Document:

Exhibit 10.2

 

EXECUTION COPY

 

AMENDED AND RESTATED

STOCKHOLDERS AGREEMENT

 

between

 

LIBERTY MEDIA CORPORATION

 

and

 

BARRY DILLER

 

Dated as of August 9, 2005

 

 

IAC/INTERACTIVECORP

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I                                     DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
  Certain Defined Terms

  	
   

  
	
  Section 1.2.

  	
  Other Defined Terms

  	
   

  
	
  Section 1.3.

  	
  Other Definitional Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II                                 RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III                             CORPORATE GOVERNANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
  Voting on Certain Matters

  	
   

  
	
  Section 3.2.

  	
  Restrictions on Other Agreements

  	
   

  
	
  Section 3.3.

  	
  Irrevocable Proxy of Liberty

  	
   

  
	
  Section 3.4.

  	
  Cooperation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV                             TRANSFER OF COMMON SHARES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
  Restrictions on Transfer by Liberty and
  Diller

  	
   

  
	
  Section 4.2.

  	
  Tag-Along for Diller and Liberty for
  Transfers by the Other

  	
   

  
	
  Section 4.3.

  	
  Right of First Refusal Between Liberty and
  Diller

  	
   

  
	
  Section 4.4.

  	
  Transfers of Class B Shares

  	
   

  
	
  Section 4.5.

  	
  Transferees

  	
   

  
	
  Section 4.6.

  	
  Notice of Transfer

  	
   

  
	
  Section 4.7.

  	
  Compliance with Transfer Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V                                 BDTV ENTITY ARRANGEMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
  Management

  	
   

  
	
  Section 5.2.

  	
  Changes to BDTV Structures

  	
   

  
	
  Section 5.3.

  	
  Transfers of BDTV Interests

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI                             MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
  Conflicting Agreements

  	
   

  
	
  Section 6.2.

  	
  Duration of Agreement

  	
   

  
	
  Section 6.3.

  	
  Further Assurances

  	
   

  
	
  Section 6.4.

  	
  Amendment and Waiver

  	
   

  
	
  Section 6.5.

  	
  Severability

  	
   

  
	
  Section 6.6.

  	
  Effective Time

  	
   

  
	
  Section 6.7.

  	
  Entire Agreement

  	
   

  
	
  Section 6.8.

  	
  Successors and Assigns

  	
   

  
	
  Section 6.9.

  	
  Counterparts

  	
   

  
	
  Section 6.10.

  	
  Liabilities Under Federal Securities Laws

  	
   

  
	
  Section 6.11.

  	
  Remedies

  	
   

  

 

 

	
  Section 6.12.

  	
  Notices

  	
   

  
	
  Section 6.13.

  	
  Adjustment of Shares Numbers

  	
   

  
	
  Section 6.14.

  	
  Governing Law; Consent to Jurisdiction

  	
   

  
	
  Section 6.15.

  	
  Interpretation

  	
   

  

 

ii

 

AMENDED AND
RESTATED 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.

 

WHEREAS, the
parties hereto have agreed that Liberty and Diller shall enter into this
Agreement in order to amend and restate in its entirety the respective rights
and obligations of the parties set forth in the Amended and Restated Stockholders
Agreement, dated as of December 16, 2001 (the “2001 Stockholders Agreement”);
and

 

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
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, Expedia, Inc. 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 Amended and Restated
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.

 

“CEO” means the Chief Executive Officer of the
Company.

 

“CEO Termination Date” means the later of (i) such
time as Diller no longer serves as CEO 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

 

2

 

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).

 

“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 IAC/InterActiveCorp, 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 Equity) 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 Equity) 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

 

3

 

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 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 Amended and
Restated 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.

 

4

 

“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.

 

“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.

 

5

 

“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 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)

  	
   

  
	
  Expedia 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)

  	
   

  

 

6

 

	
  Term

  	
   

  	
  Section

  	
   

  
	
  Liberty Termination Date

  	
   

  	
  Section 6.2(a)

  	
   

  
	
  Litigation

  	
   

  	
  Section 6.14

  	
   

  
	
  Non-Transferring Stockholder

  	
   

  	
  Section 4.4(a)

  	
   

  
	
  Settlement Threshold

  	
   

  	
  Section 4.3(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

 

7

 

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).

 

(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).

 

8

 

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
CEO 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 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 CEO for any reason other than Cause, Diller shall be deemed to
continue to be CEO 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 CEO 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 CEO).

 

(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

 

9

 

execute all written consents in lieu of meetings, as applicable, to
effectuate the provisions of this Article III.

 

ARTICLE IV

 

TRANSFER OF COMMON SHARES

 

Section 4.1. 
Restrictions on Transfer
by Liberty and Diller.
 (a)  Until the CEO 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 

 

10

 

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 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

 

11

 

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.

 

(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 CEO other than any Transfer made in connection with Diller
ceasing to be CEO.  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

 

12

 

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 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.

 

13

 

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 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, Expedia, Inc. (but only for so long
as Diller is Chairman of the Board of Directors of Expedia, Inc.) Liberty
or Diller in any significant matter for the three years prior to the date of
such

 

14

 

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 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

 

15

 

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).

 

(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

 

16

 

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 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

 

17

 

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 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 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

 

18

 

case, will require the unanimous approval of the holders of all voting
and non-voting equity interests in such BDTV Entity.

 

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 separately shares of capital stock
of Expedia, Inc. (“Expedia Shares”) to be held by it immediately
following the effective time of the Company’s spin off of Expedia, Inc.,
to sell such Expedia Shares, directly or indirectly, separately from a sale of
the Common Shares (but only as permitted by the agreements between Liberty and
Diller with respect to the Expedia Shares), to reorganize the assets of any or
all of the BDTV Entities to reflect ownership of the Expedia Shares, including,
without limitation, to transfer Common Shares and/or Expedia 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 Expedia 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.

 

19

 

At such time
as (i) the CEO Termination Date has occurred or Diller becomes Disabled or
(ii) the Diller Stockholder Group ceases to own its Eligible Stockholder
Amount of 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 CEO Termination Date has occurred or
Diller has become Disabled (the “Diller Termination
Date”).

 

In addition,
at such time as the CEO 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

 

20

 

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, 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 immediately
following the effective time of the Company’s spin off of Expedia, Inc.

 

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 1997 Stockholders Agreement, and (d) as
provided in Section 5.2 hereof, the agreements relating to Expedia, Inc.,
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.  Effective upon the effective time of this
Agreement, the 2001 Stockholders Agreement shall terminate and shall be
superseded by this Agreement.

 

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

 

21

 

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 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

  

 

22

 

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 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”.

 

23

 

IN WITNESS
WHEREOF, the parties hereto have executed this Amended and Restated Stockholders
Agreement as of the date first written above.

 

	
   

  	
  LIBERTY MEDIA CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ AUTHORIZED REPRESENTATIVE

  	
   

  
	
   

  	
   

  	
     Name:

  
	
   

  	
   

  	
     Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ BARRY DILLER

  	
   

  
	
   

  	
   

  	
  BARRY DILLER

  

 

 

[SIGNATURE
PAGE TO AMENDED AND RESTATED STOCKHOLDERS AGREEMENT]Exhibit 10.3

 

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.

 

2

 

“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.

 

3

 

“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

 

4

 

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).

 

5

 

“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.

 

6

 

“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.

 

7

 

“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.

 

8

 

“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.

 

9

 

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

 

10

 

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

 

11

 

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

 

12

 

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

 

13

 

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.

 

14

 

(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

 

15

 

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

 

16

 

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

 

17

 

(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

 

18

 

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

 

19

 

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

 

20

 

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

 

21

 

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.

 

22

 

(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

 

23

 

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

 

24

 

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

 

25

 

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.

 

26

 

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

  
					

 

27

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