder Group which may be lent at any one time to others in Stock Lending Transactions during the period from the date hereof to the first anniversary of this Agreement may not exceed an aggregate of 15,000,000 shares of Common Stock (subject to adjustment pursuant to Section 6.13 hereof) (the “Liberty Lending Limit”); and (ii) following such first anniversary the Liberty Lending Limit will be increased to an aggregate of 16,250,000 shares of Common Stock (subject to adjustment as aforesaid). For purposes hereof, a “Stock Lending Transaction” shall mean a transaction effected in connection with any Hedging Transaction whereby the Liberty Stockholder Group lends shares of Common Stock to a third party or permits a third party to sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business such shares of Common Stock.

(g) Upon written request made from time to time by Liberty, Diller will use reasonable efforts to cause the Company to deliver to Liberty and Diller a written statement specifying the number of shares of Company Common Stock, Company Class B Common Stock and other Voting Securities issued and outstanding as of the most recent practicable date. Liberty and Diller will, in connection with any applicable calculations hereunder or under the Governance Agreement, be entitled to rely upon the information set forth in such statement. In the event such statement is not delivered to Liberty within five Business Days following

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Liberty’s request therefor, Liberty and Diller (and their respective successors and permitted assigns) shall be entitled to rely for purposes of such calculations on the number of shares of Company Common Stock, Company Class B Common Stock and other Voting Securities listed as issued and outstanding in the Company’s most recent quarterly or annual report publicly filed with the Commission or the most recent statement from the Company.

Section 4.3. Right of First Refusal Between Liberty and Diller. (a) Any Transfer of shares of Class B Common Stock by a member of the Liberty Stockholder Group or a member of the Diller Stockholder Group (the “L/D Transferring Party”) will be subject to the right of first refusal provisions of this Section 4.3, other than a Transfer by a member of the Liberty Stockholder Group or the Diller Stockholder Group permitted by Section 4.1(a) hereof or a Transfer that is a sale described in clause (i) of the first or second sentence of Section 4.2 (e).

(b) Prior to effecting any Transfer referred to in Section 4.3(a), the L/D Transferring Party shall deliver written notice (the “L/D Offer Notice”) to Diller, if the L/D Transferring Party is a member of the Liberty Stockholder Group, or to Liberty, if the L/D Transferring Party is a member of the Diller Stockholder Group (the recipient of such notice, the “L/D Other Party”), which L/D Offer Notice shall specify (i) the Person to whom the L/D Transferring Party proposes to make such Transfer, (ii) the number or amount of the shares of Class B Common Stock to be Transferred, (iii) the L/D Offer Price (as defined below), and (iv) all other material terms and conditions of the proposed Transfer, including a description of any non-cash consideration sufficiently detailed to permit valuation thereof, and which L/D Offer Notice shall be accompanied by any written offer from the prospective transferee to purchase such shares of Class B Common Stock, if available and permitted pursuant to the terms thereof. The L/D Offer Notice shall constitute an irrevocable offer to the L/D Other Party, for the period of time described below, to purchase all (but not less than all) of such shares of Class B Common Stock.

(c) For purposes of this Section 4.3, “L/D Offer Price” shall mean the purchase price per share of Class B Common Stock to be paid to the L/D Transferring Party in the proposed transaction (as it may be adjusted in order to determine the net economic value thereof). In the event that the consideration payable to the L/D Transferring Party in a proposed transaction consists of securities, the purchase price per share shall equal the fair market value of such securities divided by the number of shares of Class B Common Stock to be Transferred. Such fair market value shall be the market price of any publicly traded security and, if such security is not publicly traded, the fair market value shall be equal to the Fair Market Value of such security determined as follows: Each of Liberty and Diller shall select an Independent Investment Banking Firm each of which shall promptly make a determination (each such determination, an “Appraisal”) of the Fair Market Value of such security. If the higher of such Appraisals is less than or equal to 110% of the lower of such Appraisals, then the Fair Market Value shall be equal to the average of such Appraisals. If the higher of such Appraisals is greater than 110% of the lower of such Appraisals, then a third Independent Investment Banking Firm (which shall be an Independent Investment Banking Firm that shall not have been engaged by the Company, IAC/InterActiveCorp (but only for so long as Diller is the Chief Executive Officer of IAC/InterActiveCorp) Liberty or Diller in any significant matter for the three years prior to the date of such selection) shall be selected by the first two Independent Investment Banking Firms, which third Independent Investment Banking Firm shall promptly make a determination of the

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Fair Market Value. The Fair Market Value shall equal the average of the two of such three Appraisals closest in value (or if there are no such two, then of all three Appraisals).

(d) If the L/D Other Party elects to purchase the offered shares of Class B Common Stock, it shall give notice to the L/D Transferring Party within ten Business Days after receipt of the L/D Offer Notice of its election (or in the case of a third party tender offer or exchange offer, at least five Business Days prior to the expiration date of such offer, provided that all conditions to such offer that need to be satisfied prior to acceptance for payment (other than with respect to the number of shares of Class B Common Stock tendered) shall have been satisfied or waived and the L/D Offer Notice shall have been provided at least ten Business Days prior to the expiration date of such offer), which shall constitute a binding obligation, subject to standard terms and conditions for a stock purchase contract between two significant stockholders of an issuer (provided that the L/D Transferring Party shall not be required to make any representations or warranties regarding the business of the Company), to purchase the offered shares of Class B Common Stock, which notice shall include the date set for the closing of such purchase, which date shall be at least 20 Business Days following the delivery of such election notice, or, if later, five Business Days after receipt of all required regulatory approvals; provided that the closing shall only be delayed pending receipt of required regulatory approvals if (i) the L/D Other Party is using reasonable efforts to obtain the required regulatory approvals, (ii) there is a reasonable prospect of receiving such regulatory approvals and (iii) if such closing is delayed more than 90 days after the date of the L/D Other Party’s notice of election to purchase, then the L/D Other Party agrees to pay interest on the aggregate L/D Offer Price at the Reference Rate to the L/D Transferring Party from such date to the closing date. Notwithstanding the foregoing, such time periods shall not be deemed to commence with respect to any purported notice that does not comply in all material respects with the requirements of this Section 4.3(d). Liberty and Diller may assign their respective rights to purchase under this Section 4.3 to any Person who is a Permitted Designee.

(e) If the L/D Other Party does not respond to the L/D Offer Notice within the required response time period or elects not to purchase the offered shares of Class B Common Stock, the L/D Transferring Party shall be free to complete the proposed Transfer (to the same proposed transferee, in the case of a privately-negotiated transaction) on terms no less favorable to the L/D Transferring Party or its Affiliate, as the case may be, than those set forth in the L/D Offer Notice, provided that (x) such Transfer is closed within (I) 90 days after the latest of (A) the expiration of the applicable period for the L/D Other Party to accept the offer from the L/D Transferring Party, or (B) the receipt by the L/D Transferring Party of notice declining the offer to purchase the shares of Class B Common Stock or, in the case of (A) or (B), if later, five Business Days following receipt of all required regulatory approvals; provided that the closing shall only be delayed pending receipt of required regulatory approvals if (i) the L/D Transferring Party is using reasonable efforts to obtain the required regulatory approvals and (ii) there is a reasonable prospect of receiving such regulatory approvals, or (II) in the case of a public offering, within 20 days of the declaration by the Commission of the effectiveness of a registration statement filed with the Commission pursuant to this Agreement, and (y) the price at which the shares of Class B Common Stock are transferred must be equal to or higher than the L/D Offer Price (except in the case of a public offering, in which case the price at which the shares of Class B Common Stock are sold (before deducting underwriting discounts and commissions) shall be equal to at least 90% of the L/D Offer Price).

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(f) If the L/D Other Party elects to exercise its right of first refusal under this Section 4.3, the L/D Other Party shall pay the L/D Offer Price in cash (by wire transfer of immediately available funds) or by the delivery of marketable securities having an aggregate fair market value equal to the L/D Offer Price, provided, that if the securities to be so delivered by the L/D Other Party would not, in the L/D Transferring Party’s possession, have at least the same general degree of liquidity as the securities the L/D Transferring Party was to receive in such proposed transaction (determined by reference to the L/D Transferring Party’s ability to dispose of such securities (including, without limitation, the trading volume of such securities and the L/D Other Party’s percentage ownership of the issuer of such securities)), then the L/D Other Party shall be required to deliver securities having an appraised value (calculated in accordance with the method described in Section 4.3(c)) equal to the L/D Offer Price. If the L/D Other Party delivers securities in payment of the L/D Offer Price, it will cause the issuer of such securities to provide the L/D Transferring Party with customary registration rights related thereto (if, in the other transaction, the L/D Transferring Party would have received cash, cash equivalents, registered securities or registration rights). Each of Diller and Liberty agrees to use his or its commercially reasonable efforts (but not to expend any money) to preserve for the other Stockholder, to the extent possible, the tax benefits available to it in such proposed transaction, and to otherwise seek to structure such transaction in the most tax efficient method available. Notwithstanding the foregoing, if Diller pays the L/D Offer Price in securities, such securities must be securities that Liberty is permitted to own under applicable FCC Regulations.

(g) Notwithstanding anything to the contrary contained in this Section 4.3, the time periods applicable to an election by the L/D Other Party to purchase the offered securities shall not be deemed to commence until the Fair Market Value has been determined, provided that, in the case of a third party tender offer or exchange offer, in no event shall any such election be permitted within five Business Days prior to the latest time by which shares of Class B Common Stock shall be tendered in such offer if all conditions to such offer that need to be satisfied prior to acceptance for payment (other than the number of shares tendered) have been satisfied or waived. Each of Diller and Liberty agrees to use his and its best efforts to cause the Fair Market Value to be determined as promptly as practicable, but in no event later than ten Business Days after the receipt by the L/D Other Party of the L/D Offer Notice.

Section 4.4. Transfers of Class B Shares. (a) Subject to the rights of first refusal pursuant to Section 4.3 and subject to paragraph (c) below, in the event that any Stockholder or any members of its Stockholder Group (the “Transferring Stockholder”) proposes to Transfer any shares of Class B Common Stock, such Transferring Stockholder shall send a written notice (which obligation may be satisfied by the delivery of the applicable L/D Offer Notice) (the “Exchange Notice,” which term will include any corresponding L/D Offer Notice) to Diller, if the Transferring Stockholder is Liberty or a member of the Liberty Stockholder Group, or to Liberty, if the Transferring Stockholder is Diller or a member of the Diller Stockholder Group (the recipient of such notice, the “Non-Transferring Stockholder”), that such Transferring Stockholder intends to Transfer shares of Class B Common Stock, including the number of such shares proposed to be Transferred. The Non-Transferring Stockholder shall give notice to the Transferring Stockholder within 10 Business Days of its receipt of the Exchange Notice of its desire to exchange some or all of such shares of Class B Common Stock proposed to be Transferred for an equivalent number of shares of Common Stock or its election to purchase all such offered shares of Class B Common Stock pursuant to Section 4.3. If the Non-Transferring

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Stockholder desires to exchange some or all of such shares rather than exercise its right of first refusal pursuant to Section 4.3, such shares of Class B Common Stock shall be exchanged. Except to the extent necessary to avoid liability under Section 16(b) of the Exchange Act and subject to applicable law, any such exchange shall be consummated immediately prior to the consummation of any such Transfer.

(b) If any shares of Class B Common Stock proposed to be Transferred are not exchanged pursuant to the provisions of paragraph (a) above, prior to any such Transfer, the Transferring Stockholder shall convert, or cause to be converted, such shares of Class B Common Stock into shares of Common Stock (or such other securities of the Company into which such shares are then convertible).

(c) The provisions of Section 4.4(a) and 4.4(b) shall not be applicable to any Transfers (i) to a member of such Stockholder’s Stockholder Group, (ii) pursuant to a pledge or grant of a security interest in compliance with clause (x) of Section 4.1(a), or (iii) from Liberty, Diller or their respective Stockholder Group to the other Stockholder or its or his Stockholder Group subject to the terms of this Agreement.

Section 4.5. Transferees. (a) Any Permitted Transferee or Permitted Designee of a Stockholder shall be subject to the terms and conditions of this Agreement as if such Permitted Transferee or Permitted Designee were Liberty (if Liberty or a Permitted Transferee of Liberty is the transferor) or Diller (if Diller or a Permitted Transferee of Diller is the transferor). Prior to the initial acquisition of beneficial ownership of any Common Shares by any Permitted Transferee (or a Permitted Designee), and as a condition thereto, each Stockholder agrees (i) to cause its respective Permitted Transferees or Permitted Designees to agree in writing with the other parties hereto to be bound by the terms and conditions of this Agreement to the extent described in the preceding sentence and (ii) that such Stockholder shall remain directly liable for the performance by its respective Permitted Transferees or Permitted Designees of all obligations of such Permitted Transferees or Permitted Designees under this Agreement. Except as otherwise contemplated by this Agreement (including the terms of Sections 4.2, 4.3 and 4.4), (i) each of Diller and Liberty agrees not to cause or permit any of its respective Permitted Transferees to cease to qualify as a member of such Stockholder’s Stockholder Group so long as such Permitted Transferee beneficially owns any Common Shares, and if any such Permitted Transferee shall cease to be so qualified, such Permitted Transferee shall automatically upon the occurrence of such event cease to be a “Permitted Transferee” for any purpose under this Agreement and (ii) each Stockholder agrees not to Transfer any Common Shares to any Affiliate other than a Permitted Transferee of such Stockholder.

(b) No Third Party Transferee shall have any rights or obligations under this Agreement, except:

(i) in the case of a Third Party Transferee of Liberty (or any member of the Liberty Stockholder Group) who acquires shares of Common Stock and who (together with its Affiliates) would not be a Public Stockholder, such Third Party Transferee shall be subject to the obligations of Liberty (but subject to the other terms and conditions of this Agreement) pursuant to Section 3.1(a) (but shall not have the right to consent to any Contingent Matters), Section 3.1(b), Section 3.1(c), Section 3.2, Section 3.4, this Section

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4.5 and Article VI; provided that such Third Party Transferee shall only be subject to such obligations for so long as it would not be a Public Stockholder; and

(ii) in the case of a Third Party Transferee of Diller (or any member of the Diller Stockholder Group) who (together with its Affiliates) upon consummation of any Transfer would not be a Public Stockholder, such Third Party Transferee shall be subject to the obligations of Diller (but subject to the other terms and conditions of this Agreement) pursuant to Section 3.1(a) (but shall not have the right to consent to any Contingent Matters), 3.1(b), Section 3.1(c), Section 3.4, this Section 4.5 and Article VI; provided that such Third Party Transferee shall only be subject to such obligations for so long as it would not be a Public Stockholder.

(c) Prior to the consummation of a Transfer described in Section 4.5(b) to the extent rights and obligations are to be assigned, and as a condition thereto, the applicable Third Party Transferee shall agree in writing with the other parties hereto to be bound by the terms and conditions of this Agreement to the extent described in Section 4.5(b). To the extent the Third Party Transferee is not an “ultimate parent entity” (as defined in the HSR Act), the ultimate parent entity of such Third Party Transferee shall agree in writing to be directly liable for the performance of the Third Party Transferee to the same extent Liberty would be liable for the performance of its Permitted Transferees.

Section 4.6. Notice of Transfer. In addition to any other notices required by this Agreement, to the extent any Stockholder and its Permitted Transferees Transfer any Common Shares, such Stockholder shall, within three Business Days following consummation of such Transfer, deliver notice thereof to the Company and the other Stockholder, provided, however, that no such notice shall be required to be delivered unless the aggregate Common Shares transferred by such Stockholder and its Permitted Transferees since the date of the last notice delivered by such Stockholder pursuant to this Section 4.6 exceeds 1% of the outstanding Common Shares.

Section 4.7. Compliance with Transfer Provisions. Any Transfer or attempted Transfer of Common Shares in violation of any provision of this Agreement shall be void.

ARTICLE V

BDTV ENTITY ARRANGEMENTS

Section 5.1. Management. The business and affairs of each BDTV Entity will be managed by a Board of Directors elected by the holders of a majority of the voting equity interests in such BDTV Entity. Notwithstanding the foregoing, the taking of any action by a BDTV Entity with respect to (i) to the extent permitted by applicable law, any matter that would have constituted a Fundamental Change under the 1997 IAC Stockholders Agreement (as applied to such BDTV Entity and to the Common Shares, mutatis mutandis) or (ii) any acquisition or disposition (including pledges) of any Common Shares held by such BDTV Entity, in either case, will require the unanimous approval of the holders of all voting and non-voting equity interests in such BDTV Entity.

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Section 5.2. Changes to BDTV Structures. Liberty and Diller agree, subject to applicable law and FCC Regulations, to take such actions as may be reasonably necessary, including but not limited to amending the certificate of incorporation of each BDTV Entity, in order to provide Liberty with the ability to transfer, directly or indirectly, such amounts of Common Shares as Liberty is permitted to sell hereunder, and, if requested by Liberty, Diller agrees, subject to applicable law and at Liberty’s sole cost and expense to take actions as are reasonably necessary to permit each BDTV Entity to hold Common Shares separately from shares of capital stock of IAC/InterActiveCorp (“IAC Shares”), to sell such Common Shares, directly or indirectly, separately from a sale of the IAC Shares (but only as permitted by the agreements between Liberty and Diller with respect to the IAC Shares), to reorganize the assets of any or all of the BDTV Entities to reflect ownership of the Common Shares, including, without limitation, to transfer Common Shares and/or IAC Shares to a Subsidiary of a BDTV Entity (and any such Subsidiary of a BDTV Entity that holds Common Shares or other entity holding Common Shares as a result of such reorganization shall be deemed a BDTV Unrestricted Entity or BDTV Limited Entity, as applicable) or otherwise to enable Liberty to exercise its rights hereunder with respect to Common Shares and under the agreements between Liberty and Diller with respect to the IAC Shares.

Section 5.3. Transfers of BDTV Interests. Except as otherwise specifically provided in this Agreement (including Section 4.1(b)), no transfers or other dispositions (including pledges), directly or indirectly, of any interest in (a) any BDTV Limited Entity by Liberty or (b) any BDTV Entity by Diller will be permitted without the consent of the other; provided (i) Liberty shall be entitled to transfer all or part of its interest in a BDTV Entity to members of the Liberty Stockholder Group, (ii) at such time Liberty becomes the owner of any voting securities of any BDTV Limited Entity, such BDTV Limited Entity shall be deemed to be a BDTV Unrestricted Entity, and (iii) in connection with any sale by Diller entitling Liberty to a right pursuant to Section 4.2, Liberty and Diller shall take such reasonable action as may be required in order for Liberty’s interest in a BDTV Limited Entity to be sold in any such transaction. Without the prior written consent of Liberty, Diller shall not Transfer any interest in a BDTV Entity (other than to Liberty or, subject to Liberty’s reasonable consent, a member of the Diller Stockholder Group).

For purposes of determining whether Liberty is permitted to transfer the Common Shares held by a BDTV Unrestricted Entity, (i) such BDTV Unrestricted Entity shall be deemed to be a member of the Liberty Stockholder Group and the restrictions on transfers of interests in BDTV Entities shall not apply to Liberty (subject, however, to the other restrictions on transfer of Common Shares set forth herein, including the Right of First Refusal applicable to the Class B Common Stock) and (ii) in connection with any proposed sale by any member of the Liberty Stockholder Group of the Common Shares held by a BDTV Entity (or its equity interest in such BDTV Entity), such member of the Liberty Stockholder Group shall be entitled to purchase Diller’s entire interest in such BDTV Entity for an amount in cash equal to the Diller Interest Purchase Price or, at such purchaser’s election, require Diller to sell his interest in such BDTV Entity to any such transferee for a pro rata portion of the consideration to be paid by the applicable transferee in such transaction.

At such time as (i) the Chairman Termination Date has occurred or Diller becomes Disabled or (ii) the Diller Stockholder Group ceases to own its Eligible Stockholder Amount of

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Common Shares, Diller shall be required to sell his entire interest in the BDTV Entities to Liberty (or Liberty’s designee) at a price equal to the Diller Interest Purchase Price.

ARTICLE VI

MISCELLANEOUS

Section 6.1. Conflicting Agreements. Each of the parties hereto represents and warrants that such party has not granted and is not a party to any proxy, voting trust or other agreement that is inconsistent with or conflicts with any provision of this Agreement.

Section 6.2. Duration of Agreement. Except as otherwise provided in this Agreement, the rights and obligations of a Stockholder under this Agreement shall terminate as follows:

(a) Each of Liberty and Diller shall cease to be entitled to exercise any rights and shall cease to have any obligations under this Agreement as of the date that its Stockholder Group collectively ceases to own its Eligible Stockholder Amount of Common Shares; provided that Liberty shall cease to be entitled to exercise any rights and shall cease to have any obligations under Section 4.2 at such time as the Liberty Stockholder Group ceases to beneficially own at least 5% of the outstanding Common Shares (the “Liberty Termination Date”).

(b) Diller and each member of his Stockholder Group shall cease to be entitled to exercise any rights under this Agreement if the Chairman Termination Date has occurred or Diller has become Disabled (the “Diller Termination Date”).

In addition, at such time as the Chairman Termination Date has occurred or Diller has become Disabled, neither the Diller Stockholder Group nor the Liberty Stockholder Group shall have any obligation under this Agreement with respect to the matters covered under Sections 3.3, 4.1 and 4.3.

Section 6.3. Further Assurances. At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.

Section 6.4. Amendment and Waiver. This Agreement may not be amended, modified, or waived except in a written instrument executed by the parties. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.

Section 6.5. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed,

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construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

Section 6.6. Effective Time. This Agreement shall become effective as of the date hereof.

Section 6.7. Entire Agreement. Except as otherwise expressly set forth herein, (a) this Agreement, (b) the Governance Agreement, (c) as provided in Section 5.1 hereof, the IAC 1997 Stockholders Agreement, and (d) as provided in Section 5.2 hereof, the agreements relating to IAC/InterActiveCorp, embody the complete agreement and understanding among the parties hereto with respect to the subject matter hereof or thereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way.

Section 6.8. Successors and Assigns. Neither this Agreement nor any of the rights or obligations under this Agreement shall be assigned, in whole or in part (except by operation of law pursuant to a merger whose purpose is not to avoid the provisions of this Agreement), by any party without the prior written consent of the other party hereto. Subject to the foregoing, this Agreement shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns.

Section 6.9. Counterparts. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement.

Section 6.10. Liabilities Under Federal Securities Laws. The exercise by any party (or its Affiliates or Stockholder Group, if applicable) (and including, in the case of the Liberty Stockholder Group, its exercise of the preemptive rights under Article III of the Governance Agreement) of any rights under this Agreement shall be subject to such reasonable delay as may be required to prevent any party or its respective Stockholder Group from incurring any liability under the federal securities laws and the parties agree to cooperate in good faith in respect thereof.

Section 6.11. Remedies. (a) Each party hereto acknowledges that money damages would not be an adequate remedy in the event that any of the covenants or agreements in this Agreement are not performed in accordance with its terms, and it is therefore agreed that in addition to and without limiting any other remedy or right it may have, the non-breaching party will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof.

(b) All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.

Section 6.12. Notices. Except as otherwise provided herein, any notice, request, claim, demand or other communication under this Agreement shall be in writing, shall be either

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personally delivered, delivered by facsimile transmission, or sent by reputable overnight courier service (charges prepaid) to the address for such Person set forth below or such other address as the recipient party has specified by prior written notice to the other parties hereto and shall be deemed to have been given hereunder when receipt is acknowledged for personal delivery or facsimile transmission or one day after deposit with a reputable overnight courier service.

If to Liberty:

Liberty Media Corporation

12300 Liberty Boulevard

Englewood, CO 80112

Attention: General Counsel

Telephone: (720) 875-5400

Facsimile: (720) 875-5382

with a copy to:

Baker Botts LLP

30 Rockefeller Plaza

44th Floor

New York, NY 10112

Attention: Frederick H. McGrath, Esq.

Telephone: (212) 408-2530

Facsimile: (212) 259-2530

If to Diller:

c/o IAC/InterActiveCorp

152 West 57th Street

New York, NY 10112

Attention: General Counsel

Telephone: (212) 314-7274

Facsimile: (212) 632-9642

with a copy to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, NY 10019

Attention: Pamela S. Seymon, Esq.

                 Andrew J. Nussbaum, Esq.

Telephone: (212) 403-1000

Facsimile: (212) 403-2000

Section 6.13. Adjustment of Shares Numbers. If, after the effective time of this Agreement, there is a subdivision, split, stock dividend, combination, reclassification or similar event with respect to any of the shares of Capital Stock referred to in this Agreement, then, in any such event, the numbers and types of shares of such Capital Stock referred to in this

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Agreement (and if applicable, the share prices thereof) shall be adjusted to the number and types of shares of such Capital Stock that a holder of such number of shares of such Capital Stock would own or be entitled to receive as a result of such event if such holder had held such number of shares immediately prior to the record date for, or effectiveness of, such event.

Section 6.14. Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the principles of conflicts of law. Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of Delaware for any action, proceeding or investigation in any court or before any governmental authority (“Litigation”) arising out of or relating to this Agreement and the transactions contemplated hereby and further agrees that service of any process, summons, notice or document by U.S. mail to its respective address set forth in this Agreement shall be effective service of process for any Litigation brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of this Agreement or the transactions contemplated hereby in the courts of the State of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum. Each of the parties irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any and all rights to trial by jury in connection with any Litigation arising out of or relating to this Agreement or the transactions contemplated hereby.

Section 6.15. Interpretation. The table of contents and headings contained in this Agreement are for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.

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IN WITNESS WHEREOF, the parties hereto have executed this Stockholders Agreement as of the date first written above.

LIBERTY MEDIA CORPORATION
By:	/s/ CHARLES Y. TANABE
	Name: Charles Y. Tanabe
	Title: Senior Vice President
	/s/ BARRY DILLER
	BARRY DILLER

EX-10.8

Exhibit 10.8

FORM OF EXPEDIA, INC. RESTRICTED STOCK UNIT AGREEMENT (EMPLOYEES)

THIS AGREEMENT, dated as of the award date (the “Award Date”) designated on the Summary of Award referenced below, between Expedia, Inc., a Delaware corporation (the “Corporation”), and the employee of the Corporation or one of its businesses (the “Eligible Individual”) designated as receiving an award of restricted stock units (the “Restricted Stock Units”) by the Compensation/Benefits Committee of the Board of Directors of the Corporation (or such other Committee as the Board may from time to time designate) (the “Committee”).

All capitalized terms used herein, to the extent not defined, shall have the meanings set forth in the Corporation’s 2005 Stock and Annual Incentive Plan (the “Plan”).

1. Award and Vesting of Restricted Stock Units

(a) Subject to the provisions of this Agreement and to the provisions of the Plan, the Corporation hereby grants Restricted Stock Units to the Eligible Individual pursuant to Section 7 of the Plan. Reference is made to the “Summary of Award” that can be found on the Smith Barney Benefit Access System at www.benefitaccess.com. Your Summary of Award, which sets forth the number of Restricted Stock Units granted to you by the Corporation and the Award Date (among other information), is hereby incorporated by reference into, and shall be read as part and parcel of, this Agreement.

(b) Subject to the terms and conditions of this Agreement, the provisions of the Plan [and subject to the satisfaction of performance goals approved by the Committee on [DATE]], the Restricted Stock Units shall vest and no longer be subject to any restriction (such period during which restrictions apply is the “Restriction Period”):

Vesting Date Percentage of Total Award Vesting

(c) Notwithstanding the provisions of Paragraph 1(b), in the event the Eligible Individual incurs a Termination of Employment by the Corporation for Cause, or the Eligible Individual voluntarily incurs a Termination of Employment within two years after any event or circumstance that would have been grounds for a Termination of Employment for Cause, the Eligible Individual’s Restricted Stock Units (whether or not vested) shall be forfeited and canceled in their entirety upon such Termination of Employment, and the Corporation may cause the Eligible Individual, immediately upon notice from the Corporation, either to return the shares or cash issued upon settlement of Restricted Stock Units that vested during the two-year period after the events or circumstances giving rise to or constituting grounds for such Termination of

Employment for Cause or to pay to the Corporation an amount equal to the aggregate amount, if any, that the Eligible Individual had previously realized in respect of any and all shares issued upon settlement of Restricted Stock Units that vested during the two-year period after the events or circumstances giving rise to or constituting grounds for such Termination of Employment for Cause (i.e., the value of the Restricted Stock Units upon vesting), in each case including any dividend equivalents or other distributions received in respect of any such Restricted Stock Units.

(d) In the event the Eligible Individual incurs a Termination of Employment during the Restriction Period for any reason other than as set forth in Paragraph 1(c), all remaining unvested Restricted Stock Units shall be forfeited by the Eligible Individual and canceled in their entirety effective immediately upon such termination.

(e) For purposes of this Agreement, employment with the Corporation shall include employment with the Corporation’s Affiliates (excluding InterActiveCorp and its subsidiaries) and its successors. Nothing in this Agreement or the Plan shall confer upon the Eligible Individual any right to continue in the employ of the Corporation or any of its Affiliates or interfere in any way with the right of the Corporation or any such Affiliates to terminate the Eligible Individual’s employment at any time.

2. Settlement of Units

As soon as practicable after any Restricted Stock Units have vested and are no longer subject to the Restriction Period (or at such later date specified by the Committee or in accordance with the election of the Eligible Individual, if the Committee so permits), such Restricted Stock Units shall be settled. Subject to Paragraph 8 (pertaining to the withholding of taxes), for each Restricted Stock Unit settled pursuant to this Paragraph 2, the Corporation shall (i) if the Eligible Individual is employed within the United States, issue one share of Common Stock for each vested Restricted Stock Unit and cause to be delivered to the Eligible Individual one or more unlegended, freely-transferable stock certificates in respect of such shares issued upon settlement of the vested Restricted Stock Units or (ii) if the Eligible Individual is employed outside the United States, pay, or cause to be paid, to the Eligible Individual an amount of cash equal to the Fair Market Value of one share of Common Stock for each vested Restricted Stock Unit settled at such time. Notwithstanding the foregoing, the Corporation shall be entitled to hold the shares or cash issuable upon settlement of Restricted Stock Units that have vested until the Corporation or the agent selected by the Corporation to manage the Plan under which the Restricted Stock Units have been issued (the “Agent”) shall have received from the Eligible Individual a duly executed Form W-9 or W-8, as applicable.

3. Non-Transferability of the Restricted Stock Units

During the Restriction Period and until such time as the Restricted Stock Units are ultimately settled as provided in Paragraph 2 above, the Restricted Stock Units shall not be transferable by the Eligible Individual by means of sale, assignment, exchange, encumbrance, pledge, hedge or otherwise.

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4. Rights as a Stockholder

Except as otherwise specifically provided in this Agreement, during the Restriction Period, the Eligible Individual shall not be entitled to any rights of a stockholder with respect to the Restricted Stock Units. Notwithstanding the foregoing, if the Corporation declares and pays dividends on the Common Stock during the Restriction Period, the Eligible Individual will be credited with additional amounts for each Restricted Stock Unit equal to the dividend that would have been paid with respect to such Restricted Stock Unit if it had been an actual share of Common Stock, which amount shall remain subject to restrictions (and as determined by the Committee may be reinvested in Restricted Stock Units or may be held in kind as restricted property) and shall vest concurrently with the vesting of the Restricted Stock Units upon which such dividend equivalent amounts were paid. Notwithstanding the foregoing, dividends and distributions other than regular quarterly cash dividends, if any, may result in an adjustment pursuant to Paragraph 5, rather than under this Paragraph 4.

5. Adjustment in the Event of Change in Stock; Change in Control

In the event of (i) a stock dividend, stock split, reverse stock split, share combination, or recapitalization or similar event affecting the capital structure of the Corporation (each, a “Share Change”), or (ii) a merger, consolidation, acquisition of property or shares, separation, spinoff, reorganization, stock rights offering, liquidation, Disaffiliation, payment of cash dividends other than an ordinary dividend or similar event affecting the Corporation or any of its Subsidiaries (each, a “Corporate Transaction’”), the Committee or the Board may in its discretion make such substitutions or adjustments as it deems appropriate and equitable to the number of Restricted Stock Units and the number and kind of shares of Common Stock underlying the Restricted Stock Units.

In the case of Corporate Transactions, such adjustments may include, without limitation (i) the cancellation of the Restricted Stock Units in exchange for payments of cash, property or a combination thereof having an aggregate value equal to the value of such Restricted Stock Units, as determined by the Committee or the Board in its sole discretion, (ii) the substitution of other property (including, without limitation, cash or other securities of the Corporation and securities of entities other than the Corporation) for the shares of Common Stock underlying the Restricted Stock Units and (iii) in connection with any Disaffiliation, arranging for the assumption of the Restricted Stock Units, or the replacement of the Restricted Stock Units with new awards based on other property or other securities (including, without limitation, other securities of the Corporation and securities of entities other than the Corporation), by the affected Subsidiary, Affiliate or division or by the entity that controls such Subsidiary, Affiliate or division following such Disaffiliation (as well as any corresponding adjustments to any Restricted Stock Units that remain based upon securities of the Corporation).

The determination of the Committee regarding any such adjustment will be final and conclusive and need not be the same for all Participants.

Unless otherwise determined by the Committee, in the event of a Change in Control, the provisions of Section 10 of the Plan shall apply.

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6. Payment of Transfer Taxes, Fees and Other Expenses

The Corporation agrees to pay any and all original issue taxes and stock transfer taxes that may be imposed on the issuance of shares received by an Eligible Individual in connection with the Restricted Stock Units, together with any and all other fees and expenses necessarily incurred by the Corporation in connection therewith.

7. Other Restrictions

(a) The Restricted Stock Units shall be subject to the requirement that, if at any time the Committee shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body is required, then in any such event, the award of Restricted Stock Units shall not be effective unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.

(b) The Eligible Individual acknowledges that the Eligible Individual is subject to the Corporation’s policies regarding compliance with securities laws, including but not limited to its Securities Trading Policy (as in effect from time to time and any successor policies), and, pursuant to these policies, if the Eligible Individual is on the Corporation’s insider list, the Eligible Individual shall be required to obtain pre-clearance from the Corporation’s General Counsel prior to purchasing or selling any of the Corporation’s securities, including any shares issued upon vesting of the Restricted Stock Units, and may be prohibited from selling such shares other than during an open trading window. The Eligible Individual further acknowledges that, in its discretion, the Corporation may prohibit the Eligible Individual from selling such shares even during an open trading window if the Corporation has concerns over the potential for insider trading.

8. Taxes and Withholding

No later than the date as of which an amount first becomes includible in the gross income of the Eligible Individual for federal, state, local or foreign income or employment or other tax purposes with respect to any Restricted Stock Units, the Eligible Individual shall pay to the Corporation, or make arrangements satisfactory to the Corporation regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. The obligations of the Corporation under this Agreement shall be conditioned on compliance by the Eligible Individual with this Paragraph 8, and the Corporation and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Eligible Individual, including deducting such amount from the delivery of shares or cash issued upon settlement of the Restricted Stock Units that gives rise to the withholding requirement.

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9. Notices

All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by facsimile, overnight courier or registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Eligible Individual: at the last known address on record at the Corporation.

If to the Corporation:

Expedia, Inc.

3150 139^th Avenue S.E.

Bellevue, WA 98005

Attention: General Counsel

Facsimile: (425) 679-7251

or to such other address or facsimile number as any party shall have furnished to the other in writing in accordance with this Paragraph 9. Notice and communications shall be effective when actually received by the addressee. Notwithstanding the foregoing, the Eligible Individual consents to electronic delivery of documents required to be delivered by the Corporation under the securities laws.

10. Effect of Agreement

Except as otherwise provided hereunder, this Agreement shall be binding upon and shall inure to the benefit of any successor or successors of the Corporation.

11. Laws Applicable to Construction; Consent to Jurisdiction

The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without reference to principles of conflict of laws, as applied to contracts executed in and performed wholly within the State of Delaware. In addition to the terms and conditions set forth in this Agreement, the Restricted Stock Units are subject to the terms and conditions of the Plan, which are hereby incorporated by reference.

Any and all disputes arising under or out of this Agreement, including without limitation any issues involving the enforcement or interpretation of any of the provisions of this Agreement, shall be resolved by the commencement of an appropriate action in the state or federal courts located within the state of Delaware, which shall be the exclusive jurisdiction for the resolution of any such disputes. The Eligible Individual hereby agrees and consents to the personal jurisdiction of said courts over the Eligible Individual for purposes of the resolution of any and all such disputes.

12. Severability

The invalidity or enforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

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13. Conflicts and Interpretation

In the event of any conflict between this Agreement and the Plan, the Plan shall control. In the event of any ambiguity in this Agreement, or any matters as to which this Agreement is silent, the Plan shall govern including, without limitation, the provisions thereof pursuant to which the Committee has the power, among others, to (i) interpret the Plan, (ii) prescribe, amend and rescind rules and regulations relating to the Plan and (iii) make all other determinations deemed necessary or advisable for the administration of the Plan.

In the event of any (i) conflict between the Summary of Award (or any other information posted on the Smith Barney Benefit Access System) and this Agreement, the Plan and/or the books and records of the Corporation or (ii) ambiguity in the Summary of Award (or any other information posted on the Smith Barney Benefit Access System), this Agreement, the Plan and/or the books and records of the Corporation, as applicable, shall control.

14. Amendment

The Corporation may modify, amend or waive the terms of the Restricted Stock Unit award, prospectively or retroactively, but no such modification, amendment or waiver shall impair the rights of the Eligible Individual without his or her consent, except as required by applicable law, NASDAQ or stock exchange rules, tax rules or accounting rules. The waiver by either party of compliance with any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement.

15. Headings

The headings of paragraphs herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any of the provisions of this Agreement.

16. Counterparts

This Agreement may be executed in counterparts, which together shall constitute one and the same original.

17. Data Protection

The Eligible Individual authorizes the release from time to time to the Corporation (and any of its subsidiaries or affiliated companies) and to the Agent (together, the “Relevant Companies”) of any and all personal or professional data that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). Without limiting the above, the Eligible Individual permits his or her employing company to collect, process, register and transfer to the Relevant Companies all Relevant Information (including any professional and personal data that may be useful or necessary for the purposes of the administration of the Plan and/or this Agreement and/or to implement or structure any further grants of equity awards (if any)). The Eligible Individual hereby authorizes the Relevant Information to be transferred to any jurisdiction in which the Corporation, his or her employing company or the Agent considers appropriate. The Eligible Individual shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

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IN WITNESS WHEREOF, as of the date first above written, the Corporation has caused this Agreement to be executed on its behalf by a duly authorized officer and the Eligible Individual has hereunto set the Eligible Individual’s hand. Electronic acceptance of this Agreement pursuant to the Corporation’s instructions to the Eligible Individual (including through an online acceptance process managed by the Agent) is acceptable.

EXPEDIA, INC.

Name:

Title:

ELIGIBLE INDIVIDUAL

7

EX-10.9

Exhibit 10.9

FORM OF EXPEDIA, INC. RESTRICTED STOCK UNIT AGREEMENT (DIRECTORS)

THIS AGREEMENT, dated as of August 9, 2005, between Expedia, Inc., a Delaware corporation (the “Corporation”), and              (the “Director”).

All capitalized terms used herein, to the extent not defined, shall have the meanings set forth in the Corporation’s 2005 Stock and Annual Incentive Plan (the “Plan”).

1. Grant and Vesting of Restricted Stock Units.

(a) Subject to the provisions of this Agreement and to the provisions of the Plan, the Corporation hereby grants Restricted Stock Units to the Director pursuant to Section 7 of the Plan. Reference is made to the “Summary of Award” that can be found on the Smith Barney Benefit Access System at www.benefitaccess.com. Your Summary of Award, which sets forth the number of Restricted Stock Units granted to you by the Corporation and the Award Date (among other information), is hereby incorporated by reference into, and shall be read as part and parcel of, this Agreement.

(b) Subject to the terms and conditions of this Agreement and to the provisions of the Plan, the Restricted Stock Units shall vest and no longer be subject to any restriction (such period during which restrictions apply is the “Restriction Period”):

Vesting Date Percentage of Total Grant Vesting

(c) In the event of termination of the Director’s service with the Corporation during the Restriction Period for any reason, all remaining unvested Restricted Stock Units shall be forfeited by the Director and canceled in their entirety effective immediately upon such termination.

(d) For purposes of this Agreement, service with the Corporation shall include employment with the Corporation’s Affiliates (excluding IAC/InterActiveCorp and its subsidiaries) and its successors. Nothing in this Agreement or the Plan shall confer upon the Director any right to continue in the service of the Corporation or any of its Affiliates.

2. Settlement of Units.

As soon as practicable after any Restricted Stock Units have vested and are no longer subject to the Restriction Period, such Restricted Stock Units shall be settled. Subject to Paragraph 8 (pertaining to the withholding of taxes), for each Restricted Stock Unit settled

pursuant to this Paragraph 2, the Corporation shall issue one share of Common Stock for each vested Restricted Stock Unit and cause to be delivered to the Director one or more unlegended, freely-transferable stock certificates in respect of such shares issued upon settlement of the vested Restricted Stock Units. Notwithstanding the foregoing, the Corporation shall be entitled to hold the shares issuable upon settlement of Restricted Stock Units that have vested until the Corporation or the Agent (as defined in Paragraph 8 below) shall have received from the Director a duly executed Form W-9 or W-8, as applicable.

3. Nontransferability of the Restricted Stock Units.

During the Restriction Period and until such time as the Restricted Stock Units are ultimately settled as provided in Paragraph 2 above, the Restricted Stock Units shall not be transferable by the Director by means of sale, assignment, exchange, encumbrance, pledge, hedge or otherwise.

4. Rights as a Stockholder.

Except as otherwise specifically provided in this Agreement, during the Restriction Period, the Director shall not be entitled to any rights of a stockholder with respect to the Restricted Stock Units. Notwithstanding the foregoing, if the Corporation declares and pays dividends on the Common Stock during the Restriction Period, the Director will be credited with additional amounts for each Restricted Stock Unit equal to the dividend that would have been paid with respect to such Restricted Stock Unit if it had been an actual share of Common Stock, which amount shall remain subject to restrictions (and as determined by the Committee (as defined herein) may be reinvested in Restricted Stock Units or may be held in kind as restricted property) and shall vest concurrently with the vesting of the Restricted Stock Units upon which such dividend equivalent amounts were paid. Notwithstanding the foregoing, dividends and distributions other than regular quarterly cash dividends, if any, may result in an adjustment pursuant to Paragraph 5, rather than under this Paragraph 4.

5. Adjustment in the Event of Change in Stock; Change in Control.

In the event of (i) a stock dividend, stock split, reverse stock split, share combination or recapitalization or similar event affecting the capital structure of the Corporation (each, a “Share Change”), or (ii) a merger, consolidation, acquisition of property or shares, separation, spinoff, reorganization, stock rights offering liquidation, Disaffiliation, payment of cash dividends other than an ordinary dividend or similar event affecting the Corporation or any of its Subsidiaries (each, a “Corporate Transaction”), the Compensation/Benefits Committee of the Board of Directors (or such other committee as the Board may from time to time designate) (the “Committee”) or Board may in its discretion make such substitutions or adjustments as it deems appropriate and equitable to the number of Restricted Stock Units and the number and kind of shares of Common Stock underlying the Restricted Stock Units.

In the case of Corporate Transactions, such adjustments may include, without limitation (i) the cancellation of the Restricted Stock Units in exchange for payments of cash, property or a combination thereof having an aggregate value equal to the value of such Restricted Stock Units, as determined by the Committee or the Board in its sole discretion, (ii) the substitution of other

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property (including, without limitation, cash or other securities of the Corporation and securities of entities other than the Corporation) for the shares of Common Stock underlying the Restricted Stock Units and (iii) in connection with any Disaffiliation, arranging for the assumption of the Restricted Stock Units, or the replacement of the Restricted Stock Units with new awards based on other property or other securities (including, without limitation, other securities of the Corporation and securities of entities other than the Corporation), by the affected Subsidiary, Affiliate or division or by the entity that controls such Subsidiary, Affiliate or division following such Disaffiliation (as well as any corresponding adjustments to any Restricted Stock Units that remain based upon securities of the Corporation).

The determination of the Committee regarding any such adjustments will be final and conclusive and need not be the same for all Participants.

Notwithstanding the foregoing, in the event of a Change in Control, the Restricted Stock Units shall automatically vest.

6. Payment of Transfer Taxes, Fees and Other Expenses.

The Corporation agrees to pay any and all original issue taxes and stock transfer taxes that may be imposed on the issuance of shares received by an Director in connection with the Restricted Stock Units, together with any and all other fees and expenses necessarily incurred by the Corporation in connection therewith.

7. Other Restrictions.

(a) The Restricted Stock Units shall be subject to the requirement that, if at any time the Committee shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body is required, then in any such event, the grant of Restricted Stock Units shall not be effective unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.

(b) The Director acknowledges that the Director is subject to the Corporation’s policies regarding compliance with securities laws, including but not limited to its Securities Trading Policy (as in effect from time to time and any successor policies), and, pursuant to these policies, the Director shall be required to obtain pre-clearance from the Corporation’s General Counsel prior to purchasing or selling any of the Corporation’s securities, including any shares issued upon vesting of the Restricted Stock Units, and may be prohibited from selling such shares other than during an open trading window. The Director further acknowledges that, in its discretion, the Corporation may prohibit the Director from selling such shares even during an open trading window if the Corporation has concerns over the potential for insider trading.

8. Taxes and Withholding.

No later than the date as of which an amount first becomes includible in the gross income of the Director for federal, state, local or foreign income tax purposes with respect to any

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Restricted Stock Units, the Director (i) shall pay to the Corporation, or make arrangements satisfactory to the Corporation regarding the payment of, any federal, state, local and foreign taxes of any kind required by law to be withheld with respect to such amount and (ii) shall provide to the Corporation or to the agent selected by the Corporation for managing the Plan under which the Restricted Stock Units have been granted a properly completed and duly executed Form W-9 or W-8, as applicable, prior to the date as of which an amount first becomes includible in the gross income of the Director for income tax purposes. The obligations of the Corporation under this Agreement shall be conditioned on compliance by the Director with this Paragraph 8, and the Corporation and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Director, including deducting such amount from the delivery of shares issued upon settlement of the Restricted Stock Units that gives rise to the withholding requirement.

9. Notices.

All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by facsimile, overnight courier or registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Director:

If to the Corporation:

Expedia, Inc.

3150 139^th Avenue S.E.

Bellevue, WA 98005

Attention: General Counsel

Facsimile: (425) 679-4283

or to such other address or facsimile number as any party shall have furnished to the other in writing in accordance with this Paragraph 9. Notice and communications shall be effective when actually received by the addressee. Notwithstanding the foregoing, the Director consents to electronic delivery of documents required to be delivered by the Corporation under the securities laws.

10. Effect of Agreement.

Except as otherwise provided hereunder, this Agreement shall be binding upon and shall inure to the benefit of any successor or successors of the Corporation.

11. Laws Applicable to Construction; Consent to Jurisdiction.

The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without reference to principles of conflict of laws, as applied to contracts executed in and performed wholly within the State of Delaware. In addition to the

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terms and conditions set forth in this Agreement, the Restricted Stock Units are subject to the terms and conditions of the Plan, which is hereby incorporated by reference.

Any and all disputes arising under or out of this Agreement, including without limitation any issues involving the enforcement or interpretation of any of the provisions of this Agreement, shall be resolved by the commencement of an appropriate action in the state or federal courts located within the state of Delaware, which shall be the exclusive jurisdiction for the resolution of any such disputes. The Director hereby agrees and consents to the personal jurisdiction of said courts over the Director for purposes of the resolution of any and all such disputes.

12. Severability.

The invalidity or enforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

13. Conflicts and Interpretation.

In the event of any conflict between this Agreement and the Plan, the Plan shall control. In the event of any ambiguity in this Agreement, or any matters as to which this Agreement is silent, the Plan shall govern including, without limitation, the provisions thereof pursuant to which the Committee has the power, among others, to (i) interpret the Plan, (ii) prescribe, amend and rescind rules and regulations relating to the Plan and (iii) make all other determinations deemed necessary or advisable for the administration of the Plan.

In the event of any (i) conflict between the Summary of Award (or any other information posted on the Smith Barney Benefit Access System) and this Agreement, the Plan and/or the books and records of the Corporation, or (ii) ambiguity in the Summary of Award (or any other information posted on the Smith Barney Benefit Access System), this Agreement, the Plan and/or the books and records of the Corporation, as applicable, shall control

14. Amendment.

The Committee may modify, amend or waive the terms of the Restricted Stock Unit award, prospectively or retroactively, but no such modification, amendment or waiver shall materially impair the rights of the Director without his or her consent, except as required by applicable law, NASDAQ or stock exchange rule, tax rules or accounting rules. The waiver by either party of compliance with any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement.

15. Headings.

The headings of paragraphs herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any of the provisions of this Agreement.

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16. Counterparts.

This Agreement may be executed in counterparts, which together shall constitute one and the same original.

17. Data Protection

The Director authorizes the release from time to time to the Corporation (and any of its subsidiaries or affiliated companies) and to the Agent (together, the “Relevant Companies”) of any and all personal or professional data that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). Without limiting the above, Director permits the Corporation to collect, process, register and transfer to the Relevant Companies all Relevant Information (including any professional and personal data that may be useful or necessary for the purposes of the administration of the Plan and/or this Agreement and/or to implement or structure any further grants of equity awards (if any)). The Director hereby authorizes the Relevant Information to be transferred to any jurisdiction in which the Corporation or the Agent considers appropriate. Employee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

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IN WITNESS WHEREOF, as of the date first above written, the Corporation has caused this Agreement to be executed on its behalf by a duly authorized officer and the Director has hereunto set the Director’s hand.

EXPEDIA, INC.

Name:

Title:

ELIGIBLE DIRECTOR

7

EX-10.10

Exhibit 10.10

EXECUTION COPY

TAX SHARING AGREEMENT

by and between

IAC/INTERACTIVECORP

and

EXPEDIA, INC.

Dated as of

August 9, 2005

TAX SHARING AGREEMENT

This TAX SHARING AGREEMENT (this “Agreement”), dated as of August 9, 2005, by and between IAC/InterActiveCorp, a Delaware corporation (“Parent”), and Expedia, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“SpinCo”).

W I T N E S S E T H

WHEREAS, Parent and SpinCo have entered into a Separation Agreement, dated as of August 9, 2005 (the “Separation Agreement”), providing for the Separation of the Parent Group from the SpinCo Group;

WHEREAS, pursuant to the terms of the Separation Agreement, Parent will contribute all of the Separated Assets to SpinCo and its Subsidiaries and will cause SpinCo and its Subsidiaries to assume the Assumed Liabilities;

WHEREAS, for U.S. federal income tax purposes, it is intended that the Contribution and the Spin-Off shall qualify as a tax-free transaction under Sections 355(a) and 368(a)(1)(D) of the Code;

WHEREAS, at the close of business on the Effective Date, the taxable year of SpinCo shall close for U.S. federal income tax purposes; and

WHEREAS, the parties hereto wish to provide for the payment of Income Taxes and Other Taxes and entitlement to refunds thereof, allocate responsibility and provide for cooperation in connection with the filing of returns in respect of Income Taxes and Other Taxes, and provide for certain other matters relating to Income Taxes and Other Taxes.

NOW, THEREFORE, in consideration of the premises and the representations, covenants and agreements herein contained and intending to be legally bound hereby, Parent and SpinCo hereby agree as follows:

1. Definitions. Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to them in the Separation Agreement. For purposes of this Agreement, the following terms shall have the meanings set forth below:

“Actually Realized” or “Actually Realizes” shall mean, for purposes of determining the timing of the incurrence of any Spin-Off Tax Liability, Income Tax Liability or Other Tax Liability or the realization of a Refund (or any related Income Tax or Other Tax cost or benefit), whether by receipt or as a credit or other offset to Taxes payable, by a Person in respect of any payment, transaction, occurrence or event, the time at which the amount of Income Taxes or Other Taxes paid (or Refund realized) by such Person is increased above (or reduced below) the amount of Income Taxes or Other Taxes that such Person would have been required to pay (or Refund that such Person would have realized) but for such payment, transaction, occurrence or event.

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“Aggregate Spin-Off Tax Liabilities” shall mean the sum of the Spin-Off Tax Liabilities with respect to each Taxing Jurisdiction.

“Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions located in the State of New York are authorized or obligated by law or executive order to close.

“Carryback” shall mean the carryback of a Tax Attribute (including, without limitation, a net operating loss, a net capital loss or a tax credit) by a member of the SpinCo Group from a Post-Distribution Taxable Period to a Pre-Distribution Taxable Period during which such member of the SpinCo Group was included in a Combined Return filed for such Pre-Distribution Taxable Period.

“Cash Acquisition Merger” shall mean a merger of a newly formed Subsidiary of SpinCo with a corporation, limited liability company, limited partnership, general partnership or joint venture (in each case, not previously owned directly or indirectly by SpinCo) solely for cash pursuant to which SpinCo acquires such corporation, limited liability company, limited partnership, general partnership or joint venture and no Equity Securities of SpinCo or any SpinCo Subsidiary are issued, sold, redeemed or acquired, directly or indirectly.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Combined Return” shall mean a consolidated, combined or unitary Income Tax Return or Other Tax Return that actually includes, by election or otherwise, one or more members of the Parent Group together with one or more members of the SpinCo Group.

“Contribution” shall mean those certain capital contributions to SpinCo by Parent made in connection with the Spin-Off.

“Distribution Date” shall mean the date on which the Spin-Off is completed.

“Distribution-Related Proceeding” shall mean any Proceeding in which the IRS, another Tax Authority or any other party asserts a position that could reasonably be expected to adversely affect the Tax-Free Status of any of the Spin-Off-Related Transactions.

“EMA” shall mean the Employee Matters Agreement by and between Parent and SpinCo dated as of August 9, 2005.

“Equity Securities” shall mean any stock or other securities treated as equity for tax purposes, options, warrants, rights, convertible debt, or any other instrument or security that affords any Person the right, whether conditional or otherwise, to acquire stock or to be paid an amount determined by reference to the value of stock.

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“Expedia Service Provider” shall mean any “Expedia Employee” as such term is defined in the EMA or any other provider of services to any member of the SpinCo Group.

“Fifty-Percent or Greater Interest” shall have the meaning ascribed to such term for purposes of Sections 355(d) and (e) of the Code.

“Final Determination” shall mean the final resolution of liability for any Income Tax or Other Tax, which resolution may be for a specific issue or adjustment or for a taxable period, (a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the laws of a State, local, or foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for Refund or the right of the Tax Authority to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as the case may be); (b) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (c) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the laws of a State, local, or foreign taxing jurisdiction; (d) by any allowance of a Refund or credit in respect of an overpayment of Income Tax or Other Tax, but only after the expiration of all periods during which such Refund may be recovered (including by way of offset) by the jurisdiction imposing such Income Tax or Other Tax; or (e) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the parties.

“IAC Service Provider” shall mean any “IAC Employee” as such term is defined in the EMA or any other provider of services to any member of the Parent Group.

“Income Tax” (a) shall mean (i) any federal, state, local or foreign tax, charge, fee, impost, levy or other assessment that is based upon, measured by, or calculated with respect to (A) net income or profits (including, but not limited to, any capital gains, gross receipts, or minimum tax, and any tax on items of tax preference, but not including sales, use, value added, real property gains, real or personal property, transfer or similar taxes), (B) multiple bases (including, but not limited to, corporate franchise, doing business or occupation taxes), if one or more of the bases upon which such tax may be based, by which it may be measured, or with respect to which it may be calculated is described in clause (a)(i)(A) of this definition, or (C) any net worth, franchise or similar tax, in each case together with (ii) any interest and any penalties, fines, additions to tax or additional amounts imposed by any Tax Authority with respect thereto and (b) shall include any transferee or successor liability in respect of an amount described in clause (a) of this definition.

“Income Tax Benefit” shall mean, with respect to the effect of any Carryback on the Income Tax Liability of Parent or the Parent Group for any taxable period, the excess of (a) the hypothetical Income Tax Liability of Parent or the Parent Group for such taxable period, calculated as if such Carryback had not been utilized but

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with all other facts unchanged over (b) the actual Income Tax Liability of Parent or the Parent Group for such taxable period, calculated taking into account such Carryback (and treating a Refund as a negative Income Tax Liability, for purposes of such calculation).

“Income Tax Liabilities” shall mean all liabilities for Income Taxes.

“Income Tax Return” shall mean any return, report, filing, statement, questionnaire, declaration or other document required to be filed with a Tax Authority in respect of Income Taxes.

“Indemnified Party” shall mean any Person seeking indemnification pursuant to the provisions of this Agreement.

“Indemnifying Party” shall mean any party hereto from which any Indemnified Party is seeking indemnification pursuant to the provisions of this Agreement.

“IRS” shall mean the Internal Revenue Service of the United States.

“Losses” shall mean any and all losses, liabilities, claims, damages, obligations, payments, costs and expenses, matured or unmatured, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown (including, without limitation, the costs and expenses of any and all Actions, threatened Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys’ fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened Actions).

“Option” shall have the meaning ascribed to such term in the EMA.

“Other Tax Liabilities” shall mean all liabilities for Other Taxes.

“Other Tax Returns” shall mean any return, report, filing, statement, questionnaire, declaration or other document required to be filed with a Tax Authority in respect of Other Taxes.

“Other Taxes” shall mean all forms of taxation, whenever created or imposed, and whether of the United States of America or elsewhere, and whether imposed by a local, municipal, governmental, State, federation or other body, and without limiting the generality of the foregoing, shall include superfund, sales, use, ad valorem, value added, occupancy, transfer, recording, withholding, payroll, employment, excise, occupation, premium or property taxes (in each case, together with any related interest, penalties and additions to tax, or additional amounts imposed by any Tax Authority thereon); provided, however, that Other Taxes shall not include any Income Taxes.

“Parent Consolidated Group” shall mean the affiliated group of corporations (within the meaning of Section 1504(a) of the Code without regard to the exclusions in Section 1504(b)(1) through (8)) of which Parent is the common parent (and any predecessor or successor to such affiliated group).

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“Parent Group” shall mean (a) Parent and each Person that is a direct or indirect Subsidiary of Parent (including any Subsidiary of Parent that is disregarded for U.S. federal Income Tax purposes (or for purposes of any state, local, or foreign tax law)) immediately after the Spin-Off after giving effect to the Spin-Off-Related Transactions, (b) any corporation (or other Person) that shall have merged or liquidated into Parent or any such Subsidiary and (c) any predecessor or successor to any Person otherwise described in this definition.

“Parent Separate Return” shall mean any Separate Return required to be filed by Parent or any member of the Parent Group.

“Permitted Transaction” shall mean any transaction that satisfies the requirements of Sections 4(c).

“Person” shall mean any individual, partnership, joint venture, limited liability company, corporation, association, joint stock company, trust, unincorporated organization or similar entity or a governmental authority or any department or agency or other unit thereof.

“Post-Distribution Taxable Period” shall mean a taxable period that, to the extent it relates to a member of the SpinCo Group, begins after the Distribution Date.

“Pre-Distribution Taxable Period” shall mean a taxable period that, to the extent it relates to a member of the SpinCo Group, ends on or before the Distribution Date.

“Private Letter Ruling” shall mean (a) any private letter ruling issued by the IRS in connection with any of the Spin-Off-Related Transactions or (b) any similar ruling issued by any other Tax Authority in connection with any of the Spin-Off-Related Transactions.

“Private Letter Ruling Documents” shall mean (a) any Private Letter Ruling, any request for a Private Letter Ruling submitted to the IRS, together with the appendices and exhibits thereto and any supplemental filings or other materials subsequently submitted to the IRS, in connection with the Spin-Off-Related Transactions, or (b) any similar filings submitted to any other Tax Authority in connection with any such request for a Private Letter Ruling.

“Proceeding” shall mean any audit or other examination, or judicial or administrative proceeding relating to liability for, or Refunds or adjustments with respect to, Income Taxes or Other Taxes.

“Refund” shall mean any refund of Income Taxes or Other Taxes, including any reduction in Income Tax Liabilities or Other Tax Liabilities by means of a credit, offset or otherwise.

“Representative” shall mean with respect to a Person, such Person’s officers, directors, employees and other authorized agents.

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“Restriction Period” shall mean the period beginning on the date hereof and ending on the twenty five (25) month anniversary of the Distribution Date.

“Separate Return” shall mean (a) in the case of any Income Tax Return or Other Tax Return required to be filed by any member of the SpinCo Group (including any consolidated, combined or unitary return), any such tax return that does not include any member of the Parent Group and (b) in the case of any Income Tax Return or Other Tax Return required to be filed by any member of the Parent Group (including any consolidated, combined or unitary return), any such tax return that does not include any member of the SpinCo Group.

“Separation Agreement” shall have the meaning set forth in the recitals of this Agreement.

“SpinCo Adjustment” shall mean an adjustment of any item of income, gain, loss, deduction or credit attributable to members of the SpinCo Group (including, in the case of any state or local consolidated, combined or unitary income or franchise taxes, a change in one or more apportionment factors of members of the SpinCo Group) pursuant to a Final Determination for a Pre-Distribution Taxable Period.

“SpinCo Board” shall mean the Board of Directors of SpinCo.

“SpinCo Business” shall mean each trade or business actively conducted (within the meaning of Section 355(b) of the Code) by SpinCo or any member of the SpinCo Group immediately after the Spin-Off, as set forth in the Tax Opinion Documents.

“SpinCo Consolidated Group” shall mean the affiliated group of corporations (within the meaning of Section 1504(a) of the Code without regard to the exclusions in Section 1504(b)(1) through (8)) of which SpinCo is the common parent, determined immediately after the Spin-Off (and any predecessor or successor to such affiliated group other than the Parent Consolidated Group).

“SpinCo Group” shall mean (a) SpinCo and each Person that is a direct or indirect Subsidiary of SpinCo (including any Subsidiary of SpinCo that is disregarded for U.S. federal Income Tax purposes (or for purposes of any State, local, or foreign tax law)) immediately after the Spin-Off after giving effect to the Spin-Off-Related Transactions, (b) any corporation (or other Person) that shall have merged or liquidated into SpinCo or any such Subsidiary and (c) any predecessor or successor to any Person otherwise described in this definition.

“SpinCo Separate Return” shall mean any Separate Return required to be filed by SpinCo or any member of the SpinCo Group, including, without limitation, (a) any U.S. consolidated federal Income Tax Returns of the SpinCo Consolidated Group required to be filed with respect to a Post-Distribution Taxable Period and (b) any U.S. consolidated federal Income Tax Returns for any group of which any member of the SpinCo Group was the common parent.

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“SpinCo Tax Benefit” shall mean, with respect to any Taxing Jurisdiction, any decrease in Income Tax Liability or Other Tax Liability (or increase in a Refund) Actually Realized with respect to a Combined Return that is attributable to a SpinCo Adjustment.

“SpinCo Tax Liability” shall mean, with respect to any Taxing Jurisdiction, any increase in Income Tax Liability or Other Tax Liability (or reduction in a Refund) Actually Realized with respect to a Combined Return that is attributable to a SpinCo Adjustment.

“Spin-Off” shall mean the distribution of Expedia Common Stock, Expedia Class B Common Stock and Expedia Series A Preferred Stock pursuant to the Reclassification.

“Spin-Off-Related Transactions” shall mean the Contribution together with the Spin-Off.

“Spin-Off Tax Liabilities” shall mean, with respect to any Taxing Jurisdiction, the sum of (a) any increase in Income Tax Liability or Other Tax Liability (or reduction in a Refund) Actually Realized as a result of any corporate-level gain or income recognized with respect to the failure of any of the Spin-Off-Related Transactions to qualify for Tax-Free Status under the income tax laws of such Taxing Jurisdiction pursuant to any settlement, Final Determination, judgment, assessment, proposed adjustment or otherwise, (b) interest on such amounts calculated pursuant to such Taxing Jurisdiction’s laws regarding interest on tax liabilities at the highest Underpayment Rate for corporations in such Taxing Jurisdiction from the date such additional gain or income was recognized until full payment with respect thereto is made pursuant to Section 3 hereof (or in the case of a reduction in a Refund, the amount of interest that would have been received on the foregone portion of the Refund but for the failure of any of the Spin-Off-Related Transactions to qualify for Tax-Free Status), and (c) any penalties actually paid to such Taxing Jurisdiction that would not have been paid but for the failure of any of the Spin-Off-Related Transactions to qualify for Tax-Free Status in such Taxing Jurisdiction.

“Tax Attribute” shall mean a consolidated, combined or unitary net operating loss, net capital loss, unused investment credit, unused foreign tax credit, or excess charitable contribution (as such terms are used in Treasury Regulations 1.1502-79 and 1.1502-79A or comparable provisions of foreign, State or local tax law), or a minimum tax credit or general business credit.

“Tax Authority” shall mean a governmental authority (foreign or domestic) or any subdivision, agency, commission or authority thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including, without limitation, the IRS).

“Tax Benefits” shall have the meaning set forth in Section 3(a) hereof.

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“Tax Counsel” shall mean tax counsel of recognized national standing that is acceptable to Parent.

“Tax-Free Status” shall mean the qualification of each of the Spin-Off-Related Transactions, as the case may be, (a) as a transaction described in Sections 355(a) and 368(a)(1)(D) of the Code, (b) as a transaction in which the stock distributed thereby is “qualified property” for purposes of Section 361(c) of the Code, and (c) as a transaction in which Parent, the members of the Parent Group, SpinCo and the members of the SpinCo Group recognize no income or gain other than intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code.

“Taxing Jurisdiction” shall mean the United States and every other government or governmental unit having jurisdiction to tax Parent or SpinCo or any of their respective Affiliates.

“Tax Opinion” shall mean the tax opinion issued by Tax Counsel in connection with the Spin-Off-Related Transactions.

“Tax Opinion Documents” shall mean the Tax Opinion and the information and representations provided by, or on behalf of, Parent or SpinCo to Tax Counsel in connection therewith.

“Tax-Related Losses” shall mean:

(a) the Aggregate Spin-Off Tax Liabilities,

(b) all accounting, legal and other professional fees, and court costs incurred in connection with any settlement, Final Determination, judgment or other determination with respect to such Aggregate Spin-Off Tax Liabilities, and

(c) all costs, expenses and damages associated with stockholder litigation or controversies and any amount paid by Parent or SpinCo in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Tax Authority payable by Parent or SpinCo or their respective Affiliates, in each case, resulting from the failure of any of the Spin-Off-Related Transactions to qualify for Tax-Free Status.

“Underpayment Rate” shall mean the annual rate of interest described in Section 6621(c) of the Code for large corporate underpayments of Income Tax (or similar provision of state, local, or foreign Income Tax law, as applicable), as determined from time to time.

“Unqualified Tax Opinion” shall mean an unqualified opinion of Tax Counsel on which Parent may rely to the effect that a transaction will not disqualify any of the Spin-Off-Related Transactions from Tax-Free Status, assuming that the Spin-Off-Related Transactions would have qualified for Tax-Free Status if such transaction did not occur.

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2. Filing of Tax Returns; Payment of Taxes.

(a) Filing of Tax Returns; Payment of Income Taxes and Other Taxes.

(i) Parent Consolidated Returns; Other Combined Returns. Parent shall prepare and file or cause to be prepared and filed (A) all U.S. consolidated federal Income Tax Returns of the Parent Consolidated Group and (B) all other Combined Returns. Except as provided in Section (2)(a)(ii) hereof, Parent shall pay, or cause to be paid, and shall be responsible for, any and all Income Taxes and Other Taxes due or required to be paid with respect to or required to be reported on any such Income Tax Return or Other Tax Return (in each case, excluding any amounts which are SpinCo Tax Liabilities or otherwise attributable to SpinCo Adjustments).

(ii) SpinCo Adjustments. SpinCo shall pay, or cause to be paid, and shall be responsible for, any SpinCo Tax Liabilities. Other than in connection with the initial filing of Combined Returns and the payment of the tax liability shown as due thereon provided for in Section 2(a)(i) hereof, SpinCo shall be responsible for all SpinCo Tax Liabilities and shall be entitled to all SpinCo Tax Benefits.

(iii) Parent Separate Returns. Parent shall prepare and file or cause to be prepared and filed all Parent Separate Returns. Parent shall pay, or cause to be paid, and shall be responsible for, any and all Income Taxes or Other Taxes due or required to be paid with respect to or required to be reported on any Parent Separate Return (including any increase in such Income Tax Liabilities or Other Tax Liabilities as a result of a Final Determination).

(iv) SpinCo Separate Returns. SpinCo shall prepare and file or cause to be prepared and filed all SpinCo Separate Returns. SpinCo shall pay, or cause to be paid, and shall be responsible for, any and all Income Taxes or Other Taxes due or required to be paid with respect to or required to be reported on any SpinCo Separate Return (including any increase in such Income Tax Liabilities or Other Tax Liabilities as a result of a Final Determination).

(b) Preparation of Tax Returns.

(i) Parent (or its designee) shall determine the entities to be included in any Combined Return and make or revoke any Income Tax elections, adopt or change any accounting methods, and determine any other position taken on or in respect of any Income Tax Return or Other Tax Return required to be prepared and filed by Parent pursuant to Section 2(a)(i). Notwithstanding the immediately preceding sentence, any Income Tax Return or Other Tax Return filed by Parent pursuant to Section 2(a)(i) with respect to any Pre-Closing Taxable Period shall, to the extent relating to SpinCo or the SpinCo Group, be prepared consistent with Parent’s past practice for the filing of such returns and shall not include any tax election relating to SpinCo or the SpinCo Group that is inconsistent with past practice (or, where no such past practice exists, shall not reflect any tax return position or include any tax election that would materially adversely affect SpinCo or the SpinCo Group), except to the extent that SpinCo consents to such tax return position or tax election (such consent not to be unreasonably withheld); provided, however, that, for the avoidance of doubt, the allocation and pro-ration of

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items of income, gain, loss, deduction and credit for the period which includes the Spin-Off shall (to the extent allowable) be determined by Parent in its sole discretion in accordance with Treasury Regulation Section 1.1502-76(b). SpinCo shall, and shall cause each member of the SpinCo Group to, prepare and submit at Parent’s request (but in no event later than 90 days after such request), at SpinCo’s expense, all information that Parent shall reasonably request, in such form as Parent shall reasonably request including any such information requested to enable Parent to prepare any Income Tax Returns or Other Tax Return required to be filed by Parent pursuant to Section 2(a)(i). Parent shall make any such Income Tax Return or Other Tax Return and related workpapers available for review by SpinCo to the extent such return relates to Taxes for which SpinCo would reasonably be expected to be liable or with respect to which SpinCo would reasonably be expected to have a claim. If practicable, Parent shall make such return available for review sufficiently in advance of the due date for filing such return to provide SpinCo an opportunity to analyze and comment on such return. Parent and SpinCo shall attempt in good faith to resolve any issues arising out of the review of such return.

(ii) Except as required by applicable law or as a result of a Final Determination, neither Parent nor SpinCo shall (nor shall cause or permit any members of the Parent Group or SpinCo Group, respectively, to) take any position that is either inconsistent with the treatment of the Spin-Off-Related Transactions as having Tax-Free Status (or analogous status under State, local or foreign law) or, with respect to a specific item of income, deduction, gain, loss, or credit on an Income Tax Return or Other Tax Return, treat such specific item in a manner which is inconsistent with the manner such specific item is reported on an Income Tax Return or Other Tax Return prepared or filed by Parent pursuant to Section 2(a) hereof (including, without limitation, the claiming of a deduction previously claimed on any such Income Tax Return or Other Tax Return).

3. Indemnification for Income Taxes and Other Taxes.

(a) Indemnification by Parent. From and after the Distribution Date, except as provided in Section 3(b), Parent and each member of the Parent Group shall jointly and severally indemnify, defend and hold harmless SpinCo and each member of the SpinCo Group and each of their respective Representatives and Affiliates (and the heirs, executors, successors and assigns of any of them) from and against (i) all Spin-Off Tax Liabilities incurred by any member of the Parent Group, (ii) without duplication, all Income Tax Liabilities, and Other Tax Liabilities that any member of the Parent Group is responsible for pursuant to Section 2, and (iii) all Income Taxes and Other Taxes, Spin-Off Tax Liabilities and Tax-Related Losses incurred by any member of the Parent Group or SpinCo Group by reason of the breach by Parent or any member of the Parent Group of any of Parent’s representations or covenants hereunder or made in connection with the Tax Opinion and, in each case, any related costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses); provided, however, that neither Parent nor any member of the Parent Group shall have any obligation to indemnify, defend or hold harmless any Person pursuant to this Section 3(a) to the extent that such indemnification obligation is otherwise attributable to any breach by SpinCo or any member of the SpinCo Group of any of SpinCo’s representations or covenants hereunder (including any representations made in connection with the Tax Opinion). If the indemnification obligation of Parent or any member of the Parent Group under this Section 3(a) (or the adjustment giving rise to such indemnification obligation) results in (i) increased deductions, losses, or credits, or (ii) decreases in income, gains

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or recapture of Tax credits (“Tax Benefits”) to SpinCo or any member of the SpinCo Group, which would not, but for the indemnification obligation (or the adjustment giving rise to such indemnification obligation), be allowable, then SpinCo shall pay Parent the amount by which such Tax Benefit actually reduces, in cash, the amount of Tax that SpinCo or any member of the SpinCo Group would have been required to pay and bear (or increases, in cash, the amount of Tax refund to which SpinCo or any member of the SpinCo Group would have been entitled) but for such indemnification obligation (or adjustment giving rise to such indemnification obligation). SpinCo shall pay Parent for such Tax Benefit no later than five days after such Tax Benefit is Actually Realized.

(b) Indemnification by SpinCo. From and after the Distribution Date, SpinCo and each member of the SpinCo Group shall jointly and severally indemnify, defend and hold harmless Parent and each member of the Parent Group and each of their respective Representatives and Affiliates (and the heirs, executors, successors and assigns of any of them) from and against (i) all SpinCo Tax Liabilities, Income Tax Liabilities, Other Tax Liabilities, Spin-Off Tax Liabilities and Tax-Related Losses that SpinCo or any member of the SpinCo Group is responsible for under Section 2 or Section 4 (including, without limitation, any Income Tax Liabilities, Other Tax Liabilities or Spin-Off Tax Liabilities or Tax-Related Losses arising with respect to a Permitted Transaction for which SpinCo is liable pursuant to Section 4(e)(i)) and (ii) all Income Taxes, Other Taxes, Spin-Off Tax Liabilities and other Tax-Related Losses incurred by any member of the Parent Group or SpinCo Group by reason of the breach by SpinCo or any member of the SpinCo Group of any of SpinCo’s representations or covenants hereunder (including any representations made in connection with the Tax Opinion) and, in each case, any related costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses). If the indemnification obligation of SpinCo or any member of the SpinCo Group under this Section 3(b) (or the adjustment giving rise to such indemnification obligation) results in a Tax Benefit to Parent or any member of the Parent Group, which would not, but for the Tax which is the subject of the indemnification obligation (or the adjustment giving rise to such indemnification obligation), be allowable, then Parent shall pay SpinCo the amount by which such Tax Benefit actually reduces, in cash, the amount of Tax that Parent or any member of the Parent Group would have been required to pay and bear (or increases, in cash, the amount of Tax refund to which Parent or any member of the Parent Group would have been entitled) but for such indemnification (or adjustment giving rise to such indemnification obligation). Parent shall pay SpinCo for such Tax Benefit no later than five days after such Tax Benefit is Actually Realized.

(c) Timing of Indemnification. Any payment and indemnification made pursuant to this Section 3 (other than a payment for any Tax Benefit, the timing of which is provided in Sections 3(a) and 3(b) above) shall be made by the Indemnifying Party promptly, but, in any event, no later than:

(i) in the case of an indemnification obligation with respect to any SpinCo Tax Liabilities, Spin-Off Tax Liabilities, Income Tax Liabilities or Other Tax Liabilities, the later of (A) five Business Days after the Indemnified Party notifies the Indemnifying Party and (B) five Business Days prior to the date the Indemnified Party is required to make a payment of taxes, interest, or penalties to the applicable Tax Authority (including a payment with respect to an assessment of a tax deficiency by any Taxing

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Jurisdiction or a payment made in settlement of an asserted tax deficiency) or realizes a reduced Refund; and

(ii) in the case of any payment or indemnification of any Losses not otherwise described in clause (i) of this Section 3(c) (including, but not limited to, any Losses described in clause (b) or (c) of the definition of Tax-Related Losses, attorneys’ fees and expenses and other indemnifiable Losses), the later of (A) five Business Days after the Indemnified Party notifies the Indemnifying Party and (B) five Business Days prior to the date the Indemnified Party makes a payment thereof.

4. Spin-Off Related Matters.

(a) Representations.

(i) Tax Opinion Documents. SpinCo hereby represents and warrants that (A) it has examined the Tax Opinion Documents (including, without limitation, the representations to the extent that they relate to the plans, proposals, intentions, and policies of SpinCo, its Subsidiaries, the SpinCo Business, or the SpinCo Group) and (B) to the extent in reference to SpinCo, its Subsidiaries, the SpinCo Business, or the SpinCo Group, the facts presented and the representations made therein are true, correct and complete.

(ii) Tax-Free Status. SpinCo hereby represents and warrants that it has no plan or intention of taking any action, or failing to take any action or knows of any circumstance, that could reasonably be expected to (A) cause any of the Spin-Off-Related Transactions not to have Tax-Free Status or (B) cause any representation or factual statement made in this Agreement, the Separation Agreement, the Tax Opinion Documents or any of the Ancillary Agreements to be untrue in a manner that would have an adverse effect on the Tax-Free Status of any of the Spin-Off-Related Transactions.

(iii) Plan or Series of Related Transactions. SpinCo hereby represents and warrants that, to the best knowledge of SpinCo, after due inquiry, none of the Spin-Off-Related Transactions are part of a plan (or series of related transactions) pursuant to which a Person will acquire stock representing a Fifty-Percent or Greater Interest in SpinCo or any successor to SpinCo.

(b) Covenants.

(i) Actions Consistent with Representations and Covenants. Neither Parent nor SpinCo shall take any action or permit any member of the Parent Group or the SpinCo Group, respectively, to take any action, or shall fail to take any action or permit any member of the Parent Group or the SpinCo Group, respectively, to fail to take any action, where such action or failure to act would be inconsistent with or cause to be untrue any material information, covenant or representation in this Agreement, the Separation Agreement, the Tax Opinion Documents or any of the Ancillary Agreements.

(ii) Preservation of Tax-Free Status; SpinCo Business. SpinCo shall not (A) take any action (including, but not limited to, any cessation, transfer or disposition of all or any portion of any SpinCo Business; payment of extraordinary dividends; and

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acquisitions or issuances of stock) or permit any member of the SpinCo Group to take any such action, and SpinCo shall not fail to take any such action or permit any member of the SpinCo Group to fail to take any such action, in each case, unless such action or failure to act could not reasonably be expected to cause any of the Spin-Off-Related Transactions not to have Tax-Free Status or could not require Parent or SpinCo to reflect a liability or reserve with respect to any of the Spin-Off-Related Transactions in its financial statements, and (B) until the first day after the Restriction Period, engage in any transaction (including, without limitation, any cessation, transfer or disposition of all or any portion of any SpinCo Business) that could reasonably be expected to result in it or any member of the SpinCo Group ceasing to be a company engaged in any SpinCo Business.

(iii) Sales, Issuances and Redemptions of Equity Securities. Until the first day after the Restriction Period, none of SpinCo or any member of the SpinCo Group shall, or shall agree to, sell or otherwise issue to any Person, or redeem or otherwise acquire from any Person, any Equity Securities of SpinCo or any member of the SpinCo Group; provided, however, that (A) the adoption by SpinCo of a shareholder rights plan shall not constitute a sale or issuance of such Equity Securities, (B) SpinCo and the members of the SpinCo Group may repurchase such Equity Securities to the extent that such repurchases meet the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30, (C) SpinCo may issue such Equity Securities to the extent such issuances satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d), and (D) members of the SpinCo Group may issue or sell Equity Securities to other members of the SpinCo Group, and may redeem or purchase Equity Securities from other members of the SpinCo group, in each case, to the extent not inconsistent with the Tax-Free Status of the Spin-Off-Related Transactions; provided, that, SpinCo shall not be permitted to issue or redeem Equity Securities pursuant to this clause (D).

(iv) Tender Offers; Other Business Transactions. Until the first day after the Restriction Period, none of SpinCo or any member of the SpinCo Group shall (A) solicit any Person to make a tender offer for, or otherwise acquire or sell, the Equity Securities of SpinCo, (B) participate in or support any unsolicited tender offer for, or other acquisition, issuance or disposition of, the Equity Securities of SpinCo or (C) approve or otherwise permit any proposed business combination or any transaction which, in the case of clauses (A), (B) or (C), individually or in the aggregate, together with any transaction occurring within the four-year period beginning on the date which is two years before the Distribution Date and any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Spin-Off, could result in one or more Persons acquiring (except for acquisitions that otherwise satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d)) directly or indirectly stock representing a 40% or greater interest, by vote or value, in SpinCo (or any successor thereto). In addition, none of SpinCo or any member of the SpinCo Group shall at any time, whether before or subsequent to the expiration of the Restriction Period, engage in any action described in clauses (A), (B) or (C) of the preceding sentence if it is pursuant to an arrangement negotiated (in whole or in part) prior to the first anniversary of the Spin-Off, even if at the time of the Spin-Off or thereafter such action is subject to various conditions.

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(v) Dispositions of Assets. Until the first day after the Restriction Period, none of SpinCo or any member of the SpinCo Group shall sell, transfer, or otherwise dispose of or agree to dispose of assets (including, for such purpose, any shares of capital stock of a Subsidiary and any transaction treated for tax purposes as a sale, transfer or disposition) that, in the aggregate, constitute more than 30% of the gross assets of SpinCo, nor shall SpinCo or any member of the SpinCo Group sell, transfer, or otherwise dispose of or agree to dispose of assets (including, for such purpose, any shares of capital stock of a Subsidiary and any transaction treated for tax purposes as a sale, transfer or disposition) that, in the aggregate, constitute more than 30% of the consolidated gross assets of the SpinCo Group. The foregoing sentence shall not apply to (A) sales, transfers, or dispositions of assets in the ordinary course of business, (B) any cash paid to acquire assets from an unrelated Person in an arm’s-length transaction, or (C) any assets transferred to a Person that is disregarded as an entity separate from the transferor for federal income tax purposes. The percentages of gross assets or consolidated gross assets of SpinCo or the SpinCo Group, as the case may be, sold, transferred, or otherwise disposed of, shall be based on the fair market value of the gross assets of SpinCo and the members of the SpinCo Group as of the Distribution Date. For purposes of this Section 4(b)(v), a merger of SpinCo or one of its Subsidiaries with and into any Person shall constitute a disposition of all of the assets of SpinCo or such Subsidiary. Notwithstanding anything in this Section 4(b)(v) to the contrary, following the Spin-Off, SpinCo shall be permitted to make certain sales, transfers, and other dispositions of assets, in each case, solely in the manner described on Schedule 4(b) hereto.

(vi) Liquidations, Mergers, Reorganizations. Until the first day after the Restriction Period, neither SpinCo nor any of its Subsidiaries shall, or shall agree to, voluntarily dissolve or liquidate or engage in any transaction involving a merger (except for a Cash Acquisition Merger), consolidation or other reorganization; provided, that, mergers of direct or indirect wholly-owned Subsidiaries of SpinCo solely with and into SpinCo or with other direct or indirect wholly-owned Subsidiaries of SpinCo, and liquidations of SpinCo’s subsidiaries are not subject to this Section 4(b)(vi) to the extent not inconsistent with the Tax-Free Status of the Spin-Off-Related Transactions. Notwithstanding anything in this Section 4(b)(vi) to the contrary, following the Spin-Off, SpinCo shall be permitted to engage in certain transactions involving liquidations or reorganizations, in each case, solely in the manner described on Schedule 4(b) hereto.

(c) Permitted Transactions.

Notwithstanding the restrictions otherwise imposed by Sections 4(b)(iii) through 4(b)(vi), during the Restriction Period, SpinCo may (i) issue, sell, redeem or otherwise acquire (or cause a member of the SpinCo Group to issue, sell, redeem or otherwise acquire) Equity Securities of SpinCo or any member of the SpinCo Group in a transaction that would otherwise breach the covenant set forth in Section 4(b)(iii), (ii) approve, participate in, support or otherwise permit a proposed business combination or transaction that would otherwise breach the covenant set forth in Section 4(b)(iv), (iii) sell or otherwise dispose of the assets of SpinCo or any member of the SpinCo Group in a transaction that would otherwise breach the covenant set forth in Section 4(b)(v), or (iv) merge SpinCo or any

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member of the SpinCo Group with another entity without regard to which party is the surviving entity in a transaction that would otherwise breach the covenant set forth in Section 4(b)(vi), if and only if such transaction would not violate Section 4(b)(i) or Section 4(b)(ii) and prior to entering into any agreement contemplating a transaction described in clauses (i), (ii), (iii) or (iv), and prior to consummating any such transaction: (X) SpinCo shall provide Parent with an Unqualified Tax Opinion in form and substance satisfactory to Parent in its sole and absolute discretion, exercised in good faith (and in determining whether an opinion is satisfactory, Parent may consider, among other factors, the appropriateness of any underlying assumptions and management’s representations if used as a basis for the opinion) or (Y) SpinCo shall request that Parent obtain a Private Letter Ruling in accordance with Section 4(d)(ii) of this Agreement to the effect that such transaction will not affect the Tax-Free Status of any of the Spin-Off-Related Transactions and Parent shall have received such a Private Letter Ruling, in form and substance satisfactory to Parent in its discretion, exercised in good faith.

(d) Private Letter Rulings and Restrictions on SpinCo.

(i) Private Letter Ruling at Parent’s Request. Parent shall have the right to obtain a Private Letter Ruling in its discretion, exercised in good faith. If Parent determines to obtain a Private Letter Ruling, SpinCo shall (and shall cause each member of the SpinCo Group to) cooperate with Parent and take any and all actions reasonably requested by Parent in connection with obtaining the Private Letter Ruling (including, without limitation, by making any representation or covenant or providing any materials or information requested by any Tax Authority; provided that SpinCo shall not be required to make (or cause any member of the SpinCo Group to make) any representation or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control). In connection with obtaining a Private Letter Ruling pursuant to this Section 4(d)(i), (A) Parent shall, to the extent practicable, consult with SpinCo reasonably in advance of taking any material action in connection therewith; (B) Parent shall (1) reasonably in advance of the submission of any Ruling Documents or Private Letter Ruling Documents, provide SpinCo with a draft copy thereof, (2) reasonably consider SpinCo’s comments on such draft copy, and (3) provide SpinCo with a final copy; and (C) Parent shall provide SpinCo with notice reasonably in advance of, and SpinCo shall have the right to attend and participate in, any formally scheduled meetings with any Tax Authority (subject to the approval of the Tax Authority) that relate to such Private Letter Ruling.

(ii) Private Letter Rulings at SpinCo’s Request. Parent agrees that at the reasonable request of SpinCo pursuant to Section 4(c), Parent shall (and shall cause each member of the Parent Group to) cooperate with SpinCo and use its reasonable best efforts to seek to obtain, as expeditiously as possible, a Private Letter Ruling from the IRS and/or any other applicable Tax Authority for the purpose of confirming compliance on the part of SpinCo or any member of the SpinCo Group with its obligations under Section 4(b) of this Agreement. Further, in no event shall Parent be required to file any request for a Private Letter Ruling under

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this Section 4(d)(ii) unless SpinCo represents that (A) it has read the request for the Private Letter Ruling and any materials, appendices and exhibits submitted or filed therewith, and (B) all information and representations, if any, relating to any member of the SpinCo Group, contained in the Private Letter Ruling Documents are true, correct and complete in all material respects. SpinCo shall reimburse Parent for all reasonable costs and expenses incurred by the Parent Group in obtaining a Private Letter Ruling requested by SpinCo within 10 Business Days after receiving an invoice from Parent therefor. SpinCo hereby agrees that Parent shall have sole and exclusive control over the process of obtaining a Private Letter Ruling, and that only Parent shall apply for a Private Letter Ruling. In connection with obtaining a Private Letter Ruling pursuant to this Section 4(d)(ii), (A) Parent shall, to the extent practicable, consult with SpinCo reasonably in advance of taking any material action in connection therewith; (B) Parent shall (1) reasonably in advance of the submission of any Private Letter Ruling Documents, provide SpinCo with a draft copy thereof, (2) reasonably consider SpinCo’s comments on such draft copy, and (3) provide SpinCo with a final copy; and (C) Parent shall provide SpinCo with notice reasonably in advance of, and SpinCo shall have the right to attend and participate in, any formally scheduled meetings with any Tax Authority (subject to the approval of the Tax Authority) that relate to such Private Letter Ruling.

(iii) Prohibition on SpinCo. SpinCo hereby agrees that, except to the extent permitted by Section 4(d)(ii), neither it nor any member of the SpinCo Group shall seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise) concerning any of the Spin-Off-Related Transactions (or the impact of any transaction on any of the Spin-Off-Related Transactions).

(e) Liability of SpinCo for Undertaking Certain Actions. Notwithstanding anything in this Agreement to the contrary, SpinCo and each member of the SpinCo Group shall be responsible for any and all Tax-Related Losses that are attributable to, or result from:

(i) any act or failure to act by SpinCo or any member of the SpinCo Group, which action or failure to act breaches any of the covenants described in Section 4(b)(i) through 4(b)(vi) of this Agreement (determined without regard to the exceptions or provisos set forth in such provisions or in Section 4(c), so that SpinCo and each member of the SpinCo Group shall be responsible for any and all Tax-Related Losses even if such Tax-Related Losses are attributable to or result from any act or failure to act pursuant to an exception or proviso described in Section 4(b)(i) through 4(b)(vi) or in Section 4(c)), expressly including, for this purpose, any Permitted Transaction and any act or failure to act that breaches Section 4(b)(i) or 4(b)(ii), regardless of whether such act or failure to act is permitted by Section 4(b)(iii) through 4(b)(vi);

(ii) any acquisition of Equity Securities of SpinCo or any member of the SpinCo Group by any Person or Persons (including, without limitation, as a result of an issuance of SpinCo Equity Securities or a merger of another entity with and into SpinCo or any member of the SpinCo Group) or any acquisition of assets of SpinCo or any member of the SpinCo Group (including, without limitation, as a result of a merger) by any Person or Persons; and

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(iii) Tax Counsel withdrawing all or any portion of the Tax Opinion or any Tax Authority withdrawing all or any portion of a Private Letter Ruling issued to Parent in connection with the Spin-Off-Related Transactions because of a breach by SpinCo or any member of the SpinCo Group of a representation made in this Agreement (or made in connection with the Tax Opinion or any Private Letter Ruling).

(f) Cooperation.

(i) Without limiting the prohibition set forth in Section 4(d)(iii), until the first day after the Restriction Period, SpinCo shall furnish Parent with a copy of any ruling request that any member of the SpinCo Group may file with the IRS or any other Tax Authority and any opinion received that in any respect relates to, or otherwise reasonably could be expected to have any effect on, the Tax-Free Status of any of the Spin-Off-Related Transactions.

(ii) Parent shall reasonably cooperate with SpinCo in connection with any request by SpinCo for an Unqualified Tax Opinion pursuant to Section 4(c).

(iii) Until the first day after the Restriction Period, SpinCo will provide adequate advance notice to Parent in accordance with the terms of Section 4(f)(iv) of any action described in Sections 4(b)(i) through 4(b)(vi) within a period of time sufficient to enable Parent to seek injunctive relief pursuant to Section 4(g) in a court of competent jurisdiction.

(iv) Each notice required by Section 4(f)(iii) shall set forth the terms and conditions of any such proposed transaction, including, without limitation, (A) the nature of any related action proposed to be taken by the board of directors of SpinCo, (B) the approximate number of Equity Securities (and their voting and economic rights) of SpinCo or any member of the SpinCo Group (if any) proposed to be sold or otherwise issued, (C) the approximate value of SpinCo’s assets (or assets of any member of the SpinCo Group) proposed to be transferred, and (D) the proposed timetable for such transaction, all with sufficient particularity to enable Parent to seek such injunctive relief. Promptly, but in any event within 30 days, after Parent receives such written notice from SpinCo, Parent shall notify SpinCo in writing of Parent’s decision to seek injunctive relief pursuant to Section 4(g).

(v) From and after the date Parent first requests a Private Letter Ruling pursuant to Section 4(d) until the first day after the two-year anniversary of such date that Parent receives such Private Letter Ruling (pursuant to Section 4(d)(i) or 4(d)(ii)), neither SpinCo nor any member of the SpinCo Group shall take (or refrain from taking) any action to the extent that such action or inaction would have caused a representation given by SpinCo in connection with any such request for a Private Letter Ruling to have been untrue as of the relevant representation date, had SpinCo or any member of the SpinCo Group intended to take (or refrain from taking) such action on the relevant representation date.

(g) Enforcement. The parties hereto acknowledge that irreparable harm would occur in the event that any of the provisions of this Section 4 were not performed in accordance with their specific terms or were otherwise breached. The parties hereto agree that, in order to preserve the Tax-Free Status of the Spin-Off-Related Transactions, injunctive relief is

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appropriate to prevent any violation of the foregoing covenants; provided, however, that injunctive relief shall not be the exclusive legal or equitable remedy for any such violation.

5. Refunds. Parent shall be entitled to all Refunds (and any interest thereon received from the applicable Tax Authority) in respect of Income Taxes and Other Taxes paid with respect to any Tax Return filed by Parent or any member of the Parent Group (other than any SpinCo Separate Return filed prior to the Closing Date), except to the extent such Refunds are solely attributable to SpinCo Tax Benefits. SpinCo shall be entitled to all Refunds (and any interest thereon received from the applicable Tax Authority) in respect of Income Taxes and Other Taxes paid with respect to any Tax Return filed by SpinCo or any member of the SpinCo Group (including, without limitation, any SpinCo Separate Return filed before the Closing Date) or which are solely attributable to SpinCo Tax Benefits. A party receiving a Refund to which another party is entitled pursuant to this Section 5 shall pay the amount to which such other party is entitled within fifteen Business Days after such Refund is Actually Realized. Each of Parent and SpinCo shall cooperate with the other party in connection with any claim for Refund in respect of an Income Tax or Other Tax for which any member of the Parent Group or the SpinCo Group, as the case may be, is responsible pursuant to Section 2.

6. Tax Contests.

(a) Notification. Each of Parent and SpinCo shall notify the other party in writing of any communication with respect to any pending or threatened Proceeding in connection with an Income Tax Liability or Other Tax Liability (or any issue related thereto) of Parent or any member of the Parent Group, or SpinCo or any member of the SpinCo Group, respectively, for which a member of the SpinCo Group or the Parent Group, respectively, may be responsible pursuant to this Agreement within ten (10) Business Days of receipt; provided, however, that in the case of any Distribution-Related Proceeding (whether or not SpinCo or Parent may be responsible thereunder), such notice shall be provided no later than ten (10) Business Days after Parent or SpinCo, as the case may be, first receives written notice from the IRS or other Tax Authority of such Distribution-Related Proceeding). Each of Parent and SpinCo shall include with such notification a true, correct and complete copy of any written communication, and an accurate and complete written summary of any oral communication, received by Parent or a member of the Parent Group, or SpinCo or a member of the SpinCo Group, respectively. The failure of Parent or SpinCo timely to forward such notification in accordance with the immediately preceding sentence shall not relieve SpinCo or Parent, respectively, of any obligation to pay such Income Tax Liability or Other Tax Liability or indemnify Parent and the members of the Parent Group, or SpinCo and the members of the SpinCo Group, respectively, and their respective Representatives, Affiliates, successors and assigns therefor, except to the extent that the failure timely to forward such notification actually prejudices the ability of SpinCo or Parent to contest such Income Tax Liability or Other Tax Liability or increases the amount of such Income Tax Liability or Other Tax Liability.

(b) Representation with Respect to Tax Disputes. Parent (or such member of the Parent Group as Parent shall designate) shall have the sole right to represent the interests of the members of the Parent Group and the members of the SpinCo Group and to employ counsel of its choice at its expense in any Proceeding relating to (i) any U.S. consolidated federal Income Tax Returns of the Parent Consolidated Group, (ii) any other

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Combined Returns and (iii) any Parent Separate Returns. SpinCo (or such member of the SpinCo Group as SpinCo shall designate) shall have the sole right to represent the interests of the members of the SpinCo Group and to employ counsel of its choice at its expense in any Proceeding relating to SpinCo Separate Returns.

(c) Power of Attorney. Each member of the SpinCo Group shall execute and deliver to Parent (or such member of the Parent Group as Parent shall designate) any power of attorney or other document requested by Parent (or such designee) in connection with any Proceeding described in the first sentence of Section 6(b).

(d) Distribution-Related Proceedings, Proceedings with Respect to SpinCo Tax Liabilities.

(i) In the event of any Distribution-Related Proceeding or Proceeding relating to a SpinCo Tax Liability as a result of which SpinCo could reasonably be expected to become liable for Tax or any Tax-Related Losses and with respect to which Parent has the right to represent the interests of the members of the Parent Group and/or the members of the SpinCo Group pursuant to Section 6(b) above, (A) Parent shall consult with SpinCo reasonably in advance of taking any significant action in connection with such Proceeding, (B) Parent shall consult with SpinCo and offer SpinCo a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such Proceeding, (C) Parent shall defend such Proceeding diligently and in good faith as if it were the only party in interest in connection with such Proceeding, and (D) Parent shall provide SpinCo copies of any written materials relating to such Proceeding received from the relevant Tax Authority. Notwithstanding anything in the preceding sentence to the contrary, the final determination of the positions taken, including with respect to settlement or other disposition, in (i) any Distribution-Related Proceeding, or (ii) any other Proceeding relating to a SpinCo Tax Liability, which other Proceeding would not reasonably be expected to result in a liability for additional Taxes in an amount exceeding five (5) million dollars for a single tax year, shall be made in the sole discretion of Parent and shall be final and not subject to the dispute resolution provisions of Article 9. With respect to any Proceeding relating to a SpinCo Tax Liability (other than any Distribution-Related Proceeding), which could reasonably be expected to result in a liability for additional Taxes in an amount exceeding five (5) million dollars for a single tax year, SpinCo shall be entitled to participate in such Proceeding, and Parent shall not settle, compromise or abandon any such Proceeding without obtaining the prior written consent of SpinCo, which consent shall not be unreasonably withheld.

(ii) In the event of any Distribution-Related Proceeding with respect to any SpinCo Separate Return, (A) SpinCo shall consult with Parent reasonably in advance of taking any significant action in connection with such Proceeding, (B) SpinCo shall consult with Parent and offer Parent a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such Proceeding, (C) SpinCo shall defend such Proceeding diligently and in good faith as if it were the only party in interest in connection with such Proceeding, (D) Parent shall be entitled to participate in such Proceeding and receive copies of any written materials relating to such Proceeding received from the relevant Tax Authority, and (E) SpinCo shall not settle, compromise or abandon any such

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Proceeding without obtaining the prior written consent of Parent, which consent shall not be unreasonably withheld.

7. Apportionment of Tax Attributes; Carrybacks.

(a) Apportionment of Tax Attributes.

(i) If the Parent Consolidated Group has a Tax Attribute, the portion, if any, of such Tax Attribute apportioned to SpinCo or any member of the SpinCo Consolidated Group and treated as a carryover to the first Post-Distribution Taxable Period of SpinCo (or such member) shall be determined by Parent in accordance with Treasury Regulation Sections 1.1502-21, 1.1502-21T, 1.1502-22, 1.1502-79 and, if applicable, 1.1502-79A.

(ii) No Tax Attribute with respect to consolidated U.S. federal Income Tax of the Parent Consolidated Group, other than those described in Section 7(a)(i), and no Tax Attribute with respect to consolidated, combined or unitary State, local, or foreign Income Tax, in each case, arising in respect of a Combined Return shall be apportioned to SpinCo or any member of the SpinCo Group, except as Parent (or such member of the Parent Group as Parent shall designate) determines is otherwise required under applicable law.

(iii) Parent (or its designee) shall determine the portion, if any, of any Tax Attribute which must (absent a Final Determination to the contrary) be apportioned to SpinCo or any member of the SpinCo Group in accordance with this Section 7(a) and applicable law, and the amount of tax basis and earnings and profits to be apportioned to SpinCo or any member of the SpinCo Group in accordance with applicable law, and shall provide written notice of the calculation thereof to SpinCo as soon as practicable after the information necessary to make such calculation becomes available to Parent.

(iv) Except as otherwise required by applicable law or pursuant to a Final Determination, SpinCo shall not take any position (whether on a Tax Return or otherwise) that is inconsistent with the information contained in the written notice delivered by Parent pursuant to Section 7(a)(iii).

(b) Carrybacks. Except to the extent otherwise consented to by Parent or prohibited by applicable law, SpinCo shall elect to relinquish, waive or otherwise forgo all Carrybacks. In the event that SpinCo (or the appropriate member of the SpinCo Group) is prohibited by applicable law to relinquish, waive or otherwise forgo a Carryback (or Parent consents to a Carryback), (i) Parent shall cooperate with SpinCo, at SpinCo’s expense, in seeking from the appropriate Tax Authority such Refund as reasonably would result from such Carryback, and (ii) SpinCo shall be entitled to any Income Tax Benefit Actually Realized by a member of the Parent Group (including any interest thereon received from such Tax Authority), to the extent that such Refund is directly attributable to such Carryback, within 15 Business Days after such Refund is Actually Realized; provided, however, that SpinCo shall indemnify and hold the members of the Parent Group harmless from and against any and all collateral tax consequences resulting from or caused by any such Carryback, including (but not limited to) the loss or postponement of any benefit from the use of tax attributes generated by a member of the Parent Group or an Affiliate thereof if (x) such tax attributes expire unutilized, but would have

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been utilized but for such Carryback, or (y) the use of such tax attributes is postponed to a later taxable period than the taxable period in which such tax attributes would have been utilized but for such Carryback. If there is a Final Determination that results in any change to or adjustment of an Income Tax Benefit Actually Realized by a member of the Parent Group that is directly attributable to a Carryback, then Parent (or its designee) shall make a payment to SpinCo, or SpinCo shall make a payment to Parent (or its designee), as may be necessary to adjust the payments between SpinCo and Parent (or its designee) to reflect the payments that would have been made under this Section 7(b) had the adjusted amount of such Income Tax Benefit been taken into account in computing the payments due under this Section 7(b).

8. Cooperation and Exchange of Information.

(a) Cooperation and Exchange of Information. Each of Parent and SpinCo, on behalf of itself and each member of the Parent Group and the SpinCo Group, respectively, agrees to provide the other party (or its designee) with such cooperation or information as such other party (or its designee) reasonably shall request in connection with the determination of any payment or any calculations described in this Agreement, the preparation or filing of any Income Tax Return or Other Tax Return or claim for Refund, or the conduct of any Proceeding. Such cooperation and information shall include, without limitation, upon reasonable notice (i) promptly forwarding copies of appropriate notices and forms or other communications (including, without limitation, information document requests, revenue agent’s reports and similar reports, notices of proposed adjustments and notices of deficiency) received from or sent to any Tax Authority or any other administrative, judicial or governmental authority, (ii) providing copies of all relevant Income Tax Returns or Other Tax Returns, together with accompanying schedules and related workpapers, documents relating to rulings or other determinations by any Tax Authority, and such other records concerning the ownership and tax basis of property, or other relevant information, (iii) the provision of such additional information and explanations of documents and information provided under this Agreement (including statements, certificates, forms, returns and schedules delivered by either party) as shall be reasonably requested by Parent (or its designee) or SpinCo (or its designee), as the case may be, (iv) the execution of any document that may be necessary or reasonably helpful in connection with the filing of an Income Tax Return or Other Tax Return, a claim for a Refund, or in connection with any Proceeding, including such waivers, consents or powers of attorney as may be necessary for Parent or SpinCo, as the case may be, to exercise its rights under this Agreement, and (v) the use of Parent’s or SpinCo’s, as the case may be, reasonable efforts to obtain any documentation from a governmental authority or a third party that may be necessary or reasonably helpful in connection with any of the foregoing. It is expressly the intention of the parties to this Agreement to take all actions that shall be necessary to establish Parent as the sole agent for Income Tax or Other Tax purposes of each member of the SpinCo Group with respect to all Combined Returns. Upon reasonable notice, each of Parent and SpinCo shall make its, or shall cause the members of the Parent Group or the SpinCo Group, as applicable, to make their, employees and facilities available on a mutually convenient basis to provide explanation of any documents or information provided hereunder. Any information obtained under this Section 8 shall be kept confidential, except as otherwise reasonably may be necessary in connection with the filing of Income Tax Returns or Other Tax Returns or claims for Refund or in conducting any Proceeding.

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(b) Retention of Records. Each of Parent and SpinCo agrees to retain all Income Tax Returns and Other Tax Returns, related schedules and workpapers, and all material records and other documents as required under Section 6001 of the Code and the regulations promulgated thereunder (and any similar provision of State, local, or foreign law) existing on the date hereof or created in respect of (i) any taxable period that ends on or before or includes the Distribution Date or (ii) any taxable period that may be subject to a claim hereunder until the later of (A) the expiration of the statute of limitations (including extensions) for the taxable periods to which such Income Tax Returns, Other Tax Returns and other documents relate and (B) the Final Determination of any payments that may be required in respect of such taxable periods under this Agreement. From and after the end of the period described in the preceding sentence of this Section 8(b), if a member of the Parent Group or the SpinCo Group wishes to dispose of any such records and documents, then Parent or SpinCo, as the case may be, shall provide written notice thereof to the other party and shall provide the other party the opportunity to take possession of any such records and documents within 90 days after such notice is delivered; provided, however, that if such other party does not, within such 90-day period, confirm its intention to take possession of such records and documents, Parent or SpinCo, as the case may be, may destroy or otherwise dispose of such records and documents.

(c) Remedies. Each of Parent and SpinCo hereby acknowledges and agrees that (i) the failure of any member of the Parent Group or the SpinCo Group, as the case may be, to comply with the provisions of this Section 8 may result in substantial harm to the Parent Group or the SpinCo Group, as the case may be, including the inability to determine or appropriately substantiate an Income Tax Liability or Other Tax Liability (or a position in respect thereof) for which the Parent Group (or a member thereof) or the SpinCo Group (or a member thereof), as applicable, would be responsible under this Agreement or appropriately defend against an adjustment thereto by a Tax Authority, (ii) the remedies available to the Parent Group for the breach by a member of the SpinCo Group of its obligations under this Section 8 shall include (without limitation) the indemnification by SpinCo of the Parent Group for any Income Tax Liabilities or Other Tax Liabilities incurred or any tax benefit lost or postponed by reason of such breach and the forfeiture by the SpinCo Group of any related rights to indemnification by Parent and (iii) the remedies available to the SpinCo Group for the breach by a member of the Parent Group of its obligations under this Section 8 shall include (without limitation) the indemnification by Parent of the SpinCo Group for any Income Tax Liabilities or Other Tax Liabilities incurred or any Tax benefit lost or postponed by reason of such breach and the forfeiture by the Parent Group of any related rights to indemnification by SpinCo.

(d) Reliance by Parent. If any member of the SpinCo Group supplies information to a member of the Parent Group in connection with an Income Tax Liability or Other Tax Liability and an officer of a member of the Parent Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the Parent Group identifying the information being so relied upon, the chief financial officer of SpinCo (or his or her designee) shall certify in writing that to his knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete. SpinCo agrees to indemnify and hold harmless each member of the Parent Group and its directors, officers and employees from and against any fine, penalty, or other cost or expense of any kind attributable to a member of the SpinCo Group having supplied, pursuant to this Section 8, a member of the Parent Group with

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inaccurate or incomplete information in connection with an Income Tax Liability or Other Tax Liability.

(e) Reliance by SpinCo. If any member of the Parent Group supplies information to a member of the SpinCo Group in connection with an Income Tax Liability or Other Tax Liability and an officer of a member of the SpinCo Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the SpinCo Group identifying the information being so relied upon, the chief financial officer of Parent (or his or her designee) shall certify in writing that to his knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete. Parent agrees to indemnify and hold harmless each member of the SpinCo Group and its directors, officers and employees from and against any fine, penalty, or other cost or expense of any kind attributable to a member of the Parent Group having supplied, pursuant to this Section 8, a member of the SpinCo Group with inaccurate or incomplete information in connection with an Income Tax Liability or Other Tax Liability.

9. Resolution of Disputes. The provisions of Article X of the Separation Agreement (Dispute Resolution) shall apply to any dispute arising in connection with this Agreement; provided, however, that in the case of disputes arising under this Agreement, Parent and SpinCo shall jointly select the arbitrator, who shall be an attorney or accountant who is generally recognized in the tax community as a qualified and competent tax practitioner with experience in the tax area involved in the issue or issues to be resolved.

10. Payments.

(a) Method of Payment. All payments required by this Agreement shall be made by (i) wire transfer to the appropriate bank account as may from time to time be designated by the parties for such purpose; provided that, on the date of such wire transfer, notice of the transfer is given to the recipient thereof in accordance with Section 11, or (ii) any other method agreed to by the parties. All payments due under this Agreement shall be deemed to be paid when available funds are actually received by the payee.

(b) Interest. Any payment required by this Agreement that is not made on or before the date required hereunder shall bear interest, from and after such date through the date of payment, at the Underpayment Rate.

(c) Characterization of Payments. For all tax purposes, the parties hereto agree to treat, and to cause their respective Affiliates to treat, (i) any payment required by this Agreement or by the Separation Agreement, as either a contribution by Parent to SpinCo or a distribution by SpinCo to Parent, as the case may be, occurring immediately prior to the Spin-Off and (ii) any payment of interest or non-federal Income Taxes by or to a Tax Authority, as taxable or deductible, as the case may be, to the party entitled under this Agreement to retain such payment or required under this Agreement to make such payment, in either case, except as otherwise mandated by applicable law or a Final Determination; provided that in the event it is determined (A) pursuant to applicable law that it is more likely than not, or (B) pursuant to a Final Determination, that any such treatment is not permissible (or that an Indemnified Party nevertheless suffers an Income Tax or Other Tax detriment as a result of such payment), the

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payment in question shall be adjusted to place the Indemnified Party in the same after-tax position it would have enjoyed absent such applicable law or Final Determination.

11. Microsoft Agreements and Options Treatment.

(a) Microsoft Agreements. SpinCo and each member of the SpinCo Group hereby assume any and all obligations of Parent or any member of the Parent Group under (i) that certain agreement by and among Microsoft Corporation, USA Networks, Inc. and Expedia, Inc. dated as of November 9, 2001, a copy of which is attached hereto (the “Microsoft Compensation Deductions Agreement”), (ii) that certain agreement by and between Microsoft Corporation and Expedia, Inc., dated as of October 1, 1999, a copy of which is attached hereto (the “Microsoft Tax Allocation Agreement”), and (iii) that certain agreement by and among Expedia, Inc., USA Networks, Inc., Taipei, Inc., Microsoft Corporation, and Microsoft E-Holdings, Inc., dated as of July 15, 2001, a copy of which is attached hereto (the “July 15, 2001 Agreement”). From and after the Distribution Date, SpinCo and each member of the SpinCo Group shall jointly and severally indemnify, defend and hold harmless Parent and each member of the Parent Group from and against all liability arising out of or relating to the Microsoft Compensation Deductions Agreement, the Microsoft Tax Allocation Agreement, and the July 15, 2001 Agreement.

(b) Options Treatment.

(i) Deductions. To the extent permitted by law, Parent (or the appropriate member of the Parent Group) shall claim all Tax deductions arising by reason of exercises of Options or compensatory warrants held by IAC Service Provider to acquire Parent common stock or SpinCo common stock, and SpinCo (or the appropriate member of the SpinCo Group) shall claim all Tax deductions arising by reason of exercises of Options or compensatory warrants held by Expedia Service Provider to acquire Parent common stock or SpinCo common stock. For purposes of this Section 11(b)(i), Mr. Barry Diller shall be treated as an IAC Service Provider only with respect to his Options to acquire Parent common stock and as an Expedia Service Provider only with respect to his Options to acquire SpinCo common stock; provided, however, if there is a Final Determination that Parent and not SpinCo is entitled to a deduction with respect to any such SpinCo Options held by Mr. Barry Diller, Parent shall pay to SpinCo, when Actually Realized, any Tax Benefit relating thereto. For purposes of this Section 11(b)(i), Mr. Victor A. Kaufman shall be treated as an IAC Service Provider.

(ii) Withholding and Reporting. Parent shall, to the extent required by law, withhold applicable Taxes and satisfy applicable Tax reporting obligations with respect to exercises of Options or compensatory warrants held by IAC Service Providers to acquire Parent common stock or SpinCo common stock, and SpinCo shall, to the extent required by law, withhold applicable Taxes and satisfy applicable Tax reporting obligations with respect to exercises of Options or compensatory warrants held by Expedia Service Providers to acquire Parent common stock or SpinCo common stock.

12. Notices. Notices, requests, permissions, waivers, and other communications hereunder shall be in writing and shall be deemed to have been duly given upon (a) a transmitter’s confirmation of a receipt of a facsimile transmission (but only if followed by confirmed delivery of a standard overnight courier the following Business Day or if delivered by

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hand the following Business Day), or (b) confirmed delivery of a standard overnight courier or delivered by hand, to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice):

If to Parent, to:	IAC/InterActiveCorp
	152 West 57th Street
	New York, NY 10019
	Attention: General Counsel
	Telecopier: (212) 632-9642
If to SpinCo to:	Expedia, Inc.
	3150 139th Avenue SE
	Bellevue, WA 98005
	Attention: General Counsel
	Telecopier: (425) 679-7251

Such names and addresses may be changed by notice given in accordance with this Section 12.

13. Designation of Affiliate. Each of Parent and SpinCo may assign any of its rights or obligations under this Agreement to any member of the Parent Group or the SpinCo Group, respectively, as it shall designate; provided, however, that no such assignment shall relieve Parent or SpinCo, respectively, of any obligation hereunder, including any obligation to make a payment hereunder to SpinCo or Parent, respectively, to the extent such designee fails to make such payment.

14. Miscellaneous. Except to the extent otherwise provided in this Agreement, this Agreement shall be subject to the provisions of Article XIV (Miscellaneous) of the Separation Agreement to the extent set forth therein.

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the day and year first written above.

IAC/INTERACTIVECORP
By:	/s/ GREGORY R. BLATT
	Name:	Gregory R. Blatt
	Title:	Executive Vice President
EXPEDIA, INC.
By:	/s/ KEENAN M. CONDER
	Name:	Keenan M. Conder
	Title:	Senior Vice President

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EX-10.11

Exhibit 10.11

EXECUTION COPY

EMPLOYEE MATTERS AGREEMENT

by and between

IAC/INTERACTIVECORP

and

EXPEDIA, INC.

Dated as of August 9, 2005

TABLE OF CONTENTS

		Page
ARTICLE I	DEFINITIONS	1
1.1	Affiliate	1
1.2	Agreement	1
1.3	Ancillary Agreements	1
1.4	Approved Leave of Absence	1
1.5	ASO Contract	1
1.6	Auditing Party	1
1.7	Award	2
1.8	Benefit Plan	2
1.9	Close of the Effective Date	2
1.10	COBRA	2
1.11	Code	2
1.12	Committee	2
1.13	Covered Employees	2
1.14	Current Term	2
1.15	Effective Date	2
1.16	Effective Time	2
1.17	Effective Time Year	2
1.18	ERISA	2
1.19	Expedia	2
1.20	Expedia Common Stock	3
1.21	Expedia Employee	3
1.22	Expedia Entities	3
1.23	Expedia Executive Benefit Plans	3
1.24	Expedia Flexible Benefit Plan	3
1.25	Expedia Long-Term Incentive Plan	3
1.26	Expedia Ratio	3
1.27	Expedia Retirement Savings Plan	3
1.28	Expedia Retirement Savings Plan Trust	3
1.29	Expedia Stock Value	3
1.30	Former Expedia Employee	3
1.31	Former IAC Employee	3
1.32	Group Insurance Policies	3
1.33	Health and Welfare Plans	4
1.34	HIPAA	4
1.35	HMO	4
1.36	HMO Agreements	4
1.37	IAC	4
1.38	IAC Common Stock	4
1.39	IAC Compensation/Benefits Committee	4
1.40	IAC Employee	4
1.41	IAC Entities	4

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1.42	IAC Executive Benefit Plans	4
1.43	IAC Executive Deferred Compensation Plan	4
1.44	IAC Flexible Benefit Plans	5
1.45	IAC Incentive Plans	5
1.46	IAC Long-Term Incentive Plans	5
1.47	IAC Post-Separation Stock Value	5
1.48	IAC Ratio	5
1.49	IAC Retirement Savings Plan	5
1.50	IAC Severance Pay Program	5
1.51	IAC Stock Value	5
1.52	Immediately after the Effective Date	5
1.53	Liabilities	5
1.54	Medical Plan	5
1.55	NASDAQ	6
1.56	Non-parties	6
1.57	Option	6
1.58	Participating Company	6
1.59	Person	6
1.60	Restricted Stock	6
1.61	Restricted Stock Unit	6
1.62	Reverse Stock Split	6
1.63	Separated Businesses	6
1.64	Separation	6
1.65	Separation Agreement	6
1.66	Subsidiaries	6
1.67	Tax Sharing Agreement	7
1.68	Transferred Account Balances	7
1.69	U.S.	7
1.70	VEBA	7
ARTICLE II	GENERAL PRINCIPLES	7
2.1	Employment of Expedia Employees	7
2.2	Assumption and Retention of Liabilities; Related Assets	7
2.3	Expedia Participation in IAC Benefit Plans	8
2.4	Terms of Participation by Expedia Employees in Expedia Benefit Plans	8
2.5	Commercially Reasonable Efforts	8
2.6	Regulatory Compliance	8
2.7	Approval by IAC as Sole Stockholder	8
ARTICLE III	SAVINGS PLANS	8
3.1	Savings Plan	8
3.2	Stock Considerations	9
ARTICLE IV	HEALTH AND WELFARE PLANS	9
4.1	General	9
	(a)    Establishment of Expedia Health and Welfare Plans	9
	(b)    Retention of Sponsorship and Liabilities	10

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4.2	Vendor Contracts	10
	(a)    Third-Party ASO Contracts, Group Insurance Policies and HMOs	10
	(b)    Effect of Change in Rates	10
4.3	Flexible Benefit Plan	11
4.4	Workers’ Compensation Liabilities	11
4.5	Payroll Taxes and Reporting of Compensation	12
4.6	COBRA and HIPAA Compliance	12
4.7	VEBA	12
ARTICLE V	EXECUTIVE BENEFITS AND OTHER BENEFITS	13
5.1	Assumption of Obligations	13
5.2	IAC Incentive Plans	13
	(a)    Expedia Bonus Awards	13
	(b)    IAC Bonus Awards	13
5.3	IAC Long-Term Incentive Plans	13
	(a)    Vested Old IAC Options	13
	(b)    Unvested Old IAC Options Held by IAC Employees and Former IAC Employees other than Barry Diller	14
	(c)    Unvested Old IAC Options Held by Expedia Employees and Former Expedia Employees other than Barry Diller	14
	(d)    Unvested Old IAC Options Held by Mr. Diller	15
	(e)    IAC Restricted Stock Units Held by IAC Employees and Former IAC Employees	15
	(f)     IAC Restricted Stock Units Held by Expedia Employees and Former Expedia Employees	16
	(g)    IAC Restricted Stock	16
	(h)    Foreign Grants/Awards	16
	(i)     Miscellaneous Option and Other Award Terms	16
	(j)     Waiting Period for Exercisability of Options and Grant of Options and Awards	17
	(k)    Restrictive Covenants	17
5.4	Registration Requirements	18
5.5	IAC Executive Deferred Compensation Plans	18
5.6	Severance	18
ARTICLE VI	GENERAL AND ADMINISTRATIVE	18
6.1	Sharing of Participant Information	18
6.2	Reasonable Efforts/Cooperation	19
6.3	No Third-Party Beneficiaries	19
6.4	Audit Rights With Respect to Information Provided	19
6.5	Fiduciary Matters	20
6.6	Consent of Third Parties	20
ARTICLE VII	MISCELLANEOUS	20
7.1	Effect If Effective Time Does Not Occur	20
7.2	Relationship of Parties	20
7.3	Affiliates	20
7.4	Notices	21
7.5	Incorporation of Separation Agreement Provisions	21

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EMPLOYEE MATTERS AGREEMENT

This Employee Matters Agreement (this “Agreement”), dated as of August 9, 2005, with effect as of the Effective Time, is entered into by and between IAC/InterActiveCorp, a Delaware corporation (“IAC”), and Expedia, Inc., a Delaware corporation (“Expedia”).

RECITALS:

WHEREAS, IAC and Expedia have entered into a Separation Agreement pursuant to which the Parties (as defined below) have set out the terms on which, and the conditions subject to which, they wish to implement the Separation (as defined in the Separation Agreement) (such agreement, as amended, restated or modified from time to time, the “Separation Agreement”).

WHEREAS, in connection therewith, IAC and Expedia have agreed to enter into this Agreement to allocate between them assets, liabilities and responsibilities with respect to certain employee compensation, pension and benefit plans, programs and arrangements and certain employment matters.

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

DEFINITIONS

Unless otherwise defined in this Agreement, capitalized words and expressions and variations thereof used in this Agreement or in its Appendices have the meanings set forth below. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Separation Agreement.

1.1 “Affiliate” has the meaning given that term in the Separation Agreement.

1.2 “Agreement” means this Employee Matters Agreement, including all the Schedules hereto.

1.3 “Ancillary Agreements” has the meaning given that term in the Separation Agreement.

1.4 “Approved Leave of Absence” means an absence from active service (i) due to an individual’s inability to perform his or her regular job duties by reason of illness or injury and resulting in eligibility to receive benefits pursuant to the terms of the IAC Short-Term Disability Plan or the IAC Long-Term Disability Plan, or (ii) pursuant to an approved leave policy with a guaranteed right of reinstatement.

1.5 “ASO Contract” has the meaning set forth in Section 4.2(a).

1.6 “Auditing Party” has the meaning set forth in Section 6.4(a).

1.7 “Award” when immediately preceded by “IAC,” means IAC Restricted Stock and IAC Restricted Stock Units and, when immediately preceded by “Expedia,” means Expedia Restricted Stock and Restricted Stock Units.

1.8 “Benefit Plan” means, with respect to an entity or any of its Subsidiaries, (a) each “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) and all other employee benefits arrangements, policies or payroll practices (including, without limitation, severance pay, sick leave, vacation pay, salary continuation, disability, retirement, deferred compensation, bonus, stock option or other equity-based compensation, hospitalization, medical insurance or life insurance) sponsored or maintained by such entity or by any of its Subsidiaries (or to which such entity or any of its Subsidiaries contributes or is required to contribute) and (b) all “employee pension benefit plans” (as defined in Section 3(2) of ERISA), occupational pension plan or arrangement or other pension arrangements sponsored, maintained or contributed to by such entity or any of its Subsidiaries (or to which such entity or any of its Subsidiaries contributes or is required to contribute). When immediately preceded by “IAC,” Benefit Plan means any Benefit Plan sponsored, maintained or contributed to by IAC or an IAC Entity. When immediately preceded by “Expedia,” Benefit Plan means any Benefit Plan sponsored, maintained or contributed to by Expedia or any Expedia Entity.

1.9 “Close of the Effective Date” means 11:59:59 P.M., Eastern Standard Time or Eastern Daylight Time (whichever shall then be in effect), on the Effective Date.

1.10 “COBRA” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code § 4980B and ERISA §§ 601 through 608.

1.11 “Code” means the Internal Revenue Code of 1986, as amended, or any successor federal income tax law. Reference to a specific Code provision also includes any proposed, temporary or final regulation in force under that provision.

1.12 “Committee” has the meaning set forth in Section 5.3(a).

1.13 “Covered Employees” has the meaning set forth in Section 4.3.

1.14 “Current Term” has the meaning set forth in Section 4.4(b).

1.15 “Effective Date” has the meaning given that term in the Separation Agreement.

1.16 “Effective Time” has the meaning given that term in the Separation Agreement.

1.17 “Effective Time Year” means the calendar year during which the Effective Time occurs.

1.18 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific provision of ERISA also includes any proposed, temporary or final regulation in force under that provision.

1.19 “Expedia” has the meaning set forth in the preamble to this Agreement.

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1.20 “Expedia Common Stock” has the meaning given that term in the Separation Agreement.

1.21 “Expedia Employee” means any individual who, immediately prior to the Effective Time, is either actively employed by, or then on Approved Leave of Absence from, an Expedia Entity.

1.22 “Expedia Entities” means the Expedia Group as defined in the Separation Agreement and any business or operations (whether current or historical regardless of whether discontinued or sold) included in the Separated Businesses.

1.23 “Expedia Executive Benefit Plans” means the executive benefit and nonqualified plans, programs, and arrangements established, sponsored, maintained, or agreed upon, by any Expedia Entity for the benefit of employees and former employees of any Expedia Entity before the Close of the Effective Date.

1.24 “Expedia Flexible Benefit Plan” means the flexible benefit plan to be established by Expedia pursuant to Section 4.3 of this Agreement as in effect as of the time relevant to the applicable provision of this Agreement.

1.25 “Expedia Long-Term Incentive Plan” means the long-term incentive plan or program to be established by Expedia, effective immediately prior to the Effective Date, in connection with the treatment of Awards as described in Article V.

1.26 “Expedia Ratio” means 1.12444, the quotient obtained by dividing the IAC Stock Value by the Expedia Stock Value.

1.27 “Expedia Retirement Savings Plan” means the 401(k) and profit sharing plan to be established by Expedia pursuant to Section 3.1 of this Agreement, as in effect as of the time relevant to the applicable provision of this agreement.

1.28 “Expedia Retirement Savings Plan Trust” means a trust relating to the Expedia Retirement Savings Plan intended to qualify under Section 401(a) and be exempt under Section 501(a) of the Code.

1.29 “Expedia Stock Value” means $22.50, the closing per-share price of Expedia Common Stock trading in the “when issued market” on August 8, 2005, as listed on the NASDAQ as of 4:00 P.M., Eastern Daylight Time.

1.30 “Former Expedia Employee” means any individual who as of the Effective Time is a former employee of the Expedia Group or the IAC Group, and whose last employment with the Expedia Group or IAC Group, was with an Expedia Entity.

1.31 “Former IAC Employee” means any individual who as of the Effective Time is a former employee of the IAC Group or the Expedia Group, and whose last employment with the IAC Group or Expedia Group, was with an IAC Entity.

1.32 “Group Insurance Policies” has the meaning set forth in Section 4.2(a).

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1.33 “Health and Welfare Plans” means any plan, fund or program which was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, medical, dental, surgical or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs or day care centers, scholarship funds, or prepaid legal services, including any such plan, fund or program as defined in Section 3(1) of ERISA. When immediately preceded by “IAC,” Health and Welfare Plans means each Health and Welfare Plan that is an IAC Benefit Plan. When immediately preceded by “Expedia,” Health and Welfare Plans means each Health and Welfare Plan that is an Expedia Benefit Plan.

1.34 “HIPAA” means the health insurance portability and accountability requirements for “group health plans” under the Health Insurance Portability and Accountability Act of 1996, as amended.

1.35 “HMO” means a health maintenance organization that provides benefits under the IAC Medical Plans or the Expedia Medical Plans.

1.36 “HMO Agreements” has the meaning set forth in Section 4.2(a).

1.37 “IAC” has the meaning set forth in the preamble to this Agreement.

1.38 “IAC Common Stock” means, with respect to periods prior to the Separation, shares of common stock, $0.01 par value per share, of IAC, and with respect to periods following the Separation, shares of common stock, $0.001 par value per share, of IAC.

1.39 “IAC Compensation/Benefits Committee“ means the Compensation/Benefits Committee of the IAC Board of Directors, or any subcommittee thereof.

1.40 “IAC Employee” means any individual who, immediately prior to the Close of the Effective Date, is either actively employed by, or then on Approved Leave of Absence from, any IAC Entity.

1.41 “IAC Entities” means the members of the IAC Group, as defined in the Separation Agreement, and their respective Subsidiaries and Affiliates, excluding any business or operations (whether current or historical, regardless of whether discontinued or sold) that are included in the Separated Businesses.

1.42 “IAC Executive Benefit Plans” means the executive benefit and nonqualified plans, programs, and arrangements established, sponsored, maintained, or agreed upon, by any IAC Entity for the benefit of employees and former employees of any IAC Entity before the Close of the Effective Date.

1.43 “IAC Executive Deferred Compensation Plan” means the IAC Executive Deferred Compensation Plan in effect as of the time relevant to the applicable provision of this Agreement.

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1.44 “IAC Flexible Benefit Plans” means the IAC Healthcare FSA and the IAC Dependent Care FSA, as in effect as of the time relevant to the applicable provision of this Agreement.

1.45 “IAC Incentive Plans” means any of the annual or short term incentive plans of IAC, all as in effect as of the time relevant to the applicable provisions of this Agreement.

1.46 “IAC Long-Term Incentive Plans” means any of the Silver King Communications, Inc. 1995 Stock Incentive Plan, HSN, Inc. 1997 Stock and Annual Incentive Plan, USA Interactive Amended and Restated 2000 Annual Stock and Incentive Plan, IAC/InterActiveCorp 2005 Stock and Annual Incentive Plan, Home Shopping Network, Inc. 1996 Stock Option Plan for Employees, Equity and Bonus Compensation Agreement with Barry Diller, Expedia, Inc. 1999 Amended and Restated Stock Option Plan, the Hotels Reservations Network, Inc. 2000 Stock Plan, Ticketmaster Online-Citysearch, Inc. 1996 Stock Option Plan, Ticketmaster Online-Citysearch, Inc. 1998 Stock Option Plan, Ticketmaster 1999 Stock Plan, and Ticketweb, Inc. 2000 Stock Plan, Styleclick, Inc. 1995 Stock Option Plan, Servicemagic, Inc. Amended and Restated 1999 Stock Option Plan and Precision Response Corporation Amended and Restated 1996 Incentive Stock Plan, Expedia, Inc. Amended and Restated 2001 Stock Plan, 1998 Stock Option Plan of LendingTree, Inc., Amended and Restated Stock Incentive Plan of LendingTree, Inc., the Silver King Communications, Inc. Directors Stock Option Plan, Hotwire, Inc. 2000 Equity Incentive Plan and any other stock incentive plan of IAC, all as in effect as of the time relevant to the applicable provisions of this Agreement.

1.47 “IAC Post-Separation Stock Value” means $28.10, the closing per-share price of IAC Common Stock in the “when issued market” on August 8, 2005, as listed on the NASDAQ as of 4:00 P.M. Eastern Daylight time.

1.48 “IAC Ratio” means 0.90036, the quotient obtained by dividing the IAC Stock Value by the IAC Post-Separation Stock Value.

1.49 “IAC Retirement Savings Plan” means the InterActiveCorp Retirement Savings Plan as in effect as of the time relevant to the applicable provision of this Agreement.

1.50 “IAC Severance Pay Program” means any severance plan, policy, program or other arrangement as in effect as of the time relevant to the applicable provision of this Agreement.

1.51 “IAC Stock Value” means $25.30, the closing per-share price of the IAC Common Stock trading “regular way with due bills” on August 8, 2005, as listed on the NASDAQ as of 4:00 P.M., Eastern Daylight Time.

1.52 “Immediately after the Effective Date” means on the first moment of the day after the Effective Date.

1.53 “Liabilities” has the meaning given that term in the Separation Agreement.

1.54 “Medical Plan” when immediately preceded by “IAC,” means the Benefit Plan under which medical benefits are provided to IAC Employees established and maintained by

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IAC. When immediately preceded by Expedia, Medical Plan means the Benefit Plan under which medical benefits are provided to Expedia Employees to be established by Expedia pursuant to Article IV.

1.55 “NASDAQ” means the National Association of Securities Dealers Inc. Automated Quotation System.

1.56 “Non-parties” has the meaning set forth in Section 6.4(b).

1.57 “Option” when immediately preceded by “Old IAC,” means an option (either nonqualified or incentive) to purchase shares of IAC Common Stock prior to the Effective Time pursuant to an IAC Long-Term Incentive Plan. When immediately preceded by “New IAC,” Option means an option (either nonqualified or incentive) to purchase shares of IAC Common Stock following the Effective Time pursuant to an IAC Long-Term Incentive Plan. When immediately preceded by “Expedia,” Option means an option (either nonqualified or incentive) to purchase shares of Expedia Common Stock following the Effective Time pursuant to the Expedia Long-Term Incentive Plan.

1.58 “Participating Company” means (a) IAC and (b) any other Person (other than an individual) that participates in a plan sponsored by any IAC Entity.

1.59 “Person” has the meaning given that term in the Separation Agreement.

1.60 “Restricted Stock” when immediately preceded by “IAC,” means shares of IAC Common Stock that are subject to restrictions on transferability and a risk of forfeiture and are issued under an IAC Benefit Plan and, when immediately preceded by “Expedia,” means shares of Expedia Common Stock that are subject to restrictions on transferability and a risk of forfeiture and are issued under an Expedia Benefit Plan.

1.61 “Restricted Stock Unit” when immediately preceded by “IAC,” means units issued under an IAC Benefit Plan representing a general unsecured promise by IAC to pay the value of shares of IAC Common Stock in cash or shares of IAC Common Stock and, when immediately preceded by “Expedia,” means units issued under the Expedia Long-Term Incentive Plan representing a general unsecured promise by Expedia to pay the value of shares of Expedia Common Stock in cash or shares of Expedia Common Stock.

1.62 “Reverse Stock Split” means the one-for-two reverse stock split of IAC Common Stock that IAC will complete immediately prior to the Effective Time.

1.63 “Separated Businesses” has the meaning given that term in the Separation Agreement.

1.64 “Separation” has the meaning given that term in the Separation Agreement.

1.65 “Separation Agreement” has the meaning set forth in the recitals to this Agreement.

1.66 “Subsidiaries” has the meaning given that term in the Separation Agreement.

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1.67 “Tax Sharing Agreement” means the Tax Sharing Agreement entered into as of the date hereof between IAC and Expedia.

1.68 “Transferred Account Balances” has the meaning set forth in Section 4.3.

1.69 “U.S.” means the 50 United States of America and the District of Columbia.

1.70 “VEBA” when immediately preceded by IAC, means the IAC Health and Welfare Benefit Trust. When immediately preceded by Expedia, VEBA means the Expedia Health and Welfare Benefit Trust to be established by Expedia pursuant to Section 4.7 that corresponds to the IAC VEBA.

ARTICLE II

GENERAL PRINCIPLES

2.1 Employment of Expedia Employees. All Expedia Employees shall continue to be employees of Expedia or another Expedia Entity, as the case may be, immediately after the Effective Time.

2.2 Assumption and Retention of Liabilities; Related Assets.

(a) As of the Effective Date, except as expressly provided in this Agreement, the IAC Entities shall assume or retain and IAC hereby agrees to pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all IAC Benefit Plans, (ii) all Liabilities with respect to the employment or termination of employment of all IAC Employees, Former IAC Employees and their dependents and beneficiaries, and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or nonpayroll worker of any IAC Entity or in any other employment, non-employment, or retainer arrangement, or relationship with any IAC Entity), in each case to the extent arising in connection with or as a result of employment with or the performance of services to any IAC Entity, and (iii) any other Liabilities expressly assigned to IAC under this Agreement. All assets held in trust to fund the IAC Benefit Plans and all insurance policies funding the IAC Benefit Plans shall be IAC Assets (as defined in the Separation Agreement), except to the extent specifically provided otherwise in this Agreement.

(b) From and after the Effective Date, except as expressly provided in this Agreement, Expedia and the Expedia Entities shall assume or retain, as applicable, and Expedia hereby agrees to pay, perform, fulfill and discharge, in due course in full, (i) all Liabilities under all Expedia Benefit Plans, (ii) all Liabilities with respect to the employment or termination of employment of all Expedia Employees, Former Expedia Employees and their dependents and beneficiaries, and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or nonpayroll worker of Expedia or any Expedia Entity or in any other employment, non-employment, or retainer arrangement, or relationship with Expedia or an Expedia Entity), in each case to the extent arising in connection with or as a result of employment with or the performance of services to

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any Expedia Entity and (iii) any other Liabilities expressly assigned to Expedia or any Expedia Entity under this Agreement.

2.3 Expedia Participation in IAC Benefit Plans. Except as expressly provided in this Agreement, effective as of the Close of the Effective Date, Expedia and each other Expedia Entity shall cease to be a Participating Company in any IAC Benefit Plan, and IAC and Expedia shall take all necessary action before the Effective Date to effectuate such cessation as a Participating Company.

2.4 Terms of Participation by Expedia Employees in Expedia Benefit Plans. IAC and Expedia shall agree on methods and procedures, including, without limitation, amending the respective Benefit Plan documents, to prevent Expedia Employees from receiving duplicative benefits from the IAC Benefit Plans and the Expedia Benefit Plans. With respect to Expedia Employees, each Expedia Benefit Plan shall provide that all service, all compensation and all other benefit-affecting determinations that, as of the Close of the Effective Date were recognized under the corresponding IAC Benefit Plan shall, as of Immediately after the Effective Date receive full recognition, credit and validity and be taken into account under such Expedia Benefit Plan to the same extent as if such items occurred under such Expedia Benefit Plan, except to the extent that duplication of benefits would result or for benefit accrual to the extent that Expedia adopts a final average pay defined benefit pension plan.

2.5 Commercially Reasonable Efforts. IAC and Expedia shall use commercially reasonable efforts to (a) enter into any necessary agreements to accomplish the assumptions and transfers contemplated by this Agreement; and (b) provide for the maintenance of the necessary participant records, the appointment of the trustees and the engagement of recordkeepers, investment managers, providers, insurers, etc.

2.6 Regulatory Compliance. IAC and Expedia shall, in connection with the actions taken pursuant to this Agreement, cooperate in making any and all appropriate filings required under the Code, ERISA and any applicable securities laws, implementing all appropriate communications with participants, transferring appropriate records and taking all such other actions as may be necessary and appropriate to implement the provisions of this Agreement in a timely manner.

2.7 Approval by IAC as Sole Stockholder. Prior to the Effective Time, IAC shall cause Expedia to adopt the Expedia 2005 Long-Term Incentive Plan.

ARTICLE III

SAVINGS PLANS

3.1 Savings Plan. Effective as of the Effective Date, Expedia shall establish the Expedia Retirement Savings Plan and the Expedia Retirement Savings Plan Trust. As soon as practical following the establishment of the Expedia Retirement Savings Plan and the Expedia Retirement Savings Plan Trust, IAC shall cause the accounts of the Expedia Employees to be transferred to the Expedia Retirement Savings Plan and the Expedia Retirement Savings Plan Trust in cash or such other assets as mutually agreed by IAC and Expedia, and Expedia shall cause the Expedia Retirement Savings Plan to assume and be solely responsible for all Liabilities

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for plan benefits (but not legal Liabilities, such as penalties for violation of law, if applicable, relating to the administration of plan benefits by IAC prior to the Effective Time and during such time as IAC owned 100% of an Expedia Entity with respect to which IAC administered plan benefits, it being understood that Expedia shall be responsible for such legal Liabilities incurred during such periods prior to the Effective Time during which IAC did not own 100% of such Expedia Entities) under the Expedia Retirement Savings Plan to or relating to Expedia Employees whose accounts are transferred from the IAC Retirement Savings Plan. Notwithstanding the foregoing, IAC Common Stock that is held in the accounts of Expedia Employees and any outstanding participant loans to Expedia Employees whose accounts are transferred under the IAC Retirement Savings Plan shall be transferred to the Expedia Retirement Savings Plan in kind and shall thereafter be treated in the manner set forth in Section 3.2. IAC and Expedia agree to cooperate in making all appropriate filings and taking all reasonable actions required to implement the provisions of this Section 3.1; provided that Expedia acknowledges that it will be responsible for complying with any requirements and applying for any determination letters with respect to the Expedia Retirement Savings Plan.

3.2 Stock Considerations. To the extent that IAC Employees and Former IAC Employees receive shares of Expedia Common Stock in connection with the Separation with respect to IAC Common Stock held under the IAC Retirement Savings Plan, such shares will be deposited in an Expedia Common Stock Fund under the IAC Retirement Savings Plan. To the extent that Expedia Employees and Former Expedia Employees hold shares of IAC Common Stock in their IAC Common Stock Fund under the Expedia Retirement Savings Plan following the transfer from the IAC Retirement Savings Plan to the Expedia Retirement Savings Plan set forth in Section 3.1, the Expedia Retirement Savings Plan shall permit such employees to continue to hold such shares in an IAC Common Stock Fund under the Expedia Retirement Savings Plan following such transfer. Following the Effective Date, Expedia Employees and Former Expedia Employees shall not be permitted to acquire shares of IAC Common Stock in the IAC Common Stock Fund under the Expedia Retirement Savings Plan and IAC Employees and Former IAC Employees shall not be permitted to acquire shares of Expedia Common Stock in the Expedia Common Stock Fund under the IAC Retirement Savings Plan. IAC and Expedia shall assume sole responsibility for ensuring that their respective Savings Plans are maintained in compliance with applicable laws with respect to holding shares of common stock of the other entity.

ARTICLE IV

HEALTH AND WELFARE PLANS

4.1 General.

(a) Establishment of Expedia Health and Welfare Plans. Effective as of the Effective Date, Expedia shall adopt Health and Welfare Plans for the benefit of Expedia Employees, and Expedia shall be responsible for all Liabilities relating to, arising out of or resulting from health and welfare coverage or claims incurred by or on behalf of Expedia Employees or their covered dependents under the Expedia Health and Welfare Plans prior to, on or after the Effective Date.

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(b) Retention of Sponsorship and Liabilities. Following the Effective Date, IAC shall retain:

(i) sponsorship of all IAC Health and Welfare Plans and any trust or other funding arrangement established or maintained with respect to such plans, including any “voluntary employee’s beneficiary association,” or any assets held as of the Effective Date with respect to such plans; and

(ii) all Liabilities relating to, arising out of, or resulting from health and welfare coverage or claims incurred by or on behalf of IAC Employees or Former IAC Employees or their covered dependents under the IAC Health and Welfare Plans prior to, on or before the Effective Date.

IAC shall not assume any Liability relating to health and welfare claims incurred by or on behalf of Expedia Employees or Former Expedia Employees or their respective covered dependents prior to, on or after the Effective Date, and such claims shall be satisfied pursuant to Section 4.1(a). A claim or Liability (1) for medical, dental, vision and/or prescription drug benefits shall be deemed to be incurred upon the rendering of health services giving rise to the obligation to pay such benefits; (2) for life insurance and accidental death and dismemberment and business travel accident insurance benefits and workers’ compensation benefits shall be deemed to be incurred upon the occurrence of the event giving rise to the entitlement to such benefits; (3) for salary continuation or other disability benefits shall be deemed to be incurred upon the effective date of an individual’s disability giving rise to the entitlement to such benefits under the applicable disability policy; and (4) for a period of continuous hospitalization shall be deemed to be incurred on the date of admission to the hospital.

4.2 Vendor Contracts.

(a) Third-Party ASO Contracts, Group Insurance Policies and HMOs. IAC and Expedia shall use commercially reasonable efforts to obligate the third party administrator to each administrative-services-only contract with a third-party administrator that relates to any of the IAC Health and Welfare Plans (an “ASO Contract”), each group insurance policy that relates to any of the IAC Health and Welfare Plans (“Group Insurance Policies”) and each agreement with a Health Maintenance Organization that provides medical services under the IAC Health and Welfare Plans (“HMO Agreements”), in each case, in existence as of the date of this Agreement that is applicable to Expedia Employees, to enter into a separate ASO Contract, Group Insurance Policy and HMO Agreement, as applicable, with Expedia providing for substantially similar terms and conditions as are contained in the ASO Contracts, Group Insurance Policies and HMO Agreements, as applicable, to which IAC is a party. Such terms and conditions shall include the financial and termination provisions, performance standards, methodology, auditing policies, quality measures and reporting requirements.

(b) Effect of Change in Rates. IAC and Expedia shall use commercially reasonable efforts to cause each of the insurance companies and third-party administrators providing services and benefits under the IAC Health and Welfare Plans and the Expedia Health and Welfare Plans to maintain the premium and/or administrative rates based on the aggregate number of participants in both the IAC Health and Welfare Plans and the Expedia Health and

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Welfare Plans as of Immediately Prior to the Effective Date through the end of the year in which the Effective Date occurs. To the extent they are not successful in such efforts, IAC and Expedia shall each bear the revised premium or administrative rates attributable to the individuals covered by their respective Health and Welfare Plans.

4.3 Flexible Benefit Plan. Effective as of the Effective Date, Expedia shall establish the Expedia Flexible Benefit Plan. Prior to the Effective Date, IAC and Expedia shall take all actions necessary or appropriate so that, effective as of the Close of the Effective Date, (a) the account balances (whether positive or negative) (the “Transferred Account Balances”) under the health care reimbursement program, the transit and parking reimbursement program and the dependent care reimbursement program of the IAC Flexible Benefit Plan (all of such accounts, “IAC Flexible Benefit Plan”) of the Expedia Employees who are participants in IAC Flexible Benefit Plan (the “Covered Employees”) shall be transferred to the Expedia Flexible Benefit Plan; (b) the elections, contribution levels and coverage levels of the Covered Employees shall apply under the Expedia Flexible Benefit Plan in the same manner as under the IAC Flexible Benefit Plan; and (c) the Covered Employees shall be reimbursed from the Expedia Flexible Benefit Plan for claims incurred at any time during the plan year of the IAC Flexible Benefit Plan in which the Effective Time occurs submitted to the Expedia Flexible Benefit Plan from and after the Effective Date on the same basis and the same terms and conditions as under the IAC Flexible Benefit Plan.

4.4 Workers’ Compensation Liabilities.

(a) Except as provided below, all workers’ compensation Liabilities relating to, arising out of, or resulting from any claim by an IAC Employee, Former IAC Employee, Expedia Employee and Former Expedia Employee that results from an accident occurring, or from an occupational disease which becomes manifest, on or before the Close of the Effective Date shall be retained by IAC. All workers’ compensation Liabilities relating to, arising out of, or resulting from any claim by an IAC Employee or Former IAC Employee that results from an accident occurring, or from an occupational disease which becomes manifest, on or after the Effective Date shall be retained by IAC. All workers’ compensation Liabilities relating to, arising out of, or resulting from any claim by an Expedia Employee or Former Expedia Employee that results from an accident occurring, or from an occupational disease which becomes manifest, on or after the Effective Date shall be retained by Expedia. For purposes of this Agreement, a compensable injury shall be deemed to be sustained upon the occurrence of the event giving rise to eligibility for workers’ compensation benefits or at the time that an occupational disease becomes manifest, as the case may be. IAC, Expedia and the other Expedia Entities shall cooperate with respect to any notification to appropriate governmental agencies of the Effective Time and the issuance of new, or the transfer of existing, workers’ compensation insurance policies and claims handling contracts.

(b) The parties acknowledge that Expedia and the Expedia Entities have been part of IAC’s workers’ compensation insurance program for certain periods prior to the Effective Date. For the program covering the term October 1, 2004 to the Effective Date (the “Current Term”), IAC will continue to administer the program and absorb all administrative costs associated with this obligation, and Expedia agrees to the following cost adjustments. Expedia will receive a pro-rated return premium covering the period from the Effective Date to

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October 1, 2005. The return premium will be received either on October 31, 2005 after Expedia fulfills its obligation of reimbursement to IAC for all monthly insurance charges up to October 1, 2005 or through the forgiveness of pre-paid insurance obligations of the Expedia Entities to IAC from the Effective Date to October 1, 2005. In addition, for both the program covering the Current Term and programs covering periods prior to the start of the Current Term, the Expedia Entities will be eligible for a one-time dividend, valued and payable on October 31, 2008, based on ultimate loss development as advised by IAC broker/consultants or recognized authority selected by IAC and reasonably acceptable to Expedia.

4.5 Payroll Taxes and Reporting of Compensation. IAC and Expedia shall, and shall cause the other IAC Entities and the other Expedia Entities to, respectively, take such action as may be reasonably necessary or appropriate in order to minimize Liabilities related to payroll taxes after the Effective Date. IAC and Expedia shall, and shall cause the other IAC Entities and the other Expedia Entities to, respectively, each bear its responsibility for payroll tax obligations and for the proper reporting to the appropriate governmental authorities of compensation earned by their respective employees after the Close of the Effective Date, including compensation related to the exercise of Options.

4.6 COBRA and HIPAA Compliance. IAC shall be responsible for administering compliance with the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the IAC Health and Welfare Plans with respect to IAC Employees and Former IAC Employees and their covered dependents who incur a COBRA qualifying event or loss of coverage under the IAC Health and Welfare Plans at any time before, on or after the Effective Time. Expedia or another Expedia Entity shall be responsible for administering compliance with the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the Expedia Health and Welfare Plans and/or the IAC Health and Welfare Plans with respect to Expedia Employees and Former Expedia Employees and their covered dependents who incur a COBRA qualifying event or loss of coverage under the Expedia Health and Welfare Plans and/or the IAC Health and Welfare Plans at any time before, on or after the Effective Time. The Parties hereto agree that the consummation of the transactions contemplated by this Agreement and the Separation Agreement shall not constitute a COBRA qualifying event for any purpose of COBRA.

4.7 VEBA. Effective as of the Effective Date, Expedia shall establish the Expedia VEBA for the purpose of funding certain Expedia Health and Welfare Plans. As soon as practicable following the Effective Date, IAC shall contribute a lump sum amount in cash to Expedia equal to the excess, if any, of (a) IAC budget rates for self-insured medical, dental and vision care plans applicable to Expedia Employees and Former Expedia Employees, in each case, from January 1, 2005 through the Effective Date over (b) the sum of actual claims paid to Expedia Employees and Former Expedia Employees from self-insured medical, dental and vision care plans from January 1, 2005 through the Effective Date, which amount shall be contributed by Expedia to the Expedia VEBA upon receipt by Expedia from IAC.

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ARTICLE V

EXECUTIVE BENEFITS AND OTHER BENEFITS

5.1 Assumption of Obligations. Except as provided in this Agreement, effective as of the Effective Time, Expedia shall assume and be solely responsible for all Liabilities to or relating to Expedia Employees and Former Expedia Employees under all IAC Executive Benefit Plans and Expedia Executive Benefit Plans. The Parties hereto agree that none of the transactions contemplated by the Separation Agreement or any of the Ancillary Agreements, including, without limitation, this Agreement, constitutes a “change in control,” “change of control” or similar term, as applicable, within the meaning of any Employee Benefit Plan.

5.2 IAC Incentive Plans.

(a) Expedia Bonus Awards. Expedia shall be responsible for determining all bonus awards that would otherwise be payable under the IAC Incentive Plans to Expedia Employees for the Effective Time Year. Expedia shall also determine for Expedia Employees (i) the extent to which established performance criteria (as interpreted by Expedia, in its sole discretion) have been met, and (ii) the payment level for each Expedia Employee. Expedia shall assume all Liabilities with respect to any such bonus awards payable to Expedia Employees for the Effective Time Year and thereafter.

(b) IAC Bonus Awards. IAC shall retain all Liabilities with respect to any bonus awards payable under the IAC Incentive Plans to IAC Employees for the Effective Time Year and thereafter.

5.3 IAC Long-Term Incentive Plans. IAC and Expedia shall use commercially reasonable efforts to take all actions necessary or appropriate so that each outstanding Option and Award granted under any IAC Long-Term Incentive Plan held by any individual shall be adjusted as set forth in this Article V. The adjustments set forth below shall be the sole adjustments made with respect to Old IAC Options, IAC Restricted Stock Units and IAC Restricted Stock in connection with the Reverse Stock Split and the other transactions contemplated by the Separation Agreement.

(a) Vested Old IAC Options. As determined by the Compensation/Benefits Committee of the IAC Board of Directors (the “Committee”) pursuant to its authority under the applicable IAC Long-Term Incentive Plan, each Old IAC Option that is vested as of the Effective Time shall be converted into both an Expedia Option and a New IAC Option and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Old IAC Option immediately prior to the Effective Time; provided, however, that from and after the Effective Time (i) the number of shares of IAC Common Stock subject to such New IAC Option, rounded down to the nearest whole share, shall be equal to one half the number of shares of IAC Common Stock subject to such Old IAC Option immediately prior to the Reverse Stock Split and the Effective Time, (ii) the number of shares of Expedia Common Stock subject to such Expedia Option, rounded down to the nearest whole share, shall be equal to one half the number of shares of IAC Common Stock subject to the Old IAC Option immediately prior to the Reverse Stock Split and the Effective Time, (iii) the per share exercise price of such New IAC Option, rounded up to the nearest whole cent, shall be equal to the

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quotient obtained by dividing (x) the per share exercise price of such Old IAC Option immediately prior to the Reverse Stock Split and the Effective Time by (y) the IAC Ratio and (iv) the per share exercise price of the Expedia Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (x) the per share exercise price of the Old IAC Option immediately prior to the Reverse Stock Split and the Effective Time by (y) the Expedia Ratio; provided, however, the exercise price, the number of shares of IAC Common Stock and Expedia Common Stock subject to such options and the terms and conditions of exercise of such options shall be determined in a manner consistent with the requirements of Section 409A of the Code; provided, further, that, in the case of any Old IAC Option to which Section 421 of the Code applies by reason of its qualification under Section 422 of the Code as of immediately prior to the Effective Time, the exercise price, the number of shares of IAC Common Stock and Expedia Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 424(a) of the Code.

(b) Unvested Old IAC Options Held by IAC Employees and Former IAC Employees other than Barry Diller. As determined by the Committee pursuant to its authority under the applicable IAC Long-Term Incentive Plan, each Old IAC Option held by an IAC Employee or a Former IAC Employee (other than Barry Diller) that is unvested as of the Effective Time shall be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Old IAC Option immediately prior to the Effective Time; provided, however, that from and after the Effective Time (i) the number of shares of IAC Common Stock subject to such New IAC Option, rounded down to the nearest whole share, shall be equal to the product of (x) the number of shares of IAC Common Stock subject to such Old IAC Option immediately prior to the Reverse Stock Split and the Effective Time and (y) the IAC Ratio and (ii) the per share exercise price of such New IAC Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (x) the per share exercise price of such Old IAC Option immediately prior to the Reverse Stock Split and the Effective Time by (y) the IAC Ratio; provided, however, the exercise price, the number of shares of IAC Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 409A of the Code; provided, further, that, in the case of any Old IAC Option to which Section 421 of the Code applies by reason of its qualification under Section 422 of the Code as of immediately prior to the Effective Time, the exercise price, the number of shares of IAC Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 424(a) of the Code.

(c) Unvested Old IAC Options Held by Expedia Employees and Former Expedia Employees other than Barry Diller. As determined by the Committee pursuant to its authority under the applicable IAC Long-Term Incentive Plan, each Old IAC Option held by an Expedia Employee or Former Expedia Employee (other than Barry Diller) that is unvested as of the Effective Time shall be converted into an Expedia Option and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Old IAC Option immediately prior to the Effective Time; provided, however, that from and after the Close of the Effective Time (i) the number of shares of Expedia Common Stock subject to such Option, rounded down to the nearest whole share, shall be equal to the product of (x) the number of shares of IAC Common Stock subject to such Old IAC Option immediately prior to

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the Reverse Stock Split and the Effective Time and (y) the Expedia Ratio and (ii) the per share exercise price of such Expedia Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (x) the per share exercise price of such Old IAC Option immediately prior to the Reverse Stock Split and the Effective Time by (y) the Expedia Ratio; provided, however, the exercise price, the number of shares of Expedia Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 409A of the Code; provided, further, that, in the case of any Old IAC Option to which Section 421 of the Code applies by reason of its qualification under Section 422 of the Code as of the Effective Time, the exercise price, the number of shares of Expedia Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 424(a) of the Code.

(d) Unvested Old IAC Options Held by Mr. Diller. As determined by the Committee pursuant to its authority under the applicable IAC Long-Term Incentive Plan, each Old IAC Option held by Barry Diller that is unvested as of the Effective Time shall be converted into both an Expedia Option and a New IAC Option and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Old IAC Option immediately prior to the Effective Time; provided, however, that from and after the Effective Time (i) the number of shares of IAC Common Stock subject to such New IAC Option, rounded down to the nearest whole share, shall be equal to one half the number of shares of IAC Common Stock subject to such Old IAC Option immediately prior to the Reverse Stock Split and the Effective Time, (ii) the number of shares of Expedia Common Stock subject to such Expedia Option, rounded down to the nearest whole share, shall be equal to one half the number of shares of IAC Common Stock subject to the Old IAC Option immediately prior to the Reverse Stock Split and the Effective Time, (iii) the per share exercise price of such New IAC Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (x) the per share exercise price of such Old IAC Option immediately prior to the Reverse Stock Split and the Effective Time by (y) the IAC Ratio and (iv) the per share exercise price of the Expedia Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (x) the per share exercise price of the Old IAC Option immediately prior to the Reverse Stock Split and the Effective Time by (y) the Expedia Ratio; provided, however, the exercise price, the number of shares of IAC Common Stock and Expedia Common Stock subject to such options and the terms and conditions of exercise of such options shall be determined in a manner consistent with the requirements of Section 409A of the Code. Following completion of the Effective Time, the satisfaction of conditions to vesting of Mr. Diller’s New IAC Options governed by this Section 5.3(d) will be determined based on Mr. Diller’s employment with IAC, and the satisfaction of conditions to vesting of Mr. Diller’s Expedia Options governed by this Section 5.3(d) will be determined based on Mr. Diller’s employment with Expedia.

(e) IAC Restricted Stock Units Held by IAC Employees and Former IAC Employees. As determined by the Committee pursuant to its authority under the applicable IAC Long-Term Incentive Plan, each IAC Restricted Stock Unit held by an IAC Employee or a Former IAC Employee shall be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such IAC Restricted Stock Unit immediately prior to the Effective Time; provided, however, that from and after the Close of the Effective Time, the number of shares of IAC Common Stock covered by each IAC Restricted Stock Unit, rounded to

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the nearest whole share, shall be equal to the product of (x) the number of shares of IAC Common Stock covered by such IAC Restricted Stock Unit immediately prior to the Reverse Stock Split and the Effective Time and (y) the IAC Ratio.

(f) IAC Restricted Stock Units Held by Expedia Employees and Former Expedia Employees. As determined by the Committee pursuant to its authority under the applicable IAC Long-Term Incentive Plan, each IAC Restricted Stock Unit held by an Expedia Employee or a Former Expedia Employee as of the Effective Time shall be converted into an Expedia Restricted Stock Unit, and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such IAC Restricted Stock Unit immediately prior to the Effective Time; provided, however, that from and after the Close of the Effective Time, the number of shares of Expedia Common Stock covered by such Expedia Restricted Stock Unit held by the participant, as applicable, rounded to the nearest whole share, shall be equal to the product of (x) the number of shares of IAC Common Stock covered by such IAC Restricted Stock Unit immediately prior to the Reverse Stock Split and the Effective Time and (y) the Expedia Ratio.

(g) IAC Restricted Stock. Shares of IAC Restricted Stock that are outstanding immediately prior to the Reverse Stock Split and the Effective Time shall be treated in the Reverse Stock Split and the Reclassification (as defined in the Separation Agreement) in the same manner as other outstanding shares of IAC common stock are treated in the Reverse Stock Split and the Reclassification and will otherwise be subject to the same terms and conditions (including vesting conditions) applicable to such shares of IAC Restricted Stock immediately prior to the Reverse Stock Split and the Effective Time.

(h) Foreign Grants/Awards. To the extent that the IAC Awards or any of the Old IAC Options are granted to non-U.S. employees under any domestic or foreign equity-based incentive program sponsored by an IAC Entity, IAC and Expedia shall use their commercially reasonable efforts to preserve, at and after the Effective Time, the value and tax treatment accorded to such Old IAC Options and such IAC Awards granted to non-U.S. employees under any domestic or foreign equity-based incentive program sponsored by an IAC Entity.

(i) Miscellaneous Option and Other Award Terms. After the Effective Date, New IAC Options and IAC Awards adjusted pursuant to Section 5.3, regardless of by whom held, shall be settled by IAC pursuant to the terms of the applicable IAC Long-Term Incentive Plan, and Expedia Options and Expedia Awards, regardless of by whom held, shall be settled by Expedia pursuant to the terms of the Expedia Long-Term Incentive Plan. Accordingly, it is intended that, to the extent of the issuance of such Expedia Options and Expedia Awards in connection with the adjustment provisions of this Section 5.3, the Expedia Long-Term Incentive Plan shall be considered a successor to each of the IAC Long-Term Incentive Plans and to have assumed the obligations of the applicable IAC Long-Term Incentive Plan to make the adjustment of the IAC Options and IAC Awards as set forth in this Section 5.3. The Effective Time shall not constitute a termination of employment for any Expedia Employees for purposes of any New IAC Option or IAC Award and, except as otherwise provided in this Agreement, with respect to grants adjusted pursuant to this Section 5.3, employment with Expedia shall be treated as employment with IAC with respect to New IAC Options or IAC Awards held by Expedia Employees and employment with IAC shall be treated as employment with Expedia with respect

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to Expedia Options and Expedia Awards held by IAC Employees. Mr. Diller shall be treated as an IAC Employee with respect to continued exercisability of vested New IAC Options and Mr. Diller shall be treated as an Expedia Employee with respect to continued exercisability of vested Expedia Options.

(j) Waiting Period for Exercisability of Options and Grant of Options and Awards. The New IAC Options and Expedia Options shall not be exercisable during a period beginning on a date prior to the Effective Date determined by IAC in its sole discretion, and continuing until the IAC Post-Separation Stock Value and the Expedia Stock Value are determined after the Effective Time, or such longer period as IAC, with respect to New IAC Options, and Expedia, with respect to Expedia Options, determines necessary to implement the provisions of this Section 5.3. The IAC Restricted Stock Units and Expedia Restricted Stock Units shall not be settled during a period beginning on a date prior to the Effective Date determined by IAC in its sole discretion, and continuing until the IAC Post-Separation Stock Value and the Expedia Stock Value are determined immediately after the Effective Time, or such longer period as IAC, with respect to IAC Restricted Stock Units, and Expedia, with respect to Expedia Restricted Stock Units, determines necessary to implement the provisions of this Section 5.3.

(k) Restrictive Covenants. Following the Effective Date, Expedia shall use commercially reasonable efforts to monitor the Expedia Employees and Former Expedia Employees to determine whether any such Expedia Employees or Former Expedia Employees have breached any of the restrictive covenants in the agreements evidencing the terms of their New IAC Options and IAC Awards. As soon as practicable following Expedia’s reasonable belief that an Expedia Employee or Former Expedia Employee has breached any such covenant, Expedia shall provide IAC in writing with the name and address of such employee or former employee and the name and address of the enterprise in which such employee or former employee is believed to have been engaged. Notwithstanding the foregoing or anything in any agreement evidencing the terms of any New IAC Options and IAC Awards or otherwise to the contrary, it shall not be a violation of any IAC non-competition or non-solicitation of clients or customers covenant for an Expedia Employee to engage in acts on behalf of Expedia or an Expedia Entity that are otherwise prohibited by the terms of such non-competition or non-solicitation of clients or customers covenants and it shall not be a violation of any Expedia non-competition or non-solicitation of clients or customers covenant for an IAC Employee to engage in acts on behalf of IAC or an IAC Entity that are otherwise prohibited by the terms of such non-competition or non-solicitation of clients or customers covenants. In addition, following the Effective Time, the restrictive covenants (including without limitation any proprietary rights agreements or confidential information covenants) to which any Expedia Employee or Former Expedia Employee are party shall run in favor of Expedia (and, to the extent relating to IAC, shall run in favor of IAC to the same extent that they ran in favor of IAC immediately prior to the Effective Time; provided, that the Effective Time shall be treated as a termination of employment from IAC for purposes of the duration of IAC’s ability to enforce the restrictive covenant) and the restrictive covenants to which any IAC Employee or Former IAC Employee are party shall run in favor of IAC. Any employment agreement between IAC and an Expedia Employee or Former Expedia Employee shall as of the Effective Time be assigned by IAC to Expedia and assumed by Expedia.

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5.4 Registration Requirements. As soon as possible following the time as of which the Registration Statement (as defined in the Separation Agreement) is declared effective by the Securities and Exchange Commission but in any case before the Effective Date and before the date of issuance or grant of any Expedia Option and/or shares of Expedia Common Stock pursuant to this Article V, Expedia agrees that it shall file a Form S-8 Registration Statement with respect to and cause to be registered pursuant to the Securities Act of 1933, as amended, the shares of Expedia Common Stock authorized for issuance under the Expedia Long-Term Incentive Plan as required pursuant to such Act and any applicable rules or regulations thereunder, with such registration to be effective prior to the Effective Date. IAC agrees that, following the Effective Date, it shall use reasonable efforts to continue to maintain a Form S-8 Registration Statement with respect to and cause to be registered pursuant to the Securities Act of 1933, as amended, the shares of IAC Common Stock authorized for issuance under the IAC Long-Term Incentive Plans as required pursuant to such Act and any applicable rules or regulations thereunder.

5.5 IAC Executive Deferred Compensation Plans. Effective as of the Effective Date, Expedia shall establish a deferred compensation plan that is substantially identical to the IAC Executive Deferred Compensation Plan to provide benefits to Expedia Employees and Former Expedia Employees from and after the Effective Date who were participants in the IAC Executive Deferred Compensation Plan as of immediately prior to the Effective Date.

5.6 Severance. An Expedia Employee shall not be deemed to have terminated employment for purposes of determining eligibility for severance benefits in connection with or in anticipation of the consummation of the transactions contemplated by the Separation Agreement. Expedia shall be solely responsible for all Liabilities in respect of all costs arising out of payments and benefits relating to the termination or alleged termination of any Expedia Employee or Former Expedia Employee’s employment that occurs prior to, as a result of, in connection with or following the consummation of the transactions contemplated by the Separation Agreement, including any amounts required to be paid (including any payroll or other taxes), and the costs of providing benefits, under any applicable severance, separation, redundancy, termination or similar plan, program, practice, contract, agreement, law or regulation (such benefits to include any medical or other welfare benefits, outplacement benefits, accrued vacation, and taxes).

ARTICLE VI

GENERAL AND ADMINISTRATIVE

6.1 Sharing of Participant Information. IAC and Expedia shall share, and IAC shall cause each other IAC Entity to share, and Expedia shall cause each other Expedia Entity to share with each other and their respective agents and vendors (without obtaining releases) all participant information necessary for the efficient and accurate administration of each of the Expedia Benefit Plans and the IAC Benefit Plans. IAC and Expedia and their respective authorized agents shall, subject to applicable laws, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other Party, to the extent necessary for such administration. Until the Close of the Effective Date, all participant information shall be provided in the manner and medium applicable to Participating Companies in IAC Benefit Plans generally, and thereafter until December 31, 2006,

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all participant information shall be provided in a manner and medium as may be mutually agreed to by IAC and Expedia.

6.2 Reasonable Efforts/Cooperation. Each of the Parties hereto will use its commercially reasonable efforts to promptly take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by this Agreement. Each of the Parties hereto shall cooperate fully on any issue relating to the transactions contemplated by this Agreement for which the other Party seeks a determination letter or private letter ruling from the Internal Revenue Service, an advisory opinion from the Department of Labor or any other filing (including, but not limited to, securities filings (remedial or otherwise)), consent or approval with respect to or by a governmental agency or authority in any jurisdiction in the United States or abroad.

6.3 No Third-Party Beneficiaries. This Agreement is solely for the benefit of the Parties and is not intended to confer upon any other Persons any rights or remedies hereunder. Except as expressly provided in this Agreement, nothing in this Agreement shall preclude IAC or any other IAC Entity, at any time after the Close of the Effective Date, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any IAC Benefit Plan, any benefit under any Benefit Plan or any trust, insurance policy or funding vehicle related to any IAC Benefit Plan. Except as expressly provided in this Agreement, nothing in this Agreement shall preclude Expedia or any other Expedia Entity, at any time after the Close of the Effective Date, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any Expedia Benefit Plan, any benefit under any Benefit Plan or any trust, insurance policy or funding vehicle related to any Expedia Benefit Plan.

6.4 Audit Rights With Respect to Information Provided.

(a) Each of IAC and Expedia, and their duly authorized representatives, shall have the right to conduct reasonable audits with respect to all information required to be provided to it by the other Party under this Agreement. The Party conducting the audit (the “Auditing Party”) may adopt reasonable procedures and guidelines for conducting audits and the selection of audit representatives under this Section 6.4. The Auditing Party shall have the right to make copies of any records at its expense, subject to any restrictions imposed by applicable laws and to any confidentiality provisions set forth in the Separation Agreement, which are incorporated by reference herein. The Party being audited shall provide the Auditing Party’s representatives with reasonable access during normal business hours to its operations, computer systems and paper and electronic files, and provide workspace to its representatives. After any audit is completed, the Party being audited shall have the right to review a draft of the audit findings and to comment on those findings in writing within thirty business days after receiving such draft.

(b) The Auditing Party’s audit rights under this Section 6.4 shall include the right to audit, or participate in an audit facilitated by the Party being audited, of any Subsidiaries and Affiliates of the Party being audited and to require the other Party to request any benefit providers and third parties with whom the Party being audited has a relationship, or agents of such Party, to agree to such an audit to the extent any such Persons are affected by or addressed

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in this Agreement (collectively, the “Non-parties”). The Party being audited shall, upon written request from the Auditing Party, provide an individual (at the Auditing Party’s expense) to supervise any audit of a Non-party. The Auditing Party shall be responsible for supplying, at the Auditing Party’s expense, additional personnel sufficient to complete the audit in a reasonably timely manner. The responsibility of the Party being audited shall be limited to providing, at the Auditing Party’s expense, a single individual at each audited site for purposes of facilitating the audit.

6.5 Fiduciary Matters. It is acknowledged that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good faith determination that to do so would violate such a fiduciary duty or standard. Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.

6.6 Consent of Third Parties. If any provision of this Agreement is dependent on the consent of any third party (such as a vendor) and such consent is withheld, the Parties hereto shall use commercially reasonable efforts to implement the applicable provisions of this Agreement to the full extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, the Parties hereto shall negotiate in good faith to implement the provision in a mutually satisfactory manner. The phrase “commercially reasonable efforts” as used herein shall not be construed to require any Party to incur any non-routine or unreasonable expense or Liability or to waive any right.

ARTICLE VII

MISCELLANEOUS

7.1 Effect If Effective Time Does Not Occur. If the Separation Agreement is terminated prior to the Effective Date, then this Agreement shall terminate and all actions and events that are, under this Agreement, to be taken or occur effective immediately prior to or as of the Close of the Effective Date, or Immediately after the Effective Date, or otherwise in connection with the Separation Transactions, shall not be taken or occur except to the extent specifically agreed by IAC and Expedia.

7.2 Relationship of Parties. Nothing in this Agreement shall be deemed or construed by the Parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the Parties, it being understood and agreed that no provision contained herein, and no act of the Parties, shall be deemed to create any relationship between the Parties other than the relationship set forth herein.

7.3 Affiliates. Each of IAC and Expedia shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by another IAC Entity or an Expedia Entity, respectively.

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7.4 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed given to a Party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses and facsimile numbers and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number or person as a Party may designate by notice to the other Parties):

(a) if to IAC:

IAC/InterActiveCorp

152 West 57th Street

New York, NY 10019

Attention: General Counsel

Facsimile No.: (212) 632-9642

with copies to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, NY 10019

Attention: Michael S. Katzke, Esq.

Facsimile No.: (212) 403-2345

(b) if to Expedia:

Expedia, Inc.

3150 139th Ave SE

Bellevue, WA 98005

Attention: General Counsel

Fax: (425) 679-7251

7.5 Incorporation of Separation Agreement Provisions. The following provisions of the Separation Agreement are hereby incorporated herein by reference, and unless otherwise expressly specified herein, such provisions shall apply as if fully set forth herein mutatis mutandis (references in this Section 7.5 to an “Article” or “Section” shall mean Articles or Sections of the Separation Agreement, and references in the material incorporated herein by reference shall be references to the Separation Agreement): Article VII (relating to Survival and Indemnification); Article XI (relating to Further Assurances); Article IX (relating to Exchange of Information; Confidentiality); Article X (relating to Dispute Resolution); Article XIII (relating to Sole Discretion of IAC; Termination); Article XIV (relating to Miscellaneous).

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IN WITNESS WHEREOF, the Parties have caused this Employee Matters Agreement to be duly executed as of the day and year first above written.

IAC/INTERACTIVECORP
By:	/s/ GREGORY R. BLATT
	Name: Gregory R. Blatt
	Title:   Executive Vice President
EXPEDIA, INC.
By:	/s/ KEENAN M. CONDER
	Name: Keenan M. Conder
	Title:   Senior Vice President

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EX-10.12

Exhibit 10.12

TRANSITION SERVICES AGREEMENT

by and between

IAC/INTERACTIVECORP

and

EXPEDIA, INC.

DATED AS OF August 9, 2005

TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT, dated as of August 9, 2005 (this “Services Agreement”), is entered into by and between IAC/InterActiveCorp, a Delaware corporation (“IAC”), and Expedia, Inc., a Delaware corporation and wholly owned Subsidiary of IAC (“Expedia”). Capitalized terms used herein but not defined herein shall have the meaning set for the in that certain Separation Agreement, dated as of the date hereof, by and between IAC and Expedia (the “Separation Agreement”).

WHEREAS, the Board of Directors of IAC has determined it is appropriate and desirable to separate IAC and Expedia into two publicly-traded companies by separating IAC’s principal travel and travel-related businesses, and related assets and liabilities, and contributing them to Expedia and effecting a reclassification of the capital stock of IAC;

WHEREAS, IAC and Expedia expect to enter into the Separation Agreement on the date hereof, which sets forth, among other things, the assets, liabilities, rights and obligations of each of the Parties for purposes of effecting the separation of IAC and Expedia; and

WHEREAS, in connection therewith, (a) Expedia desires to procure certain services from IAC, and IAC is willing to provide such services to Expedia, during a transition period commencing on the Effective Date, on the terms and conditions set forth in this Services Agreement; and (b) IAC desires to procure certain services from Expedia, and Expedia is willing to provide such services to IAC, during a transition period commencing on the Effective Date, on the terms and conditions set forth in this Services Agreement.

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

ARTICLE I

Definitions

1.01. All terms used herein and not defined herein shall have the meanings assigned to them in the Separation Agreement.

ARTICLE II

Agreement To Provide and Accept Services

2.01. Provision of Services.

(a) On the terms and subject to the conditions contained herein, IAC shall provide, or shall cause its Subsidiaries and Affiliates and their respective employees designated by IAC (such designated Subsidiaries, Affiliates and employees, together with IAC, being herein collectively referred to as the “IAC Service Providers”) to provide, to Expedia the services (“IAC Services”) listed on the attached Schedules (the “Schedules”) as being performed by the IAC. Subject to Section 3.01, any decisions as to which of the IAC Service Providers (including the decisions to use third parties) shall provide the IAC Services shall be made by IAC in its sole

discretion, except to the extent specified in the applicable Schedule. Each IAC Service shall be provided in exchange for the consideration set forth with respect to such IAC Service on the applicable Schedule or as the Parties may otherwise agree in writing. Each IAC Service shall be provided and accepted in accordance with the terms, limitations and conditions set forth herein and on the applicable Schedule.

(b) On the terms and subject to the conditions contained herein, Expedia shall provide, or shall cause its Subsidiaries and Affiliates and their respective employees designated by it (such designated Subsidiaries, Affiliates and employees, together with Expedia, being herein collectively referred to as the “Expedia Service Providers” and together with the IAC Service Providers, the “Service Providers”) to provide, to IAC the services (“Expedia Services” and together with the IAC Services, the “Services”) listed on the attached Schedules as being performed by Expedia. Subject to Section 3.01, any decisions as to which of the Expedia Service Providers (including the decisions to use third parties) shall provide the Expedia Services shall be made by Expedia in its sole discretion, except to the extent specified in the applicable Schedule. Each Expedia Service shall be provided in exchange for the consideration set forth with respect to such Service on the applicable Schedule or as the Parties may otherwise agree in writing. Each Expedia Service shall be provided and accepted in accordance with the terms, limitations and conditions set forth herein and on the applicable Schedule.

(c) As used in this Services Agreement, the term “Receiving Party” shall mean the Party receiving Services.

2.02. Books and Records; Availability of Information. Each Party shall create and maintain accurate books in connection with the provision of the Services performed by it and, upon reasonable notice from the other Party, shall make available for inspection and copy by such other Party’s agents such records during reasonable business hours. Each Party shall make available on a timely basis to the Service Providers all information and materials reasonably requested by such Service Providers to enable them to provide the Services. Each Party shall provide to the Service Providers reasonable access to such Party’s premises to the extent necessary for the purpose of providing the Services.

ARTICLE III

Services; Payment; Independent Contractors

3.01. Services To Be Provided. (a) Unless otherwise agreed by the Parties (including to the extent specified in the applicable Schedule), (i) the Service Providers shall be required to perform the Services only in a manner, scope, nature and quality as provided by or within IAC that is similar in all material respects to the manner in which such Services were performed immediately prior to the Effective Date, and (ii) the Services shall be used for substantially the same purposes and in substantially the same manner (including as to volume, amount, level or frequency, as applicable) as the Services have been used immediately prior to the Effective Date; provided, however, that the applicable Schedule shall control the scope of the Service to be performed (to the extent provided therein), unless otherwise agreed in writing. Each Party and the Service Providers shall act under this Services Agreement solely as an independent contractor and not as an agent or employee of any other Party or any of such Party’s Affiliates.

(b) The provision of Services by Service Providers shall be subject to Article V hereof.

(c) Each Party agrees to use its reasonable efforts to reduce or eliminate its dependency on the Services as soon as is reasonably practicable; provided that a breach of this Section 3.01(c) shall not affect a Service Provider’s obligation to provide any Service through the term applicable to such Service.

3.02. The Parties will use good-faith efforts to reasonably cooperate with each other in all matters relating to the provision and receipt of Services. Such cooperation shall include obtaining all consents, licenses or approvals necessary to permit each Party to perform its obligations hereunder; provided, however, under no circumstances shall any Service Provider be required to make any payments to any third party in respect of any such consents, licenses or approvals nor shall any Service Provider be required to make any alternative arrangements in the event that any such consents, licenses or approvals are not obtained.

3.03. Additional Services.

(a) From time to time during the term, each of IAC and Expedia may request the other Party (i) to provide additional (including as to volume, amount, level or frequency, as applicable) or different services which the other Party is not expressly obligated to provide under this Agreement if such services are of the type and scope provided within IAC during fiscal year 2005 or (ii) expand the scope of any Service (such additional or expanded services, the “Additional Services”). The Party receiving such request shall consider such request in good faith and shall use commercially reasonable efforts to provide such Additional Service; provided, no Party shall be obligated to provide any Additional Services if it does not, in its reasonable judgment, have adequate resources to provide such Additional Services or if the provision of such Additional Services would interfere with the operation of its business. The Party receiving the request for Additional Services shall notify the requesting Party within fifteen (15) days as to whether it will or will not provide the Additional Services.

(b) If a Party agrees to provide Additional Services pursuant to Section 3.03(a), then a representative of each party shall in good faith negotiate the terms of a supplemental Schedule to this Agreement which will describe in detail the service, project scope, term, price and payment terms to be charged for the Additional Service. Once agreed to in writing, the supplemental Schedule shall be deemed part of this Agreement as of such date and the Additional Services shall be deemed “Services” provided hereunder, in each case subject to the terms and conditions of this Agreement.

3.04. Payments.

(a) Statements will be delivered to the Receiving Party within fifteen days after the end of each month by the Service Providers designated by each Party for Services provided to the Receiving Party during the preceding month, and each such statement shall set forth a brief description of such Services, the amounts charged therefor, and, except as the Parties may agree, such amounts shall be due and payable by the Receiving Party within 30 days after the date of such statement. Statements not paid within such 30-day period shall be subject

to late charges, calculated at an interest rate per annum equal to the Prime Rate plus 2% (or the maximum legal rate, whichever is lower), and calculated for the actual number of days elapsed, accrued from the date on which such payment was due up to the date of the actual receipt of payment. Payments shall be made by wire transfer to an account designated in writing from time to time by Service Provider.

3.05. Disclaimer of Warranty. EXCEPT AS EXPRESSLY SET FORTH IN THIS SERVICES AGREEMENT, THE SERVICES TO BE PURCHASED UNDER THIS SERVICES AGREEMENT ARE FURNISHED AS IS, WHERE IS, WITH ALL FAULTS AND WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. In the event that the provision of any Service for the account of a Receiving Party by a Service Provider conflicts with such Service Provider’s provision of such Service for its own account, priority for the provision of such Service shall be allocated in a equitable manner on an aggregate basis, and in a manner consistent with the Receiving Party’s level of use of such Service during fiscal year 2005 up to the Effective Date (or as described in the applicable Schedule).

3.06. Taxes. In the event that any Tax is properly chargeable on the provision of the Services as indicated on the applicable Schedule, the Receiving Party shall be responsible for and shall pay the amount of any such Tax in addition to and at the same time as the Service fees. All Service fees and other consideration will be paid free and clear of and without withholding or deduction for or on account of any Tax, except as may be required by law.

3.07. Use of Services. The Receiving Party shall not, and shall cause its Affiliates not to, resell any Services to any person whatsoever or permit the use of the Services by any person other than in connection with the conduct of the Receiving Party’s operations as conducted immediately prior to the Effective Date.

ARTICLE IV

Term of Services

4.01. The provision of Services shall commence on the Effective Date and shall terminate no later than 18 months after the date hereof or as of the date indicated for each such Service on the applicable Schedule; provided, however, that subject to the applicable Schedule, any Service may be cancelled or reduced in amount or any portion thereof by the Receiving Party upon 90 days’ written notice thereof (or such other notice period if one is set forth for such Service on the applicable Schedule) subject to the requirement that the Receiving Party pay to the Service Provider the actual out-of-pocket costs incurred by the Service Provider, as well as the actual incremental internal costs incurred by the Service Providers, in each case directly resulting from such cancellation (including employee severance and other termination costs), which out-of-pocket and internal costs shall be set forth in a written statement provided by the Service Provider to the Receiving Party; provided, further, that such costs shall not exceed amounts payable hereunder in respect of the applicable Service for the 90 days prior to such termination. The forgoing notwithstanding and subject to Section 7.02, (1) a Service Provider may immediately terminate any individual Service provided to a Receiving Party in the event

that the Receiving Party fails to make payments for such Service under Section 3.02 and has not cured such failure within 30 days of written notice of such failure from the Service Provider, and (2) upon 90 days’ written notice, the Service Provider may terminate any Service provided to the Receiving Party at such time as the Service Provider no longer provides the same Service to itself for its own account.

4.02. In the event a Receiving Party requests an extension of the term of provision of Services, such request shall be considered in good faith by the Service Provider. Any terms, conditions or costs or fees to be paid by the Receiving Party for Services provided during an extended term will be on mutually acceptable terms. For the avoidance of doubt, under no circumstances shall a Service Provider be required to extend the term of provision of any Service if (i) the Service Provider does not, in its reasonable judgment, have adequate resources to continue providing such Services, (ii) the extension of the term would interfere with the operation of the Service Provider’s business or (iii) the extension would require capital expenditure on the part of the Service Provider or otherwise require the Service Provider to renew or extend any Contract with any third party.

ARTICLE V

Force Majeure

5.01. The Service Providers shall not be liable for any expense, loss or damage whatsoever arising out of any interruption of Service or delay or failure to perform under this Services Agreement that is due to acts of God, acts of a public enemy, acts of terrorism, acts of a nation or any state, territory, province or other political division thereof, changes in applicable law, fires, floods, epidemics, riots, theft, quarantine restrictions, freight embargoes or other similar causes beyond the reasonable control of the Service Providers. In any such event, the Service Providers’ obligations hereunder shall be postponed for such time as its performance is suspended or delayed on account thereof. Each Service Provider will promptly notify the recipient of the Service, either orally or in writing, upon learning of the occurrence of such event of force majeure. Upon the cessation of the force majeure event, such Service Provider will use commercially reasonable efforts to resume, or to cause any other relevant Service Provider to resume, its performance with the least practicable delay (provided that, at the election of the applicable Receiving Party, the applicable term for such suspended Services shall be extended by the length of the force majeure event).

ARTICLE VI

Liabilities

6.01. Consequential and Other Damages. Except as otherwise provided in the Separation Agreement, none of the Service Providers shall be liable to the Receiving Party with respect to this Services Agreement, whether in contract, tort (including negligence and strict liability) or otherwise, for any special, indirect, incidental or consequential damages whatsoever (except, in each case, to the extent any such amount is paid to third parties by a Receiving Party or its Affiliates) which in any way arise out of, relate to or are a consequence of, the performance

or nonperformance by it hereunder or the provision of, or failure to provide, any Service hereunder, including with respect to loss of profits, business interruptions or claims of customers.

6.02. Limitation of Liability. Subject to Section 6.03 hereof, the liability of any Service Provider with respect to this Services Agreement or any act or failure to act in connection herewith (including, but not limited to, the performance or breach hereof), or from the sale, delivery, provision or use of any Service provided under or covered by this Services Agreement, whether in contract, tort (including negligence and strict liability) or otherwise, shall be limited to actions or omissions resulting from intentional breach of this Services Agreement or gross negligence, and, in any event, such liability shall not exceed the fees previously paid to such Service Provider under this Services Agreement.

6.03. Obligation To Re-perform. In the event of any breach of this Services Agreement by any Service Provider resulting from any error or defect in the performance of any Service (which breach Service Provider can reasonably be expected to cure by re-performance in a commercially reasonable manner), the Service Provider shall use its reasonable commercial efforts to correct in all material respects such error, defect or breach or reperform in all material respects such Service at the request of the Receiving Party.

6.04. Indemnity. Except as otherwise provided in this Service Agreement (including the limitation of liability provisions in this Article VI), each Party shall indemnify, defend and hold harmless the other Party from and against any Liability arising out of the intentional breach or gross negligence of the indemnifying Party or its Affiliates, employees, agents, or contractors (including with respect to the performance or nonperformance of any Service hereunder).

ARTICLE VII

Termination

7.01. Termination. Notwithstanding anything herein to the contrary, this Services Agreement shall terminate, and the obligation of the Service Providers to provide or cause to be provided any Service shall cease, on the earliest to occur of (i) the last date indicated for the termination of any Service on the Schedules, as the case may be, (ii) the date on which the provision of all Services has been terminated or canceled pursuant to Article IV hereof, or (iii) the date on which this Services Agreement is terminated by Expedia or IAC, as the case may be, in accordance with the terms of Section 7.02 hereof; provided that, in each case, no such termination shall relieve any Party of any liability for any breach of any provision of this Services Agreement prior to the date of such termination.

7.02. Breach of Services Agreement; Dispute Resolution. Subject to Article VI hereof, and without limiting a Party’s obligations under Section 4.01, if a Party shall cause or suffer to exist any material breach of any of its obligations under this Services Agreement, including any failure to make a payment within 30 days after receipt of the statement describing the Services provided for pursuant to Section 3.04 with respect to more than one Service provided hereunder, and that Party does not cure such default in all material respects within 30 days after receiving written notice thereof from the non-breaching Party, the non-breaching

Party shall have the right to terminate this Services Agreement immediately thereafter. In the event a dispute arises between the Parties regarding the terms of this Services Agreement, such dispute shall be governed by Article X of the Separation Agreement.

7.03. Sums Due. In addition to any other payments required pursuant to this Service Agreement, in the event of a termination of this Services Agreement, the Service Providers shall be entitled to the immediate payment of, and the Receiving Party shall within three Business Days, pay to the Service Providers, all accrued amounts for Services, Taxes and other amounts due under this Services Agreement as of the date of termination.

7.04. Effect of Termination. Section 2.02 hereof and Articles V, VI, VII and VIII hereof shall survive any termination of this Services Agreement.

ARTICLE VIII

Miscellaneous

8.01. Incorporation of Separation Agreement Provisions. The following provisions of the Separation Agreement are hereby incorporated herein by reference, and unless otherwise expressly specified herein, such provisions shall apply as if fully set forth herein (references in this Section 8.01 to an “Article” or “Section” shall mean Articles or Sections of the Separation Agreement, and references in the material incorporated herein by reference shall be references to the Separation Agreement): Sections 14.02, 14.03, 14.06, 14.07, 14.09, 14.10, 14.11, 14.14 and 14.15.

8.02. Ownership of Work Product. Subject to the terms of the Separation Agreement, (i) each Service Provider acknowledges and agrees that it will acquire no right, title or interest (including any license rights or rights of use) to any work product resulting from the provision of Services hereunder for the Receiving Party’s exclusive use and such work product shall remain the exclusive property of the Receiving Party and (ii) each Receiving Party acknowledges and agrees that it will acquire no right, title or interest (other than a non-exclusive, worldwide right of use) to any work product resulting from the provision of Services hereunder that is not for the Receiving Party’s exclusive use and such work product shall remain the exclusive property, subject to license, of the Service Provider.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives.

IAC/INTERACTIVECORP
By:	/s/    GREGORY R. BLATT
	Name: Gregory R. Blatt
	Title:   Executive Vice President

EXPEDIA, INC.
By:	/s/    KEENAN M. CONDER
	Name: Keenan M. Conder
	Title:   Senior Vice President

EX-31.1

Exhibit 31.1

Certification

I, Barry Diller, Chairman and Senior Executive of Expedia, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Expedia, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation;

c. disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 11, 2005

/s/ BARRY DILLER

Barry Diller

Chairman and Senior Executive

EX-31.2

Exhibit 31.2

Certification

I, Dara Khosrowshahi, Chief Executive Officer of Expedia, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Expedia, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation;

c. disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 11, 2005

/s/ DARA KHOSROWSHAHI

Dara Khosrowshahi

Chief Executive Officer

EX-31.3

Exhibit 31.3

Certification

I, Mark S. Gunning, Chief Financial Officer of Expedia, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Expedia, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

1) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

2) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation;

3) disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 11, 2005

/s/ MARK S. GUNNING

Mark S. Gunning

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Barry Diller, Chairman and Senior Executive of Expedia, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:

1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2005 (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 11, 2005

/s/ BARRY DILLER

Barry Diller

Chairman and Senior Executive

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Dara Khosrowshahi, Chief Executive Officer of Expedia, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:

1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2005 (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 11, 2005

/s/ DARA KHOSROWSHAHI

Dara Khosrowshahi

Chief Executive Officer

EX-32.3

Exhibit 32.3

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark S. Gunning, Chief Financial Officer of Expedia, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:

1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2005 (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 11, 2005

/s/ MARK S. GUNNING

Mark S. Gunning

Chief Financial Officer