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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS
PART II—INFORMATION NOT REQUIRED IN PROSPECTUS

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As filed with the Securities and Exchange Commission on September 22, 2016

REGISTRATION NO. 333-210377


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Amendment No. 4

to

Form S-1

on

Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



LIBERTY EXPEDIA HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)



Delaware
(State or other jurisdiction
of incorporation or organization)
  6719
(Primary Standard Industrial
Classification code number)
  81-1838757
(I.R.S. Employer
Identification No.)

12300 Liberty Boulevard, Englewood, Colorado 80112, (720) 875-5300
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)

Richard N. Baer
Liberty Expedia Holdings, Inc.
12300 Liberty Boulevard
Englewood, Colorado 80112
(720) 875-5300

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copy to:

Renee L. Wilm
Baker Botts L.L.P.
30 Rockefeller Plaza
New York, New York 10112
(212) 408-2503



Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective and all other conditions to the proposed transactions described herein have been satisfied or waived, as applicable.

         If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:     o

         If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

         If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering.     o

         Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o   Accelerated filer  o   Non-accelerated filer  ý
(Do not check if a
smaller reporting company)
  Smaller reporting company  o

         If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

         Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  o

         Exchange Act Rule 14d-1(d) (Cross Border Third-Party Tender Offer)  o

          The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

   


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Information in this proxy statement/prospectus is not complete and may be changed. We may not sell the securities offered by this proxy statement/prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction where an offer or solicitation is not permitted.

Subject to completion, dated September 22, 2016

LOGO

LIBERTY INTERACTIVE CORPORATION
12300 Liberty Boulevard
Englewood, Colorado 80112
(720) 875-5300

Dear Stockholder:   [    ], 2016

           You are cordially invited to a special meeting of stockholders of Liberty Interactive Corporation ( Liberty Interactive ) Series A Liberty Ventures common stock, par value $0.01 per share ( LVNTA ), and Series B Liberty Ventures common stock, par value $0.01 per share ( LVNTB) , to be held at [    ] a.m. local time, on [    ], 2016, at [    ], telephone [    ]. A notice of the special meeting, a proxy card, and a proxy statement/prospectus containing important information about the matters to be acted on at the special meeting accompany this letter.

           Pursuant to the requirements of Liberty Interactive's restated certificate of incorporation, at the special meeting, holders of Liberty Ventures common stock will be asked to consider and vote on a proposal (the redemption proposal ), to approve the redemption by Liberty Interactive of a portion of the outstanding shares of Liberty Ventures common stock for all of the outstanding shares of common stock of a wholly owned subsidiary of Liberty Interactive, Liberty Expedia Holdings, Inc. ( Splitco ), on a pro rata basis, amounting to a redemption on a per share basis as follows: (i) 0.4 of each outstanding share of LVNTA for 0.4 of a share of a new Series A common stock, par value $0.01 per share ( LEXEA ), of Splitco and (ii) 0.4 of each outstanding share of LVNTB for 0.4 of a share of a new Series B common stock, par value $0.01 per share ( LEXEB ), of Splitco. Cash will be paid in lieu of any fractional shares (after taking into account all of the shares of Liberty Ventures common stock and Splitco common stock owned by each holder thereof, as applicable). Splitco would hold Liberty Interactive's 15.8% ownership interest and 52.4% voting interest in Expedia, Inc. ( Expedia ) (as of June 30, 2016), Liberty Interactive's wholly owned subsidiary Bodybuilding.com, LLC ( Bodybuilding ), anticipated corporate level cash and cash equivalents of $50 million and $350 million in indebtedness. All of the businesses, assets and liabilities currently attributed to Liberty Interactive's Ventures Group that are not held by Splitco would remain with Liberty Interactive and continue to be attributed to the Ventures Group. We refer to the redemption and the resulting separation of Splitco from Liberty Interactive pursuant to the redemption as the Split-Off . The Split-Off is conditioned on the receipt of the requisite stockholder approval of the redemption proposal, among other things. Holders of Liberty Ventures common stock will also be asked to consider and vote on a proposal (the adjournment proposal , and together with the redemption proposal, the Split-Off Proposals ) to authorize the adjournment of the special meeting by Liberty Interactive to permit further solicitation of proxies, if necessary or appropriate, if sufficient votes are not represented at the special meeting to approve the redemption proposal. In connection with the Split-Off, no changes will be made to the assets and liabilities that are currently attributed to Liberty Interactive's other tracking stock group, the QVC Group. The holders of QVC Group common stock are not being asked to vote on the Split-Off Proposals.

           If all conditions to the Split-Off are satisfied or, where permissible, waived, on the date designated by the board (the redemption date ), Liberty Interactive would redeem a portion of the outstanding shares of Liberty Ventures common stock for all of the outstanding shares of Splitco common stock, on a pro rata basis, amounting to a redemption on a per share basis as follows: (i) 0.4 of each outstanding share of LVNTA for 0.4 of a share of LEXEA, and (ii) 0.4 of each outstanding share of LVNTB for 0.4 of a share of LEXEB. After the redemption, 0.6 of each share of LVNTA and 0.6 of each share of LVNTB will remain outstanding as Liberty Ventures common stock. In each case, cash will be paid in lieu of any fractional shares (after taking into account all of the shares of Liberty Ventures common stock and Splitco common stock owned of record by each holder thereof, as applicable). Holders of Liberty Interactive's Series A QVC Group common stock ( QVCA ) or Series B QVC Group common stock ( QVCB ) will not receive any shares of Splitco common stock in the Split-Off.

           As of [    ], 2016, there were [    ] outstanding shares of LVNTA and [    ] outstanding shares of LVNTB (exclusive of stock options or restricted stock units). Based on these outstanding share numbers, Splitco expects to issue [    ] shares of LEXEA and [    ] shares of LEXEB, and Liberty Interactive expects up to [    ] shares of LVNTA and [    ] shares of LVNTB to remain outstanding, immediately following the Split-Off. Splitco expects to list its LEXEA and LEXEB on the Nasdaq Global Select Market under the symbols "LEXEA" and "LEXEB", respectively.

           The Liberty Interactive board has unanimously approved each of the Split-Off Proposals and unanimously recommends that the holders of Liberty Ventures common stock vote " FOR " each of the Split-Off Proposals.

           Your vote is important, regardless of the number of shares you own. Whether or not you plan to attend the special meeting, please vote as soon as possible to make sure that your shares are represented.

           Thank you for your cooperation and continued support and interest in Liberty Interactive.

  Very truly yours,

 

Gregory B. Maffei

  President and Chief Executive Officer

            Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Split-Off Proposals or the securities being offered in the Split-Off or has passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

            Investing in the securities of Splitco involves risks. See "Risk Factors" beginning on page 17.

           The accompanying proxy statement/prospectus is dated [    ], 2016 and is first being mailed on or about [    ], 2016 to the stockholders of record as of 5:00 p.m., New York City time, on [    ], 2016.


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HOW YOU CAN FIND ADDITIONAL INFORMATION

        Liberty Interactive is subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended ( Exchange Act ) and, in accordance with the Exchange Act, Liberty Interactive files periodic reports and other information with the Securities and Exchange Commission ( SEC ). In addition, this proxy statement/prospectus incorporates important business and financial information about Liberty Interactive from other documents that are not included in or delivered with this proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain copies of documents filed by Liberty Interactive with the SEC, including the documents incorporated by reference in this proxy statement/prospectus, through the SEC website at http://www.sec.gov or by contacting Liberty Interactive by writing or telephoning the office of Investor Relations:

Liberty Interactive Corporation
12300 Liberty Boulevard
Englewood, Colorado 80112
Telephone: (877) 772-1518

        If you would like to request any documents from Liberty Interactive please do so by five business days before the date of the special meeting in order to receive them before the special meeting. If you request any documents, they will be mailed to you by first class mail, or another equally prompt means, within one business day after your request is received.

        See "Additional Information—Where You Can Find More Information" beginning on page 172.

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LIBERTY INTERACTIVE CORPORATION

12300 Liberty Boulevard
Englewood, Colorado 80112
(720) 875-5300



NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
to be Held on [                        ], 2016

         NOTICE IS HEREBY GIVEN of the special meeting of stockholders of Liberty Interactive Corporation ( Liberty Interactive ) to be held at [        ] a.m. local time, on [        ], 2016, at [        ], telephone [        ], to consider and vote on the following proposals (the Split-Off Proposals ):

        We refer to the redemption and the resulting separation of Splitco from Liberty Interactive pursuant to the redemption as the Split-Off .

        Liberty Interactive encourages you to read the accompanying proxy statement/prospectus in its entirety before voting. Splitco's charter (the Splitco charter ) is included as an exhibit to the registration statement of which this proxy statement/prospectus forms a part.

        Holders of record of LVNTA and LVNTB, in each case, outstanding as of 5:00 p.m., New York City time, on [                        ], 2016, the record date for the special meeting, will be entitled to notice of the special meeting and to vote on the Split-Off Proposals at the special meeting or any adjournment or postponement thereof. Holders of record of Liberty Interactive's Series A QVC Group common stock, par value $0.01 per share, and Series B QVC Group common stock, par value $0.01 per share, are not being asked to vote on the Split-Off Proposals, and thus will not be entitled to notice of the special meeting or to vote at the special meeting or any adjournment or postponement thereof. Liberty Interactive's restated certificate of incorporation does not require the approval of the holders of the QVC Group common stock to complete the Split-Off.

        Each of the Split-Off Proposals described above requires the approval of a majority of the aggregate voting power of the shares of Liberty Ventures common stock, outstanding on the record date, that are present in person or by proxy at the special meeting, voting together as a separate class.

        The Liberty Interactive board of directors has carefully considered and unanimously approved each of the Split-Off Proposals and recommends that the holders of Liberty Ventures common stock vote " FOR " each of the Split-Off Proposals.

        Votes may be cast in person or by proxy at the special meeting or prior to the meeting by telephone or through the Internet.

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        A list of stockholders entitled to vote at the special meeting will be available at Liberty Interactive's offices in Englewood, Colorado for review by its stockholders for any purpose germane to the special meeting, for at least 10 days prior to the special meeting.

        YOUR VOTE IS IMPORTANT.     Liberty Interactive urges you to vote as soon as possible by telephone, Internet or mail.

    By order of the board of directors,

 

 

Pamela L. Coe
Senior Vice President, Secretary and Deputy General Counsel

Englewood, Colorado
[                        ], 2016

Please execute and return the enclosed proxy promptly, whether or not you intend to be present at the special meeting.

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TABLE OF CONTENTS

QUESTIONS AND ANSWERS

    1  

SUMMARY

    4  

Splitco

    4  

Liberty Interactive's Corporate Structure

    5  

The Split-Off Proposals

    6  

Comparative Per Share Market Price and Dividend Information

    15  

RISK FACTORS

    17  

Factors Relating to Splitco's Corporate History and Structure

    17  

Factors Relating to Splitco's Businesses

    19  

Factors Relating to the Split-Off and the Split-Off Proposals

    48  

Factors Relating to Splitco's Common Stock and the Securities Market

    52  

CAUTIONARY STATEMENTS CONCERNING FORWARD LOOKING STATEMENTS

    56  

THE SPECIAL MEETING

    57  

Time, Place and Date

    57  

Purpose

    57  

Quorum

    57  

Who May Vote

    57  

Votes Required

    57  

Votes You Have

    58  

Shares Outstanding

    58  

Number of Holders

    58  

Voting Procedures for Record Holders

    58  

Voting Procedures for Shares Held in Street Name

    59  

Revoking a Proxy

    59  

Solicitation of Proxies

    59  

THE SPLIT-OFF AND REDEMPTION PROPOSAL

    60  

General

    60  

Background for the Split-Off

    60  

Reasons for the Split-Off

    61  

Vote and Recommendation

    62  

The Redemption; Redemption Ratio

    63  

Effect of the Redemption

    63  

Interests of Certain Persons

    64  

Conditions to the Split-Off

    65  

Effect of the Split-Off on Outstanding Ventures Group Incentive Awards

    66  

U.S. Federal Income Tax Consequences of the Split-Off

    67  

Conduct of the Business of the Ventures Group if the Split-Off is Not Completed

    70  

Amount and Source of Funds and Financing of the Transaction; Expenses

    71  

Accounting Treatment

    71  

No Appraisal Rights

    71  

Results of the Split-Off

    71  

Listing and Trading of our Common Stock

    71  

Stock Transfer Agent and Registrar

    72  

ADJOURNMENT PROPOSAL

    73  

Vote and Recommendation

    73  

CAPITALIZATION

    74  

SELECTED FINANCIAL DATA

    75  

Selected Historical Financial Data of Splitco

    75  

Selected Historical Financial Data of Liberty Interactive

    77  

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Selected Unaudited Historical Attributed Financial Data of the Ventures Group

    80  

UNAUDITED COMPARATIVE PER SHARE INFORMATION

    81  

DESCRIPTION OF SPLITCO'S BUSINESS

    82  

Overview

    82  

Expedia, Inc. 

    82  

Bodybuilding

    90  

Regulatory Matters

    94  

Competition

    96  

Properties

    97  

Employees

    98  

Legal Proceedings

    98  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    99  

Overview

    99  

Strategies and Challenges

    100  

Results of Operations—Combined—June 30, 2016 and 2015

    101  

Results of Operations—Years Ended December 31, 2015, 2014 and 2013

    105  

Liquidity and Capital Resources

    111  

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

    112  

Critical Accounting Estimates and Policies

    112  

Quantitative and Qualitative Disclosures about Market Risk

    115  

DESCRIPTION OF CERTAIN INDEBTEDNESS

    116  

MANAGEMENT OF SPLITCO

    118  

Directors

    118  

Executive Officers

    121  

Directors and Executive Officers

    123  

Director Independence

    123  

Board Composition

    123  

Committees of the Board

    123  

Compensation Committee Interlocks and Insider Participation

    124  

Pro Forma Security Ownership of Certain Beneficial Owners

    124  

Pro Forma Security Ownership of Management

    125  

EXECUTIVE COMPENSATION

    128  

Executive Officers of Splitco

    128  

Directors

    128  

Equity Incentive Plans

    129  

Equity Compensation Plan Information

    129  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    131  

Security Ownership of Certain Beneficial Owners

    131  

Security Ownership of Management

    132  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    136  

Relationships Among Splitco, the Malone Group, Diller and Expedia

    136  

Relationships Between Splitco and Liberty Interactive and/or Liberty Media

    151  

DESCRIPTION OF SPLITCO CAPITAL STOCK AND COMPARISON OF STOCKHOLDER RIGHTS

    157  

Other Provisions of Splitco's Charter and Bylaws

    163  

Section 203 of the Delaware General Corporation Law

    170  

Transfer Agent and Registrar

    170  

ADDITIONAL INFORMATION

    171  

Legal Matters

    171  

Experts

    171  

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Independent Registered Public Accounting Firm

    171  

Stockholder Proposals

    171  

Where You Can Find More Information

    172  

INDEX TO FINANCIAL STATEMENTS

    F-1  

        This proxy statement/prospectus describes the businesses and assets of Splitco as though they were its businesses and assets for all historical periods described. However, Splitco is a newly formed entity that will not have conducted any operations prior to the Split-Off and instead will have had such businesses and assets transferred to it prior to the Split-Off. References in this proxy statement/prospectus to the historical assets, liabilities, businesses or activities of Splitco's businesses or the businesses in which it has interests are intended to refer to the historical assets, liabilities, businesses or activities as they were conducted or held by Liberty Interactive prior to the Split-Off. Upon completion of the Split-Off, Splitco will be an independent publicly traded company, and Liberty Interactive will have no continuing stock ownership in Splitco. The historical combined financial information of Splitco as part of Liberty Interactive contained in this proxy statement/prospectus is not necessarily indicative of Splitco's future financial position, future results of operations or future cash flows, nor does it reflect what the financial position, results of operations or cash flows of Splitco would have been had it been operated as a stand-alone company during the periods presented.

        You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than the date set forth on the cover page of this proxy statement/prospectus. Changes to the information contained herein may occur after that date and we do not undertake any obligation to update the information unless required to do so by law.

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QUESTIONS AND ANSWERS

         The questions and answers below highlight only selected information about the special meeting and how to vote your shares. You should read carefully the entire proxy statement/prospectus, including the additional documents incorporated by reference herein, to fully understand the Split-Off Proposals.

Q:    When and where is the special meeting?

A:
The special meeting will be held at [    ] a.m. local time, on [                ], 2016 at [            ], telephone  [                ].

Q:    What is the record date for the special meeting?

A:
The record date for the special meeting is 5:00 p.m., New York City time, on [                ], 2016.

Q:    What is the purpose of the special meeting?

A:
To consider and vote on the Split-Off Proposals.

Q:    What stockholder vote is required to approve the Split-Off Proposals?

A:
Each of the Split-Off Proposals requires the approval of a majority of the aggregate voting power of the shares of Liberty Ventures common stock, outstanding on the record date, that are present in person or by proxy at the special meeting, voting together as a separate class.

Q:    How many votes do stockholders have?

A:
At the special meeting:

holders of Series A Liberty Ventures common stock ( LVNTA ) have one vote per share; and

holders of Series B Liberty Ventures common stock ( LVNTB ) have ten votes per share.

Q:    What if the redemption proposal is not approved?

A:
The redemption proposal must be approved for the Split-Off to be completed. If the redemption proposal is not approved, no shares of Liberty Ventures common stock will be redeemed for shares of Splitco common stock.

Q:    Why is Liberty Interactive seeking approval of the adjournment proposal?

A:
To ensure that a sufficient number of shares of Liberty Ventures common stock are present and entitled to vote at the special meeting on the redemption proposal, Liberty Interactive may need to adjourn the special meeting to solicit additional proxies. If no adjournment were effected and the redemption proposal did not receive the requisite approval at the special meeting because there were insufficient votes represented at the special meeting, Liberty Interactive would need to call a new special meeting at which it may again seek the approval of holders of Liberty Ventures

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Q:    What do stockholders need to do to vote on the Split-Off Proposals?

A:
After carefully reading and considering the information contained in this proxy statement/prospectus, you should complete, sign, date and return the enclosed proxy card by mail, or vote by the telephone or through the Internet, in each case as soon as possible so that your shares are represented and voted at the special meeting. Instructions for voting by telephone or through the Internet are printed on the proxy voting instructions attached to the proxy card. In order to vote through the Internet, have your proxy card available so you can input the required information from the card, and log into the Internet website address shown on the proxy card. When you log on to the Internet website address, you will receive instructions on how to vote your shares. The telephone and Internet voting procedures are designed to authenticate votes cast by use of a personal identification number, which will be provided to each voting stockholder separately. Alternatively, you may also vote in person at the special meeting.

Q:    If shares are held in "street name" by a broker, bank or other nominee, will the broker, bank or other nominee vote those shares for the beneficial owner on the Split-Off Proposals?

A:
If you hold your shares in street name and do not provide voting instructions to your broker, bank or other nominee, your shares will not be voted on the Split-Off Proposals. Accordingly, your broker, bank or other nominee will vote your shares held in "street name" on the Split-Off Proposals only if you provide instructions on how to vote. If a broker, who is a record holder of shares, indicates on a form of proxy that the broker does not have discretionary authority to vote those shares on the Split-Off Proposals, or if those shares are voted in circumstances in which proxy authority is defective or has been withheld with respect to the Split-Off Proposals, these shares are considered " broker non-votes " with respect to the Split-Off Proposals.

Q:    What if I do not vote on the Split-Off Proposals?

A:
If you do not submit a proxy or you do not vote in person at the special meeting, your shares will not be counted as present and entitled to vote for purposes of determining a quorum, but your failure to vote will have no effect on determining whether either of the Split-Off Proposals is approved (if a quorum is present). If you submit a proxy but do not indicate how you want to vote, your proxy will be counted as a vote " FOR " each of the Split-Off Proposals.

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Q:    What if a quorum is not present at the special meeting?

A:
In order to conduct the business of the special meeting, a quorum must be present. This means that at least a majority of the aggregate voting power represented by the shares of Liberty Ventures common stock outstanding on the record date must be represented at the special meeting either in person or by proxy. Because applicable New York Stock Exchange and Nasdaq Stock Market LLC rules do not permit discretionary voting by brokers with respect to the proposals to be acted upon at the special meeting, broker non-votes will not count as present and entitled to vote for purposes of determining a quorum. This may make it more difficult to establish a quorum at the special meeting. If a quorum is not present at the special meeting, we expect the chairman of the meeting to adjourn the meeting in accordance with the terms of Liberty Interactive's bylaws for the purpose of soliciting additional proxies.

Q:    What if I respond and indicate that I am abstaining from voting?

A:
If you submit a proxy in which you indicate that you are abstaining from voting, your shares will count as present for purposes of determining a quorum, but your proxy will have the same effect as a vote " AGAINST " each of the Split-Off Proposals.

Q:    May stockholders change their vote after returning a proxy card or voting by telephone or over the Internet?

A:
Yes. You may change your vote by voting in person at the special meeting or, before the start of the special meeting, by delivering a signed proxy revocation or a new signed proxy with a later date to Liberty Interactive Corporation, c/o Computershare Trust Company, N.A., P.O. Box 43023, Providence, Rhode Island 02940-3023. Any proxy revocation or new proxy must be received before the start of the special meeting. In addition, you may change your vote through the Internet or by telephone (if you originally voted by the corresponding method) not later than [            ], New York City time, on [                ], 2016.

Q:    What do I do if I have additional questions?

        

A:
If you have any questions prior to the special meeting or if you would like copies of any document referred to or incorporated by reference in this document, please call Investor Relations at (877) 772-1518 or Liberty Interactive's proxy solicitor, D.F. King & Co., Inc. ( D.F. King ), at (212) 269-5550 (brokers and banks only) or (800) 820-2415 (toll free).

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SUMMARY

         The following summary includes information contained elsewhere in this proxy statement/prospectus. This summary does not contain all of the important information that you should consider before voting on the Split-Off Proposals. You should read the entire proxy statement/prospectus, including the documents incorporated by reference herein, carefully.

Splitco

        Splitco is currently a wholly owned subsidiary of Liberty Interactive. Upon completion of the Split-Off, Splitco's principal businesses, assets and liabilities will consist of Liberty Interactive's 15.8% ownership interest and 52.4% voting interest in Expedia (as of June 30, 2016), Liberty Interactive's wholly owned subsidiary Bodybuilding, anticipated corporate level cash and cash equivalents of $50 million and $350 million in indebtedness. Upon completion of the Split-Off, Splitco will be an independent publicly traded company and Liberty Interactive will not retain any ownership interest in it. In connection with the Split-Off, Splitco expects to enter into certain agreements, including the reorganization agreement and the tax sharing agreement, with Liberty Interactive and/or Liberty Media Corporation ( Liberty Media ) (or certain of their subsidiaries), pursuant to which, among other things, Splitco and Liberty Interactive will indemnify each other against certain liabilities that may arise from their respective businesses. See "Certain Relationships and Related Party Transactions—Relationships Between Splitco and Liberty Interactive and/or Liberty Media." Currently, Liberty Interactive's ownership of shares of Expedia's common stock, par value $0.0001 per share ( EXPE ), and Expedia's Class B common stock, par value $0.0001 per share (the Expedia class B common stock and together with EXPE, the Expedia Common Shares ) is governed by a Governance Agreement with Barry Diller ( Diller ) and Expedia and a Stockholders Agreement with Diller, each of which will be assigned to Splitco in connection with the Split-Off. In connection with the Split-Off, Splitco has entered into a Transaction Agreement (the Transaction Agreement ) with Liberty Interactive, John C. Malone ( Malone ), Leslie Malone ( Mrs. Malone and together with Malone, the Malone Group ) and Diller, as well as a letter agreement with Expedia, and, prior to the completion of the Split-Off, Splitco expects to enter into certain agreements with Diller and Expedia regarding the governance of Splitco and its interest in Expedia and Splitco expects the Malone Group to grant Diller a proxy over their Splitco shares for up to eighteen months, each of which will become effective immediately following the completion of the Split-Off (the proxy arrangements ). See "Certain Relationships and Related Party Transactions—Relationships Among Splitco, the Malone Group, Diller and Expedia—Proxy Arrangements." As a result of these arrangements, upon completion of the Split-Off, Expedia will become a consolidated operating subsidiary of Splitco.

        Expedia is an online travel company, empowering business and leisure travelers with the tools and information they need to efficiently research, plan, book and experience travel. Expedia seeks to grow its business through a dynamic portfolio of travel brands, including its majority-owned subsidiaries that feature a broad supply portfolio—including over 307,000 properties and over 1.2 million live vacation rental listings in 200 countries, 475 airlines, packages, rental cars and cruises, as well as destination services and activities. Travel suppliers distribute and market products via Expedia's traditional desktop offerings, as well as through alternative distribution channels including media and social media, Expedia's private label business and its call centers in order to reach its extensive, global audience.

        Upon completion of the Split-Off, Bodybuilding will be Splitco's wholly owned subsidiary. Bodybuilding is an internet retailer of sports and fitness products, dietary supplements and a digital media publisher featuring health-and-fitness content, workout programs, video trainers, recipes, health advice and motivational stories. The online and mobile application e-retail model combines detailed product information and real-time user reviews for more than 15,000 dietary supplements and accessories to help consumers achieve their health, fitness and appearance goals. Beyond the e-retail

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model, Bodybuilding's website provides the technology and tools needed for personal training, nutrition, supplement expertise and support groups.

        References to "our business" in this proxy statement/prospectus refer to Splitco's businesses following the Split-Off, consisting of the businesses of Expedia, Bodybuilding and their respective subsidiaries and affiliates.

        Splitco is a Delaware corporation that was incorporated on March 15, 2016. Splitco's principal executive offices are located at 12300 Liberty Blvd., Englewood, Colorado 80112 and its main telephone number is (720) 875-5300.

Liberty Interactive's Corporate Structure

        The QVC Group common stock and Liberty Ventures common stock are intended to track and reflect the economic performance of the QVC Group and the Ventures Group, respectively. Tracking stock is a type of common stock that the issuing company intends to reflect or "track" the economic performance of a particular business or "group," rather than the economic performance of the company as a whole. While the QVC Group and the Ventures Group have separate collections of businesses, assets and liabilities attributed to them, no group is a separate legal entity and therefore cannot own assets, issue securities or enter into legally binding agreements. Holders of tracking stocks have no direct claim to the group's stock or assets and are not represented by separate boards of directors. Instead, holders of tracking stock are stockholders of the parent corporation, with a single board of directors and subject to all of the risks and liabilities of the parent corporation. The Ventures Group is comprised primarily of Liberty Interactive's operating subsidiaries Bodybuilding and Evite, Inc. ( Evite ) and Liberty Interactive's interests in Expedia, FTD Companies, Inc. ( FTD ), Interval Leisure Group, Inc. ( Interval ), LendingTree, Inc. ( LendingTree ) and Liberty Broadband Corporation ( Liberty Broadband ), along with investments in Time Warner Inc. ( TWX ) and Charter Communications, Inc. ( Charter ), cash, certain liabilities related to exchangeable debentures of Liberty Interactive LLC ( Liberty LLC ) and certain deferred tax liabilities. The QVC Group is primarily focused on Liberty Interactive's merchandise-focused televised-shopping programs, Internet and mobile application businesses and has attributed to it Liberty Interactive's wholly owned subsidiaries QVC, Inc. ( QVC ) and zulily, llc ( zulily ), and Liberty Interactive's interest in HSN, Inc. ( HSN ), along with cash and certain liabilities that reside with QVC and the other attributed entities, as well as outstanding senior notes and one series of Liberty LLC's exchangeable debentures and certain deferred tax liabilities. In July 2016, Liberty Interactive completed the spin-off of Commerce Hub, Inc. ( CommerceHub ), which included its former Commerce Technologies, Inc. business and which was attributed to the Ventures Group immediately prior to such spin-off. Upon completion of the Split-Off, Liberty Interactive's entire ownership interest in Expedia and Bodybuilding will no longer be attributed to the Ventures Group.

        Pursuant to an irrevocable proxy (the Diller Proxy ) granted to Diller by Liberty Interactive pursuant to the Stockholders Agreement, Diller generally controls the vote of the Expedia Common Shares beneficially owned by Liberty Interactive. In connection with the completion of the Split-Off, Diller will cease to directly control a majority voting interest in Expedia by irrevocably assigning the Diller Proxy to Splitco for a period of time up to 18 months following completion of the Split-Off, subject to certain termination events as further described in this proxy statement/prospectus. By virtue of (i) certain governance rights with respect to Splitco as set forth in the form of Splitco's restated charter and amendments to the Stockholders Agreement and Transaction Agreement and (ii) the grant by the Malone Group of an irrevocable proxy to vote, subject to certain exceptions, shares of Splitco's common stock beneficially owned by the Malone Group upon the completion of the Split-Off or thereafter for a period of time ending upon termination of Diller's assignment of the Diller Proxy, Diller will be able to elect the directors of Splitco who will determine how Splitco will exercise certain rights and vote the Expedia Common Shares owned by Splitco in the election of Expedia directors. See "Certain Relationships and Related Party Transactions—Relationships Among Splitco, the Malone

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Group, Diller and Expedia—Proxy Arrangements." Following the assignment of the Diller Proxy to Splitco, based on publicly available information, other than the Expedia Common Shares that are subject to the terms of the Diller Proxy and the Diller Assignment of which Diller and Splitco will continue to share beneficial ownership, Diller is expected to beneficially own approximately 5,777,586 shares of EXPE (based upon Expedia's Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year ended December 31, 2015, filed with the SEC on April 29, 2016), representing approximately 2.2% of the outstanding voting power of the Expedia Common Shares. Following the completion of the Split-Off, the voting of the Expedia Common Shares beneficially owned by Diller which Diller will be entitled to vote will be subject to certain terms contained in an amendment to the Stockholders Agreement and the voting of the Expedia Common Shares beneficially owned by Splitco, which Splitco will be entitled to vote and as to which Splitco and Diller will continue to share beneficial ownership, will be subject to certain terms contained in Splitco's restated charter, its bylaws, an amendment to the Stockholders Agreement, the agreement assigning the Diller Proxy to Splitco and the Transaction Agreement. Decisions relating to the voting of Expedia Common Shares in the election of the board of directors of Expedia will be made in accordance with resolutions adopted by the board of directors of Splitco pursuant to the terms of the restated charter. See "Description of Splitco Capital Stock and Comparison of Stockholder Rights—Other Provisions of Splitco's Charter and Bylaws—Board of Directors." With respect to other matters to be presented for approval at any meeting of Expedia stockholders, subject to certain exceptions including matters relating to certain fundamental corporate actions as further described in this proxy statement/prospectus, Diller and Splitco will use their reasonable best efforts to agree on a common position for such matters and, if they so agree, will each vote all Expedia Common Shares which they have the power to vote as so agreed. If Diller and Splitco are unable to agree as to how their respective Expedia Common Shares will be voted on such matter, each may vote their Expedia Common Shares which it has the power to vote in their sole discretion. See "Certain Relationships and Related Party Transactions—Relationships Among Splitco, the Malone Group, Diller and Expedia—Proxy Arrangements."

The Split-Off Proposals

        Liberty Interactive currently has two tracking stocks: the QVC Group common stock and the Liberty Ventures common stock, which track the QVC Group and the Ventures Group, respectively. A tracking stock is a type of common stock that the issuing company intends to reflect or "track" the economic performance of a particular business or "group," rather than the economic performance of the company as a whole.

        While the QVC Group and the Ventures Group have separate collections of businesses, assets and liabilities attributed to them, no group is a separate legal entity and therefore cannot own assets, issue securities or enter into legally binding agreements. Holders of tracking stock have no direct claim to the group's stock or assets and are not represented by separate boards of directors. Instead, holders of tracking stock are stockholders of the parent corporation, with a single board of directors and subject to all of the risks and liabilities of the parent corporations.

        In accordance with the terms of Liberty Interactive's charter, the Liberty Interactive board has determined to seek the approval of the holders of Liberty Ventures common stock to redeem a portion of the outstanding shares of Series A Liberty Ventures common stock and Series B Liberty Ventures common stock, for all of the outstanding shares of common stock of Splitco, a wholly owned subsidiary of Liberty Interactive. The redemption is summarized under "The Split-Off and Redemption Proposal" below. In connection with the Split-Off, no changes will be made to the assets and liabilities that are currently attributed to the QVC Group.

        Pursuant to the redemption proposal, holders of Liberty Ventures common stock are being asked to approve the redemption by Liberty Interactive of a portion of the outstanding shares of Liberty Ventures common stock for all of the outstanding shares of Splitco common stock, on a pro rata basis,

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amounting to a redemption on a per share basis as follows: (i) 0.4 of each outstanding share of Series A Liberty Ventures common stock and (ii) 0.4 of each outstanding share of Series B Liberty Ventures common stock for shares (or a fraction thereof) of the corresponding series of Splitco common stock in accordance with paragraph (f)(i) of Section A.2. of Liberty Interactive's charter. As described herein, cash will be paid in lieu of fractional shares.

        Pursuant to the adjournment proposal, holders of Liberty Ventures common stock are also being asked to approve the authorization of the adjournment of the special meeting by Liberty Interactive to permit further solicitation of proxies, if necessary or appropriate, if sufficient votes are not represented at the special meeting to approve the redemption proposal.

        The following is a brief summary of the terms of the Split-Off Proposals and the Split-Off. Please see "The Split-Off and Redemption Proposal" and "Adjournment Proposal" for a more detailed description of the matters described below.

Q:
What is the Split-Off?

A:
If all conditions to the Split-Off are satisfied or, where permissible, waived, Liberty Interactive will redeem 40% of the shares of each of the Series A Liberty Ventures common stock and the Series B Liberty Ventures common stock outstanding on the redemption date for 100% of the outstanding shares of the corresponding series of Splitco common stock. Shares of QVCA and QVCB will not be redeemed and holders of Liberty Interactive's Series A QVC Group common stock and Series B QVC Group common stock will not receive shares of Splitco common stock in the Split-Off. Upon completion of the Split-Off, we will be a separate company from Liberty Interactive, and Liberty Interactive will not have any ownership interest in us.


From and after the redemption effective time (as defined below), holders of Liberty Ventures common stock will no longer have any rights with respect to their shares of Liberty Ventures common stock that are redeemed , except for the right to receive the applicable series and whole number of shares of Splitco common stock to which such holders are entitled, and any payments of cash in lieu of fractional shares. Holders of Liberty Ventures common stock will, however, retain all rights of ownership with respect to the whole number of shares of Liberty Ventures common stock that are not redeemed. The number of shares of QVC Group common stock held by stockholders of Liberty Interactive will not change as a result of the Split-Off.

Q:
Can Liberty Interactive decide not to complete the Split-Off?

A:
Yes. Liberty Interactive's board of directors has reserved the right, in its sole discretion, to amend, modify, delay or abandon the Split-Off and related transactions at any time prior to the redemption date. In addition, the Split-Off is subject to the satisfaction of certain conditions, some of which may be waived by the Liberty Interactive board of directors in its sole discretion. See "The Split-Off and Redemption Proposal—Conditions to the Split-Off." In the event the Liberty Interactive board of directors amends, modifies, delays or abandons the Split-Off, Liberty Interactive intends to promptly issue a press release and file a Current Report on Form 8-K to report such event.

Q:
What will I receive in the Split-Off?

A:
On the redemption date, (i) 0.4 of each outstanding share of LVNTA will be redeemed for 0.4 of a share of LEXEA, and 0.6 of each share of LVNTA will remain outstanding as Liberty Ventures common stock, and (ii) 0.4 of each outstanding share of LVNTB will be redeemed for 0.4 of a share of LEXEB, and 0.6 of each share of LVNTB will remain outstanding as Liberty Ventures common stock, subject, in each case, to the payment of cash in lieu of any fractional shares. By way of example, a holder of 100 shares of LVNTA would receive 40 shares of LEXEA in

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    redemption for 40 shares of LVNTA and would retain the remaining 60 shares of LVNTA, while a holder of 100 shares of LVNTB would receive 40 shares of LEXEB in redemption for 40 shares of LVNTB and would retain the remaining 60 shares of LVNTB. These redemption ratios were determined by the board of directors of Liberty Interactive, in accordance with the Liberty Interactive restated charter, based on their good faith determination of the percentage of the fair value of Liberty Ventures that is to be represented by Splitco.


Any holder which would otherwise receive a fraction of a share of Splitco common stock or retain a fraction of a share of Liberty Ventures common stock will instead receive cash in lieu of any fractional shares.

Q:
Is the completion of the Split-Off subject to any conditions?

A:
The completion of the Split-Off and related transactions are subject to the satisfaction (as determined by the Liberty Interactive board of directors in its sole discretion) of the following conditions, certain of which may be waived by the Liberty Interactive board of directors in its sole discretion:

the receipt of the requisite stockholder approval of the redemption proposal at the special meeting;

Liberty Interactive's receipt of the opinion of Skadden, Arps, Slate, Meagher & Flom LLP ( Skadden Arps ) to the effect that the Split-Off will qualify as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Internal Revenue Code of 1986, as amended (the Code ), and that, for U.S. federal income tax purposes, (i) no gain or loss will be recognized by Liberty Interactive upon the distribution of Splitco's common stock in the Split-Off, and (ii) no gain or loss will be recognized by, and no amount will be included in the income of, holders of Liberty Ventures common stock upon the receipt of shares of Splitco's common stock in the Split-Off (except with respect to the receipt of cash in lieu of fractional shares);

the effectiveness under the Securities Act of 1933, as amended (the Securities Act ), of the Registration Statement on Form S-4, of which this proxy statement/prospectus forms a part, and the effectiveness of the registration of the Splitco common stock under Section 12(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act );

the execution of the proxy arrangements;

the approval of the Nasdaq Stock Market LLC ( Nasdaq ) for the listing of the Splitco common stock;

the entry into a margin loan arrangement by Splitco and one or more of its subsidiaries in a principal amount of $400 million; and

the receipt of any material regulatory or contractual consents or approvals that the Liberty Interactive board determines to obtain.

The conditions set forth in the first, second, third, fourth and fifth bullet points are non-waivable. The Liberty Interactive board of directors may, however, waive the conditions set forth in the sixth and seventh bullet points. In the event the Liberty Interactive board of directors waives a material condition to the Split-Off, Liberty Interactive intends to promptly issue a press release and file a Current Report on Form 8-K to report such event. See "The Split-Off and Redemption Proposal—Conditions to the Split-Off."

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Q:
What is being distributed in the Split-Off?

A:
Approximately [            ] shares of Splitco's Series A common stock and [            ] shares of its Series B common stock will be distributed in the Split-Off, based on the number of shares of LVNTA and LVNTB outstanding on [            ], 2016. The shares of Splitco common stock to be distributed by Liberty Interactive will constitute all the issued and outstanding shares of Splitco common stock immediately after the redemption. The exact number of shares to be distributed in the Split-Off will not be known until the redemption effective time.

Q:
When will the Split-Off be effective?

A:
Liberty Interactive intends to effect the Split-Off on the redemption date, which will be determined by the board of directors of Liberty Interactive following the satisfaction or, where permissible, waiver of the conditions to the Split-Off (other than those which by their terms can only be satisfied concurrently with the completion of the Split-Off). Liberty Interactive will issue a press release announcing the redemption date once established. The redemption will be as soon as practicable following the satisfaction or, where permissible, waiver, of all conditions to the Split-Off on a date to be designated by the board of directors of Liberty Interactive (the redemption effective time ). At such time, each holder of Liberty Ventures common stock will cease to own a portion of its Liberty Ventures shares but will receive shares of Splitco.

Q:
What transactions are occurring in connection with the Split-Off other than those involved in the internal restructuring?

A:
In connection with the Split-Off, a bankruptcy remote wholly owned subsidiary of Splitco ( SplitSPV ) intends to enter into a margin loan arrangement in a principal amount of $400 million (the Margin Loan ) (of which $350 million will be borrowed at the time of the Split-Off), secured by all of the shares of EXPE owned by Splitco, which will be held through SplitSPV and which will be guaranteed solely by Splitco, from one or more third parties (the proceeds from such borrowing, the Loan Proceeds ). As part of the internal restructuring, approximately $300 million of the Loan Proceeds will be distributed from Splitco to Liberty Interactive, and Liberty Interactive, within 12 months following the completion of such distribution, will use all of the distributed portion of the Loan Proceeds received from Splitco to repurchase shares of Liberty Interactive's common stock under its share repurchase program pursuant to a special authorization by Liberty Interactive's board of directors. Liberty Interactive's board of directors will determine, in its sole discretion, the number and series of any shares of Liberty Interactive's common stock which it will repurchase under its share repurchase program, which may include shares of QVC Group common stock and/or Liberty Ventures common stock. See "Description of Certain Indebtedness."

Costs associated with the proposed transactions will be paid by Liberty Interactive and are expected to be approximately $[            ] million. Please see "The Split-Off and Redemption Proposal—Amount and Source of Funds and Financing of the Transaction; Expenses."

Q:
What will the relationship be between Splitco and Liberty Interactive after the Split-Off?

A:
Upon completion of the Split-Off, Splitco and Liberty Interactive will operate independently, and neither will have any ownership interest in the other. In connection with the Split-Off, however, Splitco and Liberty Interactive and/or Liberty Media (or certain of their subsidiaries) are entering into certain agreements in order to govern the ongoing relationships between Splitco and Liberty Interactive after the Split-Off and to provide for an orderly transition. Such agreements will include (i) a reorganization agreement with Liberty Interactive to provide for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Split-Off, certain conditions to the Split-Off and provisions governing the relationship between

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    Splitco and Liberty Interactive with respect to and resulting from the Split-Off; (ii) a tax sharing agreement with Liberty Interactive that governs Liberty Interactive's and Splitco's respective rights, responsibilities and obligations with respect to taxes and tax benefits, the filing of tax returns, the control of audits and other tax matters; (iii) a services agreement with Liberty Media, pursuant to which, for three years following the Split-Off, Liberty Media will provide Splitco with specified services, including insurance administration and risk management services, other services typically performed by Liberty Media's legal, investor relations, tax, accounting, and internal audit departments, and such other services as Liberty Media may obtain from its officers, employees and consultants in the management of its own operations that Splitco may from time to time request or require; (iv) a facilities sharing agreement with a wholly owned subsidiary of Liberty Media, pursuant to which, for three years following the Split-Off, Splitco will share office facilities with Liberty Interactive and Liberty Media; and (v) aircraft time sharing agreements with Liberty Media or one of its wholly owned subsidiaries, pursuant to which Liberty Media or its subsidiary will lease the aircraft to Splitco and provide a fully qualified flight crew for all operations on a periodic, non-exclusive time sharing basis. See "Certain Relationships and Related Party Transactions—Relationships Between Splitco and Liberty Interactive and/or Liberty Media."

Q:
Does the Split-Off create any conflicts of interest for Splitco's board of directors or management?

A:
Those persons who are on the board of directors or management teams of both Liberty Interactive and Splitco may be presented with business opportunities that may be suitable for both companies. Splitco' charter acknowledges that it may have overlapping directors and officers with other entities that compete with its businesses and that Splitco may engage in material business transactions with such entities. Splitco has renounced its rights to certain business opportunities and its charter provides that no director or officer of Splitco will breach their fiduciary duty and therefore be liable to Splitco or its stockholders by reason of the fact that any such individual directs a corporate opportunity to another person or entity (including Liberty Interactive or Liberty Media) instead of Splitco, or does not refer or communicate information regarding such corporate opportunity to Splitco, unless (x) such opportunity was expressly offered to such person solely in his or her capacity as a director or officer of Splitco or as a director or officer of any of Splitco's subsidiaries, and (y) such opportunity relates to a line of business in which Splitco or any of its subsidiaries is then directly engaged. See "Risk Factors—Our company has overlapping directors and officers with Liberty Interactive and Liberty Media, which may lead to conflicting interests," and "The Split-Off and Redemption Proposal—Interests of Certain Persons."

Q:
Which businesses, assets and liabilities currently attributed to Ventures Group will remain attributed to Ventures Group after consummation of the Split-Off?

A:
The Ventures Group is comprised of the following assets:

Bodybuilding.com, LLC   Expedia, Inc.
(NASDAQ: EXPE)
  LendingTree, Inc.
(NASDAQ: TREE)

Brit Media, Inc. (Brit + Co)

 

FTD Companies, Inc. (NASDAQ: FTD)

 

Liberty Israel Venture
Fund II, LLC

Charter Communications, Inc. (NYSE: CHTR)

 

giggle, Inc.

 

Quid, Inc.

 

 

Interval Leisure Group, Inc. (NASDAQ: IILG)

 

Time Inc.
(NYSE: TIME)

Evite, Inc.

 

Liberty Broadband Corporation (NASDAQ: LBRDK)

 

Time Warner Inc.
(NYSE: TWX)

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    The Ventures Group is also comprised of cash and cash equivalents of approximately $116 million at June 30, 2016. The Ventures Group also has attributed to it certain liabilities related to Liberty Interactive LLC's 4% Exchangeable Senior Debentures due 2029, 3.75% Exchangeable Senior Debentures due 2030, 3.5% Exchangeable Senior Debentures due 2031, 0.75% Exchangeable Senior Debentures due 2043 and 1.75% Exchangeable Senior Debentures due 2046 and certain deferred tax liabilities.

    Assuming the completion of the Split-Off, the Ventures Group will be comprised of the assets set forth above, other than Expedia and Bodybuilding, as well as certain cash and cash equivalents. The Ventures Group will also retain certain liabilities related to Liberty Interactive LLC's exchangeable debentures and certain deferred tax liabilities.

Q:
What are the reasons for the Split-Off?

A:
In 2012, Liberty Interactive recapitalized its common stock into two new tracking stock groups: the Interactive Group (which, in 2015, was renamed the QVC Group) and the Ventures Group, for the purpose of creating greater transparency for the assets and liabilities attributed to each group, among other reasons. For a description of the QVC Group and Ventures Group tracking stocks, see "The Split-Off and Redemption Proposal—Background for the Split-Off." Although the public markets have responded favorably to these two tracking stocks, Liberty Interactive believes that a meaningful trading discount continues to apply to the underlying value of the businesses and assets attributed to its Ventures Group. Although there can be no assurance, Liberty Interactive believes that the Split-Off will result in a higher aggregate trading value for Splitco common stock and the Liberty Ventures common stock as compared to the trading price of Liberty Ventures common stock in the absence of the Split-Off. Splitco stock is expected to provide greater transparency for investors with respect to its dominant business, its investment in Expedia, which should result in greater focus and attention by the investment community on this business. Moreover, the Split-Off will advance Liberty Interactive's objective of rationalizing its portfolio of assets and tracking stock groups, and is expected to allow Liberty Interactive's management to focus more exclusively on its core strategies. The Split-Off is also expected to enhance Splitco's ability to issue equity for strategic acquisitions and other business combinations by creating a more efficiently priced equity security for Splitco and to enable it and Liberty Interactive to more effectively tailor equity incentives for their respective management and employees with less dilution to public stockholders. In addition, Liberty Interactive believes that separating Splitco from Liberty Interactive's other businesses could help facilitate a potential combination of Splitco with Expedia by substantially eliminating the need for negotiations regarding the valuation of Liberty Interactive's other businesses, thereby increasing Splitco's flexibility to pursue such a transaction in the future. Liberty Interactive believes that a combination of Splitco with Expedia could be beneficial for its stockholders, on the one hand, and Expedia, on the other hand, by eliminating the overhang associated with the current dual-public company structure. No assurance can be given, however, that any investment, acquisition or other strategic opportunities will become available following the Split-Off on terms that Splitco finds favorable or at all, nor can any assurance be given that a combination of Splitco and Expedia will ever occur.

For a discussion of additional reasons, factors, costs and risks associated with the Split-Off considered by the Liberty Interactive board of directors, see "The Split-Off and Redemption Proposal—Reasons for the Split-Off."

Q:
What do I have to do to participate in the Split-Off?

A:
Liberty Interactive will deliver or make available to all holders of certificated Liberty Ventures shares, from and after the redemption date, a letter of transmittal with which to surrender the portion of their shares that are subject to redemption. These holders must surrender their stock

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    certificates together with the letter of transmittal (and any other documentation required thereby) in order to receive their Splitco shares of the applicable series and number in the Split-Off. Holders who properly surrender their certificates with a duly completed letter of transmittal following the Split-Off will receive shares in book-entry form representing the portion of their Liberty Ventures shares that were not redeemed in the Split-Off. See "Q: Will I receive certificates representing shares of Splitco common stock following the redemption?" below.

    Accounts holding shares of Liberty Ventures common stock in book-entry form will be debited as of the redemption effective time, and promptly thereafter credited with the applicable series and number of shares of Splitco common stock. Holders of Liberty Ventures shares held in book-entry form will not need to take any action to receive their Splitco shares in the Split-Off.

Q:
Will I receive certificates representing shares of Splitco common stock following the redemption?

A:
No. In the redemption, no physical certificates representing shares of Splitco common stock will be delivered to stockholders. Instead, Liberty Interactive, with the assistance of Computershare, the exchange agent, will electronically distribute shares of Splitco common stock in book-entry form to you or your bank or brokerage firm on your behalf. If you are a record holder of Liberty Ventures common stock on the redemption date, Computershare will mail you a book-entry account statement that reflects your shares of Splitco common stock. If you are a beneficial owner of Liberty Ventures common stock (but not a record holder) on the redemption date, your bank or brokerage firm will credit your account with the shares of Splitco common stock that you are entitled to receive.

Q:
How will outstanding Liberty Ventures equity awards be treated?

A:
Options to purchase shares of Liberty Ventures common stock, restricted stock units with respect to shares of Liberty Ventures common stock and restricted shares of Liberty Ventures common stock have been granted to various directors, officers and employees and consultants of Liberty Interactive and certain of its subsidiaries pursuant to the various stock incentive plans administered by the Liberty Interactive board of directors or the compensation committee thereof. As a result of the Split-Off, these options, restricted stock units and restricted shares will be split into Splitco stock awards and adjusted Liberty Ventures stock awards. See "The Split-Off and Redemption Proposal—Effect of the Split-Off on Outstanding Ventures Group Incentive Awards."

Q:
What are the terms of the Splitco common stock?

A:
Each series of Splitco common stock is identical in all respects, except that:

each LEXEA share entitles its holder to one vote per share and each LEXEB share entitles its holder to ten votes per share (other than the election or removal of Common Stock Directors prior to the Series B Director Termination Time, in which case each LEXEA share entitles its holder to one vote per share and each LEXEB share entitles its holder to two votes per share); and

each LEXEB share is convertible, at the option of the holder, into one LEXEA share. LEXEA and Series C Splitco shares are not convertible at the option of the holder.

No Series C Splitco shares will be distributed in connection with or will be outstanding immediately following the Split-Off. For information regarding these provisions, including the reasons for and effects of these provisions, see "Description of Splitco Capital Stock and Comparison of Stockholder Rights."

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Q:
How do shares of Liberty Ventures common stock compare to shares of Splitco common stock?

A:
The Liberty Ventures common stock is a tracking stock of Liberty Interactive. Accordingly, the Liberty Ventures common stock includes terms that are specific to a tracking stock and would not typically apply to a regular common stock, such as conversion at the option of the company, redemption for stock of a subsidiary and mandatory conversion, redemption or dividend provisions upon an asset disposition. None of these tracking stock-specific terms will apply to the Splitco common stock.

Please see "Description of Splitco Capital Stock and Comparison of Stockholder Rights" for more information.

Q:
What are the U.S. federal income tax consequences of the Split-Off?

A:
The Split-Off is conditioned upon the receipt by Liberty Interactive of the opinion of Skadden Arps to the effect that the Split-Off will qualify as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Code and that, for U.S. federal income tax purposes, (i) no gain or loss will be recognized by Liberty Interactive upon the distribution of Splitco common stock in the Split-Off, and (ii) no gain or loss will be recognized by, and no amount will be included in the income of, holders of Liberty Ventures common stock upon the receipt of shares of Splitco common stock in the Split-Off (except with respect to the receipt of cash in lieu of fractional shares). The receipt of the opinion, as well as certain other conditions to the Split-Off, may not be waived by the Liberty Interactive board of directors.

Please see "The Split-Off and Redemption Proposal—U.S. Federal Income Tax Consequences of the Split-Off" and "Risk Factors—Factors Relating to the Split-Off and the Split-Off Proposals—The Split-Off could result in a significant tax liability to Liberty Interactive and holders of Liberty Ventures common stock" and "—We may have a significant indemnity obligation to Liberty Interactive, which is not limited in amount or subject to any cap, if the Split-Off is treated as a taxable transaction" for more information regarding the opinion of Skadden Arps and the potential tax consequences to you of the Split-Off.

Q:
Does Splitco intend to pay cash dividends?

A:
No. Splitco currently intends to retain future earnings, if any, following the Split-Off to finance the expansion of its businesses. As a result, Splitco does not expect to pay any cash dividends in the foreseeable future. All decisions regarding the payment of dividends by Splitco will be made by its board of directors, from time to time, in accordance with applicable law.

Q:
Where will Splitco common stock trade?

A:
Currently, there is no public market for Splitco common stock. Subject to the consummation of the Split-Off, Splitco expects to list its Series A common stock and Series B common stock on the Nasdaq Global Select Market under the symbols "LEXEA" and "LEXEB," respectively.

Splitco expects that its common stock will begin trading on the first trading day following the redemption date. Splitco cannot predict the trading prices for its common stock when such trading begins.

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Q:
What costs and risks were considered by the board of directors of Liberty Interactive in determining whether to effect the Split-Off?

A:
Liberty Interactive's board considered a number of costs and risks associated with the Split-Off, including:

after the Split-Off, the Liberty Ventures common stock and Splitco common stock will have smaller market capitalizations than the current market capitalization of the Ventures Group, and their stock prices may be more volatile than the Liberty Ventures common stock trading price prior to the Split-Off. The combined market values of the Liberty Ventures common stock and Splitco common stock may be lower than the market value of the Liberty Ventures common stock prior to the Split-Off;

the risk of being unable to achieve the benefits expected from the Split-Off;

in connection with the Split-Off, SplitSPV intends to borrow up to $350 million of Loan Proceeds. As part of the internal restructuring, approximately $300 million of the Loan Proceeds will be distributed from Splitco to Liberty Interactive, and Liberty Interactive will use all of the distributed portion of the Loan Proceeds received from Splitco to repurchase shares of Liberty Interactive's common stock under its share repurchase program pursuant to a special authorization by Liberty Interactive's board of directors. These transactions will increase Splitco's leverage, potentially leading to increased stock price volatility, in addition to Splitco incurring higher interest payments to service the Margin Loan;

the loss of synergies from operating as one company;

the potential disruption to the businesses of Liberty Interactive;

the substantial costs of effecting the Split-Off, and of continued compliance with legal and other requirements applicable to two separate public reporting companies;

the potential for having to register as an investment company under the Investment Company Act of 1940 in the future, such as in the event Splitco becomes primarily engaged, directly or through one or more of its subsidiaries, in a business of investing, reinvesting, owning, holding or trading in securities and there is no exemption or grace period available to us at that time; and

the potential tax liabilities that could arise from the Split-Off.

Liberty Interactive's board of directors concluded that the potential benefits of the Split-Off outweighed its potential costs. The Liberty Interactive board of directors did not consider alternatives to the Split-Off due to the nature of the particular assets and businesses to be held by Splitco following the Split-Off, in particular the ownership interest in Expedia. Please see "The Split-Off and Redemption Proposal—Reasons for the Split-Off" for more information regarding the costs and risks associated with the Split-Off.

Q:
What will happen to the listing of Liberty Interactive common stock?

A:
The Series A and Series B Liberty Ventures common stock and Series A and Series B QVC Group common stock will continue to trade on the Nasdaq Global Select Market following the Split-Off.

Q:
Will I have appraisal rights in connection with the Split-Off?

A:
No. Holders of Liberty Ventures common stock are not entitled to appraisal rights in connection with the Split-Off.

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Q:
Who is the transfer agent and registrar for Splitco common stock?

A:
Computershare Trust Company, N.A., 250 Royall Street, Canton, MA 02021, telephone: (866) 367-6355.

Q:
Who is the exchange agent for the Split-Off?

A:
Computershare Trust Company, N.A., 250 Royall Street, Canton, MA 02021, telephone: (866) 367-6355.

Q:
What is the recommendation of the Liberty Interactive board of directors on the Split-Off Proposals?

A:
The Liberty Interactive board of directors has unanimously approved each of the Split-Off Proposals and unanimously recommends that holders of Liberty Ventures common stock vote " FOR " each of the Split-Off Proposals.

Q:
Whom can I contact for more information?

A:
If you have questions relating to the mechanics of the redemption, you should contact the exchange agent. Before the Split-Off, if you have questions relating to the Split-Off, you should contact the office of Investor Relations of Liberty Interactive, 12300 Liberty Blvd., Englewood, CO 80112, telephone: (720) 875-5408.

Pursuant to a services agreement to be entered into between Splitco and Liberty Media, Liberty Media will provide Splitco with investor relations assistance for a period following the Split-Off. Accordingly, if you have questions relating to Splitco following the Split-Off, you should contact the office of Investor Relations of Liberty Media, 12300 Liberty Blvd., Englewood, Colorado 80112, telephone: (877) 772-1518.

Comparative Per Share Market Price and Dividend Information

    Market Price

        In order to bring Liberty Interactive into compliance with a Nasdaq listing requirement regarding the minimum number of publicly held shares of the Series B Liberty Ventures common stock, on April 11, 2014, a two-for-one stock split of Series A and Series B Liberty Ventures common stock was effected by means of a dividend that was paid on April 11, 2014 of one share of Series A or Series B Liberty Ventures common stock to holders of each share of Series A or Series B Liberty Ventures common stock, respectively, held by them as of 5:00 pm, New York City time, on April 4, 2014. Accordingly, the high and low sales prices of LVNTA and LVNTB common stock have been retroactively restated in the table below. On October 3, 2014, Liberty reattributed from the Interactive Group to the Ventures Group approximately $1 billion in cash and its digital commerce companies. Subsequent to the reattribution, the Interactive Group is now referred to as the QVC Group. In connection with the reattribution, the Liberty Interactive tracking stock trading symbol "LINTA" was changed to "QVCA" and the "LINTB" trading symbol to "QVCB," effective October 7, 2014. Effective June 4, 2015, the name of the "Liberty Interactive common stock" was changed to the "QVC Group common stock." Each series of Liberty Ventures common stock trades on the Nasdaq Global Select Market. The following table sets forth the range of high and low sales prices of shares of Liberty Ventures common stock for the quarters listed below.

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  Liberty Ventures  
 
   
  Series A (LVNTA)   Series B (LVNTB)  
 
   
  High   Low   High   Low  

2014:

 

 

                         

 

First quarter

  $ 74.21   $ 55.63   $ 74.66   $ 60.65  

 

Second quarter (April 1 - April 11)

  $ 68.66   $ 56.06   $ 71.93   $ 58.02  

 

Second quarter (April 12 - June 30)(1)

  $ 73.96   $ 54.67   $ 67.03   $ 56.24  

 

Third quarter (July 1 - August 27)(2)

  $ 75.95   $ 68.45   $ 80.02   $ 71.72  

 

Third quarter (August 28 - September 30)(2)

  $ 39.95   $ 36.40   $ 42.66   $ 39.50  

 

Fourth quarter

  $ 38.32   $ 25.12   $ 39.80   $ 29.12  

2015:

 

 

                         

 

First quarter

  $ 42.39   $ 35.01   $ 40.63   $ 36.04  

 

Second quarter

  $ 45.43   $ 38.87   $ 43.57   $ 36.92  

 

Third quarter

  $ 43.78   $ 35.49   $ 43.65   $ 38.03  

 

Fourth quarter

  $ 45.39   $ 39.79   $ 45.31   $ 40.27  

2016:

 

 

                         

 

First quarter

  $ 44.50   $ 32.35   $ 45.31   $ 35.55  

 

Second quarter

  $ 40.44   $ 34.26   $ 39.39   $ 36.85  

 

Third quarter (July 1 - July 22)(3)

  $ 42.69   $ 36.24   $ 40.62   $ 36.87  

 

Third quarter (July 25 - September 21)(3)

  $ 40.80   $ 36.09   $ 39.89   $ 38.05  

(1)
As discussed above, Liberty Interactive completed a two-for-one stock split on April 11, 2014 on its Series A and Series B Liberty Ventures common stock.

(2)
On August 27, 2014, Liberty Interactive completed the spin-off to holders of its Liberty Ventures common stock of its former wholly owned subsidiary, Liberty TripAdvisor Holdings, Inc. ( TripAdvisor Holdings ) as a pro-rata dividend of shares of TripAdvisor Holdings to the stockholders of Liberty Interactive's Series A and Series B Liberty Ventures common stock ( TripAdvisor Holdings Spin-Off ).

(3)
On July 22, 2016, Liberty Interactive completed the spin-off of its former wholly owned subsidiary, CommerceHub, as a pro-rata dividend of shares of CommerceHub to the holders of Liberty Interactive's Series A and Series B Liberty Ventures common stock.

        As of November 11, 2015, the last trading day prior to the public announcement of the Liberty Interactive board's intention to distribute its interest in Expedia and its wholly owned subsidiary Bodybuilding to Splitco, LVNTA closed at $42.10 and LVNTB closed at $42.00. As of September 21, 2016, the most recent practicable date prior to the mailing of this proxy statement/prospectus, LVNTA closed at $38.55 and LVNTB closed at $39.89.

    Dividends

        Liberty Interactive.     Liberty Interactive has never paid cash dividends on any series of its common stock. All decisions regarding payment of dividends by Liberty Interactive are made by its board of directors, from time to time, in accordance with applicable law after taking into account various factors, including its earnings, financial condition and other relevant considerations.

        Splitco.     Splitco currently intends to retain future earnings, if any, following the Split-Off to finance the expansion of its businesses. As a result, Splitco does not expect to pay any cash dividends in the foreseeable future. All decisions regarding the payment of dividends by Splitco will be made by its board of directors, from time to time, in accordance with applicable law.

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RISK FACTORS

         An investment in Splitco common stock involves risks. You should consider carefully the risks described below together with all of the other information included in this proxy statement/prospectus in deciding whether to vote to approve the Split-Off Proposals. Any of the following risks, if realized, could have a material adverse effect on the value of Splitco's common stock. The risks described below and elsewhere in this proxy statement/prospectus are not the only ones that relate to Splitco's businesses, its capitalization or the Split-Off. The risks described below are considered to be the most material. However, there may be other unknown or unpredictable economic, business, competitive, regulatory or other factors that also could have material adverse effects on Splitco's businesses. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. If any of the events below were to occur, Splitco's businesses, prospects, financial condition, results of operations and/or cash flows could be materially adversely affected. This proxy statement/prospectus contains forward-looking statements that contain risks and uncertainties. Please refer to the section entitled "Cautionary Statements Concerning Forward Looking Statements" on page 56 of this proxy statement/prospectus in connection with your consideration of the risk factors and other important factors that may affect future results described below.

         For purposes of these risk factors, unless the context otherwise indicates, we have assumed that the redemption proposal has been approved and that the Split-Off has occurred. References in this section to "our company," "our business," "us," "we" and words of similar effect refer to Splitco.

Factors Relating to Splitco's Corporate History and Structure

         The combined financial information of Splitco included in this proxy statement/prospectus is not necessarily representative of Splitco's future financial position, future results of operations or future cash flows, nor does it reflect what Splitco's financial position, results of operations or cash flows would have been as a stand-alone company during the periods presented.

        Because the historical combined financial information of Liberty Interactive included in this proxy statement/prospectus includes the results of the legacy Splitco business and because such financial information largely reflects the historical results of Bodybuilding, it is not representative of Splitco's future financial position, future results of operations or future cash flows, nor does it reflect what Splitco's financial position, results of operations or cash flows would have been as a stand-alone company, pursuing independent strategies, during the periods presented, especially in light of the fact that the future results of operations will be significantly comprised of the results of Expedia.

         We are a holding company, and we could be unable in the future to obtain cash in amounts sufficient to service our financial obligations or meet our other commitments.

        Our ability to meet our financial obligations and other contractual commitments, including to make debt service payments under SplitSPV's Margin Loan and any other credit facilities that we may obtain in the future, depends upon our ability to access cash. We are a holding company, and our sources of cash include our available cash balances, net cash from the operating activities of our wholly owned subsidiary Bodybuilding, any dividends and interest we may receive from our investments (including Expedia) and proceeds from any asset sales we may undertake in the future. See "—We do not have direct access to the cash that Expedia generates from its operating activities" for more information regarding potential dividend payments. We currently have no plans with respect to any asset sales. The ability of our existing operating subsidiary Bodybuilding or Expedia, which will become an operating subsidiary of our company following the completion of the proxy arrangements, to pay dividends or to make other payments or advances to us depends on their individual operating results and any statutory, regulatory or contractual restrictions to which they may be or may become subject.

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         We do not have direct access to the cash that Expedia generates from its operating activities.

        Expedia generated approximately $1,368 million, $1,367 million, and $763 million of cash from its operations during the years ended December 31, 2015, 2014 and 2013 respectively. Expedia uses the cash it generates from its operations to fund its investing activities and to service its debt and other financing obligations. We do not have access to the cash that Expedia generates unless Expedia declares a dividend on its capital stock payable in cash, repurchases any or all of its outstanding shares of capital stock for cash (to the extent we were to participate in such repurchase) or otherwise distributes or makes payments to its stockholders, including us.

        Although during the years ended December 31, 2015, 2014 and 2013, Expedia repurchased 0.5 million shares, 7.0 million shares and 9.3 million shares, respectively, spending $45 million, $537 million and $515 million, respectively, we have not participated in these stock repurchases. Further, for the years ended December 31, 2015, 2014 and 2013, Expedia declared aggregate dividends of $0.84 per share, $0.66 per share and $0.56 per share, respectively. Although we have participated, pro rata, in these dividends, no assurance can be given that Expedia will continue to pay cash dividends at the same rate or at all.

         Our company may have future capital needs and may not be able to obtain additional financing on acceptable terms.

        In connection with the Split-Off, we will have outstanding borrowings of $350 million under a margin loan agreement (the Margin Loan Agreement ) entered into by SplitSPV, the payment of which borrowings are guaranteed solely by our company and secured by all of the shares of EXPE owned by our company. SplitSPV will hold all of the shares of EXPE owned by our company. Because our most significant asset consists of our equity interests in Expedia and the Margin Loan Agreement prohibits, with limited exceptions, the incurrence of additional indebtedness by SplitSPV, our company will be very limited in its ability to incur additional financing, and our cash reserves and limited operating cash flow may be insufficient to satisfy our financial obligations. In addition, the Margin Loan Agreement provides that, among other triggering events, if at any time the closing price per share of EXPE falls below certain minimum values, a partial repayment of the Margin Loan will be due and payable with respect to each such circumstance, together with accrued and unpaid interest and, during approximately the first 2 years of the term of the Margin Loan, a prepayment premium. If the company or SplitSPV is unable to pay such amounts, the lenders may foreclose on the pledged shares of EXPE that SplitSPV holds and any other collateral that then secures SplitSPV's obligations under the Margin Loan Agreement, which would materially adversely affect our asset composition and financial condition as well as our access to capital on a going forward basis.

         We have no operating history as a separate company upon which you can evaluate our performance.

        We do not have an operating history as a separate public company. Accordingly, there can be no assurance that our business will be successful on a long-term basis. We may not be able to grow our businesses as planned and may not be profitable.

         We may become subject to the Investment Company Act of 1940.

        We do not believe that, upon completion of the Split-Off, we will be subject to regulation under the Investment Company Act of 1940 (the 40 Act ). We were formed for the purpose of effecting the Split-Off and owning and holding our 52.2% voting interest in Expedia and our wholly-owned subsidiary, Bodybuilding. We intend to engage primarily in the global travel and online commerce industries through these companies. Our officers and any employees who provide services to us pursuant to the terms of the services agreement with Liberty Media will devote their business activities with respect to us to the businesses of these companies. Following the Split-Off, our interest in Expedia

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and Bodybuilding will comprise substantially all of our assets and substantially all of our income, if any, will be derived from dividends and other distributions made on our interests in Expedia and Bodybuilding. Based on these factors, we believe that we are not an investment company under the 40 Act, including under Section 3(b)(1) of the 40 Act. As a result of the proxy arrangements, Expedia will become a consolidated, operating subsidiary of our company. Following the Split-Off, we will own a 52.2% voting interest in Expedia. If, at any time, we become primarily engaged, directly or through one or more of our subsidiaries, in a business of investing, reinvesting, owning, holding or trading in securities, we could become subject to regulation under the 40 Act. Following any such change in our business and after giving effect to any applicable grace periods, we may be required to register as an investment company, which could result in significant registration and compliance costs, could require changes to our corporate governance structure and financial reporting, and could restrict our activities going forward. In addition, if we were to become inadvertently subject to the 40 Act, any violation of the 40 Act could subject us to material adverse consequences, including potentially significant regulatory penalties and the possibility that certain of our contracts would be deemed unenforceable.

Factors Relating to Splitco's Businesses

         Expedia operates in an increasingly competitive global environment.

        The market for the services that Expedia offers is increasingly and intensely competitive. Expedia competes with both established and emerging online and traditional sellers of travel-related services, including:

    online and traditional travel agencies, wholesalers and tour operators;

    travel suppliers, including hotels and airlines;

    large online portal and search websites;

    travel metasearch websites;

    corporate travel management service providers;

    mobile platform travel applications;

    social media websites;

    ecommerce websites and group buying websites; and

    alternative accommodation websites.

        Online and traditional travel agencies:     Expedia faces increasing competition from other online travel agencies ( OTAs ) in many regions, such as The Priceline Group and its subsidiaries Booking.com and Agoda.com, as well as regional competitors such as Ctrip, which in some cases may have more favorable offerings for travelers or suppliers, including pricing and supply breadth. Expedia also competes with traditional travel agencies (operating both offline and online), wholesalers and tour operators for both travelers and the acquisition and retention of supply.

        Travel suppliers:     Some of Expedia's competitors, including travel suppliers such as airlines and hotels, may offer products and services on more favorable terms to consumers who transact directly with them, including lower prices, no fees or unique access to proprietary loyalty programs, such as points and miles. Many of these competitors, such as airlines, hotel and rental car companies, have been steadily focusing on increasing online demand on their own websites and mobile applications in lieu of third-party distributors such as the various Expedia sites. For instance, some low cost airlines, which are having increasing success in the marketplace, distribute their online supply exclusively through their own websites and several large hotel chains have combined to establish a single online hotels search platform with links directly to their own websites and mobile applications. Suppliers who

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sell on their own websites, in some instances, offer advantages such as favorable rates, increased or exclusive product availability, complimentary Wi-Fi, and their own bonus miles or loyalty points, or in the case of airlines, promote hotel supply at their websites, which could make their offerings more attractive to consumers than Expedia's.

        Search engines:     Expedia also faces increasing competition from search engines including Google. To the extent that these leading search engines that have a significant presence in Expedia's key markets disintermediate online travel agencies or travel content providers by offering comprehensive travel planning, shopping or booking capabilities, or increasingly refer those leads directly to suppliers or other favored partners, increase the cost of traffic directed to Expedia's websites, or offer the ability to transact on their own website, there could be a material adverse impact on Expedia's business and financial performance. For example, in recent years search engines have increased their focus on acquiring or launching flight and hotel search products that provide increasingly comprehensive travel planning content and direct booking capabilities, comparable to OTAs. To the extent these actions have a negative effect on Expedia's search traffic or the cost of acquiring such traffic, Expedia's business and financial performance could be adversely affected.

        In addition, Expedia's websites, or websites in which Expedia holds a significant ownership position, including trivago-branded websites, compete for advertising revenue with these search engines, as well as with large internet portal sites that offer advertising opportunities for travel-related companies. Several of these competitors have significantly greater financial, technical, marketing and other resources and larger client bases than Expedia. Expedia expects to face additional competition as other established and emerging companies enter the online advertising market. Competition could result in higher traffic acquisitions costs, reduced margins on Expedia's advertising services, loss of market share, reduced customer traffic to Expedia's websites and reduced advertising by travel companies on Expedia's websites.

        Travel metasearch engines:     Travel metasearch websites, including Kayak.com (a subsidiary of Priceline), trivago (a majority-owned subsidiary of Expedia), TripAdvisor, Inc. ( TripAdvisor ) and Qunar (a subsidiary of Ctrip), aggregate travel search results for a specific itinerary across supplier, travel agent and other websites. In addition, some metasearch sites have added or intend to add various forms of direct or assisted booking functionality to their sites in direct competition with certain of Expedia's brands. To the extent metasearch websites limit Expedia's participation within their search results, or consumers utilize the metasearch website for travel services and bookings instead of Expedia, Expedia's traffic-generating arrangements could be affected in a negative manner, or it may be required to increase its marketing costs to maintain market share, either of which could have an adverse effect on Expedia's business and results of operations. For example, during 2015 TripAdvisor continued to expand its instant book feature that allows visitors to book directly on the TripAdvisor website, which could have a negative impact on Expedia's unit volume growth in the future. In addition, as a result of Expedia's acquisition of a majority ownership interest in trivago, Expedia also now competes more directly with other metasearch engines and content aggregators for advertising revenue. To the extent that trivago's ability to aggregate travel search results for a specific itinerary across supplier, travel agent and other websites is hampered, whether due to its affiliation with Expedia or otherwise, trivago's business and results of operations could be adversely affected and the value of Expedia's investment in trivago could be negatively impacted.

        Corporate travel management service providers:     Egencia, Expedia's full-service corporate travel management company, competes with online and traditional corporate travel providers, including Carlson Wagonlit and American Express, as well as vendors of corporate travel and expense management software and services, including Concur. Some of these competitors may have more financial resources, greater name recognition, well-established client bases, differentiated business

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models, or a broader global presence, which may make it difficult for Expedia to retain or attract new corporate travel clients.

        Mobile platform travel applications:     Mobile platforms, including smartphones and tablet computers, have rapidly emerged and continue to grow significantly. The emergence and improved functionality of mobile platforms has led to an increased use by consumers of standalone applications to research and book travel. If Expedia is unable to offer innovative, user-friendly, feature-rich mobile applications for its travel services, along with effective marketing and advertising, or if its mobile applications are not used by consumers, Expedia could lose market share to existing competitors or new entrants and its future growth and results of operations could be adversely affected.

        Social media websites:     Social media websites, including Facebook, continue to develop search functionality for data included within their websites and mobile applications, which may in the future develop into an alternative research and booking resource for travelers, resulting in additional competition.

        Alternative accommodations:     Airbnb and similar websites that facilitate the short-term rental of homes and apartments from owners provide an alternative to hotel rooms and vacation rental properties available through Expedia websites, including HomeAway which was acquired by Expedia on December 15, 2015. The continued growth of alternative accommodation sources could affect overall travel patterns generally and the demand for Expedia's services specifically in facilitating reservations at hotel and vacation rentals.

        Other participants in the travel industry:     Traditional consumer ecommerce websites and group buying websites have periodically undertaken efforts to expand their local offerings into the travel market by adding hotel offers to their sites. To the extent such websites continue to expand these services over time, it may create additional competition. In addition, car rideshare services, such as Uber, increasingly compete with the traditional car rental services that Expedia offers on its retail websites and to its corporate clients, which may negatively affect its car-based and corporate travel businesses.

        We cannot assure you that Expedia will be able to compete successfully against any current, emerging and future competitors or on platforms that may emerge, or provide differentiated products and services to its traveler base. Increasing competition from current and emerging competitors, the introduction of new technologies and the continued expansion of existing technologies, such as metasearch and other search engine technologies, may force Expedia to make changes to its business models, which could affect its financial performance and liquidity. In general, increased competition has resulted in and may continue to result in reduced margins, as well as loss of travelers, transactions and brand recognition.

         The industry in which Expedia operates is dynamic.

        Expedia continues to adapt its business to remain competitive, including investing in evolving channels such as metasearch and mobile, as well as offering new consumer choices, including inventory types and transactional models, and increasing supplier inventory on its existing platforms through acquisitions and partnerships. If Expedia fails to appropriately adapt to competitive or consumer preference developments, its business could be adversely affected. Expedia's attempts to adapt its current business models or practices or adopt new business models and practices in order to compete may involve significant risks and uncertainties, including distraction of management from current operations, expenses associated with the initiatives, inadequate return on investments, difficulties and expenses associated with the integration of acquired brands and their inventory onto Expedia's platforms, as well as limiting its ability to develop new site innovations. In addition, adaptations to Expedia's business may require significant investments, including changes to its financial systems and

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processes, which could significantly increase its costs and increase the risk of payment delays and/or non-payments of amounts owed to it from its supplier partners and customers. In addition, these new initiatives may not be successful and may harm Expedia's financial condition and operating results.

         Expedia's business could be negatively affected by changes in search engine algorithms and dynamics or other traffic-generating arrangements.

        Expedia increasingly utilizes internet search engines such as Google, principally through the purchase of travel-related keywords, to generate a significant portion of the traffic to its websites and the websites of its affiliates. Search engines frequently update and change the logic that determines the placement and display of results of a user's search, such that the purchased or algorithmic placement of links to Expedia's websites and those of its affiliates can be negatively affected. In addition, a significant amount of traffic is directed to Expedia's websites and those of its affiliates through participation in pay-per-click and display advertising campaigns on search engines, including Google, and travel metasearch engines, including Kayak and TripAdvisor. Pricing and operating dynamics for these traffic sources can change rapidly, both technically and competitively. Moreover, a search or metasearch engine could, for competitive or other purposes, alter its search algorithms or results causing a website to place lower in search query results. If a major search engine changes its algorithms or results in a manner that negatively affects the search engine ranking, paid or unpaid, of Expedia's websites and the websites of its affiliates, or those of its third-party distribution partners, or if competitive dynamics impact the costs or effectiveness of search engine optimization, search engine marketing or other traffic-generating arrangements in a negative manner, Expedia's business and financial performance would be adversely affected, potentially to a material extent. In addition, certain metasearch companies have added or intend to add various forms of direct or assisted booking functionality to their sites. To the extent such functionality is promoted at the expense of traditional paid listings, this may reduce the amount of traffic to Expedia's websites or those of its affiliates.

         Expedia's business depends on its relationships with travel suppliers and travel distribution partners.

        An important component of Expedia's business success depends on its ability to maintain and expand relationships with travel suppliers and global distribution system ( GDS ) partners and owners and managers of vacation rental properties. A substantial portion of Expedia's revenue is derived from compensation negotiated with travel suppliers, in particular hotel suppliers, and GDS partners for bookings made through its websites. Each year Expedia typically negotiates or renegotiates numerous long-term hotel and airline contracts.

        No assurances can be given that Expedia's compensation, access to inventory, or access to inventory at competitive rates, will not be further reduced or eliminated in the future, or that travel suppliers will not reduce average daily rates ( ADRs ), attempt to implement costly direct connections, charge Expedia for or otherwise restrict access to content, increase credit card fees or fees for other services, fail to provide Expedia with accurate booking information or otherwise take actions that would increase Expedia's operating expenses. Any of these actions, or other similar actions, could reduce Expedia's revenue and margins thereby adversely affecting its business and financial performance.

         Expedia and Bodybuilding rely on the value of their brands, and the costs of maintaining and enhancing brand awareness are increasing.

        Expedia and Bodybuilding invest financial and human resources in their respective brands in order to retain and expand their customer bases. We expect that the cost of maintaining and enhancing these brands will continue to increase due to a variety of factors, including increased spending from competitors, promotional and discounting activities, the increasing costs of growing customer loyalty programs, the increasing costs of supporting multiple brands and the impact of competition among its multiple brands, expansion into geographies and products where its brands are less well known,

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inflation in media pricing including search engine keywords and the continued emergence and relative travel-related traffic share growth of search engines and metasearch engines. During 2015, certain online travel companies and metasearch sites continued to expand their offline and digital advertising campaigns globally, increasing competition for share of voice, and Expedia expects this activity to continue in the future. Expedia is also pursuing and expects to continue to pursue long-term growth opportunities, particularly in emerging markets, which have had and may continue to have a negative impact on its overall marketing efficiency. Bodybuilding's ability to maintain and enhance its brands will depend largely on its ability to continue to provide useful, reliable, trustworthy and innovative products, which it may not be able to do successfully. Bodybuilding may also introduce new products, terms of service or policies that users do not like, which may negatively affect its brand.

        Expedia's and Bodybuilding's efforts to preserve and enhance consumer awareness of their brands may not be successful, and, even if they are successful in their branding efforts, such efforts may not be cost-effective, or as efficient as they have been historically. Moreover, branding efforts with respect to some brands within the Expedia portfolio have in the past and may in the future result in marketing inefficiencies and negatively impact growth rates of other brands within its portfolio. If Expedia and Bodybuilding are unable to maintain or enhance consumer awareness of their brands and generate demand in a cost-effective manner, it would have a material adverse effect on their businesses and financial performance.

         Expedia and Bodybuilding rely on information technology to operate their businesses and maintain their competitiveness, and any failure to invest in and adapt to technological developments and industry trends could harm their businesses.

        Expedia depends on the use of sophisticated information technologies and systems, including technology and systems used for website and mobile applications, reservations, customer service, supplier connectivity, communications, procurement, payments, fraud detection and administration, while Bodybuilding relies extensively on information systems for its ecommerce business (which includes website, mobile applications, customer service, payment and fraud detection), supply chain, manufacturing operations, financial reporting, human resources and various other processes and transactions. As Expedia's and Bodybuilding's operations grow in size, scope and complexity, they must continuously improve and upgrade their systems and infrastructure to offer an increasing number of customers enhanced products, services, features and functionality, while maintaining or improving the reliability and integrity of their systems and infrastructure.

        Expedia's and Bodybuilding's future success also depends on their ability to adapt their services and infrastructure to meet rapidly evolving consumer trends and demands while continuing to improve the performance, features and reliability of their services in response to competitive service and product offerings. The emergence of alternative platforms such as smartphone and tablet computing devices and the emergence of niche competitors who may be able to optimize products, services or strategies for such platforms have, and will continue to, require new and costly investments in technology. Expedia and Bodybuilding may not be successful, or may be less successful than their current or new competitors, in developing technology that operates effectively across multiple devices and platforms and that is appealing to consumers, either of which would negatively impact their business and financial performance. New developments in other areas, such as cloud computing and software as a service provider, could also make it easier for competition to enter Expedia's markets due to lower up-front technology costs. In addition, Expedia and Bodybuilding may not be able to maintain their existing systems or replace or introduce new technologies and systems as quickly as they would like or in a cost-effective manner.

        Expedia has been engaged in a multi-year effort to migrate key portions of its consumer, affiliate, and corporate travel sites and back office application functionality to new technology platforms to enable it to improve conversion, innovate more rapidly, achieve better search engine optimization and

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improve its site merchandising and transaction processing capabilities, among other anticipated benefits. During the migration process the sites have in the past, and may continue in the future, to experience reduced functionality and decreases in conversion rates. Expedia is also in the early stages of a multi-year effort to increase its utilization of cloud computing services. Bodybuilding also continually adds software and hardware, effectively upgrading its systems and network infrastructure, as well as taking other steps to improve the efficiency of its systems. Implementations and system enhancements such as these have been in the past, and may continue to be in the future, more time consuming and expensive than originally anticipated, and the resources devoted to those efforts have adversely affected, and may continue to adversely affect, Expedia's and Bodybuilding's ability to develop new site innovations. Expedia and Bodybuilding may be unable to devote financial resources to new technologies and systems, or enhancements to existing infrastructure, technologies and systems, in the future. Overall, these implementations and systems enhancements may not achieve the desired results in a timely manner, to the extent anticipated, or at all. If any of these events occur, Expedia's and Bodybuilding's respective business and financial performance could suffer.

         Acquisitions, investments or significant commercial arrangements could result in operating and financial difficulties.

        Expedia has acquired, invested in or entered into significant commercial arrangements with a number of businesses in the past, and its future growth may depend, in part, on future acquisitions, investments or significant commercial arrangements, any of which could be material to its financial condition and results of operations. Certain financial and operational risks related to acquisitions, investments or significant commercial arrangements that may have a material impact on Expedia's business are:

    Use of cash resources and incurrence of debt and contingent liabilities in funding acquisitions, including with regard to future payment obligations in connection with put/call rights, may limit other potential uses of Expedia's cash, including stock repurchases, dividend payments and retirement of outstanding indebtedness;

    Amortization expenses related to acquired intangible assets and other adverse accounting consequences, including changes in fair value of contingent consideration;

    Expected and unexpected costs incurred in pursuing acquisitions, including identifying and performing due diligence on potential acquisition targets that may or may not be successful, if unsuccessful could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes due, a loss of anticipated tax benefits or other adverse effects on Expedia's business, operating results or financial condition;

    Diversion of management's attention or other resources from Expedia's existing businesses;

    Difficulties and expenses in assimilating the operations, products, technology, privacy protection systems, information systems or personnel of the acquired company;

    Impairment of relationships with employees, suppliers, customers, vendors and affiliates of Expedia's business and the acquired business;

    The assumption of known and unknown debt and liabilities of the acquired company;

    Failure of the acquired company to achieve anticipated traffic, transactions, revenues, earnings or cash flows or to retain key management or employees;

    Failure to generate adequate returns on Expedia's acquisitions and investments, or returns in excess of alternative uses of capital;

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    Failure to properly and timely integrate acquired companies and their operations, reducing Expedia's ability to achieve, among other things, anticipated returns on its acquisitions through cost savings and other synergies;

    Entrance into markets in which Expedia has no direct prior experience and increased complexity in its business;

    Challenges relating to the structure of an investment, such as governance, accountability and decision-making conflicts, that may arise in the context of a joint venture or majority ownership investment;

    Impairment of goodwill or other intangible assets such as trademarks or other intellectual property arising from Expedia's acquisitions;

    Costs associated with litigation or other claims arising in connection with the acquired company;

    Increased or unexpected costs or delays to obtain governmental approvals for acquisitions;

    Increased competition amongst potential acquirers for acquisition targets could result in a material increase in the purchase price for such targets or otherwise limit Expedia's ability to consummate acquisitions; and

    Adverse market reaction to acquisitions or investments or failure to consummate such transactions.

        Moreover, Expedia relies heavily on the representations and warranties and related indemnities provided to it by the sellers of acquired companies, including as they relate to creation, ownership and rights in intellectual property and compliance with laws and contractual requirements. Expedia's failure to address these risks or other problems encountered in connection with past or future acquisitions and investments could cause it to fail to realize the anticipated benefits of such acquisitions or investments, incur unanticipated liabilities and harm its business generally.

        For example during 2015, Expedia expended significant resources in acquiring, investing or otherwise entering into significant commercial arrangements with a number of companies, including Orbitz Worldwide, Inc., Decolar.com, Inc. and HomeAway and certain assets of Travelocity.com LP.

        In connection with Expedia's acquisition of HomeAway, Expedia is subject to legal, financial and competitive risk associated with HomeAway's transition to a primarily transaction-based business. HomeAway historically had generated revenues primarily when owners or managers of vacation rentals pay HomeAway subscription fees for the listing of their properties on the HomeAway family of sites. HomeAway is currently in the process of transitioning to a transaction-based model, where the owner or manager of the property pays HomeAway a commission for each online booking of the property by a traveler and the traveler pays a service fee for the use of the HomeAway platform. Under the transaction-based model, the primary source of its revenues would be generated on a per booking basis by instituting a service fee to the traveler each time a property is booked and expanding its practice of charging a commission to the owner or manager of such property in connection with such booking. This transition, which is currently underway, involves significant additional risks and potential costs for HomeAway, including:

    Delays or unanticipated costs in implementing the transition, which may delay or negate any expected benefits;

    Supplier or traveler disruption similar to or worse than disruptions associated with previous business model and platform migrations;

    Market research that indicated higher than expected price elasticity for travelers in increasingly transparent markets such as HomeAway's market and for HomeAway's suppliers more broadly;

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    Suppliers and travelers may not adopt HomeAway's new payment structures as expected or at all, or may choose to transact with competitors;

    Execution risk associated with launching a new business initiative that HomeAway did not have prior experience in;

    Failure to implement or expand HomeAway's technology, systems and network infrastructure in light of additional payment processing and reporting complexity, or failure to do so at reasonable cost;

    Search engine optimization risks;

    Higher cost of traffic reducing cost per view effectiveness and reducing HomeAway's ability to spend at the desired return on investment;

    Increased risk of fraud; and

    Additional potential tax exposures.

        These risks could have a material adverse effect on HomeAway's business and results of operations, which in turn could have a material adverse effect on Expedia's operations and financial results.

         Expedia's and Bodybuilding's international operations involve additional risks and their exposure to these risks will increase as their businesses expand globally.

        A large portion of Expedia's revenue is derived from its international operations. Expedia operates in a number of jurisdictions outside of the United States and intends to continue to expand its international presence. As Expedia has expanded globally, its international (non-U.S.) revenue has increased from 39% in 2010 to 44% in 2015. In foreign jurisdictions, Expedia faces complex, dynamic and varied risk landscapes. As Expedia enters countries and markets that are new to it, it must tailor its services and business models to the unique circumstances of such countries and markets, which can be complex, difficult and costly and divert management and personnel resources. Laws and business practices that favor local competitors or prohibit or limit foreign ownership of certain businesses or Expedia's failure to adapt its practices, systems, processes and business models effectively to the traveler and supplier preferences of each country into which it expands, could slow its growth. For example, to compete in certain international markets Expedia has in the past, and may in the future, adopt locally-preferred payment methods, which has increased its costs and instances of fraud. Certain international markets in which Expedia operates have lower margins than more mature markets, which could have a negative impact on its overall margins as its revenues from these markets grow over time.

        Expedia also earns an increasing portion of its income, and accumulates a greater portion of its cash flow, in foreign jurisdictions. As a result, any repatriation of funds currently held by its subsidiaries in foreign jurisdictions may result in a higher effective tax rate and incremental cash tax payments.

        In addition to the risks outlined elsewhere in this section, Expedia's and Bodybuilding's international operations are also subject to a number of other risks, including:

    Currency exchange restrictions or costs and exchange rate fluctuations, and the risks and costs inherent in hedging such exposures;

    Exposure to local economic or political instability and threatened or actual acts of terrorism;

    Compliance with U.S. and Non-U.S. regulatory laws and requirements relating to anti-corruption, antitrust or competition, economic sanctions, data content and privacy, consumer protection, employment and labor laws, health and safety, ecommerce and advertising and promotions;

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    Compliance with additional U.S. laws applicable to U.S. companies operating internationally;

    Differences, inconsistent interpretations and changes in U.S. and non-U.S. laws and regulations, including international and local tax laws, tariffs and trade barriers;

    Weaker enforcement of Expedia's and Bodybuilding's contractual and intellectual property rights;

    Lower levels of credit card usage and increased payment and fraud risk;

    Longer payment cycles, and difficulties in collecting accounts receivable;

    Preferences by local populations for local providers;

    Restrictions on, or adverse tax and other consequences related to, repatriation of cash and the withdrawal of non-U.S. investments, cash balances and earnings, as well as restrictions on the ability to invest operations in certain countries;

    Financial risk arising from transactions in multiple currencies;

    Slower adoption of the internet as an advertising, broadcast and commerce medium in those markets as compared to the United States;

    Limited fulfillment and technology infrastructure;

    Inconsistent product regulation or sudden policy changes by foreign agencies or governments;

    Expedia's and Bodybuilding's ability to support new technologies, including mobile devices, that may be more prevalent in international markets;

    Difficulties in attracting and retaining qualified employees in international markets, as well as managing staffing and operations due to increased complexity, distance, time zones, language and cultural differences; and

    Uncertainty regarding liability for products, services and content, including uncertainty as a result of local laws and lack of precedent.

        The China travel market in particular is significant and has grown significantly in recent years. Prior to May 2015, Expedia conducted its operations in China primarily through its majority ownership interest in eLong, Inc., a leading online travel service provider in China. Following the sale of its eLong ownership stake in May 2015 to a group of China-based purchasers, including to a subsidiary of Ctrip International, Ltd., Expedia has conducted its business in China through localized websites and commercial arrangements with local partners, including Ctrip. There can be no guarantee that Expedia will be able to grow or even maintain market share and brand awareness in the highly dynamic and intensely competitive market in China and its failure to do so could significantly impacts its ability to grow its overall business.

         A failure to comply with current laws, rules and regulations or changes to such laws, rules and regulations and other legal uncertainties may adversely affect Expedia's and Bodybuilding's businesses, financial performance, results of operations or business growth.

        Expedia's and Bodybuilding's businesses and financial performance could be adversely affected by unfavorable changes in or interpretations of existing laws, rules and regulations or the promulgation of new laws, rules and regulations applicable to Expedia and Bodybuilding and their businesses, including those relating to travel and vacation rental licensing and listing requirements, the sale and advertising of substances regulated by the Food and Drug Administration (the FDA ) and other government agencies, the internet and online commerce, internet advertising and price display, consumer protection, anti-corruption, anti-trust and competition, economic and trade sanctions, tax, banking, data

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security and privacy, as applicable. As a result, regulatory authorities could prevent or temporarily suspend Expedia or Bodybuilding from carrying on some or all of its activities or otherwise penalize Expedia or Bodybuilding if its practices were found not to comply with applicable regulatory or licensing requirements or any binding interpretation of such requirements. Unfavorable changes or interpretations could decrease demand for Expedia's and Bodybuilding's products and services, limit marketing methods and capabilities, affect their margins, increase costs and/or subject them to additional liabilities.

        For example, there are, and will likely continue to be, an increasing number of laws and regulations pertaining to the internet and online commerce that may relate to liability for information retrieved from or transmitted over the internet, display of certain taxes and fees, online editorial and user-generated content, user privacy, behavioral targeting and online advertising, taxation, liability for third-party activities and the quality of products and services. Furthermore, the growth and development of online commerce may prompt calls for more stringent consumer protection laws and more aggressive enforcement efforts, which may impose additional burdens on online businesses generally.

        Likewise, the SEC, Department of Justice and Office of Foreign Assets Controls ( OFAC ), as well as foreign regulatory authorities, have continued to increase the enforcement of economic and trade regulations and anti-corruption laws across industries. U.S. trade sanctions relate to transactions with designated foreign countries, including Cuba, Iran, Sudan and Syria, and nationals and others of those countries, as well as certain specifically targeted individuals and entities. Expedia and Bodybuilding believe that their respective activities comply with OFAC trade regulations and anti-corruption regulations, including the Foreign Corrupt Practices Act and the UK Bribery Act. As regulations continue to evolve and regulatory oversight continues to increase, Expedia and Bodybuilding cannot guarantee that their respective programs and policies will be deemed compliant by all applicable regulatory authorities. In the event their controls should fail or are found to be out of compliance for other reasons, they could be subject to monetary damages, civil and criminal money penalties, litigation and damage to their reputation and the value of their brands.

        Expedia also has been subject, and it will likely be subject in the future, to inquiries from time to time from regulatory bodies concerning compliance with consumer protection, competition, tax and travel industry-specific laws and regulations, including but not limited to investigations and legal proceedings relating to the travel industry and, in particular, parity provisions in contracts between hotels and online travel companies. The failure of Expedia's businesses to comply with these laws and regulations could result in fines and/or proceedings against it by governmental agencies and/or consumers, which if material, could adversely affect its business, financial condition and results of operations. Further, if such laws and regulations are not enforced equally against other competitors in a particular market, Expedia's compliance with such laws may put it at a competitive disadvantage vis-à-vis competitors who do not comply with such requirements. Expedia is unable at this time to predict the timing or outcome of these various investigations and lawsuits or similar future investigations or lawsuits, and their impact, if any, on its business and results of operations.

        In addition, HomeAway has been and continues to be, subject to regulatory developments that affect the vacation rental industry and the ability of companies like Expedia to list those vacation rentals online. For example, some states and local jurisdictions have adopted or are considering statutes or ordinances that prohibit property owners and managers from renting certain properties for fewer than 30 consecutive days or otherwise limit their ability to do so, and other states and local jurisdictions may adopt similar regulations. Some states and local jurisdictions also have fair housing or other laws governing whether and how properties may be rented, which they assert apply to vacation rentals. Many homeowners, condominium and neighborhood associations have adopted rules that prohibit or restrict short-term vacation rentals. In addition, many of the fundamental statutes and ordinances that impose taxes or other obligations on travel and lodging companies were established before the growth of the

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Internet and ecommerce, which creates a risk of these laws being used in ways not originally intended that could burden property owners and managers or otherwise harm Expedia's business.

        The promulgation of new laws, rules and regulations, or the new interpretation of existing laws, rules and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which Expedia provides travel services could require it to change certain aspects of its business, operations and commercial relationships to ensure compliance, which could decrease demand for services, reduce revenues, increase costs and/or subject the company to additional liabilities.

        From time to time, Congress, the FDA, the Federal Trade Commission (the FTC ) or other federal, state, local or foreign legislative and regulatory authorities may impose additional laws or regulations that apply to Bodybuilding, repeal laws or regulations that Bodybuilding considers favorable to it or impose more stringent interpretations of current laws or regulations. Such developments could require formulation of certain products to meet new standards, recalls or discontinuance of certain products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling and advertising, additional scientific substantiation, adverse event reporting or other new requirements.

        Furthermore, Expedia's and Bodybuilding's future growth may be limited by anti-trust or competition laws. For example, Expedia's business has grown and continues to expand, and, as a consequence, increases in its size and market share may negatively affect its ability to obtain regulatory approval of proposed acquisitions, investments or significant commercial arrangements, any of which could adversely affect Expedia's ability to grow and compete.

         Application of existing tax laws, rules or regulations are subject to interpretation by taxing authorities.

        The application of various domestic and international income and non-income tax laws, rules and regulations to Expedia's historical and new products and services is subject to interpretation by the applicable taxing authorities. These taxing authorities have become more aggressive in their interpretation and/or enforcement of such laws, rules and regulations over time, as governments are increasingly focused on ways to increase revenues. This has contributed to an increase in audit activity and harsher stances by tax authorities. As such, additional taxes or other assessments may be in excess of Expedia's current tax reserves or may require Expedia to modify its business practices to reduce its exposure to additional taxes going forward, any of which could have a material adverse effect on its business, results of operations and financial condition.

        A number of taxing authorities have made inquiries, brought lawsuits and have levied assessments asserting that Expedia is required to collect and remit hotel occupancy or other taxes. Expedia is also in various stages of inquiry or audit with multiple European Union jurisdictions regarding the application of value added tax to its European Union transactions. While Expedia believes it complies with applicable tax laws, rules and regulations in the jurisdictions in which it operates, tax authorities may determine that it owes additional taxes. Expedia has in the past and may in the future be required in certain domestic and foreign jurisdictions to pay any such tax assessments prior to contesting their validity, which payments may be substantial. This requirement is commonly referred to as "pay-to-play." Payment of these amounts is not an admission that the taxpayer believes it is subject to such taxes. For example, as a pre-condition to challenging the assessments, on January 9, 2015, Expedia paid $2.3 million under protest to the city of Portland, Oregon and Multnomah County, Oregon; during 2009, Expedia paid $48 million under protest to the city of San Francisco and an additional $25.5 million under protest on May 26, 2014 in connection with additional assessments; and during 2013, Expedia paid $171 million to the state of Hawaii. The state of Hawaii has also issued additional assessments for general excise tax, penalties and interest against Expedia, Hotels.com and Hotwire, including: an assessment of $20.5 million for 2012 tax year non-commissioned hotel reservations, an assessment of $29.2 million (including a duplicative assessment) for tax years 2000 through 2012

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non-commissioned travel agency services relating to rental cars, and an assessment of $28.5 million for non-commissioned travel agency services relating to hotel reservations and car rental for the tax year 2013 and for which Expedia has requested additional support from the state of Hawaii but has not received any response to date.

        Significant judgment and estimation is required in determining Expedia's worldwide tax liabilities. In the ordinary course of Expedia's business, there are transactions and calculations, including intercompany transactions and cross-jurisdictional transfer pricing, for which the ultimate tax determination is uncertain or otherwise subject to interpretation. Tax authorities may disagree with Expedia's intercompany charges, including the amount of or basis for such charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. Although Expedia believes its tax estimates are reasonable, the final determination of tax audits could be materially different from its historical income tax provisions and accruals in which case it may be subject to additional tax liabilities, possibly including interest and penalties, which could have a material adverse effect on its cash flows, financial condition and results of operations.

         Amendments to existing tax laws, rules or regulations or enactment of new unfavorable tax laws, rules or regulations could have an adverse effect on Expedia's and Bodybuilding's businesses and financial performance.

        Many of the underlying laws, rules or regulations imposing taxes and other obligations were established before the growth of the internet and ecommerce. If the tax or other laws, rules or regulations were amended, or if new unfavorable laws, rules or regulations were enacted, particularly with respect to occupancy, sales, value-added taxes ( VAT ), or unclaimed property, the results could increase Expedia's and Bodybuilding's tax payments or other obligations, prospectively or retrospectively, subject them to interest and penalties, decrease the demand for their products and services if they pass on such costs to their consumers, result in increased costs to update or expand their technical or administrative infrastructure or effectively limit the scope of their business activities if they decided not to conduct business in particular jurisdictions. As a result, these changes could have an adverse effect on Expedia's and Bodybuilding's businesses or financial performance.

        Taxing authorities may also successfully assert that Bodybuilding should have collected or in the future should collect sales and use, commercial activity, VAT or similar taxes, and it could be subject to liability with respect to past or future sales. Bodybuilding does not collect sales and use, commercial activity, VAT or similar taxes in all jurisdictions in which it has sales, based on its belief that such taxes are not applicable. Several states have presented Bodybuilding with tax assessments, alleging that it is required to collect and remit sales and other similar taxes. Such tax assessments, penalties and interest or future requirements could have an adverse effect on Bodybuilding's business or financial performance.

        In addition, in the past U.S. and foreign governments have introduced proposals for tax legislation, or have adopted tax laws, that could have a significant adverse effect on Expedia's and Bodybuilding's tax rates, or increase their tax liabilities, the carrying value of deferred tax assets, or their deferred tax liabilities. For example, in October 2015, the Organization for Economic Co-Operation and Development released a final package of measures to be implemented by member nations in response to a 2013 action plan calling for a coordinated multi-jurisdictional approach to "base erosion and profit shifting" by multinational companies. Multiple member jurisdictions, including the United States, have begun implementing recommended changes such as proposed country by country reporting beginning as early as 2016. Additional multilateral changes are anticipated in upcoming years. Any changes to national or international tax laws could impact the tax treatment of Expedia's and Bodybuilding's foreign earnings and adversely affect their profitability. Expedia's and Bodybuilding's effective tax rates in the future could also be adversely affected by changes to their operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or the discontinuance of beneficial tax arrangements in certain jurisdictions.

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        Expedia and Bodybuilding continue to work with relevant authorities and legislators to clarify their obligations under existing, new and emerging tax laws and regulations.

         Expedia and Bodybuilding are involved in various legal proceedings and may experience unfavorable outcomes, which could adversely affect their businesses and financial condition.

        Expedia is involved in various legal proceedings and claims involving taxes, property, personal injury, contract, alleged infringement of third-party intellectual property rights, antitrust, consumer protection, securities laws, and other claims. Bodybuilding may be subject to intellectual property litigation and infringement claims initiated by others, other competitors or entities may assert rights in, or ownership of, its trademarks and other intellectual property rights or in marks that are similar to Bodybuilding's, and it may not be able to successfully resolve these types of conflicts to its satisfaction. These matters may involve claims for substantial amounts of money or for other relief that might necessitate changes to Expedia's or Bodybuilding's business or operations. The defense of these actions is and will likely continue to be both time consuming and expensive and their outcomes cannot be predicted with certainty. Determining reserves for pending litigation is a complex, fact-intensive process that requires significant legal judgment. It is possible that unfavorable outcomes in one or more such proceedings could result in substantial payments that could adversely affect Expedia's or Bodybuilding's business, consolidated financial position, results of operations, or cash flows in a particular period.

         Uncertainties in global economic conditions and their impact on consumer spending patterns, particularly in the travel industry and in the sports nutrition segment, could materially and adversely impact Expedia's and Bodybuilding's operating results.

        Consumers may view a substantial portion of their spending on travel and Bodybuilding's product offerings as discretionary items rather than necessities. As a result, travel expenditures and sports nutrition expenditures are sensitive to personal and business-related discretionary spending levels and tend to decline or grow more slowly during economic downturns. Decreased travel expenditures and sports nutrition expenditures could reduce the demand for Expedia's and Bodybuilding's services, respectively, thereby causing a reduction in their revenue.

        For example, during regional or global recessions, domestic and global economic conditions can deteriorate rapidly, resulting in increased unemployment and a reduction in available budgets for both business and leisure travelers, which slows spending on the services Expedia provides and has a negative impact on its revenue growth. Additionally, if individual countries or regions experience deteriorating credit and economic conditions, and/or significant fluctuations of currency values relative to other currencies such as the U.S. dollar, it can lead to a negative impact on Expedia's foreign denominated net assets, gross bookings, revenues, operating expenses, and net income as expressed in U.S. dollars. Further economic weakness and uncertainty may result in significantly decreased spending on Expedia's services by both business and leisure travelers and on Bodybuilding's products by all consumers, which may have a material adverse impact on their businesses and financial performance. Geopolitical conflicts, significant fluctuations in currency values, sovereign debt issues and macroeconomic concerns are examples of events that contribute to a somewhat uncertain economic environment, which could have a negative impact on consumer spending in the future.

        Expedia's business is also sensitive to fluctuations in hotel supply, occupancy and ADRs, decreases in airline capacity, periodically rising airline ticket prices, or the imposition of taxes or surcharges by regulatory authorities, all of which Expedia has experienced historically.

        Other factors that could negatively affect Expedia's and Bodybuilding's businesses include:

    Significant changes in oil prices;

    Levels of unemployment;

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    Home foreclosures and changes in home values;

    Continued air carrier and hotel chain consolidation;

    Reduced access to discount airfares;

    Travel-related strikes or labor unrest, bankruptcies or liquidations;

    Incidents of actual or threatened terrorism;

    Periods of political instability or geopolitical conflict in which travelers become concerned about safety issues;

    Natural disasters or events such as severe weather conditions, volcanic eruptions, hurricanes or earthquakes;

    Travel-related accidents or the grounding of aircraft due to safety concerns; and

    Health-related risks, such as the Ebola, H1N1, SARs and avian flu outbreaks.

        Such concerns could result in a protracted decrease in demand for Expedia's travel services and Bodybuilding's products and services. This decrease in demand, depending on its scope and duration, together with any future issues affecting travel and food safety, could significantly and adversely affect Expedia's and Bodybuilding's respective businesses, working capital and financial performance over the short and long-term. In addition, the disruption of the existing travel plans of a significant number of travelers upon the occurrence of certain events, such as severe weather conditions, actual or threatened terrorist activity or war, could result in the incurrence of significant additional costs and decrease Expedia's revenues leading to constrained liquidity if Expedia, as it has done historically in the case of severe weather conditions, provides relief to affected travelers by refunding the price or fees associated with airline tickets, hotel reservations and other travel products and services.

         Expedia and Bodybuilding are subject to payments-related and fraud risks.

        Expedia has agreements with companies that process customer credit and debit card transactions, the volume of which are very large and continue to grow, for the facilitation of customer bookings of travel services from Expedia's travel suppliers. These agreements allow these processing companies, under certain conditions, to hold an amount of Expedia's cash (referred to as a holdback ) or require Expedia to otherwise post security equal to a portion of bookings that have been processed by that company. These processing companies may be entitled to a holdback or suspension of processing services upon the occurrence of specified events, including material adverse changes in Expedia's financial condition. An imposition of a holdback or suspension of processing services by one or more of Expedia's processing companies could materially reduce Expedia's liquidity. Moreover, there can be no assurances that the rates Expedia and Bodybuilding pay for the processing of customer credit and debit card transactions will not increase which could reduce Expedia's and Bodybuilding's revenue, thereby adversely affecting their businesses and financial performance.

        In addition, credit card networks, such as Visa, MasterCard and American Express, have adopted rules and regulations that apply to all merchants who process and accept credit cards and include the Payment Card Industry Data Security Standards ( PCI DSS ). Under these rules, Expedia and Bodybuilding are required to adopt and implement internal controls over the use, storage and security of card data. Expedia and Bodybuilding assess their compliance with the PCI DSS rules on a periodic basis and make necessary improvements to their internal controls. Failure to comply may subject Expedia and Bodybuilding to fines, penalties, damages and civil liability and could prevent them from processing or accepting credit cards.

        Expedia's and Bodybuilding's results of operations and financial positions have been negatively affected by their acceptance of fraudulent bookings made using credit and debit cards or fraudulently

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obtained loyalty points. Expedia and Bodybuilding are sometimes held liable for accepting fraudulent orders on their websites or other orders for which payment is subsequently disputed by their customers, both of which lead to the reversal of payments received by Expedia or Bodybuilding, as applicable, for such orders (referred to as a charge back ). Accordingly, Expedia and Bodybuilding calculate and record allowances for the resulting credit and debit card charge backs. Expedia's and Bodybuilding's abilities to detect and combat fraudulent schemes, which have become increasingly common and sophisticated, may be negatively impacted by the adoption of new payment methods, the emergence and innovation of new technology platforms, including smartphones and tablet computers, and global expansion, including into markets with a history of elevated fraudulent activity. If Expedia and Bodybuilding are unable to effectively combat fraudulent orders on their websites or mobile applications or if they otherwise experience increased levels of charge backs, Expedia's and Bodybuilding's respective results of operations and financial positions could be materially adversely affected.

        In addition, when onboarding suppliers to Expedia's websites, Expedia may fail to identify falsified or stolen supplier credentials, which may result in fraudulent bookings or unauthorized access to personal or confidential information of users of its websites and mobile applications. A fraudulent supplier scheme could also result in negative publicity, damage to Expedia's reputation, and could cause users of its websites and mobile applications to lose confidence in the quality of its services. Any of these events would have a negative effect on the value of Expedia's brands, which could have an adverse impact on its financial performance.

         Expedia has foreign exchange risk.

        Expedia conducts a significant and growing portion of its business outside the United States. As a result, it faces exposure to movements in currency exchange rates, particularly those related to the British pound sterling, euro, Canadian dollar, Australian dollar, Thai baht, Brazilian real, and Nordic currencies.

        These exposures include but are not limited to re-measurement gains and losses from changes in the value of foreign denominated monetary assets and liabilities; translation gains and losses on foreign subsidiary financial results that are translated into U.S. dollars upon consolidation; fluctuations in hotel revenue due to relative currency movements from the time of booking to the time of stay; planning risk related to changes in exchange rates between the time Expedia prepares its annual and quarterly forecasts and when actual results occur; and the impact of relative exchange rate movements on cross-border travel such as from Europe to the United States and the United States to Europe.

        Depending on the size of the exposures and the relative movements of exchange rates, if Expedia chooses not to hedge or fails to hedge effectively its exposure, it could experience a material adverse effect on its financial statements and financial condition. As seen in some recent periods, in the event of severe volatility in exchange rates these exposures can increase, and the impact on Expedia's results of operations can be more pronounced. In addition, the current environment and the increasingly global nature of Expedia's business have made hedging these exposures more complex. Expedia has increased and plans to continue increasing the scope, complexity and duration of its foreign exchange risk management. Expedia makes a number of estimates in conducting hedging activities including in some cases cancellations and payments in foreign currencies. In addition, an effective exchange rate hedging program is dependent upon effective systems, accurate and reliable data sources, controls and change management procedures. In the event Expedia's estimates differ significantly from actual results or if it fails to adopt effective hedging processes, Expedia could experience greater volatility as a result of its hedging activities.

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         Expedia's stock price is highly volatile.

        The market price of Expedia's common stock is highly volatile and could continue to be subject to wide fluctuations in response to factors such as the following, some of which are beyond its control:

    Quarterly variations in its operating and financial results;

    Operating and financial results that vary from the expectations of securities analysts and investors, including failure to deliver returns on technology or emerging market marketing investments;

    Changes in expectations as to Expedia's future financial performance, including financial estimates by securities analysts and investors;

    Rating agency credit rating actions or pronouncements;

    Reaction to Expedia's earnings releases and conference calls, or presentations by executives at investor and industry conferences;

    Worldwide macro-economic conditions and fluctuations in currency exchange rates;

    Changes in Expedia's capital or governance structure;

    Changes in market valuations of other internet or online service companies;

    Changes in search industry dynamics, such as key word pricing and traffic, or other changes that negatively affect Expedia's ability to generate traffic to its websites;

    Announcements of dividends or changes in the amount or frequency of Expedia's dividends;

    Announcements of technological innovations or new services by Expedia or its competitors;

    Announcements by Expedia or its competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

    Loss of a major travel supplier, such as an airline, hotel or car rental chain;

    Changes in the status of Expedia's intellectual property rights;

    Lack of success in the expansion of Expedia's business model geographically;

    Significant claims or proceedings against Expedia or adverse developments or decisions in pending proceedings;

    Significant security breaches;

    Additions or departures of key personnel;

    Rumors or public speculation about any of the above factors; and

    Price and volume fluctuations in the stock markets in general.

        Volatility in Expedia's stock price could also make it less attractive to certain investors, and/or invite speculative trading in its common stock or debt instruments.

         Expedia may experience constraints in its liquidity and may be unable to access capital when necessary or desirable, either of which could harm its financial position.

        Expedia is accumulating a greater portion of its cash flows in foreign jurisdictions than previously and any repatriation of such funds for use in the United States, including for corporate purposes such as acquisitions, stock repurchases, dividends or debt refinancings, would likely result in additional U.S. income tax expense. In addition, Expedia has experienced, and may experience in the future, declines

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in seasonal liquidity and capital provided by its merchant hotel business, which has historically provided a meaningful portion of its operating cash flow and is dependent on several factors, including the rate of growth of Expedia's merchant hotel business and the relative growth of businesses which consume rather than generate working capital, such as its agency hotel, advertising and managed corporate travel businesses and payment terms with suppliers. Expedia also continued to see growth in both its merchant and agency hotel products. To the extent its merchant hotel business stopped growing or began to decline, it would likely result in pressure on Expedia's working capital cash balances, cash flow over time and liquidity. Moreover, Expedia expended significant resources in 2015 in acquiring and investing in a number of companies, including Orbitz, Decolar.com and HomeAway and certain assets of Travelocity and it may be obligated to expend significant additional resources in 2016 in connection with certain "put" rights associated with its majority investment in trivago, which rights are exercisable by trivago's current shareholders in 2016.

        The availability of funds depends in significant measure on capital markets and liquidity factors over which Expedia exerts no control. In light of periodic uncertainty in the capital and credit markets, Expedia can provide no assurance that sufficient financing will be available on desirable or even any terms to fund investments, acquisitions, stock repurchases, dividends, debt refinancing or extraordinary actions or that its counterparties in any such financings would honor their contractual commitments. In addition, any downgrade of Expedia's debt ratings by Standard & Poor's, Moody's Investor Service, Fitch or similar ratings agencies, increases in general interest rate levels and credit spreads or overall weakening in the credit markets could increase its cost of capital.

         System interruptions, security breaches and the lack of redundancy in Expedia's and Bodybuilding's respective information systems may harm their businesses.

        Expedia and Bodybuilding rely on information technology systems, including the Internet and third-party hosted services, to support a variety of business processes and activities and to store sensitive data, including booking and purchase transactions, intellectual property, proprietary business information and that of its suppliers and business partners, personally identifiable information of its customers and employees, and data with respect to invoicing and the collection of payments, accounting, procurement, and supply chain activities. In addition, Expedia relies on its information technology systems to process financial information and results of operations for internal reporting purposes and to comply with financial reporting, legal, and tax requirements. Bodybuilding relies extensively on information systems for its ecommerce business, supply chain, manufacturing operations, financial reporting, human resources and various other processes and transactions.

        The risk of a cybersecurity-related attack, intrusion, or disruption, including by criminal organizations, hacktivists, foreign governments, and terrorists, is persistent. Additionally, as Expedia continues to integrate its acquired companies, such as Orbitz, into its information technology systems, it may increase the risk of these system interruptions. Expedia and Bodybuilding have experienced and may in the future experience system interruptions that make some or all of these systems unavailable or prevent them from efficiently fulfilling orders or providing services to third parties. These interruptions could include security intrusions, attacks on systems for fraud or service interruption, computer and telecommunications failures and natural events. Significant interruptions, outages or delays in their internal systems, or systems of third parties that they rely upon, and network access, or deterioration in the performance of such systems, would impair their ability to process transactions, decrease the quality of service that they can offer to customers, damage their reputation and brands, increase their costs and/or cause losses.

        Potential security breaches to Expedia's or Bodybuilding's systems or the systems of their service providers, whether resulting from internal or external sources, could significantly harm their respective businesses. Both Expedia and Bodybuilding devote resources to network security, monitoring and testing, employee training and other security measures, but there can be no guarantee that these

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security measures will prevent all possible security breaches or attacks. A party, whether internal or external, that is able to circumvent Expedia's or Bodybuilding's security systems could misappropriate customer or employee information, intellectual property, proprietary information or other business and financial data or cause significant interruptions in their operations. Expedia and Bodybuilding may need to expend significant resources to protect against security breaches or to address problems caused by breaches, and reductions in website availability could cause a loss of substantial business volume during the occurrence of any such incident. Because the techniques used to sabotage security change frequently, often are not recognized until launched against a target and may originate from less regulated and remote areas around the world, Expedia and Bodybuilding may be unable to proactively address these techniques or to implement adequate preventive measures. Security breaches could result in negative publicity, damage to reputation, exposure to risk of loss or litigation and possible liability due to regulatory penalties and sanctions or pursuant to contractual arrangements with payment card processors for associated expenses and penalties. Security breaches could also cause customers and potential users of Expedia and Bodybuilding and their respective business partners to lose confidence in their security, which would have a negative effect on the value of their brands. Failure to adequately protect against attacks or intrusions, whether for Expedia's or Bodybuilding's own systems or systems of vendors, could expose them to security breaches that could have an adverse impact on financial performance.

        In addition, no assurance can be given that Expedia's or Bodybuilding's backup systems or contingency plans will sustain critical aspects of their operations or business processes in all circumstances, many other systems are not fully redundant and their disaster recovery or business continuity planning may not be sufficient. Fire, flood, power loss, telecommunications failure, break-ins, earthquakes, acts of war or terrorism, acts of God, computer viruses, electronic intrusion attempts from both external and internal sources and similar events or disruptions may damage or impact or interrupt computer or communications systems or business processes at any time. Any of these events could cause system interruption, delays and loss of critical data, and could prevent Expedia or Bodybuilding from providing services to their customers and/or third parties for a significant period of time. Remediation may be costly and Expedia and Bodybuilding may not have adequate insurance to cover such costs. Moreover, the costs of enhancing infrastructure to attain improved stability and redundancy may be time consuming and expensive and may require resources and expertise that are difficult to obtain.

         Expedia and Bodybuilding process, store and use personal information, payment card information and other consumer data, which subjects them to risks stemming from possible failure to comply with governmental regulation and other legal obligations.

        Expedia and Bodybuilding may acquire personal or confidential information from users of their websites and mobile applications. There are numerous laws, regulations and policies in the U.S. and foreign jurisdictions regarding privacy and the storing, sharing, use, processing, disclosure and protection of personal information, payment card information and other consumer data, the scope of which is changing, subject to differing interpretations, and may be inconsistent between countries or conflict with other rules. Expedia and Bodybuilding strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection. It is possible, however, that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or the practices of the companies. Any failure or perceived failure by Expedia, Bodybuilding or their service providers to comply with the privacy policies, privacy related obligations to users or other third parties, or privacy related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information, payment card information or other consumer data, may result in governmental enforcement actions, litigation or public statements against Expedia or Bodybuilding, as applicable, by consumer advocacy groups or others and could cause Expedia's and Bodybuilding's

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customers and members to lose trust in them, as well as subject them to bank fines, penalties or increased transaction costs, all of which could have an adverse effect on their respective businesses.

        The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the internet have recently come under increased public scrutiny. The U.S. Congress and federal agencies, including the FTC and the Department of Commerce, are reviewing the need for greater regulation for the collection and use of information concerning consumer behavior on the internet, including regulation aimed at restricting certain targeted advertising practices. U.S. courts are also considering the applicability of existing federal and state statutes, including computer trespass and wiretapping laws, to the collection and exchange of information online. In addition, the European Court of Justice's invalidation of the U.S.-EU Safe Harbor Framework could make it more difficult for Expedia to transfer data outside of the European Union for processing and the European Union's reforms to its existing data protection legal framework, may result in a greater compliance burden for companies, including Expedia, with users in Europe and increased costs of compliance. European Union and U.S. authorities reached agreement on February 2, 2016 on a new data transfer framework called the EU-U.S. Privacy Shield, which was formally adopted by the European Commission on July 12, 2016. The European Union and the U.S. must implement the new framework, which may be subject to legal challenge. Finally, countries in other regions, most notably Asia, Eastern Europe and Latin America, are increasingly implementing new privacy regulations, resulting in additional compliance burdens and uncertainty as to how some of these laws will be interpreted.

         Expedia relies on the performance of highly skilled personnel and, if it is unable to retain or motivate key personnel or hire, retain and motivate qualified personnel, its business would be harmed.

        Expedia's performance is largely dependent on the talents and efforts of highly skilled individuals. Expedia's future success depends on its continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of its organization. In particular, the contributions of Barry Diller, Expedia's Chairman and Senior Executive, and Dara Khosrowshahi, its Chief Executive Officer, are critical to the overall management of the company. Expedia's future success will depend on the performance of its senior management and key employees. Expedia cannot ensure that it will be able to retain the services of Mr. Diller, Mr. Khosrowshahi or any other member of its senior management or key employees, the loss of whom could seriously harm its business. Competition for well-qualified employees in certain aspects of Expedia's business, including software engineers, developers, product management personnel, development personnel, and other technology professionals, also remains intense.

        Expedia's continued ability to compete effectively depends on its ability to attract new employees and to retain and motivate its existing employees. If Expedia does not succeed in attracting well-qualified employees or retaining or motivating existing employees, its business would be adversely affected. Expedia does not maintain any key person life insurance policies.

        Expedia has in the past, and may again in the future, restructure portions of its global workforce to simplify and streamline its organization, improve its cost structure and strengthen its overall businesses. These changes could affect employee morale and productivity and be disruptive to Expedia's business and financial performance.

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

        Mr. Diller serves as Expedia's Chairman of the Board of Directors and Senior Executive, while retaining his role as Chairman of the Board of Directors and Senior Executive of IAC/InterActiveCorp

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( IAC ), and Mr. Victor Kaufman serves as Vice Chairman of both Expedia and IAC. The fact that Mr. Diller and Mr. Kaufman hold positions with and securities of both companies could create, or appear to create, potential conflicts of interest for them when facing decisions that may affect both IAC and Expedia. They may also face conflicts of interest with regard to the allocation of their time between the companies.

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

         Expedia and Bodybuilding work closely with various business partners and rely on third-parties for many systems and services, and therefore could be harmed by their activities.

        Expedia and Bodybuilding could be harmed by the activities of third parties that they do not control. Expedia and Bodybuilding work closely with business partners, including in connection with significant commercial arrangements and joint ventures, and, in the case of Expedia, through its Expedia Affiliate Network business. Expedia and Bodybuilding also rely on third-party service providers for certain customer care, fulfillment, processing, systems development, technology and other services, including, increasingly, travel care (in the case of Expedia) and information technology services. If these partners or third-party service providers experience difficulty or fail to meet Expedia's or Bodybuilding's respective requirements or standards or the requirements or standards of governmental authorities, it could damage Expedia's and Bodybuilding's respective reputations, make it difficult for them to operate some aspects of their respective businesses, or expose Expedia and Bodybuilding to liability for their actions which could have an adverse impact on Expedia's and Bodybuilding's respective business and financial performance. Likewise, if the third-party service providers on which Expedia and Bodybuilding rely were to cease operations, temporarily or permanently, face financial distress or other business disruption, Expedia and Bodybuilding could suffer increased costs and delays in their ability to provide similar services until an equivalent service provider could be found or Expedia and Bodybuilding could develop replacement technology or operations, any of which could also have an adverse impact on Expedia's and Bodybuilding's respective business and financial performance.

         Expedia is exposed to various counterparty risks.

        Expedia is exposed to the risk that various counterparties, including financial entities, will fail to perform. This creates risk in a number of areas, including with respect to Expedia's bank deposits and investments, foreign exchange risk management, insurance coverages, and letters of credit. As it relates to deposits, as of December 31, 2015, Expedia held cash in bank depository accounts of approximately $1.6 billion (primarily in Bank of America, BNP Paribas, HSBC, JPMorgan Chase, Royal Bank of Canada and Standard Chartered Bank) and held time deposits of approximately $29 million at financial institutions including, JPMorgan Chase and Nordea. Additionally, majority-owned subsidiaries of Expedia held cash of approximately $71 million (primarily in Deutsche Bank and Citibank). As it relates to foreign exchange, as of December 31, 2015, Expedia was party to forward contracts with a notional value of approximately $1.9 billion, the fair value of which was approximately $8 million. The counterparties to these contracts were Credit Suisse International, Standard Chartered Bank, Goldman Sachs Bank, JPMorgan Chase, Bank of America, US Bank, Barclays Bank PLC, BNP Paribas, Wells

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Fargo, Royal Bank of Canada, Societe Generale, Bank of Tokyo-Mitsubishi, Citibank and HSBC. Expedia employs forward contracts to hedge a portion of its exposure to foreign currency exchange rate fluctuations. At the end of the deposit term or upon the maturity of the forward contracts, the counterparties are obligated, or potentially obligated in the case of forward contracts, to return Expedia's funds or pay Expedia net settlement values. If any of these counterparties were to liquidate, declare bankruptcy or otherwise cease operations, it may not be able to satisfy its obligations under these time deposits or forward contracts.

        In addition, due to instability in the economy Expedia also faces increased credit risk and payment delays from its non-financial contract counterparties.

         Expedia has significant indebtedness, which could adversely affect its business and financial condition

        Expedia has outstanding long-term indebtedness with a face value of $3.2 billion, and it has a $1.5 billion unsecured revolving credit facility. Risks relating to Expedia's indebtedness include:

    Increasing Expedia's vulnerability to general adverse economic and industry conditions;

    Requiring Expedia to dedicate a portion of its cash flow from operations to payments on its indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes;

    Making it difficult for Expedia to optimally capitalize and manage the cash flow for its businesses;

    Limiting Expedia's flexibility in planning for, or reacting to, changes in its businesses and the markets in which it operates;

    Placing Expedia at a competitive disadvantage compared to its competitors that have less debt; and

    Limiting Expedia's ability to borrow additional funds or to borrow funds at rates or on other terms we find acceptable.

        The agreements governing Expedia's indebtedness contain various covenants that may limit its ability to effectively operate its businesses, including those that restrict its ability to, among other things:

    Borrow money, and guarantee or provide other support for indebtedness of third parties including guarantees;

    Pay dividends on, redeem or repurchase Expedia's capital stock;

    Enter into certain asset sale transactions, including partial or full spin-off transactions;

    Enter into secured financing arrangements;

    Enter into sale and leaseback transactions; and

    Enter into unrelated businesses.

        In addition, Expedia's credit facility requires that it meet certain financial tests, including an interest coverage test and a leverage ratio test.

        Any failure to comply with the restrictions of Expedia's credit facility or any agreement governing its other indebtedness may result in an event of default under those agreements. Such default may allow the creditors to accelerate the related debt, which acceleration may trigger cross-acceleration or cross-default provisions in other debt. In addition, lenders may be able to terminate any commitments they had made to supply Expedia with further funds (including periodic rollovers of existing

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borrowings). In addition, it is possible that Expedia may need to incur additional indebtedness in the future in the ordinary course of business. The terms of Expedia's credit facility and the indentures governing its outstanding senior notes allow it to incur additional debt subject to certain limitations. If new debt is added to current debt levels, the risks described above could intensify.

         Expedia and Bodybuilding cannot be sure that their intellectual property and proprietary information is protected from copying or use by others, including potential competitors.

        Expedia's and Bodybuilding's websites and mobile applications rely on content, brands and technology, much of which is proprietary. Expedia and Bodybuilding establish and protect their intellectual property by relying on a combination of trademark, copyright, trade secret and patent laws in the U.S. and other jurisdictions, license and confidentiality agreements, and internal policies and procedures. In connection with Expedia's and Bodybuilding's license agreements with third parties, they seek to control access to, and the use and distribution of, their proprietary information and intellectual property. Even with these precautions, however, it may be possible for another party to copy or otherwise obtain and use Expedia's or Bodybuilding's intellectual property without their authorization or to develop similar intellectual property independently. Effective trademark, copyright, patent and trade secret protection may not be available in every jurisdiction in which Expedia's and Bodybuilding's services are made available, and policing unauthorized use of intellectual property is difficult and expensive. Expedia and Bodybuilding cannot be sure that the steps they have taken will prevent misappropriation or infringement of their respective intellectual property. Any misappropriation or violation of these rights could have a material adverse effect on Expedia's and Bodybuilding's respective businesses. Furthermore, Expedia or Bodybuilding may need to go to court or other tribunals to enforce their intellectual property rights, to protect their trade secrets or to determine the validity and scope of the proprietary rights of others. These proceedings might result in substantial costs and diversion of resources and management attention.

        Expedia currently licenses from third parties some of the technologies, content and brands incorporated into its websites. As it continues to introduce new services that incorporate new technologies, content and brands, Expedia may be required to license additional technology, content or brands. Expedia cannot be sure that such technology, content and brand licenses will be available on commercially reasonable terms, if at all.

         Bodybuilding operates in a highly competitive industry and its failure to compete effectively could materially and adversely affect its sales and growth prospects.

        Bodybuilding competes primarily against other specialty retailers, supermarkets, drugstores, mass merchants, multi-level marketing organizations and mail order companies. This market is sensitive to the introduction of new products, which may rapidly capture a significant share of the market. As certain products become more mainstream, Bodybuilding experiences increased competition for those products. For example, as the trend in favor of whey protein products developed, it experienced increased competition for whey protein products from supermarkets, drug stores, mass merchants and other food companies. Increased competition from companies that distribute through retail, e-commerce or wholesale channels could have a material adverse effect on Bodybuilding's financial condition and results of operations. Certain of Bodybuilding's competitors may have significantly greater financial, technical and marketing resources. In addition, Bodybuilding's competitors may be more effective and efficient in introducing new products. Bodybuilding may not be able to compete effectively, and any of the factors listed above may cause price reductions, reduced margins and losses of market share.

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         Bodybuilding's failure to appropriately and timely respond to changing consumer preferences and demand for new products and services could significantly harm its customer relationships and its business, financial condition and results of operations.

        Bodybuilding's performance is affected by industry trends including, among others, demographic trends and health and lifestyle preferences, as well as other factors, such as industry media coverage and governmental actions. For example, this industry is subject to potential regulatory activity and other legal matters that could affect the credibility of a given product or category of products. Consumer trends and their overall impact on consumer spending and limited product innovation and introductions in the vitamin, mineral and supplement ( VMS ) industry can dramatically affect purchasing patterns. Additionally, Bodybuilding's performance is affected by competitive trends such as the entry of new competitors, changes in promotional strategies or expansion of product assortment by various competitors.

        Sales of sports nutrition products are generally more sensitive to consumer trends, such as increased demand for products recommended by the media, resulting in higher volatility than other products. Accordingly, Bodybuilding launches new sports nutrition products on an ongoing basis in response to prevailing market conditions and consumer demands.

        Bodybuilding relies on consumer perception regarding the safety, quality and effectiveness of the supplement products it sells, as well as similar products distributed by other companies. Consumer perception of products can be significantly influenced by adverse publicity in the form of published scientific research, national media attention or other publicity, whether or not accurate, that associates consumption of Bodybuilding's products or any other similar products with illness or other adverse effects, or questions the benefits of Bodybuilding's products or other similar products or that claims that any such products are ineffective. Future scientific research or publicity could be unfavorable to the industry or any of Bodybuilding's specific products and may not be consistent with earlier favorable research or publicity. Unfavorable research or publicity could have a material adverse effect on Bodybuilding's ability to generate sales.

        Bodybuilding's business is subject to changing consumer trends and preferences. Any failure to accurately predict or react to these trends could negatively impact consumer opinion of Bodybuilding as a source for the latest products, which in turn could harm its customer relationships and cause it to lose market share. The success of Bodybuilding's product offerings depends upon a number of factors, including its ability to:

    anticipate customer needs;

    successfully introduce new products in a timely manner;

    price its products competitively;

    deliver its products in sufficient volumes and in a timely manner; and

    differentiate its product offerings from those of its competitors.

         Bodybuilding may be subject to material product liability claims if people or property are harmed by the products it sells, which could increase its costs and adversely affect its reputation, revenues and operating income.

        Some of the products Bodybuilding sells, distributes or manufactures may expose it to product liability claims relating to personal injury, death, or environmental or property damage, and may require product recalls or other actions. Bodybuilding's products consist of vitamins, minerals, herbs and other ingredients that are classified as foods or dietary supplements and are not subject to pre-market regulatory approval in the United States. These products could contain contaminated substances, and some of the products contain ingredients that do not have long histories of human

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consumption. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur.

        In addition, third-party manufacturers produce many of the products Bodybuilding sells. Bodybuilding relies on these manufacturers to ensure the integrity of their ingredients and formulations. As a distributor of products manufactured by third parties, Bodybuilding may also be liable for various product liability claims for products it does not manufacture. Moreover, as a practical matter, indemnification from a product supplier is dependent on the creditworthiness of the indemnifying party and its insurer, and the absence of significant defenses by the insurers. Bodybuilding may be unable to obtain full recovery from the insurer or any indemnifying third-party in respect of any claims against it in connection with products manufactured by such third-party.

        Even with adequate insurance and indemnification, product liability claims could significantly damage Bodybuilding's reputation and consumer confidence in its products. Bodybuilding's litigation expenses could increase as well, which also could have a material adverse effect on its results of operations even if a product liability claim is unsuccessful or is not fully pursued.

         Bodybuilding may experience product recalls, withdrawals or seizures, which could materially and adversely affect its business, financial condition and results of operations.

        Bodybuilding may initiate or participate in product recalls, withdrawals or seizures if any of the products it sells are believed to cause injury or illness or if Bodybuilding is alleged to have violated governmental regulations in the labeling, promotion, sale or distribution of those products. A significant product recall, withdrawal or seizure may require significant management attention, would likely result in substantial and unexpected costs and may materially and adversely affect Bodybuilding's business, financial condition and results of operations. Furthermore, a significant product recall, withdrawal or seizure may adversely affect consumer confidence in its brands and third-party brands sold by Bodybuilding and thus decrease consumer demand for products sold by Bodybuilding.

        As is common in the VMS industry, Bodybuilding relies on its contract manufacturers and suppliers to ensure that the products they manufacture and sell to Bodybuilding comply with all applicable regulatory and legislative requirements. In general, Bodybuilding seeks representations and warranties, indemnification and insurance from its contract manufacturers and suppliers. However, even with adequate insurance and indemnification, any claims of non-compliance could significantly damage Bodybuilding's reputation and consumer confidence in its products. In addition, if products offered for sale by Bodybuilding do not comply with applicable regulatory, statutory and legislative requirements, Bodybuilding cannot market such products and may be required to recall or remove such products from the market and may face lawsuits related to any alleged non-compliance, which in certain cases could materially and adversely affect Bodybuilding's business, financial condition and results of operations.

         Increases in the prices of key raw materials or shortages of such materials could materially and adversely affect Bodybuilding's business, financial condition and results of operations.

        Bodybuilding's products are composed of certain key raw materials. If the prices of these raw materials were to increase significantly, it could result in a significant increase in the prices charged to Bodybuilding for its own branded products and third-party products. Raw material prices may increase in the future and Bodybuilding may not be able to pass on those increases to customers who purchase the products it sells. A significant increase in the price of raw materials that cannot be passed on to customers could have a material adverse effect on Bodybuilding's business, financial condition and results of operations.

        Bodybuilding expects supplies of raw materials to meet its specifications. If any raw material is adulterated or does not meet Bodybuilding's specifications, it could significantly impact Bodybuilding's

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contract manufacturers ability to produce products and could materially and adversely affect its business, financial condition and results of operations.

        In addition, if Bodybuilding is no longer able to obtain products from one or more of its suppliers on reasonable terms, its customer relationships could be materially and adversely affected. Events such as terrorist attacks, civil unrest or war, or the perceived threat thereof, may also have a significant adverse effect on the availability of raw materials essential to the manufacturing of Bodybuilding's products, which could have a material adverse effect on its business, financial condition and results of operations.

         Compliance with governmental regulations could increase Bodybuilding's costs significantly and adversely affect its operating income.

        The processing, formulation, manufacturing, packaging, labeling, advertising and distribution of Bodybuilding's products and the products that it manufactures for third parties are subject to federal law and regulation by one or more federal agencies, including the FDA, FTC, U.S. Department of Agriculture and U.S. Environmental Protection Agency. These activities are also regulated by various state, local and international laws and authorities in the jurisdictions in which Bodybuilding's products and the products that it manufactures for third parties are sold. Regulatory authorities may prevent or delay the introduction of new products or require reformulation of existing products, which could result in lost sales and/or increased costs. A regulatory authority may determine that a Bodybuilding product or product ingredient presents an unacceptable health risk or may determine that a statement of nutritional support for its products, or third party products sold by Bodybuilding, is an unsubstantiated claim or an unauthorized food "health claim." Any such regulatory determination could adversely affect Bodybuilding's sales of those products.

         If Bodybuilding does not successfully optimize and operate its fulfillment centers, its business could be materially and adversely affected.

        If Bodybuilding does not adequately predict customer demand or otherwise optimize and operate its fulfillment centers successfully or efficiently, excess or insufficient fulfillment center capacity could result in increased costs, impairment charges, or both, or harm its business in other ways. In addition, a failure to optimize inventory in Bodybuilding's fulfillment centers could increase net shipping costs by requiring long-zone or partial shipments.

        Bodybuilding relies on a limited number of shipping companies to deliver inventory to it and ship orders to customers. If Bodybuilding is not able to negotiate acceptable terms with these companies or they experience performance problems or other difficulties, it could negatively impact Bodybuilding's operating results and customer experience. In addition, Bodybuilding's ability to receive inbound inventory efficiently and ship completed orders to customers also may be materially and adversely affected by inclement weather, fire, flood, power loss, earthquakes, labor disputes, acts of war or terrorism, acts of God and other similar factors.

         Bodybuilding faces significant inventory risk.

        Bodybuilding is exposed to significant inventory risks as a result of, among other factors, seasonality, new product launches, raw ingredient supply shortages, rapid changes in product cycles and pricing, defective merchandise, changes in consumer demand and consumer spending patterns and changes in consumer tastes with respect to its products, each of which may adversely affect its operating results. Bodybuilding endeavors to accurately predict these trends and avoid overstocking or understocking products it sells. Demand for products, however, can change significantly between the time inventory or components are ordered and the date of sale.

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         A significant disruption to Bodybuilding's delivery network could adversely impact sales or increase its costs, which could decrease its profits.

        Because Bodybuilding relies on FedEx, DHL, the U.S. Postal Service and regional carriers such as OnTrac and LaserShip to deliver most of the small parcel products it offers on its sites, it is subject to shipping delays or disruptions caused by inclement weather, natural disasters, labor activism, health epidemics or bioterrorism. In addition, because it relies on such national and regional major transportation companies for the delivery of some of its other products, Bodybuilding is also subject to risks of breakage or other damage during delivery by any of these third parties. If Bodybuilding is not able to deliver products in a timely fashion or products are damaged during the delivery process, its customers could become dissatisfied and cease buying products through its sites, which would adversely affect its business, financial condition and results of operations.

         Bodybuilding's business relies on email and other messaging services, and any restrictions on the sending of emails or messages or an inability to timely deliver such communications could adversely affect its business, financial condition and results of operations.

        Bodybuilding's business is highly dependent upon email and other messaging services for promoting its sites and products. Bodybuilding provides emails and other "push" communications to customers and other visitors informing them of what is available for purchase on its site that day, and believes these messages are an important part of its marketing and generate a substantial portion of its revenue. If Bodybuilding is unable to successfully deliver emails or other messages to its subscribers, or if subscribers decline to open its emails or other messages, its revenue and profitability would be materially and adversely affected. Changes in how webmail applications organize and prioritize email may also reduce the number of subscribers opening its emails. Actions by third parties to block, impose restrictions on or charge for the delivery of emails or other messages could also adversely impact Bodybuilding's business. From time to time, Internet service providers or other third parties may block bulk email transmissions or otherwise experience technical difficulties that result in Bodybuilding's inability to successfully deliver emails or other messages to third parties. Changes in the laws or regulations that limit its ability to send such communications or impose additional requirements upon Bodybuilding in connection with sending such communications would also materially and adversely impact its business. Bodybuilding's use of email and other messaging services to send communications about its site or other matters may also result in legal claims against it, which may cause increased expenses, and if successful may result in fines and orders with costly reporting and compliance obligations or may limit or prohibit its ability to send emails or other messages. Bodybuilding also relies on social networking messaging services to send communications and to encourage customers to send communications. Changes to the terms of these social networking services to limit promotional communications, any restrictions that would limit Bodybuilding's ability or its customers' ability to send communications through their services, disruptions or downtime experienced by these social networking services or decline in the use of or engagement with social networking may materially and adversely affect its business, financial condition and results of operations.

         Bodybuilding's user growth, engagement and monetization on mobile devices depends upon effective operation of mobile operating systems, networks and standards that it does not control.

        There is no guarantee that popular mobile devices will continue to feature Bodybuilding.com or Bodybuilding's other products, or that mobile device users will continue to use its products rather than competing products. Bodybuilding is dependent on the interoperability of Bodybuilding.com and its other products with popular mobile operating systems, networks, and standards that it does not control, such as the Android and iOS operating systems, and any changes in such systems, its relationships with mobile operating system partners, handset manufacturers, or mobile carriers, or in their terms of service or policies that degrade Bodybuilding's products' functionality, reduce or eliminate its ability to

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distribute its products, or give preferential treatment to competitive products, could adversely affect Bodybuilding.com usage and monetization on mobile devices. Additionally, in order to deliver high quality mobile products, it is important that Bodybuilding's products work well with a range of mobile technologies, systems, networks, and standards that it does not control, and that it has good relationships with handset manufacturers and mobile carriers. Bodybuilding may not be successful in maintaining or developing relationships with key participants in the mobile industry or in developing products that operate effectively with these technologies, systems, networks, or standards. In the event that it is more difficult for its users to access and use Bodybuilding.com or its other products on their mobile devices, or if Bodybuilding's users choose not to access or use Bodybuilding.com or its other products on their mobile devices or use mobile products that do not offer access to Bodybuilding.com or its other products, Bodybuilding's user growth and user engagement could be harmed. From time to time, Bodybuilding may also take actions regarding the distribution of its products or the operation of its business based on what it believes to be in its long-term best interests. Such actions may adversely affect its relationships with the operators of mobile operating systems, handset manufacturers, mobile carriers, or other business partners, and there is no assurance that these actions will result in the anticipated long-term benefits. In the event that Bodybuilding's relationships with such third parties deteriorate, its user growth, engagement, and monetization could be adversely affected and its business could be harmed.

        Bodybuilding believes that its ability to compete effectively through a mobile presence depends upon many factors both within and beyond its control, including:

    the popularity, usefulness, ease of use, performance, and reliability of its products compared to its competitors' products, particularly with respect to mobile applications;

    the size and composition of its user base;

    the engagement of its users with its products and competing products;

    the timing and market acceptance of products, including developments and enhancements to its or its competitors' products;

    its ability to monetize its products;

    customer service and support efforts;

    changes mandated by legislation, regulatory authorities or litigation, including settlements and consent decrees, some of which may have a disproportionate effect on Bodybuilding;

    acquisitions or consolidation within its industry, which may result in more formidable competitors;

    Bodybuilding's ability to attract, retain and motivate talented employees, particularly software engineers, designers and product managers;

    its ability to cost-effectively manage and grow its operations; and

    its reputation and brand strength relative to those of its competitors.

        If Bodybuilding is not able to compete effectively on mobile devices, its user base and level of user engagement may decrease, it may become less attractive to developers and marketers and its business, financial conditions and results of operations may be materially and adversely affected.

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         If Bodybuilding fails to retain existing users or add new users, or if its users decrease their level of engagement with its products, Bodybuilding's business, financial condition and results of operations may be significantly harmed.

        The size of Bodybuilding's user base and its users' level of engagement are critical to its success. Bodybuilding's financial performance has been and will continue to be significantly determined by its success in adding, retaining and engaging active users. If people do not perceive its products to be useful, reliable and trustworthy, Bodybuilding may not be able to attract or retain users or otherwise maintain or increase the frequency and duration of their engagement. Bodybuilding's user engagement patterns have changed over time, and user engagement can be difficult to measure, particularly as users continue to engage increasingly via mobile devices and as Bodybuilding introduces new and different products and services. Any number of factors could potentially negatively affect user retention, growth and engagement, including if:

    users increasingly engage with other products or services;

    Bodybuilding fails to introduce new products or services that users find engaging or if it introduces new products or services that are not favorably received;

    users have difficulty installing, updating or otherwise accessing its products on mobile devices;

    user behavior on any of Bodybuilding's products changes, including decreases in the quality and frequency of content shared on its products and services;

    Bodybuilding is unable to continue to develop products for mobile devices that users find engaging, that work with a variety of mobile operating systems and networks and that achieve a high level of market acceptance;

    there are decreases in user sentiment about the quality or usefulness of its products or concerns related to privacy and sharing, safety, security or other factors;

    Bodybuilding is unable to manage and prioritize information to ensure users are presented with content that is interesting, useful and relevant to them;

    users adopt new technologies where its products may be displaced in favor of other products or services, or may not be featured or otherwise available;

    there are adverse changes in Bodybuilding's products that are mandated by legislation, regulatory authorities or litigation, including settlements or consent decrees;

    technical or other problems prevent Bodybuilding from delivering its products in a rapid and reliable manner or otherwise affect the user experience, such as security breaches or failure to prevent or limit spam or similar content;

    Bodybuilding adopts policies or procedures related to areas such as sharing or user data that are perceived negatively by its users or the general public;

    it elects to focus its user growth and engagement efforts more on longer-term initiatives, or if initiatives designed to attract and retain users and engagement are unsuccessful or discontinued, whether as a result of actions by Bodybuilding, third parties or otherwise;

    Bodybuilding fails to provide adequate customer service to users, marketers or developers;

    developers whose products are integrated with Bodybuilding.com or other companies in its industry are the subject of adverse media reports or other negative publicity; or

    Bodybuilding's current or future products, such as its development tools and application programming interfaces that enable developers to build, grow and monetize mobile and web

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      applications, reduce user activity on Bodybuilding.com by making it easier for its users to interact and share on third-party mobile and web applications.

        Any of the above factors could have a material and adverse effect on Bodybuilding's business, financial condition and results of operations.

         Bodybuilding's inability to acquire, use or maintain the marks and domain names for its sites could substantially harm its business and results of operations.

        Bodybuilding is currently the registrant of marks for its brands in numerous jurisdictions and is the registrant of the Internet domain name for the websites of Bodybuilding.com. However, it has not registered its marks or domain names in all major international jurisdictions. Domain names generally are regulated by Internet regulatory bodies. If Bodybuilding does not have or cannot obtain on reasonable terms the ability to use its marks in a particular country, or to use or register its domain name, it could be forced either to incur significant additional expenses to market its products within that country, including the development of a new brand and the creation of new promotional materials and packaging, or to elect not to sell products in that country. Either result could materially and adversely affect Bodybuilding's business, financial condition and results of operations.

        Furthermore, the regulations governing domain names and laws protecting marks and similar proprietary rights could change in ways that block or interfere with Bodybuilding's ability to use relevant domains or its current brand. Also, Bodybuilding might not be able to prevent third parties from registering, using or retaining domain names that interfere with its consumer communications or infringe or otherwise decrease the value of its marks, domain names and other proprietary rights. Regulatory bodies also may establish additional generic or country-code top-level domains or may allow modifications of the requirements for registering, holding or using domain names. As a result, Bodybuilding might not be able to register, use or maintain the domain names that utilize the name Bodybuilding or its other brands in all of the countries in which it currently or intends to conduct business.

         The seasonality of Bodybuilding's business places increased strain on its operations.

        Bodybuilding derives significant sales during the first quarter of each year. If it does not stock or restock popular products in sufficient amounts such that it fails to meet customer demand, it could significantly affect its revenue and future growth. If it overstocks products, it may be required to take significant inventory markdowns or write-offs and incur commitment costs, which could reduce profitability. If too many customers access Bodybuilding's websites within a short period of time due to increased demand, it may experience system interruptions or site performance slowdown that make its website unavailable or prevent it from efficiently fulfilling orders, which may reduce the volume of products it sells and the attractiveness of its products and services. In addition, Bodybuilding may be unable to adequately staff its fulfillment and customer service centers during these peak periods.

         Bodybuilding may be unable to accurately forecast revenue and appropriately plan its expenses in the future.

        Revenue and operating results are difficult to forecast because they generally depend on the volume, timing and type of the orders Bodybuilding receives, all of which are uncertain. Bodybuilding bases a significant portion of its expense levels and investment plans on its estimates of total revenue and gross margins. Bodybuilding's business is affected by general economic and business conditions in the United States and in international markets. A significant portion of its expenses are fixed, and as a result, it may be unable to adjust its spending in a timely manner to compensate for any unexpected shortfall in net revenue. Any failure to accurately predict net revenue or gross margins could cause

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Bodybuilding's operating results to be lower than expected, which could materially and adversely affect its financial condition.

Factors Relating to the Split-Off and the Split-Off Proposals

         The Split-Off could result in a significant tax liability to Liberty Interactive and holders of Liberty Ventures common stock.

        It is a condition to the Split-Off that Liberty Interactive receive the opinion of Skadden Arps, in form and substance reasonably acceptable to Liberty Interactive, to the effect that, for U.S. federal income tax purposes, the Split-Off will qualify as a tax-free transaction to Liberty Interactive and holders of Liberty Ventures common stock under Section 355, Section 368(a)(1)(D) and related provisions of the Code (except with respect to the receipt of cash in lieu of fractional shares).

        The opinion of Skadden Arps will be based on the law in effect as of the date of the Split-Off and will rely upon certain assumptions, as well as statements, representations and certain undertakings made by officers of Liberty Interactive and Splitco and John C. Malone. These assumptions, statements, representations and undertakings are expected to relate to, among other things, Liberty Interactive's business reasons for engaging in the Split-Off, the conduct of certain business activities by Liberty Interactive and Splitco, and the plans and intentions of Liberty Interactive and Splitco to continue conducting those business activities and not to materially modify their ownership or capital structure following the Split-Off. If any of those statements, representations or assumptions is incorrect or untrue in any material respect or any of those undertakings is not complied with, or if the facts upon which the opinion is based are materially different from the facts that prevail at the time of the Split-Off, the conclusions reached in such opinion could be adversely affected.

        Liberty Interactive does not intend to seek a ruling from the Internal Revenue Service (the IRS ) as to the U.S. federal income tax treatment of the Split-Off. The opinion of Skadden Arps will not be binding on the IRS or a court, and there can be no assurance that the IRS will not challenge the conclusions reached in the opinion or that a court would not sustain such a challenge.

        Even if the Split-Off otherwise qualifies under Section 355, Section 368(a)(1)(D) and related provisions of the Code, the Split-Off would result in a significant U.S. federal income tax liability to Liberty Interactive (but not to holders of Liberty Ventures common stock) under Section 355(e) of the Code if one or more persons acquire, directly or indirectly, a 50-percent or greater interest (measured by either vote or value) in the stock of Liberty Interactive or in the stock of Splitco (excluding, for this purpose, the acquisition of Splitco common stock by holders of Liberty Ventures common stock in the Split-Off) as part of a plan or series of related transactions that includes the Split-Off. Any acquisition of the stock of Liberty Interactive or Splitco (or any successor corporation) within two years before or after the Split-Off generally would be presumed to be part of a plan that includes the Split-Off, although the parties may be able to rebut that presumption under certain circumstances. The process for determining whether an acquisition is part of a plan under these rules is complex, inherently factual in nature and subject to a comprehensive analysis of the facts and circumstances of the particular case. Notwithstanding the opinion of Skadden Arps described above, Liberty Interactive or Splitco might inadvertently cause or permit a prohibited change in ownership of Liberty Interactive or Splitco, thereby triggering tax liability to Liberty Interactive, which could have a material adverse effect.

        If, for any reason, it is subsequently determined that the Split-Off does not qualify for tax-free treatment (other than with respect to the receipt of cash in lieu of fractional shares), Liberty Interactive and/or holders of Liberty Ventures common stock could incur significant tax liabilities determined in the manner described in "The Split-Off and Redemption Proposal—U.S. Federal Income Tax Consequences of the Split-Off." As described further under "Certain Relationships and Related Party Transactions—Relationships Between Splitco and Liberty Interactive and/or Liberty Media—Tax

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Sharing Agreement," in certain circumstances, Splitco will be required to indemnify Liberty Interactive, its subsidiaries and certain related persons for taxes and losses resulting from the Split-Off.

        For a more complete discussion of the opinion of Skadden Arps and the material U.S. federal income tax consequences of the Split-Off to Liberty Interactive and holders of Liberty Ventures common stock, please see "The Split-Off and Redemption Proposal—U.S. Federal Income Tax Consequences of the Split-Off."

         We may have a significant indemnity obligation to Liberty Interactive, which is not limited in amount or subject to any cap, if the Split-Off is treated as a taxable transaction.

        Pursuant to the tax sharing agreement that we will enter into with Liberty Interactive in connection with the Split-Off (the tax sharing agreement ), we will be required to indemnify Liberty Interactive, its subsidiaries and certain related persons for taxes and losses resulting from the failure of the Split-Off to qualify as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Code to the extent that such taxes and losses (i) result primarily from, individually or in the aggregate, the breach of certain covenants made by our company (applicable to actions or failures to act by Splitco and its subsidiaries following the completion of the Split-Off) or (ii) result from the application of Section 355(e) of the Code to the Split-Off as a result of the treatment of the Split-Off as part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, a 50-percent or greater interest (measured by vote or value) in the stock of Splitco (or any successor corporation).

        Our indemnification obligations to Liberty Interactive, its subsidiaries and certain related persons will not be limited in amount or subject to any cap. If we are required to indemnify Liberty Interactive, its subsidiaries or such related persons under the circumstances set forth in the tax sharing agreement, we may be subject to substantial liabilities, which could materially adversely affect our financial position.

        For a more detailed discussion of the tax sharing agreement, please see "Certain Relationships and Related Party Transactions—Relationships Between Splitco and Liberty Interactive and/or Liberty Media—Tax Sharing Agreement."

         In certain circumstances, we may have a significant reimbursement obligation to Expedia pursuant to the terms of the Reimbursement Agreement.

        We have entered into a reimbursement agreement (the Reimbursement Agreement , including any amendments thereto) with Liberty Interactive and Expedia in connection with the Split-Off, pursuant to which Liberty Interactive and Splitco have agreed to reimburse Expedia for certain costs and expenses resulting from the Split-Off and the proxy arrangements that may be incurred by Expedia with respect to its Amended and Restated Credit Agreement, dated as of September 5, 2014, as amended (the Expedia Credit Agreement ), Expedia's 7.456% Senior Notes due 2018 (the 2018 Notes ) and Expedia's 5.95% Senior Notes due 2020 (the 2020 Notes ). These reimbursement obligations of Liberty Interactive and Splitco are capped at $45 million, subject to certain limited exceptions. For more information on the Reimbursement Agreement, see "Certain Relationships and Related Party Transactions—Relationships Among Splitco, the Malone Group, Diller and Expedia—Proxy Arrangements—Reimbursement Agreement." If we are required to provide reimbursements to Expedia pursuant to the Reimbursement Agreement, our cash position will be adversely affected.

         We may determine to forgo certain transactions in order to avoid the risk of incurring significant tax-related liabilities.

        Under the tax sharing agreement, we will covenant not to take any action, or fail to take any action, following the Split-Off, which action or failure to act is inconsistent with the Split-Off qualifying

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for tax-free treatment under Section 355, Section 368(a)(1)(D) and related provisions of the Code. Further, the tax sharing agreement will require that we generally indemnify Liberty Interactive for any taxes or losses incurred by Liberty Interactive (or its subsidiaries) resulting from breaches of such covenants or resulting from the application of Section 355(e) of the Code to the Split-Off as a result of the treatment of the Split-Off as part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, a 50-percent or greater interest (measured by vote or value) in the stock of our company (or any successor corporation).

        Generally, under Section 355(e) of the Code, an acquisition of our stock will be presumed to be part of a plan (or series of related transactions) with the Split-Off if such acquisition occurs within two years after the Split-Off (or if such stock is received in the Split-Off in exchange for Liberty Ventures common stock that was acquired within the two years before the Split-Off). This presumption, however, may be rebutted based upon an analysis of the facts and circumstances related to the Split-Off and the particular acquisition in question, including a weighing of certain plan and non-plan factors set forth in Treasury regulations promulgated under Section 355(e) of the Code. Further, these Treasury regulations provide certain safe harbors under which an acquisition will be deemed not to be part of a plan (or series of related transactions) with the Split-Off for purposes of Section 355(e) of the Code.

        In light of the requirements under Section 355 of the Code, including the factors and safe harbors described above, we might determine to forgo certain transactions that might otherwise be advantageous. In particular, we might determine to continue to operate certain of our business operations for the foreseeable future even if a sale or discontinuance of such business might otherwise be advantageous. Moreover, in light of the requirements of Section 355(e) of the Code, we might determine to forgo certain transactions, including share repurchases, stock issuances, certain asset dispositions and other strategic transactions, for some period of time following the Split-Off. In addition, our indemnity obligation under the tax sharing agreement might discourage, delay or prevent our entering into a change of control transaction for some period of time following the Split-Off.

         We may incur material costs as a result of our separation from Liberty Interactive.

        We will incur costs and expenses not previously incurred as a result of our separation from Liberty Interactive. These increased costs and expenses may arise from various factors, including financial reporting, costs associated with complying with the federal securities laws (including compliance with the Sarbanes-Oxley Act of 2002 ( Sarbanes-Oxley )), tax administration and human resources related functions. Although Liberty Media will continue to provide many of these services for us under the services agreement, we cannot assure you that the services agreement will continue or that these costs will not be material to our business.

         Prior to the Split-Off, we will not have been an independent company and we may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent company.

        Prior to the Split-Off, our business was operated by Liberty Interactive as part of its broader corporate organization, rather than as an independent company. Liberty Interactive's senior management oversaw the strategic direction of our businesses and Liberty Interactive (directly and through its services agreement with Liberty Media) performed various corporate functions for us, including, but not limited to:

    selected human resources related functions;

    tax administration;

    selected legal functions (including compliance with Sarbanes-Oxley), as well as external reporting;

    treasury administration, investor relations, internal audit and insurance functions; and

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    selected information technology and telecommunications services.

        Following the Split-Off, neither Liberty Interactive nor Liberty Media will have any obligation to provide these functions to us other than those services that will be provided by Liberty Media pursuant to the services agreement between us and Liberty Media. If, once our services agreement terminates, we do not have in place our own systems and business functions, we do not have agreements with other providers of these services or we are not able to make these changes cost effectively, we may not be able to operate our business effectively and our profitability may decline. If Liberty Media does not continue to perform effectively the services to be provided to us under the services agreement, we may not be able to operate our business effectively after the Split-Off.

         We may not realize the potential benefits from the Split-Off in the near term or at all.

        In this proxy statement/prospectus, we have described anticipated strategic and financial benefits we expect to realize as a result of our separation from Liberty Interactive. See "The Split-Off and Redemption Proposal—Reasons for the Split-Off." In particular, we believe that the Split-Off will better position us to take advantage of business opportunities, strategic alliances and other acquisitions through Splitco's enhanced acquisition currency, as well as increase our flexibility to pursue a potential combination of Splitco and Expedia. We also expect the Split-Off to enable Splitco to provide its employees with more attractive equity incentive awards. However, no assurance can be given that the market will react favorably to the Split-Off or that the current discount applied by the market to the Liberty Ventures common stock will not be applied to Splitco's common stock, thereby causing Splitco's equity to not be as attractive to its employees as well as any potential acquisition counterparties. In addition, no assurance can be given that any investment, acquisition or other strategic opportunities will become available following the Split-Off on terms that Splitco finds favorable or at all, nor can any assurance be given that a combination of Splitco and Expedia will ever occur. Given the added costs associated with the completion of the Split-Off, including the separate accounting, legal and other compliance costs of being a separate public company, our failure to realize the anticipated benefits of the Split-Off in the near term or at all could adversely affect our company.

         Our company has overlapping directors and officers with Liberty Interactive and Liberty Media, which may lead to conflicting interests.

        As a result of the Split-Off, the September 2011 separation of Starz from Liberty Interactive and the January 2013 spin-off of Liberty Media from Starz, most of the executive officers of Splitco also serve as executive officers of Liberty Interactive and Liberty Media and our Chairman of the Board is also the Chairman of the Board of Liberty Interactive. Following the Split-Off, John C. Malone will be the Chairman of the Board and a director of our company, Liberty Interactive and Liberty Media, and Christopher W. Shean will be the Chief Executive Officer, President and a director of our company, and Senior Vice President and Chief Financial Officer of Liberty Interactive and Liberty Media. None of these companies has any ownership interest in any of the others. Our executive officers and members of our company's board of directors have fiduciary duties to our stockholders. Likewise, any such persons who serve in similar capacities at Liberty Interactive or Liberty Media or any other public company have fiduciary duties to that company's stockholders. For example, there may be the potential for a conflict of interest when our company, Liberty Interactive or Liberty Media pursues corporate opportunities that may be suitable for each of them. Therefore, such persons may have conflicts of interest or the appearance of conflicts of interest with respect to matters involving or affecting more than one of the companies to which they owe fiduciary duties. Our company has renounced its rights to certain business opportunities and our restated charter will provide that no director or officer of our company will breach their fiduciary duty and therefore be liable to our company or its stockholders by reason of the fact that any such individual directs a corporate opportunity to another person or entity (including Liberty Interactive and Liberty Media) instead of our company, or does not refer or

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communicate information regarding such corporate opportunity to our company, unless (x) such opportunity was expressly offered to such person solely in his or her capacity as a director or officer of our company or as a director or officer of any of our subsidiaries, and (y) such opportunity relates to a line of business in which our company or any of its subsidiaries is then directly engaged. In addition, any potential conflict that qualifies as a "related party transaction" (as defined in Item 404 of Regulation S-K) is subject to review by an independent committee of the applicable issuer's board of directors in accordance with its corporate governance guidelines. Any other potential conflicts that arise will be addressed on a case-by-case basis, keeping in mind the applicable fiduciary duties owed by the executive officers and directors of each issuer. From time to time, we may enter into transactions with Liberty Interactive or Liberty Media and/or their respective subsidiaries or other affiliates. There can be no assurance that the terms of any such transactions will be as favorable to our company, Liberty Interactive, Liberty Media or any of their respective subsidiaries or affiliates as would be the case where there is no overlapping officer or director.

         Our inter-company agreements are being negotiated while we are a subsidiary of Liberty Interactive.

        We are entering into a number of inter-company agreements covering matters such as tax sharing and our responsibility for certain liabilities previously undertaken by Liberty Interactive for certain of our businesses. In addition, we are entering into a services agreement with Liberty Media pursuant to which it will provide to us certain management, administrative, financial, treasury, accounting, tax, legal and other services, for which we will pay Liberty Media a services fee. The terms of all of these agreements are being established while we are a wholly owned subsidiary of Liberty Interactive, and hence may not be the result of arms' length negotiations. Although we believe that the negotiations with Liberty Media will be at arms' length, the persons negotiating on behalf of Liberty Media also serve as officers of Liberty Interactive, as described above. We believe that the terms of these inter-company agreements are commercially reasonable and fair to all parties under the circumstances; however, conflicts could arise in the interpretation or any extension or renegotiation of the foregoing agreements after the Split-Off. See "Certain Relationships and Related Party Transactions."

         Liberty Interactive's board of directors may abandon the Split-Off at any time, or its board of directors may determine to amend the terms of any agreement we enter into relating to the Split-Off.

        No assurance can be given that the Split-Off will occur, or if it occurs that it will occur on the terms described in this proxy statement/prospectus. In addition to the conditions to the Split-Off described herein (certain of which may be waived by the Liberty Interactive board of directors in its sole discretion), the Liberty Interactive board of directors may abandon the Split-Off at any time prior to the redemption effective time for any reason or for no reason. Additionally, the agreements to be entered into by Splitco with Liberty Interactive and Liberty Media in connection with the Split-Off (including the reorganization agreement, the tax sharing agreement, the services agreement, the facilities sharing agreement and the aircraft time sharing agreements) may be amended or modified prior to the redemption effective time in the sole discretion of Liberty Interactive or Liberty Media, as applicable. If any condition to the Split-Off is waived or if any material amendments or modifications are made to the terms of the Split-Off or to such ancillary agreements prior to the Split-Off, Liberty Interactive intends to promptly issue a press release and file a Current Report on Form 8-K informing the market of the substance of such waiver, amendment or modification.

Factors Relating to Splitco's Common Stock and the Securities Market

         We cannot be certain that an active trading market will develop or be sustained after the Split-Off, and following the Split-Off, our stock price may fluctuate significantly.

        There can be no assurance that an active trading market will develop or be sustained for our common stock after the Split-Off. We cannot predict the prices at which either series of our common

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stock may trade after the Split-Off, the effect of the Split-Off on the trading prices of the Liberty Ventures common stock or whether the market value of the shares of a series of our common stock and the shares of the same series of the Liberty Ventures common stock held by a stockholder after the Split-Off will be less than, equal to or greater than the market value of a share of the corresponding series of Liberty Ventures common stock held by such stockholder prior to the Split-Off.

        The market price of our common stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:

    actual or anticipated fluctuations in our operating results;

    changes in earnings estimated by securities analysts or our ability to meet those estimates;

    the operating and stock price performance of comparable companies; and

    domestic and foreign economic conditions.

        The fair value of Liberty Interactive's investment in Expedia, on an as-converted basis, was approximately $2,509 million as of June 30, 2016, which represents a large portion of the total market value of the Ventures Group tracking stock, as a whole, and will represent an even larger portion of Splitco's total market value following the Split-Off. As a result of the Split-Off, our stock price may move in tandem with the Expedia stock price to a greater degree than the Liberty Ventures common stock does today, with the result that our stock price may be disproportionately affected by the results of operations of Expedia and developments in its business.

         If, following the Split-Off, we are unable to satisfy the requirements of Section 404 of Sarbanes-Oxley, or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned and our stock price may suffer.

        Section 404 of Sarbanes-Oxley requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated subsidiaries' internal control over financial reporting. To comply with this statute, we will be required to document and test our internal control procedures, our management will be required to assess and issue a report concerning our internal control over financial reporting, and our independent auditors will be required to issue an opinion on management's assessment of those matters. Our compliance with Section 404 of Sarbanes-Oxley will first be tested in connection with the filing of our Annual Report on Form 10-K for the fiscal year ending December 31, 2017. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management may identify material weaknesses or significant deficiencies which may not be remedied in time to meet the deadline imposed by Sarbanes-Oxley. If our management cannot favorably assess the effectiveness of our internal control over financial reporting or our auditors identify material weaknesses in our internal controls, investor confidence in our financial results may weaken, and our stock price may suffer.

         It may be difficult for a third party to acquire us, even if doing so may be beneficial to our stockholders.

        Certain provisions of our restated charter and bylaws may discourage, delay or prevent a change in control of our company that a stockholder may consider favorable. These provisions include the following:

    prior to the Proxy Arrangement Termination Date (as defined in "Certain Relationships and Related Party Transactions—Relationships Among Splitco, the Malone Group, Diller and

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      Expedia—Proxy Arrangements—Transaction Agreement—Proxy Arrangement Termination Date"):

      having a board divided into Series B Directors and Common Stock Directors (each as defined in "Management of Splitco—Directors"), with the Series B Directors having certain powers with respect to the voting of our Expedia Common Shares in the election of Expedia directors;

      requiring that a supermajority vote of our stockholders is necessary to sell or transfer any of the shares of Expedia class B common stock held by our company;

      requiring stockholder approval by holders of at least 70% of our voting power or the approval by at least 80% of our board of directors with respect to certain extraordinary matters, such as a merger or consolidation of our company, a sale of all or substantially all of our assets or an amendment to our restated charter;

      limiting the size of our board of directors to seven members;

      having the proxy arrangements terminate upon a change in control of our company, with the voting power over our Expedia Common Shares reverting to Mr. Diller pursuant to his proxy over such shares;

    prior to and following the Proxy Arrangement Termination Date:

    authorizing a capital structure with multiple series of common stock: a Series B that entitles the holders to ten votes per share, except in the election of Common Stock Directors prior to the Proxy Arrangement Termination Date, a Series A that entitles the holders to one vote per share and a Series C that, except as otherwise required by applicable law, entitles the holders to no voting rights;

    authorizing the issuance of "blank check" preferred stock, which could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;

    providing that all legal actions with respect to derivative claims and fiduciary duty claims be brought exclusively in Delaware courts;

    limiting who may call special meetings of stockholders;

    prohibiting stockholder action by written consent, other than in certain limited circumstances, thereby requiring all stockholder actions to be taken at a meeting of the stockholders;

    establishing advance notice requirements for nominations of candidates for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;

    the existence of authorized and unissued stock which would allow our board of directors to issue shares to persons friendly to current management, thereby protecting the continuity of its management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us; and

    only following the Proxy Arrangement Termination Date:

    classifying our board of directors with staggered three-year terms, which may lengthen the time required to gain control of our board of directors; and

    requiring stockholder approval by holders of at least 70% of our voting power or the approval by at least 75% of our board of directors with respect to certain extraordinary

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      matters, such as a merger or consolidation of our company, a sale of all or substantially all of our assets or an amendment to our restated charter.

        Certain other provisions of the proxy arrangements may also have the effect of making an acquisition of our company more difficult. See "—After the Split-Off, Splitco may be controlled by one principal stockholder" for a description of these arrangements and their potential impact on any proposed acquisition transaction.

         After the Split-Off, Splitco may be controlled by one principal stockholder.

        Malone currently has beneficial ownership of shares of Liberty Ventures common stock representing approximately 33.0% of the aggregate voting power of the outstanding shares of Liberty Ventures common stock as of July 31, 2016. Following the consummation of the Split-Off, Malone is expected to beneficially own shares of our common stock representing approximately 33.0% of Splitco's voting power, based upon the redemption ratios in the Split-Off and his beneficial ownership of LVNTA and LVNTB as of July 31, 2016 (as reflected under "Security Ownership of Certain Beneficial Owners—Security Ownership of Management" below). Malone's rights to vote or dispose of his equity interest in Splitco will not be subject to any restrictions in favor of Splitco other than as may be required by applicable law and except for customary transfer restrictions pursuant to incentive award agreements. Malone's equity interest in Splitco will, however, be subject to restrictions pursuant to the terms of the proxy arrangements.

        Until the Proxy Arrangement Termination Date, Malone and his wife will grant Diller an irrevocable proxy over the shares of Splitco common stock beneficially owned by him and his wife (the Covered Shares ). As a result, Diller will vote the Covered Shares in matters submitted to a vote of our stockholders, subject to limited exceptions. As a result of the voting power attributed to the Covered Shares, Diller will also effectively be able to block certain actions by Splitco prior to the Proxy Arrangement Termination Date, including, but not limited to, certain amendments to our restated charter and bylaws and the transfer of all or any portion of the shares of Expedia class B common stock owned by Splitco. Diller will also be able to replace the Series B Directors though Malone will retain the right to remove the Series B Directors. Following the Proxy Arrangement Termination Date, Malone and his wife will resume full voting control over the Covered Shares.

         Holders of a single series of our common stock may not have any remedies if an action by our directors has an adverse effect on only that series of our common stock.

        Principles of Delaware law and the provisions of our restated charter may protect decisions of our board of directors that have a disparate impact upon holders of any single series of our common stock. Under Delaware law, the board of directors has a duty to act with due care and in the best interests of all of our stockholders, including the holders of all series of our common stock. Principles of Delaware law established in cases involving differing treatment of multiple classes or series of stock provide that a board of directors owes an equal duty to all common stockholders regardless of class or series and does not have separate or additional duties to any group of stockholders. As a result, in some circumstances, our directors may be required to make a decision that is viewed as adverse to the holders of one series of our common stock. Under the principles of Delaware law and the business judgment rule, holders may not be able to successfully challenge decisions that they believe have a disparate impact upon the holders of one series of our stock if our board of directors is disinterested and independent with respect to the action taken, is adequately informed with respect to the action taken and acts in good faith and in the honest belief that the board is acting in the best interest of all of our stockholders.

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CAUTIONARY STATEMENTS CONCERNING FORWARD LOOKING STATEMENTS

        Certain statements in this proxy statement/prospectus and in the documents incorporated by reference herein constitute forward-looking statements, including certain statements relating to the business strategies, market potential and future financial performance of Splitco and its subsidiaries, and other matters. In particular, information included under "The Split-Off and Redemption Proposal," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Splitco's Business" and "Financial Information" contain forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, Splitco or Liberty Interactive express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but such statements necessarily involve risks and uncertainties and there can be no assurance that the expectation or belief will result or be achieved or accomplished. The use of words such as "anticipates," "estimates," "expects," "intends," "plans" and "believes," among others, generally identify forward-looking statements; however, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements.

        These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this proxy statement/prospectus, and Splitco and Liberty Interactive expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein or therein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. When considering such forward-looking statements, you should keep in mind the factors described in "Risk Factors" and other cautionary statements contained or incorporated in this document. Such risk factors and statements describe circumstances which could cause actual results to differ materially from those contained in any forward-looking statement.

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THE SPECIAL MEETING

Time, Place and Date

        The special meeting of the stockholders is to be held at [    ] local time, on [    ], 2016, at [    ], telephone [    ].

Purpose

        At the special meeting, holders of Liberty Ventures common stock will be asked to consider and vote on (i) the redemption proposal, which would allow Liberty Ventures to redeem a portion of the outstanding shares of Liberty Ventures common stock for all of the outstanding shares of Splitco, and (ii) the adjournment proposal. Please see "The Split-Off and Redemption Proposal" and "Adjournment Proposal" for more information regarding the Split-Off Proposals.

Quorum

        In order to conduct the business of the special meeting, a quorum must be present. This means that at least a majority of the aggregate voting power represented by the shares of Liberty Ventures common stock outstanding on the record date must be represented at the special meeting either in person or by proxy. For purposes of determining a quorum, your shares will be included as represented at the meeting even if you indicate on your proxy that you abstain from voting. If a broker, who is a record holder of shares, indicates on a form of proxy that the broker does not have discretionary authority to vote those shares on any Split-Off Proposal, or if those shares are voted in circumstances in which proxy authority is defective or has been withheld, those shares ( broker non-votes ) will not be treated as present for purposes of determining the presence of a quorum. See "—Voting Procedures for Shares Held in Street Name—Effect of Broker Non-Votes" below. Applicable New York Stock Exchange and Nasdaq Stock Market LLC rules that prohibit discretionary voting by brokers with respect to the Split-Off Proposals may make it more difficult to establish a quorum at the special meeting. If a quorum is not present at the special meeting, we expect the chairman of the meeting to adjourn the meeting in accordance with the terms of Liberty Interactive's bylaws for the purpose of soliciting additional proxies.

Who May Vote

        Holders of shares of LVNTA and LVNTB, as recorded in Liberty Interactive's stock register as of 5:00 p.m., New York City time, on [    ], 2016, the record date for the special meeting, may vote together, as a separate class, on the Split-Off Proposals at the special meeting or at any adjournment or postponement thereof. Holders of QVCA or QVCB are not entitled to vote at the special meeting.

Votes Required

        Each of the Split-Off Proposals requires the approval of a majority of the aggregate voting power of the shares of Liberty Ventures common stock, outstanding on the record date, that are present in person or by proxy at the special meeting, voting together as a separate class.

        As of July 31, 2016, Liberty Interactive's directors and executive officers beneficially owned approximately 35.7% of the total voting power of the outstanding shares of Liberty Ventures common stock. Liberty Interactive has been informed that all of its executive officers and directors intend to vote " FOR " each of the Split-Off Proposals.

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Votes You Have

        At the special meeting:

    holders of shares of LVNTA will have one vote per share; and

    holders of shares of LVNTB will have ten votes per share;

in each case, for each share that Liberty Interactive's records show they owned as of the record date.

Shares Outstanding

        As of [    ], 2016, the record date for the special meeting, an aggregate of [    ] shares of LVNTA and [    ] shares of LVNTB were issued and outstanding and entitled to vote at the special meeting.

Number of Holders

        There were, as of the record date for the special meeting, approximately [    ] and [    ] record holders of LVNTA and LVNTB, respectively (which amounts do not include the number of stockholders whose shares are held of record by banks, brokers or other nominees, but include each such institution as one holder).

Voting Procedures for Record Holders

        Holders of record of Liberty Ventures common stock as of the record date for the special meeting may vote in person at the special meeting. Alternatively, they may give a proxy by completing, signing, dating and returning the enclosed proxy card by mail, or by voting by telephone or through the Internet. Instructions for voting by telephone or the Internet are printed on the proxy voting instructions attached to the proxy card. In order to vote through the Internet, holders should have their proxy cards available so they can input the required information from the card, and log onto the Internet website address shown on the proxy card. When holders log onto the Internet website address, they will receive instructions on how to vote their shares. The telephone and Internet voting procedures are designed to authenticate votes cast by use of a personal identification number, which will be provided to each voting stockholder separately. Unless subsequently revoked, shares of Liberty Ventures common stock represented by a proxy submitted as described herein and received at or before the special meeting will be voted in accordance with the instructions on the proxy.

         YOUR VOTE IS IMPORTANT. It is recommended that you vote by proxy even if you plan to attend the special meeting. You may change your vote at the special meeting.

        If you submit a proxy but do not indicate how you want to vote, your proxy will be counted as a vote " FOR " the approval of each of the Split-Off Proposals.

        If you submit a proxy in which you indicate that you abstain from voting, your shares will count as present for purposes of determining a quorum, but your proxy will have the same effect as a vote " AGAINST " each of the Split-Off Proposals.

        If you do not submit a proxy or you do not vote in person at the special meeting, your shares will not be counted as present and entitled to vote for purposes of determining a quorum. Your failure to vote will have no effect on determining whether the Split-Off Proposals are approved (if a quorum is present), as those votes are based on the voting power of the shares of Liberty Ventures common stock present and entitled to vote at the special meeting.

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Voting Procedures for Shares Held in Street Name

        General.     If you hold your shares in the name of a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee when voting your shares of Liberty Ventures common stock or when granting or revoking a proxy.

        Effect of Broker Non-Votes.     As a result of applicable New York Stock Exchange and Nasdaq Stock Market LLC rules, broker non-votes will not count as shares of Liberty Ventures common stock present and entitled to vote for purposes of determining a quorum. In addition, they will have no effect on the Split-Off Proposals (if a quorum is present). You should follow the directions your broker, bank or other nominee provides to you regarding how to vote your shares of common stock or when granting or revoking a proxy.

Revoking a Proxy

        You may change your vote by voting in person at the special meeting or, before the start of the special meeting, by delivering a signed proxy revocation or a new, signed proxy with a later date to Liberty Interactive Corporation, c/o Computershare Trust Company, N.A., P.O. Box 43023, Providence, Rhode Island 02940-3023. Any proxy revocation or new proxy must be received before the start of the special meeting. In addition, you may change your vote through the Internet or by telephone (if you originally voted by the corresponding method) not later than [    ], New York City time, on [    ], 2016.

        Your attendance at the special meeting will not, by itself, revoke your proxy.

        If your shares are held in an account by a broker, bank or other nominee who you previously contacted with voting instructions, you should contact your broker, bank or other nominee to change your vote.

Solicitation of Proxies

        The accompanying proxy for the special meeting is being solicited on behalf of the Liberty Interactive board. In addition to this mailing, Liberty Interactive's employees may solicit proxies personally or by telephone. Liberty Interactive pays the cost of soliciting these proxies. Liberty Interactive also reimburses brokers and other nominees for their expenses in sending these materials to you and getting your voting instructions. Liberty Interactive has also retained D.F. King to assist in the solicitation of proxies at a cost of $7,500, plus reasonable out of pocket expenses.

        If you have any further questions about voting or attending the special meeting, please contact Liberty Interactive Investor Relations at (877) 772-1518 or its proxy solicitor, D.F. King, at (212) 269-5550 (brokers and banks only) or (800) 820-2415 (toll free).

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THE SPLIT-OFF AND REDEMPTION PROPOSAL

General

        Under the terms of the Liberty Interactive charter, the Liberty Interactive board may, subject to the approval of the holders of the Liberty Ventures common stock voting as a separate class, redeem all or a portion of the outstanding shares of Liberty Ventures common stock for all of the outstanding shares of Splitco common stock. The Liberty Interactive board has determined to redeem a portion of the outstanding shares of Liberty Ventures common stock for shares of common stock of Splitco, subject to the receipt of the requisite stockholder approval and the satisfaction or, where permissible, waiver of the other conditions described below.

        Accordingly, the Liberty Interactive board has determined to submit the redemption proposal for the approval of the Liberty Ventures stockholders.

Background for the Split-Off

        The board of directors of Liberty Interactive periodically reviews with management the strategic goals and prospects of its various businesses, equity affiliates and other investments. In 2012, Liberty Interactive recapitalized its common stock into two new tracking stocks, the Interactive Group (which, in 2015, was renamed the QVC Group) and the Ventures Group, for the purpose of creating greater transparency for the assets and liabilities attributed to each group, among other reasons. The QVC Group common stock and Liberty Ventures common stock are intended to track and reflect the economic performance of the QVC Group and the Ventures Group, respectively. Tracking stock is a type of common stock that the issuing company intends to reflect or "track" the economic performance of a particular business or "group," rather than the economic performance of the company as a whole. While the QVC Group and the Ventures Group have separate collections of businesses, assets and liabilities attributed to them, no group is a separate legal entity and therefore no group can own assets, issue securities or enter into legally binding agreements. Holders of tracking stocks have no direct claim to the group's stock or assets and are not represented by separate boards of directors. Instead, holders of tracking stock are stockholders of the parent corporation, with a single board of directors and subject to all of the risks and liabilities of the parent corporation. The Ventures Group is comprised primarily of Liberty Interactive's operating subsidiaries Bodybuilding and Evite and Liberty Interactive's interests in Expedia, FTD, Interval, LendingTree and Liberty Broadband along with investments in TWX and Charter, cash, certain liabilities related to exchangeable debentures of Liberty LLC and certain deferred tax liabilities. The QVC Group is primarily focused on Liberty Interactive's merchandise-focused televised-shopping programs, Internet and mobile application businesses and has attributed to it Liberty Interactive's wholly owned subsidiaries QVC and zulily, and Liberty Interactive's interest in HSN, along with cash and certain liabilities that reside with QVC and the other attributed entities, as well as outstanding senior notes and one series of Liberty LLC's exchangeable debentures and certain deferred tax liabilities. In July 2016, Liberty Interactive completed the spin-off of CommerceHub, which included its former Commerce Technologies, Inc. business and which was attributed to the Ventures Group immediately prior to such spin-off. Upon completion of the Split-Off, Liberty Interactive's entire ownership interest in Expedia and Bodybuilding will no longer be attributed to the Ventures Group.

        Although the public markets have responded favorably to these two tracking stocks, Liberty Interactive believes that the public markets continue to apply a meaningful discount to the underlying value of the businesses and assets attributed to the Ventures Group tracking stock group in establishing the trading value of the Liberty Ventures common stock due to the interrelationships of the businesses of Liberty Interactive, the multiple layers of financial reporting and uncertainty surrounding the allocation of corporate opportunities and capital resources among Liberty Interactive's tracking stock groups. Accordingly, in November 2015, the Liberty Interactive board of directors determined to pursue the Split-Off, as described in more detail below, as well as the spin-off of CommerceHub, Inc. Upon

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completion of the Split-Off, Liberty Interactive's entire ownership interest in Expedia and Bodybuilding will no longer be attributed to the Ventures Group.

        Our company is currently a wholly owned subsidiary of Liberty Interactive. Upon completion of the Split-Off, our principal businesses, assets and liabilities will consist of Liberty Interactive's approximate 15.8% ownership interest and 52.4% voting interest in Expedia (as of June 30, 2016), Liberty Interactive's wholly owned subsidiary Bodybuilding, anticipated corporate level cash and cash equivalents of $50 million and $350 million in indebtedness (such businesses and assets, as well as any related liabilities, including with respect to the Margin Loan, the Splitco Assets and Liabilities ).

Reasons for the Split-Off

        In determining to approve the Split-Off, it was believed that the Split-Off would result in the creation of stockholder value because, among other things, the aggregate trading value of Splitco's common stock and the Liberty Ventures common stock would exceed the aggregate trading value of the existing Liberty Ventures common stock, although there can be no assurance that this will occur. The Liberty Interactive board of directors took into account a number of factors approving the Split-Off, including the following:

    Following the Split-Off, Splitco common stock is expected to provide greater transparency for investors with respect to Splitco's dominant business, Expedia, resulting in more focus and attention by the investment community on this business.

    The Split-Off is expected to cause the trading discount applied to the Liberty Ventures common stock to be reduced, because separating Splitco will better highlight the discount at which the Liberty Ventures common stock historically has traded relative to the value of the underlying assets attributed to the Ventures Group. Such historical discount is due to the complexity of the Liberty Ventures capital structure, among other things, and by removing such complexity through the separation of Splitco, we believe the trading discount applied to Liberty Ventures common stock will be reduced, although there can be no assurance that this will occur. An increase in the aggregate trading prices of the Liberty Ventures common stock and the Splitco common stock would enhance the ability of Splitco to issue its equity for purposes of making strategic acquisitions with less dilution to its stockholder base (including in a potential future combination of Splitco with Expedia following the Split-Off, in which Splitco could issue its common stock as consideration).

    By separating Liberty Interactive's interests in Expedia and Bodybuilding from its other businesses and assets, the Split-Off will advance Liberty Interactive's objective of rationalizing its portfolio of assets and tracking stock groups.

    By separating Splitco from Liberty Interactive, it is expected that complications in negotiations with Expedia regarding the valuation of Liberty Interactive's other businesses will be avoided, thus increasing Splitco's flexibility to pursue a potential combination with Expedia in the future.

    The Split-Off is expected to enhance the ability of Liberty Interactive and Splitco to retain and attract qualified personnel, by enabling each company to grant equity incentive awards based on its own publicly traded equity with less dilution to its stockholders (as a result of the reduction in the discount associated with its equity), and will further enable each company to more effectively tailor employee benefit plans and retention programs and provide improved incentives to the management, employees and future hires of each company that will better and more directly align the incentives for each company's management and employees with their performance.

    The proxy arrangements to be entered into among Liberty Interactive, Splitco, Diller and the Malone Group and the organizational documents of Splitco would provide Splitco with the

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      ability to vote its Expedia Common Shares which were previously subject to the Diller Proxy, subject to the terms and conditions set forth therein.

        The Liberty Interactive board of directors also considered a number of costs and risks associated with the Split-Off in approving the Split-Off, including the following:

    after the Split-Off, the Liberty Ventures common stock and Splitco will each have smaller individual market capitalizations than the current market capitalization of the Liberty Ventures common stock, and their trading prices may be more volatile than the trading price of the Liberty Ventures common stock prior to the Split-Off. The board also considered the possibility that the combined market values of the separate stocks may be lower than the market value of the Liberty Ventures common stock in the absence of the Split-Off;

    the risk of being unable to achieve the benefits expected from the Split-Off;

    the leverage to be incurred by Splitco as a result of obtaining the proceeds from the Margin Loan, a substantial portion of which will be distributed to Liberty Interactive by Splitco as part of the internal restructuring;

    the loss of synergies from operating as one company, particularly in administrative and support functions;

    the potential disruption of the businesses of Liberty Interactive, as its management and employees devote time and resources to completing the Split-Off;

    the substantial costs of effecting the Split-Off and continued compliance with legal and other requirements applicable to two separate public reporting companies;

    the potential tax liabilities that could arise from the Split-Off, including the possibility that the IRS could successfully assert that the Split-Off is taxable to holders of Liberty Ventures common stock and/or to Liberty Interactive. In the event such tax liabilities were to arise, Splitco's potential indemnity obligation to Liberty Interactive is not subject to a cap; and

    the potential for having to register as an investment company under the Investment Company Act of 1940 in the future, such as in the event Splitco becomes primarily engaged, directly or through one or more of its subsidiaries, in a business of investing, reinvesting, owning, holding or trading in securities and there is no exemption or grace period available to us at that time.

        Liberty Interactive's board of directors evaluated the costs and benefits of the transaction as a whole and did not find it necessary to assign relative weights to the specific factors considered. Liberty Interactive's board concluded, however, that the potential benefits of the Split-Off outweighed its potential costs, and that separating our company from Liberty Interactive through the Split-Off is appropriate, advisable and in the best interests of Liberty Interactive and its stockholders. The Liberty Interactive board did not consider alternatives to the Split-Off due to the nature of the particular assets and businesses to be held by Splitco upon completion of the Split-Off, in particular the ownership interest in Expedia.

Vote and Recommendation

        The approval of a majority of the aggregate voting power of the shares of Liberty Ventures common stock, outstanding on the record date, that are present in person or by proxy at the special meeting, voting together as a separate class, is required to approve the redemption proposal.

        Liberty Interactive's board of directors has unanimously approved the redemption proposal and believes that the adoption of the redemption proposal is in the best interests of Liberty Interactive and its stockholders. Accordingly, the Liberty Interactive board unanimously recommends that the holders of Liberty Ventures common stock vote in favor of the redemption proposal.

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The Redemption; Redemption Ratio

        Pursuant to the redemption proposal, holders of Liberty Ventures common stock are being asked to approve the redemption of a portion of the outstanding shares of Liberty Ventures common stock for all outstanding shares of Splitco common stock. At the time of the redemption, Liberty Interactive's approximate 15.8% ownership interest and 52.4% voting interest in Expedia (as of June 30, 2016), Liberty Interactive's wholly owned subsidiary Bodybuilding, anticipated corporate level cash and cash equivalents of $50 million and $350 million in indebtedness would be attributed to Splitco. The assets and liabilities that are currently attributed to Liberty Interactive's other tracking stock group, the QVC Group, will not change as a result of the Split-Off.

        A more complete description of the businesses and assets that will be attributed to Splitco at the time of the Split-Off can be found in "Description of Splitco's Business" in this proxy statement/prospectus.

        Splitco common stock will be divided into three series with different voting rights; however, only Series A and Series B shares will be outstanding immediately following the Split-Off. Splitco common stock will not have the attributes of a tracking stock. Thus, Splitco's restated charter will contain many similar provisions to the Liberty Interactive charter; however, the Splitco restated charter will not contain any provisions specific to a tracking stock structure. For a comparison of rights of holders of Splitco common stock and Liberty Interactive common stock, please see "Description of Splitco Capital Stock and Comparison of Stockholder Rights."

        If all conditions to the Split-Off are satisfied or, where permissible, waived, Liberty Interactive will redeem, on a pro rata basis, 40% of the shares of each series of Liberty Ventures common stock outstanding on the redemption date for 100% of the outstanding shares of Splitco. Accordingly, on the redemption date, (i) 0.4 of each outstanding share of LVNTA will be redeemed for 0.4 of a share of LEXEA, and 0.6 of each share of LVNTA will remain outstanding as Liberty Ventures common stock; and (ii) 0.4 of each outstanding share of LVNTB will be redeemed for 0.4 of a share of LEXEB, and 0.6 of each share of LVNTB will remain outstanding as Liberty Ventures common stock, subject, in each case, to the payment of cash in lieu of any fractional shares. By way of example, a holder of 100 shares of LVNTA would receive 40 shares of LEXEA in redemption for 40 shares of LVNTA and would retain the remaining 60 shares of LVNTA, while a holder of 100 shares of LVNTB would receive 40 shares of LEXEB in redemption for 40 shares of LVNTB and would retain the remaining 60 shares of LVNTB.

        As of July 31, 2016, there were outstanding 135,222,884 shares of LVNTA and 7,119,929 shares of LVNTB (exclusive of any stock options or restricted stock units). Based on the number of shares of Liberty Ventures common stock outstanding on July 31, 2016, Splitco expects to issue approximately 54,089,200 shares of its Series A common stock and 2,848,000 shares of its Series B common stock in the Split-Off, and Liberty Interactive expects approximately 81,133,800 shares of LVNTA and 4,272,000 shares of LVNTB to remain outstanding immediately following the Split-Off.

        The actual redemption date will be established by the Liberty Interactive board following the satisfaction or, where permissible, waiver of all conditions to the Split-Off (other than those which by their terms can only be satisfied concurrently with the redemption date). Once established, the redemption date will be publicly announced by Liberty Interactive. The redemption effective time would be 5:00 p.m., New York City time, on the redemption date.

Effect of the Redemption

        From and after the redemption effective time, holders of Liberty Ventures common stock will no longer have any rights with respect to those shares of Liberty Ventures common stock that are redeemed , except for the right to receive the applicable series and whole number of shares of Splitco common stock to which such holders are entitled, and any payments of cash in lieu of fractional shares.

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Holders of Liberty Ventures common stock will, however, retain all rights of ownership with respect to the whole number of shares of Liberty Ventures common stock that are not redeemed .

        Liberty Interactive will deliver or make available to all holders of certificated shares of Liberty Ventures common stock a letter of transmittal with which to surrender those of their certificated shares to be redeemed in exchange for shares of the series and number of shares of Splitco common stock in book-entry form. Holders of certificated shares of Liberty Ventures common must surrender their stock certificates together with a duly executed letter of transmittal (and any other documentation required thereby) in order to receive their Splitco shares in the Split-Off. Any shares of Liberty Ventures common stock not subject to redemption that are represented by a surrendered certificate will be exchanged for shares in book-entry form. Registration in book-entry form refers to a method of recording stock ownership when no physical share certificates are issued to stockholders, as is the case in the Split-Off.

        Accounts holding shares of Liberty Ventures common stock in book-entry form will be debited for the applicable series and number of shares to be redeemed as of the redemption effective time, and promptly thereafter credited with the applicable series and number of shares of Splitco common stock. No letters of transmittal will be delivered to holders of shares in book-entry form, and holders of book-entry shares of Liberty Ventures common stock will not need to take any action to receive their Splitco shares in the Split-Off.

        After the redemption, an investment in Liberty Ventures common stock will continue to represent an ownership interest in Liberty Interactive as a whole. The number of shares of QVC Group common stock outstanding prior to the Split-Off will not change as a result of the Split-Off. Following the redemption, the number of outstanding shares of Liberty Ventures common stock will be reduced by the number of shares of Liberty Ventures common stock that are redeemed. As a result, following the Split-Off, the voting rights and liquidation units associated with the outstanding shares of Liberty Ventures common stock that are redeemed in the redemption will be eliminated, and the shares of Liberty Ventures common stock that remain outstanding following the redemption will represent, in the aggregate, a smaller percentage of the total voting power and total liquidation units, respectively, associated with Liberty Interactive's outstanding capital stock.

Interests of Certain Persons

        In considering the recommendation of the Liberty Interactive board to vote to approval the redemption proposal, holders of Liberty Ventures common stock should be aware that the executive officers and directors of Liberty Interactive will receive adjustments to their stock incentive awards with respect to Liberty Ventures common stock and stock incentive awards with respect to Splitco common stock. See "—Effect of the Split-Off on Outstanding Ventures Group Incentive Awards" below for more information.

        Holders of Liberty Ventures common stock should also be aware that certain current executive officers of Liberty Interactive will also serve as executive officers of Splitco immediately following the Split-Off. See "Risk Factors—Our company has overlapping directors and officers with Liberty Interactive and Liberty Media, which may lead to conflicting interests." Furthermore, the executive officers of Liberty Interactive and Splitco are entitled to indemnification with respect to actions taken by them in connection with the Split-Off under the organizational documents of Liberty Interactive and Splitco, as well as customary indemnification agreements to which Liberty Interactive and Splitco, on the one hand, and these persons, on the other hand, are parties.

        Additionally, pursuant to the Diller Proxy, Diller generally controls the vote of the Expedia Common Shares beneficially owned by Liberty Interactive. In connection with the completion of the Split-Off, Diller will cease to directly control a majority voting interest in Expedia by irrevocably assigning the Diller Proxy to Splitco for a period of time up to 18 months following completion of the Split-Off, subject to certain termination events as further described in this proxy statement/prospectus.

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By virtue of (i) certain governance provisions with respect to Splitco as set forth in the form of Splitco's restated charter and an amendment to the Stockholders Agreement and (ii) the grant by the Malone Group of an irrevocable proxy to vote, subject to certain exceptions, shares of Splitco's common stock beneficially owned by the Malone Group upon the completion of the Split-Off or thereafter for a period of time ending upon termination of Diller's assignment of the Diller Proxy, Diller will be able to elect the directors of Splitco who will determine how Splitco will exercise certain rights and vote the Expedia Common Shares owned by Splitco in the election of Expedia directors. See "Certain Relationships and Related Party Transactions—Relationships Among Splitco, the Malone Group, Diller and Expedia—Proxy Arrangements."

        As of July 31, 2016, Liberty Interactive's executive officers and directors beneficially owned shares of Liberty Ventures common stock representing in the aggregate approximately 35.7% of the aggregate voting power of the outstanding shares of Liberty Ventures common stock. Liberty Interactive has been informed that all of its executive officers and directors, including John C. Malone, intend to vote " FOR " the redemption proposal.

        The Liberty Interactive board of directors was aware of these interests and considered them when it approved the redemption proposal.

Conditions to the Split-Off

        Liberty Interactive's board of directors has reserved the right, in its sole discretion, to amend, modify, delay or abandon the Split-Off and the related transactions at any time prior to the redemption effective time. In addition, the completion of the Split-Off and related transactions are subject to the satisfaction (as determined by the Liberty Interactive board of directors in its sole discretion) of the following conditions, certain of which may be waived by the Liberty Interactive board of directors in its sole discretion:

    (1)
    the receipt of the requisite stockholder approval of the redemption proposal at the special meeting;

    (2)
    the opinion of Skadden Arps in form and substance reasonably acceptable to Liberty Interactive, providing to the effect that the Split-Off will qualify as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Code and that, for U.S. federal income tax purposes, (i) no gain or loss will be recognized by Liberty Interactive upon the distribution of our common stock in the Split-Off, and (ii) no gain or loss will be recognized by, and no amount will be included in the income of, holders of Liberty Ventures common stock upon the receipt of shares of our common stock in the Split-Off (except with respect to the receipt of cash in lieu of fractional shares);

    (3)
    the effectiveness under the Securities Act of the Splitco registration statement, of which this proxy statement/prospectus forms a part, and the effectiveness of the registration of the Splitco common stock under Section 12(b) of the Exchange Act;

    (4)
    the execution of the proxy arrangements;

    (5)
    the approval of Nasdaq for the listing of our common stock;

    (6)
    the entry into a margin loan arrangement by our company and one or more subsidiaries in a principal amount of $400 million; and

    (7)
    the receipt of any material regulatory or contractual consents or approvals that the Liberty Interactive board determines to obtain.

        The first five conditions set forth above are non-waivable. The Liberty Interactive board of directors may, however, waive the sixth and seventh conditions set forth above. In the event the Liberty

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Interactive board of directors waives a material condition to the Split-Off, Liberty Interactive intends to promptly issue a press release and file a Current Report on Form 8-K to report such event.

Effect of the Split-Off on Outstanding Ventures Group Incentive Awards

        Options to purchase shares of Liberty Ventures common stock, restricted stock units with respect to shares of Liberty Ventures common stock and restricted shares of Liberty Ventures common stock have been granted to various directors, officers and employees and consultants of Liberty Interactive and certain of its subsidiaries pursuant to the various stock incentive plans administered by the Liberty Interactive board of directors or the compensation committee thereof. Below is a description of the effect of the Split-Off on these outstanding equity awards.

    Option Awards

        Each holder of an outstanding option to purchase shares of Liberty Ventures common stock on the redemption date (an original Ventures option award ) will receive (i) an option to purchase shares of the corresponding series of our common stock (a new Splitco option award ) and (ii) an adjustment to the exercise price of and the number of shares subject to the original Ventures option award (as so adjusted, an adjusted Ventures option award ). The exercise prices of and the number of shares subject to the new Splitco option award and the related adjusted Ventures option award will be determined based on the exercise price of and the number of shares subject to the original Ventures option award, the redemption ratios being used in the Split-Off, the pre-Split-Off trading price of Liberty Ventures common stock (determined using the volume weighted average price of the applicable series of Liberty Ventures common stock over the three-consecutive trading days immediately preceding the Split-Off) and the relative post-Split-Off trading prices of Liberty Ventures common stock and Splitco common stock (determined using the volume weighted average price of the applicable series of common stock over the three-consecutive trading days beginning on the first trading day following the Split-Off on which both the Liberty Ventures common stock and the Splitco common stock trade in the "regular way" (meaning once the common stock trades using a standard settlement cycle)), such that the pre-Split-Off intrinsic value of the original Ventures option award is allocated between the new Splitco option award and the adjusted Ventures option award.

        Except as described above, all other terms of an adjusted Ventures option award and a new Splitco option award (including, for example, the vesting terms thereof) will, in all material respects, be the same as those of the corresponding original Ventures option award. The terms of the adjusted Ventures option awards will be determined and the new Splitco option awards will be issued as soon as practicable following the determination of the pre- and post-Split-Off trading prices of Liberty Ventures common stock and Splitco common stock, as applicable.

    Restricted Stock Units

        Each holder of a restricted stock unit with respect to shares of Liberty Ventures common stock on the redemption date (an original Ventures restricted stock unit award ) will receive in the redemption (i) an award of restricted stock units with respect to the corresponding series of shares of Splitco common stock (a new Splitco restricted stock unit award ) and (ii) an adjustment to the number of restricted stock units with respect to shares of Liberty Ventures common stock held by such holder (as so adjusted, an adjusted Ventures restricted stock unit award ). The number of shares of Splitco common stock or Liberty Ventures common stock subject to such new Splitco restricted stock unit award or adjusted Ventures restricted stock unit award, respectively, will be determined based on the redemption ratios being used in the Split-Off. Except as described above, all new Splitco restricted stock unit awards (including, for example, the vesting terms thereof) will, in all material respects, be the same as those of the corresponding original Ventures restricted stock unit award

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    Restricted Stock Awards

        As of the redemption effective time, (i) 0.4 of each outstanding restricted share of LVNTA will be redeemed for 0.4 of a restricted share of LEXEA and (ii) 0.4 of each outstanding restricted share of LVNTB will be redeemed for 0.4 of a restricted share of LEXEB, with cash paid in lieu of fractional shares. Except as described above, all new Splitco restricted shares (including, for example, the vesting terms thereof) will, in all material respects, be the same as those of the corresponding original Ventures restricted shares.

    Transitional Plan

        All of the new Splitco equity incentive awards will be issued pursuant to the Splitco Transitional Stock Adjustment Plan (the transitional plan ), a copy of which will be filed as an exhibit to the Registration Statement on Form S-4 of which this proxy statement/prospectus forms a part. The transitional plan will govern the terms and conditions of the foregoing Splitco incentive awards but will not be used to make any grants following the Split-Off.

U.S. Federal Income Tax Consequences of the Split-Off

        The following discussion summarizes the U.S. federal income tax consequences to holders of Liberty Ventures common stock that exchange shares of Liberty Ventures common stock for shares of Splitco common stock pursuant to the Split-Off. This discussion is based on the Code, applicable Treasury regulations, judicial authority, and administrative rulings and practice, all as in effect as of the date of this document, and all of which are subject to change at any time, possibly with retroactive effect. This discussion is limited to holders of Liberty Ventures common stock that are U.S. holders, as defined below, that hold their shares of Liberty Ventures common stock as capital assets, within the meaning of Section 1221 of the Code. Further, this discussion does not discuss all tax considerations that may be relevant to holders of Liberty Ventures common stock in light of their particular circumstances, nor does it address any tax consequences to holders of Liberty Ventures common stock subject to special treatment under the U.S. federal income tax laws, such as tax-exempt entities, partnerships (including entities treated as partnerships for U.S. federal income tax purposes), persons who acquired such shares of Liberty Ventures common stock pursuant to the exercise of employee stock options or otherwise as compensation, financial institutions, insurance companies, dealers or traders in securities, and persons who hold their shares of Liberty Ventures common stock as part of a straddle, hedge, conversion, constructive sale, synthetic security, integrated investment or other risk-reduction transaction for U.S. federal income tax purposes. This discussion does not address any U.S. federal estate, gift or other non-income tax consequences or any state, local or foreign tax consequences.

         Holders of Liberty Ventures common stock are urged to consult with their tax advisors as to the particular tax consequences to them as a result of the Split-Off.

        For purposes of this section, a U.S. holder is a beneficial owner of Liberty Ventures common stock that is, for U.S. federal income tax purposes:

    an individual who is a citizen or a resident of the United States;

    a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States or any state or political subdivision thereof;

    an estate, the income of which is subject to United States federal income taxation regardless of its source; or

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    a trust, if (i) a court within the United States is able to exercise primary jurisdiction over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or (ii) it has a valid election in place under applicable Treasury regulations to be treated as a U.S. person.

        If a partnership (including any entity treated as partnership for U.S. federal income tax purposes) holds shares of Liberty Ventures common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A partner in a partnership holding shares of Liberty Ventures common stock should consult its tax advisor regarding the tax consequences of the Split-Off.

        The completion of the Split-Off is conditioned upon the receipt by Liberty Interactive of the opinion of Skadden Arps, dated as of the date of the Split-Off, to the effect that, under current U.S. federal income tax law, the Split-Off will qualify as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Code. The receipt of the opinion may not be waived by the Liberty Interactive board of directors as a condition to the Split-Off.

        The opinion of Skadden Arps will be based on the law in effect as of the date of the Split-Off and will rely upon certain assumptions, as well as statements, representations and certain undertakings made by officers of Liberty Interactive and Splitco and John C. Malone. These assumptions, statements, representations and undertakings are expected to relate to, among other things, Liberty Interactive's business reasons for engaging in the Split-Off, the conduct of certain business activities by Liberty Interactive and Splitco, and the plans and intentions of Liberty Interactive and Splitco to continue conducting those business activities and not to materially modify their ownership or capital structure following the Split-Off. If any of those statements, representations or assumptions is incorrect or untrue in any material respect or any of those undertakings is not complied with, or if the facts upon which the opinion is based are materially different from the facts that prevail at the time of the Split-Off, the conclusions reached in such opinion could be adversely affected.

        Stockholders should note that Liberty Interactive does not intend to seek a ruling from the IRS as to the U.S. federal income tax treatment of the Split-Off. The legal authorities upon which the opinion of Skadden Arps will be based are subject to change or differing interpretations at any time, possibly with retroactive effect. The opinion of Skadden Arps will not be binding on the IRS or a court, and there can be no assurance that the IRS will not challenge the conclusions reached in the opinion or that a court would not sustain such a challenge.

        Assuming that the Split-Off qualifies as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Code, then:

    subject to the discussion below regarding Section 355(e) of the Code, no gain or loss will be recognized by Liberty Interactive upon the distribution of (a) shares of Splitco Series A common stock to holders of Series A Liberty Ventures common stock and (b) shares of Splitco Series B common stock to holders of Series B Liberty Ventures common stock;

    except with respect to the receipt of cash in lieu of fractional shares, no gain or loss will be recognized by, and no amount will be included in the income of, a holder of Liberty Ventures common stock upon the receipt of shares of Splitco common stock pursuant to the Split-Off;

    the aggregate tax basis of the shares of (i) Splitco Series A common stock received by holders of Series A Liberty Ventures common stock and (ii) Splitco Series B common stock received by holders of Series B Liberty Ventures common stock will in each case equal the aggregate tax basis of the shares of Series A Liberty Ventures common stock and Series B Liberty Ventures common stock, respectively, that are surrendered in exchange therefor; and

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    the holding period of the shares of Splitco common stock received in the Split-Off by a holder of Liberty Ventures common stock will include the holding period of the shares of Liberty Ventures common stock exchanged therefor.

        Stockholders who have acquired different blocks of Liberty Ventures common stock at different times or at different prices should consult their tax advisors regarding the allocation of their aggregate tax basis among, and the holding period of, the shares of Splitco common stock received in exchange for such blocks of Liberty Ventures common stock.

        If a stockholder receives cash in lieu of fractional shares of Splitco common stock, the stockholder will be treated as receiving such fractional shares in the Split-Off and then selling such fractional shares for the amount of cash received. The sale will generally result in the recognition of capital gain or loss for U.S. federal income tax purposes, measured by the difference between the amount of cash received for such fractional shares and the stockholder's tax basis in such fractional shares (determined as described above). In addition, a stockholder who receives cash in lieu of retaining fractional shares of Liberty Ventures common stock will generally recognize capital gain or loss equal to the difference between the amount of cash received for such fractional shares and the stockholder's tax basis in such fractional shares.

        If the Split-Off does not qualify under Section 355, Section 368(a)(1)(D) and related provisions of the Code, Liberty Interactive would generally be subject to tax as if it sold the shares of Splitco common stock distributed in the Split-Off in a taxable transaction. Liberty Interactive would recognize taxable gain in an amount equal to the excess of (i) the total fair market value of the shares of Splitco common stock distributed in the Split-Off over (ii) Liberty Interactive's aggregate tax basis in such shares of Splitco common stock. A stockholder who receives shares of Splitco common stock in the Split-Off would be treated as either (i) recognizing a capital gain or loss equal to the difference between the fair market value of the shares of Splitco common stock received and the stockholder's tax basis in the Liberty Ventures common stock exchanged therefor, or (ii) in certain circumstances, receiving a taxable distribution in an amount equal to the total fair market value of the shares of Splitco common stock received, which would generally be taxed (a) as a dividend to the extent of Liberty Interactive's current and accumulated earnings and profits, then (b) as a non-taxable return of capital to the extent of the stockholder's tax basis in its shares of Liberty Ventures common stock with respect to which the distribution was made (although there may be certain other alternatives for determining the amount of such non-taxable return of capital if the stockholder owns shares of Liberty Ventures common stock other than those upon which the distribution was made), and thereafter (c) as a capital gain with respect to the remaining value. A stockholder would have a tax basis in its shares of Splitco common stock following the Split-Off equal to the fair market value of such stock. Certain stockholders may be subject to special rules governing taxable distributions, such as those that relate to the dividends received deduction and extraordinary dividends.

        Even if the Split-Off otherwise qualifies under Section 355, Section 368(a)(1)(D) and related provisions of the Code, the Split-Off would result in a significant U.S. federal income tax liability to Liberty Interactive (but not to holders of Liberty Ventures common stock) under Section 355(e) of the Code if one or more persons acquire, directly or indirectly, a 50-percent or greater interest (measured by either vote or value) in the stock of Liberty Interactive or in the stock of Splitco (excluding, for this purpose, the acquisition of Splitco common stock by holders of Liberty Ventures common stock in the Split-Off) as part of a plan or series of related transactions that includes the Split-Off. Any acquisition of the stock of Liberty Interactive or Splitco (or any successor corporation) within two years before or after the Split-Off generally would be presumed to be part of a plan that includes the Split-Off, although the parties may be able to rebut that presumption under certain circumstances. The process for determining whether an acquisition is part of a plan under these rules is complex, inherently factual in nature, and subject to a comprehensive analysis of the facts and circumstances of the particular case. Notwithstanding the opinion of Skadden Arps described above, Liberty Interactive or Splitco might

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inadvertently cause or permit a prohibited change in the ownership of Liberty Interactive or Splitco to occur. If the Split-Off were determined to be taxable to Liberty Interactive under Section 355(e) of the Code, Liberty Interactive would recognize taxable gain in an amount equal to the excess of (i) the total fair market value of the shares of Splitco common stock distributed in the Split-Off over (ii) Liberty Interactive's aggregate tax basis in such shares of Splitco common stock.

        Pursuant to the tax sharing agreement, Splitco will be required to indemnify Liberty Interactive, its subsidiaries and certain related persons for taxes and losses resulting from the failure of the Split-Off to qualify as a tax-free transaction under Section 355 and Section 368(a)(1)(D) and related provisions of the Code to the extent that such taxes and losses (i) result primarily from, individually or in the aggregate, the breach of certain covenants made by Splitco (applicable to actions or failures to act by Splitco and its subsidiaries following the completion of the Split-Off), or (ii) result from the application of Section 355(e) of the Code to the Split-Off as a result of the treatment of the Split-Off as part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, a 50-percent or greater interest (measured by either vote or value) in the stock of Splitco (or any successor corporation). Please see "Certain Relationships and Related Party Transactions— Relationships Between Splitco and Liberty Interactive and/or Liberty Media—Tax Sharing Agreement" for a more detailed discussion of the tax sharing agreement between Splitco and Liberty Interactive.

    Information Reporting and Backup Withholding

        A stockholder may be subject to backup withholding (currently imposed at a rate of 28%) to the extent of any cash received in lieu of fractional shares of Splitco common stock or Liberty Ventures common stock in connection with the Split-Off, unless the stockholder provides its correct taxpayer identification number and complies with applicable certification procedures or otherwise establishes an exemption. In addition, a stockholder who receives cash in lieu of fractional shares and fails to provide its correct taxpayer identification number or other adequate basis for exemption may be subject to certain penalties imposed by the IRS. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will generally be allowed as a credit against a stockholder's U.S. federal income tax liability, provided that certain required information is furnished to the IRS on a timely basis.

    Net Investment Income

        Recently enacted legislation imposes a 3.8% tax on the net investment income of certain U.S. citizens and resident aliens and on the undistributed net investment income of certain estates and trusts. Among other items, net investment income would generally include any capital gain recognized by a stockholder as a result of the receipt of cash in lieu of fractional shares pursuant to the Split-Off (net of certain capital losses).

Conduct of the Business of the Ventures Group if the Split-Off is Not Completed

        If the Split-Off is not completed, Liberty Interactive intends to continue to conduct the business of the Ventures Group substantially in the same manner as it is operated today. From time to time, Liberty Interactive will evaluate and review its business operations, properties, dividend policy and capitalization, and make such changes as are deemed appropriate, and continue to seek to identify strategic alternatives to maximize stockholder value.

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Amount and Source of Funds and Financing of the Transaction; Expenses

        It is expected that Liberty Interactive will incur an aggregate of $ [                        ] million in expenses in connection with the Split-Off. These expenses will be comprised of:

    approximately $[            ] million in printing and mailing expenses associated with this proxy statement/prospectus;

    approximately $[            ] million in legal fees and expenses;

    approximately $[            ] million in accounting fees and expenses;

    approximately $[            ] million in SEC filing fees; and

    approximately $[            ] million in other miscellaneous expenses.

These expenses will be paid by Liberty Interactive from its existing cash balances. These fees and expenses, however, do not include the payment of cash in lieu of the issuance of fractional shares of our common stock. Computershare, as our company's transfer agent, will aggregate all fractional shares into whole shares and sell the whole shares at prevailing market prices on behalf of those holders who would have been entitled to receive a fractional share. The transfer agent will determine, in its sole discretion, when, how and through which broker-dealers such sales will be made without any influence by us. We anticipate that these sales will occur as soon as practicable after the Split-Off is completed. Neither we nor the transfer agent will guarantee any minimum sale price for any fractional shares.

Accounting Treatment

        The Split-Off will be accounted for at historical cost due to the fact that our common stock is to be distributed pro rata to holders of Liberty Ventures common stock.

No Appraisal Rights

        Under the General Corporation Law of the State of Delaware, holders of Liberty Ventures common stock will not have appraisal rights in connection with the Split-Off.

Results of the Split-Off

        Immediately following the Split-Off, we expect to have outstanding approximately 54,089,200 shares of our Series A common stock and approximately 2,848,000 shares of our Series B common stock, based upon the number of shares of LVNTA and LVNTB, respectively, outstanding as of July 31, 2016. The actual number of shares of our Series A common stock and our Series B common stock to be distributed in the Split-Off will depend upon the actual number of shares of LVNTA and LVNTB outstanding at the redemption effective time.

        Immediately following the Split-Off, we expect to have approximately 1,310 holders of record of our Series A common stock and 85 holders of record of our Series B common stock, based upon the number of holders of record of LVNTA and LVNTB, respectively, as of July 31, 2016 (which amount does not include the number of stockholders whose shares are held of record by banks, brokerage houses or other institutions, but includes each such institution as one stockholder).

Listing and Trading of our Common Stock

        On the date of this proxy statement/prospectus, we are a wholly owned subsidiary of Liberty Interactive. Accordingly, there is no public market for our common stock. We expect to list our Series A common stock and our Series B common stock on the Nasdaq Global Select Market under the symbols "LEXEA" and "LEXEB," respectively. Neither we nor Liberty Interactive can assure you as to the trading price of either series of our common stock after the Split-Off. The approval of

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Nasdaq for the listing of our common stock is a condition to the Split-Off, which may not be waived by the Liberty Interactive board of directors.

Stock Transfer Agent and Registrar

        Computershare Trust Company, N.A. is the transfer agent and registrar for all series of Liberty Interactive common stock, including the Liberty Ventures common stock, and Splitco common stock.

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ADJOURNMENT PROPOSAL

        Liberty Interactive is seeking the approval of holders of Liberty Ventures common stock to adjourn the special meeting even if a quorum is present, if necessary and appropriate, to solicit additional proxies if there are not sufficient votes at the special meeting to determine if stockholders are in favor of the redemption proposal. If the special meeting is adjourned, and the adjournment is for a period of 30 days or less, no notice of the time or place of the reconvened meeting will be given to holders of Liberty Ventures common stock other than an announcement made at the special meeting. At the adjourned meeting any business may be transacted that might have been transacted at the original meeting. If the adjournment is for more than 30 days, however, a notice of the adjourned meeting shall be given to each holder of record of Liberty Ventures common stock entitled to vote at the original meeting. If after the adjournment a new record date is fixed for the adjourned meeting, the board of directors of Liberty Interactive shall fix a new record date for notice of such adjourned meeting in accordance with Delaware law, and shall give notice of the adjourned meeting to each holder of record of Liberty Ventures common stock entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.

Vote and Recommendation

        The approval of a majority of the aggregate voting power of the shares of Liberty Ventures common stock, outstanding on the record date, that are present in person or by proxy at the special meeting, voting together as a separate class, is required to approve the adjournment proposal.

        Liberty Interactive's board of directors has unanimously approved the adjournment proposal and believes that the adoption of the adjournment proposal is in the best interests of Liberty Interactive and its stockholders. Accordingly, the Liberty Interactive board unanimously recommends that the holders of Liberty Ventures common stock vote in favor of the adjournment proposal.

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CAPITALIZATION

        The following table sets forth (i) Splitco's historical capitalization as of June 30, 2016 and (ii) Splitco's adjusted capitalization assuming the Split-Off was effective on June 30, 2016. The table below should be read in conjunction with the accompanying historical combined financial statements of Splitco, including the notes thereto.

 
  Historical
6/30/16
  As Adjusted
6/30/16
 
 
  (amounts in thousands)
 

Assets

             

Cash and cash equivalents(1)

  $ 1,614     51,614  

Liabilities

             

Income taxes payable(2)

    71,412      

Debt

             

Long-term debt and capital lease obligations, net, including current portion

    29,120     29,120  

Margin loan(1)

        350,000  

Equity

             

Common stock(3)

        569  

Additional paid-in capital(3)

        398,513  

Parent's investment(3)

    627,670      

Accumulated other comprehensive earnings (loss), net of taxes

    (34,081 )   (34,081 )

Retained earnings

    56,936     56,936  

Total equity

    650,525     421,937  

Total capitalization

  $ 679,645     801,057  

(1)
In connection with the Split-Off, Splitco expects to borrow $350 million under a margin loan agreement that will be entered into by a subsidiary of Splitco holding all the shares of EXPE that will be owned by Splitco. Pursuant to the internal restructuring, approximately $300 million will be distributed from Splitco to Liberty Interactive.

(2)
The income taxes payable allocated to Splitco by Liberty Interactive as of December 31, 2015 and 2014, respectively, will be treated as an equity contribution upon completion of the Split-Off.

(3)
Upon completion of the Split-Off, the shares outstanding will be reflected in equity and parent's investment will be reclassified to additional paid in capital. The amounts reflected are the shares outstanding as of June 30, 2016 based on an assumed redemption ratio of 0.4.

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SELECTED FINANCIAL DATA

Selected Historical Financial Data of Splitco

        The following tables present selected combined financial statement information of Splitco. The selected historical information relating to Splitco's combined financial condition and results of operations is presented for each of the years in the five-year period ended December 31, 2015 and the six months ended June 30, 2016 and 2015. The financial data for the three years ended December 31, 2015 has been derived from Splitco audited combined financial statements for the respective periods. Data for the other periods presented has been derived from unaudited information. The data should be read in conjunction with Splitco's combined financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included herein.

    Summary Balance Sheet Data:

 
   
  December 31,  
 
  June 30,
2016
 
 
  2015   2014   2013   2012   2011  
 
  (amounts in thousands)
 

Cash and cash equivalents

  $ 1,614     2,243     1,631     3,072     2,545     2,731  

Inventory

  $ 45,310     53,194     48,961     58,452     33,798     24,530  

Investment in Expedia, Inc. 

  $ 888,270     927,057     513,814     476,538     431,332     620,904  

Property and equipment, net

  $ 27,334     29,628     31,617     33,186     21,336     13,224  

Intangible assets not subject to amortization

  $ 77,364     77,364     77,364     77,364     77,364     77,364  

Intangible assets subject to amortization, net

  $ 23,892     24,142     22,298     22,081     22,057     18,188  

Total assets

  $ 1,074,260     1,125,593     705,786     677,937     593,985     761,032  

Accounts payable

  $ 17,683     22,505     25,823     32,569     18,163     13,539  

Total related party notes payable(1)

  $         15,902     19,902     23,914     27,915  

Total debt and capital lease obligations

  $ 29,120     41,204     35,988     38,803     15,862     2,913  

Deferred income tax liabilities, noncurrent

  $ 288,714     304,483     156,150     147,848     141,731     114,787  

Income taxes payable, noncurrent

  $ 71,412     68,842     65,743     66,366     63,797     549  

Total parent's investment

  $ 650,525     672,119     387,236     354,721     314,935     589,158  

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    Summary Statement of Operations Data:

 
  Six months
ended
June 30,
  Years ended December 31,  
 
  2016   2015   2015   2014   2013   2012   2011  
 
  (amounts in thousands, except per share amounts)
 

Revenue

  $ 228,448     244,952     464,415     454,733     420,990     320,898     250,484  

Gross profit

  $ 56,717     56,735     112,825     100,911     92,744     75,873     61,584  

Operating income

  $ 6,468     6,577     10,276     9,837     9,405     8,787     9,753  

Interest expense

  $ (579 )   (589 )   (1,218 )   (1,214 )   (734 )   (253 )   (22 )

Related party interest expense(1)

  $     (774 )   (1,240 )   (1,867 )   (2,258 )   (2,684 )   (3,008 )

Share of earnings (losses) of Expedia, Inc. 

  $ (21,700 )   80,099     117,518     58,105     30,630     66,581     119,426  

Realized and unrealized gains (losses) on financial instruments, net

  $                     (269,808 )    

Gains (losses) on transactions, net

  $                     442,972      

Gain (loss) on dilution of investment in Expedia, Inc. 

  $ (3,465 )   620     319,587     2,768     (921 )   790     (4,489 )

Net earnings (loss) attributable to Liberty Expedia Holdings, Inc. shareholders

  $ (8,842 )   55,070     280,915     45,198     25,497     157,371     76,319  

Unaudited Pro Forma basic earnings (loss) per common share(2)

  $ (0.16 )   0.97     4.94     0.80     0.45     2.77     1.34  

(1)
As discussed in note 9 to the accompanying combined financial statements, as part of a contribution agreement entered into by Liberty Interactive and Bodybuilding on October 26, 2015, the balance of the related party note payable and accrued interest was contributed to equity.

(2)
Unaudited pro forma basic earnings (loss) per share was computed by dividing net earnings (loss) attributable to Splitco stockholders by 57 million common shares, which is the aggregate number of shares of Series A and Series B common stock that would have been issued if the Split-Off had occurred on June 30, 2016 (for the six month periods ending June 30, 2016 and June 30, 2015) or December 31, 2015 (for the years ended December 31, 2015, 2014, 2013, 2012 and 2011), assuming a redemption ratio of 0.4.

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Selected Historical Financial Data of Liberty Interactive

        The following tables present selected historical information related to Liberty Interactive's financial condition and results of operations is presented for each of the years in the five year period ended December 31, 2015 and the six months ended June 30, 2016 and 2015. The following data should be read in conjunction with Liberty Interactive's consolidated financial statements.

    Summary Balance Sheet Data:

 
   
  December 31,  
 
  June 30,
2016
 
 
  2015   2014   2013   2012   2011  
 
  (amounts in millions)
 

Cash and cash equivalents

  $ 510     2,449     2,306     902     2,291     846  

Investments in available-for-sale securities and other cost investments

  $ 1,770     1,353     1,224     1,313     1,720     1,168  

Investment in affiliates. 

  $ 1,525     1,641     1,633     1,237     851     951  

Investment in Liberty Broadband measured at fair value

  $ 2,561                      

Intangibles not subject to amortization

  $ 9,524     9,485     7,893     8,383     8,424     8,450  

Assets of discontinued operations(1)(2)

  $             7,095     7,428     349  

Total assets(2)

  $ 20,693     21,180     18,598     24,642     26,223     17,309  

Long-term debt, including current portion

  $ 8,227     8,707     8,008     6,981     7,436     6,005  

Deferred income tax liabilities

  $ 3,757     3,502     2,821     2,926     2,935     2,897  

Liabilities of discontinued operations(1)(2)

  $             1,452     1,748     19  

Equity(2)

  $ 6,994     6,875     5,780     11,435     12,051     6,627  

Noncontrolling interest(1)

  $ 102     88     107     4,499     4,489     134  

    Summary Statement of Operations Data:

 
  Six months
ended
June 30,
  Years ended December 31,  
 
  2016   2015   2015   2014   2013   2012   2011  
 
  (amounts in millions, except per share amounts)
 

Revenue

  $ 5,073     4,466     9,989     10,499     10,219     9,888     9,461  

Operating income (loss)

  $ 439     505     1,116     1,188     1,136     1,163     1,133  

Interest expense

  $ (185 )   (185 )   (360 )   (387 )   (380 )   (466 )   (426 )

Share of earnings (losses) of affiliates

  $ (21 )   90     (60 )   39     33     47     139  

Realized and unrealized gains (losses) on financial instruments, net

  $ 336     28     114     (57 )   (22 )   (351 )   84  

Gains (losses) on transactions, net

  $ 9     111     110     74     (1 )   443      

Gains (losses) on dilution of investments in affiliates

  $ 73     (5 )   314     (2 )   1     (5 )   9  

Earnings (loss) from continuing operations(3):

                                           

Liberty Capital common stock

    NA     NA     NA     NA     NA     NA     10  

Liberty Interactive Corporation common stock

    NA     NA     NA     NA     NA     33     576  

QVC Group common stock

  $ 236     280     674     575     500     291     NA  

Liberty Ventures common stock

  $ 222     130     237     3     54     281     NA  

  $ 458     410     911     578     554     605     586  

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  Six months
ended
June 30,
  Years ended December 31,  
 
  2016   2015   2015   2014   2013   2012   2011  
 
  (amounts in millions, except per share amounts)
 

Basic earnings (loss) from continuing operations attributable to Liberty Interactive Corporation stockholders per common share(4)

                                           

Series A and Series B Liberty Capital common stock

    NA     NA     NA     NA     NA     NA     0.12  

Series A and Series B Liberty Interactive Corporation common stock               

    NA     NA     NA     NA     NA         0.88  

Series A and Series B QVC Group common stock

  $ 0.45     0.56     1.35     1.10     0.88     0.48     NA  

Series A and Series B Liberty Ventures common stock

  $ 1.56     0.87     1.61     0.03     0.74     4.26     NA  

Diluted earnings (loss) from continuing operations attributable to Liberty Interactive Corporation stockholders per common share(4)

                                           

Series A and Series B Liberty Capital common stock

    NA     NA     NA     NA     NA     NA     0.12  

Series A and Series B Liberty Interactive Corporation common stock               

    NA     NA     NA     NA     NA         0.87  

Series A and Series B QVC Group common stock

  $ 0.44     0.55     1.33     1.09     0.86     0.47     NA  

Series A and Series B Liberty Ventures common stock

  $ 1.55     0.85     1.60     0.03     0.73     4.19     NA  

(1)
On December 11, 2012, Liberty Interactive acquired approximately 4.8 million additional shares of common stock of TripAdvisor (an additional 4% equity ownership interest), for $300 million, along with the right to control the vote of the shares of TripAdvisor's common stock and class B common stock Liberty Interactive owns. Following the transaction Liberty Interactive owned approximately 22% of the equity and 57% of the total votes of all classes of TripAdvisor common stock. On August 27, 2014, Liberty Interactive completed the TripAdvisor Holdings Spin-Off. TripAdvisor Holdings is comprised of Liberty Interactive's former interest in TripAdvisor as well as BuySeasons, Inc., Liberty Interactive's former wholly-owned subsidiary, and corporate level debt. Following the completion of the TripAdvisor Holdings Spin-Off, Liberty Interactive and TripAdvisor Holdings operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other. The consolidated financial statements of Liberty Interactive have been prepared to reflect TripAdvisor Holdings as discontinued operations. However, noncontrolling interest attributable to its former ownership interest in TripAdvisor is included in the noncontrolling interest line item in the consolidated balance sheet from the date of acquisition until the date of completion of the TripAdvisor Holdings Spin-Off.

(2)
On September 23, 2011, Liberty Interactive completed the split-off of Liberty Media to Liberty Interactive's stockholders (the LMC Split-Off ). At the time of the LMC Split-Off, Liberty Media owned all the assets, businesses and liabilities previously attributed to the Capital and Starz tracking stock groups. The LMC Split-Off was effected by means of a redemption of all of the Liberty Capital common stock and Liberty Starz common stock of Liberty Interactive in exchange for the common stock of Liberty Media.

(3)
Includes earnings (losses) from continuing operations attributable to the noncontrolling interests of $42 million, $40 million, $45 million, $63 million and $53 million for the years ended December 31, 2015, 2014, 2013, 2012, and 2011, respectively.

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(4)
Basic and diluted earnings per share have been calculated for Liberty Capital and Liberty Starz common stock for the period subsequent to March 3, 2008 through September 23, 2011. Basic and diluted EPS have been calculated for Liberty Interactive Corporation common stock for the periods from May 9, 2006 to August 9, 2012. Basic and diluted EPS have been calculated for QVC Group common stock and Liberty Ventures common stock subsequent to August 9, 2012.

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Selected Unaudited Historical Attributed Financial Data of the Ventures Group

        The following tables present selected historical attributed financial information of the Ventures Group as of June 30, 2016 and December 31, 2015 and 2014 and for the six months ended June 30, 2016 and 2015 and each of the years in the three-year period ended December 31, 2015. The following data should be read in conjunction with Liberty Interactive's Attributed Financial Information.

    Summary Balance Sheet Data:

 
   
  December 31,  
 
  June 30,
2016
 
 
  2015   2014  
 
  (amounts in millions)
 

Cash and cash equivalents

  $ 116     2,023     1,884  

Short term marketable securities

  $     898     868  

Investments in available-for-sale securities and other cost investments

  $ 1,766     1,349     1,220  

Investments in affiliates, accounted for using the equity method

  $ 1,300     1,433     1,258  

Investment in Liberty Broadband measured at fair value

  $ 2,561          

Intangible assets not subject to amortization, net

  $ 128     127     259  

Long-term debt, including current portion

  $ 1,829     2,172     2,191  

Deferred tax liabilities

  $ 2,531     2,143     1,987  

Attributed net assets (liabilities)

  $ 1,826     1,592     1,393  

    Summary Statement of Operations Data:

 
  Six months
ended
June 30,
  Years ended December 31,  
 
  2016   2015   2015   2014   2013  
 
  (amounts in millions)
 

Revenue

  $ 282     530     820     471      

Cost of sales

  $ (174 )   (369 )   (546 )   (306 )    

Operating expenses

  $ (37 )   (46 )   (79 )   (37 )    

Selling, general and administrative expenses

  $ (77 )   (103 )   (203 )   (127 )   (19 )

Depreciation and amortization

  $ (15 )   (28 )   (46 )   (19 )    

Operating income (loss)

  $ (21 )   (16 )   (54 )   (18 )   (19 )

Interest expense

  $ (38 )   (40 )   (77 )   (75 )   (90 )

Share of earnings (losses) of affiliates, net

  $ (51 )   57     (115 )   (12 )   (15 )

Realized and unrealized gains (losses) on financial instruments, net

  $ 332     30     72     (35 )   (10 )

Gains (losses) on transactions, net

  $ 9     111     110     74      

Gains (losses) on dilution of investments in affiliates

  $ 73     (4 )   314         (3 )

Other, net

  $ 28     13     25     22     28  

Income tax benefit (expense)

  $ (110 )   (21 )   (38 )   48     163  

Earnings (loss) from continuing operations

  $ 222     130     237     4     54  

Earnings (loss) from discontinued operations, net of taxes

  $             63     43  

Net earnings (loss)

  $ 222     130     237     67     97  

Less net earnings (loss) attributable to noncontrolling interests

  $     8     8     50     34  

Net earnings (loss) attributable to Liberty Interactive Corporation shareholders

  $ 222     122     229     17     63  

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UNAUDITED COMPARATIVE PER SHARE INFORMATION

        Presented below is per common share data regarding the income, cash dividends declared and book value of Liberty Ventures common stock and Splitco common stock on historical consolidated bases. You should read the information below in conjunction with the financial statements and accompanying notes included in this proxy statement/prospectus.

Liberty Ventures Common Stock Historical Per Share Data

        This table shows historical per share information for Liberty Ventures common stock.

 
  As of and for the
six months
ended June 30,
2016
  As of and for the
year ended
December 31,
2015
 

Basic earnings per share attributable to the Ventures Group

  $ 1.56   $ 1.61  

Diluted earnings per share attributable to the Ventures Group

    1.55     1.60  

Cash dividends per share

         

Book value per share

    12.86     11.21  

Liberty Ventures Common Stock Pro Forma Per Share Data

        This table shows pro forma per share information for Liberty Ventures common stock after giving effect to the Split-Off.

 
  As of and for the
six months
ended June 30,
2016
  As of and for the
year ended
December 31,
2015
 

Earnings per share from continuing operations

  $ 4.05   $ (0.93 )

Cash dividends per share

         

Book value per share

    20.61     16.14  

Splitco Common Stock Pro Forma Per Share Data

        This table shows pro forma per share information for Splitco common stock after giving effect to the Split-Off.

 
  As of and for the
six months
ended June 30,
2016
  As of and for the
year ended
December 31,
2015
 

Basic earnings per share attributable to common shareholders

  $ (1.91 ) $ (0.51 )

Cash dividends per share

         

Book value per share

    42.61     NA  

        The above pro forma earnings per share data was calculated by dividing net earnings (loss) attributable to Splitco stockholders per the pro forma condensed combined statements of operations by 57 million common shares, which is the aggregate number of shares of Series A and Series B common stock that would have been issued if the Split-Off had occurred on June 30, 2016 or December 31, 2015, respectively, assuming a redemption ratio of 0.4. The pro forma book value per share information was calculated by dividing total combined pro forma Liberty Expedia Holdings equity per the pro forma condensed consolidated balance sheet by 57 million common shares outstanding.

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DESCRIPTION OF SPLITCO'S BUSINESS

         For purposes of this description of Splitco's business, references in this section to "our company," "our business," "us," "we" and words of similar effect refer to Splitco.

Overview

        Splitco is currently a wholly owned subsidiary of Liberty Interactive. Upon completion of the Split-Off, we will be an independent, publicly traded company, and Liberty Interactive will not retain any ownership interest in us. Splitco is a holding company, engaged primarily in (1) the global travel industry and (2) the online commerce industry through our ownership of interests in our subsidiaries. Upon the completion of the Split-Off, our principal assets and businesses will consist of our consolidated subsidiary Expedia, in which we hold an approximate 15.8% equity interest and 52.4% voting interest (as of June 30, 2016), and our wholly owned subsidiary Bodybuilding.

        At present, Liberty Interactive's interest in Expedia and its wholly owned subsidiary Bodybuilding are attributed to its Ventures Group. Bodybuilding, as an operating company, has been included in the businesses and assets of Splitco in order to preserve the tax-free nature of the Split-Off to Liberty Interactive and to holders of Liberty Ventures common stock under applicable tax regulations. Bodybuilding was selected because it was no longer considered to be strategic to the continuing operations of Liberty Interactive and the Ventures Group.

Expedia, Inc.

        Expedia is an online travel company, empowering business and leisure travelers with the tools and information they need to efficiently research, plan, book and experience travel. Expedia seeks to grow its business through a dynamic portfolio of travel brands, including its majority owned subsidiaries that feature a broad supply portfolio—including over 307,000 properties and 1.2 million live vacation rental listings in 200 countries, 475 airlines, packages, rental cars and cruises, as well as destination services and activities. Travel suppliers distribute and market products via its traditional desktop offerings, as well as through alternative distribution channels including mobile and social media, Expedia's private label business and its call centers in order to reach its extensive, global audience. In addition, its advertising and media businesses help other businesses, primarily travel providers, reach a large audience of travelers around the globe.

        Expedia is focused on revolutionizing travel through the power of technology. Expedia believes the strength of its brand portfolio as well as its enhanced product offerings and new channel penetration drives customer demand, which when combined with Expedia's global scale and broad based supply, gives Expedia a unique advantage in addressing the ongoing migration of travel bookings from offline to online around the world. With Expedia's unmatched global audience of travelers, and its deep and broad selection of travel products, there is a rich interplay between supply and demand in Expedia's global marketplace that helps it provide value to both travelers planning trips and supply partners wanting to grow their business through a better understanding of travel retailing and consumer demand in addition to reaching consumers in markets beyond their reach. Expedia's primary growth drivers are technology and product innovation, global expansion, and new channel penetration.

    Portfolio of Brands

        Expedia operates a strong brand portfolio with global reach, targeting a broad range of travelers, travel suppliers and advertisers. Expedia knows that consumers typically visit multiple travel sites prior to booking travel, and having a multi-brand strategy increases the likelihood that those consumers will visit one or more of its sites. Expedia also markets to consumers through a variety of channels, including internet search and metasearch sites, and having multiple brands appear in search results also increases the likelihood of attracting visitors. Expedia's brands tailor their product offerings and

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websites to particular traveler demographics. For example, Hotwire finds deep discount deals for the budget-minded travel shopper while the Classic Vacations brand targets high-end, luxury travelers. Brand Expedia spans the widest swath of potential customers with travel options across a broad value spectrum, while the Hotels.com brand focuses specifically on a hotel only product offering.

        Brand Expedia.     As one of the world's leading full-service online travel brands, Expedia-branded websites in 33 countries, including Expedia.com in the United States, make a large variety of travel products and services available directly to travelers. Brand Expedia aims to provide the latest technology and the widest selection of travel options for many different types of travelers, from families booking a summer vacation to individual travelers arranging a quick weekend getaway, as well as unmanaged business travelers. Travelers can search for, compare information about (including pricing, availability and verified traveler reviews) and book travel products and services on Expedia-branded websites and mobile apps, including airline tickets, lodging, car rentals, cruises, insurance and many local expert services—such as airport transfers, local attractions, activities and tours—from a large number of suppliers, on both a stand-alone and package basis.

        Hotels.com Worldwide.     Hotels.com is focused entirely on marketing and distributing lodging accommodations. Hotels.com, with 89 localized sites worldwide in 39 languages worldwide and market leading mobile apps on all major platforms, offers travelers a broad selection of lodging options. Because of its single product offering, Hotels.com is often Expedia's first entry point into a region, allowing Expedia to evaluate the market opportunity prior to adding additional brands and product offerings. Hotels.com Rewards®, the loyalty program established in 2008, offers travelers the ability to earn one free night for every ten nights stayed.

        Hotwire.     Hotwire offers a travel booking service that matches flexible, value-oriented travelers with suppliers who have excess seats, rooms and cars they offer at lower rates than retail. Hotwire's Hot Rate® Hotels, Hot Rate® Cars and Hot Rate® Flights offer travelers an extra low price but the supplier name is revealed after the traveler books and pays. With Hotwire's unique model, suppliers create value from excess availability without diluting their core, brand-loyal traveler base. Hotwire partners with leading hotel companies worldwide, brand-name domestic and international airlines, and major car rental companies in the United States.

        Orbitz.     In September 2015, Expedia acquired Orbitz Worldwide, Inc., including all of its brands and assets. Orbitz Worldwide is a global travel portfolio including Orbitz, ebookers, CheapTickets, Orbitz Partner Network and Orbitz for Business.

        Travelocity.     After entering into an exclusive, long-term strategic marketing agreement with Travelocity during the third quarter of 2013, under which Brand Expedia powered the technology platform, supply and customer service for Travelocity's existing websites in the United States and Canada, Expedia announced in January 2015 that it had acquired the Travelocity brand and associated assets from Sabre Corporation ( Sabre ) and had terminated the strategic marketing and other related agreements.

        HomeAway.     In December, 2015, Expedia acquired HomeAway, Inc. ( HomeAway ), which operates an online marketplace for the vacation rental industry. The HomeAway portfolio includes the vacation rental websites HomeAway.com, VRBO.com and VacationRentals.com in the United States; HomeAway.co.uk and OwnersDirect.co.uk in the United Kingdom; HomeAway.de in Germany; Abritel.fr and Homelidays.com in France; HomeAway.es and Toprural.es in Spain; AlugueTemporada.com.br in Brazil; HomeAway.com.au and Stayz.com.au in Australia; and travelmob.com in Singapore. HomeAway also owns a majority interest in Bookabach.com.nz, a vacation rental site in New Zealand, and operates BedandBreakfast.com, a comprehensive global site for finding bed-and-breakfast properties. In addition to its online marketplace, HomeAway also offers software

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solutions to property managers through its HomeAway Software for Professionals and Glad to Have You products.

        Expedia Affiliate Network.     Expedia's private label, business-to-business brand Expedia Affiliate Network ( EAN ) makes hotel bookings available to travelers through third-party branded websites, call centers and in-person locations. Some of EAN's largest partners include airline suppliers, loyalty programs, leading regional online travel companies and major retailers. EAN offers an Application Programming Interface and template solution and generally compensates partners on a gross profit-share basis.

        Egencia.     Expedia's full-service travel management company offers travel products and services to businesses and their corporate travelers. Egencia maintains a global presence in 65 countries across North America, Europe and Asia Pacific. Egencia provides, among other things, a global technology platform coupled with local telephone assistance with expert travel consultants, unique supply targeted at business travelers and consolidated reporting for its clients. Egencia charges its corporate clients account management fees, as well as transactional fees for various contacts made as part of the travel process. In addition, Egencia provides on-site agents to some corporate clients to provide in-house, seamless support. Egencia also offers consulting and meeting management services as well as advertising opportunities. Expedia believes the corporate travel sector represents a significant opportunity for Expedia through Egencia's compelling technology solution for businesses seeking to improve employees' travel experiences and optimize travel costs by moving the focus of the corporate travel program to online and mobile services versus the traditional call center approach.

        trivago.     trivago is Expedia's majority-owned hotel metasearch company, based in Dusseldorf, Germany, featuring price comparison from more than one million hotels. Officially launched in 2005, trivago is one of the best known travel brands in Europe and is expanding globally with sites in 55 countries.

        Wotif Group.     In November 2014, Expedia completed the acquisition of Wotif Group, a leading Australian online travel company, comprised of the Wotif.com, lastminute.com.au and travel.com.au brands in Australia, and Wotif.co.nz and lastminute.co.nz in New Zealand. Wotif.com launched in 2000, and listed on the Australian Securities Exchange in June 2006 as Wotif.com Holdings Limited, under the ASX code "WTF," prior to being acquired by Expedia.

        Venere.     The Venere website, www.venere.com, lists hotel properties in hundreds of locations around the world and provides hotel partners with geographically diverse sources of demand.

        Classic Vacations.     Classic Vacations offers individually tailored vacations primarily through a national network of third-party retail travel agents. Classic Vacations delivers a full line of premium vacation packages—air, hotels, car rentals, activities, cruises and private transportation—to create customized luxury vacations in Hawaii, the Caribbean, Mexico, Costa Rica, Europe, Australia, New Zealand, Fiji, Maldives, Dubai, Seychelles and Tahiti. Travel agents and travelers can preview the product offering through Expedia's websites, www.classicforagents.com and www.classicvacations.com.

        Expedia Local Expert.     The Expedia Local Expert network offers online and in-market concierge services, activities, experiences, attractions and ground transportation. With access to a rich portfolio of thousands of tours and adventures, LX can be found on more than 40 Expedia, Orbitz, Travelocity and Wotif websites, and operates more than 100 concierge and activity desks in major resort destinations.

        Expedia CruiseShipCenters.     Expedia CruiseShipCenters is a leading seller of cruises and vacations. The franchise company has over 200 retail locations across North America, a team of over 4,100 professionally-trained vacation consultants and an inventory of more than 200,000 staterooms available to book online or in store.

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        CarRentals.com.     CarRentals.com is an online car rental marketing and retail firm offering a diverse selection of car rentals direct to consumers. Following Expedia's July 2014 acquisition of Auto Escape Group, one of Europe's leading online car rental reservation companies, the Auto Escape Group joined with the CarRentals.com brand. With CarRentals.com's international expansion, it is able to provide Expedia's customers more choices across the globe and help its supply partners expand their marketing reach.

    Growth Strategy

        Product Innovation.     Each of Expedia's leading brands was a pioneer in online travel and has been responsible for driving key innovations in the space over the past two decades. Each Expedia technology platform is operated by a dedicated technology team, which drives innovations that make researching and shopping for travel increasingly easier and help customers find and book the best possible travel options. In the past several years, Expedia made key investments in technology, including significant development of its technical platforms that makes it possible for them to deliver innovations at a faster pace. For example, Expedia launched new global platforms for Hotels.com and Brand Expedia, enabling them to significantly increase the innovation cycle, thereby improving conversion and driving faster growth rates for those brands. In 2013, Expedia signed an agreement to power the technology, supply, and customer service platforms for Travelocity-branded sites in the United States and Canada, enabling Expedia to leverage its investments in each of these key areas. The shift of Travelocity-branded sites to the Expedia technology platform was successfully completed over the course of 2014. In November 2014, Expedia completed the acquisition of Wotif Group and subsequently converted the Wotif.com site to the Expedia platform. In January 2015, Expedia acquired the Travelocity brand and other associated assets from Sabre. The strategic marketing and other related agreements previously entered into were terminated. In September 2015, Expedia completed the acquisition of Orbitz Worldwide, including all of its brands. The migration of the Orbitz.com, CheapTickets.com and eBookers sites to the Expedia technology platform was completed in the first half of 2016, and Orbitz for Business customers were migrated to the Egencia technology platform as of July 2016. In December 2015, Expedia completed the acquisition of HomeAway, including all of its brands. Expedia intends to continue leveraging these investments when launching additional points of sale in new countries, introducing new website features, adding supplier products and services including new business model offerings, as well as proprietary and user-generated content for travelers.

        Global Expansion.     The Expedia, Hotels.com, Egencia, EAN, and Hotwire brands operate both domestically and through international points of sale, including in Europe, Asia Pacific, Canada and Latin America. In addition, Venere.com is an online hotel reservation specialist in Europe, eBookers offers multi-product online reservation in Europe and Wotif Group includes a leading portfolio of travel brands, including Wotif.com, Wotif.co.nz, lastminute.com.au, lastminute.com.nz and travel.com.au. Egencia, our corporate travel business, operates in 65 countries around the world and continues to expand, including its 2012 acquisition of VIA Travel. The HomeAway portfolio has vacation rental sites all around the world. Expedia owns a majority share of trivago, a leading hotel metasearch company. Officially launched in 2005, trivago is one of the best known travel brands in Europe and North America. trivago continues to operate independently and rapidly grow revenue through global expansion, including aggressive expansion in new countries. In addition, Expedia has commercial agreements in place with Ctrip and eLong in China, as well as Decolar.com, Inc. in Latin America. In the first half of 2016, approximately 35% of Expedia's worldwide gross bookings and 42% of worldwide revenue were through international points of sale compared to just 21% for both worldwide gross bookings and revenue in 2005. Expedia has a goal of generating at least 65% of its revenue through businesses and points of sale outside of the United States.

        In expanding its global reach, Expedia leverages significant investments in technology, operations, brand building, supplier relationships and other initiatives that it has made since the launch of

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Expedia.com in 1996. Expedia's scale of operations enhances the value of technology innovations it introduces on behalf of its travelers and suppliers. Expedia believes that its size and scale affords the company the ability to negotiate competitive rates with its supply partners, provides breadth of choice and travel deals to its traveling customers through an expanding supply portfolio and creates opportunities for new value added offers for its customers such as its loyalty programs. The size of Expedia's worldwide traveler base makes its sites an increasingly appealing channel for travel suppliers to reach customers. In addition, the sheer size of Expedia's user base and search query volume allows it to test new technologies very quickly in order to determine which innovations are most likely to improve the travel research and booking process, and then roll those features out to its worldwide audience in order to drive improvements in conversion.

        New Channel Penetration.     Today, the majority of online travel bookings are generated through typical desktop and laptop computers. However, technological innovations and developments are creating new opportunities including travel bookings made through mobile devices. In the past few years, each of Expedia's brands made significant progress creating new mobile websites and mobile/tablet applications that are receiving strong reviews and solid download trends. Expedia believes mobile bookings via smartphones present an opportunity for incremental growth as they are often completed within one or two days of the travel or stay, which is a much shorter booking window than Expedia has historically experienced via more traditional online booking methods. During the last few years, customers' behaviors and preferences on tablet devices began to show differences from trends seen on smartphones. For example, the booking window on a smartphone typically is much shorter than the trend on the tablet device and historical average on a desktop or laptop. In addition, Expedia is seeing increasing cross-device usage among its customers, who connect to its websites and apps across multiple devices and platforms throughout their travel planning process. Expedia also believes that in the future mobile is likely to represent an efficient marketing channel given the opportunity for direct traffic acquisition, increase in share of wallet and in repeat customers, particularly through mobile applications. During the first half of 2016, one in four Expedia, Inc. transactions were booked globally on a mobile device.

    Business Models

        Expedia makes travel products and services available both on a stand-alone and package basis, primarily through the following business models: the merchant model, the agency model and the advertising model. In addition, upon Expedia's acquisition of HomeAway on December 15, 2015, Expedia also earns revenue related to subscription-based vacation rental listing and other ancillary services provided to property owners and managers. Under the merchant model, Expedia facilitates the booking of hotel rooms, airline seats, car rentals and destination services from its travel suppliers and Expedia is the merchant of record for such bookings. The majority of Expedia's merchant transactions relate to hotel bookings. Under the agency model, Expedia facilitates travel bookings and acts as the agent in the transaction, passing reservations booked by the traveler to the relevant travel provider. Expedia receives commissions or ticketing fees from the travel supplier and/or traveler.

        Expedia continues to see closer integration of the agency hotel product with its core merchant product through its Expedia Traveler Preference ( ETP ) program by offering, for participating hotels, customers the choice of whether to pay Expedia in advance under its merchant program or pay at the hotel at the time of the stay. Growth in the ETP program has generally resulted in reduced negotiated economics to compensate for hotel supply partners absorbing expenses such as credit card fees and customer service costs, and as Expedia continues to expand the breadth and depth of its global hotel offering, it has made and expects to continue to make adjustments to its economics in various geographies, including changes based on local market conditions. Based on these dynamics, Expedia expects its revenue per room night to remain under pressure in the future.

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        Through various of its Expedia-branded and other websites, travelers can dynamically assemble multiple component travel packages in a single transaction at a lower price as compared to booking each component separately. Packages assembled by travelers through the packaging model on these websites primarily include a merchant hotel component and an air or car component. Travelers select packages based on the total package price, without being provided component pricing. The use of the merchant travel components in packages enables Expedia to make certain travel products available at prices lower than those charged on an individual component basis by travel suppliers without impacting their other models. In addition, Expedia also offers third-party pre-assembled package offerings, primarily through its international points of sale, further broadening the scope of products and services to travelers. Expedia expects the package product to continue to be marketed primarily using the merchant model.

        Under the advertising model, Expedia offers travel and non-travel advertisers access to a potential source of incremental traffic and transactions through its various media and advertising offerings on trivago and its transaction-based websites.

        Expedia's HomeAway brand offers subscription-based vacation rental listing products and services to property owners or managers where property owners or managers purchase in advance online advertising services related to the listing of their properties for rent over a fixed term (typically one year), and on a transaction-basis where a commission is earned on traveler bookings completed on its websites. Going forward, Expedia expects to transition over time to more transaction-based service offerings, and it recently introduced a consumer booking fee.

    Relationships with Travel Partners

        Overview.     Expedia makes travel products and services available from a variety of hotel companies, large and small commercial airlines, car rental companies, cruise lines, destination service providers, and with the closing of the HomeAway acquisition, property owners and managers. Expedia seeks to build and maintain long-term, strategic relationships with travel suppliers and global distribution system ( GDS ) partners. An important component of the success of Expedia's business depends on its ability to maintain its existing relationships, as well as build new relationships, with travel suppliers and GDS partners.

        Travel Suppliers.     Expedia strives to deliver value to its travel supply partners through a wide range of innovative, targeted merchandising and promotional strategies designed to generate consumer demand and increase their revenue, while simultaneously reducing their overall marketing transaction and customer service costs. Expedia's strategic account managers and local hotel market managers work directly with travel suppliers to optimize the exposure of their travel products and brands through Expedia's points of sale, including participation in need-based, seasonal and event-driven promotions and experimentation within the new channels Expedia is building.

        Expedia has developed proprietary, supplier-oriented technology that streamlines the interaction between some of its websites and hotel central reservation systems, making it easier and more cost-effective for hotels to manage reservations made through Expedia's brands. Through this "direct connect" technology, hotels can upload information about available products and services and rates directly from their central reservation systems into Expedia's websites, as well as automatically confirm hotel reservations made by Expedia's travelers. In the absence of direct connect technology, both of these processes are generally completed via a proprietary extranet.

        In addition, HomeAway's vacation rental listing services includes a set of tools for property owners or managers, which enables them to manage an availability calendar, reservations, inquiries and the content of the listing, as well as provide various other services for property owners or managers to manage reservations or drive incremental sales volume.

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        Distribution Partners.     GDSs, also referred to as computer reservation services, provide a centralized, comprehensive repository of travel suppliers' 'content'—such as availability and pricing of seats on various airline point-to-point flights, or 'segments'. The GDSs act as intermediaries between the travel suppliers and travel agencies, allowing agents to reserve and book flights, rooms or other travel products. Expedia's relationships with GDSs primarily relate to its air business. Expedia uses Sabre, Amadeus and Travelport as its GDS segment providers in order to ensure the widest possible supply of content for Expedia's travelers.

    Marketing and Promotions

        Expedia's marketing programs are intended to build and maintain the value of its various brands, drive traffic and ultimately bookings through its various brands and businesses, optimize ongoing traveler acquisition costs and strategically position its brands in relation to one another. Expedia's long-term success and profitability depends on its continued ability to maintain and increase the overall number of traveler transactions flowing through its brand and shared global platforms in a cost-effective manner, as well as its ability to attract repeat customers to its sites.

        Expedia's marketing channels primarily include online advertising, including search engine marketing and optimization, as well as meta-search, social media sites, offline advertising, loyalty programs, mobile apps and direct and/or personalized traveler communications on its websites as well as through direct e-mail communication with its travelers. Expedia's marketing programs and initiatives include promotional offers such as coupons as well as seasonal or periodic special offers from its travel suppliers based on its supplier relationships. Expedia's traveler loyalty programs include Hotels.com Rewards on Hotels.com global websites and Expedia® + rewards on over 25 Brand Expedia points of sale, as well as Orbitz Rewards on Orbitz.com. The cost of these loyalty programs is recorded as a reduction of revenue in Expedia's financial statements.

        Expedia also makes use of affiliate marketing. The Expedia.com, Hotels.com, Hotwire, Travelocity, HomeAway, Wotif, lastminute.com.au and Venere-branded websites receive bookings from consumers who have clicked-through to the respective websites through links posted on affiliate partner websites. Affiliate partners can also make travel products and services available on their own websites through a Brand Expedia, Hotels.com or HomeAway co-branded offering or a private label website. Expedia's EAN and Orbitz Partner Network businesses provides its affiliates with technology and access to a wide range of products and services. Expedia manages agreements with thousands of third-party affiliate partners, including a number of leading travel companies, pursuant to which it pays a commission for bookings originated from their websites.

    Operations and Technology

        Expedia provides 24-hour-a-day, seven-day-a-week traveler sales and support by telephone or via e-mail. For purposes of operational flexibility, Expedia uses a combination of outsourced and in-house call centers. Expedia's call centers are located throughout the world, including outsourced operations in the Philippines, El Salvador, Egypt and India. Expedia invested significantly in its call center technologies, with the goal of improving customer experience and increasing the efficiency of its call center agents, and has plans to continue reaping the benefits of these investments going forward.

        Expedia's systems infrastructure and web and database servers are housed in various locations, mainly in the United States, which have 24-hour monitoring and engineering support, as well as in the public cloud. These data centers have their own generators and multiple back-up systems. Significant amounts of Expedia's owned computer hardware for operating the websites are located at these facilities. For some critical systems, Expedia has both production and disaster-recovery facilities. Expedia's technology systems are subject to certain risks, which are described in "Risk Factors."

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    Intellectual Property

        Expedia's intellectual property rights, including its patents, trademarks, copyright, domain names, trade dress, proprietary technology and trade secrets, are an important component of its business. For example, Expedia relies heavily upon its intellectual property and proprietary information in its content, brands, software code, proprietary technology, ratings indexes, informational databases, images, graphics and other components that make up its services. Expedia has acquired some of its intellectual property rights and proprietary information through acquisitions, as well as licenses and content agreements with third parties.

        Expedia protects its intellectual property and proprietary information by relying on its terms of use, confidentiality procedures and contractual provisions, as well as international, national, state and common law rights. In addition, Expedia enters into confidentiality and invention assignment agreements with employees and contractors, and license and confidentiality agreements with other third parties. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use Expedia's trade secrets or its intellectual property and proprietary information without authorization which, if discovered, might require the uncertainty of legal action to correct. In addition, there can be no assurance that others will not independently and lawfully develop substantially similar properties.

        Expedia maintains its trademark portfolio by filing trademark applications with the appropriate international trademark offices, maintaining appropriate registrations, securing contractual trademark rights when appropriate, and relying on common law trademark rights when appropriate. Expedia also registers copyrights and domain names as it deems appropriate. Expedia protects its trademarks, copyrights and domain names with an enforcement program and use of intellectual property licenses. Trademark and intellectual property protection may not be available or may not be sought, sufficient or effective in every jurisdiction where Expedia operates. Contractual disputes or limitations may affect the use of trademarks and domain names governed by private contract.

        Expedia has considered, and will continue to consider, the appropriateness of filing for patents to protect future inventions, as circumstances may warrant. However, patents protect only specific inventions and there can be no assurance that others may not create new products or methods that achieve similar results without infringing upon patents owned by Expedia.

    Seasonality

        Expedia generally experiences seasonal fluctuations in the demand for its travel products and services. For example, traditional leisure travel bookings are generally the highest in the first three quarters as travelers plan and book their spring, summer and holiday travel. The number of bookings typically decreases in the fourth quarter. Because revenue for most of its travel products, including merchant and agency hotel, is recognized when the travel takes place rather than when it is booked, revenue typically lags bookings by several weeks or longer. The seasonal revenue impact is exacerbated with respect to income by the nature of Expedia's variable cost of revenue and direct sales and marketing costs, which it typically realizes in closer alignment to booking volumes, and the more stable nature of its fixed costs. Furthermore, operating profits for Expedia's primary advertising business, trivago, are experienced in the second half of the year as selling and marketing costs offset revenue in the first half of the year as Expedia aggressively markets during the busy booking period for summer travel. As a result, revenue and income are typically the lowest in the first quarter and highest in the third quarter. The continued growth of Expedia's international operations or a change in its product mix, including the assimilation, growth and shift to more of a transaction-based business model for the vacation rental listing business of HomeAway, may influence the typical trend of the seasonality in the future.

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    Terms of Investment in Expedia

        We own an approximate 15.8% equity interest and 52.4% voting interest in Expedia (as of June 30, 2016). Historically, Liberty Interactive has been a party to a Stockholders Agreement with Diller, pursuant to which Diller held an irrevocable proxy over all the shares of EXPE and Expedia class B common stock owned by Liberty Interactive. In connection with the Split-Off, and the completion of the proxy arrangements, the Stockholders Agreement will be assigned to us and amended to provide for the assignment of Diller's proxy over these shares to our company through the Proxy Arrangement Termination Date. As a result, we will begin consolidating Expedia as of the completion of the Split-Off, as Splitco will then control a majority of the voting interest in Expedia for accounting purposes. Additionally, in conjunction with the application of acquisition accounting, we anticipate a full step up in basis of Expedia along with a gain between our historical basis and the fair value of our interest in Expedia. Liberty Interactive is also subject to a Governance Agreement with Expedia, which will be assigned to us in connection with the Split-Off and which will provide us following the Split-Off, with certain director nomination and other rights and imposes certain restrictions on the ownership of shares of Expedia class B common stock. We will maintain our rights under the Governance Agreement, as assigned and amended, and the Stockholders Agreement, as assigned, even upon termination of the proxy arrangements.

        For more information regarding the proxy arrangements, see "Certain Relationships and Related Party Transactions—Relationships Among Splitco, the Malone Group, Diller and Expedia—Proxy Arrangements."

Bodybuilding

        Bodybuilding is an Internet retailer of sports, fitness and dietary supplements and other health and wellness products. Bodybuilding markets approximately 550 globally recognized brands, including several brands exclusive to its retail channel. Through its website and mobile applications, Bodybuilding offers directly to its customers one of the largest varieties of supplements, vitamins, minerals, exercise products, frozen prepared meals, clothing and exercise equipment, with approximately 16,000 stock keeping units ( SKUs ), and delivers its products primarily through its fulfillment centers.

        Bodybuilding is one of the largest e-retailers in the nutritional and dietary-supplement industry, as ranked by Alexa.com. It also publishes a significant amount of online health and fitness content, offering complimentary fitness content, workout programs, video trainers, articles, recipes, health advice and motivational stories. Bodybuilding's online model also includes a combination of detailed product information and real-time user reviews to help its visitors select products designed to aid in achieving their health and fitness goals. Bodybuilding's website, which was launched in 1999, currently includes more than 30,000 pages of editorial content, 10,000 videos, 16,000 pages of store content and over 6.5 million forum threads comprising 125 million forum posts.

        Visitors to Bodybuilding's website typically include gym-goers, athletes, weightlifters and bodybuilders, as well as other individuals wanting to improve their mental and physical well-being through diet and exercise, including more than 30 million monthly unique visitors and 11 million members of BodySpace, an inclusive online fitness community that allows people of all health and fitness levels to track their progress and discuss goals, techniques, supplementation and achievements.

        Bodybuilding strives to provide everything necessary for individuals to be healthy and fit, as well as a platform for users to share their inspirational stories once they achieve their health and fitness goals. Providing customers with the information, motivation and supplements necessary to reach and maintain their health and fitness goals perpetuates website traffic, continued engagement and product purchases. Bodybuilding primarily generates revenue from the online sale of products, through Bodybuilding's website and mobile applications. In addition, a limited amount of revenue is generated through advertising.

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        Bodybuilding is currently a wholly owned subsidiary of Liberty Interactive and, upon completion of the Split-Off, will be our wholly owned subsidiary.

    Industry

        According to the Nutrition Business Journal ( NBJ ), the global supplement industry was worth $108 billion in 2014, and is estimated to grow to $153 billion by 2020. The global demand for supplements can vary based on, among other factors, market demand, gross domestic product, product availability and lifestyle of consumers. The United States represents the largest regional consumption of supplements, representing 34% of the global market demand in 2014. The Sports Nutrition, Meal, Homeopathic, and Specialty Supplement product category of dietary supplements was the fastest growing supplement sector in 2014, worth $39 billion.

        The VMS industry in the United States is highly fragmented. According to the NBJ, no single industry participant accounted for more than 5% of total domestic VMS industry sales in 2014. Retailers of VMS products primarily include multi-level marketers, online specialty and mass retailers and brick-and-mortar stores, including, but not limited to, grocery stores, membership clubs and specialty and mass retailers. The NBJ anticipates that specialty retail will remain the major market driver for supplements through 2020, and the specialty retail channel is expected to add over $8 billion in new annual sales by that time. Additionally, the NBJ forecasts that online sales channel will achieve 13% compound annual growth from 2014 to 2020.

        Factors that affect the growth of the nutritional and dietary supplement industry include an aging U.S. population, rising healthcare costs and the increased use of preventive measures. In addition, the general population's increased focus on diet and nutrition, along with growing fitness and wellness program participation, serves as a positive trend for the nutritional and dietary supplement industry.

        In addition, worldwide readers continue to migrate from traditional print to digital media to consume content related to their professional and personal interests. The global supplement industry and general health and fitness markets are no exception to this trend, and consumers of health and fitness content and products are increasingly using the internet to research and purchase health and fitness supplements and other products.

        Bodybuilding's performance is affected by industry trends including, among others, demographic trends and health and lifestyle preferences, as well as other factors, such as competition, industry media coverage and governmental actions. For example, the dietary supplement industry is subject to potential regulatory activity and other legal matters that could affect the credibility of a given product or category of products. Consumer trends may be influenced by current economic conditions, and limited product innovation, and introductions in the VMS industry can dramatically affect purchasing patterns. Even though Bodybuilding's business model allows it to respond to changing industry trends by introducing new products and adjusting its product mix and offering sales incentives, such actions may not fully alleviate adverse trends.

    Competitive Strengths

        Bodybuilding believes it is well positioned to capitalize on favorable VMS industry dynamics and trends as a result of its competitive strengths described below:

    Extensive Product Selection, Including a Strong Assortment of Exclusive Brands

        Bodybuilding offers one of the largest online selections of dietary and nutritional supplements. It offers its consumers vast selection, ease of access, competitive prices, inspirational content, personalized and mobile shopping experiences and superior customer service to drive channel growth. Bodybuilding believes it has a complete and authoritative merchandise assortment and markets a broad product

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selection. Bodybuilding's merchandise assortment includes approximately 16,000 SKUs from a combination of over 550 nationally recognized brands, as well as its own private label brands. Merchandise from Bodybuilding's exclusive brands accounted for approximately 19% of its revenue in 2015, and provides its customers the opportunity to purchase quality products at strong value.

    Digital Content and Community

        Bodybuilding has a diverse and broad range of online content that allows its customers to experience a full scale fitness environment. In addition, the Bodybuilding online fitness community, BodySpace, allows over 11 million members to connect, track and share health and fitness progress, achievements and experiences. Bodybuilding hosts 30 million monthly unique visitors that utilize its digital content, which helps customers to remain engaged, drives traffic and increases sales in the Bodybuilding online store.

    Competitive Pricing

        Bodybuilding strives to have low prices on the largest selection of sports nutrition products. Many of the products offered in Bodybuilding's industry require a minimum advertised price, which does not allow Bodybuilding to price below a certain threshold that is determined by the supplier. For the majority of Bodybuilding's other products, its strategy is to be price-competitive with its largest competitors. Bodybuilding utilizes third party technology to receive real time data on competitors' pricing and makes pricing adjustments accordingly. Bodybuilding's exclusive products are priced based on margin and category competitors to provide the best price and overall value to its customers.

    Fast Shipping and Methods of Fulfillment

        Bodybuilding's fulfillment centers target to complete and ship an order as quickly as possible, often in the same day it is received. In 2015, 58% of orders were shipped within the same day, and 98% of orders were shipped by the next day. In 2015, it was awarded the Elite Service Award by StellaService for fast shipping. In addition, the average order-to-delivery time for our domestic customers is less than 2.5 days, while many of our competitors offer 3-4 days from order to delivery. By operating its own facilities, Bodybuilding gains greater control over order timeliness, cost, accuracy and inventory levels.

    Value-Added Customer Service

        Bodybuilding offers one of the highest degrees of customer service among national competitors, and was recognized in 2015 by both Bizrate Insights and StellaService for its excellence in customer service. Bodybuilding has earned the Elite award for both outstanding email and phone support by StellaService, and has been rated in the Platinum Circle of Excellence by Bizrate Insights for the past six years. Bodybuilding's focus on value added customer service, aided by the deep product knowledge of its experienced customer service representatives, creates additional value for its customers. Bodybuilding does not require call quotas or time restrictions for its customer service representatives, which aides Bodybuilding in retaining its strong customer service team. This team helps Bodybuilding build trust with consumers, build its brand awareness, enhance its reputation and drive sales.

    Product Offerings

    Dietary Supplements: Sports Nutrition

        Bodybuilding's sports nutrition consumers look for products to help maintain or supplement a healthy lifestyle. These products are used in conjunction with cardiovascular conditioning, weight training and sports activities. Sports nutrition supplements include protein and weight gain powders, meal replacements, weight management, energy production, recovery enhancement and pre- and post-workout supplements. Bodybuilding's sports nutrition products are offered in many convenient

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forms, such as powders, tablets, capsules, soft gels and liquids. In 2015, these products generated approximately 83% of Bodybuilding's revenue, with protein, pre-workout and post-workout supplements representing 42%, 15% and 13% of revenue, respectively. Bodybuilding offers approximately 9,000 SKUs in sports nutrition.

    Dietary Supplements: Other

        Bodybuilding's Other category represents all other product classifications it stocks that do not fit within the Sports Nutrition category. These products include items such as multivitamins, herbs, minerals, botanicals, probiotics, apparel and accessories. Bodybuilding offers approximately 7,000 SKUs in its "Other" category.

    Brands, Suppliers and Availability of Raw Materials

        Bodybuilding resells many dietary supplement brands through its vendor supplier partnerships and its exclusive brands. Based on sales, Bodybuilding's top ten brands for the year ended December 31, 2015 include: BPI Sports, BSN, Cellucor, Dymatize, JYM, MusclePharm, MuscleTech, Optimum Nutrition, RSP Nutrition and Universal Nutrition.

        Bodybuilding partners with a large number of suppliers; however, approximately 60% of inventory purchases are concentrated with its top eight suppliers. Bodybuilding's largest supplier is Optimum Nutrition, from which Bodybuilding purchased approximately 17% of its merchandise in fiscal year 2015. Bodybuilding considers numerous factors in selecting its suppliers, including, among others, quality, price, credit terms and product offerings. Bodybuilding does not typically enter into fixed-term supply agreements with its vendors. Bodybuilding strives to maintain sufficient inventory to enable it to meet customer demand and provide a high level of service to its customers.

    Seasonality

        Bodybuilding's business is slightly seasonal. The first quarter of a given calendar year, when consumers implement their New Year's resolutions related to health and fitness, accounts for the largest percentage of company sales by quarter. There are varying degrees of seasonality throughout the remainder of the year based on key promotional events such as, among others, Black Friday, Cyber Monday, Bodybuilding's annual Birthday Sale, and the Bodybuilding supplement awards.

    Intellectual Property

        Bodybuilding's intellectual property (including trademarks, service marks, trade dress, logos, copyrights, domain names, patents, trade secrets and proprietary technologies) is a critical part of its business. To protect its intellectual property, Bodybuilding relies on a combination of laws and regulations, as well as contractual restrictions. Bodybuilding pursues the registration of trademarks and service marks, including "Bodybuilding.com" and certain variations thereon, copyrights and domain names in the United States and certain foreign locations. Bodybuilding also relies on the protection of laws regarding unregistered copyrights for its proprietary software and certain other content it creates. Bodybuilding continues to evaluate the merits of applying for future copyright registrations. Bodybuilding also evaluates technology and inventions for patentability and may consider filing patent applications for future technology inventions, and relies on trade secret laws to protect its proprietary technology and other intellectual property. To further protect its intellectual property, Bodybuilding enters into confidentiality and assignment of inventions agreements with certain employees and contractors, as well as confidentiality agreements with other third parties, such as suppliers. Bodybuilding's private label formulations are propriety, protected by contractual confidentiality, and subject to statutory trade secret protection where applicable.

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    Technology

        Bodybuilding leverages a combination of best-in-class third party and custom-built proprietary technology and operational platforms to deliver a unique and engaging experience for its customers and suppliers. With over 140 engineers in an engineering department organized into distinct operating groups, Bodybuilding has built a full set of technology solutions specific for the online supplementation market.

Regulatory Matters

    Internet Services

        Our online commerce businesses are subject, both directly and indirectly, to various laws and governmental regulations. Certain of these businesses engaged in the provision of goods and services over the Internet must comply with federal and state laws and regulations applicable to online communications and commerce. For example, the Children's Online Privacy Protection Act ( COPPA ) prohibits web sites from collecting personally identifiable information online from children under age 13 without parental consent and imposes a number of operational requirements. In 2012, the FTC adopted revised COPPA regulations amending certain definitions and modifying certain operational requirements regarding notice and parental consent, among other matters. Certain email activities are subject to the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, commonly known as the CAN-SPAM Act. The CAN-SPAM Act regulates the sending of unsolicited commercial email by requiring the email sender, among other things, to comply with specific disclosure requirements and to provide an "opt-out" mechanism for recipients. Both of these laws include statutory penalties for non-compliance. The Digital Millennium Copyright Act limits, but does not eliminate, liability for listing or linking to third party websites that may include content that infringes on copyrights or other rights so long as our Internet businesses comply with the statutory requirements. Various states also have adopted laws regulating certain aspects of Internet communications. On February 24, 2016, the President signed legislation that permanently extends the moratorium on state and local taxes on Internet access and commerce.

        Goods sold over the Internet also must comply with traditional regulatory requirements, such as the Federal Trade Commission ( FTC ) requirements regarding truthful and accurate claims. Our online commerce businesses are subject to laws governing the collection, use, retention, security and transfer of personally-identifiable information about their users. In particular, the collection and use of personal information by companies has received increased regulatory scrutiny on a global basis. The enactment, interpretation and application of user data protection laws are in a state of flux, and the interpretation and application of such laws may vary from country to country. For example, on December 15, 2015, the European Commission, the European Parliament and the Council of the European Union ( Council ) reached agreement on new data laws that give customers additional rights and impose additional restrictions and penalties on companies for illegal collection and misuse of personal information. The European Parliament and the Council adopted the new laws in April 2016, with the laws to take effect two years later. Further, on October 6, 2015, the Court of Justice of the European Union invalidated the "Safe Harbor Framework," which had allowed companies to collect and process personal data in European Union nations for use in the U.S. European Union and U.S. authorities announced on February 2, 2016 that they had reached agreement on a new data transfer framework, called the EU-U.S. Privacy Shield, which was formally adopted by the European Commission on July 12, 2016. The European Union and the U.S. must implement the new framework, which may be subject to legal challenge. Finally, a European Union directive restricting the Internet tracking tools known as "cookies" has taken effect.

        In the U.S., the FTC has proposed a privacy policy framework, and legislation that would require organizations that suffer a breach of security related to personal information to notify owners of such

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information is pending in Congress. Many states have adopted laws requiring notification to users when there is a security breach affecting personal data, such as California's Information Practices Act. Complying with these different national and state privacy requirements may cause the Internet companies in which we have interests to incur substantial costs. In addition, such companies generally have and post on their websites privacy policies and practices regarding the collection, use and disclosure of user data. A failure to comply with such posted privacy policies or with the regulatory requirements of federal, state, or foreign privacy laws could result in proceedings or actions by governmental agencies or others (such as class action litigation) which could adversely affect our online commerce businesses. Technical violations of certain privacy laws can result in significant penalties, including statutory penalties. In 2012, the FCC amended its regulations under the Telephone Consumer Protection Act ( TCPA ), which could subject our Internet businesses to increased liability for certain telephonic communications with customers, including but not limited to text messages to mobile phones. Under the TCPA, plaintiffs may seek actual monetary loss or statutory damages of $500 per violation, whichever is greater, and courts may treble such damage awards for willful or knowing violations. Data collection, privacy and security are growing public concerns. If consumers were to decrease their use of our Internet businesses' websites to purchase products and services, the businesses could be harmed. Congress and individual states may consider additional online privacy legislation.

        Other Internet-related laws and regulations enacted in the future may cover issues such as defamatory speech, copyright infringement, pricing and characteristics and quality of products and services. The future adoption of such laws or regulations may slow the growth of commercial online services and the Internet, which could in turn cause a decline in the demand for the services and products of our online commerce businesses and increase their costs of doing business or otherwise have an adverse effect on their businesses, operating results and financial conditions. Moreover, the applicability to commercial online services and the Internet of existing laws governing issues such as property ownership, libel, personal privacy and taxation is uncertain and could expose these companies to substantial liability.

        On February 26, 2015, the FCC adopted rules in its open Internet proceeding that could restrict the ability of broadband providers to block or otherwise disadvantage our business. Among other things, the open Internet rules prohibit Internet service providers from: (1) blocking access to, or impairing or degrading, legal content, applications, services or non-harmful devices; and (2) favoring selected Internet traffic. On June 14, 2016, the United States Court of Appeals for the District of Columbia Circuit denied petitions for review filed by several broadband providers challenging the new open Internet rules.

        Proposed Changes in Regulation.     The regulation of Internet services, online sales and other forms of product marketing is subject to the political process and has been in constant flux over the past decade. Further material changes in the law and regulatory requirements must be anticipated and there can be no assurance that our business will not be adversely affected by future legislation, new regulation or deregulation.

    Expedia

        Expedia must comply with laws and regulations relating to the travel industry and the provision of travel services, including registration in various states as "sellers of travel" and compliance with certain disclosure requirements and participation in state restitution funds. In addition, Expedia's businesses are subject to regulation by the U.S. Department of Transportation and must comply with various rules and regulations governing the provision of air transportation, including those relating to advertising and accessibility.

        As Expedia continues to expand the reach of its brands into the European, Asia-Pacific and other international markets, it is increasingly subject to laws and regulations applicable to travel agents or

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tour operators in those markets, including, in some countries, pricing display requirements, licensing and registration requirements, mandatory bonding and travel indemnity fund contributions, industry specific value-added tax regimes and laws regulating the provision of travel packages. For example, the European Economic Community Council Directive on Package Travel, Package Holidays and Package Tours imposes various obligations upon marketers of travel packages, such as disclosure obligations to consumers and liability to consumers for improper performance of the package, including supplier failure.

        Additionally, Expedia is subject to consumer protection, privacy and consumer data, labor, economic and trade sanction programs, tax, and anti-trust and competition laws and regulations around the world that are not specific to the travel industry. Some of these laws and regulations have not historically been applied in the context of online travel companies, so there can be uncertainty regarding how these requirements relate to Expedia's various business models.

    Bodybuilding

        The FDA is the regulatory agency with principal oversight authority for the products Bodybuilding offers, and the FTC regulates the advertising of those products. Bodybuilding's internal legal department reviews all aspects of its FDA and FTC regulatory processes for compliance with regulations. Bodybuilding has established processes to review the underlying safety and efficacy of its branded products, which include review of the ingredients' safety information, product formulation, product form, product labeling, the efficacy and claim support for the product and any marketing materials. All consumer communications that deal with product and health issues must be approved by Bodybuilding's legal team prior to being disseminated to the public. Bodybuilding also has standard procedures whereby all potential contract manufacturers are reviewed and approved before they can supply any of Bodybuilding's branded products. In addition, all potential new products are evaluated and approved prior to being accepted into the branded product lines.

        Bodybuilding's relationships with manufacturers require that all of its branded products not be adulterated or misbranded under any provisions of the Federal Food, Drug, and Cosmetic Act and the regulations promulgated thereunder, including, but not limited to, compliance with applicable Current Good Manufacturing Practices. This means that ingredients in Bodybuilding's products must be tested for identity, purity, quality, strength and composition before being incorporated into branded products, and that Bodybuilding's final branded products must again be tested for identity, purity, quality, strength and composition prior to being released. All of these products require a certificate of analysis, which includes certification to 100% of label claims. Bodybuilding has established a standard quality control operating procedure that calls for on-site audits of its contract manufacturers' facilities and processes. Bodybuilding also requires that its manufacturers have certificates of analysis (such as for microbial testing and label testing). Third party vendors are also subject to a standard review, must comply with Bodybuilding's vendor partnership agreement and are required to carry adequate insurance policies to satisfy Bodybuilding's standards. Each new product proposed to be carried by Bodybuilding is reviewed by its legal department, which rejects those products that they believe may present undue risk or be unsafe.

Competition

    Expedia

        Expedia's brands compete in rapidly evolving and intensely competitive markets. Expedia believes international markets represent especially large opportunities for Expedia and those of its competitors that wish to expand their brands and businesses abroad to achieve global scale. Expedia also believes that it is one of only a few companies that are focused on building a truly global, travel marketplace.

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        Expedia's competition, which is strong and increasing, includes online and offline travel companies that target leisure and corporate travelers, including travel agencies, tour operators, travel supplier direct websites and their call centers, consolidators and wholesalers of travel products and services, large online portals and search websites, certain travel meta-search websites, mobile travel applications and social media websites, as well as traditional consumer ecommerce and group buying websites. Expedia faces these competitors in local, regional, national and/or international markets. In some cases, competitors are offering favorable terms and improved interfaces to suppliers and travelers which make competition increasingly difficult. Expedia also faces competition for customer traffic on internet search engines and metasearch websites, which impacts its customer acquisition and marketing costs.

        Expedia believes that maintaining and enhancing its brands is a critical component of its effort to compete. Expedia differentiates its brands from its competitors primarily based on the multiple channels it uses to generate demand, quality and breadth of travel products, channel features and usability, price or promotional offers, traveler service and quality of travel planning content and advice, as well as offline brand efforts. The emphasis on one or more of these factors varies, depending on the brand or business and the related target demographic. Expedia's brands face increasing competition from travel supplier direct websites. In some cases, supplier direct channels offer advantages to travelers, such as long standing loyalty programs, complimentary services such as Wi-Fi, and better pricing. Expedia's websites feature travel products and services from numerous travel suppliers, and allow travelers to combine products and services from multiple providers in one transaction. Expedia faces competition from airlines, hotels, rental car companies, cruise operators and other travel service providers, whether working individually or collectively, some of which are suppliers to its websites. Expedia's business is generally sensitive to changes in the competitive landscape, including the emergence of new competitors or business models, and supplier consolidation.

    Bodybuilding

        Bodybuilding's performance is affected by competitive trends such as the entry of new competitors and competitors that have expanded their product selection to focus on sports nutrition. This includes many mass retailers as well as some of the largest online e-retailers. Additionally, changes in promotional strategies or expansion of product assortment by various competitors also impact competitive conditions. Bodybuilding believes the following are the principal competitive factors in its market:

    pricing (including costs of shipping), selection and availability of products;

    reliability and speed of delivery of products ordered online

    the ability to offer relevant and engaging content;

    the accessibility and ease of use of website and mobile applications; and

    customer service and support.

Properties

        In connection with the Split-Off, a wholly owned subsidiary of Liberty Media will enter into a facilities sharing agreement with Splitco, pursuant to which Splitco will share office facilities with Liberty Media and Liberty Interactive located at 12300 Liberty Boulevard, Englewood, Colorado. See "Certain Relationships and Related Party Transactions—Relationships between Splitco and Liberty Interactive and/or Liberty Media—Facilities Sharing Agreement."

        Expedia leases approximately 2.9 million square feet of office space worldwide, pursuant to leases with expiration dates through December 2026. Expedia leases 510,000 square feet for its headquarters in Bellevue, Washington, pursuant to leases with expiration dates through October 2018. In addition,

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Expedia also leases approximately 890,000 square feet of office space for its domestic operations in various other cities and locations pursuant to leases with expiration dates through December 2022. Expedia also leases approximately 1.5 million square feet of office space for its international operations in various cities and locations pursuant to leases with expiration dates through December 2026. In addition to its leased space, on April 30, 2015, Expedia acquired its future corporate headquarters for $229 million, consisting of multiple office and lab buildings located in Seattle, Washington. The build out of the headquarters is expected to be significant as Expedia converts lab facilities into office space.

        Bodybuilding operates order fulfillment centers in Shiremanstown, Pennsylvania, North Las Vegas, Nevada, New Berlin, Wisconsin and Dunstable, Bedfordshire, England, and technology development operations in Santa Ana, Costa Rica and Portland, Oregon. Bodybuilding owns its corporate headquarters, which is located in Boise, Idaho. Fulfillment centers are typically leased with standard lease terms of three to five years, with lease expiration dates varying between 2016 and 2020.

Employees

        Splitco (on a nonconsolidated basis) currently does not have any corporate employees. We anticipate that, subsequent to the Split-Off, Liberty Media will provide Splitco with certain transitional services pursuant to a services agreement, and that certain of Liberty Interactive and/or Liberty Media's corporate employees and executive officers will serve as corporate employees and executive officers of Splitco. See "Certain Relationships and Related Party Transactions—Relationships between Splitco and Liberty Interactive and/or Liberty Media—Services Agreement." As of December 31, 2015, Expedia had approximately 18,730 full and part-time employees. As of December 31, 2015, Bodybuilding had approximately 764 full time equivalent employees and 15 part-time employees. None of these employees are represented by a labor union or covered by a collective bargaining agreement. Splitco believes that these employee relations are good.

Legal Proceedings

        In the ordinary course of their respective business, each of Expedia and its subsidiaries and Bodybuilding are party to legal proceedings and claims involving property, personal injury, contract, alleged infringement of third-party intellectual property rights and other claims. There are no other material pending legal proceedings or claims to which we or our subsidiaries are party or of which any of our property is the subject. There may be claims or actions pending or threatened against us or our subsidiaries of which we are currently not aware and the ultimate disposition of which would have a material adverse effect on us.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying condensed combined financial statements and the notes thereto. References in this section to "our company," "our business," "us," "we" and words of similar effect refer to Splitco.

Overview

        During November 2015, the board of directors of Liberty Interactive Corporation ("Liberty Interactive") authorized management to pursue a plan to Split-Off to holders of its Liberty Ventures Group ("Liberty Ventures") common stock, of a newly formed entity, Liberty Expedia Holdings, Inc. ("Expedia Holdings" or the "Company" as discussed below) ("Expedia Holdings Split-Off" or "Expedia Split-Off"). Expedia Holdings is comprised of, among other things, Liberty Interactive's ownership interest in Expedia, Inc. ("Expedia"), as well as Liberty Interactive's wholly-owned subsidiary Bodybuilding.com, LLC ("Bodybuilding").

        We own an approximate 15.8% equity interest and 52.4% voting interest in Expedia as of June 30, 2016. Historically, Liberty Interactive has been a party to a Stockholders Agreement with Mr. Diller, pursuant to which Mr. Diller held an irrevocable proxy over all the shares of Expedia common stock ("EXPE") and Expedia class B common stock owned by Liberty Interactive. Liberty Interactive is also subject to a Governance Agreement with Expedia which provides for the right to appoint approximately 20% of the members of Expedia's board of directors, which is currently comprised of 13 members (3 of which were appointed by Liberty Interactive). Based on these arrangements it was determined that Expedia Holdings has significant influence with respect to Expedia and accordingly, accounts for its investment in Expedia as an equity method affiliate. In connection with the Split-Off, and the completion of the proxy arrangements, the Stockholders Agreement will be assigned to Expedia Holdings and amended to provide for the assignment of Mr. Diller's proxy over these shares to Expedia Holdings through the Proxy Arrangement Termination Date. As a result, Expedia Holdings expects to begin consolidating Expedia as of the completion of the Split-Off, as Expedia Holdings will then control a majority of the voting interest in Expedia for accounting purposes. In conjunction with application of acquisition accounting we anticipate a full step up in basis of Expedia along with a gain related to a difference between our historical basis and the fair value of our interest in Expedia.

        The Governance Agreement with Expedia will be assigned to Expedia Holdings in connection with the Split-Off and will provide rights related to certain director nominations, registration and other rights, and imposes certain restrictions on the ownership of shares of Expedia class B common stock. The rights under the Governance Agreement, as assigned and amended, will be maintained even upon termination of the proxy arrangements and includes a preemptive right. Expedia Holdings will have preemptive rights that entitle it to purchase a number of Expedia Common Shares (excluding certain issuances related to options, warrants or convertible securities) so that Expedia Holdings will maintain the identical ownership interest in Expedia (subject to certain adjustments) that it had immediately prior to such issuance or proposed issuance (but not in excess of 20.01%). Any purchase by Expedia Holdings will be allocated between EXPE and Expedia class B common stock in the same proportion as the issuance or issuances giving rise to the preemptive right, except to the extent that Expedia Holdings opts to acquire shares of EXPE in lieu of shares of Expedia class B common stock.

        The financial information represents a combination of the historical financial information of Bodybuilding and Liberty Interactive's interest in Expedia. This financial information refers to the combination of the aforementioned subsidiary and investment as "Expedia Holdings," "the Company," "us," "we" and "our" here and in the notes to the condensed combined financial statements.

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Strategies and Challenges

    Executive Summary

        Bodybuilding is an Internet retailer of sports, fitness, dietary supplements, and other health and wellness products. It is also a large publisher of online health and fitness content, offering complimentary fitness content, workout programs, video trainers, articles, recipes, health advice and motivational stories. The online model also includes a combination of detailed product information and real-time user reviews to help its visitors achieve their health and fitness goals. Visitors include gym-goers, athletes, weightlifters and bodybuilders, and any individual wanting to improve their mental and physical well-being through diet and exercise. Bodybuilding launched its website in 1999 and now includes more than 30,000 pages of editorial content, 10,000 videos, 16,000 pages of store content and over 6.5 million forum threads. Its properties encompass more than 30 million monthly unique visitors and 11 million members of BodySpace, an inclusive fitness community within Bodybuilding that allows people of all health and fitness levels to track their progress and discuss goals, techniques, supplementation and achievements.

        Expedia is an online travel company, empowering business and leisure travelers with the tools and information they need to efficiently research, plan, book and experience travel. Expedia seeks to grow its business through a dynamic portfolio of travel brands, including its majority owned subsidiaries that feature a broad supply portfolio—including approximately 307,000 properties in 200 countries, 475 airlines, packages, rental cars, cruises, as well as destination services and activities. Travel suppliers distribute and market products via its traditional desktop offerings, as well as through alternative distribution channels including mobile and social media, its private label business and its call centers in order to reach its extensive, global audience.

    Key Drivers of Revenue

        Bodybuilding primarily earns revenue from the sale of health and fitness supplements and accessories on its website and mobile properties, with a very limited amount of sales coming from advertising revenue. Bodybuilding markets approximately 550 globally recognized brands, including several brands exclusive to its retail channel. Through its website, Bodybuilding offers directly to its customers one of the largest varieties of supplements, vitamins and minerals with approximately 16,000 SKUs, and delivers its products primarily through its fulfillment centers. Bodybuilding is diligent about offering a broad spectrum of products to meet the needs of its customers but also develops, identifies and retains exclusive brands for its customers. Bodybuilding expects to drive revenue by continuing to sell supplements, increase advertising revenue on its properties, further leverage its fitness related content, and optimize its online and mobile properties for a better shopping and online customer experience. Bodybuilding's business is slightly seasonal; the first quarter of the year is its busiest, as people start to implement their New Year's resolutions towards health and fitness.

        Expedia revenue is primarily derived from the facilitation of the booking of hotel rooms, airline seats, car rentals and destination services from their travel suppliers, commissions or ticketing fees from travel suppliers and/or travelers and revenue from click-through fees charged to their travel partners for traveler leads sent to the travel partners' websites. Expedia also earns revenue from term-based paid subscriptions for vacation rental listings and other ancillary services provided to property owners and managers. Expedia expects to continue to grow revenue through technology and product innovation, global expansion and new channel penetration.

    Current Trends Affecting Our Business

        Bodybuilding competes primarily against other specialty and online retailers, supermarkets, drugstores, mass merchants, multi-level marketing organizations and mail order companies. Bodybuilding faces these competitors in both domestic and international markets. This market is

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sensitive to fitness trends, product and shipping prices, government regulation, foreign currency exchange rates and the introduction of new products. As sports nutrition products become more mainstream, the size of the total addressable market will continue to increase. This will positively impact Bodybuilding's opportunity to serve more customers, but also attracts competition to this market. In addition, mobile visitors to its website continue to make up a larger portion of our total traffic. The capacity to increase total traffic and the ability to provide the full value proposition to visitors on a mobile platform is challenging, and these visitors make purchases at a lower rate than traditional desktop visitors. Bodybuilding expects these trends to negatively impact its domestic and international sales and profitability in the near-term.

        Expedia faces strong and increasing competition from online and offline travel companies that target leisure and corporate travelers, including travel agencies, tour operators, travel supplier direct websites and their call centers, consolidators and wholesalers of travel products and services, large online portals and search websites, certain travel meta-search websites, mobile travel applications, social media websites, as well as traditional consumer eCommerce and group buying websites. Expedia faces these competitors in local, regional, national and/or international markets. In some cases, competitors are offering favorable terms and improved interfaces to suppliers and travelers which make competition increasingly difficult. Expedia also faces competition for customer traffic on Internet search engines and metasearch websites, which impacts their customer acquisition and marketing costs.

        Bodybuilding and Expedia must stay abreast of rapidly evolving technological developments and offerings to remain competitive and increase the utility of their products and services. As their operations grow in size and scope, they must continuously improve and upgrade their systems and infrastructure while maintaining or improving the reliability and integrity of their systems and infrastructure. These companies must be able to incorporate new technologies into their products and services in order to address the needs of their customers.

Results of Operations—Combined—June 30, 2016 and 2015

Combined operating results:

 
  Six months ended
June 30,
 
 
  2016   2015  
 
  amounts in thousands
 

Revenue

  $ 228,448     244,952  

Cost of sales (exclusive of depreciation and amortization included below)

    171,731     188,217  

Gross profit

    56,717     56,735  

Operating expenses, excluding stock-based compensation

             

Operating expense

    16,587     16,282  

Selling, general and administrative

    24,913     23,001  

Adjusted OIBDA

    15,217     17,452  

Stock-based compensation expense (benefit)

    (1,084 )   913  

Depreciation and amortization

    9,833     9,962  

Operating income (loss)

  $ 6,468     6,577  

    Revenue

        Revenue decreased $16.5 million for the six months ended June 30, 2016 as compared to the corresponding period in the prior year. The decrease was primarily driven by a 4% decrease in store visitors and a 6% reduction in the average order value due to: increasing mix shift of orders to

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domestic, increased mobile sales, changes to promotional strategies and reduced shipping prices paid by international customers. In addition, order volumes decreased from the prior year by approximately 3%, but Bodybuilding did experience a slight increase in the conversion of visitors as both desktop and mobile conversion rates improved. The entire supplement market continues to be more price sensitive as competition increases. Bodybuilding evaluates promotions and reprices products continuously in order to present a compelling and competitive offering to customers. These changes to prices and Bodybuilding's ability to source products cost effectively impact margins. Private label and exclusive offerings typically have higher margins and continue to make up a larger portion of total sales.

    Cost of sales

        Cost of sales decreased $16.5 million for the six months ended June 30, 2016 as compared to the corresponding period in the prior year. The decrease was a result of a decrease in product sales and Bodybuilding's ability to source products cost effectively, an increased sales mix to private label and exclusive offerings, as discussed above, the termination of a third-party logistics arrangement in the Netherlands, a reduction in overall shipping costs and expired product recovery optimization.

    Operating expenses

        Operating expenses increased $305 thousand for the six months ended June 30, 2016 as compared to the corresponding period in the prior year. The increase in operating expenses was primarily driven by additional software and content delivery expenses.

    Selling, general and administrative expenses

        Selling, general and administrative expenses increased $1.9 million for the six months ended June 30, 2016 as compared to the corresponding period in the prior year. The increase was driven by the discontinuation of a fulfillment center during June 2016, as well as additional product listing, display retargeting, and television ad spend, legal and compliance fees and increased group insurance. In addition, selling, general and administrative costs for the six months ended June 30, 2015 were driven down by legal claim settlements and a credit due to the release of the paid time-off accrual as a result of a corporate policy change.

    Stock-based compensation expense (benefit)

        We had a benefit from stock-based compensation of $1.1 million and expense of $913 thousand for the six months ended June 30, 2016 and 2015, respectively. The benefit in the current period is primarily due to a decrease in the per unit valuation of outstanding stock appreciation rights at Bodybuilding.

    Depreciation and amortization expense

        Depreciation and amortization expense was relatively flat for the six months ended June 30, 2016 as compared to the corresponding period in the prior year.

    Operating Income (Loss)

        Operating income was relatively flat for the six months ended June 30, 2016 as compared to the corresponding period in the prior year as the decrease in overall operating results (as discussed above) was offset by the decrease in stock-based compensation expense.

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    Adjusted OIBDA

        We define Adjusted OIBDA as revenue less cost of sales, operating expenses and selling, general and administrative expense (excluding stock compensation). Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of our businesses, including each business's ability to service debt and fund capital expenditures. In addition, this measure allows us to view operating results, perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes such costs as depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for operating income (loss), net earnings (loss), cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. See note 8 to the accompanying condensed combined quarterly financial statements for a reconciliation of Adjusted OIBDA to earnings (loss) before income taxes.

        Adjusted OIBDA decreased $2.2 million for the six months ended June 30, 2016 as compared to the corresponding period in the prior year. The decrease in Adjusted OIBDA was a result of decreased revenue as well as increased operating expenses and selling, general and administrative costs.

Other Income and Expense

        Components of Other income (expense) are presented in the table below.

 
  Six months ended
June 30,
 
 
  2016   2015  
 
  amounts in thousands
 

Other income (expense):

             

Interest expense

  $ (579 )   (589 )

Related party interest expense

        (774 )

Share of earnings (losses) of Expedia, Inc. 

    (21,700 )   80,099  

Other, net

    (3,616 )   255  

  $ (25,895 )   78,991  

    Interest expense

        Interest expense was relatively flat for the six months ended June 30, 2016 as compared to the corresponding prior year period.

    Related party interest expense

        Related party interest expense recognized during the six months ended June 30, 2015 related to a note with Liberty Interactive that was contributed to equity in the fourth quarter of 2015.

    Share of earnings (losses) of Expedia, Inc.

        Share of losses of Expedia were $21.7 million for the six months ended June 30, 2016 as compared to share of earnings of $80.1 million in the corresponding prior year period. The change in our share of Expedia's earnings (losses) is primarily due to a gain recognized by Expedia on the sale of its ownership stake in eLong, Inc. ("eLong") as well as a one-time gain recognized in connection with the

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acquisition of additional interest in one of its equity method investments during the six months ended June 30, 2015.

        See note 3 in the accompanying notes to the quarterly condensed combined quarterly financial statements for additional discussion of the Company's investment in Expedia.

        The following is a discussion of Expedia's results of operations. In order to provide a better understanding of Expedia's operations, we have included a summarized presentation of Expedia's results of operations. Expedia is a separate publicly traded company and additional information about Expedia can be obtained through its website and public filings. The amounts included in the table below represent Expedia's results for the six months ended June 30, 2016 and 2015.

 
  Six months ended June 30,  
 
  2016   2015  
 
  amounts in millions
 

Revenue

  $ 4,100     3,036  

Operating expenses, excluding stock-based compensation

    3,593     2,703  

Adjusted OIBDA

    507     333  

Depreciation and amortization

    (396 )   (206 )

Stock-based compensation

    (149 )   (70 )

Legal reserves, occupancy tax and other

    (6 )   (8 )

Restructuring and related reorganization charges

    (28 )   (10 )

Operating income (loss)

    (72 )   39  

Other income (expense), net

    (106 )   550  

Earnings (loss) before income taxes

    (178 )   589  

Income tax benefit (expense)

    76     (130 )

Net earnings (loss)

  $ (102 )   459  

        Expedia had a net loss of approximately $102 million and net earnings of approximately $459 million for the six months ended June 30, 2016 and 2015, respectively.

        Expedia's revenue increased $1.1 billion during the six months ended June 30, 2016 as compared to the corresponding period in 2015. The increase was primarily driven by the impact of acquisitions (which added 24% to the growth rate in total revenue for the six months ended June 30, 2016) and growth in the Core online travel agencies segment, including growth at Brand Expedia and Hotels.com, as well as growth at trivago, partially offset by a decrease in revenue due to the sale of eLong in May 2015.

        The increase in revenue (described above) and income tax benefit during the six months ended June 30, 2016 were offset by the impact of an $890 million increase in operating expenses (described below), an $190 million increase in depreciation and amortization, an $656 million decrease in other income and a $79 million increase in stock-based compensation. In addition, during the six months ended June 30, 2015, Expedia recognized a pre-tax gain of $509 million on the sale of its ownership stake in eLong and a $77 million gain in connection with the acquisition of additional interest in one of its equity method investments.

        The increase in operating expenses was primarily driven by increased marketing expenses, personnel costs and customer operations expenses, higher data center costs and higher net credit card processing costs related to growth of its merchant bookings, as well as an increase in overall costs as a result of acquisitions. These increases were somewhat offset by a decrease in operating expenses as a result of the sale of eLong in May 2015. The decrease in other income is primarily due to a gain on

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sale recognized in 2015 and a one-time gain recorded in 2015 by Expedia (both discussed above), as well as the impact of foreign exchange rates. The increase in depreciation and amortization was primarily due to amortization of intangible assets related to new business acquisitions (including Orbitz and HomeAway) as well as increased depreciation and amortization of technology assets. The increase in stock-based compensation was largely due to costs associated with trivago as well as expense related to restructuring and reorganization activities, partially offset by the absence of eLong related stock-based compensation in the current period. The income tax benefit in the current period is primarily due to the release of a valuation allowance for net operating losses as well as recognition of excess tax benefits related to share-based payments resulting from the adoption of new accounting guidance for share-based payments.

    Other, net

        Other, net primarily relates to gains (losses) on dilution of investment in Expedia. We had a loss on dilution of investment in Expedia of $3.5 million for the six months ended June 30, 2016 compared to a gain on dilution of investment of $620 thousand in the corresponding prior year period. The loss in the current period was the result of stock option exercises at Expedia below Expedia Holdings' book basis per share.

    Income tax benefit (expense)

        We had an income tax benefit of $10.6 million during the six months ended June 30, 2016 and income tax expense of $30.2 million for the six months ended June 30, 2015. The 2016 effective tax rate is greater than the U.S. statutory tax rate of 35% due to the dividends received deduction on dividends from Expedia and the impact of state and local taxes. The effective tax rate was 35% for the six months ended June 30, 2015.

    Net earnings (losses)

        We had net losses of $8.8 million and net earnings of $55.4 million for the six months ended June 30, 2016 and 2015, respectively. The change in net earnings was largely due to our share of losses and loss on dilution of investment in Expedia as discussed above, as well as the result of the above described fluctuations in our revenue and expense.

Results of Operations—Years Ended December 31, 2015, 2014 and 2013

Combined operating results:

 
  Years ended December 31,  
 
  2015   2014   2013  
 
  amounts in thousands
 

Revenue

  $ 464,415     454,733     420,990  

Cost of sales (exclusive of depreciation and amortization included below)

    351,590     353,822     328,246  

Gross profit

    112,825     100,911     92,744  

Operating expenses, excluding stock-based compensation

                   

Operating expense

    31,912     29,268     26,584  

Selling, general and administrative

    47,817     40,820     35,665  

Adjusted OIBDA

    33,096     30,823     30,495  

Stock-based compensation

    1,882     1,679     1,722  

Depreciation and amortization

    20,938     19,307     19,368  

Operating income (loss)

  $ 10,276     9,837     9,405  

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    Revenue

        Revenue increased $9.7 million and $33.7 million for the years ended December 31, 2015 and 2014, respectively, as compared to the corresponding prior year periods.

        Overall the increase in revenue during 2015 was primarily due to an approximate 7% increase in order volume for the year ended December 31, 2015 as compared to the prior year. During 2015, Bodybuilding continued to see traffic to the e-retail site grow as unique visitors increased 17% from the prior year. Conversion of visitors was down 68 basis points primarily due to a shift in desktop visits to mobile visits, which historically convert at lower rates. Conversion is defined as the rate at which visitors to the Bodybuilding e-retail site become paying customers. Offsetting the order volume gain was a decrease in the average order value of approximately 4% from the prior year due to less international orders, increased mobile sales and reduced shipping prices paid by customers. The entire supplement space became more price sensitive as competition continued to increase. Bodybuilding evaluates promotions and reprices products continuously in order to present a compelling and competitive offering to customers. These changes to prices and Bodybuilding's ability to source products cost effectively impact margins. Private label and exclusive offerings typically have higher margins and continue to make up a larger portion of total sales. Additionally, during 2015 domestic net product sales grew 8% while international net product sales decreased approximately 24%. International demand was hurt by both competition and unfavorable exchange rates which increased overseas pricing as products are priced in USD and then translated into local currencies for the global customer.

        The overall 2014 increase in revenue was primarily due to a 5% increase in orders and a 1% increase in average order value. Bodybuilding had an increase in overall site traffic of approximately 15% but conversion was lower by 77 basis points. During 2014 domestic growth was 11% while international sales were down 10%. Bodybuilding experienced pricing pressure globally as exchange rates were unfavorable.

    Cost of Sales

        Cost of sales decreased $2.2 million and increased $25.6 million for the years ended December 31, 2015 and 2014, respectively, as compared to the corresponding prior year periods.

        The decrease in 2015 was a result of Bodybuilding's ability to source products cost effectively, an increased sales mix to private label, lower returns and a reduction in overall shipping costs. During late 2013 and 2014 Bodybuilding increased their distribution center footprint to allow them to be closer to the customer. This has allowed Bodybuilding to decrease shipping costs while allowing them to deliver products timely to the customer.

        The increase in cost of goods sold in 2014 was primarily related to an increase in product sales during the year ended December 31, 2014. Additionally, as discussed above the addition of new distribution centers increased overall cost of goods during the period as the distribution centers were staffed and initially trained to be able to function at acceptable levels.

    Adjusted OIBDA

        We define Adjusted OIBDA as revenue less cost of sales, operating expenses and selling, general and administrative expenses (excluding stock compensation). Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of our businesses, including each business's ability to service debt and fund capital expenditures. In addition, this measure allows us to view operating results, perform analytical comparisons and benchmarking between businesses and

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identify strategies to improve performance. This measure of performance excludes such costs as depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. See note 11 to the accompanying combined financial statements for a reconciliation of Adjusted OIBDA to earnings (loss) from continuing operations before income taxes.

        Adjusted OIBDA increased $2.3 million and $0.3 million during the years ended December 31, 2015 and 2014, respectively, as compared to the corresponding prior year periods.

        The increase in Adjusted OIBDA during the year ended December 31, 2015 was a result of the increase in gross profits, discussed above (combined changes in revenue and cost of sales), partially offset by growth in operating expenses and selling, general and administrative costs. The increase in selling, general and administrative costs was driven by greater marketing efforts to grow site traffic, increased technology costs to sustain traffic growth and content and increased personnel costs during the period. Personnel costs were approximately $4.2 million higher due to increased headcount during 2015 and 2014 to support expected growth and due to changes related to merit and bonus program payments. During the period certain executives resigned and payments of severance and other retention costs of approximately $1.2 million were paid to secure necessary talent to manage the business. Additionally, with the opening of additional distribution centers in other parts of the United States the distribution center near Bodybuilding's headquarters was shut down and approximately $1 million in costs were incurred.

        The increase in Adjusted OIBDA during the year ended December 31, 2014 was driven by the increase in gross profits, discussed above (combined changes in revenue and cost of sales), mostly offset by increases in operating expenses and selling, general and administrative costs. The increase in costs were primarily the result of personnel costs and marketing costs related to the growth of the business.

    Operating Income (Loss)

        Operating income increased $439 thousand and $432 thousand for the years ended December 31, 2015 and 2014, respectively, as compared to the corresponding prior year periods. The change in operating income for both the years ended December 31, 2015 and 2014 was largely due to the fluctuations in Adjusted OIBDA as discussed above.

        Stock-based compensation expense was relatively flat for both the years ended December 31, 2015 and 2014 as compared to the corresponding prior year periods.

        Depreciation and amortization expense increased $1.6 million and was relatively flat for the years ended December 31, 2015 and 2014, respectively, as compared to the corresponding prior year periods. The increase in depreciation and amortization expense during the current year was primarily due to continued software costs capitalized in previous period depreciated during the current year.

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Other Income and Expense:

        Components of Other Income (Expense) are presented in the table below.

 
  Years ended December 31,  
 
  2015   2014   2013  
 
  amounts in thousands
 

Other income (expense):

                   

Interest expense

  $ (1,218 )   (1,214 )   (734 )

Related party interest expense

    (1,240 )   (1,867 )   (2,258 )

Share of earnings (losses) of Expedia, Inc. 

    117,518     58,105     30,630  

Gain (loss) on dilution of investment in affiliate

    319,587     2,768     (921 )

Other, net

    (430 )   (525 )   12  

  $ 434,217     57,267     (26,729 )

    Interest expense

        Interest expense was relatively flat and increased $480 thousand for the years ended December 31, 2015 and 2014, respectively, as compared to the corresponding prior year periods. The increase in the year ended December 31, 2014 was primarily due to interest for a full year related to borrowings associated with the completion of construction of the Bodybuilding headquarters in 2013.

    Related party interest expense

        Related party interest decreased $627 thousand and $391 thousand for the years ended December 31, 2015 and 2014, respectively, as compared to the corresponding prior year periods. The decrease in both the years ended December 31, 2015 and 2014 was due to the payment of outstanding principal during each of the periods as well as the contribution of the note to equity in the fourth quarter of 2015.

    Share of earnings (losses) of Expedia, Inc.

        Share of earnings of Expedia increased $59.4 million and $27.5 million during the years ended December 31, 2015 and 2014, respectively, as compared to the corresponding prior year periods. The increase in Splitco's share of Expedia's earnings between December 31, 2015 and 2014 is primarily due to a significant gain Expedia recognized on the sale of a business during the year ended December 31, 2015.

        The following is a discussion of Expedia's results of operations. In order to provide a better understanding of Expedia's operations, we have included a summarized presentation of Expedia's results of operations. Expedia is a separate publicly traded company and additional information about

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Expedia can be obtained through its website and public filings. The amounts included in the table below represent Expedia's results for each of the years ended December 31, 2015, 2014 and 2013.

 
  Years ended December 31,  
 
  2015   2014   2013  
 
  amounts in millions
 

Revenue

  $ 6,672     5,763     4,771  

Operating expenses, excluding stock-based compensation

    (5,613 )   (4,748 )   (3,904 )

Adjusted OIBDA

    1,059     1,015     867  

Depreciation and amortization

    (500 )   (345 )   (283 )

Stock-based compensation

    (178 )   (85 )   (130 )

Legal reserves, occupancy tax and other

    105     (42 )   (78 )

Restructuring and related reorganization charges

    (72 )   (25 )    

Acquisition-related and other

            (10 )

Operating income

    414     518     366  

Other income (expense), net

    512     (53 )   (66 )

Earnings (loss) before income taxes

    926     465     300  

Income tax benefit (expense)

    (203 )   (92 )   (84 )

Net earnings

  $ 723     373     216  

        Expedia had net earnings of approximately $723 million, $373 million and $216 million for the years ended December 31, 2015, 2014 and 2013, respectively.

        Expedia's revenue increased $909 million and $992 million during the years ended December 31, 2015 and 2014, respectively, as compared to the corresponding prior years. During 2015, Expedia's revenue increased primarily due to growth in the Core online travel agencies segment, including strong performance at Brand Expedia, Hotels.com and Expedia Affiliate Network as well as growth at trivago, partially offset by a decrease in revenue due to the sale of eLong. In 2014, revenue increased primarily due to growth in hotel and advertising media revenue. Acquisitions added approximately 8% and 1% to the year-over-year growth rates in total revenue for 2015 and 2014, respectively.

        The increase in revenue (described above) and other gains (described below) during the year ended December 31, 2015 were partially offset by the impact of an $865 million increase in operating expenses (described below), a $155 million increase in depreciation and amortization, a $93 million increase in stock-based compensation, a $47 million increase in restructuring and related reorganization charges and a $111 million increase in income tax expense.

        The increase in operating expenses was primarily driven by increased marketing expenses and personnel costs, higher data center costs, and higher net credit card processing costs related to growth of its merchant bookings. The increase in depreciation and amortization expense was primarily due to amortization of intangible assets related to new business acquisitions as well as increased depreciation and amortization of technology assets. The increase in stock-based compensation was largely due to additional options granted during the current year as well as expense related to replacement awards issued in connection with acquisitions and the acceleration of certain replacement awards. Restructuring and related reorganization charges during 2015 were primarily related to employee severance and benefits in connection with the Orbitz integration. The increase in income tax expense is primarily due to the gain on the sale of eLong during 2015, and the release of liabilities related to uncertain tax positions in 2014.

        Expedia recognized a $105 million gain in legal reserves, occupancy tax and other during 2015 due to the receipt of a refund of prepaid pay-to-play payments from the State of Hawaii in connection with the general excise tax litigation and the recovery of costs related to occupancy tax litigation matters,

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which were partially offset by charges for changes in its reserve related to hotel occupancy and other taxes. The $512 million other income (expense), net was largely due to a pre-tax gain of $509 million during 2015 in connection with the sale of Expedia's ownership stake in eLong, Inc.

        The increase in revenue (described above) during 2014 was partially offset by the net impact of an $844 million increase in operating expenses, a $62 million increase in depreciation and amortization, a $45 million decrease in stock-based compensation, a $25 million increase in restructuring and related reorganization charges and an $8 million increase in income tax expense.

        The increase in operating expenses was primarily driven by increased marketing expenses and personnel costs, including commissions and incentives, higher net credit card processing costs and increases in customer operations expenses primarily due to an increase in transaction costs and volumes period over period. The increase in depreciation and amortization expense was primarily due to increased depreciation and amortization of technology assets and amortization of intangible assets related to new business acquisitions, partially offset by the completion of amortization related to certain intangible assets. Restructuring and related reorganization charges in 2014 primarily related to severance and related benefits as well as an Australian stamp duty tax related to business restructuring events.

        These increases were slightly offset by a $45 million decrease in stock-based compensation, a $36 million decrease in legal reserves, occupancy tax and other, a $10 million decrease in acquisition-related and other, and a $13 million decrease in other income (expense), net. The decrease in stock-based compensation was largely due to stock-based compensation recorded in 2013 in connection with the trivago acquisition. Expedia recognized a loss in legal reserves, occupancy tax and other during 2014 related to monies paid in advance of litigation in the San Francisco occupancy tax proceedings. The loss in 2013 relates to amounts paid or expected to be paid in advance of litigation primarily related to penalties and interest in connection with Hawaii's general excise tax litigation. The $10 million acquisition-related and other charge in 2013 related to the upfront consideration paid to settle a portion of an employee compensation plan of trivago.

    Gain (loss) on dilution of investment in Expedia, Inc.

        The significant gain in 2015 was due to an acquisition by Expedia that was executed partially through the issuance of EXPE. This diluted our ownership percentage and is treated like a sale at a price greater than our cost basis.

    Income taxes

        Our effective tax rate for the years ended December 31, 2015, 2014 and 2013 was 37%, 32% and 28%, respectively. The effective tax rate differed from the federal tax rate of 35% in each period due to the impact of state and local taxes, net of a federal benefit and the dividends received deduction on dividends from Expedia. The impact of state and local taxes was relatively flat on a percentage basis in each of the years. The dividends received deduction on a dollar basis increased slightly each year, while book income increased considerably over those periods, which resulted in the dividends received deduction having less impact on a percentage basis in each period.

    Net earnings (losses)

        We had net earnings of $281.5 million, $45.7 million and $26.0 million for the years ended December 31, 2015, 2014 and 2013, respectively. The change in net earnings was the result of the above described fluctuations in our revenue, expenses and other income (expense) items including the significant gain on dilution of investment in Expedia in 2015.

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Liquidity and Capital Resources

        The following are potential sources of liquidity: available cash balances, cash generated by the operating activities of our wholly owned subsidiary (to the extent such cash exceeds the working capital needs of the subsidiary and is not otherwise restricted), proceeds from asset sales, outstanding debt facilities, debt and equity issuances and dividend and interest receipts.

        As of June 30, 2016, Bodybuilding had a cash balance of $1.6 million. In conjunction with the Split-Off, the Company intends to borrow $350 million under a new margin loan and distribute $300 million to Liberty Interactive. This will result in a corporate cash balance of approximately $50 million at the Split-Off date to cover corporate costs associated with the new public company structure. We may, however, determine to execute a larger or subsequent margin loan to cover any reimbursement obligations we may have to Expedia pursuant to the Reimbursement Agreement.

        Although we have an approximate 52.4% voting interest in Expedia as of June 30, 2016, Expedia is a separate public company with a significant non-controlling interest, as we only have a 15.8% economic interest in Expedia as of June 30, 2016. Accordingly, decision making with respect to using Expedia's cash balances must consider Expedia's minority holders. We do not have ready access to the cash that Expedia generates unless Expedia declares a dividend on its capital stock payable in cash, repurchases any or all of its outstanding shares of capital stock for cash (to the extent we were to participate in such repurchase) or otherwise distributes or makes payments to its stockholders, including us. Any potential distributions of cash from Expedia to us would generally be on a pro rata basis based on economic ownership interests.

 
  Six months ended
June,
 
 
  2016   2015  
 
  amounts in thousands
 

Cash flow information

             

Net cash provided (used) by operating activities

  $ 29,852     16,739  

Net cash provided (used) by investing activities

  $ (7,043 )   (33,084 )

Net cash provided (used) by financing activities

  $ (23,438 )   19,348  

        During the six months ended June 30, 2016, our primary uses of cash included net repayments of debt of $12.1 million and capital expenditures of $7.0 million. These uses of cash were funded by cash on hand and cash provided by operating activities.

        During the six months ended June 30, 2015, our primary uses of cash included investments in Expedia of $22.6 million and capital expenditures of $10.5 million. These uses of cash were funded by a contribution from parent, operating activities and additional net borrowings of debt of $5.2 million.

        During the six months ended June 30, 2016 and 2015, Expedia paid dividends to Liberty Interactive aggregating approximately $11 million and $8 million, respectively.

        The projected use of our cash will be continued investment in the Bodybuilding business and additional investments in new or existing businesses.

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Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

        Information concerning the amount and timing of required payments, both accrued and off-balance sheet, under our contractual obligations, excluding uncertain tax positions as it is indeterminable when payments will be made, is summarized below.

 
  Payments due by period  
 
  Total   Less than
1 year
  2 - 3 years   4 - 5 years   After
5 years
 
 
  amounts in thousands
 

Combined contractual obligations

                               

Long-term debt

  $ 37,276     3,407     6,773     23,015     4,081  

Interest payments(1)

  $ 4,855     1,012     1,676     653     1,514  

Lease obligations, including interest

  $ 12,300     3,992     7,155     1,153      

Total

  $ 54,431     8,411     15,604     24,821     5,595  

(1)
Assumed outstanding balance and interest rate were the same through the maturity of the note.

Critical Accounting Estimates and Policies

        The preparation of our financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Listed below are the accounting estimates and accounting policies that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported.

        Application of the Equity Method of Accounting for Investments in Affiliates.     For those investments in affiliates in which the Company has the ability to exercise significant influence, the equity method of accounting is used. Under this method, the investment, originally recorded at cost, is adjusted to recognize the Company's share of net earnings or losses of the affiliate as they occur rather than as dividends or other distributions are received. Losses are limited to the extent of the Company's investment in, advances to and commitments for the investee. The Company determines the difference between the purchase price of the investee and the underlying equity which results in an excess basis in the investment. This excess basis is allocated to the underlying assets and liabilities of the Company's investee through an acquisition accounting exercise and is allocated within memo accounts used for equity accounting purposes. Depending on the applicable underlying assets, these amounts are either amortized over the applicable useful lives or determined to be indefinite lived.

        Changes in the Company's proportionate share of the underlying equity of an equity method investee, which result from the issuance of additional equity securities by such equity investee, to investors other than the Company, are recognized in the statement of operations through the gain (loss) on dilution of investment in affiliate line item. We periodically evaluate our equity method investment to determine if decreases in fair value below our cost basis are other than temporary. If a decline in fair value is determined to be other than temporary, we are required to reflect such decline in our consolidated statement of operations. Other than temporary declines in fair value of our equity method investment would be included in share of earnings (losses) of affiliates in our combined statement of operations.

        The primary factors we consider in our determination of whether declines in fair value are other than temporary are the length of time that the fair value of the investment is below our carrying value; the severity of the decline; and the financial condition, operating performance and near term prospects of the investee. In addition, we consider the reason for the decline in fair value, be it general market

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conditions, industry specific or investee specific; analysts' ratings and estimates of 12 month share price targets for the investee; changes in stock price or valuation subsequent to the balance sheet date; and our intent and ability to hold the investment for a period of time sufficient to allow for a recovery in fair value. Fair value of our publicly traded cost and equity investments is based on the market prices of the investments at the balance sheet date. We estimate the fair value of our non-public cost and equity investments using a variety of methodologies, including cash flow multiples, discounted cash flow, per subscriber values, or values of comparable public or private businesses. Impairments are calculated as the difference between our carrying value and our estimate of fair value. As our assessment of the fair value of our investments and any resulting impairment losses and the timing of when to recognize such charges requires a high degree of judgment and includes significant estimates and assumptions, actual results could differ materially from our estimates and assumptions.

        Our evaluation of the fair value of our investments and any resulting impairment charges are made as of the most recent balance sheet date. Changes in fair value subsequent to the balance sheet date due to the factors described above are possible. Subsequent decreases in fair value will be recognized in our combined statement of operations in the period in which they occur to the extent such decreases are deemed to be other than temporary. Subsequent increases in fair value will be recognized in our combined statement of operations only upon our ultimate disposition of the investment.

        Fair Value of Non-Financial Instruments.     Our non-financial instrument valuations are primarily comprised of our determination of the estimated fair value allocation of net tangible and identifiable intangible assets acquired in business combinations, our annual assessment of the recoverability of our goodwill and other nonamortizable intangibles, and our evaluation of the recoverability of our other long-lived assets upon certain triggering events.

        The Company periodically reviews the carrying value of its intangible assets with definite lives and other long-lived assets to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets or asset groups might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset group, or a significant decline in the observable market value of an asset group, among others. If such facts indicate a potential impairment, the recoverability of the asset group is assessed by determining whether the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the asset group over the remaining economic life of the asset group. If the carrying amount of the asset group is greater than the expected undiscounted cash flows to be generated by such asset group, including its ultimate disposition, an impairment adjustment is recognized.

        If the carrying value of our intangible or long-lived assets exceeds their estimated fair value, we are required to write the carrying value down to fair value. Any such writedown is included in impairment expense in our combined statement of operations. A high degree of judgment is required to estimate the fair value of our intangible and long-lived assets. We may use quoted market prices, prices for similar assets, present value techniques and other valuation techniques to prepare these estimates. We may need to make estimates of future cash flows and discount rates as well as other assumptions in order to implement these valuation techniques. Due to the high degree of judgment involved in our estimation techniques, any value ultimately derived from our intangible or long-lived assets may differ from our estimate of fair value.

        The accounting guidance permits entities to first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If the qualitative assessment supports that it is more likely than not that the carrying value of the Company's indefinite-lived intangible assets, other than goodwill, exceeds its fair value, then a quantitative assessment is

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performed. As of December 31, 2015, the Company had approximately $77.3 million of indefinite lived intangible assets.

        We perform our annual assessment of the recoverability of our goodwill in the fourth quarter each year. The Company utilizes a qualitative assessment for determining whether step one of the goodwill impairment analysis is necessary. The accounting guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. In evaluating goodwill on a qualitative basis, the Company reviews the business performance of each reporting unit and evaluates other relevant factors as identified in the relevant accounting guidance to determine whether it is more likely than not that an indicated impairment exists for any of our reporting units. The Company considers whether there are any negative macroeconomic conditions, industry specific conditions, market changes, increased competition, increased costs in doing business, management challenges, the legal environments and how these factors might impact company specific performance in future periods. As part of the analysis, the Company also considers fair value determinations for certain reporting units that have been made at various points throughout the current and prior year for other purposes. At December 31, 2015 it was determined that no indication of impairment existed.

        Revenue Recognition and Retail Related Adjustments.     Revenue from product sales is recognized when all the following criteria are met: a customer executes an order, the sales price and shipping charge has been determined, credit card authorization has occurred and collection is reasonably assured and it is probable that the product has been received by the customer, based on estimated delivery times. Shipping charges billed to customers are classified as revenue. The sales price of orders that have been shipped, but for which the Company estimates that the order has not yet been received by the customer, is recorded as deferred revenue and included in other current liabilities.

        An allowance for returned merchandise is provided as a percentage of sales based on historical experience. The total reduction in sales due to returns for the years ended December 31, 2015, 2014 and 2013 aggregated $5.1 million, $6.4 million and $10.7 million, respectively.

        In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated guidance will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company is currently evaluating the effect that the new standard may have on its revenue recognition and has not yet selected a transition method but does not believe the standard will significantly impact its financial statements and related disclosures.

        Income Taxes.     We are required to estimate the amount of tax payable or refundable for the current year and the deferred income tax liabilities and assets for the future tax consequences of events that have been reflected in our financial statements or tax returns for each taxing jurisdiction in which we operate. This process requires our management to make judgments regarding the timing and probability of the ultimate tax impact of the various agreements and transactions that we enter into. Based on these judgments we may record tax reserves or adjustments to valuation allowances on deferred tax assets to reflect the expected realizability of future tax benefits. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate, our inability to generate sufficient future taxable income or unpredicted results from the final determination of each year's liability by taxing authorities. These changes could have a significant impact on our financial position.

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Quantitative and Qualitative Disclosures about Market Risk

        We are exposed to market risk in the normal course of business due to our ongoing investing and financial activities. Market risk refers to the risk of loss arising from adverse changes in stock prices and interest rates. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. We have established policies, procedures and internal processes governing our management of market risks and the use of financial instruments to manage our exposure to such risks.

        Our investment in Expedia is subject to market risk that is not directly reflected in our financial statements. At June 30, 2016, the fair value of Liberty Interactive's investment in Expedia, on an as-converted basis, was approximately $2,509 million. Had the market price been 10% lower, the fair value of Liberty Interactive's investment in Expedia, on an as-converted basis, would have been $251 million lower.

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DESCRIPTION OF CERTAIN INDEBTEDNESS

        On July 7, 2016, SplitSPV entered into a multi-draw margin loan credit facility (the Existing Margin Loan Facility and, the credit agreement governing such facility, the Existing Margin Loan Agreement ) with Bank of America, N.A., as administrative agent (the Administrative Agent ) and calculation agent thereunder, and the lenders thereunder. The Existing Margin Loan Agreement provides for term loan commitments in an aggregate principal amount of up to $300 million. The Existing Margin Loan Facility matures on the earlier of December 30, 2016 and the date of the Split-Off. The lenders under the Existing Margin Loan Agreement are secured, on an equal and ratable, first priority basis by the shares of EXPE owned by SplitSPV.

        In connection with the Split-Off, SplitSPV will enter into a new multi-draw margin loan credit facility (the New Margin Loan Facility and, the credit agreement governing such facility, the New Margin Loan Agreement ) with the Administrative Agent, as administrative agent and calculation agent thereunder, and the lenders thereunder. SplitSPV will be permitted to use the proceeds of the loans under the New Margin Loan Facility for (i) distributions as a dividend or a return of capital to the equity or limited liability company interests of any person owning equity interests in SplitSPV, (ii) the purchase of margin stock and (iii) other general corporate purposes.

        The New Margin Loan Agreement will permit SplitSPV, subject to certain funding conditions, to borrow term loans up to an aggregate principal amount equal to $400 million, with $300 million available to be funded not later than 5 business days after the closing date (the Closing Date ) of the New Margin Loan Facility, and the remaining $100 million available to be funded at any time and from time to time, but not later than 5 business days prior to the twelve-month anniversary of the Closing Date. The New Margin Loan Facility will mature on the date that is the second anniversary of the Closing Date.

        SplitSPV's obligations under the New Margin Loan Facility will be fully and unconditionally guaranteed solely by Splitco. In addition, SplitSPV's obligations will be secured by first priority liens on SplitSPV's ownership interest in EXPE sufficient for SplitSPV to meet its loan to value requirement under the New Margin Loan Agreement (the Pledged Stock ). If SplitSPV defaults on its obligations under the New Margin Loan Agreement, each lender (subject to applicable cure periods) will have the right to terminate its commitments and declare the outstanding principal amount of its loans under the New Margin Loan Facility, together with any accrued and unpaid interest thereon, the prepayment amount, if applicable, and all other amounts owing or payable under the New Margin Loan Agreement and the other loan documents entered into in connection with the New Margin Loan Facility to be immediately due and payable, and such lender will have the right to (i) foreclose on that portion of the Pledged Stock securing its respective portion of the New Margin Loan Facility and any other collateral that then secures SplitSPV's obligations to such lender, (ii) exercise any and all other rights such lender may have against SplitSPV at law or in equity and (iii) pursue the rights of such lender under the guarantee of Splitco.

        Borrowings under the New Margin Loan Agreement will bear interest at a per annum rate equal to the 3-month (or lesser period if applicable in connection with a borrowing) LIBOR rate plus a per annum spread of 1.6%, unless it is unlawful for the applicable lender to fund or maintain loans based on LIBOR or there are material restrictions on the applicable lender to do so, in which case borrowings under the New Margin Loan Agreement will either (a) bear interest at 0.6% plus the higher of (i) the federal funds rate plus 1/2 of 1%, (ii) the prime rate and (iii) LIBOR plus 1%, for each day during such period or (b) be prepaid. We currently anticipate that interest will be payable quarterly in arrears, beginning, at the earliest, on December 31, 2016.

        The New Margin Loan Agreement will provide that SplitSPV may prepay the loans under the New Margin Loan Facility at any time, subject to certain notice requirements and a prepayment premium if SplitSPV prepays all or any portion of such loans prior to the first business day following the first

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anniversary of the Closing Date. The New Margin Loan Agreement will also require mandatory prepayments, together with the payment of the prepayment premium, if applicable, or, in some cases, the posting of additional collateral, upon the occurrence of certain events that are customary for margin loans of this type.

        The New Margin Loan Agreement will contain various affirmative and negative covenants that restrict the activities of SplitSPV (including, with limited exceptions, the incurrence of additional indebtedness by SplitSPV) and, in some cases, Splitco, as guarantor. The New Margin Loan Agreement will not include any financial covenants. The New Margin Loan Agreement will also contain events of default that are customary for margin loans of this type, including the occurrence of the following events (and subject to customary cure periods and materiality thresholds):

    failure to pay principal, interest or other amounts due under the New Margin Loan Agreement (including margin calls or other mandatory prepayments);

    failure to observe covenants or other agreements in the New Margin Loan Agreement or inaccuracy of representations or warranties under the New Margin Loan Agreement;

    insolvency and related occurrences or events of insolvency with respect to SplitSPV or Splitco;

    judgments entered against SplitSPV or Splitco above certain thresholds;

    failure of enforceability or invalidity of the New Margin Loan Facility loan documents or the effectiveness of the liens created under the New Margin Loan Facility loan documents;

    approval of amendments to the organizational documents of any issuer of the Pledged Stock that would further restrict the lenders' ability to foreclose on and sell the Pledged Stock;

    default by Splitco under the guarantee agreement it will enter into with respect to SplitSPV's obligations under the New Margin Loan Agreement; and

    default by SplitSPV or Splitco under other agreements governing material indebtedness.

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MANAGEMENT OF SPLITCO

Directors

        From the completion of the Split-Off until the Proxy Arrangement Termination Date, our board of directors will be comprised of seven members, five of whom are designated as Common Stock Directors (the Common Stock Directors ) and are elected by the holders of our outstanding shares of Series A common stock and Series B common stock, and two of whom are designated as Series B Directors (the Series B Directors ) and are elected by holders of our outstanding shares of Series B common stock. For more information on the Common Stock Directors and Series B Directors, see "Description of Splitco's Capital Stock—Other Provisions of Splitco's Charter and Bylaws—Board of Directors."

        The following sets forth certain information concerning the persons who are expected to serve as the initial Common Stock Directors and one of the initial Series B Directors of Splitco immediately following the Split-Off, including their ages, directorships held and a description of their business experience, including, if applicable, current positions held with Liberty Interactive. It is anticipated that an additional Series B Director will be appointed to serve on the Splitco board of directors following the Split-Off, although the identity of that individual is not presently known. No assurance can be given, however, as to whether these directors will continue to serve on the Splitco board following the expiration of their respective terms, as their re-election will be subject to the approval of Splitco's stockholders.

    Series B Directors

Name
  Position and Experience
Alexander von Furstenberg   A director of Splitco.

Age: 46

 

Professional Background: Mr. von Furstenberg currently serves as Chief Investment Officer of Ranger Global Advisors, LLC, a family office focused on value-based investing ( Ranger ), which he founded in June 2011. Prior to his tenure with Ranger, Mr. von Furstenberg founded Arrow Capital Management, LLC, a private investment firm focused on global public equities, where he served as Co-Managing Member and Chief Investment Officer since 2003. During the past five years, Mr. von Furstenberg has served as a member of the Board of Directors of IAC/InterActiveCorp, a leading media and Internet company, since 2008 and served as a member of the board of directors of W.P. Stewart & Co. Ltd., a Bermuda based asset management firm through 2013. Since 2001, he has acted as Chief Investment Officer of Arrow Investments, Inc., a private investment office which serves his family. In addition, Mr. von Furstenberg serves as Co-chairman of the Board of DVF Studio a global luxury lifestyle brand. Mr. von Furstenberg is Diller's stepson.

 

 

Other Public Company Directorships: Mr. von Furstenberg has been a director of Expedia since December 2015 and a director of IAC/InterActiveCorp, since December 2008.

 

 

Board Member Qualifications: Mr. von Furstenberg has private investment and board experience, as well as a high level of financial literacy. Mr. von Furstenberg's particular insight into capital markets and investment strategy will assist our board in evaluating strategic opportunities for Splitco.

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    Common Stock Directors

Name
  Position and Experience
John C. Malone   Chairman of the Board and a director of Splitco.

Age: 75

 

Professional Background: Mr. Malone has served as Chairman of the Board of Liberty Interactive, including its predecessors, since its inception in 1994 and served as Liberty Interactive's Chief Executive Officer from August 2005 to February 2006. Mr. Malone served as Chairman of the Board of Tele-Communications, Inc. ( TCI ) from November 1996 until March 1999, when it was acquired by AT&T Corp., and as Chief Executive Officer of TCI from January 1994 to March 1997.

 

 

Other Public Company Directorships: Mr. Malone has served as (i) Chairman of the Board of Liberty Media (including its predecessor) since August 2011 and as a director since December 2010, (ii) Chairman of the Board of Liberty TripAdvisor Holdings, Inc. ( Liberty TripAdvisor ) from August 2014 to June 2015, (iii) Chairman of the Board of Liberty Broadband since November 2014, (iv) Chairman of the Board of Liberty Global plc ( LGP ) since June 2013, having previously served as Chairman of the Board of Liberty Global, Inc. ( LGI ), LGP's predecessor, from June 2005 to June 2013, as a director of LGI's predecessor, Liberty Media International, Inc. ( LMI ), from March 2004 to June 2005 and (v) a director of UnitedGlobalCom, Inc., now a subsidiary of LGP, from January 2002 to June 2005. He has served as (i) a director of Discovery Communications, Inc. ( Discovery ) since September 2008 and served as a director of Discovery's predecessor Discovery Holding Company ( DHC ) from May 2005 to September 2008, and as Chairman of the Board from March 2005 to September 2008, (ii) a director of Expedia, Inc. since December 2012, having previously served as a director from August 2005 to November 2012, (iii) a director of Charter Communications, Inc. ( Charter ) since May 2013 and (iv) a director of Lions Gate Entertainment Corp. since March 2015. Previously, he served as (i) a director of Sirius XM Holdings, Inc. ( Sirius XM ) from April 2009 to May 2013, (ii) a director of Ascent Capital Group, Inc. from January 2010 to September 2012, (iii) a director of Live Nation Entertainment, Inc. ( Live Nation ) from January 2010 to February 2011, (iv) a director of DIRECTV and its predecessors from February 2008 to June 2010 and (v) a director of IAC/InterActive Corp from May 2006 to June 2010.

 

 

Board Membership Qualifications: Mr. Malone, as President of TCI, co-founded Liberty Interactive's former parent company and is considered one of the preeminent figures in the media and telecommunications industry. He is well known for his sophisticated problem solving and risk assessment skills.

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Name
  Position and Experience

Christopher W. Shean

 

Chief Executive Officer, President and a director of Splitco.

Age: 51

 

Professional Background: Mr. Shean has served as Senior Vice President of Liberty Media since May 2007, the Chief Financial Officer from November 2011 to October 2016 and the Controller from May 2007 to October 2011. Mr. Shean served as a Senior Vice President and Chief Financial Officer of Liberty TripAdvisor from July 2013 to January 2016. He also has served as a Vice President of Liberty Interactive from October 2000 to January 2002, a Senior Vice President since January 2002, the Controller from October 2000 to October 2011 and the Chief Financial Officer from November 2011 to October 2016. He has also served as a Senior Vice President and Chief Financial officer of Liberty Broadband from June 2014 to October 2016.

 

 

Other Public Company Directorships: Mr. Shean has served as a director of Expedia since December 2015 and as a director of FTD since December 2014. Mr. Shean previously served as a director of TripAdvisor from February 2013 to December 2015.

 

 

Board Member Qualifications: Mr. Shean has significant financial and operational experience gained through his service as Chief Financial Officer and other executive-level positions at Liberty Interactive and Liberty Media and as a former partner of KPMG. As a result of his extensive business and financial experience, Mr. Shean will provide valuable business, financial and risk management advice to our board of directors. Mr. Shean also possesses a high level of financial literacy and expertise regarding mergers, acquisitions, investments and other strategic transactions.

Stephen M. Brett

 

A director of Splitco.

Age: 76

 

Professional Background: Mr. Brett has served as Chairman of the Board of General Communication, Inc. ( GCI ) since June 2005 and as a director of GCI since January 2001. He has been of counsel to Sherman & Howard, L.L.C., a law firm, since January 2001. Prior to that, he served as Senior Executive Vice President for AT&T Broadband from March 1999 to April 2000. He has also served as Executive Vice President, General Counsel and Secretary of TCI from 1991 to 1999 and Executive Vice President, General Counsel and Secretary of United Artists from 1988 to 1991.

 

 

Other Public Company Directorships: Mr. Brett has served as Chairman of the Board of GCI since June 2005 and as a director of GCI since January 2001.

 

 

Board Member Qualifications: Mr. Brett brings to our board considerable experience in the telecommunications and cable industries, as well as over 40 years of experience as a corporate lawyer. He provides our board with executive leadership perspective on the legal operations and management of large public companies and risk management policies.

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Name
  Position and Experience

Gregg L. Engles

 

A director of Splitco.

Age: 59

 

Professional Background: Mr. Engles has served as Chairman of the Board and Chief Executive Officer of The WhiteWave Foods Company ( WhiteWave ) since October 2012. He previously served as Chief Executive Officer and a director of Dean Foods Company, WhiteWave's former parent company, from January 2011 until WhiteWave's initial public offering in October 2012.

 

 

Other Public Company Directorships: Mr. Engles previously served as a director and Chairman of the Board of Dean Foods Company from January 2011 to October 2012 and as a director of Treehouse Foods, Inc. from June 2005 to May 2008.

 

 

Board Member Qualifications: Mr. Engles offers our board significant operational experience gained through his senior leadership positions at WhiteWave and other large public companies. He provides our board with executive leadership perspective on the operations and management of public companies, which will assist our board in evaluating strategic opportunities.

Scott W. Schoelzel

 

A director of Splitco.

Age: 58

 

Professional Background: Mr. Schoelzel served as Vice President and Portfolio Manager of the Janus Twenty and Janus Forty Funds from August 1997 through December 2008. Prior to managing the Janus Twenty and Janus Forty Funds, Mr. Schoelzel launched and managed the Janus Olympus Fund from December 1995 to August 1997. Prior to joining Janus in 1994, Mr. Schoelzel served as a research analyst and portfolio manager at Founders Funds, Inc. where he managed the Founders Growth Fund from October 1991 to December 1993.

 

 

Other Public Company Directorships: None.

 

 

Board Member Qualifications: Mr. Schoelzel's extensive background in investment analysis and management and his knowledge of finance and capital markets contribute to our board's consideration of our capital structure and evaluation of financial opportunities and strategies and strengthen our board's collective qualifications, skills and attributes.

Executive Officers

        The following sets forth certain information concerning the persons (other than Mr. Shean, who is also expected to serve as a Common Stock Director of Splitco and is described above) who are existing officers of Liberty Interactive and who are expected to serve as Splitco's initial executive officers immediately following the Split-Off, including their ages, directorships held and a description of their business experience, including positions held with Liberty Interactive (including its predecessors). All of these executive officers also serve as officers at Liberty Interactive and provide such services pursuant to an existing services agreement between Liberty Interactive and Liberty Media. Notwithstanding the multiple roles to be served by these persons at Splitco, Liberty Interactive and/or Liberty Media following the Split-Off, Splitco and Liberty Interactive believe the following persons are the most

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qualified and appropriate to serve in these multiple roles during the post-Split-Off transition period given such person's in-depth knowledge of and experience with the businesses of Splitco, Liberty Interactive and Liberty Media. No assurance can be given, however, as to whether or how long these officers will continue to serve at any of the companies.

Name
  Positions
Wade Haufschild   Chief Financial Officer of Splitco.

Age: 40

 

Vice President of Liberty Media and its predecessor since December 2011. Vice President of Liberty Interactive since January 2010. Vice President of Liberty Broadband since October 2014. Vice President of Liberty TripAdvisor since August 2014. Prior to joining Liberty Interactive, Mr. Haufschild was an accountant in the accounting firm of KPMG LLP from January 1999 to December 2009, most recently serving as a Senior Manager in its Department of Professional Practice.

Richard N. Baer

 

Chief Legal Officer of Splitco.

Age: 59

 

Senior Vice President and General Counsel of Liberty Interactive and Liberty Media from January 2013 through December 2015 and Chief Legal Officer since January 2016. Senior Vice President and General Counsel of Liberty Broadband from June 2014 through December 2015 and Chief Legal Officer since January 2016. Senior Vice President and General Counsel of Liberty TripAdvisor from July 2013 through December 2015 and Chief Legal Officer since January 2016. Executive Vice President and Chief Legal Officer of UnitedHealth Group Incorporated from May 2011 to December 2012. Executive Vice President and General Counsel of Qwest Communications International Inc. from December 2002 to April 2011 and Chief Administrative Officer from August 2008 to April 2011.

Albert E. Rosenthaler

 

Chief Corporate Development Officer of Splitco.

Age: 57

 

Senior Vice President of Liberty Media from May 2007 through December 2015 and Chief Tax Officer from January 2016 to October 2016. Senior Vice President of Liberty Interactive from April 2002 through December 2015 and Chief Tax Officer from January 2016 to October 2016. Senior Vice President of Liberty Broadband from June 2014 through December 2015 and Chief Tax Officer from January 2016 to October 2016. Senior Vice President of Liberty TripAdvisor from July 2013 through December 2015, Chief Tax Officer from January 2016 to October 2016 and a director since August 2014. Effective October 1, 2016, Mr. Rosenthaler will be Chief Corporate Development Officer of Liberty Media, Liberty Interactive, Liberty Broadband and Liberty TripAdvisor.

        Splitco's executive officers will serve in such capacities until the first annual meeting of its board of directors, or until their respective successors have been duly elected and have been qualified, or until their earlier death, resignation, disqualification or removal from office.

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Directors and Executive Officers

        There is no family relationship between any of Splitco's executive officers or directors identified above, by blood, marriage or adoption.

        During the past ten years, none of the above persons has had any involvement in such legal proceedings as would be material to an evaluation of his or her ability or integrity.

Director Independence

        It will be Splitco's policy that a majority of the members of its board of directors will be independent of its management. Pursuant to the Transaction Agreement, three of the Common Stock Directors and one of the Series B Directors (who will be identified at a later date, as described above) will be independent of Splitco's management. For a director to be deemed independent, Splitco's board of directors must affirmatively determine that the director has no direct or indirect material relationship with the company. To assist Splitco's board of directors in determining which of its directors will qualify as independent, the nominating and corporate governance committee of Splitco's board is expected to follow the Corporate Governance Rules of Nasdaq on the criteria for director independence.

        In accordance with these criteria, it is expected that the Splitco board of directors will determine that each of Messrs. Brett, Engles and Schoelzel qualifies as an independent director of Splitco.

Board Composition

        The board of Splitco will be comprised of directors with a broad range of backgrounds and skill sets, including in media and telecommunications, private investment, corporate law and auditing. Detailed information on Splitco's policies with respect to board candidates will be available following the establishment of the board's nominating and corporate governance committee.

        Upon completion of the Split-Off, the Common Stock Directors of Splitco will serve for an initial one-year term and the Series B Directors will serve for an initial term ending upon the earlier of the Proxy Arrangement Termination Date and the second annual meeting of the stockholders of Splitco following the completion of the Split-Off. Following the Proxy Arrangement Termination Date, the members of Splitco's board of directors, other than those who may be elected by holders of any then-outstanding preferred stock, will be divided into three classes. See "Description of Splitco's Capital Stock—Other Provisions of Splitco's Charter and Bylaws—Board of Directors."

Committees of the Board

        It is expected that Splitco's board of directors will form the following committees: audit committee, compensation committee, nominating and corporate governance committee and executive committee, which will have comparable responsibilities to the corresponding committees of Liberty Interactive's board, as well as a Common Stock Director committee and a Series B Director committee, which will have the power and authority to take all such actions specified in Splitco's organizational documents as to be taken by the Common Stock Directors and Series B Directors, respectively (or respective committees thereof). It is currently contemplated that the members and chairmen of these committees (with the exception of the executive committee, Common Stock Director committee and Series B Director committee, each of which will not have a chairman) will be appointed prior to the completion of the Split-Off. In addition, it is currently contemplated that the "audit committee financial expert" for purposes of the Exchange Act and the rules and regulations of Nasdaq will be designated at such time.

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Compensation Committee Interlocks and Insider Participation

        Splitco's board of directors does not currently have a compensation committee. It is expected that no member of Splitco's compensation committee (once formed) will be or will have been, during 2015, an officer or employee of Splitco or Liberty Interactive, or will have engaged in any related party transaction in which Splitco or Liberty Interactive was a participant. It is expected that no interlocking relationship will exist between the Splitco board and its compensation committee and the board of directors or compensation committee of any other company.

Pro Forma Security Ownership of Certain Beneficial Owners

        Prior to the Split-Off, all of the outstanding shares of our common stock will be owned by Liberty Interactive. The following table sets forth information, to the extent known by Liberty Interactive or ascertainable from public filings with respect to the estimated beneficial ownership of each person or entity (other than certain persons who will serve as directors or executive officers of Splitco, whose ownership information follows) who is expected to beneficially own more than five percent of the outstanding shares of any series of Splitco common stock, assuming that the redemption had occurred at 5:00 p.m., New York City time, on July 31, 2016. The percentage voting power is presented on an aggregate basis for all series of Splitco common stock.

        The security ownership information for Splitco common stock has been estimated based upon outstanding stock information for Liberty Ventures common stock as of July 31, 2016, and, in the case of percentage ownership information, has been estimated based upon approximately 54,089,200 shares of LEXEA and 2,848,000 shares of LEXEB estimated to have been distributed in the Split-Off. However, because of the difficulty in determining in advance the precise effect of the redemption on outstanding option awards with respect to shares of LVNTA and LVNTB (see "The Split-Off and Redemption Proposal—Effect of the Split-Off on Outstanding Ventures Group Incentive Awards" for more information), for purposes of the following presentation, we have not included beneficial ownership information with respect to any new option awards with respect to shares of LEXEA and LEXEB that may be received by the persons for whom beneficial ownership information is presented below.

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        So far as is known to Liberty Interactive, the persons indicated below would have sole voting power with respect to the shares estimated to be owned by them, except as otherwise stated in the notes to the table.

Name and Address of Beneficial Owner
  Title of
Series
  Amount and
Nature of Beneficial
Ownership
  Percent
of Series
(%)
  Voting
Power
(%)
 

John C. Malone

    LEXEA     404,660 (1)   *     33.0  

c/o Liberty Interactive Corporation
12300 Liberty Boulevard
Englewood, CO 80112

    LEXEB     2,680,785 (1)   94.1        

Barry Diller

   
LEXEA
   
404,660

(2)
 
*
   
33.0
 

c/o Arrow Investments, Inc.
555 West 18th Street, 5th Floor
New York, NY 10011

    LEXEB     2,680,785 (2)   94.1        

FPR Partners LLC
199 Fremont Street, Suite 2500
San Francisco, CA 94105-2261

   
LEXEA
   
5,382,641

(3)
 
10.0
   
6.5
 

The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355

   
LEXEA
   
3,149,050

(4)
 
5.8
   
3.8
 

*
Less than one percent

(1)
See footnote (1) to the table included under "Security Ownership of Certain Beneficial Owners and Management—Security Ownership of Certain Beneficial Owners" below. Pursuant to the Malone Proxy, from immediately following the redemption effective time until the Proxy Arrangement Termination Date, Malone and his wife will grant Diller an irrevocable proxy over the shares of Splitco common stock beneficially owned by Malone and his wife, subject to certain exceptions. See "Certain Relationships and Related Party Transactions—Relationships Among Splitco, the Malone Group, Diller and Expedia—Proxy Arrangements—Malone Proxy."

(2)
Pursuant to the Malone Proxy, from immediately following the redemption effective time until the Proxy Arrangement Termination Date, Malone and his wife will grant Diller an irrevocable proxy over the shares of Splitco common stock beneficially owned by Malone and his wife, subject to certain exceptions. See "Certain Relationships and Related Party Transactions—Relationships Among Splitco, the Malone Group, Diller and Expedia—Proxy Arrangements—Malone Proxy."

(3)
See footnote (5) to the table included under "Security Ownership of Certain Beneficial Owners and Management—Security Ownership of Certain Beneficial Owners" below.

(4)
See footnote (3) to the table included under "Security Ownership of Certain Beneficial Owners and Management—Security Ownership of Certain Beneficial Owners" below.

Pro Forma Security Ownership of Management

        The following table sets forth information with respect to the estimated beneficial ownership by each person who is expected to serve as an executive officer or director of Splitco (other than, for purposes of this section, the additional Series B Director, who will be identified at a later date, as previously described) and all of such persons as a group of (1) shares of Splitco's Series A common stock and Series B common stock and (2) shares of EXPE, assuming that the redemption had occurred

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at 5:00 p.m., New York City time, on July 31, 2016. The percentage voting power is presented on an aggregate basis for all series of Splitco common stock.

        The security ownership information for Splitco common stock has been estimated based upon outstanding stock information for Liberty Ventures common stock as of July 31, 2016, and, in the case of percentage ownership information, has been estimated based upon approximately 54,089,200 shares of LEXEA and 2,848,000 shares of LEXEB estimated to have been distributed in the Split-Off. In the case of percentage ownership information for Expedia Common Shares, the ownership information has been estimated based upon 137,008,911 shares of EXPE and 12,799,999 shares of Expedia class B common stock, in each case, outstanding on August 1, 2016. None of our directors or named executive officers own shares of Expedia class B common stock.

        Shares of restricted stock that will be issued pursuant to the transitional plan are included in the outstanding share numbers provided throughout this proxy statement/prospectus. However, because of the difficulty in determining in advance the precise effect of the redemption on outstanding option awards with respect to shares of LVNTA and LVNTB for our directors and named executive officers (see "The Split-Off and Redemption Proposal—Effect of the Split-Off on Outstanding Ventures Group Incentive Awards" for more information), for purposes of the following presentation, we have not included beneficial ownership information with respect to any new option awards with respect to shares of LEXEA and LEXEB that may be received by the directors or named executive officers for whom beneficial ownership information is presented below.

        For purposes of the following presentation, beneficial ownership of shares of Splitco Series B common stock, though convertible on a one-for-one basis into shares of Splitco Series A common stock, is reported as beneficial ownership of Series B common stock, and not as beneficial ownership of Series A common stock, but the voting power of the Series A common stock and Series B common stock has been aggregated.

        The number of shares indicated as owned by the following persons includes interests in shares that would have been held by the Liberty Media 401(k) plan as of July 31, 2016. The shares held by the trustee of the Liberty Media 401(k) Savings Plan for the benefit of these persons are voted as directed by such persons.

        So far as is known to Liberty Interactive, the persons indicated below would have sole voting power with respect to the shares estimated to be owned by them, except as otherwise stated in the notes to the table.

Name of Beneficial Owner
  Title of
Series
  Amount and
Nature of Beneficial
Ownership
  Percent
of Class
(%)
  Voting
Power
(%)
 
 
   
  (In thousands)
   
   
 

John C. Malone

  LEXEA     405 (1)   *     33.0  

Chairman of the Board and Director

  LEXEB     2,681 (2)   94.1        

  EXPE              

Christopher W. Shean

  LEXEA     80 (3)   *     *  

Chief Executive Officer, President and Director

  LEXEB                

  EXPE              

Stephen M. Brett

  LEXEA     **     *     *  

Director

  LEXEB                

  EXPE              

Gregg L. Engles

  LEXEA              

Director

  LEXEB                

  EXPE              

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Name of Beneficial Owner
  Title of
Series
  Amount and
Nature of Beneficial
Ownership
  Percent
of Class
(%)
  Voting
Power
(%)
 
 
   
  (In thousands)
   
   
 

Scott W. Schoelzel

  LEXEA              

Director

  LEXEB                

  EXPE              

Alexander von Furstenberg

  LEXEA              

Director

  LEXEB                

  EXPE              

Wade Haufschild

  LEXEA     10 (4)   *     *  

Chief Financial Officer

  LEXEB                

  EXPE              

Richard N. Baer

  LEXEA     4 (5)   *     *  

Chief Legal Officer

  LEXEB                

  EXPE              

Albert E. Rosenthaler

  LEXEA     40 (6)   *     *  

Chief Corporate Development Officer

  LEXEB                

  EXPE              

All directors and executive officers as a group (9 persons)

  LEXEA     539 (7)   1.0     33.1  

  LEXEB     2,681 (2)   94.1        

  EXPE              

*
Less than one percent

**
Less than 1,000 shares

(1)
See footnotes (1) and (3) to the table included under "Security Ownership of Certain Beneficial Owners and Management—Security Ownership of Management" below.

(2)
See footnotes (1), (4) and (5) to the table included under "Security Ownership of Certain Beneficial Owners and Management—Security Ownership of Management" below.

(3)
See footnotes (2), (7) and (9) to the table included under "Security Ownership of Certain Beneficial Owners and Management—Security Ownership of Management" below.

(4)
Includes 827 LEXEA restricted shares and 8,031 stock options to purchase LEXEA shares that are currently exercisable.

(5)
See footnote (9) to the table included under "Security Ownership of Certain Beneficial Owners and Management—Security Ownership of Management" below.

(6)
See footnotes (2), (7) and (9) to the table included under "Security Ownership of Certain Beneficial Owners and Management—Security Ownership of Management" below.

(7)
See footnotes (1), (2), (3), (7) and (9) to the table included under "Security Ownership of Certain Beneficial Owners and Management—Security Ownership of Management" below.

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EXECUTIVE COMPENSATION

Executive Officers of Splitco

        The initial executive officers of Splitco will be comprised of the current officers of Liberty Interactive. Splitco is a newly formed company, and therefore has not paid any compensation to any of its executive officers. In September 2011, Liberty Interactive completed the split-off (the Split-Off ) of its former subsidiary then-known as Liberty Media Corporation (currently known as Starz, Old LMC ). In January 2013, Old LMC completed the spin-off of its former subsidiary Liberty Media (then-known as Liberty Spinco, Inc.) (the LMC Split-Off ). In connection with the Split-Off, Liberty Interactive entered into a services agreement with Old LMC, which was assumed by Liberty Media in the LMC Split-Off, pursuant to which Liberty Interactive compensates Liberty Media for the portion of the salary and other cash compensation Liberty Media pays to its employees, including the named executive officers, that is allocable to Liberty Interactive for time spent by each such employee on matters related to that company. As noted elsewhere and described in more detail herein, in connection with the Split-Off, Splitco and Liberty Media will enter into a services agreement pursuant to which Splitco will pay Liberty Media an agreed-upon services fee in exchange for the performance of specified services by Liberty Media and its employees for Splitco, including the services of Splitco's executive officers. For more information regarding this agreement, please see "Certain Relationships and Related Party Transactions—Relationships Between Splitco and Liberty Interactive and/or Liberty Media—Services Agreement." Although, as noted above, Splitco has not paid any compensation to any of its executive officers, compensation has historically been paid to these officers for their service to each of Liberty Media and Liberty Interactive. Thus, for information concerning the compensation paid to the "named executive officers" of Splitco for their service to each of Liberty Media and Liberty Interactive for the year ended December 31, 2015 and certain related information, see Exhibit 99.1 to the Registration Statement on Form S-4, of which this proxy statement/prospectus forms a part, which includes substantially the same information that is included in each of the "Executive Compensation" sections of the annual reports on Form 10-K/A filed by each of Liberty Media and Liberty Interactive with the SEC on April 29, 2016.

        The historical compensation information included in the section of Exhibit 99.1 entitled "Liberty Interactive Corporation" is not solely attributable to services performed with respect to our business and assets and no specific allocation of such compensation is determinable solely with respect to such services. Rather it reflects the full amount of compensation paid by Liberty Interactive to each applicable person during the applicable period.

        The amount and timing of any equity-based compensation to be paid to the Splitco executive officers following the Split-Off (other than awards issued pursuant to the transitional plan) will be determined by the compensation committee of the Splitco board of directors. Any equity incentive awards granted to executive officers of Splitco following the Split-Off will generally be granted pursuant to the Liberty Expedia Holdings, Inc. 2016 Omnibus Incentive Plan, which is described under "—Equity Incentive Plans" below.

Directors

        Splitco's nonemployee directors will receive cash compensation directly from Splitco in such amounts and at such times as the Splitco board of directors shall determine. The amount and timing of any equity-based compensation to be paid to the Splitco directors following the Split-Off (other than awards issued pursuant to the transitional plan) will be determined by the Splitco board of directors. Any equity incentive awards granted to nonemployee directors of Splitco following the Split-Off will generally be granted pursuant to the Liberty Expedia Holdings, Inc. 2016 Omnibus Incentive Plan, which is described under "—Equity Incentive Plans" below. For information concerning the compensation paid to the directors of Liberty Media and Liberty Interactive for the year ended

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December 31, 2015 and certain related information, see Exhibit 99.1 to the Registration Statement on Form S-4, of which this proxy statement/prospectus forms a part.

Equity Incentive Plans

    Liberty Expedia Holdings, Inc. 2016 Omnibus Incentive Plan

        In connection with the Split-Off, Splitco will adopt the Liberty Expedia Holdings, Inc. 2016 Omnibus Incentive Plan (the incentive plan ). The incentive plan is designed to provide additional remuneration to officers, employees, nonemployee directors and independent contractors for exceptional service and to encourage their investment in Splitco. Non-qualified stock options, SARs, restricted shares, restricted stock units, cash awards, performance awards or any combination of the foregoing may be granted under the incentive plan (collectively, awards ). The maximum number of shares of Splitco common stock with respect to which awards may be granted is 3.7 million, subject to anti-dilution and other adjustment provisions of the incentive plan. With limited exceptions, under the incentive plan, no person may be granted in any calendar year awards covering more than 500,000 shares of Splitco common stock, subject to anti-dilution and other adjustment provisions of the incentive plan. In addition, no person may receive payment for cash awards during any calendar year in excess of $10 million and no nonemployee director may be granted during any calendar year awards having a value (as determined on the grant date of such award) in excess of $1.5 million. Shares of Splitco common stock issuable pursuant to awards will be made available from either authorized but unissued shares or shares that have been issued but reacquired by Splitco. The incentive plan will be administered by the compensation committee with regard to all awards granted under the incentive plan (other than awards granted to the nonemployee directors), and the compensation committee will have full power and authority to determine the terms and conditions of such awards. The incentive plan will be administered by the full board of directors with regard to all awards granted under the incentive plan to nonemployee directors, and the full board of directors will have full power and authority to determine the terms and conditions of such awards.

    Liberty Expedia Holdings, Inc. Transitional Stock Adjustment Plan

        At the time of the Split-Off, Splitco will also have awards outstanding under the transitional plan as described under "The Split-Off and Redemption Proposal—Effect of the Split-Off on Outstanding Liberty Ventures Incentive Awards."

Equity Compensation Plan Information

        At the time of the Split-Off, Splitco will have two equity compensation plans, each of which is listed below. The only plan under which awards will be outstanding immediately following the Split-Off is the transitional plan.

        The following table reflects the awards that would have been outstanding as of December 31, 2015 assuming that (i) the Split-Off had occurred on that date and (ii) the treatment of the outstanding

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Liberty Ventures incentive awards described under "The Split-Off and Redemption Proposal—Effect of the Split-Off on Outstanding Liberty Ventures Awards."

Plan Category
  Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights (a)(1)
  Weighted average
exercise price of
outstanding
options, warrants
and rights
  Number of
securities
available for future
issuance under
equity compensation
plans (excluding
securities reflected
in column (a))(2)
 

Equity compensation plans approved by security holders: None

                   

Equity compensation plans not approved by security holders:(1)

                   

Liberty Expedia Holdings, Inc. 2016 Omnibus Incentive Plan

                3,700,000  

Series A common stock

    0     NA        

Series B common stock

    0     NA        

Liberty Expedia Holdings, Inc. Transitional Stock Adjustment Plan

                0  

Series A common stock

    1,177,012   $ 27.01        

Series B common stock

    495,875   $ 44.13        

Total

                   

Series A common stock

    1,177,012              

Series B common stock

    495,875              

                3,700,000  

(1)
Each plan will be approved by Liberty Interactive in its capacity as the sole stockholder of Splitco prior to the Split-Off. Following the Split-Off, Splitco will seek stockholder approval of the incentive plan at its first annual meeting of stockholders.

(2)
Each plan permits grants of, or with respect to, shares of any series of Splitco common stock, subject to a single aggregate limit.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

        The following table sets forth information concerning shares of Liberty Interactive common stock beneficially owned by each person or entity (excluding any of its directors and executive officers) known by Liberty Interactive to own more than five percent of the outstanding shares of any series of Liberty Interactive common stock. All of such information is based on publicly available filings.

        The security ownership information is given as of July 31, 2016 and, in the case of percentage ownership information, is based upon (1) 446,645,121 QVCA shares, (2) 29,358,638 QVCB shares, (3) 135,222,884 LVNTA shares and (4) 7,119,929 LVNTB shares, in each case, outstanding on that date. The percentage voting power is presented on an aggregate basis for all series of common stock.

Name and Address of Beneficial Owner
  Title of
Series
  Amount and Nature of
Beneficial Ownership
  Percent
of Series
(%)
  Voting
Power
(%)
 

John C. Malone

  QVCA     391,864 (1)   *     36.4  

c/o Liberty Interactive Corporation

  QVCB     27,655,931 (1)   94.2        

12300 Liberty Boulevard

  LVNTA     1,011,650 (1)   *        

Englewood, CO 80112

  LVNTB     6,701,962 (1)   94.1        

Jackson Square Partners, LLC

  QVCA     29,212,778 (2)   6.5     3.1  

101 California Street, Suite 3750

                       

San Francisco, CA 94111

                       

The Vanguard Group

  QVCA     20,503,926 (3)   4.6     3.0  

100 Vanguard Blvd.

  LVNTA     7,872,624 (3)   5.8        

Malvern, PA 19355

                       

Harris Associates L.P. 

  QVCA     23,834,788 (4)   5.3     2.5  

111 S. Wacker Drive, Suite 4600

                       

Chicago, IL 60606

                       

FPR Partners LLC

  QVCA     6,175,234 (5)   1.4     2.1  

199 Fremont Street, Suite 2500

  LVNTA     13,456,602 (5)   10.0        

San Francisco, CA 94105-2261

                       

*
Less than one percent

(1)
Information with respect to shares of Liberty Interactive common stock beneficially owned by Mr. Malone, Liberty Interactive's Chairman of the Board, is also set forth in "—Security Ownership of Management."

(2)
Based on Form 13F, dated August 12, 2016, filed by Jackson Square Partners, LLC ( Jackson ), which states that Jackson has sole investment discretion over 29,212,778 QVCA shares, sole voting power over 10,550,960 QVCA shares and shared voting power over 7,465,556 QVCA shares.

(3)
Based on Form 13F, dated August 10, 2016, filed by The Vanguard Group ( Vanguard ), which states that Vanguard has sole investment discretion over 19,999,864 QVCA shares and 7,765,666 LVNTA shares, shared investment discretion over 504,062 QVCA shares and 106,958 LVNTA shares, shared voting power over 87,275 QVCA shares and 15,226 LVNTA shares and sole voting power over 451,785 QVCA shares and 97,832 LVNTA shares.

(4)
Based on Form 13F, dated August 10, 2016, filed by Harris Associates L.P., which states that Harris Associates L.P. has sole investment discretion over 23,384,588 QVCA shares, sole voting power over 21,911,997 QVCA shares and shared voting power over 450,200 QVCA shares.

(5)
Based on Form 13F, dated August 15, 2016, and Amendment No. 3 to Schedule 13G, dated February 16, 2016, jointly filed by FPR Partners, LLC ( FPR Partners ), which state that FPR Partners has (i) sole investment discretion and sole voting power over 6,175,234 QVCA shares and (ii) sole investment discretion and sole voting power over 13,456,602 LVNTA shares.

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Security Ownership of Management

        The following table sets forth information with respect to the ownership by each of the directors and named executive officers of Liberty Interactive and by all of its directors and named executive officers as a group of shares of each series of Liberty Interactive common stock. The security ownership information with respect to Liberty Interactive common stock is given as of July 31, 2016 and, in the case of percentage ownership information, is based upon (1) 446,645,121 QVCA shares, (2) 29,358,638 QVCB shares, (3) 135,222,884 LVNTA shares and (4) 7,119,929 LVNTB shares, in each case, outstanding on that date. The percentage voting power is presented in the table below on an aggregate basis for all series of common stock.

        Shares of restricted stock that have been granted pursuant to Liberty Interactive's incentive plans are included in the outstanding share numbers, for purposes of the table below and throughout this report. Shares of common stock issuable upon exercise or conversion of options, warrants and convertible securities that were exercisable or convertible on or within 60 days after July 31, 2016 are deemed to be outstanding and to be beneficially owned by the person holding the options, warrants or convertible securities for the purpose of computing the percentage ownership of that person and for the aggregate percentage owned by the directors and named executive officers as a group, but are not treated as outstanding for the purpose of computing the percentage ownership of any other individual person. For purposes of the following presentation, beneficial ownership of shares of QVCB or LVNTB, though convertible on a one-for-one basis into shares of QVCA or LVNTA, respectively, are reported as beneficial ownership of QVCB or LVNTB only, and not as beneficial ownership of QVCA or LVNTA, respectively. So far as is known to us, the persons indicated below have sole voting and dispositive power with respect to the shares indicated as owned by them, except as otherwise stated in the notes to the table.

        The number of shares indicated as owned by the persons in the table includes interests in shares held by the Liberty Media 401(k) Savings Plan as of July 31, 2016. The shares held by the trustee of the Liberty Media 401(k) Savings Plan for the benefit of these persons are voted as directed by such persons.

Name
  Title of
Series
  Amount and
Nature of
Beneficial
Ownership
  Percent
of Series
(%)
  Voting
Power
(%)
 
 
   
  (In thousands)
   
   
 

John C. Malone

  QVCA     392 (1)(2)(3)   *     36.4  

Chairman of the Board and

  QVCB     27,656 (1)(4)(5)   94.2        

Director

  LVNTA     1,012 (1)(3)   *        

  LVNTB     6,702 (1)(4)(5)   94.1        

Gregory B. Maffei

 

QVCA

   
9,352

(2)(6)(7)(8)
 
2.1
   
1.5
 

President, Chief Executive Officer

  QVCB     112 (7)   *        

and Director

  LVNTA     2,461 (2)(7)(8)   1.8        

  LVNTB     140 (7)   2.0        

Michael A. George

 

QVCA

   
2,651

(7)
 
*
   
*
 

Director; President and Chief

  QVCB                

Executive Officer, QVC, Inc.

  LVNTA     689 (7)   *        

  LVNTB                

M. Ian G. Gilchrist

 

QVCA

   
9

(7)(9)
 
*
   
*
 

Director

  QVCB                

  LVNTA     2 (7)(9)   *        

  LVNTB                

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Name
  Title of
Series
  Amount and
Nature of
Beneficial
Ownership
  Percent
of Series
(%)
  Voting
Power
(%)
 
 
   
  (In thousands)
   
   
 

Evan D. Malone

 

QVCA

    50 (7)(9)   *     *  

Director

  QVCB                

  LVNTA     13 (7)(9)   *        

  LVNTB                

David E. Rapley

 

QVCA

   
27

(7)(9)
 
*
   
*
 

Director

  QVCB                

  LVNTA     10 (7)(9)   *        

  LVNTB                

M. LaVoy Robison

 

QVCA

   
34

(7)
 
*
   
*
 

Director

  QVCB                

  LVNTA     11 (7)   *        

  LVNTB                

Larry E. Romrell

 

QVCA

   
51

(7)(9)
 
*
   
*
 

Director

  QVCB     **     *        

  LVNTA     15 (7)(9)   *        

  LVNTB     **     *        

Mark C. Vadon

 

QVCA

   
8,559

(7)(9)(10)(11)
 
1.9
   
*
 

Director

  QVCB                

  LVNTA     820 (9)(11)   *        

  LVNTB                

Andrea L. Wong

 

QVCA

   
23

(9)
 
*
   
*
 

Director

  QVCB                

  LVNTA     6 (9)   *        

  LVNTB                

Richard N. Baer

 

QVCA

   
45

(9)
 
*
   
*
 

Chief Legal Officer

  QVCB                

  LVNTA     11 (9)   *        

  LVNTB                

Albert E. Rosenthaler

 

QVCA

   
367

(2)(7)
 
*
   
*
 

Chief Tax Officer

  QVCB                

  LVNTA     100 (2)(7)   *        

  LVNTB                

Christopher W. Shean

 

QVCA

   
393

(2)(7)
 
*
   
*
 

Chief Financial Officer

  QVCB                

  LVNTA     200 (2)(7)   *        

  LVNTB                

All directors and executive officers as a group (13 persons)

  QVCA     21,953 (1)(2)(3)(6)(7)(8)(9)(10)(11)   4.9     39.0  

  QVCB     27,769 (1)(4)(5)(7)   94.6        

  LVNTA     5,350 (1)(2)(3)(7)(8)(9)   4.0        

  LVNTB     6,842 (1)(4)(5)(7)   96.1        

*
Less than one percent

**
Less than 1,000 shares

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(1)
Includes 376,260 QVCA shares, 852,358 QVCB shares, 132,072 LVNTA shares and 206,413 LVNTB shares held by Mr. Malone's wife, Mrs. Leslie Malone, as to which shares Mr. Malone has disclaimed beneficial ownership.

(2)
Includes shares held in the Liberty Media 401(k) Savings Plan as follows:

 
  QVCA   LVNTA  

John C. Malone

    1,666      

Gregory B. Maffei

    7,081     1,475  

Albert E. Rosenthaler

    14,401     3,112  

Christopher W. Shean

    10,525     2,208  

Total

    33,673     6,795  
(3)
Includes (i) 13,938 QVCA shares and 683,578 LVNTA shares pledged to Fidelity Brokerage Services, LLC ( Fidelity ) in connection with a margin loan facility extended by Fidelity and (ii) 196,000 LVNTA shares pledged to Merrill Lynch, Pierce, Fenner & Smith Incorporated ( Merrill Lynch ) in connection with a loan facility extended by Merrill Lynch.

(4)
Includes 458,946 QVCB shares and 111,140 LVNTB shares held by two trusts which are managed by an independent trustee, of which the beneficiaries are Mr. Malone's adult children and in which Mr. Malone has no pecuniary interest. Mr. Malone retains the right to substitute assets held by the trusts and has disclaimed beneficial ownership of the shares held by the trusts.

(5)
In February 1998, in connection with the settlement of certain legal proceedings relative to the Estate of Bob Magness, the late founder and former Chairman of the Board of TCI, TCI entered into a call agreement with Mr. Malone and Mr. Malone's wife. In connection with the acquisition by AT&T of TCI, TCI assigned to Liberty Interactive's predecessor its rights under this call agreement. Liberty Interactive has since succeeded to these rights. As a result, Liberty Interactive has the right, under certain circumstances, to acquire QVCB and LVNTB shares owned by the Malones. The call agreement also prohibits the Malones from disposing of their QVCB and LVNTB shares, except for certain exempt transfers (such as transfers to related parties or public sales of up to an aggregate of 5% of their shares of QVCB or LVNTB after conversion to shares of QVCA or LVNTA) and except for transfers made in compliance with Liberty Interactive's call rights.

(6)
Includes 41,047 QVCA shares held by the Maffei Foundation, as to which shares Mr. Maffei has disclaimed beneficial ownership.

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(7)
Includes beneficial ownership of shares that may be acquired upon exercise of, or which relate to, stock options exercisable within 60 days after July 31, 2016.

 
  QVCA   QVCB   LVNTA   LVNTB  

Gregory B. Maffei

    5,470,228     112,436     1,335,914     112,139  

Michael A. George

    1,719,843         527,890      

M. Ian G. Gilchrist

    5,843         818      

Evan D. Malone

    10,958         2,745      

David E. Rapley

    5,132         1,284      

M. LaVoy Robison

    20,252         4,885      

Larry E. Romrell

    16,090         4,029      

Mark C. Vadon

    864,737              

Albert E. Rosenthaler

    200,615         50,203      

Christopher W. Shean

    200,615         120,129      

Total

    8,514,313     112,436     2,047,897     112,139  
(8)
Includes 1,948,442 QVCA shares and 480,574.89 LVNTA shares pledged to Morgan Stanley Private Bank, National Association in connection with a loan facility.

(9)
Includes restricted shares, none of which has vested, as follows:

 
  QVCA   QVCB   LVNTA   LVNTB  

Gregory B. Maffei

                16,320  

M. Ian G. Gilchrist

    3,290         384      

Evan D. Malone

    4,724         1,555      

David E. Rapley

    3,290         1,171      

Larry E. Romrell

    1,857         787      

Mark C. Vadon

    3,464         938      

Andrea L. Wong

    4,724         1,555      

Richard N. Baer

    45,189         10,976      

Albert E. Rosenthaler

            6,702      

Christopher W. Shean

            6,702      

Total

    66,538         30,770     16,320  
(10)
Upon the completion of Liberty Interactive's acquisition of zulily, Liberty Interactive assumed Mr. Vadon's outstanding options to acquire 1,315,390 shares of zulily's Class B common stock and converted such options into 864,737 options to purchase QVCA shares.

(11)
Includes 4,363,159 QVCA shares and 818,686 LVNTA shares held by Lake Tana LLC for which Mr. Vadon serves as manager and retains full investment and voting control.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

        In connection with the Split-Off, Splitco expects that its board of directors will adopt a formal written policy for the review, approval or ratification of any transactions or arrangements involving related parties. All of Splitco's directors, executive officers and employees will be subject to the policy and will be asked to promptly report any such related party transaction. Splitco expects that the formal written policy will provide that, if a director or executive officer has an actual or potential conflict of interest (which includes being a party to a proposed "related party transaction" (as defined by Item 404 of Regulation S-K)), the director or executive officer should promptly inform the person designated by its board to address such actual or potential conflicts. Splitco expects that the formal written policy will also provide that no related party transaction may be effected by Splitco without the approval of the audit committee of its board or another independent body of its board designated to address such actual or potential conflicts. Splitco also expects that directors will be asked to recuse themselves from any discussion or decision by the board or a board committee that involves or affects their personal, business or professional interests.

Relationships Among Splitco, the Malone Group, Diller and Expedia

        Prior to the completion of the Split-Off, the relationship among Diller, Liberty Interactive and Expedia is governed by two agreements which were entered into in connection with the spin-off of TripAdvisor, Inc. from Expedia in December 2011 and each of which will be assigned to Splitco in connection with the Split-Off: an Amended and Restated Governance Agreement, dated as of December 20, 2011, among Expedia, Liberty Interactive and Diller (the Governance Agreement ) and an Amended and Restated Stockholders Agreement, dated as of December 20, 2011, between Diller and Liberty Interactive (the Stockholders Agreement ).

        The following summaries of the Governance Agreement, the Governance Agreement Assignment, the Stockholders Agreement and the Assigned Stockholders Agreement do not purport to be complete and are qualified in their entirety by reference to the Governance Agreement, the form of the Governance Agreement Assignment, the form of the Stockholders Agreement and the Stockholders Agreement Assignment, respectively, which are filed as exhibits to the Registration Statement on Form S-4 of which this proxy statement/prospectus forms a part.

    The Governance Agreement, As Assigned

    Assignment

        In connection with the Split-Off, we will enter into an Assignment and Assumption of Governance Agreement (the Governance Agreement Assignment ) with Liberty Interactive, Diller and Expedia to effect the assignment by Liberty Interactive and assumption by us of Liberty Interactive's rights, benefits and obligations under the Governance Agreement. Effective immediately prior to the Split-Off, we will be substituted for Liberty Interactive for all purposes under the Governance Agreement. We refer to the Governance Agreement, as it will be amended by the Governance Agreement Assignment, as the Assigned Governance Agreement .

    Representation of Splitco on the Expedia Board of Directors

        Under the terms of the Assigned Governance Agreement:

    Splitco has the right to nominate up to such number of Expedia directors as is equal to 20% of the total number of Expedia directors (rounded up to the next whole number if the total number of directors is not an even multiple of 5) so long as Splitco beneficially owns at least 16,825,982 equity securities of Expedia (i.e., so long as Splitco's ownership percentage is at least equal to 15% of the total equity securities of Expedia);

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    Splitco has the right to nominate one director of Expedia so long as Splitco beneficially owns at least 11,217,321 equity securities of Expedia (i.e., so long as Splitco owns at least 5% of the total equity securities of Expedia); and

    Expedia will use its reasonable best efforts to cause one of Splitco's designees to be a member of a committee of the board of directors of Expedia and, to the extent the person designated by Splitco would qualify as a member of the compensation committee of the board of directors of Expedia under applicable tax and securities laws and regulations, Expedia will seek to have that person appointed to the compensation committee of Expedia.

        Liberty Interactive's nominees serving on Expedia's board of directors at the time of the Split-Off will continue to serve on Expedia's board of directors as Splitco's initial nominees from and after the completion of the Split-Off until their respective successors are duly elected or appointed and qualified, or until their earlier death, resignation, or removal. Pursuant to the terms of the Assigned Governance Agreement, Expedia will cause each director that Splitco nominates to be included in the slate of nominees recommended by the board of directors of Expedia to the stockholders of Expedia for election as directors at each annual meeting of the stockholders of Expedia and will use all reasonable efforts to cause the election of each such director including soliciting proxies in favor of the election of such persons. Splitco has the right to designate a replacement director to the board of directors of Expedia in order to fill any vacancy of a director previously designated by Splitco. Splitco would have the right to transfer this ability to nominate candidates to the board of directors of Expedia, subject to the same ownership requirements as Splitco's current nomination rights, to its transferee in a Block Sale (as defined below), provided that the transferee's nominees are independent directors and are approved by Expedia's Nominating Committee (or equivalent committee of the board of directors of Expedia). In addition, as described below under "—Stockholders Agreement, As Assigned—Distribution Transactions," the spun-off or split-off company in a Distribution Transaction (as defined in "—The Stockholders Agreement, As Assigned—Distribution Transactions") will succeed to Splitco's rights under the Assigned Governance Agreement, including Splitco's right to nominate directors.

    Contingent Matters

        The Assigned Governance Agreement lists certain actions (which are referred to as Contingent Matters ) that require the prior consent of Splitco and Diller before Expedia can take any such action. For so long as:

    in the case of Splitco, Splitco owns at least 14,956,428 equity securities and at least 5% of the total equity securities of Expedia (the Splitco Condition ); and

    in the case of Diller, he owns at least 2,500,000 Expedia Common Shares (including options to purchase Expedia Common Shares, whether or not then exercisable), continues to serve as chairman of Expedia and has not become disabled (the Diller Condition , and together with the Splitco Condition, the Consent Conditions ),

Expedia has agreed that, without the prior approval of Splitco and/or Diller (whichever (or both) satisfy certain ownership requirements), it will not engage in any transaction that would result in, or have the reasonable likelihood of resulting in, Splitco or Diller having to divest any part of their interests in Expedia or any other material assets, or that would render any such ownership illegal or would subject Diller or Splitco to any fines, penalties or material additional restrictions or limitations.

        In addition, for so long as the Consent Conditions apply, if Expedia (or any of its subsidiaries) incurs any indebtedness (other than a customary refinancing not to exceed the principal amount of the existing obligation being refinanced) after which Expedia's total debt ratio (as defined in the Assigned Governance Agreement) equals or exceeds 8:1, then for so long as the total debt ratio continues to

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equal or exceed 8:1, Expedia may not take any of the following actions without the prior approval of Splitco and/or Diller:

    acquire or dispose of any assets, issue any debt or equity securities, repurchase any debt or equity securities, or incur indebtedness, if the aggregate value of such transaction or transactions (alone or in combination) during any six month period equals 10% or more of Expedia's market capitalization;

    voluntarily commence any liquidation, dissolution or winding up of Expedia or any material subsidiary of Expedia;

    make any material amendments to the certificate of incorporation or bylaws of Expedia;

    engage in any line of business other than online and offline travel services and products and related businesses, or other businesses engaged in by Expedia as of the date of determination of the total debt ratio;

    adopt any stockholder rights plan that would adversely affect Splitco or Diller, as applicable; or

    grant additional consent rights to a stockholder of Expedia.

    Preemptive Rights

        In the event that Expedia issues or proposes to issue any shares of EXPE or Expedia class B common stock (with certain limited exceptions) including shares issued upon exercise, conversion or exchange of options, warrants and convertible securities, Splitco will have preemptive rights that entitle it to purchase a number of Expedia Common Shares so that Splitco will maintain the identical ownership interest in Expedia (subject to certain adjustments) that Splitco had immediately prior to such issuance or proposed issuance (but not in excess of (20.01%)). Any purchase by Splitco will be allocated between EXPE and Expedia class B common stock in the same proportion as the issuance or issuances giving rise to the preemptive right, except to the extent that Splitco opts to acquire shares of EXPE in lieu of shares of Expedia class B common stock.

    Registration Rights

        Splitco and Diller are entitled to customary, transferrable registration rights with respect to shares of EXPE owned by them. Splitco is entitled to four demand registration rights and Diller is entitled to three demand registration rights. Expedia will pay the costs associated with such registrations (other than underwriting discounts, fees and commissions). Expedia will not be required to register shares of EXPE if a stockholder could sell the shares in the quantities proposed to be sold at such time in one transaction under Rule 144 of the Securities Act or under another comparable exemption from registration.

        In connection with a transfer of Expedia securities to an unaffiliated third party, Splitco or Diller may assign any of its or his then-remaining demand registration rights to the third party transferee, if upon the transfer the transferee acquires beneficial ownership of more than 5% of the then outstanding equity securities of Expedia. If upon the transfer the transferee acquires beneficial ownership of equity securities of Expedia representing less than 5% of the then outstanding equity securities, but having at least $250 million in then-current market value, Splitco or Diller may assign one of its or his remaining demand registration rights, which the transferee may exercise only in connection with an offering of shares of EXPE with a market value of at least $100 million.

    Inapplicability of Anti-Takeover Provisions to Distribution Transaction or Block Sale

        Pursuant to the Assigned Governance Agreement, Expedia will not, in the case of a Distribution Transaction, implement any anti-takeover provision (including any shareholder rights plan) or, in the

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case of a Block Sale (as defined in "—The Stockholders Agreement, As Assigned—Block Sales"), Expedia will render inapplicable any such anti-takeover provision:

    the purpose or reasonably evident effect of which is to restrict or limit Splitco's ability to engage in a Distribution Transaction or a Block Sale; or

    the purpose or reasonably evident effect of which is to impose a material economic detriment on the company to which Expedia equity securities are transferred in connection with a qualifying Distribution Transaction (and whose shares are distributed to the public stockholders of Splitco) or that would impose a material economic detriment on the transferee in a Block Sale.

        In addition, the Expedia board of directors will approve the transfer of Expedia Common Shares in a Distribution Transaction or Block Sale (up to a 30% ownership level in the case of a Block Sale) for purposes of Section 203 of the Delaware General Corporation Law (the DGCL ), which imposes restrictions on certain transactions with "interested stockholders" under the DGCL. In the case of a Block Sale, however, such approval for purposes of Section 203 of the DGCL will be subject to the imposition of contractual restrictions on the Block Sale transferee analogous to the provisions of Section 203 of the DGCL (as described below).

    Restrictions on Block Sale Transferee

        For three years following a Block Sale by Splitco, the transferee will be subject to, among other things, the following restrictions with regard to Expedia, unless the restrictions terminate early in the following circumstances:

    an ownership cap set at 30% of the total equity securities of Expedia (which would apply to any "group" which the transferee or its affiliates is a member), subject to adjustment under certain circumstances;

    specified "standstill" restrictions limiting the transferee's ability, at such time as any directors nominated by the transferee are serving on the Expedia board of directors, to, among other things, engage in proxy contests, propose transactions involving the company, form a "group" (as defined in the Exchange Act) or influence the management of Expedia. These restrictions, other than the prohibition on proxy contests, would terminate if the transferee relinquishes all rights to nominate directors under the Assigned Governance Agreement; and

    contractual provisions analogous to the provisions of Section 203 of the DGCL that would prohibit the transferee from engaging in specified "business combination" transactions with Expedia without the prior approval of Expedia, acting through a committee of independent directors.

        The contractual provisions mirroring Section 203 of the DGCL would not apply to the transferee if upon the Block Sale it would not be an "interested stockholder" (as defined in Section 203 of the DGCL) of Expedia. However, if these contractual provisions become applicable at the time of the Block Sale, they will continue in effect for the term of the standstill restrictions even if the transferee would subsequently cease to be an "interested stockholder" (as defined in Section 203 of the DGCL) of Expedia. The standstill restrictions and 30% ownership cap, as well as the termination provisions, would apply to subsequent transferees of all or substantially all of the shares transferred in a prior Block Sale, but in any event would not extend past the third anniversary of the original Block Sale. The statutory provisions of Section 203 of the DGCL would apply with respect to unaffiliated subsequent transferees of the shares transferred in a prior Block Sale to the extent applicable.

        Prior to the expiration of the three year term, the standstill restrictions, including the cap on ownership described above, would terminate at the earlier of (i) Diller and his affiliates "actually owning" securities representing more than 50% of the total voting power of Expedia or (ii) the Block

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Sale transferee and its affiliates beneficially owning (as defined in the Assigned Governance Agreement) securities representing less than 12% of the total voting power of Expedia and Diller beneficially owning (as defined in the Assigned Governance Agreement) securities representing more than 40% of the total voting power of Expedia. For this purpose, securities "actually owned" by Diller and his affiliates will include all securities of Expedia held by Diller and his "affiliates," plus those shares of class B common stock for which Diller and his "affiliates" have a right to "swap" shares of Common Stock (as discussed below) but for which the swap right has not been exercised, minus the securities Diller and his "affiliates" currently hold but would need to exchange for the class B common stock in such swap right.

        The above restrictions may be waived at any time by Expedia, acting through a committee of independent directors.

    Other Block Sale Provisions

        If Diller does not acquire from Splitco all shares of Expedia class B common stock proposed to be transferred in a Block Sale or in a transfer of all of the shares of Expedia class B common stock and shares of EXPE owned by Splitco through the exercise of his "swap" right or right of first refusal under the Assigned Stockholders Agreement (resulting in such Expedia class B common stock beneficially owned by Splitco being converted into, or exchanged for, shares of EXPE before the Block Sale), for a period of two years after the Block Sale, Diller will have the right from time to time to acquire from Expedia an equal number of shares of Expedia class B common stock held in treasury, either by purchase at fair market value, through an exchange of an equivalent number of shares of EXPE, or a combination thereof. Diller may exercise this right either alone or in conjunction with one or more third parties so long as Diller retains voting control over the Expedia class B common stock acquired. Prior to the expiration of the two year period following a Block Sale, Diller's right to acquire Expedia class B common stock from Expedia will be suspended immediately upon the entry by Expedia into a merger agreement providing for a merger that constitutes a change of control of Expedia, and will terminate irrevocably upon the consummation of an exchange or tender offer for securities representing a majority of the total voting power of Expedia or a merger that constitutes a change of control of Expedia.

    Certain Waivers

        During the term of the Assigned Stockholders Agreement, without Expedia's consent (to be exercised by a committee of independent directors), Diller will not waive Splitco's obligation under the Assigned Stockholders Agreement to convert or exchange shares of Expedia class B common stock to shares of EXPE in specified circumstances. This consent right is not applicable if Diller no longer has any rights under the Assigned Stockholders Agreement. In certain circumstances this consent right will survive a mutual termination of the Assigned Stockholders Agreement for a period of up to one year.

    Termination

        Generally, the Assigned Governance Agreement will terminate:

    with respect to Splitco, at such time that Splitco beneficially owns equity securities representing less than 5% of the total equity securities of Expedia; and

    with respect to Diller, at such time as Diller ceases to be the chairman of Expedia or becomes disabled.

        With respect to the provisions governing Contingent Matters, such provisions will terminate as to Diller and Splitco as set forth under "—Contingent Matters."

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    The Stockholders Agreement, As Assigned

    Assignment

        In connection with the Split-Off, we will enter into an Assignment and Assumption of Stockholders Agreement (the Stockholders Agreement Assignment ) with Liberty Interactive and Diller to effect the assignment by Liberty Interactive and assumption by us of Liberty Interactive's rights, benefits and obligations under the Stockholders Agreement. Effective immediately prior to the Split-Off, and subject to the Split-Off, we will be substituted for Liberty Interactive for all purposes under the Stockholders Agreement. We refer to the Stockholders Agreement, as it will be amended by the Stockholders Agreement Assignment, as the Assigned Stockholders Agreement .

    General

        Diller holds the Diller Proxy with respect to all securities of Expedia beneficially owned by Splitco on all matters submitted to a stockholder vote or by which the stockholders may act by written consent, except for Contingent Matters with respect to which Splitco has not consented, so long as Diller continues to own at least 2,500,000 shares of EXPE (including options). The Diller Proxy will generally remain in effect until the earlier of (i) Diller no longer serving as chairman of Expedia and (ii) Diller becoming disabled. Under certain limited circumstances, including a breach by Diller of certain provisions of the Assigned Stockholders Agreement, the Diller Proxy may terminate sooner. In addition, the Assigned Stockholders Agreement provides for the suspension of the Diller Proxy if Diller cannot vote due to mental or physical disability.

        Splitco and Diller will vote against any Contingent Matter with respect to Expedia if either Diller or Splitco does not approve the Contingent Matter (so long as either such party continues to have veto rights with respect to the Contingent Matter under the Assigned Governance Agreement). Diller will also vote all securities of Expedia over which he has voting control in favor of the Splitco designees to the board of directors of Expedia, and, subject to Diller's election as a director of Expedia, Splitco will use its reasonable best efforts to cause Diller to be elected and continue to serve as chairman of the board of directors of Expedia.

        In connection with the Split-Off, Diller will agree to assign the Diller Proxy to Splitco, as further described below in "—Diller Assignment."

    Restrictions on Transfers

        Until the later of (i) the date Diller no longer serves as chairman of Expedia and (ii) the date Diller no longer holds the Diller Proxy (or upon Diller becoming disabled, if that occurs first), and subject to the other provisions of the Assigned Stockholders Agreement, neither Splitco nor Diller can transfer shares of EXPE or Expedia class B common stock, other than:

    transfers by Diller to pay taxes relating to the granting, vesting and/or exercise of stock options to purchase shares of EXPE;

    transfers to each party's respective affiliates;

    transfers of EXPE pursuant to certain hedging transactions effected by Splitco and meeting certain requirements;

    pledges relating to financings, subject to certain conditions, and any related transfer of shares of EXPE in connection with the enforcement of such pledge; and

    transfers of options or shares of EXPE in connection with "cashless exercises" of Diller's options to purchase shares of EXPE.

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        The restrictions on transfer are subject to a number of exceptions (which exceptions, in the case of a transfer of shares of Expedia class B common stock, are generally subject to the right of first refusal described below):

    either of Splitco or Diller may transfer shares of EXPE or Expedia class B common stock to an unaffiliated third party, subject, in the case of shares of Expedia class B common stock, to the tag-along rights described below and Expedia's consent in the event of a waiver of Splitco's obligation to convert or exchange shares of Expedia class B common stock to shares of EXPE in certain circumstances as described above under "—The Governance Agreement, As Assigned—Certain Waivers";

    either of Splitco or Diller may transfer shares of EXPE so long as the transfer complies with the requirements of Rule 144 or Rule 145 under the Securities Act; and

    Splitco may engage in a Distribution Transaction or Block Sale (as described below).

    Tag-Along Rights and Right of First Refusal

        Each of Diller and Splitco will be entitled to a right to "tag-along" (i.e. participate on a pro rata basis) on sales by the other of shares of Expedia class B common stock to any unaffiliated third party with limited exceptions. Diller will not have a tag-along right in connection with a Distribution Transaction by Splitco.

        Each of Diller and Splitco has a right of first refusal in the case of a proposed transfer by the other of shares of Expedia class B common stock to an unaffiliated third party, subject to specified exceptions, including transfers by Splitco pursuant to a Distribution Transaction.

    Transfers of Shares of Expedia Class B Common Stock

        If either Splitco or Diller proposes to transfer shares of Expedia class B common stock, the other will have the right to swap any shares of EXPE it or he owns for such shares of Expedia class B common stock proposed to be transferred (subject to the right of first refusal described above). To the extent that, after application of the swap right described in the prior sentence, there remain shares of Expedia class B common stock that the selling stockholder would otherwise transfer to an unaffiliated third party, such shares must first be converted or exchanged into shares of EXPE.

        As described above under "—The Governance Agreement, As Assigned—Certain Waivers," any waiver by Diller of Splitco's obligation in the Assigned Stockholders Agreement to convert shares of Expedia class B common stock to shares of EXPE before transfer to an unaffiliated third party will be subject to the consent of Expedia, exercisable through a committee of independent directors. This consent right is not applicable if Diller no longer has any rights under the Assigned Stockholders Agreement. The consent right will survive a mutual termination of the Assigned Stockholders Agreement for one year unless Diller's rights are terminated under the circumstances described below in "—Termination."

        This transfer restriction does not apply to, among other specified transfers, transfers among the parties and their affiliates and transfers by Splitco in a Distribution Transaction.

    Distribution Transactions

        Splitco will be permitted to spin-off or split-off to its public stockholders all, but not less than all, of its equity ownership in Expedia in a transaction meeting specified requirements (a Distribution Transaction ) without first complying with the transfer restrictions described above, including Diller's tag-along right, right of first refusal, swap right and conversion requirement, and without being subject to the application of certain anti-takeover provisions, as described above under "—The Governance

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Agreement, As Assigned—Inapplicability of Anti-takeover Provisions to Distribution Transaction or Block Sale." The spun-off or split-off company will be required to assume all of Splitco's obligations (including the Diller Proxy given to Diller) and will succeed to Splitco's rights under the Assigned Governance Agreement and Assigned Stockholders Agreement (including Splitco's right to nominate directors).

    Block Sales

        For so long as Splitco's equity ownership in Expedia does not exceed 30% of the total equity securities of Expedia and Diller continues to hold a proxy over Splitco's shares in Expedia, Splitco will be permitted to sell all, but not less than all, of such equity interest in Expedia to an unaffiliated third party (a Block Sale ), without being subject to the application of certain anti-takeover provisions, as described above under "—The Governance Agreement, As Assigned—Inapplicability of Anti-Takeover Provisions to Distribution Transaction or Block Sale," subject to prior compliance with Diller's tag-along right, right of first refusal and swap right, as well as the requirement that Splitco convert shares of Expedia class B common stock to shares of EXPE or exchange them for shares of EXPE with Expedia before the Block Sale.

        Prior to any Block Sale, Splitco will be required to exchange and/or convert any shares of Expedia class B common stock proposed to be transferred in such Block Sale, to the extent Diller does not acquire such shares pursuant to exercise of his right of first refusal or swap right, for newly-issued shares of EXPE (subject to application of relevant securities laws).

    Termination

        Diller's and Splitco's rights and obligations under the Assigned Stockholders Agreement generally terminate at such time as, in the case of Diller, he no longer beneficially owns at least 1,000,000 shares of EXPE. Splitco's tag-along rights and obligations terminate at such time as Splitco ceases to beneficially own at least 5% of the outstanding shares of EXPE.

        In addition, Diller's rights under the Assigned Stockholders Agreement will terminate upon the later of (i) the date Diller ceases to serve as chairman of Expedia or becomes disabled and (ii) the date Diller no longer holds a proxy to vote the Expedia Common Shares owned by Splitco.

    Proxy Arrangements

        In connection with the Split-Off, Splitco, Diller, the Malone Group, and Liberty Interactive have entered into the Transaction Agreement (as defined below) and will enter into additional agreements in order to facilitate the assignment of the Diller Proxy from Diller to Splitco until the Proxy Arrangement Termination Date, including the Malone Proxy, the Diller Assignment and the Stockholders Agreement Amendment, each as described below, and Splitco, Liberty Interactive and Expedia have entered into the Reimbursement Agreement, as described below.

    Transaction Agreement

        On March 24, 2016, Splitco, Liberty Interactive, Diller and the Malone Group entered into the Transaction Agreement, which agreement was amended and restated on September 22, 2016 (the Transaction Agreement , including any amendments thereto), which sets forth various arrangements with respect to the Split-Off and the proxy arrangements with Diller. Unless the Transaction Agreement has been terminated prior to the completion of the Split-Off, Liberty Interactive will, and will cause Splitco to take all requisite action to, amend and restate the certificate of incorporation and bylaws of Splitco, prior to the completion of the Split-Off, to be substantially in the form of the certificate of incorporation and bylaws attached as Exhibits 3.1 and 3.2 to the Registration Statement on Form S-4 of which this proxy statement/prospectus forms a part, and the applicable parties to the Transaction

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Agreement will enter into the Diller Assignment, the Malone Proxy, the Governance Agreement Assignment, the Stockholders Agreement Assignment, the Stockholders Agreement Amendment and certain other documents in connection with the Split-Off (collectively with the Transaction Agreement, the Proxy Arrangement Documents ). In the event the Split-Off is not completed by December 31, 2016, any Proxy Arrangement Documents executed prior to such date shall be void and of no further force and effect, other than certain waivers granted in connection with entry into the Transaction Agreement.

        The Transaction Agreement provides that, immediately following the completion of the Split-Off, the Splitco board of directors will consist of seven members, with five individuals designated by Liberty Interactive to serve as Common Stock Directors and two individuals designated by Diller to serve as Series B Directors. Three of the Common Stock Directors and one Series B Director will be "independent" as to Splitco pursuant to Nasdaq rules and regulations. During the term of the Transaction Agreement, the Splitco board of directors will cause each proposed Common Stock Director and each proposed Series B Director designated in accordance with Splitco's bylaws to be nominated for election and included in the slate of nominees recommended by the Splitco board (or a committee of the Splitco board) for election at the applicable meeting of stockholders.

        The Transaction Agreement also provides that Liberty Interactive and Splitco (the Indemnifying Parties ) will indemnify each of Diller and the Malone Group (the Indemnified Parties ) from any losses incurred in connection with, arising out of or resulting from, whether prior to or after the completion of the Split-Off, any actions relating to the matters contemplated by the Malone Proxy, Diller Assignment, Transaction Agreement, Stockholders Agreement Amendment and certain provisions of our restated charter and bylaws (collectively, the Subject Instruments ), or the exercise by any Indemnified Party of its rights under the Subject Instruments. Such indemnity does not cover any loss which (i)(x) results from such Indemnified Party's willful misconduct or gross negligence, including any willful breach of a representation or warranty in, or covenant in or pursuant to, a Subject Instrument to which it is a party or (y) results primarily from any breach, other than a willful breach, of any representation or warranty in, or covenant in or to be performed under, to a Subject Instrument to which it is a party, or (ii) is incurred in connection with, arising out of or resulting from actions based upon or relating to such Indemnified Party's actions in such Indemnified Party's capacity as a director or officer of Expedia, Splitco or Liberty Interactive, as applicable.

        The Transaction Agreement further provides that Liberty Interactive and Splitco will reimburse each of Diller and the Malone Group for their respective reasonable, documented costs, fees and expenses incurred in connection with the execution and delivery of the Proxy Arrangement Documents, regardless of whether the Split-Off is completed, subject to certain expense caps. All costs and expenses incurred in connection with the Proxy Arrangement Documents not covered by the indemnification and expense reimbursement provisions will be paid by the party incurring such cost or expense.

        Prior to the completion of the Split-Off, the Transaction Agreement will terminate upon the earliest to occur of (i) December 31, 2016, (ii) the delivery of a termination notice by Diller following Malone's death or disability, (iii) delivery of a notice from Liberty Interactive that it has determined to abandon the Split-Off or terminate the Transaction Agreement, and (iv) Diller's death, disability or his ceasing to be chairman of Expedia. Following the completion of the Split-Off, the Transaction Agreement and the proxy arrangements will terminate upon the first to occur of:

    i.
    the eighteen month anniversary of the completion of the Split-Off;

    ii.
    upon the termination of the Diller Proxy upon Diller's death or disability or his ceasing to be chairman of Expedia (or any successor by merger, consolidation or other business combination);

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    iii.
    following the first anniversary of the completion of the Split-Off, the close of business on the tenth day following written notice from Diller to terminate the Diller Assignment or from Malone to terminate the Malone Proxy, in each case, for any reason;

    iv.
    a finding that any of the Subject Instruments is invalid or unenforceable in any respect (other than a de minimis respect) or preliminarily or permanently enjoining the exercise of the parties' respective rights under any Subject Instrument, subject to certain exceptions;

    v.
    delivery of written notice from Diller to terminate the Diller Assignment or the Malone Group to terminate the Malone Proxy (or, in limited circumstances, without the requirement for any such notice) upon Splitco's entry into a definitive agreement with respect to certain business combinations with a third party (including Expedia or Liberty Interactive), in which case the termination will occur immediately prior to the consummation of such business combination;

    vi.
    commencement by an independent party of certain exchange or tender offers with respect to our common stock, unless within ten business days following the commencement of such exchange or tender offer, Splitco has taken action reasonably sufficient to deter such independent party from consummating the exchange or tender offer, in which case the termination will not be deemed to have occurred until immediately prior to the consummation of such exchange or tender offer;

    vii.
    delivery of a termination notice by a non-breaching party following certain breaches by Diller, on the one hand, Splitco, Liberty Interactive or the Malone Group, on the other hand, of their respective representations, warranties or covenants contained in any related agreement to which he or it is a party, which breach remains uncured for five business days following the delivery of notice of such breach;

    viii.
    either Splitco registering or becoming required to register under the 40 Act or the occurrence of changes in Splitco's assets or capital structure, or changes in applicable law or interpretations thereof, such that assuming the termination of the Diller Assignment, Splitco would not be required to register as an investment company pursuant to the 40 Act (without giving effect to any cure or grace period or delay in the requirement to become registered under the 40 Act);

    ix.
    delivery of a notice from Diller following Malone's death or determination of his disability or his ceasing to be chairman of the Splitco board of directors;

    x.
    the date on which no shares of Splitco's Series B Common Stock remain outstanding;

    xi.
    any purported transfer or assignment of the proxy granted pursuant to the Malone Proxy without the prior consent of Malone or any purported transfer or assignment of the Diller Proxy (other than pursuant to the Diller Assignment) without the consent of Diller;

    xii.
    if and to the extent a court of competent jurisdiction makes a final determination that the assignment of the Diller Proxy pursuant to the Diller Assignment renders the Diller Proxy invalid; and

    xiii.
    delivery of a notice from Diller within ten business days following Splitco's failure to deliver certain notices with respect to an Expedia Board Voting Determination (as defined below).

        The date of termination of the Transaction Agreement, for any of the enumerated reasons, is referred to as the Proxy Arrangement Termination Date .

        The foregoing summary of the Transaction Agreement does not purport to be complete and is qualified in its entirety by reference to the Transaction Agreement, which is filed as an exhibit to the Registration Statement on Form S-4 of which this proxy statement/prospectus forms a part.

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    Amendment No. 1 to Stockholders Agreement

        Prior to the completion of the Split-Off and following the execution of the Stockholders Agreement Assignment (but subject to the Transaction Agreement then being in effect), Diller and Splitco will enter into Amendment No. 1 to the Stockholders Agreement (the Stockholders Agreement Amendment ) which provides for certain agreements relating to the voting of Diller's and Splitco's Expedia Common Shares. From the completion of the Split-Off until the Proxy Arrangement Termination Date, certain provisions of the Assigned Stockholders Agreement will be amended to provide that each of Diller and Splitco will vote his or its Expedia Common Shares in favor of the Splitco Director nominees as selected by the board of directors of Splitco pursuant to Splitco's restated charter and bylaws. With respect to the election of directors to Expedia's board of directors, other than the Splitco directors, Splitco will vote its Expedia Common Shares as directed by the Splitco board of directors pursuant to the terms of Splitco's restated charter and bylaws (i.e., as determined by the Series B Directors). Subject to the election of Diller to Expedia's board of directors, Splitco will use its reasonable best efforts to cause Diller to be elected and continue to serve as chairman of the board of Expedia. The Stockholders Agreement Amendment further provides that with respect to any matter (other than the election of directors of Expedia) to be presented to Expedia's stockholders for approval, Splitco and Diller will meet and use their respective reasonable best efforts to agree on a common position for such matters prior to any Expedia stockholder meeting, and each of Diller and Splitco will vote their respective Expedia Common Shares if and as so agreed. If Splitco and Diller are unable to agree on such a common position, with respect to any matter other than a Specified Corporate Action (as defined below), Splitco and Diller may vote their respective Expedia Common Shares in its or his sole discretion. In the event the matter relates to a Specified Corporate Action, unless Splitco and Diller agree as to how their respective Expedia Common Shares will be voted, then, subject to limited exceptions (including with regard to business combinations as described below), Splitco and Diller will vote all of their respective Expedia Common Shares against the approval of such Specified Corporate Action. Specified Corporate Actions include (i) any recapitalization, reclassification or any other change in the existing capital structure of Expedia, or any voluntary liquidation, dissolution or winding up of Expedia, (ii) any business combination involving Expedia or its subsidiaries (other than solely among subsidiaries of Expedia), or any sale of all or substantially all of Expedia's assets, (iii) the creation of any new class or series of Expedia's capital stock or the issuance (other than pursuant to options, warrants or other rights outstanding at the completion of the Split-Off) of Expedia Common Shares, (iv) any amendment to Expedia's organizational documents and (v) any removal of a director from the Expedia board of directors, subject to certain exceptions. If Splitco and Diller do not agree on how to vote their Expedia Common Shares on a proposed business combination in which a third party (other than Splitco, a Diller affiliate or another person in which Diller has a financial interest) would acquire Expedia, any of its subsidiaries or substantially all of its assets, then, if Diller supports the transaction, Splitco will vote in favor of its approval unless at least 70% of the Splitco board of directors votes to withhold such approval. Following the Proxy Arrangement Termination Date, the foregoing provisions will cease to be effective, and the corresponding provisions of the Assigned Stockholders Agreement will revert to the form in effect immediately prior to the effectiveness of the Stockholders Agreement Amendment.

        The Stockholders Agreement Amendment also contains certain waivers under the Assigned Stockholders Agreement in order to permit the proxy arrangements, including that, in the event Diller ceases to be Chairman following the completion of the Split-Off but prior to the Proxy Arrangement Termination Date, in certain circumstances, the Diller Proxy will not be terminated upon the Proxy Arrangement Termination Date but will instead terminate upon the first to occur of (x) following the Proxy Arrangement Termination Date, Diller abandoning efforts to become Chairman, (y) the 75 th day following the Proxy Arrangement Termination Date, with such period to be tolled in certain circumstances and (z) any court rendering a final judgment in any proceeding, the effect of which is to enjoin or prevent Diller from exercising efforts to become Chairman or otherwise becoming Chairman.

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        The foregoing summary of the Stockholders Agreement Amendment does not purport to be complete and is qualified in its entirety by reference to the form of the Stockholders Agreement Amendment, which is filed as an exhibit to the Registration Statement on Form S-4 of which this Proxy statement/prospectus forms a part.

    Diller Assignment

        Prior to the completion of the Split-Off (and subject to the Transaction Agreement then being in effect), Diller and Splitco will enter into an Assignment Agreement (the Diller Assignment ), which will become effective immediately following the completion of the Split-Off and pursuant to which Diller will irrevocably assign the Diller Proxy to Splitco until the Proxy Arrangement Termination Date. For so long as the Diller Assignment is in effect, Diller will not have the right to vote the Expedia Common Shares beneficially owned by Splitco. The Diller Assignment will terminate upon the Proxy Arrangement Termination Date, at which time the right to vote the Expedia Common Shares beneficially owned by Splitco will revert to Diller pursuant to the Diller Proxy until the Diller Proxy is terminated upon his death or disability or his ceasing to be chairman of Expedia (or any successor by merger, consolidation or other business combination).

        The foregoing summary of the Diller Assignment does not purport to be complete and is qualified in its entirety by reference to the form of the Diller Assignment, which is filed as an exhibit to the Registration Statement on Form S-4 of which this proxy statement/prospectus forms a part.

    Malone Proxy

        Prior to the completion of the Split-Off (and subject to the Transaction Agreement then being in effect), Diller and the Malone Group will enter into a Proxy and Voting Agreement (the Malone Proxy ), which will become effective immediately following the completion of the Split-Off. Pursuant to the Malone Proxy, the Malone Group will, subject to certain exceptions, grant Diller an irrevocable proxy until the Proxy Arrangement Termination Date to vote all shares of Splitco Series A common stock and Series B common stock beneficially owned upon the completion of the Split-Off or thereafter by the Malone Group or which any member otherwise has the power to vote (the Covered Shares ). The Malone Proxy provides that Diller will have no right to vote the Covered Shares on any matter acted on by Splitco stockholders to approve (x) any agreement or transaction (i) between Splitco or any of its affiliates, on the one hand, and Diller, IAC or any of their respective affiliates, on the other hand, or (ii) between Splitco or any of its affiliates, on the one hand, and Expedia or its subsidiaries, on the other hand or (y) the removal of any Series B Director in accordance with Splitco's certificate of incorporation. The Malone Proxy will be suspended during any period of Diller's disability.

        The Malone Proxy further provides that, on (i) any recapitalization, reclassification or other change in Splitco's capital structure or the voluntary commencement of any liquidation, dissolution or winding up of Splitco, (ii) any merger or other business combination involving Splitco or its subsidiaries or a sale of all or substantially all of Splitco's assets, (iii) the creation of any new class or series of Splitco's capital stock or the issuance of Splitco's capital stock, subject to limited exceptions, or (iv) any amendment to Splitco's organizational documents, Malone (on behalf of the Malone Group) and Diller will seek to agree on how the Covered Shares will be voted on such matter. If they reach an agreement, Diller will vote the Covered Shares as agreed, but in the event they do not agree on how the Covered Shares are to be voted on such matter, Diller will vote all Covered Shares against such proposal. With respect to the election of or the filling of any vacancy with respect to Series B Directors, Diller will vote all Covered Shares that are shares of Series B common stock in his sole discretion. With respect to the election of Common Stock Directors, Diller will vote all Covered Shares in favor of the slate of directors recommended by the Splitco board of directors (or a committee of the Splitco board). In the event there is any proposal requiring a separate class vote of the Series B common stock (other than the election of, removal of or filling of a vacancy with respect to Series B

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Directors, which are addressed above), Diller will vote all shares of Series B common stock that are Covered Shares as instructed by Malone (on behalf of the Malone Group), subject to certain exceptions. In the event there is a proposal to remove a Common Stock Director from the board of directors, Diller will vote all Covered Shares as instructed by Malone (on behalf of the Malone Group).

        Subject to certain exceptions, until the Proxy Arrangement Termination Date, the Malone Group will not transfer any Covered Shares except to a transferee who takes such shares subject to the Malone Proxy and who is acceptable to Diller in his sole discretion. Diller will vote all Covered Shares subject to the Malone Proxy and attend all meetings of Splitco stockholders in person or by proxy for purposes of reaching a quorum.

        The Malone Proxy will terminate upon the Proxy Arrangement Termination Date, at which point the right to vote the Covered Shares will revert back to the Malone Group.

        The foregoing summary of the Malone Proxy does not purport to be complete and is qualified in its entirety by reference to the form of the Malone Proxy, which is filed as an exhibit to the Registration Statement on Form S-4 of which this proxy statement/prospectus forms a part.

    Reimbursement Agreement

        On March 24, 2016, Splitco and Liberty Interactive entered into the Reimbursement Agreement with Expedia, which agreement was amended and restated on September 22, 2016, pursuant to which Liberty Interactive and Splitco agreed to reimburse Expedia for certain costs and expenses resulting from the Split-Off and the proxy arrangements that may be incurred by Expedia with respect to the Expedia Credit Agreement, the 2018 Notes and the 2020 Notes. The reimbursement obligations of Liberty Interactive and Splitco are capped at $45 million, subject to certain limited exceptions, and conditioned on Expedia acting in all material respects consistent with its existing financial policies, which were previously provided to Liberty Interactive. Prior to the completion of the Split-Off, the Reimbursement Agreement will terminate upon the termination of the Transaction Agreement. Following the completion of the Split-Off, the Reimbursement Agreement will terminate upon the earliest to occur of (i) Diller's death, disability or in the event Diller ceases to be chairman of Expedia, (ii) failure of certain reimbursement triggers to occur prior to the sixtieth day following the completion of the Split-Off (as such period may be extended in certain limited circumstances), and (iii) the date as of which Splitco and Liberty Interactive have paid all amounts due to Expedia pursuant to the terms of the Reimbursement Agreement. The Reimbursement Agreement constitutes Expedia's sole and exclusive remedy with respect to any claim arising out of any potential change of control under any contract, debt instrument, agreement or other similar instrument resulting, directly or indirectly, from the Split-Off or the proxy arrangements.

Voting of Covered Shares of Splitco common stock pursuant to the Proxy Arrangements

        Pursuant to the Malone Proxy, following the completion of the Split-Off, the Malone Group will grant Diller an irrevocable proxy over the Covered Shares until the Proxy Arrangement Termination Date. The below table sets forth a summary of the voting arrangements with respect to the Covered Shares.

Matter Presented to Splitco Stockholders   Who votes the
Covered Shares?
  Voting Agreements with respect to the
Covered Shares
Election of or filling of vacancies with respect to Splitco Series B Directors   Diller   None. Diller may vote the shares of Series B common stock that are Covered Shares in his sole discretion.

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Matter Presented to Splitco Stockholders   Who votes the
Covered Shares?
  Voting Agreements with respect to the
Covered Shares
Election of Splitco Common Stock Directors   Diller   Diller will vote all Covered Shares in favor of the slate of directors recommended by the Splitco board of directors (or a committee thereof).

Removal of Splitco Common Stock Directors

 

Diller

 

Diller will vote all Covered Shares as instructed by Malone (on behalf of the Malone Group).

Removal of Splitco Series B Directors

 

Malone (or, in the event of Malone's temporary disability, Mrs. Malone)

 

None. Malone (or, in the event of Malone's temporary disability, Mrs. Malone) may vote the Covered Shares in his sole discretion.

Any agreement or transaction (i) between Splitco or its affiliates, on the one hand, and Diller, IAC or any of their respective affiliates, on the other hand or (ii) between Splitco or any of its affiliates, on the one hand, and Expedia or its subsidiaries, on the other hand

 

The Malone Group

 

None. Malone (on behalf of the Malone Group) may vote the Covered Shares in his sole discretion.

(i) Any recapitalization, reclassification or other change in Splitco's capital structure or the voluntary commencement of any liquidation, dissolution or winding up of Splitco, (ii) any merger or business combination involving Splitco or its subsidiaries or a sale of all or substantially all of Splitco's assets, (iii) the creation of any new class or series of Splitco's capital stock or the issuance of Splitco's capital stock, subject to limited exceptions, or (iv) any amendment to Splitco's organizational documents

 

Diller

 

Malone (on behalf of the Malone Group) and Diller will seek to agree on how the Covered Shares will be voted on such matter. If they agree, Diller will vote the Covered Shares as agreed, but if they do not reach an agreement, Diller will vote the Covered Shares against such matter.

Any matter requiring a separate class vote of Splitco's shares of Series B common stock which would (i) result in a decrease in the voting power of the Series B common stock as compared to the Series A common stock or (ii) change any agreement or provision relating to the Series B Directors

 

Diller

 

Diller will vote all Covered Shares against such matter.

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Matter Presented to Splitco Stockholders   Who votes the
Covered Shares?
  Voting Agreements with respect to the
Covered Shares
Any matter requiring a separate class vote of Splitco's shares of Series B common stock (other than as set forth above)   Diller   Diller will vote all Covered Shares as instructed by Malone (on behalf of the Malone Group).

All other matters

 

Diller

 

None. Diller may vote the Covered Shares in his sole discretion.

Voting of Splitco's Expedia Common Shares pursuant to the Proxy Arrangements

        Following the completion of the Split-Off, Splitco will be entitled to vote the Expedia Common Shares subject to the Diller Proxy (representing 52.4% of the outstanding voting power of the Expedia Common Shares) as a result of the assignment of the Diller Proxy to Splitco until the Proxy Arrangement Termination Date pursuant to the Diller Assignment. Following the assignment of the Diller Proxy to Splitco, based on publicly available information, other than the Expedia Common Shares that are subject to the terms of the Diller Proxy and the Diller Assignment of which Diller and Splitco will continue to share beneficial ownership, Diller is expected to beneficially own approximately 5,777,586 shares of EXPE (based upon Expedia's Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year ended December 31, 2015, filed with the SEC on April 29, 2016), representing approximately 2.2% of the outstanding voting power of the Expedia Common Shares. Following the completion of the Split-Off, the voting of the Expedia Common Shares beneficially owned by Diller which Diller will be entitled to vote will be subject to certain terms contained in the Stockholders Agreement Amendment and the voting of the Expedia Common Shares beneficially owned by Splitco which Splitco will be entitled to vote, and as to which Splitco and Diller will continue to share beneficial ownership, will be subject to certain terms contained in Splitco's restated charter, its bylaws, the Stockholders Agreement Amendment, the Diller Assignment and the Transaction Agreement. The below table sets forth a summary of the voting arrangements following the completion of the Split-Off until the Proxy Arrangement Termination Date with respect to the Expedia Common Shares of which Diller and Splitco will share beneficial ownership. The Expedia Common Shares subject to the terms of the Diller Proxy and the Diller Assignment are referred to in the chart as Splitco's Expedia Common Shares and the remaining Expedia Common Shares of which Diller and Splitco share beneficial ownership are referred to in the chart as Diller's Expedia Common Shares.

Matter Presented to Expedia Stockholders   Who votes
the Expedia
Common Shares
subject to
the Diller Proxy?
  Voting Agreements with respect to the Expedia
Common Shares
Election of directors to the Expedia board   Splitco   Pursuant to Splitco's charter, Splitco will vote its Expedia Common Shares in accordance with an Expedia Board Voting Determination and a Splitco Director Determination.

 

 

 

 

Pursuant to the Stockholders Agreement Amendment, Diller and Splitco will vote their respective Expedia Common Shares in favor of the Splitco Director nominees selected pursuant to a Splitco Director Determination. Subject to the election of Diller to the Expedia board, Splitco will use its reasonable best efforts to cause Diller to be elected and continue to serve as chairman of Expedia.

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Matter Presented to Expedia Stockholders   Who votes
the Expedia
Common Shares
subject to
the Diller Proxy?
  Voting Agreements with respect to the Expedia
Common Shares
Specified Corporate Actions, meaning (i) any recapitalization, reclassification or any other change in the existing capital structure of Expedia, or any voluntary liquidation, dissolution or winding up of Expedia, (ii) any business combination involving Expedia or its subsidiaries (other than solely among subsidiaries of Expedia), or any sale of all or substantially all of Expedia's assets, (iii) the creation of any new class or series of Expedia's capital stock or the issuance (other than pursuant to options, warrants or other rights outstanding at the completion of the Split-Off) of Expedia Common Shares, (iv) any amendment to Expedia's organizational documents and (v) any removal of a director from the Expedia board of directors, subject to certain exceptions   Splitco   Splitco and Diller will meet and use their respective reasonable best efforts to agree on how their respective Expedia Common Shares will be voted on such matter. If they agree, Diller and Splitco will vote their respective Expedia Common Shares as agreed, but if they do not reach an agreement, each will vote their respective Expedia Common Shares against such matter.

If Diller and Splitco do not agree how to vote their shares on a proposed business combination in which a third party (other than Splitco, a Diller affiliate or another person in which Diller has a financial interest) would acquire Expedia, any of its subsidiaries or substantially all of its assets, then, if Diller supports the transaction, Splitco will also support the transaction unless at least 70% of the Splitco board of directors votes to withhold such approval.

Any matter relating to a Contingent Matter pursuant to the Assigned Governance Agreement

 

Splitco

 

Pursuant to the Assigned Stockholders Agreement, Splitco and Diller will vote against such Contingent Matter unless Diller and Splitco have consented to such Contingent Matter pursuant to the terms of the Assigned Governance Agreement

All other matters

 

Splitco

 

Splitco and Diller will meet and use their respective reasonable best efforts to agree on how their respective Expedia Common Shares will be voted on such matter. If they agree, Diller and Splitco will vote their respective Expedia Common Shares as agreed, but if they do not reach an agreement, each will vote their respective Expedia Common Shares in their sole discretion.

Relationships Between Splitco and Liberty Interactive and/or Liberty Media

        Upon completion of the Split-Off, Liberty Interactive and Splitco will operate independently, and neither will have any ownership interest in the other. In order to govern certain of the ongoing relationships between Liberty Interactive and/or Liberty Media (or their respective subsidiaries), on the one hand, and Splitco, on the other hand, after the Split-Off and to provide mechanisms for an orderly transition, Liberty Interactive and/or Liberty Media (or their respective subsidiaries), on the one hand, and Splitco, on the other hand, are entering into certain agreements, the terms of which are summarized below.

        In addition to the agreements described below, Liberty Interactive and/or Liberty Media may enter into, from time to time, agreements and arrangements with Splitco and certain of its related entities, in connection with, and in the ordinary course of, its business.

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    Reorganization Agreement

        Prior to the completion of the Split-Off, Splitco will enter into a reorganization agreement with Liberty Interactive (the reorganization agreement ) to provide for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Split-Off, certain conditions to the Split-Off and provisions governing the relationship between Splitco and Liberty Interactive with respect to and resulting from the Split-Off.

        The reorganization agreement will provide that, prior to the redemption date, Liberty Interactive will transfer to Splitco, or cause its other subsidiaries to transfer to Splitco, directly or indirectly, the Splitco Assets and Liabilities (other than the Margin Loan, which a subsidiary of Splitco will incur directly). The reorganization agreement will also provide for mutual indemnification obligations, which are designed to make Splitco financially responsible for substantially all of the liabilities that may exist relating to the businesses included in Splitco at the time of the Split-Off together with certain other specified liabilities, as well as for all liabilities incurred by Splitco after the Split-Off, and to make Liberty Interactive financially responsible for all potential liabilities of Splitco which are not related to Splitco's businesses, including, for example, any liabilities arising as a result of Splitco having been a subsidiary of Liberty Interactive, together with certain other specified liabilities. These indemnification obligations exclude any matters relating to taxes. For a description of the allocation of tax-related obligations, please see "—Tax Sharing Agreement" below.

        In addition, the reorganization agreement will provide for each of Splitco and Liberty Interactive to preserve the confidentiality of all confidential or proprietary information of the other party for five years following the Split-Off, subject to customary exceptions, including disclosures required by law, court order or government regulation.

        The reorganization agreement may be terminated and the Split-Off may be abandoned, at any time prior to the redemption effective time, by and in the sole discretion of the Liberty Interactive board of directors. In such event, Liberty Interactive will have no liability to any person under the reorganization agreement or any obligation to effect the Split-Off.

        This summary is qualified by reference to the full text of the reorganization agreement, a form of which is filed as an exhibit to the Registration Statement on Form S-4 of which this proxy statement/prospectus forms a part.

    Tax Sharing Agreement

        Prior to the completion of the Split-Off, Splitco will enter into a tax sharing agreement with Liberty Interactive that governs Liberty Interactive's and Splitco's respective rights, responsibilities and obligations with respect to taxes and tax benefits, the filing of tax returns, the control of audits and other tax matters.

        References in this summary (i) to the terms "tax" or "taxes" mean U.S. federal, state, local and foreign taxes as well as any interest, penalties, additions to tax or additional amounts in respect of such taxes, (ii) to the term "Tax-related losses" refer to losses arising from the failure of the Split-Off and related restructuring transactions to be tax-free, and (iii) to the term "compensatory equity interests" refer to options, stock appreciation rights, restricted stock, stock units or other rights with respect to Liberty Interactive stock or Splitco stock that are granted on or prior to the Split-Off date by Liberty Interactive, Splitco or any of their respective subsidiaries in connection with employee, independent contractor or director compensation or other employee benefits. In addition, references to the "Splitco group" mean, with respect to any tax year (or portion thereof) ending at or before the effective time of the Split-Off, Splitco and its subsidiaries at the effective time of the Split-Off, and with respect to any tax year (or portion thereof) beginning after the effective time of the Split-Off, Splitco and its subsidiaries during such tax year (or portion thereof); and references to the "Liberty Interactive group"

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mean, with respect to any tax year (or portion thereof), Liberty Interactive and its subsidiaries, other than any person that is a member of the Splitco group, during such tax year (or portion thereof).

        Splitco and certain of Liberty Interactive's eligible subsidiaries that will be contributed to Splitco currently join with Liberty Interactive in the filing of a consolidated return for U.S. federal income tax purposes and also join with Liberty Interactive in the filing of certain consolidated, combined, and unitary returns for state, local, and foreign tax purposes. However, generally for tax periods beginning after the Split-Off, Splitco and the members of the Splitco group will not join with Liberty Interactive in the filing of federal, state, local or foreign consolidated, combined or unitary tax returns.

        Under the tax sharing agreement, except as described below, (i) Liberty Interactive will be allocated all taxes attributable to the members of the Liberty Interactive group, and all taxes attributable to the members of the Splitco group for a pre-Split-Off period, that are reported on any consolidated, combined or unitary tax return that includes one or more members of the Liberty Interactive group and one or more members of the Splitco group, and (ii) each of Liberty Interactive and Splitco will be allocated all taxes attributable to the members of its respective group that are reported on any tax return (including any consolidated, combined or unitary tax return) that includes only the members of its respective group. Special rules apply, however, as follows:

    Liberty Interactive will be allocated any taxes and Tax-related losses that result from the Split-Off and related restructuring transactions, except that Splitco will be allocated any such taxes or Tax-related losses that (i) result primarily from, individually or in the aggregate, a breach by Splitco of any of its covenants relating to the Split-Off and related restructuring transactions as described below, or (ii) result from the application of Section 355(e) of the Code to the Split-Off as a result of the treatment of the Split-Off as part of a plan (or series of related transactions) pursuant to which one or more persons acquire a 50-percent or greater interest in the stock of Splitco; and

    Liberty Interactive and Splitco will each be allocated 50 percent of any transfer taxes arising from the Split-Off and related restructuring transactions.

        Liberty Interactive will be responsible for preparing and filing all tax returns which include one or more members of the Liberty Interactive group and one or more members of the Splitco group. In addition to the foregoing, each of Liberty Interactive and Splitco will be responsible for preparing and filing any tax returns that include only members of its respective group. On any tax return that Splitco is responsible for filing, Splitco and the members of the Splitco group will be required to allocate tax items between any tax returns for which Splitco is responsible and any related tax return for which Liberty Interactive is responsible that are filed with respect to the same tax year in a manner that is consistent with the reporting of such tax items on the tax return prepared by Liberty Interactive. All tax returns will be required to be filed by the parties in a manner consistent with the tax opinion obtained in connection with the Split-Off. Further, under the tax sharing agreement, amended tax returns with respect to the Splitco group may only be filed by the party responsible for filing the original tax return and the consent of Liberty Interactive will be required with respect to the filing of any amended tax return by Splitco that is likely to increase the taxes or indemnity obligations of Liberty Interactive by more than a de minimis amount (unless Splitco otherwise agrees to pay such incremental taxes or obligations).

        To the extent permitted by applicable law, income tax deductions with respect to the issuance, exercise, vesting or settlement after the date of the Split-Off of any compensatory equity interests will be required to be claimed: (i) in the case of any active officer or employee, solely by the group that employs such person at the time of such issuance, exercise, vesting or settlement (as applicable), (ii) in the case of any former officer or employee, solely by the group that was the last to employ such person, and (iii) in the case of a director or former director (who is not an officer or employee or former officer or employee), solely by the Liberty Interactive group if such person was, at any time

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before or after the Split-Off, a director of any member of the Liberty Interactive group, and in any other case, solely by the Splitco group. For purposes of the foregoing, an officer or employee of Liberty Interactive or a member of its group during any tax year (or portion thereof) shall exclusively be considered to be employed by Liberty Interactive or the applicable member of its group during such tax year (or portion thereof). The party whose group is allocated the foregoing income tax deductions (the employing party ) will be required to satisfy all applicable tax reporting obligations and satisfy all liabilities for taxes imposed in connection with such compensatory equity interests; however, if the corporation that is the issuer or the obligor under the applicable compensatory equity interest is a member of a different group than the employing party, such issuing corporation will be required to remit to the employing party the amount required to be withheld in respect of any withholding taxes upon settlement of such compensatory equity interest.

        Generally, each of Liberty Interactive and Splitco will be entitled to any refunds, credits, or offsets relating to taxes allocated to and paid by its respective group under the tax sharing agreement. If Splitco requests in writing that Liberty Interactive obtain a refund, credit or offset of taxes with respect to the carryback of any tax attribute of Splitco or the members of its group to a pre-Split-Off tax period, Liberty Interactive will be required to take reasonable measures to obtain a refund, credit or offset of taxes with respect to such carryback; however, Splitco will only be entitled to such refund, credit or offset of taxes attributable (on a last dollar basis) to such carryback, and such amount will be net of any out-of-pocket costs, expenses, or increase in taxes incurred by Liberty Interactive with respect to the receipt or accrual thereof.

        Each of Liberty Interactive and Splitco will generally have the authority to respond to and control all tax proceedings, including tax audits, involving any taxes reported on tax returns for which it is responsible for preparing and filing, and the other company will have the right to participate, at its own cost and expense, in such tax proceedings to the extent such proceedings could result in a tax liability for which such other company may be liable under the tax sharing agreement. Notwithstanding the foregoing, Liberty Interactive and Splitco will have the authority to jointly control all proceedings, including tax proceedings, involving any taxes or Tax-related losses arising from the Split-Off or related restructuring transactions. The tax sharing agreement will further provide for the exchange of information for tax matters (and confidentiality protections related to such exchanged information), the retention of records that may affect the tax liabilities of the parties to the agreement, and cooperation between Liberty Interactive and Splitco with respect to tax matters.

        To the extent permitted by applicable tax law, Splitco and Liberty Interactive will treat any payments made under the tax sharing agreement as a capital contribution or distribution (as applicable) immediately prior to the Split-Off. However, if any indemnity payment causes, directly or indirectly, an increase in the taxable income of the recipient (or its group), the payor's payment obligation must be grossed up to take into account the taxes owed by the recipient (or its group). Payments that are not made within the time period prescribed by the tax sharing agreement will bear interest until they are made.

        Finally, each of Liberty Interactive and Splitco will be restricted by certain covenants related to the Split-Off and related restructuring transactions. These restrictive covenants will require that neither Liberty Interactive, Splitco nor any member of their respective groups take, or fail to take, any action following the Split-Off if such action, or failure to act:

    would be inconsistent with or prohibit certain restructuring transactions related to the Split-Off from qualifying for tax-free treatment for U.S. federal income tax purposes to Liberty Interactive and its subsidiaries;

    would be inconsistent with or prohibit the Split-Off from qualifying as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Code to Liberty

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      Interactive, its subsidiaries and holders of Liberty Ventures common stock (except with respect to the receipt of cash in lieu of fractional shares); or

    would be inconsistent with, or otherwise cause any person to be in breach of, any representation, covenant, or material statement made in connection with the tax opinion delivered to Liberty Interactive relating to the qualification of the Split-Off as a transaction described under Sections 355 and 368(a)(1)(D) of the Code.

Further, each party will be restricted from taking any position for tax purposes that is inconsistent with the tax opinion obtained in connection with the Split-Off.

        The parties must indemnify each other for taxes and losses allocated to them under the tax sharing agreement and for taxes and losses arising from a breach by them of their respective covenants and obligations under the tax sharing agreement.

        Notwithstanding the tax sharing agreement, under U.S. Treasury Regulations, each member of a consolidated group is severally liable for the U.S. federal income tax liability of each other member of the consolidated group. Accordingly, with respect to periods prior to the Split-Off in which Splitco (or its subsidiaries) have been included in Liberty Interactive's consolidated group or another company's consolidated group, Splitco (or its subsidiaries) could be liable to the U.S. government for any U.S. federal income tax liability incurred, but not discharged, by any other member of such consolidated group. However, if any such liability were imposed, Splitco would generally be entitled to be indemnified by Liberty Interactive for tax liabilities allocated to Liberty Interactive under the tax sharing agreement.

        This summary is qualified by reference to the full text of the tax sharing agreement, a form of which is filed as an exhibit to the Registration Statement on Form S-4 of which this proxy statement/prospectus forms a part.

    Services Agreement

        Liberty Interactive is currently a party to a services agreement with Liberty Media under which Liberty Media provides Liberty Interactive with certain specified services. Similarly, in connection with the Split-Off, Splitco will enter into a services agreement with Liberty Media (the services agreement ), pursuant to which, following the Split-Off, Liberty Media will provide Splitco with specified services, including:

    insurance administration and risk management services;

    other services typically performed by Liberty Media's legal, investor relations, tax, accounting and internal audit departments; and

    such other services as Liberty Media may obtain from its officers, employees and consultants in the management of its own operations that Splitco may from time to time request or require.

In addition, Liberty Media will provide to Splitco certain technical and information technology services, including management information systems, computer, data storage, network and telecommunications services.

        Splitco will pay Liberty Media an agreed-upon services fee under the services agreement. Splitco will also reimburse Liberty Media for direct out-of-pocket costs incurred by Liberty Media for third party services provided to Splitco. Liberty Media and Splitco will evaluate all charges for reasonableness semi-annually and make adjustments to these charges as the parties mutually agree upon. The fees payable to Liberty Media for the first year of the services agreement are not expected to exceed approximately $3 million.

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        The services agreement will continue in effect until the close of business on the third anniversary of the Split-Off, unless earlier terminated (1) by Splitco at any time on at least 30 days' prior written notice, (2) by Liberty Media upon written notice to Splitco following a change in control or certain bankruptcy or insolvency-related events affecting Splitco or (3) by Splitco, upon written notice to Liberty Media, following certain changes in control of Liberty Media or Liberty Media being the subject of certain bankruptcy or insolvency-related events.

        This summary is qualified by reference to the full text of the services agreement, a form of which is filed as an exhibit to the Registration Statement on Form S-4 of which this proxy statement/prospectus forms a part.

    Facilities Sharing Agreement

        In connection with the Split-Off, Splitco will enter into a facilities sharing agreement (the facilities sharing agreement ) with Liberty Media and Liberty Property Holdings, Inc. ( LPH ), a wholly-owned subsidiary of Liberty Media, pursuant to which, following the Split-Off, Splitco will share office facilities with Liberty Interactive and Liberty Media located at 12300 Liberty Boulevard, Englewood, Colorado. Splitco will pay a sharing fee for use of the office based on a comparable fair market rental rate and an estimate of the usage of the office facilities by or on behalf of Splitco. The facilities sharing agreement will continue in effect until the close of business on the third anniversary of the Split-Off, unless earlier terminated (1) by Splitco at any time on at least 30 days' prior written notice, (2) by LPH upon written notice to Splitco following a default by Splitco of any of its material obligations under the facilities sharing agreement, which default remains unremedied for 30 days after written notice of such default is provided, (3) by Splitco upon written notice to LPH, following certain changes in control of Liberty Media or Liberty Media being the subject of certain bankruptcy or insolvency-related events or (4) by LPH upon written notice to Splitco, following certain changes in control of Splitco or Splitco being the subject of certain bankruptcy or insolvency-related events.

        This summary is qualified by reference to the full text of the facilities sharing agreement, a form of which will be filed as an exhibit to the Registration Statement on Form S-4 of which this proxy statement/prospectus forms a part.

    Aircraft Time Sharing Agreements

        Prior to the completion of the Split-Off, Splitco ( Lessee ) will enter into three aircraft time sharing agreements with Liberty Media or one or more of its wholly-owned subsidiaries for each of three aircraft owned by Liberty Media or in which a wholly owned subsidiary of Liberty Media owns a fractional interest. Each aircraft time sharing agreement will provide that Liberty Media or its subsidiaries will lease the aircraft to Lessee and provide or arrange for a fully qualified flight crew for all operations on a periodic, non-exclusive time sharing basis. Lessee will pay Liberty Media or its subsidiaries an amount equal to the actual expenses of each flight conducted under each aircraft time sharing agreement to the maximum extent permitted under Federal Aviation Administration rules (which we estimate will be a de minimis amount for the first year under the aircraft time sharing agreements). Such expenses may include fuel, oil, lubricants and other additives (plus an additional charge of 100% thereof), travel expenses of the crew, hanger and tie down costs, insurance obtained for a specific flight, landing fees, airport taxes and similar assessments, customs and similar fees, in-flight food and beverage costs, ground transportation, flight planning and weather contact services. The aircraft time sharing agreements will continue in effect until the close of business on the first anniversary of the Split-Off, and then will be automatically renewed on a month-to-month basis, unless terminated earlier by either party upon at least 30 days' prior written notice.

        This summary is qualified by reference to the full text of the aircraft time sharing agreements, forms of which are filed as an exhibit to the Registration Statement on Form S-4 of which this proxy statement/prospectus forms a part.

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DESCRIPTION OF SPLITCO CAPITAL STOCK AND COMPARISON OF STOCKHOLDER RIGHTS

        If the Split-Off is approved and completed, holders of Liberty Ventures common stock will become stockholders of Splitco as a result of the Split-Off. As a holder of Liberty Ventures common stock your rights are defined and governed by Liberty Interactive's restated charter, Liberty Interactive's by-laws and Delaware law. The rights of holders of Splitco common stock will be defined and governed by the Splitco restated charter, the Splitco bylaws and Delaware law. The following is a description of (i) the terms of the Liberty Ventures stockholder rights under the Liberty Interactive restated charter and (ii) the terms of the Splitco stockholder rights under the Splitco restated charter, including a comparison between the terms of the two charters. In addition, following the description, we have summarized certain other terms of the organizational documents of Splitco.

        The following discussion of the terms of the Liberty Interactive restated charter and the Splitco restated charter is qualified by reference to the full text of those charters. The Splitco restated charter is filed as an exhibit to this proxy statement/prospectus. The Liberty Interactive restated charter has been filed with the Securities and Exchange Commission. Please see "Additional Information—Where You Can Find More Information" for more information regarding Liberty Interactive's filings.

Liberty Ventures Common Stock   Splitco Common Stock
Authorized Capital Stock

Liberty Interactive is authorized to issue up to 815 million shares of Ventures Group common stock, of which 400 million shares are designated as LVNTA common stock, 15 million shares are designated as LVNTB common stock, and 400 million shares are designated as Series C Liberty Ventures common stock ( LVNTK) . See Article IV, Section A.1. of the Liberty Interactive restated charter.

 

Splitco is authorized to issue up to 326 million shares of common stock, which will be divided into three series, of which 160 million shares are designated as Series A common stock, 6 million shares are designated as Series B common stock, and 160 million shares are designated as Series C common stock. See Article IV of the Splitco restated charter.

Dividends and Securities Distributions

Liberty Interactive is permitted to pay dividends on Ventures Group common stock out of the lesser of its assets legally available for the payment of dividends under Delaware law and the "Ventures Group Available Dividend Amount" (defined generally as a fraction of the excess of the total assets less the total liabilities of the Ventures Group over the aggregate par value, or any greater amount determined to be capital in respect of, all outstanding shares of Ventures Group common stock or, if there is no such excess, an amount equal to the earnings or loss attributable to the Ventures Group (if positive) for the fiscal year in which such dividend is to be paid and/or the preceding fiscal year). If dividends are paid on any series of Ventures Group common stock, an equal per share dividend will be concurrently paid on the other series of Ventures Group common stock. See Article IV, Section A.2.(c) of the Liberty Interactive restated charter.

  Subject to any preferential rights of any outstanding series of Splitco's preferred stock created by its board from time to time, the holders of Splitco common stock will be entitled to such dividends as may be declared from time to time by its board from funds available therefor. Except as otherwise described under "—Distributions," whenever a dividend is paid to the holders of one of Splitco's series of common stock, Splitco will also pay to the holders of the other series of its common stock an equal per share dividend. See Article IV, Section B.3. of the Splitco restated charter.

Splitco is permitted to make distributions of:

shares of Series C common stock to holders of all series of Splitco common stock, on an equal per share basis;

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Liberty Ventures Common Stock   Splitco Common Stock

Liberty Interactive is permitted to make (i) share distributions of (A) Series A or Series C shares of Ventures Group common stock to holders of all series of Ventures Group common stock, on an equal per share basis; and (B) LVNTA common stock to holders of LVNTA common stock and, on an equal per share basis, shares of LVNTB common stock to holders of LVNTB common stock and, on an equal per share basis, shares of LVNTK common stock to holders of LVNTK common stock; and (ii) share distributions of (A) Series A or Series C shares of QVC Group common stock to holders of all series of Ventures Group common stock, on an equal per share basis, subject to certain limitations; and (B) Series A QVC Group common stock to holders of LVNTA common stock and, on an equal per share basis, shares of Series B QVC Group common stock to holders of LVNTB common stock and, on an equal per share basis, shares of Series C QVC Group common stock to holders of LVNTK common stock, in each case, subject to certain limitations; and (iii) share distributions of any other class or series of Liberty Interactive's securities or the securities of any other person to holders of all series of Ventures Group common stock, on an equal per share basis, subject to certain limitations. See Article IV, Section A.2.(d) of the Liberty Interactive restated charter.

 

shares of Series A common stock to holders to Series A common stock, on an equal per share basis, shares of Series B common stock to holders of Series B common stock, on an equal per share basis, and shares of Series C common stock to holders of Series C common stock, on a per share basis; and

any class or series of securities of Splitco or any other person, other than solely Splitco Series A common stock, Series B common stock or Series C common stock (or securities convertible therefor) on the basis of a distribution of (1) identical securities, on an equal per share basis, to holders of Splitco's Series A common stock, Series B common stock and Series C common stock; or (2) separate classes or series of securities, on an equal per share basis, to holders of each such series of common stock; or (3) a separate class or series of securities to the holders of one or more series of Splitco common stock and, on an equal per share basis, a different class or series of securities to the holders of all other series of Splitco common stock, provided that, in the case of (2) or (3) above, the securities so distributed do not differ in any respect other than their relative voting rights and related differences in designation, conversion and share distribution provisions, with the holders of shares of Series B common stock receiving securities of the class or series having the highest relative voting rights and the holders of shares of each other series of common stock receiving securities of the class or series having lesser relative voting rights, without regard to whether such rights differ to a greater or lesser extent than the corresponding differences in voting rights and any related differences in designation, conversion and share distributions, as applicable, and provided further that, if different classes or series of securities are being distributed to holders of Splitco Series A common stock and Series C common stock, then such securities shall be distributed either as determined by Splitco's board of directors or such that the relative voting rights of the securities of the class or series of securities to be received by the holders of Series A common stock and Series C common stock correspond, to the extent practicable, to the relative voting rights of each such series of Splitco common stock. See Article IV, Section B.4. of the Splitco restated charter.

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Liberty Ventures Common Stock   Splitco Common Stock

Conversion at Option of Holder

Each share of LVNTB common stock is convertible, at the option of the holder, into one share of LVNTA common stock. Series A and Series C shares of Ventures Group common stock are not convertible at the option of the holder. See Article IV, Section A.2.(b)(i)(A) of the Liberty Interactive restated charter.

 

The conversion rights (and limitations thereon) applicable to the Splitco common stock are substantially similar to those applicable to the Liberty Ventures common stock. See Article IV, Section B.2. of the Splitco restated charter.

Conversion at Option of Issuer

Liberty Interactive can convert each share of Series A, Series B and Series C Ventures Group common stock into a number of shares of the corresponding series of QVC Group common stock at a ratio based on the relative trading prices of the LVNTA common stock (or another series of Ventures Group common stock subject to certain limitations) and the Series A QVC Group common stock (or another series of QVC Group common stock subject to certain limitations) over a specified 20-trading day period. See Article IV, Section A.2.(b)(ii) of the Liberty Interactive restated charter.

 

None.

Optional Redemption for Stock of a Subsidiary

Liberty Interactive may redeem outstanding shares of Ventures Group common stock for shares of common stock of a subsidiary that holds assets and liabilities attributed to the Ventures Group (and may or may not hold assets and liabilities attributed to the QVC Group), provided that its board of directors seeks and receives the approval to such redemption of holders of Ventures Group common stock, voting together as a separate class.

 

None.

If Liberty Interactive were to effect a redemption as described above with stock of a subsidiary that also holds assets and liabilities of the QVC Group, shares of QVC Group common stock would also be redeemed in exchange for shares of that subsidiary, and the entire redemption would be subject to the voting rights of the holders of Ventures Group common stock described above as well as the separate class vote of the holders of QVC Group common stock. See Article IV, Section A.2.(f)(i) of the Liberty Interactive restated charter.

 

 

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Liberty Ventures Common Stock   Splitco Common Stock

Mandatory Dividend, Redemption and Conversion Rights on Disposition of Assets

If Liberty Interactive disposes, in one transaction or a series of transactions, of all or substantially all of the assets of the Ventures Group, it is required to choose one of the following four alternatives, unless its board obtains the approval of the holders of Ventures Group common stock to not take such action or the disposition qualifies under a specified exemption (in which case Liberty Interactive will not be required to take any of the following actions):

 

None.

pay a dividend to holders of Ventures Group common stock out of the available net proceeds of such disposition; or

 

 

if there are legally sufficient assets and the "Ventures Group Available Dividend Amount" would have been sufficient to pay a dividend, then: (i) if the disposition involves all of the properties and assets of the Ventures Group, redeem all outstanding shares of Ventures Group common stock in exchange for cash and/or securities or other assets with a fair value equal to the available net proceeds of such disposition, or (ii) if the disposition involves substantially all (but not all) of the properties and assets of the Ventures Group, redeem a portion of the outstanding shares of Ventures Group common stock in exchange for cash and/or securities or other assets with a fair value equal to the available net proceeds of such disposition; or

 

 

convert each outstanding share of each series of Ventures Group common stock into a number of shares of the corresponding series of QVC Group common stock at a specified premium; or

 

 

combine a conversion of a portion of the outstanding shares of Ventures Group common stock into a number of shares of the corresponding series of QVC Group common stock with either the payment of a dividend on or a redemption of shares of Ventures Group common stock, subject to certain limitations.

 

 


See Article IV, Section A.2.(f)(ii) of the Liberty Interactive restated charter.

 

 

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Liberty Ventures Common Stock   Splitco Common Stock

Voting Rights

Holders of LVNTA common stock are entitled to one vote for each share of such stock held and holders of LVNTB common stock are entitled to ten votes for each share of such stock held on all matters submitted to a vote of its stockholders. Holders of LVNTK common stock are not entitled to any voting powers (including with respect to any class votes taken in accordance with the terms of Liberty Interactive's charter), except as otherwise required by Delaware law. When so required, holders of LVNTK common stock will be entitled to 1/100th of a vote for each share of such stock held. See Article IV, Section A.2.(a)(i) and (ii) of the Liberty Interactive charter.

Holders of Ventures Group common stock will vote as one class with holders of QVC Group common stock on all matters that are submitted to a vote of its stockholders unless a separate class vote is required by the terms of Liberty Interactive's charter or the DGCL. In connection with certain dispositions of Ventures Group assets, Liberty Interactive's board may determine to seek approval of the holders of Ventures Group common stock, voting together as a separate class, to avoid effecting a mandatory dividend, redemption or conversion under Liberty Interactive's charter. See Article IV, Section A.2.(a)(iii) of the Liberty Interactive restated charter.

Liberty Interactive may not redeem outstanding shares of Ventures Group common stock for shares of common stock of a subsidiary that holds assets and liabilities attributed to the Ventures Group unless its board of directors seeks and receives the approval to such redemption of holders of Ventures Group common stock, voting together as a separate class, and, if such subsidiary also holds assets and liabilities of the QVC Group, the approval of holders of QVC Group common stock to the corresponding QVC Group common stock redemption, with each affected group voting as a separate class. See Article IV, Section A.2.(a)(v) of the Liberty Interactive restated charter.


 

The holders of Splitco Series A common stock will be entitled to one vote for each share held, and the holders of Splitco Series B common stock will be entitled to ten votes for each share held on all matters (other than the election or removal of Common Stock Directors prior to the Series B Director Termination Time) on which they are entitled to vote. With respect to any vote of stockholders on the election or removal of Common Stock Directors occurring prior to the Series B Director Termination Time, holders of Splitco Series A common stock will be entitled to one vote for each share held, and holders of Splitco Series B common stock are entitled to two votes for each share held. The holders of Splitco Series C common stock will not be entitled to any voting powers, except as required by the DGCL. When the vote or consent of holders of Splitco Series C common stock is required by Delaware law, the holders of Splitco Series C common stock will be entitled to 1/100th of a vote for each share held. Splitco's charter does not provide for cumulative voting in the election of directors. See Article IV, Section B.2.(1) of the Splitco restated charter.

The Splitco charter imposes supermajority voting requirements in connection with certain charter amendments and other extraordinary transactions which have not been approved by the Applicable Percentage of the directors then in office. When these requirements apply, the threshold vote required is 70% of the aggregate voting power of Splitco's outstanding voting securities, voting together as a single class. See Article IX of the Splitco restated charter.

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Liberty Ventures Common Stock   Splitco Common Stock

Liberty Interactive's charter imposes supermajority voting requirements in connection with certain charter amendments and other extraordinary transactions which have not been approved by 75% of the directors then in office. When these requirements apply, the threshold vote required is 66 2 / 3 % of the aggregate voting power of Liberty Interactive's outstanding voting securities, voting together as a single class. See Article IX of the Liberty Interactive restated charter.

 

 

Inter-Group Interest

From time to time, Liberty Interactive's board may determine to create an inter-group interest in the QVC Group in favor of the Ventures Group, or vice versa, subject to the terms of Liberty Interactive's charter.

 

None.

If the QVC Group has an inter-group interest in the Ventures Group at such time as any extraordinary action is taken with respect to the Ventures Group common stock (such as the payment of a dividend, a share distribution, the redemption of such stock for stock of a subsidiary or an action required to be taken in connection with a disposition of all or substantially all of the Ventures Group's assets), Liberty Interactive's board will consider what actions are required, or permitted, to be taken under Liberty Interactive's charter with respect to the QVC Group's inter-group interest in the Ventures Group. For example, in some instances, Liberty Interactive's board may determine that a portion of the aggregate consideration that is available for distribution to holders of Ventures Group common stock must be allocated to the QVC Group to compensate the QVC Group on a pro rata basis for its interest in the Ventures Group.

 

 

Similarly, if the Ventures Group has an inter-group interest in the QVC Group at such time as any extraordinary action is taken with respect to the QVC Group common stock (such as the payment of a dividend, a share distribution, the redemption of such stock for stock of a subsidiary or an action required to be taken in connection with a disposition of all or substantially all of the QVC Group's assets), Liberty Interactive's board will consider what actions are required, or permitted, to be taken under Liberty Interactive's charter with respect to the Ventures Group's inter-group interest in the QVC Group.

 

 

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Liberty Ventures Common Stock   Splitco Common Stock

All such board determinations are made in accordance with Liberty Interactive's charter and Delaware law.

 

 

Neither of the Ventures Group or QVC Group currently has any inter-group interest in the other.

 

 

Liquidation

Upon Liberty Interactive's liquidation, dissolution or winding up, holders of Ventures Group common stock will be entitled to receive in respect of such stock their proportionate interest in Liberty Interactive's assets, if any, remaining for distribution to holders of common stock (regardless of the group to which such assets are then attributed) in proportion to their respective number of liquidation units per share. See Article IV, Section A.2.(g) of the Liberty Interactive restated charter.

As of the date of this proxy statement/prospectus, each share of Ventures Group common stock is entitled to receive 1.26409 liquidation units.


 

Upon Splitco's liquidation, dissolution or winding up, after payment or provision for payment of its debts and liabilities and subject to the prior payment in full of any preferential amounts to which Splitco's preferred stock holders may be entitled, the holders of Series A common stock, Series B common stock and Series C common stock will share equally, on a share for share basis, in Splitco's assets remaining for distribution to the holders of its common stock. See Article IV, Section B.6. of the Splitco restated charter.

Other Provisions of Splitco's Charter and Bylaws

        The Splitco restated charter and bylaws will also contain the following terms. All Liberty Ventures stockholders are urged to read carefully the relevant provisions of the DGCL and the restated charter and bylaws, forms of which are filed as exhibits to Splitco's registration statement on Form S-4 of which this proxy statement/prospectus forms a part.

    Preferred Stock

        Our charter authorizes our board of directors to establish one or more series of our preferred stock and to determine, with respect to any series of our preferred stock, the terms and rights of the series, including:

    the designation of the series;

    the number of authorized shares of the series, which number our board may subsequently increase or decrease, but not below the number of such shares of such series preferred stock then outstanding;

    the dividend rate or amounts, if any, payable on the shares and, in the case of cumulative dividends, the date or dates from which dividends on all shares of the series will be cumulative and the relative preferences or rights of priority or participation with respect to such dividends;

    the rights of the series in the event of our voluntary or involuntary liquidation, dissolution or winding up and the relative preferences or rights of priority of payment;

    the rights, if any, of holders of the series to convert into or exchange for other classes or series of stock or indebtedness and the terms and conditions of any such conversion or exchange, including provision for adjustments within the discretion of our board;

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    the voting rights, if any, of the holders of the series (provided that no class or series of preferred stock outstanding prior to the Series B Director Termination Time will be entitled to vote in the election or removal of directors of our company or elect or appoint any directors);

    the terms and conditions, if any, for us to purchase or redeem the shares of the series; and

    any other relative rights, preferences and limitations of the series.

        We believe that the ability of our board of directors to issue one or more series of our preferred stock will provide us with flexibility in structuring possible future financings and acquisitions, and in meeting other corporate needs that might arise. The authorized shares of our preferred stock, as well as shares of our common stock, will be available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange or automatic quotation system on which our securities may be listed or traded.

        Although we have no intention at the present time of doing so, our company could issue a series of preferred stock that could, depending on the terms of such series, impede the completion of a merger, tender offer or other takeover attempt. Our board will make any determination to issue such shares based upon its judgment as to the best interests of our stockholders. Our board, in so acting, could issue preferred stock having terms that could discourage an acquisition attempt through which an acquirer may be able to change the composition of our board of directors, including a tender offer or other transaction that some, or a majority, of our stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then-current market price of the stock.

    Dividend Policy

        We presently intend to retain future earnings, if any, to finance the expansion of our business. Therefore, we do not expect to pay any cash dividends in the foreseeable future. All decisions regarding the payment of dividends by our company will be made by our board of directors, from time to time, in accordance with applicable law after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, plans for expansion and possible loan covenants which may restrict or prohibit our payment of dividends.

    Protective Covenants

        Our charter provides that, until the Series B Director Termination Time, we will not (i) issue any shares of Series B common stock, other than upon exercise of certain securities convertible therefor outstanding immediately following the completion of the Split-Off, without the approval of a majority of the Series B Directors then in office (in addition to any other required stockholder approval), (ii) change the number of directors constituting the entire board of directors, including the relative number of Series B Directors and Common Stock Directors or (iii) authorize any merger or consolidation of our company with or into any other corporation or other entity in which the surviving entity is not a corporation organized under the laws of the State of Delaware.

    Board of Directors

        Prior to the Series B Director Termination Time, our charter provides that the number of directors will be fixed at seven, with two directors being Series B Directors (the Series B Directors ) and five directors being Common Stock Directors (the Common Stock Directors ). Our charter provides that, following the Series B Director Termination Time, subject to any rights of the holders of any series of preferred stock to elect additional directors, the number of our directors will not be less than three and the exact number will be fixed from time to time by a resolution of our board. Prior to the Series B Director Termination Time, the Series B Directors will be elected exclusively by the holders of our

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Series B common stock and, upon completion of the Split-Off, the initial Series B Directors will serve until the earlier of (i) the termination of the Diller Assignment (the date and time of such termination, the Series B Director Termination Time ) and (ii) the second annual meeting of our stockholders following the completion of the Split-Off. At the Series B Director Termination Time, the persons then serving as Series B Directors will cease to be directors of Splitco and the total authorized number of directorships of Splitco shall automatically be reduced by the total number of authorized Series B Director directorships. Prior to the Series B Director Termination Time, the Common Stock Directors will be elected by the holders of our Series A common stock and holders of our Series B common stock (with holders of our Series B common stock having two votes per share instead of ten votes per share in such election), and will serve for one year terms expiring at each annual meeting of stockholders. At the Series B Director Termination Time, the Common Stock Directors then in office will constitute the entire board of directors and will be divided into three classes. Each class will consist, as nearly as possible, of a number of directors equal to one-third of the then authorized number of board members, other than any directors who may be elected by holders of any then-outstanding preferred stock. The board of directors of Splitco will be authorized to assign those directors already in office to such classes upon the Series B Director Termination Time. The term of office of our Class I directors expires at the first annual meeting of our stockholders following the Series B Director Termination Time. The term of office of our Class II directors expires at the second annual meeting of our stockholders following the Series B Director Termination Time. The term of office of our Class III directors expires at the third annual meeting of our stockholders following the Series B Director Termination Time. Following the Series B Director Termination Time, at each annual meeting of our stockholders, the successors of that class of directors whose term expires at that meeting will be elected to hold office for a term expiring at the annual meeting of our stockholders held in the third year following the year of their election. The directors of each class will hold office until the expiration of the term of such class and their respective successors are elected and qualified or until such director's earlier death, resignation or removal.

        Except as otherwise required by law, on all matters other than an Expedia Board Voting Determination or a Splitco Director Determination, each director will have one vote on each matter considered by our board of directors. Prior to the Series B Director Termination Time, in connection with an election of persons (other than persons to be designated as Splitco directors pursuant to the Assigned Governance Agreement) to serve on the board of directors of Expedia, Splitco will vote the shares of EXPE and shares of Expedia class B common stock beneficially owned by Splitco only in accordance with a resolution approved by a majority of the votes cast at a meeting of the board of directors at which at least one Series B Director is present or set forth in a unanimous written consent at a time when there is at least one Series B Director then in office (an Expedia Board Voting Determination ). At a meeting at which an Expedia Board Voting Determination is considered, each Common Stock Director will be entitled to cast one vote with respect to the Expedia Board Voting Determination and each Series B Director present at the meeting will be entitled to cast a number of votes with respect to such determination equal to (i) the total number of then-authorized Common Stock Directors, plus one, divided by (ii) the number of Series B Directors present at such meeting, rounded up to the next whole number of votes. The Expedia Board Voting Determination (i) shall be made not less than twenty four business days prior to the date set by Expedia for any annual or special meeting of stockholders of Expedia at which directors are to be elected (provided, that, in the event the proxy statement for the applicable Expedia stockholder meeting has not been filed with the SEC on or prior to the thirtieth business day prior to the date set by Expedia for such meeting, the Expedia Board Voting Determination shall be made as promptly as practical following the filing of such proxy statement with the SEC, and in any event not later than the close of business, New York City time, on the third business day after such proxy statement is filed with the SEC, (ii) may not be made by or delegated to a committee of our board of directors and (iii) may only be modified, amended or changed by (A) a resolution approved either (x) unanimously by directors constituting the entire board

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of directors or (y) in the event the holders of Series B common stock have taken action by written consent to fill any vacancy in the Series B Director directorships, which action has become effective, by a majority of the votes entitled to be cast with respect to an Expedia Board Voting Determination or (B) in a unanimous written consent of our board at a time when there is at least one Series B Director in office. After the Expedia Board Voting Determination is adopted, in the event any candidate for election to the board of directors of Expedia for whom Splitco's shares of EXPE and shares of Expedia class B common stock are to be voted does not stand for election for any reason, then all such shares of Expedia common stock will be voted in favor of the replacement nominee proposed by the person who nominated the person for whom such shares were to be originally voted. In connection with decisions relating to the selection of persons to stand for election as Splitco directors pursuant to the Assigned Governance Agreement or the voting of Expedia Common Shares beneficially owned by Splitco with respect to the election of such Splitco directors to the board of directors of Expedia (each, a Splitco Director Determination ), Splitco will designate the persons to stand for election as Splitco directors and will vote its Expedia Common Shares only in accordance with a resolution (i) approved by a majority of the votes cast by directors of Splitco at a meeting or (ii) set forth in a unanimous written consent. At a meeting at which a Splitco Director Determination is considered, (i) each Common Stock Director will be entitled to cast three votes with respect to the Splitco Director Determination and (ii) each Series B Director will be entitled to cast one vote with respect to such determination. Splitco Director Determinations relating to the voting of Splitco's Expedia Common Shares with respect to the election of Splitco directors shall be made at the same meeting (or set forth in a unanimous written consent on the same date) as the Expedia Board Voting Determination. In the event, after the Splitco Director Determination is adopted, any candidate for election to the board of directors of Expedia for whom Splitco's shares of EXPE and shares of Expedia class B common stock are to be voted does not stand for election for any reason, then all such Expedia Common Shares will be voted in favor of the replacement nominee proposed by the board of directors of Splitco.

        Our charter provides that, prior to the Series B Director Determination Time, any or all Series B Directors may be removed from office, with or without cause, only by the affirmative vote (or written consent) of holders of at least a majority of the total voting power of our outstanding Series B common stock and any and all Common Stock Directors may be removed from office, with or without cause, only by the affirmative vote of holders of at least a majority of the voting power of our Series A common stock and Series B common stock (with holders of our Series B common stock having two votes per share instead of ten votes per share on such matter). Following the Series B Director Termination Time, subject to the rights of the holders of any series of our preferred stock, directors may be removed from office only for cause upon the affirmative vote of the holders of at least a majority of the aggregate voting power of our outstanding capital stock entitled to vote on such matter voting together as a single class.

        Our charter provides that, prior to the Series B Director Termination Time, vacancies in the Common Stock Director directorships on our board of directors resulting from death, resignation, removal, disqualification or other cause will be filled only by the affirmative vote of a majority of the Common Stock Directors then in office (or, if only one remains in office, the sole remaining Common Stock Director). Prior to the Series B Director Termination Time, vacancies in the Series B Director directorships on our board of directors resulting from (i) removal will be filled only by the affirmative vote of the holders of at least a majority of the total voting power of our outstanding Series B common stock and (ii) death, resignation, disqualification or other cause (excluding removal) will be filled either by (x) the affirmative vote of holders of at least a majority of the total voting power of our outstanding Series B common stock or (y) a majority of the Series B Directors then in office (or, if only one remains in office, the sole remaining Series B Director).

        From the completion of the Split-Off until the Series B Director Termination Time, in connection with each annual or special meeting of stockholders of Splitco at which Common Stock Directors or

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Series B Directors are to be elected, the Common Stock Director Committee will have the right to propose the persons for nomination for election as Common Stock Directors and the Series B Director Committee will have the right to propose the persons for nomination for election as Series B Directors to the nominating and corporate governance committee of Splitco.

        Our charter provides that, following the Series B Director Termination Time, subject to the rights of the holders of any series of our preferred stock, vacancies on our board resulting from death, resignation, removal, disqualification or other cause, and newly created directorships resulting from any increase in the number of directors on our board, will be filled only by the affirmative vote of a majority of the remaining directors then in office (even though less than a quorum) or by the sole remaining director. Any director so elected shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred or to which the new directorship is assigned, and until that director's successor will have been elected and qualified or until such director's earlier death, resignation or removal. No decrease in the number of directors constituting our board will shorten the term of any incumbent director, except as may be provided in any certificate of designation with respect to a series of our preferred stock with respect to any additional director elected by the holders of that series of our preferred stock.

        Following the Series B Director Termination Time, these provisions would preclude a third party from removing incumbent directors and simultaneously gaining control of our board by filling the vacancies created by removal with its own nominees. Under the classified board provisions described above, it would take at least two elections of directors for any individual or group to gain control of our board. Accordingly, these provisions could discourage a third party from initiating a proxy contest, making a tender offer or otherwise attempting to gain control of us.

    Limitation on Liability and Indemnification

        To the fullest extent permitted by Delaware law, our directors are not liable to our company or any of its stockholders for monetary damages for breaches of fiduciary duties as a director. In addition, our company indemnifies, to the fullest extent permitted by applicable law, any person involved in any suit or action by reason of the fact that such person is a director or officer of our company or, at our request, a director, officer, employee or agent of another corporation or entity, against all liability, loss and expenses incurred by such person. We will pay the expenses of a director or officer in defending any proceeding in advance of its final disposition, provided that such payment is made upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to indemnification. See "Item 20. Indemnification of Directors and Officers."

    Corporate Opportunity

        Our charter acknowledges that Splitco may have overlapping directors and officers with other entities that compete with our businesses and that Splitco may engage in material business transactions with such entities. Splitco has renounced its rights to certain business opportunities and our charter provides that no director or officer of Splitco will breach their fiduciary duty and therefore be liable to Splitco or its stockholders by reason of the fact that any such individual directs a corporate opportunity to another person or entity (including Liberty Interactive or Liberty Media) instead of Splitco, or does not refer or communicate information regarding such corporate opportunity to Splitco, unless (x) such opportunity was expressly offered to such person solely in his or her capacity as a director or officer of Splitco or as a director or officer of any of Splitco's subsidiaries, and (y) such opportunity relates to a line of business in which Splitco or any of its subsidiaries is then directly engaged.

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    No Stockholder Action by Written Consent; Special Meetings

        Our charter provides that, except as provided in the terms of any series of preferred stock, any action required to be taken or which may be taken at any annual or special meeting of the stockholders may not be taken without a meeting and may not be effected by any consent in writing by such holders, provided that prior to the Series B Director Termination Time, holders of Series B common stock may take action by written consent with respect to the election, appointment or removal of any or all Series B Directors or the filling of any vacancy in a Series B Director directorship. Except as otherwise required by law and subject to the rights of the holders of any series of our preferred stock, special meetings of our stockholders for any purpose or purposes may be called only by our Secretary (i) upon the written request of the holders of not less than 70% of the total voting power of the then outstanding shares of our Series A common stock, Series B common stock and, if applicable, our preferred stock, entitled to vote thereon or (ii) at the request of, if prior to the Series B Director Termination Time, at least 80% of the members of the entire board of directors, or, if following the Series B Director Termination Time, at least 75% of the members of the entire board of directors (such percentage of the entire board of directors, the Applicable Percentage ).

    Advance Notice Procedures

        Our bylaws establish an advance notice procedure for stockholders to make nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders.

        All nominations by stockholders or other business to be properly brought before a meeting of stockholders will be made pursuant to timely notice in proper written form to our company's Secretary. To be timely, a stockholder's notice will be given to our company's Secretary at Splitco's offices as follows:

    (1)
    with respect to an annual meeting of our stockholders that is called for a date within 30 days before or after the anniversary date of the immediately preceding annual meeting of our stockholders, such notice must be given no earlier than the close of business on the 90th day and no later than the close of business on the 60th day prior to the meeting date;

    (2)
    with respect to an annual meeting of our stockholders that is called for a date not within 30 days before or after the anniversary date of the immediately preceding annual meeting of our stockholders, such notice must be given no later than the close of business on the 10th day following the day on which Splitco first provides notice of or publicly announces the date of the current annual meeting, whichever occurs first; and

    (3)
    with respect to an election to be held at a special meeting of our stockholders, such notice must be given no earlier than the close of business on the 90th day prior to such special meeting and no later than the close of business on the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the proposed nominees.

        The public announcement of an adjournment or postponement of a meeting of our stockholders does not commence a new time period (or extend any time period) for the giving of any such stockholder notice. However, if the number of directors to be elected to our board at any meeting is increased, and we do not make a public announcement naming all of the nominees for director or specifying the size of the increased board at least 100 days prior to the anniversary date of the immediately preceding annual meeting, a stockholder's notice will also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to our company's Secretary at our offices not later than the close of business on the 10th day following the day on which we first made the relevant public announcement. For purposes of the first annual meeting

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of stockholders to be held in 2017, the first anniversary date will be deemed to be the anniversary of the date of the completion of the Split-Off. For purposes of nominations by stockholders prior to the Series B Director Termination Time, (i) only holders of our Series B common stock will be entitled to nominate persons for election to our board of directors as Series B Directors and (ii) only holders of our Series A common stock and Series B common stock shall be entitled to nominate persons for election to our board of directors as Common Stock Directors.

    Amendments

        Our charter provides that, subject to the rights of the holders of any series of our preferred stock, the affirmative vote of the holders of at least 70% of the aggregate voting power of our outstanding capital stock entitled to vote on such matter, voting together as a single class, is required to adopt, amend or repeal any provision of our charter or to add or insert any provision in our charter, provided that the foregoing enhanced voting requirement will not apply to any adoption, amendment, repeal, addition or insertion (1) as to which Delaware law does not require the consent of our stockholders or (2) which has been approved by at least the Applicable Percentage of the members of our board then in office. Our charter further provides that the affirmative vote of the holders of at least 70% of the aggregate voting power of our outstanding capital stock entitled to vote on such matter, voting together as a single class, is required to adopt, amend or repeal any provision of our bylaws, provided that the board of directors may adopt, amend or repeal the bylaws by the affirmative vote of not less than the Applicable Percentage of the members of our board then in office, provided, further, that prior to the Series B Director Termination Time, certain provisions of the bylaws may not be amended without the approval of a majority of the Series B Directors then in office at such time as there is at least one Series B Director in office.

    Supermajority Voting Provisions

        In addition to the supermajority voting provisions discussed under "—Amendments" above, our charter provides that, subject to the rights of the holders of any series of our preferred stock, the affirmative vote of the holders of at least 70% of the aggregate voting power of our outstanding capital stock entitled to vote on such matter, voting together as a single class, is required for:

    the merger or consolidation of our company with or into any other corporation (including a merger consummated pursuant to Section 251(h) of the DGCL (pursuant to which an acquiror owning shares representing the voting percentage required to approve a merger may forego having a stockholder meeting to approve such transaction as long as certain conditions are met) and notwithstanding the exception to a vote of the stockholders for such merger set forth therein), provided, that the foregoing voting provision will not apply to any such merger or consolidation (1) as to which the laws of the State of Delaware, as then in effect, do not require the consent of our stockholders (other than Section 251(h) of the DGCL), or (2) that at least the Applicable Percentage of the members of our board of directors then in office have approved;

    the sale, lease or exchange of all, or substantially all, of our assets, provided, that the foregoing voting provisions will not apply to any such sale, lease or exchange that at least the Applicable Percentage of the members of our board of directors then in office have approved;

    our dissolution, provided, that the foregoing voting provision will not apply to such dissolution if at least the Applicable Percentage of the members of our board of directors then in office have approved such dissolution; or

    until the Series B Director Termination Time, the sale, assignment, transfer or conveyance of all or any portion of our shares of Expedia class B common stock, provided, that a business combination in which a third party acquires control of us prior to the Series B Director

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      Termination Time will not be deemed a sale, assignment, transfer or conveyance of the shares of Expedia class B common stock, subject to certain exceptions or so long as certain conditions are satisfied.

Section 203 of the Delaware General Corporation Law

        Section 203 of the DGCL imposes restrictions on certain transactions between a Delaware corporation and an "interested stockholder" (as defined in Section 203 of the DGCL) of such corporation. An "interested stockholder" for this purpose generally is a stockholder who is directly or indirectly a beneficial owner of 15% or more of the outstanding voting power of the Delaware corporation. Section 203 of the DGCL imposes restrictions on certain business combinations between an interested stockholder including certain related persons and a corporation for a period of three years after the date on which the stockholder became an interested stockholder, unless: (1) prior to the time that such stockholder became an interested stockholder, either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder is approved by the corporation's board of directors, (2) the interested stockholder acquired at least 85% of the voting power of the corporation in the transaction in which the stockholder became an interested stockholder (subject to certain exclusions), or (3) at or subsequent to such time, the business combination is approved by a majority of the board of directors and the affirmative vote of the holders of 66 2 / 3 % of the outstanding voting power of the shares not owned by the interested stockholder. Splitco is subject to Section 203 of the DGCL.

Transfer Agent and Registrar

        Computershare Trust Company, N.A. will be the transfer agent and registrar for our common stock:

Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02121

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ADDITIONAL INFORMATION

Legal Matters

        Legal matters relating to the validity of the securities to be issued in the Split-Off will be passed upon by Baker Botts L.L.P. Legal matters relating to the U.S. federal income tax consequences of the Split-Off will be passed upon by Skadden, Arps, Slate, Meagher & Flom LLP.

Experts

        The combined financial statements of Liberty Expedia Holdings, Inc. as of December 31, 2015 and 2014, and for each of the years in the three-year period ended December 31, 2015, have been included herein and in the Registration Statement on Form S-4 in reliance upon the reports of KPMG LLP, independent registered public accounting firm, and Ernst & Young LLP, independent registered public accounting firm, appearing elsewhere herein, and upon authority of such firms as experts in accounting and auditing.

        The consolidated financial statements of Expedia, Inc. at December 31, 2015 and 2014, and for each of the three years in the period ended December 31, 2015, appearing in this Proxy Statement/Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

Independent Registered Public Accounting Firm

        Liberty Interactive expects that the audit committee of its board of directors will select KPMG LLP as Liberty Interactive's independent registered public accounting firm for the year ended December 31, 2016.

Stockholder Proposals

    Liberty Interactive

        Liberty Interactive currently expects that its annual meeting of stockholders for the calendar year 2017 will be held during the second quarter of 2017. In order to be eligible for inclusion in Liberty Interactive's proxy materials for the 2017 annual meeting, any stockholder proposal must have been submitted in writing to Liberty Interactive's Corporate Secretary and received at Liberty Interactive's executive offices at 12300 Liberty Boulevard, Englewood, Colorado 80112, by the close of business on March 15, 2017 unless a later date is determined and announced in connection with the actual scheduling of the annual meeting. To be considered for presentation at the 2017 annual meeting, any stockholder proposal must have been received at Liberty Interactive's executive offices at the foregoing address not later than the close of business on the tenth day following the first day on which notice of the date of the 2017 annual meeting is communicated to stockholders or public disclosure of the date of the 2017 annual meeting is made, whichever occurs first, in order to be considered for presentation at the 2017 annual meeting.

        All stockholder proposals for inclusion in Liberty Interactive's proxy materials will be subject to the requirements of the proxy rules adopted under the Exchange Act and, as with any stockholder (regardless of whether it is included in Liberty Interactive's proxy materials), Liberty Interactive's charter and bylaws and Delaware law.

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    Splitco

        Splitco's first annual meeting of stockholders is currently expected to be held during the [      ] quarter of 201[7]. In order to be eligible for inclusion in Splitco's proxy materials for its first annual meeting, any stockholder proposal must have been submitted in writing to Splitco's Corporate Secretary and received at Splitco's executive offices at 12300 Liberty Boulevard, Englewood, Colorado 80112, by the close of business on [      ], 201[7], unless a later date is determined and announced in connection with the actual scheduling of the annual meeting. To be considered for presentation at Splitco's first annual meeting, any stockholder proposal must have been received at Splitco's executive offices at the foregoing address on or before the close of business on [      ], 201[7], or such later date as Splitco may determine and announce in connection with the actual scheduling of the annual meeting.

        All stockholder proposals for inclusion in Splitco's proxy materials will be subject to the requirements of the proxy rules adopted under the Exchange Act and, as with any stockholder proposal (regardless of whether it is included in Splitco's proxy materials), the Splitco restated charter and bylaws and Delaware law.

Where You Can Find More Information

        We have filed a Registration Statement on Form S-4 with the SEC under the Securities Act with respect to the shares of Splitco's common stock being distributed in the Split-Off as contemplated by this proxy statement/prospectus. This proxy statement/prospectus is a part of, and does not contain all of the information set forth in, the Registration Statement and the exhibits and schedules to the Registration Statement. For further information with respect to Splitco and its common stock, please refer to the Registration Statement, including its exhibits and schedules. Statements made in this proxy statement/prospectus relating to any contract or other document are not necessarily complete, and you should refer to the exhibits attached to the Registration Statement for copies of the actual contract or document.

        Liberty Interactive is, and Splitco will become, subject to the information and reporting requirements of the Exchange Act. In accordance with the Exchange Act, Liberty Interactive files, and Splitco will file, periodic reports, proxy statements and other information with the SEC. You may read and copy any document that Liberty Interactive or Splitco files with the SEC, including the Registration Statement on Form S-4, including its exhibits and schedules, at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330. You may also inspect such filings on the Internet website maintained by the SEC at www.sec.gov. Splitco's website will be http://www.libertyexpedia.com, and it intends to make its periodic reports and other information filed with or furnished to the SEC available, free of charge, through its website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information contained on any website referenced in this proxy statement/prospectus is not incorporated by reference in this proxy statement/prospectus and does not constitute a party of this proxy statement/prospectus.

        You may request a copy of any of Splitco's filings with the SEC at no cost, by writing or telephoning the office of:

    Investor Relations
    Liberty Expedia Holdings, Inc.
    12300 Liberty Blvd.
    Englewood, Colorado 80112
    Telephone: (844) 795-9468

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        Splitco intends to furnish holders of its common stock with annual reports containing consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles and audited and reported on, with an opinion expressed by, an independent public accounting firm.

        For additional information regarding Liberty Interactive and its subsidiaries, you may read and copy Liberty Interactive's periodic reports, proxy statements and other information publicly filed by Liberty Interactive at the SEC's Public Reference Room or on the SEC's website, and you may contact Liberty Interactive at the contact information set forth therein.

        The SEC allows Liberty Interactive to "incorporate by reference" information into this document, which means that Liberty Interactive can disclose important information about itself to you by referring you to other documents. The information incorporated by reference is an important part of this proxy statement/prospectus, and is deemed to be part of this document except for any information superseded by this document or any other document incorporated by reference into this document. Documents incorporated by reference herein will be made available to you, at no cost, upon your oral or written request to Liberty Interactive's Investor Relations office. Any statement, including financial statements, contained in Liberty Interactive's Annual Report on Form 10-K for the year ended December 31, 2015 (as amended) shall be deemed to be modified or superseded to the extent that a statement, including financial statements, contained in this proxy statement/prospectus or in any other later incorporated document modifies or supersedes that statement. Liberty Interactive incorporates by reference the documents listed below and any future filings it makes with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than any report or portion thereof furnished or deemed furnished under any Current Report on Form 8-K) prior to the date on which the special meeting is held:

              (i)  Liberty Interactive's Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 26, 2016, as amended by Amendment No. 1 thereto filed on April 29, 2016;

             (ii)  Liberty Interactive's Quarterly Reports on Form 10-Q for the quarter ended March 31, 2016, filed on May 9, 2016 and the quarter ended June 30, 2016, filed on August 5, 2016; and

            (iii)  Liberty Interactive's Current Reports on Form 8-K, filed on March 28, 2016, May 23, 2016, May 31, 2016, June 28, 2016, June 28, 2016, July 6, 2016, July 11, 2016, July 21, 2016, July 27, 2016, August 11, 2016, August 26, 2016 and September 1, 2016.

        You may request a copy of any of Liberty Interactive's filings with the SEC at no cost, by writing or telephoning the office of:

    Investor Relations
    Liberty Interactive Corporation
    12300 Liberty Blvd.
    Englewood, Colorado 80112
    Telephone: (720) 875-5408

        Before the Split-Off, if you have questions relating to the Split-Off, you should contact the office of Investor Relations of Liberty Interactive at the address and telephone number listed above.

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        Pursuant to a services agreement to be entered into between Splitco and Liberty Media, Liberty Media will provide Splitco with investor relations assistance for a period following the Split-Off. Accordingly, if you have questions relating to Splitco following the Split-Off, you should contact the office of Investor Relations of Liberty Media at the following address and telephone number:

    Investor Relations
    Liberty Media Corporation
    12300 Liberty Blvd.
    Englewood, Colorado 80112
    Telephone: (877) 772-1518

        You should rely only on the information contained in this proxy statement/prospectus or to which we have referred you. We have not authorized any person to provide you with different information or to make any representation not contained in this proxy statement/prospectus.

        This proxy statement/prospectus includes information concerning Expedia, which is a public company and files reports and other information with the SEC in accordance with the requirements of the Securities Act and the Exchange Act. Information included in this proxy statement/prospectus concerning Expedia has been derived from the reports and other information filed by it with the SEC. Those reports and such other information filed by Expedia with the SEC are not incorporated by reference in this proxy statement/prospectus. You may read and copy any reports and other information filed by these companies as set forth above.

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INDEX TO FINANCIAL STATEMENTS

Liberty Expedia Holdings, Inc .

   

Unaudited Financial Statements:

   

Condensed Combined Balance Sheets, June 30, 2016 and December 31, 2015

  F-2

Condensed Combined Statements of Operations, Six months ended June 30, 2016 and 2015

  F-3

Condensed Combined Statements of Comprehensive Earnings (Loss), Six months ended June 30, 2016 and 2015

  F-4

Condensed Combined Statements of Cash Flows, Six months ended June 30, 2016 and 2015

  F-5

Condensed Combined Statement of Equity, Six months ended June 30, 2016

  F-6

Notes to Condensed Combined Financial Statements, June 30, 2016

  F-7

Audited Financial Statements:

   

Report of Independent Registered Public Accounting Firm

  F-18

Combined Balance Sheets, December 31, 2015 and 2014

  F-19

Combined Statements of Operations, Years ended December 31, 2015, 2014 and 2013

  F-20

Combined Statements of Comprehensive Earnings (Loss), Years ended December 31, 2015, 2014 and 2013

  F-21

Combined Statements of Cash Flows, Years ended December 31, 2015, 2014 and 2013

  F-22

Combined Statement of Equity, Years ended December 31, 2015, 2014 and 2013

  F-23

Notes to Combined Financial Statements, December 31, 2015, 2014 and 2013

  F-24

Unaudited Pro Forma Condensed Combined Financial Statements:

   

Condensed Combined Balance Sheet, June 30, 2016

  F-50

Condensed Combined Statement of Operations, Six months ended June 30, 2016

  F-51

Condensed Combined Statement of Operations, Year ended December 31, 2015

  F-52

Expedia, Inc.:

 
 

Audited Financial Statements:

   

Report of Independent Registered Public Accounting Firm

  F-58

Consolidated Statements of Operations, Years ended December 31, 2015, 2014 and 2013

  F-59

Consolidated Statements of Comprehensive Income, Years ended December 31, 2015, 2014 and 2013

  F-60

Consolidated Balance Sheets, December 31, 2015 and 2014

  F-61

Consolidated Statements of Changes in Stockholders' Equity, Years ended December 31, 2015, 2014 and 2013

  F-62

Consolidated Statements of Cash Flows, Years ended December 31, 2015, 2014 and 2013

  F-64

Notes to Consolidated Financial Statements, December 31, 2015, 2014 and 2013

  F-65

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LIBERTY EXPEDIA HOLDINGS, INC.

Condensed Combined Balance Sheets

 
  June 30,
2016
  December 31,
2015
 
 
  (unaudited)
   
 
 
  amounts in thousands
 

Assets

             

Current assets:

             

Cash and cash equivalents

  $ 1,614     2,243  

Accounts receivable

    597     701  

Inventory, net

    45,310     53,194  

Prepaid expenses

    4,217     4,661  

Other current assets

    2,275     3,047  

Total current assets

    54,013     63,846  

Investment in Expedia, Inc. (note 3)

    888,270     927,057  

Property and equipment, at cost

   
56,518
   
55,640
 

Accumulated depreciation

    (29,184 )   (26,012 )

    27,334     29,628  

Intangible assets not subject to amortization:

             

Goodwill

    57,462     57,462  

Tradenames

    19,902     19,902  

    77,364     77,364  

Intangible assets subject to amortization, net

    23,892     24,142  

Other assets, net

    3,387     3,556  

Total assets

  $ 1,074,260     1,125,593  

Liabilities and Equity

   
 
   
 
 

Current liabilities:

             

Accounts payable

  $ 17,683     22,505  

Accrued liabilities

    9,019     6,805  

Accrued stock compensation

    2,761     5,545  

Current portion of long-term debt and capital lease obligations (note 4)

    4,745     4,755  

Deferred revenue

    5,026     4,090  

Total current liabilities

    39,234     43,700  

Long-term debt and capital lease obligations, net (note 4)

    24,375     36,449  

Deferred income tax liabilities

    288,714     304,483  

Income taxes payable

    71,412     68,842  

Total liabilities

    423,735     453,474  

Equity

             

Parent's investment

    627,670     639,002  

Accumulated other comprehensive earnings (loss), net of taxes

    (34,081 )   (32,661 )

Retained earnings

    56,936     65,778  

Total equity

    650,525     672,119  

Commitments and contingencies (note 7)

             

Total liabilities and equity

  $ 1,074,260     1,125,593  

   

See accompanying notes to condensed combined financial statements.

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LIBERTY EXPEDIA HOLDINGS, INC.

Condensed Combined Statements of Operations

(unaudited)

 
  Six months
ended June 30,
 
 
  2016   2015  
 
  amounts in thousands,
except per share
amounts

 

Total revenue, net

  $ 228,448     244,952  

Cost of retail sales (exclusive of depreciation shown separately below)

    171,731     188,217  

Gross profit

    56,717     56,735  

Operating costs and expenses:

             

Operating expense

    16,587     16,282  

Selling, general and administrative, including stock-based compensation expense (note 5)

    23,829     23,914  

Depreciation and amortization

    9,833     9,962  

    50,249     50,158  

Operating income (loss)

    6,468     6,577  

Other income (expense):

             

Interest expense

    (579 )   (589 )

Related party interest expense (note 6)

        (774 )

Share of earnings (losses) of Expedia, Inc. (note 3)

    (21,700 )   80,099  

Other, net

    (3,616 )   255  

    (25,895 )   78,991  

Earnings (loss) before income taxes

    (19,427 )   85,568  

Income tax (expense) benefit

    10,585     (30,150 )

Net earnings (loss)

    (8,842 )   55,418  

Less net earnings (loss) attributable to the noncontrolling interests

        348  

Net earnings (loss) attributable to Liberty Expedia Holdings shareholders

  $ (8,842 )   55,070  

Unaudited Pro Forma basic net earnings (loss) attributable to Series A and Series B Liberty Expedia Holdings, Inc. shareholders per common share (note 2)

  $ (0.16 )   0.97  

   

See accompanying notes to condensed combined financial statements.

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LIBERTY EXPEDIA HOLDINGS, INC.

Condensed Combined Statements of Comprehensive Earnings (Loss)

(unaudited)

 
  Six months ended
June 30,
 
 
  2016   2015  
 
  amounts in thousands
 

Net earnings (loss)

  $ (8,842 )   55,418  

Other comprehensive earnings (loss), net of taxes:

             

Share of other comprehensive earnings (loss) of Expedia, Inc. 

    (1,420 )   (13,358 )

Other comprehensive earnings (loss)

    (1,420 )   (13,358 )

Comprehensive earnings (loss)

    (10,262 )   42,060  

Less comprehensive earnings (loss) attributable to the noncontrolling interest

        348  

Comprehensive earnings (loss) attributable to Liberty Expedia Holdings, Inc. shareholders

  $ (10,262 )   41,712  

   

See accompanying notes to condensed combined financial statements.

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LIBERTY EXPEDIA HOLDINGS, INC.

Condensed Combined Statements of Cash Flows

(unaudited)

 
  Six months ended
June 30,
 
 
  2016   2015  
 
  amounts in thousands
 

Cash flows from operating activities:

             

Net earnings (loss)

  $ (8,842 )   55,418  

Adjustments to reconcile net earnings to net cash provided by operating activities:

             

Depreciation and amortization

   
9,833
   
9,962
 

Stock-based compensation

    (1,084 )   913  

Cash payments for stock-based compensation

    (1,926 )   (1,129 )

Noncash interest expense

    99     74  

Share of (earnings) losses of Expedia, Inc. 

    21,700     (80,099 )

Cash receipts from returns on Expedia, Inc. 

    11,401     8,451  

Deferred income tax expense (benefit)

    (13,153 )   27,510  

Other noncash charges (credits), net

    3,619     (255 )

Changes in operating assets and liabilities

             

Current and other assets

    9,052     (11,268 )

Payables and other liabilities

    (847 )   7,162  

Net cash provided (used) by operating activities

    29,852     16,739  

Cash flows from investing activities:

             

Capital expended for property and equipment

    (7,043 )   (10,509 )

Investment in Expedia, Inc. 

        (22,575 )

Net cash provided (used) by investing activities

    (7,043 )   (33,084 )

Cash flows from financing activities:

             

Borrowings of debt

    213,943     274,936  

Repayments of debt

    (226,049 )   (269,712 )

Contribution from (distribution to) parent, net

    (11,332 )   14,124  

Net cash provided (used) by financing activities

    (23,438 )   19,348  

Net increase (decrease) in cash and cash equivalents

    (629 )   3,003  

Cash and cash equivalents at beginning of period

    2,243     1,631  

Cash and cash equivalents at end of period

  $ 1,614     4,634  

        Supplemental disclosure to the condensed combined statements of cash flows:

 
  Six months ended
June 30,
 
 
  2016   2015  
 
  amounts in thousands
 

Cash paid for interest

  $ 512     1,318  

Cash paid for taxes

    1,743     1,151  

   

See accompanying notes to condensed combined financial statements.

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LIBERTY EXPEDIA HOLDINGS, INC.

Condensed Combined Statement of Equity

Six months ended June 30, 2016

(unaudited)

 
  Parent's
investment
  Accumulated
other
comprehensive
earnings (loss)
  Retained
Earnings
(Accumulated
deficit)
  Total equity  
 
  amounts in thousands
 

Balance at January 1, 2016

  $ 639,002     (32,661 )   65,778     672,119  

Net earnings (loss)

            (8,842 )   (8,842 )

Other comprehensive earnings (loss)

        (1,420 )       (1,420 )

Contributions from (distributions to) parent, net

    (11,332 )           (11,332 )

Balance at June 30, 2016

  $ 627,670     (34,081 )   56,936     650,525  

   

See accompanying notes to condensed combined financial statements.

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LIBERTY EXPEDIA HOLDINGS, INC.

Notes to Condensed Combined Financial Statements

(1) Basis of Presentation

        During November 2015, the board of directors of Liberty Interactive Corporation ("Liberty Interactive") authorized management to pursue a plan to Split-Off to holders of its Liberty Ventures Group ("Liberty Ventures") common stock, of a newly formed entity, Liberty Expedia Holdings, Inc. ("Expedia Holdings" or the "Company" as discussed below) ("Expedia Holdings Split-Off" or "Expedia Split-Off"). Expedia Holdings will be comprised of, among other things, Liberty Interactive's ownership interest in Expedia, Inc. ("Expedia"), as well as Liberty Interactive's wholly-owned subsidiary Bodybuilding.com, LLC ("Bodybuilding"). Bodybuilding became a wholly owned subsidiary of Liberty Interactive in October 2015 when Liberty Interactive purchased the remaining ownership interest in Bodybuilding. The Expedia Split-Off is intended to be tax-free to stockholders of Liberty Ventures. In the Expedia Split-Off, and based on an assumed distribution ratio of 0.4, record holders of Liberty Interactive's Series A and Series B Liberty Ventures common stock will receive 0.4 of a share of the corresponding series of Expedia Holdings common stock for each share of Liberty Ventures common stock held by them as of the date of the Expedia Holdings Split-Off, with cash in lieu of fractional shares.

        These financial statements represent a combination of the historical financial information of Bodybuilding and Liberty Interactive's interest in Expedia. These financial statements refer to the combination of the aforementioned subsidiary and investment as "Expedia Holdings," "the Company," "us," "we" and "our" in the notes to the condensed combined financial statements. The Expedia Split-Off will be accounted for at historical cost due to the pro rata nature of the distribution to holders of Liberty Ventures common stock. All significant intercompany accounts and transactions have been eliminated in the condensed combined financial statements.

        Expedia Holdings does not control the decision making process or business management practices of its affiliate. Accordingly, the Company relies on management of its affiliate to provide it with accurate financial information prepared in accordance with U.S. generally accepted accounting principles ("GAAP") that the Company uses in the application of the equity method. In addition, Expedia Holdings relies on audit reports that are provided by the affiliate's independent auditors on the financial statements of such affiliate. The Company is not aware, however, of any errors in or possible misstatements of the financial information provided by its equity affiliate that would have a material effect on Expedia Holdings' condensed combined financial statements.

        The accompanying (a) condensed combined balance sheet as of December 31, 2015, which has been derived from audited financial statements, and (b) the interim unaudited condensed combined financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. These condensed combined financial statements should be read in conjunction with the combined financial statements and notes thereto for the year ended December 31, 2015.

        In May 2014, the Financial Accounting Standards Board ("FASB") issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This new guidance also requires additional disclosure about the nature, amount, timing and

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LIBERTY EXPEDIA HOLDINGS, INC.

Notes to Condensed Combined Financial Statements (Continued)

(1) Basis of Presentation (Continued)

uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In March 2016, the FASB issued additional guidance which clarifies principal versus agent considerations, and in April 2016, the FASB issued further guidance which clarifies the identification of performance obligations and the implementation guidance for licensing. The updated guidance will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a full retrospective or modified retrospective transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and early adoption is permitted only for fiscal years beginning after December 15, 2016. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its financial statements and related disclosures.

        In February 2015, the FASB issued new accounting guidance which amends the consolidation guidance in Accounting Standards Codification Topic 810, Consolidation . The new guidance requires an entity to reconsider and re-document the basis for previous consolidation conclusions. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The Company adopted this guidance during the first quarter of 2016. The adoption of this guidance did not change the conclusions reached for any previous consolidation analyses.

        In July 2015, the FASB issued new accounting guidance that changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. The new principle applies to entities that measure inventory using a method other than last-in, first-out or the retail inventory method. The new standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2016. The Company is currently evaluating the effect that the updated standard will have on its combined financial statements, but does not believe that the standard will significantly impact its financial statements and related disclosures.

        In February 2016, the FASB issued new guidance which revises the accounting for leases. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new guidance also simplifies the accounting for sale and leaseback transactions. The new standard, to be applied via a modified retrospective transition approach, is effective for the Company for fiscal years and interim periods beginning after December 15, 2018, with early adoption permitted. The Company has not yet determined the effect of the standard on its ongoing financial reporting.

        In March 2016, the FASB issued new guidance which simplifies several aspects of the accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The new standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. Expedia Holdings plans to adopt this guidance in the third quarter of 2016 and does not expect the adoption will have a material effect on the Company's condensed combined financial statements.

Split-Off of Expedia Holdings from Liberty Interactive

        Following the Expedia Split-Off, Liberty Interactive and Expedia Holdings will operate as separate, publicly traded companies, and neither will have any stock ownership, beneficial or otherwise, in the other. In connection with the Expedia Split-Off, Liberty Interactive and Expedia Holdings will enter into certain agreements in order to govern certain of the ongoing relationships between the

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LIBERTY EXPEDIA HOLDINGS, INC.

Notes to Condensed Combined Financial Statements (Continued)

(1) Basis of Presentation (Continued)

two companies after the Expedia Spin-Off and to provide for an orderly transition. These agreements include a reorganization agreement, a services agreement, a facilities sharing agreement and a tax sharing agreement.

        The reorganization agreement will provide for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Expedia Split-Off, certain conditions to the Expedia Split-Off and provisions governing the relationship between Expedia Holdings and Liberty Interactive with respect to and resulting from the Expedia Split-Off. The tax sharing agreement will provide for the allocation and indemnification of tax liabilities and benefits between Liberty Interactive and Expedia Holdings and other agreements related to tax matters. Pursuant to the services agreement, Liberty Interactive will provide Expedia Holdings with general and administrative services including legal, tax, accounting, treasury and investor relations support. Under the facilities sharing agreement, Expedia Holdings will share office space with Liberty Interactive and related amenities at Liberty Interactive's corporate headquarters. Expedia Holdings will reimburse Liberty Interactive for direct, out-of-pocket expenses incurred by Liberty Interactive in providing these services and for costs that will be negotiated semi-annually.

(2) Pro Forma Earnings (Loss) per Share (EPS)

        Unaudited pro forma earnings (loss) per common share for all periods presented is computed by dividing net earnings (loss) for the respective period by 56,937,091 common shares, which is the aggregate number of shares of Series A and Series B common stock that would have been issued upon completion of the Expedia Split-Off as if it had happened on June 30, 2016.

(3) Investment in Expedia, Inc.

        Expedia is an online travel company, empowering business and leisure travelers with the tools and information they need to efficiently research, plan, book and experience travel. Expedia seeks to grow its business through a dynamic portfolio of travel brands, including its majority owned subsidiaries that feature the world's broadest supply portfolio—including approximately 307,000 properties in 200 countries, 400 airlines, packages, rental cars, cruises, as well as destination services and activities.

        Effective August 9, 2005, IAC/InterActiveCorp ("IAC") completed the spin-off of substantially all of its travel and travel-related businesses by way of the distribution of all outstanding shares of Expedia to IAC stockholders. Subsequent to the spin-off of Expedia from IAC, Liberty Interactive owned approximately 20% of the outstanding Expedia common stock and 52% of the voting interest in Expedia. As of June 30, 2016, the Company owns an approximate 15.8% equity interest and 52.4% voting interest in Expedia. Historically, Liberty Interactive has been a party to a Stockholders Agreement with Mr. Barry Diller, Chairman of the Board and Senior Executive Officer of Expedia, pursuant to which Mr. Diller held an irrevocable proxy over all the shares of Expedia common stock and Expedia class B common stock owned by Liberty Interactive. Liberty Interactive is also subject to a Governance Agreement with Expedia which provides for the right to appoint approximately 20% of the members of Expedia's board of directors, which is currently comprised of 13 members (three of which were appointed by Liberty Interactive). Based the Stockholders Agreement and the Governance Agreement, the Company determined that it does not control Expedia but instead has significant influence and accounts for its investment in Expedia as an equity method affiliate. In connection with the Expedia Holdings Split-Off, and the completion of the proxy arrangements, the Stockholders

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LIBERTY EXPEDIA HOLDINGS, INC.

Notes to Condensed Combined Financial Statements (Continued)

(3) Investment in Expedia, Inc. (Continued)

Agreement will be assigned to Expedia Holdings and amended to provide for the assignment of Mr. Diller's proxy over these shares to Expedia Holdings through the proxy arrangement termination date. As a result, Expedia Holdings expects to begin consolidating Expedia as of the completion of the Split-Off, as Expedia Holdings will then control a majority of the voting interest in Expedia, for accounting purposes. In conjunction with the application of acquisition accounting, we anticipate a full step up in basis of Expedia along with a gain related to the difference between our historical basis and the fair value of our interest in Expedia.

        The Governance Agreement with Expedia, which will be assigned to Expedia Holdings in connection with the Split-Off, provides rights related to certain director nominations, registration and other rights and imposes certain restrictions on the ownership of shares of Expedia class B common stock. The rights under the Governance Agreement, as assigned and amended, will be maintained even upon termination of the proxy arrangements and includes a preemptive right. The Company will have preemptive rights that entitle it to purchase a number of shares of Expedia common stock (excluding certain issuances related to options, warrants or convertible securities) so that the Company will maintain the identical ownership interest in Expedia (subject to certain adjustments) that it had immediately prior to such issuance or proposed issuance (but not in excess of 20.01%). Any purchase by Expedia Holdings will be allocated between Expedia common stock and Expedia class B common stock in the same proportion as the issuance or issuances giving rise to the preemptive right, except to the extent that Expedia Holdings opts to acquire shares of Expedia common stock in lieu of shares of Expedia class B common stock.

        As of June 30, 2016, the carrying value of Expedia Holdings' ownership in Expedia was approximately $888 million. The market value of Expedia Holdings' ownership in Expedia as of June 30, 2016 was approximately $2,509 million.

        Expedia Holdings recognized a loss on dilution of investment in Expedia, Inc. of $3.5 million and a gain on dilution of investment of $620 thousand during the six months ended June 30, 2016 and 2015, respectively. In addition, Expedia paid dividends aggregating approximately $11.4 million and $8.5 million which were recorded as reductions to the investment during the six months ended June 30, 2016 and 2015, respectively.

        During the six months ended June, 2016 and 2015, the Company recorded other comprehensive losses of $1.4 million and $13.4 million, respectively, of its share of Expedia's other comprehensive earnings (losses), net of income taxes. Expedia records gains and losses related to foreign currency translation adjustments in other comprehensive income (loss). The pre-tax portion of the Company's share of Expedia's other comprehensive earnings (losses) was losses of $2.3 million and $21.5 million for the six months ended June 30, 2016 and 2015, respectively.

        Upon acquisition and due to subsequent repurchases of Expedia stock by Expedia, the Company allocated excess basis between our carrying value of Expedia and their carrying value. The Company determined the initial applicable useful life of amortizable intangibles to be approximately four years. As a result of Expedia's 2015 acquisitions of Orbitz Worldwide, Inc. ("Orbitz") and HomeAway, Inc. ("HomeAway"), the Company determined the applicable useful life of amortizable intangibles to be approximately six years in connection with excess costs added subsequent to December 31, 2015. Amortization related to intangible assets with identifiable useful lives is included in the Company's share of earnings (losses) of Expedia, Inc. line item in the accompanying condensed combined statements of operations and aggregated $5.9 million and $6.8 million, net of related taxes, for the

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LIBERTY EXPEDIA HOLDINGS, INC.

Notes to Condensed Combined Financial Statements (Continued)

(3) Investment in Expedia, Inc. (Continued)

six months ended June 30, 2016 and 2015, respectively. At June 30, 2016, the excess basis allocated to amortizable intangibles, net of accumulated amortization, was $38.9 million and non-amortizable excess basis was $186.8 million.

Expedia, Inc.

        Summarized financial information for Expedia is as follows:

Expedia, Inc. Consolidated Balance Sheets

 
  June 30,
2016
  December 31,
2015
 
 
  amounts in millions
 

Current assets

  $ 4,164     2,976  

Property and equipment, net

    1,235     1,064  

Goodwill

    8,020     7,993  

Intangible assets, net

    2,646     2,794  

Other assets

    663     659  

Total assets

  $ 16,728     15,486  

Current liabilities

  $ 7,447     5,926  

Deferred income taxes

    512     474  

Long-term debt

    3,197     3,183  

Other liabilities

    1,305     973  

Equity

    4,267     4,930  

Total liabilities and equity

  $ 16,728     15,486  

Expedia, Inc. Consolidated Statements of Operations

 
  Six months ended
June 30,
 
 
  2016   2015  
 
  amounts in millions
 

Revenue

  $ 4,100     3,036  

Cost of revenue

    (809 )   (643 )

Gross profit

    3,291     2,393  

Selling, general and administrative expenses

    (3,189 )   (2,302 )

Amortization

    (174 )   (52 )

Operating income (loss)

    (72 )   39  

Interest expense

    (87 )   (57 )

Other income (expense), net

    (19 )   607  

Income tax (expense) benefit

    76     (130 )

Net income (loss)

    (102 )   459  

Net (income) loss attributable to noncontrolling interests

    25     34  

Net income (loss) attributable to Expedia, Inc. shareholders

  $ (77 )   493  

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LIBERTY EXPEDIA HOLDINGS, INC.

Notes to Condensed Combined Financial Statements (Continued)

(4) Long-Term Debt and Capital Lease Obligations

        Outstanding debt and capital leases at June 30, 2016 and December 31, 2015 are summarized as follows:

 
  June 30,
2016
  December 31,
2015
 
 
  amounts in thousands
 

Bodybuilding Secured Notes

  $ 14,893     17,738  

Revolving line of credit due 2020

    10,946     19,538  

Deferred loan costs

    (80 )   (102 )

Capital lease obligations

    3,361     4,030  

Total obligations

    29,120     41,204  

Less portion classified as current

    (4,745 )   (4,755 )

Total long-term debt and capital lease obligations

  $ 24,375     36,449  

Bodybuilding Notes

        As of June 30, 2016, Bodybuilding has various outstanding secured notes. Principal and interest payments on the secured notes are payable monthly based on the date of issuance. The secured notes are comprised of both fixed and variable rate notes with an interest rate of 4.14% on the fixed rate note and an interest rate of LIBOR plus 250 basis points on the variable rate notes (3.25% and 2.75% on the two variable rate notes at June 30, 2016). The maturity dates on the secured notes range from 2019 to 2022. The land and building purchased by Bodybuilding in March 2012 for its corporate headquarters are secured as collateral under the terms of the master term loan agreement for a portion of the outstanding secured notes. As of June 30, 2016, the total outstanding balance of the secured notes is $14.9 million.

Revolving Line of Credit

        As of June 30, 2016 Bodybuilding had a revolving line of credit (the "Revolver") through J.P. Morgan Chase Bank ("JPM") which is secured by Bodybuilding's inventory and accounts receivable. The maximum amount allowed under the Revolver is $50 million and the outstanding balance accrues interest at LIBOR plus 150 basis points, with a rate option balance that accrues interest at the CB Floating Rate less 125 basis points. The Revolver matures on January 20, 2020. As of June 30, 2016, the outstanding balance on the Revolver is $10.9 million subject to an interest rate of 2% on the first $10 million, and 2.25% on the remaining $946 thousand.

Fair Value of Debt

        The Company estimates the fair value of its secured notes and term loan based on the current rate offered to the Company for debt of the same remaining maturities (level 3). The Company believes that the carrying amount of its Revolver and secured notes approximated fair value at June 30, 2016 and December 31, 2015.

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LIBERTY EXPEDIA HOLDINGS, INC.

Notes to Condensed Combined Financial Statements (Continued)

(4) Long-Term Debt and Capital Lease Obligations (Continued)

Covenant Compliance

        As of June 30, 2016, the company was in compliance with its debt covenants which consist of both financial and nonfinancial covenants.

(5) Stock-Based Compensation

Liberty Incentive Plan

        Liberty Interactive has granted to certain directors, officers, employees and consultants of Liberty Interactive and certain of its subsidiaries stock options to purchase shares of Liberty Ventures common stock and restricted stock awards of Liberty Ventures common stock pursuant to applicable incentive plans in place at Liberty. Each holder of an outstanding option to purchase shares of Liberty Ventures common stock on the date of the Expedia Holdings Split-Off (an "original Ventures option award") will receive an option to purchase shares of the corresponding series of Company common stock (a "new Company option award") and an adjustment to the exercise price and number of shares subject to the original Ventures option award (as so adjusted, an "adjusted Ventures option award"). The exercise prices of and number of shares subject to the new Company option award and the related adjusted Ventures option award will be determined based on the exercise price and number of shares subject to the original Ventures option award, the distribution ratios being used in the Expedia Holdings Split-Off, the pre-Expedia Holdings Split-Off trading price of Liberty Ventures common stock (determined using the volume weighted average price of the applicable series of Liberty Ventures common stock over the three consecutive trading days immediately preceding the Expedia Holdings Split-Off) and the relative post-Expedia Holdings Split-Off trading prices of Liberty Ventures common stock and Company common stock (determined using the volume weighted average price of the applicable series of common stock over the three consecutive trading days beginning on the first trading day following the Expedia Holdings Split-Off on which both the Liberty Ventures common stock and the Company common stock trade in the "regular way" (meaning once the common stock trades using a standard settlement cycle)), such that the pre-Expedia Holdings Split-Off value of the original Ventures option award is allocated between the new Company option award and the adjusted Ventures option award.

        Except as described above, all other terms of an adjusted Ventures option award and a new Company option award (including, for example, the vesting terms thereof) will in all material respects, be the same as those of the corresponding original Ventures option award. The terms of the adjusted Ventures option award will be determined and the new Company option award will be granted as soon as practicable following the determination of the pre- and post-Expedia Holdings Split-Off trading prices of Liberty Ventures and Company common stock, as applicable. The compensation expense relating to employees of Liberty will continue to be recorded at Liberty Interactive. Liberty Interactive had outstanding approximately 3.6 million Liberty Ventures Series A and 1.7 million Liberty Ventures Series B options at June 30, 2016 with a weighted average exercise price of $23.90 and $38.08 per share, respectively. Approximately 2.7 million and 116 thousand of those options, respectively, were exercisable at June 30, 2016 with a weighted average exercise price of $19.38 and $42.33 per share, respectively.

        Included in selling, general and administrative expenses in the accompanying condensed combined statements of operations is a benefit from stock-based compensation of $1.1 million and stock-based compensation expense of $913 thousand for the six months ended June 30, 2016 and 2015, respectively,

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LIBERTY EXPEDIA HOLDINGS, INC.

Notes to Condensed Combined Financial Statements (Continued)

(5) Stock-Based Compensation (Continued)

which relates to Bodybuilding as discussed below. The benefit recognized during the six months ended June 30, 2016 was primarily due to a change in the per unit valuation of outstanding stock appreciation rights.

Bodybuilding Stock Appreciation Rights Plans

        There were approximately 600 thousand stock appreciation rights ("SARs") granted during the six months ended June 30, 2016 under the Bodybuilding 2011 Stock Appreciation Rights Plan. The weighted average grant date fair value of the SARs granted during the six months ended June 30, 2016 was $13.05 per share. As of June 30, 2016, the total unrecognized compensation cost related to 794 thousand unvested Bodybuilding SARs was approximately $10.2 million and will be recognized over a weighted average period of approximately 3.4 years.

(6) Related Party Transactions

        As of June 30, 2015, Bodybuilding had an outstanding note with its parent company, Liberty Interactive Corporation (the "Liberty Note"), in the amount of $13.9 million. The Liberty Note required Bodybuilding to make interest only payments at a 10% interest rate on a quarterly basis with the final payment due January 31, 2020. Bodybuilding voluntarily made principal payments on the outstanding debt of $2.0 million during the six months ended June 30, 2015. As part of a contribution agreement entered into by Liberty Interactive and Bodybuilding on October 26, 2015, the balance of the note and accrued interest which aggregated $13.0 million was considered contributed equity. During the six months ended June 30, 2015, Bodybuilding recognized $774 thousand in interest expense related to the Liberty Note.

        The Company recorded $16 thousand and $427 thousand during the six months ended June 30, 2016 and 2015, respectively, in product sales that were made to the Bodybuilding retail store located in Boise, Idaho, which is owned by a family member of Bodybuilding's former Chief Executive Officer. The relationship with this retail store was terminated during the first quarter of 2016.

        The Company paid $255 thousand and $96 thousand during the six months ended June 30, 2016 and 2015, respectively, to Liberty Interactive for legal and tax expenses that Liberty Interactive remitted on behalf of the Company.

(7) Commitments and Contingencies

Leases

        The Company leases certain warehouse and office space, equipment, furniture and computer software under both capital and noncancelable operating leases that expire at various dates through 2020. The Company is responsible, under all leases, for related building maintenance and property taxes. Total rental expense was $1.2 million and $1.3 million for the six months ended June 30, 2016 and 2015, respectively.

Litigation

        The Company is subject to legal proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is

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LIBERTY EXPEDIA HOLDINGS, INC.

Notes to Condensed Combined Financial Statements (Continued)

(7) Commitments and Contingencies (Continued)

expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed combined financial statements.

        Bodybuilding is engaged in litigation arising from a dispute over the ownership of trademarks relating to JYM brand supplement products. Mr. Stoppani has demanded that Bodybuilding discontinue manufacturing JYM products and sell the remaining inventory. Bodybuilding filed an action against Mr. Stoppani and his company PhD Fitness, LLC ("PhD Fitness") for declaratory relief in U.S. Federal Court seeking a judicial declaration that Bodybuilding is the owner of the JYM trademark. Mr. Stoppani and PhD Fitness have filed counterclaims seeking a declaratory judgment that Mr. Stoppani and PhD Fitness own the JYM mark, actual damages in excess of $50 million (actual amount to be proven at trial), punitive damages of not less than $10 million, injunctive relief and attorneys' fees. Mr. Stoppani and PhD Fitness have also filed a motion for preliminary injunction, seeking to enjoin Bodybuilding from manufacturing or selling any product under the "JYM" name, from using product formulas or specifications developed by Mr. Stoppani in the manufacture of any products, and from using Mr. Stoppani's name or likeness in the sale or promotion of any product sold under the "JYM" name. On September 20, 2016, Bodybuilding.com asked the Court for permission to file an amended complaint to add General Nutrition Center ("GNC") due to Mr. Stoppani and PhD Fitness' launch of a competing supplement line through GNC utilizing the JYM mark.

Certain Risks and Concentrations

        The Company is subject to certain risks and concentrations including dependence on relationships with its vendors. The Company's largest vendors, that accounted for greater than 10% of purchases, aggregated 31% and 29% of total purchases for the six months ended June 30, 2016 and 2015, respectively.

Off-Balance Sheet Arrangements

        Expedia Holdings did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company's financial condition, results of operations, liquidity, capital expenditures or capital resources.

(8) Segment Information

        Expedia Holdings identifies its reportable segments as (A) those combined companies that represent 10% or more of its combined annual revenue, annual Adjusted OIBDA or total assets and (B) those equity method affiliates whose share of earnings or losses represent 10% or more of Expedia Holding's annual pre-tax earnings (losses).

        Expedia Holdings evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue and Adjusted OIBDA. In addition, Expedia Holdings reviews nonfinancial measures such as unique visitors, customer acquisition and conversion rates.

        Expedia Holdings defines Adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses (excluding stock-based compensation). Expedia Holdings believes this measure is an important indicator of the operational strength and performance of its businesses, including each business's ability to service debt and fund capital expenditures. In addition,

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LIBERTY EXPEDIA HOLDINGS, INC.

Notes to Condensed Combined Financial Statements (Continued)

(8) Segment Information (Continued)

this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income (loss), net earnings (loss), cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Expedia Holdings generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

        For the six months ended June 30, 2016, Expedia Holdings has identified the following combined company and equity method investment as its reportable segments:

    Bodybuilding—a wholly-owned Internet retailer of sports, fitness and nutritional supplements. Bodybuilding also hosts an online health-and-fitness publication, offering free fitness content, workout programs, video trainers, recipes, health advice and motivational stories. Bodybuilding's revenue primarily consists of sales of health and wellness products.

    Expedia—an equity method investment of the Company that provides travel and services to leisure and corporate travelers in the United States and abroad as well as various media and advertising offerings to travel and non-travel advertisers. Expedia's revenue primarily consists of sales of travel services.

        Expedia Holdings' operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segments that are also combined companies are the same as those described in the Company's summary of significant accounting policies in the Company's annual financial statements.

Performance Measures

 
  Six months ended June 30,  
 
  2016   2015  
 
  Revenue from
external
customers
  Adjusted
OIBDA
  Revenue from
external
customers
  Adjusted
OIBDA
 
 
  amounts in thousands
 

Bodybuilding

  $ 228,448     15,217     244,952     17,452  

Expedia

    4,099,830     507,472     3,035,997     333,476  

Corporate and Other

                 

    4,328,278     522,689     3,280,949     350,928  

Eliminate Expedia, Inc. 

    (4,099,830 )   (507,472 )   (3,035,997 )   (333,476 )

Combined Expedia Holdings

  $ 228,448     15,217     244,952     17,452  

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LIBERTY EXPEDIA HOLDINGS, INC.

Notes to Condensed Combined Financial Statements (Continued)

(8) Segment Information (Continued)

Other Information

 
  June 30, 2016  
 
  Total
Assets
  Investment
in Expedia
  Capital
Expenditures
 
 
  amounts in thousands
 

Bodybuilding

  $ 185,990         7,043  

Expedia

    16,728,542         379,981  

Corporate and other

    888,270     888,270      

    17,802,802     888,270     387,024  

Eliminate Expedia, Inc. 

    (16,728,542 )       (379,981 )

Combined Expedia Holdings

  $ 1,074,260     888,270     7,043  

        The following table provides a reconciliation of segment Adjusted OIBDA to earnings (loss) before income taxes:

 
  Six months ended
June 30,
 
 
  2016   2015  
 
  amounts in thousands
 

Combined segment Adjusted OIBDA

  $ 15,217     17,452  

Stock-based compensation

    1,084     (913 )

Depreciation and amortization

    (9,833 )   (9,962 )

Interest expense

    (579 )   (589 )

Related party interest expense

        (774 )

Share of earnings (loss) of Expedia, Inc. 

    (21,700 )   80,099  

Gain (loss) on dilution of Expedia, Inc. 

    (3,465 )   620  

Other, net

    (151 )   (365 )

Earnings (loss) before income taxes

  $ (19,427 )   85,568  

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Liberty Interactive Corporation:

        We have audited the accompanying combined balance sheets of Liberty Expedia Holdings, Inc. (the Company) as of December 31, 2015 and 2014, and the related combined statements of operations, comprehensive earnings (loss), cash flows, and equity for each of the years in three-year period ended December 31, 2015. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We did not audit the financial statements of Expedia, Inc., (a 15.7% percent owned investee company as of December 31, 2015). The Company's investment in Expedia, Inc. at December 31, 2015, and 2014, included $763,868,000 and $327,442,000, respectively, and its share of earnings of Expedia, Inc. included $140,670,000, $71,765,000 and $39,496,000 for the years 2015, 2014 and 2013, respectively, that we did not audit. The financial statements of Expedia, Inc. were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the portion of the amounts included for Expedia, Inc. referred to above, is based solely on the report of the other auditors.

        We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.

        In our opinion, based on our audits and the reports of the other auditors, the combined financial statements referred to above present fairly, in all material respects, the financial position of Liberty Expedia Holdings, Inc. as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

 

/s/ KPMG LLP

Denver, Colorado
March 24, 2016

 

 

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LIBERTY EXPEDIA HOLDINGS, INC.

Combined Balance Sheets

December 31, 2015 and 2014

 
  2015   2014  
 
  amounts in thousands
 

Assets

             

Current assets:

             

Cash and cash equivalents

  $ 2,243     1,631  

Accounts receivable

    701     1,101  

Inventory, net

    53,194     48,961  

Prepaid expenses

    4,661     3,870  

Other current assets

    3,047     4,787  

Total current assets

    63,846     60,350  

Investment in Expedia, Inc. (note 3)

    927,057     513,814  

Property and equipment

    55,640     51,948  

Accumulated depreciation

    (26,012 )   (20,331 )

    29,628     31,617  

Intangible assets not subject to amortization (note 4):

             

Goodwill

    57,462     57,462  

Tradename

    19,902     19,902  

    77,364     77,364  

Intangible assets subject to amortization, net (note 4)

    24,142     22,298  

Other assets, net

    3,556     343  

Total assets

  $ 1,125,593     705,786  

Liabilities and Equity

             

Current liabilities:

             

Accounts payable

  $ 22,505     25,823  

Accrued liabilities

    6,805     8,309  

Related party notes payable (note 9)

        4,000  

Accrued stock compensation

    5,545     4,948  

Current portion of long-term debt and capital lease obligations (note 5 and 10)

    4,755     23,569  

Deferred revenue

    4,090     3,625  

Total current liabilities

    43,700     70,274  

Related party notes payable (note 9)

        11,902  

Long-term debt and capital lease obligations, net (note 5 and 10)

    36,449     12,419  

Deferred income tax liabilities (note 6)

    304,483     156,150  

Income taxes payable (note 6)

    68,842     65,743  

Total liabilities

    453,474     316,488  

Equity

             

Parent's investment

    639,002     618,473  

Accumulated other comprehensive earnings (loss), net of taxes

    (32,661 )   (16,136 )

Retained earnings (accumulated deficit)

    65,778     (215,101 )

Total parent's investment

    672,119     387,236  

Noncontrolling interests in equity of combined company

        2,062  

Total equity

    672,119     389,298  

Commitments and contingencies (note 10)

             

Total liabilities and equity

  $ 1,125,593     705,786  

   

See accompanying notes to combined financial statements.

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LIBERTY EXPEDIA HOLDINGS, INC.

Combined Statements of Operations

Years ended December 31, 2015, 2014 and 2013

 
  2015   2014   2013  
 
  amounts in thousands, except per
share amounts

 

Total revenue, net

  $ 464,415     454,733     420,990  

Cost of retail sales (exclusive of depreciation shown separately below)

    351,590     353,822     328,246  

Gross profit

    112,825     100,911     92,744  

Operating costs and expenses:

                   

Operating expense

    31,912     29,268     26,584  

Selling, general and administrative

    47,817     40,820     35,665  

Stock-based compensation expense (note 7)

    1,882     1,679     1,722  

Depreciation and amortization

    20,938     19,307     19,368  

    102,549     91,074     83,339  

Operating income (loss)

    10,276     9,837     9,405  

Other income (expense):

                   

Interest expense

    (1,218 )   (1,214 )   (734 )

Related party interest expense (note 9)

    (1,240 )   (1,867 )   (2,258 )

Share of earnings (losses) of Expedia, Inc. (note 3)

    117,518     58,105     30,630  

Gain (loss) on dilution of investment in Expedia, Inc. (note 3)

    319,587     2,768     (921 )

Other, net

    (430 )   (525 )   12  

    434,217     57,267     26,729  

Earnings (loss) from continuing operations before income taxes

    444,493     67,104     36,134  

Income tax (expense) benefit (note 6)

    (162,952 )   (21,369 )   (10,099 )

Net earnings (loss)

    281,541     45,735     26,035  

Less net earnings (loss) attributable to the noncontrolling interests

    626     537     538  

Net earnings (loss) attributable to Liberty Expedia Holdings shareholders

  $ 280,915     45,198     25,497  

Unaudited Pro Forma basic net earnings (loss) attributable to Series A and Series B Liberty Expedia Holdings, Inc. shareholders per common share (note 2)

  $ 4.94     0.80     0.45  

   

See accompanying notes to combined financial statements.

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LIBERTY EXPEDIA HOLDINGS, INC.

Combined Statements of Comprehensive Earnings (Loss)

Years ended December 31, 2015, 2014 and 2013

 
  2015   2014   2013  
 
  amounts in thousands
 

Net earnings (loss)

  $ 281,541     45,735     26,035  

Other comprehensive earnings (loss), net of taxes:

                   

Share of other comprehensive earnings (loss) of Expedia, Inc. 

    (16,525 )   (17,808 )   1,951  

Other comprehensive earnings (loss)

    (16,525 )   (17,808 )   1,951  

Comprehensive earnings (loss)

    265,016     27,927     27,986  

Less comprehensive earnings (loss) attributable to the noncontrolling interest

    626     537     538  

Comprehensive earnings (loss) attributable to Liberty Expedia Holdings, Inc. shareholders

  $ 264,390     27,390     27,448  

   

See accompanying notes to combined financial statements.

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LIBERTY EXPEDIA HOLDINGS, INC.

Combined Statements of Cash Flows

Years ended December 31, 2015, 2014 and 2013

 
  2015   2014   2013  
 
  amounts in thousands
 

Cash flows from operating activities:

                   

Net earnings (loss)

  $ 281,541     45,735     26,035  

Adjustments to reconcile net earnings to net cash provided by operating activities:

                   

Depreciation and amortization

    20,938     19,307     19,368  

Stock-based compensation

    1,882     1,679     1,722  

Cash payments for stock-based compensation

    (1,129 )   (148 )   (1,040 )

Noncash interest expense

    166     34     2  

Share of (earnings) losses of Expedia, Inc. 

    (117,518 )   (58,105 )   (30,630 )

Cash receipts from returns on Expedia, Inc. 

    19,782     15,279     12,923  

(Gain) loss on dilution of investment in affiliate

    (319,587 )   (2,768 )   921  

Deferred income tax expense (benefit)

    158,461     19,216     4,921  

Other noncash charges (credits), net

    (2,629 )   525     (10 )

Changes in operating assets and liabilities

                   

Current and other assets

    (3,314 )   6,361     (26,254 )

Payables and other liabilities

    (895 )   (8,891 )   17,762  

Net cash provided (used) by operating activities

    37,698     38,224     25,720  

Cash flows from investing activities:

                   

Capital expended for property and equipment

    (20,886 )   (17,535 )   (24,248 )

Investment in Expedia, Inc. 

    (22,575 )   (20,404 )   (25,273 )

Net cash provided (used) by investing activities

    (43,461 )   (37,939 )   (49,521 )

Cash flows from financing activities:

                   

Borrowings of debt

    494,192     455,328     231,836  

Repayments of debt

    (492,609 )   (462,179 )   (219,858 )

Contribution from (distribution to) parent, net

    38,096     5,125     12,350  

Purchase of noncontrolling interest

    (33,268 )        

Other financing activities, net

    (36 )        

Net cash provided (used) by financing activities

    6,375     (1,726 )   24,328  

Net increase (decrease) in cash and cash equivalents

    612     (1,441 )   527  

Cash and cash equivalents at beginning of period

    1,631     3,072     2,545  

Cash and cash equivalents at end of period

  $ 2,243     1,631     3,072  

        Supplemental disclosure to the combined statements of cash flows:

 
  Years ended
December 31,
 
 
  2015   2014   2013  
 
  amounts in thousands
 

Cash paid for interest

    2,321     3,047     3,152  

Cash paid for taxes

    1,389     2,776     2,649  

Non cash transactions:

                   

Property and equipment acquired with capital lease obligations

        6     6,858  

   

See accompanying notes to combined financial statements.

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LIBERTY EXPEDIA HOLDINGS, INC.

Combined Statement of Equity

Years ended December 31, 2015, 2014 and 2013

 
  Parent's
investment
  Accumulated
other
comprehensive
earnings (loss)
  Retained
Earnings
(Losses)
  Noncontrolling
interest in
equity of
Combined
Company
  Total
equity
 
 
  (amounts in thousands)
 

Balance at January 1, 2013

  $ 601,046     (279 )   (285,832 )   1,023     315,958  

Net earnings (loss)

                25,497     538     26,035  

Other comprehensive earnings (loss)

          1,951                 1,951  

Contributions from (distributions to) parent, net          

    12,350                       12,350  

Other

    (48 )         36     (36 )   (48 )

Balance at December 31, 2013

  $ 613,348     1,672     (260,299 )   1,525     356,246  

Net earnings

            45,198     537     45,735  

Other comprehensive earnings (loss)

        (17,808 )             (17,808 )

Contributions from (distributions to) parent, net          

    5,125                 5,125  

Balance at December 31, 2014

  $ 618,473     (16,136 )   (215,101 )   2,062     389,298  

Net earnings

            280,915     626     281,541  

Other comprehensive earnings (loss)

        (16,525 )             (16,525 )

Contributions from (distributions to) parent, net          

    51,109                 51,109  

Acquisition of noncontrolling interest

    (30,580 )           (2,688 )   (33,268 )

Other

            (36 )       (36 )

Balance at December 31, 2015

  $ 639,002     (32,661 )   65,778         672,119  

   

See accompanying notes to combined financial statements.

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements

December 31, 2015, 2014 and 2013

(1) Basis of Presentation

        During November 2015, the board of directors of Liberty Interactive Corporation ("Liberty Interactive") authorized management to pursue a plan to spin-off to holders of its Liberty Ventures Group ("Liberty Ventures") common stock, of a newly formed entity, Liberty Expedia Holdings, Inc. ("Expedia Holdings Split-Off" or "Expedia Split-Off"). Expedia Holdings will be comprised of, among other things, Liberty Interactive's ownership interest in Expedia, Inc. ("Expedia"), as well as Liberty Interactive's subsidiary Bodybuilding.com., LLC ("Bodybuilding").

        The Expedia Split-Off is intended to be tax-free to stockholders of Liberty Ventures and the completion of the Expedia Split-Off will be subject to various conditions, including the receipt of an opinion of tax counsel.

        The accompanying combined financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and represent a combination of the historical financial information of Bodybuilding and Liberty Interactive's interest in Expedia. These financial statements refer to the combination of the aforementioned subsidiary and investment as "Expedia Holdings," "the Company," "us," "we" and "our" in the notes to the combined financial statements. The Expedia Split-Off will be accounted for at historical cost due to the pro rata nature of the distribution to holders of Liberty Ventures common stock. All significant intercompany accounts and transactions have been eliminated in the combined financial statements.

        Expedia Holdings does not control the decision making process or business management practices of this affiliate. Accordingly, the Company relies on management of this affiliate to provide it with accurate financial information prepared in accordance with GAAP that the Company uses in the application of the equity method. In addition, Expedia Holdings relies on audit reports that are provided by the affiliate's independent auditors on the financial statements of such affiliate. The Company is not aware, however, of any errors in or possible misstatements of the financial information provided by its equity affiliate that would have a material effect on Expedia Holding's combined financial statements.

Description of Business

        Bodybuilding is an Internet retailer of sports, fitness, dietary supplements and other health and wellness products. It is also a large publisher of online health and fitness content, offering complimentary fitness content, workout programs, video trainers, articles, recipes, health advice and motivational stories. The online model also includes a combination of detailed product information and real-time user reviews to help its visitors achieve their health and fitness goals. Bodybuilding's customers include gym-goers, recreational athletes, bodybuilders and any individual seeking to improve their level of health and fitness. Bodybuilding strives to provide everything necessary to get fit, as well as a platform for users to share their inspirational story once they get there.

        Expedia provides travel products and services to leisure and corporate travelers in the United States and abroad as well as various media and advertising offerings to travel and non-travel advertisers. Expedia is accounted for using the equity method and more fully described in note 3.

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(1) Basis of Presentation (Continued)

Split-Off of Expedia Holdings from Liberty Interactive Corporation

        Following the Expedia Split-Off, Liberty Interactive and Expedia Holdings will operate as separate, publicly traded companies, and neither will have any stock ownership, beneficial or otherwise, in the other. In connection with the Expedia Split-Off, Liberty Interactive and Expedia Holdings will enter into certain agreements in order to govern certain of the ongoing relationships between the two companies after the Expedia Split-Off and to provide for an orderly transition. These agreements include a reorganization agreement, a services agreement, a facilities sharing agreement and a tax sharing agreement.

        The reorganization agreement will provide for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Expedia Split-Off, certain conditions to the Expedia Split-Off and provisions governing the relationship between Expedia Holdings and Liberty Interactive with respect to and resulting from the Expedia Split-Off. The tax sharing agreement will provide for the allocation and indemnification of tax liabilities and benefits between Liberty Interactive and Expedia Holdings and other agreements related to tax matters. Pursuant to the services agreement, Liberty will provide Expedia Holdings with general and administrative services including legal, tax, accounting, treasury and investor relations support. Under the facilities sharing agreement, Expedia Holdings will share office space with Liberty and related amenities at Liberty's corporate headquarters. Expedia Holdings will reimburse Liberty for direct, out-of-pocket expenses incurred by Liberty in providing these services and for costs that will be negotiated semi-annually.

(2) Summary of Significant Accounting Policies

Cash and Cash Equivalents

        Cash equivalents consist of highly liquid investments which are readily convertible into cash and have maturities of three months or less at the time of acquisition. The Company maintains its cash and cash equivalents in various bank deposit accounts which, at times, may exceed the federally insured limits. The Company has not experienced any losses in such accounts.

Accounts Receivable and Allowance for Doubtful Accounts

        Receivables consist of amounts in transit from banks for customer credit card, debit card and electronic funds transfer transactions that are generally processed by the banks, and collected by the Company, within one to three days of authorization. Receivables also include advertising revenue that is due from vendors within 30 days. Based on the nature of these transactions, no allowance for doubtful accounts has been recorded as of December 31, 2015 and 2014.

Inventory

        Inventory, consisting entirely of finished goods, is stated at the lower of cost or market. Cost is determined on the first-in, first-out method.

        In July 2015, the Financial Accounting Standards Board ("FASB") issued new accounting guidance that changes the measurement principle for inventory from the lower of cost or market to lower of cost

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(2) Summary of Significant Accounting Policies (Continued)

and net realizable value. The new principle applies to entities that measure inventory using a method other than last-in, first-out or the retail inventory method. The new standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2016. The Company is currently evaluating the effect that the updated standard will have on its combined financial statements, but does not believe that the standard will significantly impact its combined financial statements and related disclosures.

Fair Value of Financial Instruments

        For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs, other than quoted market prices included within Level 1, are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

Investments

        For those investments in affiliates in which the Company has the ability to exercise significant influence, the equity method of accounting is used. Under this method, the investment, originally recorded at cost, is adjusted to recognize the Company's share of net earnings or losses of the affiliate as they occur rather than as dividends or other distributions are received. Losses are limited to the extent of the Company's investment in, advances to and commitments for the investee. The Company's share of net earnings or loss of affiliates also includes any other than temporary declines in fair value recognized during the period. Changes in the Company's proportionate share of the underlying equity of an equity method investee, which result from the issuance of additional equity securities by such equity investee, are recognized in the statement of operations through the gain (loss) on dilution of investment in affiliate line item. To the extent there is a difference between our ownership percentage in the underlying equity of an equity method investee and our carrying value, such difference is accounted for as if the equity method investee were a consolidated subsidiary.

        The Company continually reviews its equity investments to determine whether a decline in fair value below the carrying value is other than temporary. The primary factors the Company considers in its determination are the length of time that the fair value of the investment is below the Company's carrying value; the severity of the decline; and the financial condition, operating performance and near term prospects of the investee. In addition, the Company considers the reason for the decline in fair value, be it general market conditions, industry specific or investee specific; analysts' ratings and estimates of 12 month share price targets for the investee; changes in stock price or valuation subsequent to the balance sheet date; and the Company's intent and ability to hold the investment for a period of time sufficient to allow for a recovery in fair value. If the decline in fair value is deemed to be other than temporary, the carrying value of the investment is written down to fair value. In situations where the fair value of an investment is not evident due to a lack of a public market price or other factors, the Company uses its best estimates and assumptions to arrive at the estimated fair value of such investment. The Company's assessment of the foregoing factors involves considerable management judgment and accordingly, actual results may differ materially from the Company's

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(2) Summary of Significant Accounting Policies (Continued)

estimates and judgments. Write-downs for equity method investments would be included in share of earnings (losses) of affiliates.

        Other investments in which the Company's ownership interest is less than 20%, unless the Company has the ability to exercise significant influence, are carried at cost. The cost balances will be evaluated using a qualitative assessment at each reporting period for impairment. Write-downs for cost investments would be included in the combined statements of operations as other than temporary declines in fair value. Bodybuilding had investments carried at cost in the amount of $2.6 million, which are included in other assets, net on the combined balance sheets as of December 31, 2015.

Property and Equipment

        Property and equipment consisted of the following:

 
  December 31, 2015   December 31, 2014  
 
  Total   Owned   Under
Capital
Lease
  Total   Owned   Under
Capital
Lease
 
 
  amounts in thousands
 

Land

  $ 2,893     2,893         2,892     2,892      

Building

    14,438     14,317     121     14,437     14,316     121  

Machinery and equipment

    14,414     8,434     5,980     12,371     6,391     5,980  

Computer software and equipment

    23,877     23,119     758     21,934     21,176     758  

Construction in progress

    18     18         314     314      

    55,640     48,781     6,859     51,948     45,089     6,859  

Accumulated depreciation

    (26,012 )   (23,614 )   (2,398 )   (20,331 )   (18,993 )   (1,338 )

  $ 29,628     25,167     4,461     31,617     26,096     5,521  

        Property and equipment that is owned is recorded at cost. Plant and equipment under capital leases are stated at the present value of minimum lease payments. Depreciation is computed using the straight-line method using estimated useful lives of 3 to 5 years for computer software and equipment, 7 years for machinery and equipment and 39 years for buildings. Depreciation expense for the years ended December 31, 2015, 2014 and 2013 was $6.9 million, $7.0 million and $7.0 million, respectively. Included in depreciation expense for the years ended December 31, 2015, 2014 and 2013 was depreciation expense related to assets under capital lease obligations which aggregated $1.1 million, $1.1 million and $277 thousand, respectively. Repairs and maintenance costs are charged to expense when incurred.

Goodwill and Other Intangible Assets

        Goodwill and other intangible assets with indefinite useful lives (collectively, "indefinite lived intangible assets") are not amortized, but instead are tested for impairment at least annually. Our annual impairment assessment of our indefinite-lived intangible assets is performed during the fourth quarter of each year.

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(2) Summary of Significant Accounting Policies (Continued)

        The Company utilizes a qualitative assessment for determining whether step one of the goodwill impairment analysis is necessary. The accounting guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. In evaluating goodwill on a qualitative basis the Company reviews the business performance and evaluates other relevant factors as identified in the relevant accounting guidance to determine whether it was more likely than not that an indicated impairment exists. The Company considers whether there are any negative macroeconomic conditions, industry specific conditions, market changes, increased competition, increased costs in doing business, management challenges, the legal environments and how these factors might impact company specific performance in future periods.

        If a step one test is considered necessary based on the qualitative factors, the Company compares the estimated fair value of each reporting unit to its carrying value. Developing estimates of fair value requires significant judgments, including making assumptions about appropriate discount rates, perpetual growth rates, relevant comparable market multiples, public trading prices and the amount and timing of expected future cash flows. The cash flows employed in Expedia Holding's valuation analyses are based on management's best estimates considering current marketplace factors and risks as well as assumptions of growth rates in future years. There is no assurance that actual results in the future will approximate these forecasts. For those reporting units whose carrying value exceeds the fair value, a second test is required to measure the impairment loss (the "Step 2 Test"). In the Step 2 Test, the fair value (Level 3) of the reporting unit is allocated to all of the assets and liabilities of the reporting unit with any residual value being allocated to goodwill. Any excess of the carrying value of the goodwill over this allocated amount is recorded as an impairment charge.

        The accounting guidance also permits entities to first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If the qualitative assessment supports that it is more likely than not that the carrying value of the Company's indefinite-lived intangible assets, other than goodwill, exceeds its fair value, then a quantitative assessment is performed. If the carrying value of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. There were no impairment charges related to indefinite-lived intangible assets during the years ended December 31, 2015, 2014 or 2013.

Websites and Internal Use Software Development Costs

        Certain costs incurred during the application development stage related to the development of internal use software are capitalized and included in intangibles. Capitalization occurs when the preliminary project design state is completed and management has authorized further funding for the project, which it deems probable of completion and to be used for the function intended. Capitalized costs include amounts directly related to website and software development such as payroll and payroll-related costs for employees and contractors who are directly associated with, and who devote time to, the development effort. Capitalization of such costs ceases when the project is substantially complete and ready for its intended use.

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(2) Summary of Significant Accounting Policies (Continued)

Impairment of Long-lived Assets

        Intangible assets with definite lives and other long-lived assets are carried at cost and are amortized on a straight-line basis over their estimated useful lives. The Company periodically reviews the carrying amounts of its property and equipment and its intangible assets (other than goodwill and indefinite-lived intangibles) to determine whether current events or circumstances indicate that such carrying amounts may not be recoverable. If the carrying amount of the asset group is greater than the expected undiscounted cash flows to be generated by such asset group, including its ultimate disposition, an impairment adjustment is to be recognized. Such adjustment is measured by the amount that the carrying value of such asset groups exceeds their fair value. The Company generally measures fair value by considering sale prices for similar asset groups or by discounting estimated future cash flows using an appropriate discount rate. Considerable management judgment is necessary to estimate the fair value of asset groups. Accordingly, actual results could vary significantly from such estimates. Asset groups to be disposed of are carried at the lower of their financial statement carrying amount or fair value less costs to sell. There was no indication of impairment of long-lived assets during the years ended December 31, 2015, 2014 or 2013.

Noncontrolling Interest

        Noncontrolling interest relates to the equity ownership interest in Bodybuilding that the Company did not wholly own until October 2015. The Company reports noncontrolling interest of the combined company within equity in the balance sheet and the amount of combined net income attributable to the parent and to the noncontrolling interest is presented in the statements of operations. Also, changes in ownership interest in the combined company in which the Company maintains a controlling interest are recorded in equity.

Revenue Recognition

        Revenue from product sales is recognized when all the following criteria are met: a customer executes an order, the sales price and shipping charge has been determined, credit card authorization has occurred and collection is reasonably assured and it is probable that the product has been received by the customer, based on estimated delivery times. Shipping charges billed to customers are classified as revenue. The sales price of orders that have been shipped, but for which the Company estimates that the order has not yet been received by the customer, is recorded as deferred revenue and included in other current liabilities.

        An allowance for returned merchandise is provided as a percentage of sales based on historical experience. The total reduction in sales due to returns for the years ended December 31, 2015, 2014 and 2013 aggregated $5.1 million, $6.4 million and $10.7 million, respectively. Sales tax collected from customers on retail sales is recorded on a net basis and is not included in revenue.

        In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated guidance will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect transition method. This guidance is effective for fiscal years,

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(2) Summary of Significant Accounting Policies (Continued)

and interim periods within those fiscal years, beginning after December 15, 2017. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its financial statements and related disclosures.

Cost of Sales

        Cost of sales primarily includes actual product cost, product promotions and volume purchase discounts received from suppliers, shipping and handling costs and warehouse costs.

Vendor Rebates

        The Company enters into arrangements with certain vendors through which the Company receives rebates for volume purchases or sales made during the year. As the right of offset exists under these arrangements, most rebates receivable under these arrangements are recorded as a reduction in the vendors' accounts payable balances on the combined balance sheets and represent the estimated amounts due to the Company under the rebate provisions of such contracts. The corresponding rebate income is recorded as a reduction of cost of goods sold based on sales of the associated inventory.

Advertising Costs

        Advertising costs are expensed as incurred. Advertising expense aggregated $9.4 million, $8.3 million and $7.0 million for the years ended December 31, 2015, 2014 and 2013, respectively. Advertising costs are reflected in selling, general and administrative expense in our combined statements of operations.

Stock-Based Compensation

        As more fully described in note 7, the Company has granted to certain management and key employees stock appreciation rights ("SARs") that will be settled in cash. The Company measures the cost of employee services received in exchange for SARs based on the fair value of the SARs, which is measured at each reporting date.

        Stock-based compensation expense was $1.9 million, $1.7 million and $1.7 million for the years ended December 31, 2015, 2014 and 2013, respectively, included in selling, general and administrative expense in the accompanying combined statements of operations.

Income Taxes

        The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying value amounts and income tax bases of assets and liabilities and the expected benefits of utilizing net operating loss and tax credit carryforwards. The deferred tax assets and liabilities are calculated using enacted tax rates in effect for each taxing jurisdiction in which the Company operates for the year in which those temporary differences are expected to be recovered or settled. Net deferred tax assets are then reduced by a valuation allowance if the Company believes it is more likely than not such net deferred tax assets will not be realized. The effect on deferred tax assets

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(2) Summary of Significant Accounting Policies (Continued)

and liabilities of an enacted change in tax rates is recognized in income in the period that includes the enactment date.

        When the tax law requires interest to be paid on an underpayment of income taxes, the Company recognizes interest expense from the first period the interest would begin accruing according to the relevant tax law. Such interest expense is included in interest expense in the accompanying combined statements of operations. Any accrual of penalties related to underpayment of income taxes on uncertain tax positions is included in other income (expense) in the accompanying combined statements of operations.

        We recognize in our combined financial statements the impact of a tax position, if that position is more likely than not to be sustained upon an examination, based on the technical merits of the position.

        In November 2015, the FASB issued new accounting guidance to simplify the presentation of deferred income taxes. The new guidance requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet and permits the use of either a retrospective or prospective transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early application permitted. The Company has early adopted this guidance using the retrospective transition method. This new guidance affected presentation, but did not affect the Company's combined financial position, results of operations or cash flows.

Certain Risks and Concentrations

        The Company is subject to certain risks and concentrations including dependence on relationships with its vendors. The Company's largest vendors, that accounted for greater than 10% of purchases, aggregated 30%, 21% and 33% of total purchases for the years ended December 31, 2015, 2014 and 2013, respectively.

Contingent Liabilities

        Periodically, we review the status of all significant outstanding matters to assess any potential financial exposure. When (i) it is probable that a liability has been incurred and (ii) the amount of the loss can be reasonably estimated, we record the estimated loss in our combined statements of operations. We provide disclosure in the notes to the combined financial statements for loss contingencies that do not meet both these conditions if there is a reasonable possibility that a loss may have been incurred that would be material to the financial statements. Significant judgment is required to determine the probability that a liability has been incurred and whether such liability is reasonably estimable. We base accruals made on the best information available at the time which can be highly subjective. The final outcome of these matters could vary significantly from the amounts included in the accompanying combined financial statements.

Comprehensive Earnings (Loss)

        Comprehensive earnings (loss) consists of net income (loss) and the Company's share of the comprehensive earnings (loss) of our equity method affiliate.

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(2) Summary of Significant Accounting Policies (Continued)

Pro Forma Earnings per Share (EPS)

        Unaudited pro forma earnings (loss) per common share for all periods presented is computed by dividing net earnings (loss) for the respective period by 56,821,431 common shares, which is the aggregate number of shares of Series A and Series B common stock that would have been issued if the Expedia Split-Off had occurred on December 31, 2015, assuming a 0.4 distribution ratio on Series A and Series B for every share of Series A or B Liberty Ventures common stock outstanding.

Estimates

        The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers (i) application of the equity method of accounting for Expedia, Inc., (ii) recoverability of software development costs and other intangible assets, (iii) estimates of retail-related adjustments and allowances to be its most significant estimates and (iv) accounting for income taxes.

(3) Investment in Expedia, Inc.

        Expedia is an online travel company, empowering business and leisure travelers with the tools and information they need to efficiently research, plan, book and experience travel. Expedia seeks to grow its business through a dynamic portfolio of travel brands, including its majority owned subsidiaries that feature the a broad supply portfolio—including approximately 271,000 hotels in 200 countries, 400 airlines, packages, rental cars, cruises, as well as destination services and activities.

        Effective August 9, 2005, IAC/InterActiveCorp ("IAC") completed the spin-off of substantially all of its travel and travel-related businesses by way of the distribution of all outstanding shares of Expedia to IAC stockholders. Subsequent to the spin-off of Expedia from IAC, Liberty Interactive owned approximately 20% of the outstanding Expedia common stock and 52% of the voting interest in Expedia. As of December 31, 2015, the Company owns an approximate 15.7% equity interest and 52.2% voting interest in Expedia. Historically, Liberty Interactive has been a party to a Stockholders Agreement with Mr. Barry Diller, Chairman of the Board and Senior Executive Officer of Expedia, pursuant to which Mr. Diller held an irrevocable proxy over all the shares of Expedia common stock and Expedia class B common stock owned by Liberty Interactive. Liberty Interactive is also subject to a Governance Agreement with Expedia which provides for the right to appoint approximately 20% of the members of Expedia's board of directors, which is currently comprised of 13 members (three of which were appointed by Liberty Interactive). Based on the Stockholders Agreement and the Governance Agreement, the Company determined that it does not control Expedia but instead has significant influence and accounts for its investment in Expedia as an equity method affiliate. In connection with the Expedia Holdings Split-Off, and the completion of the proxy arrangements, the Stockholders Agreement will be assigned to Expedia Holdings and amended to provide for the assignment of Mr. Diller's proxy over these shares to Expedia Holdings through the proxy arrangement termination date. As a result, Expedia Holdings expects to begin consolidating Expedia as of the completion of the Split-Off, as Expedia Holdings will then control a majority of the voting interest in Expedia, for accounting purposes. In conjunction with the application of acquisition accounting we anticipate a full

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(3) Investment in Expedia, Inc. (Continued)

step up in basis of Expedia along with a gain related to the difference between our historical basis and the fair value of our interest in Expedia.

        The Governance Agreement with Expedia, which will be assigned to Expedia Holdings in connection with the Split-Off, provides rights related to certain director nominations, registration and other rights and imposes certain restrictions on the ownership of shares of Expedia class B common stock. The rights under the Governance Agreement, as assigned and amended, will be maintained even upon termination of the proxy arrangements and includes a preemptive right. The Company will have preemptive rights that entitle it to purchase a number of shares of Expedia common stock (excluding certain issuances related to options, warrants or convertible securities) so that the Company will maintain the identical ownership interest in Expedia (subject to certain adjustments) that it had immediately prior to such issuance or proposed issuance (but not in excess of 20.01%). Any purchase by Expedia Holdings will be allocated between Expedia common stock and Expedia class B common stock in the same proportion as the issuance or issuances giving rise to the preemptive right, except to the extent that Expedia Holdings opts to acquire shares of Expedia common stock in lieu of shares of Expedia class B common stock.

        During March 2012, Liberty Interactive entered into a forward sales contract on 12 million shares of Expedia common stock at a per share forward price of $34.316. The forward contract was settled in October 2012 for cash proceeds of $412 million and the 12 million shares of Expedia common stock, previously held as collateral, were released to the counterparty.

        During April 2015, October 2014 and March 2013, Liberty Interactive exercised its pre-emptive rights under the Governance Agreement and purchased, directly from Expedia, an additional 265 thousand, 265 thousand and 468 thousand, respectively, for $22.6 million, $20.4 million and $25.3 million, respectively.

        During the year ended December 31, 2008, Liberty Interactive recorded a $119.0 million other-than-temporary impairment charge related to the investment in Expedia.

        As of December 31, 2015, the carrying value of Expedia Holdings' ownership in Expedia was approximately $927 million. The market value of Expedia Holdings' ownership in Expedia as of December 31, 2015 was approximately $2,934 million.

        Expedia Holdings recognized a gain on dilution of investment in affiliate of $319.6 million and $2.8 million during the years ended December 31, 2015 and 2014, respectively, and a loss of $921 thousand during the year ended December 31, 2013. The significant gain in 2015 is due to an acquisition by Expedia that was partially executed through the issuance of Expedia common stock. This diluted Expedia Holdings' ownership percentage at a price greater than our cost basis. In addition, Expedia paid dividends aggregating approximately $20 million, $15 million and $13 million which were recorded as reductions to the investment during the years ended December 31, 2015, 2014 and 2013, respectively.

        During the years ended December 31, 2015, 2014 and 2013, the Company recorded other comprehensive losses of $16.5 million and $17.8 million and earnings of $2.0 million, respectively, of its share of Expedia's other comprehensive earnings (losses), net of income taxes. Expedia records gains and losses related to foreign currency translation adjustments in other comprehensive income. The

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(3) Investment in Expedia, Inc. (Continued)

pre-tax portion of the Company's share of Expedia's other comprehensive earnings (losses) was losses of $26.7 million and $28.7 million and earnings of $3.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.

        Upon acquisition and due to subsequent repurchases of Expedia stock (at that level), the Company allocated excess basis between our carrying value of Expedia and their carrying value. The Company determined the applicable useful life of amortizable intangibles to be approximately four years. Amortization related to intangible assets with identifiable useful lives is included in the Company's share of earnings (losses) from affiliates line item in the accompanying combined statements of operations and aggregated $14.4 million, $8.5 million and $5.5 million, net of related taxes, for the years ended December 31, 2015, 2014 and 2013, respectively. At December 31, 2015, the excess basis allocated to amortizable intangibles, net of accumulated amortization, was $44.6 million and non-amortizable excess basis was $118.6 million.

Expedia, Inc.

        Summarized financial information for Expedia is as follows:

Expedia, Inc. Consolidated Balance Sheets

 
  December 31,
2015
  December 31,
2014
 
 
  amounts in millions
 

Current assets

  $ 2,979     2,924  

Property and equipment, net

    1,064     553  

Goodwill

    7,993     3,956  

Intangible assets, net

    2,794     1,290  

Other assets

    674     298  

Total assets

  $ 15,504     9,021  

Current liabilities

  $ 5,926     4,187  

Deferred income taxes

    474     453  

Long-term debt

    3,201     1,747  

Other liabilities

    973     740  

Equity

    4,930     1,894  

Total liabilities and equity

  $ 15,504     9,021  

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(3) Investment in Expedia, Inc. (Continued)

Expedia, Inc. Consolidated Statements of Operations

 
  Years ended December 31,  
 
  2015   2014   2013  
 
  amounts in millions
 

Revenue

  $ 6,672     5,763     4,771  

Cost of revenue

    (1,309 )   (1,179 )   (1,038 )

Gross profit

    5,363     4,584     3,733  

Selling, general and administrative expenses

    (4,785 )   (3,986 )   (3,295 )

Amortization

    (164 )   (80 )   (72 )

Operating income

    414     518     366  

Interest expense

    (126 )   (98 )   (87 )

Gain on sale of business

    509          

Other income (expense), net

    129     45     21  

Income tax (expense) benefit

    (203 )   (92 )   (84 )

Net income (loss)

    723     373     216  

Net (income) loss attributable to noncontrolling interests

    41     25     17  

Net income (loss) attributable to Expedia, Inc. shareholders

  $ 764     398     233  

(4) Goodwill and Other Intangible Assets

Goodwill

        The Company had goodwill of $57.5 million at both December 31, 2015 and 2014. As of December 31, 2015 accumulated goodwill impairment losses for Bodybuilding were $17.0 million.

Intangible Assets Subject to Amortization

        Intangible assets subject to amortization are comprised of the following:

 
  December 31, 2015   December 31, 2014  
 
  Gross
carrying
amount
  Accumulated
amortization
  Net
carrying
amount
  Gross
carrying
amount
  Accumulated
amortization
  Net
carrying
amount
 
 
  amounts in thousands
 

Customer relationships

  $             16,577     (16,577 )    

Internally developed software

    65,685     (44,600 )   21,085     49,962     (30,738 )   19,224  

Other

    2,628     (694 )   1,934     444     (434 )   10  

    68,313     (45,294 )   23,019     66,983     (47,749 )   19,234  

Construction in progress—Internally developed software

    1,123         1,123     3,064         3,064  

Total

  $ 69,436     (45,294 )   24,142     70,047     (47,749 )   22,298  

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(4) Goodwill and Other Intangible Assets (Continued)

        The Company's customer relationships were amortized straight-line over six years. The Company's internally developed software intangible assets are amortized straight-line over three to five years. The Company's other intangibles are amortized straight-line over five years. Intangible assets included in construction in progress—internally developed software are not amortized until they are capitalized to internally developed software.

        Amortization expense for intangible assets with finite useful lives was $14.1 million, $12.3 million and $12.4 million for the years ended December 31, 2015, 2014 and 2013, respectively. Based on its amortizable intangible assets as of December 31, 2015, the Company expects that amortization expense will be as follows for the next five years (amounts in thousands):

2016

  $ 11,753  

2017

    8,123  

2018

    3,098  

2019

    26  

2020

    19  

Total

  $ 23,019  

(5) Debt

        Outstanding debt at December 31, 2015 and 2014 is summarized as follows:

 
  December 31,
2015
  December 31,
2014
 
 
  amounts in thousands
 

Bodybuilding Secured Notes

  $ 17,738     8,700  

Revolving line of credit due 2018

        21,844  

Revolving line of credit due 2020

    19,538      

Deferred loan costs

    (102 )    

Total debt

  $ 37,174     30,544  

Less debt classified as current

    (3,407 )   (22,238 )

Total long-term debt

  $ 33,767     8,306  

Bodybuilding Secured Notes

        As of December 31, 2015, Bodybuilding has various outstanding secured notes. Principal and interest payments on the secured notes are payable monthly based on the date of issuance. The secured notes are comprised of both fixed and variable rate notes with interest rates ranging from 2.49% to 4.14% on the fixed rate notes and an interest rate of LIBOR plus 250 basis points on the variable rate notes. The maturity dates on the secured notes range from 2016 to 2022.

        In March 2012, Bodybuilding purchased land and a building for its new Corporate Headquarters for a total price of $7.6 million, a portion of which was paid for with debt proceeds. In March 2013, Bodybuilding entered into a loan for $2.9 million as a construction loan to finance modifications on the

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(5) Debt (Continued)

new office building. In March 2014, Bodybuilding entered into a loan with US Bank for $3.1 million for construction renovations on its new corporate headquarters. The land and building serve as collateral under the terms of the master term loan agreement for both the March 2013 and 2014 notes. In January 2015, Bodybuilding entered into an agreement with J.P. Morgan Chase Bank for a $12.5 million secured note. As of December 31, 2015, the total outstanding balance of the secured notes is $17.7 million.

Revolving Line of Credit

        As of December 31, 2014 Bodybuilding had a revolving asset based facility through U.S. Bank which was secured by Bodybuilding's accounts receivable and inventory. The maximum amount allowed under the facility was $27.0 million (subject to borrowing base availability) and the outstanding balance accrued interest at the one-month LIBOR rate plus applicable LOC fee. On February 10, 2015, Bodybuilding entered into an agreement with J.P. Morgan Chase Bank ("JPM") for a revolving line of credit (the "Revolver") that is secured by Bodybuilding's inventory and accounts receivable, replacing the U.S. Bank revolving line of credit. The maximum amount allowed under the new Revolver is $50 million and the outstanding balance accrues interest at LIBOR plus 150 basis points, with a rate option balance that accrues interest at the CB Floating Rate less 125 basis points. The Revolver matures on January 20, 2020. As of December 31, 2015, the outstanding balance on the Revolver was $19.5 million subject to an interest rate of 1.81% on the first $15.0 million and an interest rate of 2.25% on the remaining balance. As a result of subjective acceleration terms within the previous revolver agreement the outstanding balance on the Revolver in the prior year is classified in the current portion of long-term debt and capital lease obligations in the Company's combined balance sheets as of December 31, 2014.

Five Year Maturities

        The annual principal maturities of the Company's debt, based on stated maturity dates, for each of the next five years is as follows (amounts in thousands):

2016

  $ 3,407  

2017

  $ 3,382  

2018

  $ 3,391  

2019

  $ 3,306  

2020

  $ 19,709  

Fair Value of Debt

        The Company estimates the fair value of its secured notes and term loan based on the current rate offered to the Company for debt of the same remaining maturities (level 3). The Company believes that the carrying amount of its Revolver and secured notes approximated fair value at December 31, 2015 and December 31, 2014.

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(5) Debt (Continued)

Covenant Compliance

        As of December 31, 2015, the Company was in compliance with its debt covenants which consist of both financial and non financial covenants.

(6) Income Taxes

        Expedia Holdings, as combined, was included in the federal combined income tax return of Liberty during the periods presented. The tax provision included in these financial statements has been prepared on a stand-alone basis, as if Expedia Holdings was not part of the consolidated Liberty group. Expedia is not included in the Liberty consolidated group tax return and is not expected to be included in the Expedia Holdings federal or state income tax returns upon completion of the Expedia Holdings Split-Off as Expedia Holdings owns less than 80% of Expedia. The $68.7 million and $65.8 million income taxes payable allocated to Expedia Holdings by Liberty as of December 31, 2015 and 2014, respectively, will be treated as an equity contribution upon completion of the Expedia Holdings Split-Off.

        Income tax benefit (expense) consists of:

 
  Years ended December 31,  
 
  2015   2014   2013  
 
  amounts in thousands
 

Current:

                   

Federal

  $ (3,802 )   (1,806 )   (4,456 )

State and local

    (689 )   (347 )   (722 )

  $ (4,491 )   (2,153 )   (5,178 )

Deferred:

                   

Federal

  $ (139,212 )   (16,873 )   (4,747 )

State and local

    (19,249 )   (2,343 )   (174 )

    (158,461 )   (19,216 )   (4,921 )

Income tax benefit (expense)

  $ (162,952 )   (21,369 )   (10,099 )

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(6) Income Taxes (Continued)

        Income tax benefit (expense) differs from the amounts computed by applying the U.S. federal income tax rate of 35% as a result of the following:

 
  Years ended December 31,  
 
  2015   2014   2013  
 
  amounts in thousands
 

Computed expected tax benefit (expense)

  $ (155,572 )   (23,486 )   (12,646 )

State and local income taxes, net of federal income taxes

    (12,940 )   (1,673 )   (811 )

Foreign taxes, net of foreign tax credit

    926          

Change in valuation allowance affecting tax expense

    (926 )        

Change in state tax rate

            305  

Dividends received deduction

    4,847     3,743     3,166  

Federal tax credits

    818          

Other, net

    (105 )   47     (113 )

Income tax benefit (expense)

  $ (162,952 )   (21,369 )   (10,099 )

        The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are presented below:

 
  December 31,  
 
  2015   2014  
 
  amounts in thousands
 

Deferred tax assets:

             

Net operating and capital loss

  $ 926      

Other accrued liabilities

    2,235     2,431  

Deferred revenue

    104     100  

Other

    1,886     1,651  

Deferred tax assets

    5,151     4,182  

Valuation allowance

    (926 )    

Net deferred tax assets

    4,225     4,182  

Deferred tax liabilities:

             

Investments

    292,261     143,806  

Intangible assets

    14,928     13,835  

Other

    1,519     2,691  

Deferred tax liabilities

    308,708     160,332  

Net deferred tax liabilities

  $ 304,483     156,150  

        The Company's valuation allowance increased $926 thousand in 2015, which affected tax expense during the year ended December 31, 2015.

        At December 31, 2015, Expedia Holdings had a foreign net operating loss carryforward deferred tax asset for income tax purposes of $926 thousand. Because Expedia Holdings' ability to utilize these

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(6) Income Taxes (Continued)

foreign losses is dependent on it generating future taxable income in this foreign jurisdiction, Expedia Holdings does not believe that it is more likely than not it will utilize these foreign losses. As such, Expedia Holdings has recorded a valuation allowance of $926 thousand.

        As of December 31, 2015, the Company had not recorded tax reserves related to unrecognized tax benefits for uncertain tax positions.

        As of December 31, 2015, Liberty's tax years prior to 2012 are closed for federal income tax purposes, and the IRS has completed its examination of Liberty's 2012 and 2013 tax year. Liberty's tax loss carryforwards from its 2011 through 2014 tax years are still subject to adjustment. Liberty's 2014 and 2015 tax years are being examined currently as part of the IRS's Compliance Assurance Process program. As discussed earlier, because Expedia Holdings' ownership of Expedia is less than the required 80%, Expedia is not consolidated with Expedia Holdings for federal income tax purposes.

(7) Stock-Based Compensation

2009 Stock Appreciation Rights Plan

        Bodybuilding maintains the 2009 Stock Appreciation Rights Plan (the "2009 Plan"). Pursuant to the 2009 Plan, Bodybuilding's board of managers may grant Stock Appreciation Rights ("SARs") to officers and key employees. The 2009 Plan permits grants of up to 710 thousand units. Generally, the SARs vest over periods of three years and expire seven years from the date of issuance. As of December 31, 2015, there were no units available for grant under the 2009 Plan.

2011 Stock Appreciation Rights Plan

        Bodybuilding maintains the 2011 Stock Appreciation Rights Plan (the "2011 Plan"). Pursuant to the 2011 Plan, Bodybuilding's board of managers may grant SARs to officers and key employees. The 2011 Plan permits grants of up to 1.0 million units. Generally, the SARs vest over periods of three to four years and expire seven years from the date of issuance. As of December 31, 2015, there were 380 thousand additional units available for grant under the 2011 Plan.

        The SARs have been granted to certain management and key employees and all SARs granted to date are to be settled in cash. Bodybuilding has calculated the grant-date fair value and any subsequent remeasurement of each SAR award using the Black-Scholes Model (level 3). The SARs are classified as liabilities and the fair value of the outstanding SARs are remeasured each reporting period. Bodybuilding estimates the value of the underlying shares by performing a discounted cash flow analysis as well as a market analysis of similar ecommerce entities with publicly traded shares. Bodybuilding uses company specific historical data to estimate the expected term of the SAR, such as employee exercise and employee post-vesting departure behavior. Since Bodybuilding's shares are not publicly traded and its shares are not traded privately, expected volatility is estimated based on the average historical volatility of similar ecommerce entities with publicly traded shares.

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(7) Stock-Based Compensation (Continued)

        The weighted-average fair value of SARs granted was $13.86 and $11.22 for the years ended December 31, 2014 and 2013, respectively. There were no SARs granted in the year ended December 31, 2015. The following table summarizes certain assumptions used to estimate the fair value of Bodybuilding SARs granted:

 
  Years ended December 31,
 
  2014   2013

Risk-free interest rate

  0% - 0.97%   0.35% - 1.71%

Expected life

  3 years   3 years

Expected volatility

  43%   45%

Expected dividend yield

  none   none

        The following table summarizes the SAR activity during 2015 with respect to Bodybuilding:

 
  Number of
shares (000's)
  Weighted
average
exercise
price
  Weighted
average
remaining
contractual
term
  Aggregate
intrinsic
value
(in thousands)
 

Outstanding at January 1, 2015

    937   $ 28.90            

Granted

      $            

Exercised

    (208 ) $ 24.33            

Forfeited/Cancelled

    (104 ) $ 33.68            

Outstanding at December 31, 2015

    625   $ 29.63   4.8 years   $ 1,864  

Exercisable at December 31, 2015

    342   $ 26.88   4.1 years   $ 1,743  

        As of December 31, 2015, the total unrecognized compensation cost related to unvested awards of Bodybuilding employees was approximately $4.1 million. Such amount will be recognized in the Company's combined statements of operations over a weighted average period of approximately 4.8 years.

        The total intrinsic value of SARs exercised during the years ended December 31, 2015, 2014 and 2013 was $1.9 million, $148 thousand and $1.0 million, respectively, which equals the total cash used to settle the exercised units.

Liberty Incentive Plan

        Liberty Interactive has granted to certain directors, officers, employees and consultants of Liberty Interactive stock options to purchase shares of Liberty Ventures common stock pursuant to applicable incentive plans in place at Liberty. Each holder of an outstanding option to purchase shares of Liberty Ventures common stock on the date of the Expedia Holdings Split-Off (an "original Ventures option award") will receive an option to purchase shares of the corresponding series of Company common stock (a "new Company option award") and an adjustment to the exercise price and number of shares subject to the original Ventures option award (as so adjusted, an "adjusted Ventures option award"). The exercise prices of and number of shares subject to the new Company option award and the related adjusted Ventures option award will be determined based on the exercise price and number of shares

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(7) Stock-Based Compensation (Continued)

subject to the original Ventures option award, the distribution ratios being used in the Expedia Holdings Split-Off, the pre-Expedia Holdings Split-Off trading price of Liberty Ventures common stock (determined using the volume weighted average price of the applicable series of Liberty Ventures common stock over the three-consecutive trading days immediately preceding the Expedia Holdings Split-Off) and the relative post-Expedia Holdings Split-Off trading prices of Liberty Ventures common stock and Company common stock (determined using the volume weighted average price of the applicable series of common stock over the three consecutive trading days beginning on the first trading day following the Expedia Holdings Split-Off on which both the Liberty Ventures common stock and the Company common stock trade in the "regular way" (meaning once the common stock trades using a standard settlement cycle)), such that the pre-Expedia Holdings Split-Off value of the original Ventures option award is allocated between the new Company option award and the adjusted Ventures option award.

        Except as described above, all other terms of an adjusted Ventures option award and a new Company option award (including, for example, the vesting terms thereof) will in all material respects, be the same as those of the corresponding original Ventures option award. The terms of the adjusted Ventures option award will be determined and the new Company option award will be granted as soon as practicable following the determination of the pre- and post-Expedia Holdings Split-Off trading prices of Liberty Ventures and Company common stock, as applicable. Substantially all of Liberty Interactive's outstanding and exercisable options relate to employees of Liberty Interactive who will receive new Company option awards in the Split-Off. The compensation expense relating to employees of Liberty will continue to be recorded at Liberty Interactive. Liberty Interactive had outstanding approximately 3.7 million Liberty Ventures Series A and 1.5 million Liberty Ventures Series B options at December 31, 2015 with a weighted average exercise price of $23.29 and $38.04 per share, respectively. Approximately 2.9 million and zero of those options, respectively, were exercisable at December 31, 2015 with a weighted average exercise price of $18.97 per share.

(8) Employee Benefit Plans

        On January 31, 2012, Bodybuilding began participating in the Liberty Interactive 401(k) Plan (the "401(k) Plan"). The plan covers substantially all employees and matches 100% of the first 6% of employee contributions. Bodybuilding's contributions to the 401(k) Plan aggregated $1.5 million, $1.2 million and $1.0 million for the years ended December 31, 2015, 2014 and 2013, respectively.

(9) Related Party Transactions

        As of December 31, 2014, Bodybuilding had an outstanding note with its parent company, Liberty Interactive Corporation (the "Liberty Note"), in the amount of $15.8 million. The Liberty Note required Bodybuilding to make interest only payments at a 10% interest rate on a quarterly basis with the final payment due January 31, 2020. Bodybuilding voluntarily made principal payments on the outstanding debt of $3.0 million and $4.0 million during the years ended December 31, 2015 and 2014, respectively. As part of a contribution agreement entered into by Liberty Interactive and Bodybuilding on October 15, 2015, the balance of the note and accrued interest which aggregated $13.0 million was considered contributed equity. During the years ended December 31, 2015, 2014 and 2013,

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(9) Related Party Transactions (Continued)

Bodybuilding recognized $1.2 million, $1.9 million and $2.3 million, respectively, in interest expense related to the Liberty Note.

        The Company incurred rental expense in connection with the lease of the Florida warehouse in amounts which aggregated $324 thousand, $326 thousand and $319 thousand for the years ended December 31, 2015, 2014 and 2013, respectively. The Florida warehouse is partially owned by the former Chief Executive Officer of Bodybuilding.

        During the years ended December 31, 2015, 2014 and 2013, the Company recorded $766 thousand, $1.2 million and $1.2 million, respectively, in product sales that were made to the Bodybuilding retail store located in Boise, Idaho, which is owned by a family member of Bodybuilding's former Chief Executive Officer.

        The Company paid $551 thousand, $1.8 million and $3.1 million during the years ended December 31, 2015, 2014 and 2013, respectively, to Liberty Interactive for legal and tax expenses that Liberty Interactive remitted on behalf of the Company.

(10) Commitments and Contingencies

Leases

        The Company leases certain warehouse and office space, equipment, furniture and computer software under both capital and noncancelable operating leases that expire at various dates through 2020. The Company is responsible, under all leases, for related building maintenance and property taxes.

        At December 31, 2015, commitments under capital leases and noncancelable operating leases with initial terms in excess of one year were as follows:

 
  Capital
leases
  Operating
leases
 
 
  amounts in thousands
 

Year ended December 31:

             

2016

  $ 1,452   $ 2,540  

2017

    1,452     2,325  

2018

    1,313     2,065  

2019

        1,073  

2020

        80  

Thereafter

         

Total minimum lease payments

  $ 4,217   $ 8,083  

Less amount representing interest (at rates ranging from 2.96% to 3.35%)

    (187 )      

Present value of obligations under capital leases

    4,030        

Less current portion of obligations under capital leases

    (1,348 )      

Obligations under capital leases, excluding current portion

  $ 2,682        

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(10) Commitments and Contingencies (Continued)

        It is expected that in the normal course of business, leases that expire generally will be renewed or replaced by leases on other properties; thus, it is anticipated that future lease commitments will not be less than the amount shown for 2015. Rental expense under operating leases aggregated $2.6 million, $2.1 million and $2.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Litigation

        The Company is subject to legal proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying combined financial statements.

        In September, 2009, the US Marshall's Service executed a search warrant on behalf of the US Food and Drug Administration (the "FDA") at two Company locations. The search was related to an investigation into the Company's sale of dietary supplements that the FDA alleged were misbranded. The FDA provided the results of its investigation to the US Attorney ("Idaho District") for further action. In cooperation with the FDA, the Company conducted a voluntary recall of certain products. Legal expenses for the Company and certain officers and employees were expensed as incurred.

        On May 7, 2012, the Company signed a settlement with the US Attorney whereby it agreed to the entry of a plea of guilty to five misdemeanor counts of selling drugs misbranded by various manufacturers as dietary supplements. The Company also agreed to four years' probation and a fine payable as follows: $2 million in August 2012, $2 million in December 2013 and $3 million in June 2014. The Company paid $2 million in each of 2012 and 2013, and made the final payment of $3 million on June 30, 2014. Therefore, the Company no longer has a liability associated with the FDA settlement as of December 31, 2014. The Company recorded accretion on the obligation of $63 thousand and $204 thousand in 2014 and 2013, respectively.

Off-Balance Sheet Arrangements

        Expedia Holdings did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company's financial condition, results of operations, liquidity, capital expenditures or capital resources.

(11) Segment Information

        Expedia Holdings identifies its reportable segments as (A) those combined companies that represent 10% or more of its combined annual revenue, annual Adjusted OIBDA or total assets and (B) those equity method affiliates whose share of earnings or losses represent 10% or more of Expedia Holding's annual pre-tax earnings (losses).

        Expedia Holdings evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue and Adjusted OIBDA. In addition, Expedia Holdings reviews nonfinancial measures such as unique visitors, customer acquisition and conversion rates.

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(11) Segment Information (Continued)

        Expedia Holdings defines Adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses (excluding stock-based compensation). Expedia Holdings believes this measure is an important indicator of the operational strength and performance of its businesses, including each business's ability to service debt and fund capital expenditures. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net earnings, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Expedia Holdings generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

        For the year ended December 31, 2015, Expedia Holdings has identified the following combined company and equity method investment as its reportable segments:

    Bodybuilding—a wholly-owned company of the Company that is an Internet retailer of sports, fitness and nutritional supplements. Bodybuilding also hosts an online health-and-fitness publication, offering free fitness content, workout programs, video trainers, recipes, health advice and motivational stories. Bodybuilding's revenue primarily consists of sales of health and wellness products.

    Expedia—an equity method investment of the Company that provides travel and services to leisure and corporate travelers in the United States and abroad as well as various media and advertising offerings to travel and non-travel advertisers. Expedia's revenue primarily consists of sales of travel services.

        Expedia Holding's operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segments that are also combined companies are the same as those described in the Company's summary of significant accounting policies in the Company's annual financial statements.

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(11) Segment Information (Continued)

Performance Measures

 
  Years ended December 31,  
 
  2015   2014   2013  
 
  Revenue from
external
customers
  Adjusted
OIBDA
  Revenue from
external
customers
  Adjusted
OIBDA
  Revenue from
external
customers
  Adjusted
OIBDA
 
 
  amounts in thousands
 

Bodybuilding

  $ 464,415     33,096     454,733     30,823     420,990     30,495  

Expedia

    6,672,317     1,059,514     5,763,485     1,015,376     4,771,259     867,456  

Corporate and Other

                         

    7,136,732     1,092,610     6,218,218     1,046,199     5,192,249     897,951  

Eliminate equity method affiliate

    (6,672,317 )   (1,059,514 )   (5,763,485 )   (1,015,376 )   (4,771,259 )   (867,456 )

Combined Expedia Holdings

  $ 464,415     33,096     454,733     30,823     420,990     30,495  

Other Information

 
  December 31, 2015   December 31, 2014  
 
  Total
Assets
  Investment
in Expedia
  Capital
Expenditures
  Total
Assets
  Investment
In Expedia
  Capital
Expenditures
 
 
  amounts in thousands
 

Bodybuilding

  $ 150,221         20,886     191,972         17,535  

Expedia

    15,503,812         787,041     9,020,538         328,387  

Corporate and other

    975,372     927,057         513,814     513,814      

    16,629,405     927,057     807,927     9,726,324     513,814     345,922  

Eliminate equity method affiliate

    (15,503,812 )       (787,041 )   (9,020,538 )       (328,387 )

Combined Expedia Holdings

  $ 1,125,593     927,057     20,886     705,786     513,814     17,535  

Revenue by Geographic Area

 
  Years ended December 31,  
 
  2015   2014   2013  
 
  amounts in thousands
 

United States

  $ 400,961     371,618     329,147  

Other countries

    63,454     83,115     91,843  

Combined Expedia Holdings

  $ 464,415     454,733     420,990  

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LIBERTY EXPEDIA HOLDINGS, INC

Notes to Combined Financial Statements (Continued)

December 31, 2015, 2014 and 2013

(11) Segment Information (Continued)

Long-lived Assets by Geographic Area

 
  Years ended
December 31,
 
 
  2015   2014  
 
  amounts in
thousands

 

United Sates

  $ 27,566     31,364  

Other countries

    2,062     253  

Combined Expedia Holdings

  $ 29,628     31,617  

        The following table provides a reconciliation of segment Adjusted OIBDA to earnings (loss) from continuing operations before income taxes:

 
  Years ended December 31,  
 
  2015   2014   2013  
 
  amounts in thousands
 

Combined segment Adjusted OIBDA

  $ 33,096     30,823     30,495  

Stock-based compensation

    (1,882 )   (1,679 )   (1,722 )

Depreciation and amortization

    (20,938 )   (19,307 )   (19,368 )

Interest expense

    (1,218 )   (1,214 )   (734 )

Related party interest expense

    (1,240 )   (1,867 )   (2,258 )

Share of earnings (loss) of affiliates, net

    117,518     58,105     30,630  

Gain (loss) on dilution of investment in affiliate

    319,587     2,768     (921 )

Other, net

    (430 )   (525 )   12  

Earnings (loss) before income taxes

  $ 444,493     67,104     36,134  

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Introduction

        The following unaudited pro forma combined financial information and related notes present the historical financial statements of Splitco, Expedia, Orbitz and HomeAway as if the completion of the Expedia, Orbitz and HomeAway business combinations had previously occurred on the dates specified below. In addition, the unaudited pro forma condensed combined financial data reflects borrowings under a margin loan agreement with a portion of the proceeds being distributed to Liberty Interactive, the elimination of Splitco's equity method investment in Expedia, an equity contribution for the amount of taxes payable allocated to Splitco by Liberty Interactive, and other adjustments related to the Split-Off as detailed in the notes hereto.

Pro Forma Information

        The unaudited pro forma financial information reflects the estimated aggregate consideration of approximately $16.3 billion for the Expedia business combination, as calculated below (in thousands, except share amount and price per share amount):

Number of Expedia shares outstanding as of June 30, 2016

    149,592,566  

Multiplied by price of Expedia common stock on June 30, 2016

  $ 106.30  

Market value of Expedia on June 30, 2016

    15,901,690  

Estimate of vested and unexercised share based awards

    403,459  

  $ 16,305,149  

        The estimated transaction consideration has been determined based on the closing price of Expedia common stock on June 30, 2016 and an estimate of the value of Expedia's vested and unexercised share based awards. As the Split-Off results in Splitco obtaining control of Expedia without the issuance of consideration, pursuant to acquisition accounting rules, an estimate of such consideration has been made at estimated fair value. The final estimated transaction consideration will be based on the number of shares of Expedia common stock and the closing price as of the Split-Off date.

        The unaudited pro forma financial information related to the Expedia business combination was prepared using the acquisition method of accounting and is based on the assumption that the business combination of Expedia took place as of June 30, 2016 for purposes of the unaudited pro forma balance sheet and as of January 1, 2015 for purposes of the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 and the six months ended June 30, 2016.

        In accordance with the acquisition method of accounting, the actual consolidated financial statements of Splitco will reflect the Expedia business combination only from and after the date of the completion of the acquisition. Splitco has not yet undertaken a detailed analysis of the fair value of Expedia's assets and liabilities and will not finalize the purchase price allocation related to the Expedia business combination until after the transaction is consummated. Accordingly, the unaudited pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could be material. Additionally, the differences, if any, could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and Splitco's future results of operation and financial position.

        The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not purport to represent what the results of operations or financial position of

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Splitco would actually have been had the business combination occurred on the dates noted above, or to project the results of operations or financial position of Splitco for any future periods. The unaudited pro forma adjustments are based on available information and certain assumptions that Splitco management believes are reasonable. The unaudited pro forma adjustments are directly attributable to the business combination and are expected to have a continuing impact on the results of operations of Splitco. In the opinion of Splitco management, all adjustments necessary to present fairly the unaudited pro forma condensed combined financial information have been made.

        The accompanying unaudited pro forma condensed combined financial information should be read in conjunction with the notes hereto.

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Liberty Expedia Holdings, Inc.

Pro Forma Condensed Combined Balance Sheet

As of June 30, 2016

(unaudited)

 
  Historical
Liberty
Expedia
Holdings, Inc.
  Pro Forma
Adjustment to
Eliminate Equity
Method
Investment in
Expedia
   
  Historical
Expedia
  Pro Forma
Adjustments for the
Expedia Business
Combination
   
  Other Pro Forma
Adjustments
   
  Pro Forma  
 
  amounts in thousands
 

Assets

                                                 

Cash and cash equivalents

  $ 1,614             2,296,524             50,000   (j)     2,348,138  

Accounts receivable

    597             1,454,518                     1,455,115  

Other current assets

    51,802             412,935                     464,737  

    54,013             4,163,977             50,000         4,267,990  

Investment in Expedia, Inc. 

    888,270     (888,270 ) (a)                          

Goodwill

    57,462             8,019,775     5,906,341   (b)             13,983,578  

Indefinite-lived intangible assets

    19,902             1,382,568     609,123   (c)             2,011,593  

Definite-lived intangible assets

    23,892             1,263,471     2,138,737   (d)             3,426,100  

Other assets, net

    30,721             1,898,751                     1,929,472  

Total Assets

  $ 1,074,260     (888,270 )       16,728,542     8,654,201         50,000         25,618,733  

Liabilities and Equity

                                                 

Accounts payable

  $ 17,683             2,145,482                     2,163,165  

Deferred merchant bookings

                3,870,022     (3,483,020 ) (e)             387,002  

Deferred revenue

    5,026             331,837     (33,184 ) (f)             303,679  

Income taxes payable

                34,163                     34,163  

Other current liabilities

    16,525             1,065,251                     1,081,776  

    39,234             7,446,755     (3,516,204 )               3,969,785  

Debt

    24,375             3,196,847     252,153   (g)     350,000   (j)     3,823,375  

Income taxes payable

    71,412                         (71,412 ) (k)      

Deferred income tax liabilities

    288,714     20,312         512,088     (119,975 ) (h)             701,139  

Other liabilities

                322,098                     322,098  

Redeemable noncontrolling interests

                983,832                     983,832  

Total liabilities

    423,735     20,312         12,461,620     (3,384,026 )       278,588         9,800,229  

Combined equity:

                                                 

Class A common

                22     (22 )       54         54  

Class B common

                1     (1 )       3         3  

Treasury Stock

                (4,383,221 )   4,383,221                  

APIC

    627,670     (2,564,397 )       8,877,699     (5,961,773 )       (228,645 ) (j) (k)     750,554  

AOCI, net of tax

    (34,081 )   34,658         (299,566 )   299,566                 577  

Retained earnings (accumulated deficit)

    56,936     1,621,157   (a)     7,369     (7,369 )               1,678,093  

Total combined Liberty Expedia Holdings equity

    650,525     (908,582 )       4,202,304     (1,286,378 )       (228,588 )       2,429,281  

Noncontrolling interests in equity of combined company

                64,618     13,324,605   (i)             13,389,223  

Total equity

    650,525     (908,582 )       4,266,922     12,038,227         (228,588 )       15,818,504  

Total liabilities and equity

  $ 1,074,260     (888,270 )       16,728,542     8,654,201         50,000         25,618,733  

   

See accompanying notes to unaudited pro forma condensed combined financial information

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Liberty Expedia Holdings, Inc.
Pro Forma Condensed Combined Statement of Operations
For the Six Months ended June 30, 2016
(unaudited)

 
  Historical
Liberty
Expedia
Holdings, Inc.
  Pro Forma
Adjustment to
Eliminate
Historical
LEHI Equity
Method
Investment in
Expedia
   
  Historical
Expedia
  Pro Forma
Adjustments
for the
Expedia
Business
Combination
   
  Other Pro
Forma
Adjustments
   
  Presentation
Reclassifications
   
  Pro Forma  
 
  amounts in thousands
 

Product revenue

  $ 228,448                                         228,448  

Service revenue

                4,099,830     (1,063,457 ) (l)                     3,036,373  

Total revenue

    228,448             4,099,830     (1,063,457 )                       3,264,821  

Operating costs and expenses

   
 
   
 
 

 

   
 
   
 
 

 

   
 
 

 

   
 
 

 

   
 
 

Cost of goods sold

    171,731                                         171,731  

Cost of services, including stock-based compensation

                808,950     1,391   (m)                     810,341  

Operating, including stock-based compensation

    16,587             609,475     7,017   (m)             3,172   (s)     636,251  

Selling, general and administrative, including stock-based compensation

    23,829             2,532,907     29,687   (m)                     2,586,423  

Other operating expenses

                45,954     8,585   (m)                     54,539  

Amortization of intangible assets

    9,833             174,180     118,026   (n)             (3,172 ) (s)     298,867  

    221,980             4,171,466     164,706                         4,558,152  

Operating income

    6,468             (71,636 )   (1,228,163 )                       (1,293,331 )

Other income (expense):

                                                           

Interest expense

    (579 )           (86,899 )   (22,547 ) (o)     (3,850 ) (o)             (113,875 )

Dividend and interest income

                8,522                             8,522  

Share of earnings (losses) of affiliates, net

    (21,700 )   21,700                                      

Other, net

    (3,616 )   3,465         (28,068 )                           (28,219 )

    (25,895 )   25,165         (106,445 )   (22,547 )       (3,850 )               (133,572 )

Earnings (loss) from continuing operations before income taxes

    (19,427 )   25,165         (178,081 )   (1,250,710 )       (3,850 )               (1,426,903 )

Income tax benefit (expense)

    10,585     (9,563 ) (r)     75,556     475,270   (r)     1,463   (r)             553,311  

Net earnings (loss)

    (8,842 )   15,602         (102,525 )   (775,440 )       (2,387 )               (873,592 )

Less net earnings attributable to the noncontrolling interests

                (25,585 )   (739,247 ) (p)                     (764,832 )

Net earnings (loss) attributable to Liberty Expedia Holdings shareholders

  $ (8,842 )   15,602         (76,940 )   (36,193 )       (2,387 )               (108,760 )

Basic earnings per common share attributable to Liberty Expedia Holdings shareholders

  $ (0.16 )                                                 (1.91 )

Shares used in computing earnings per share

    56,937                                                   56,937  

See accompanying notes to unaudited pro forma condensed combined financial information

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Liberty Expedia Holdings, Inc.
Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2015
(unaudited)

 
  Historical
Liberty
Expedia
Holdings, Inc.
  Pro Forma
Adjustment to
Eliminate
Historical
LEHI Equity
Method
Investment in
Expedia
   
  Historical
Expedia
  Pro Forma
Adjustments
for Expedia's
Acquisition of
Orbitz(1)
  Pro Forma
Adjustments
for Expedia's
Acquisition of
HomeAway(2)
  Pro Forma
Adjustments
for the
Expedia
Business
Combination
   
  Other
Pro Forma
Adjustments
   
  Presentation
Reclassifications
   
  Pro Forma  
 
  amounts in thousands
 

Product revenue

  $ 464,415                                                 464,415  

Service revenue

                6,672,317     656,534     478,482     (1,591,353 ) (l)                     6,215,980  

Total revenue

    464,415             6,672,317     656,534     478,482     (1,591,353 )                       6,680,396  

Operating costs and expenses

   
 
   
 
 

 

   
 
   
 
   
 
   
 
 

 

   
 
 

 

   
 
 

 

   
 
 

Cost of goods sold

    351,590                                                 351,590  

Cost of services, including stock-based compensation

                1,309,559     184,198     74,498     2,782   (m)                     1,571,037  

Operating, including stock-based compensation

    31,912             830,244     57,754     76,913     14,033   (m)             6,859   (s)     1,017,715  

Selling, general and administrative, including stock-based compensation

    49,699             3,954,999     314,428     275,155     59,374   (m)                     4,653,655  

Other operating expenses

                284     (66,603 )       17,170   (m)                     (49,149 )

Amortization of intangible assets

    20,938             163,665     54,326     137,931     228,490   (n)             (6,859 ) (s)     598,491  

    454,139             6,258,751     544,103     564,497     321,849                         8,143,339  

Operating income

    10,276             413,566     112,431     (86,015 )   (1,913,202 )                       (1,462,944 )

Other income (expense):

                                                                       

Interest expense

    (1,218 )           (126,195 )   (11,246 )   (39,445 )   (45,093 ) (o)     (7,700 ) (o)             (230,897 )

Interest expense—related party

    (1,240 )                               1,240   (q)              

Dividend and interest income

                16,695     336     3,091                             20,122  

Share of earnings (losses) of affiliates, net

    117,518     (117,518 )                                            

Gain (loss) on dilution of investment in Expedia, Inc. 

    319,587     (319,587 )                                            

Gain on sale of business

                508,810                                     508,810  

Other, net

    (430 )           113,086     (3,407 )   (806 )                           108,443  

    434,217     (437,105 )       512,396     (14,317 )   (37,160 )   (45,093 )       (6,460 )               406,478  

Earnings (loss) from continuing operations before income taxes

    444,493     (437,105 )       925,962     98,114     (123,175 )   (1,958,295 )       (6,460 )               (1,056,466 )

Income tax benefit (expense)

    (162,952 )   166,100   (r)     (203,214 )   (34,500 )   37,365     744,152   (r)     2,455   (r)             549,406  

Net earnings (loss)

    281,541     (271,005 )       722,748     63,614     (85,810 )   (1,214,143 )       (4,005 )               (507,060 )

Less net earnings attributable to the noncontrolling interests

    626             (41,717 )   (3,709 )   (903 )   (432,444 ) (p)                     (478,147 )

Net earnings (loss) attributable to Liberty Expedia Holdings shareholders

  $ 280,915     (271,005 )       764,465     67,323     (84,907 )   (781,699 )       (4,005 )               (28,913 )

Basic earnings per common share attributable to Liberty Expedia Holdings shareholders

  $ 4.94                                                               (0.51 )

Shares used in computing earnings per share

    56,821                                                               56,821  

See accompanying notes to unaudited pro forma condensed combined financial information

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Notes to Unaudited Pro Forma Condensed Combined Financial Information

(1) Basis of Pro Forma Presentation

        The unaudited pro forma condensed combined balance sheet as of June 30, 2016 and the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2016 and for the year ended December 31, 2015 are based on (i) the historical results of operations of Liberty Expedia Holding, Inc. ("Splitco"); (ii) the historical results of operations of Expedia (which include the results of Orbitz subsequent to Expedia's September 17, 2015 acquisition of Orbitz and the results of HomeAway subsequent to Expedia's December 15, 2015 acquisition of HomeAway); (ii) the pro forma results of operations of Orbitz for the period January 1, 2015 through September 16, 2015 (which were used solely for the preparation of the pro forma combined condensed statement of operations for the year ended December 31, 2015); (iii) the pro forma results of operations of Home Away for the period January 1, 2015 through December 14, 2015 (which were used solely for the preparation of the pro forma combined condensed statement of operations for the year ended December 31, 2015); and (iv) other adjustments as detailed in note 3.

        Expedia's historical financial information is adjusted in the unaudited pro forma financial statements to give effect to unaudited pro forma adjustments that are (i) directly attributable to the business combination, (ii) factually supportable, and (iii) with respect to the unaudited pro forma statements of operations, expected to have a continuing impact on the combined results.

        The unaudited pro forma financial statements are presented solely for informational purposes and are not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods or dates indicated, nor is it necessarily indicative of the future results of the combined company.

        Certain reclassifications were made to conform the presentation of Splitco and Expedia's financial statements.

(2) Estimated Expedia Consideration and Pro Forma Purchase Price Allocation

        The acquisition of Expedia pursuant to the Split-Off will be completed without the transfer of consideration. Rather, control will be obtained through completion of the proxy transactions. As required by acquisition accounting, an estimate of such consideration has been made at estimated fair value, which was determined using the closing price of Expedia common shares and the total number of outstanding shares on June 30, 2016 and the estimated fair value of Expedia's vested share based awards on June 30, 2016. The final acquisition consideration may differ significantly from the amount determined as of June 30, 2016 due to changes in the price per share of Expedia common shares and the total number of outstanding shares at the time of the transaction. When the final purchase consideration is determined, such information will be included and amounts could be significant. Had the fair value of Expedia's common stock been 10% higher, total purchase consideration would have been greater by $1,657 million and the difference would primarily impact goodwill.

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Notes to Unaudited Pro Forma Condensed Combined Financial Information (Continued)

(2) Estimated Expedia Consideration and Pro Forma Purchase Price Allocation (Continued)

        The following is a pro forma purchase price allocation as if the Expedia business combination had occurred on June 30, 2016 (amounts in thousands):

Current Assets

  $ 4,163,977  

Property & Equipment

    1,235,282  

Goodwill

    13,926,116  

Indefinite-Lived Intangible Assets

    1,991,691  

Definite-Lived Intangible Assets

    3,402,208  

Long term assets

    643,851  

Current liabilities

    (3,930,551 )

Long term debt

    (3,449,000 )

Deferred tax liabilities, net

    (372,495 )

Other long term liabilities

    (1,305,930 )

  $ 16,305,149  

        The final determination of the allocation of the purchase price will be based on the fair value of such assets and liabilities as of the Split-Off date and may change significantly from the amounts determined in the pro forma purchase price allocation.

(3) Pro Forma Adjustments

        The unaudited pro forma adjustments related to the Split-Off included in the unaudited pro forma condensed combined financial statements are as follows:

    (a)
    Eliminate Equity Method Investment in Expedia and Record Gain on Transaction

 
  June 30, 2016  
 
  amounts in thousands,
except share amount
and price per
share amount

 

Shares of Expedia held by Splitco

    23,607,025  

Multiplied by price of Expedia common stock

  $ 106.30  

Fair value of Splitco's Investment in Expedia

    2,509,427  

Eliminate historical Investment in Expedia

    (888,270 )

Total adjustment to pro forma retained earnings for pro forma gain on transaction

  $ 1,621,157  

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Notes to Unaudited Pro Forma Condensed Combined Financial Information (Continued)

(3) Pro Forma Adjustments (Continued)

    (b)
    Goodwill

 
  June 30, 2016  
 
  amounts in thousands
 

To eliminate the historical goodwill of Expedia

  $ (8,019,775 )

To record pro forma goodwill for the purchase consideration in excess of the fair value of net assets acquired in connection with the Expedia acquisition

    13,926,116  

Total adjustment to Goodwill

  $ 5,906,341  
    (c)
    Indefinite-lived intangible assets

 
  June 30, 2016  
 
  amounts in thousands
 

To eliminate the historical net book value of Expedia's Indefinite-lived intangible assets

  $ (1,382,568 )

To record pro forma fair value of estimated Indefinite-lived intangible assets

    1,991,691  

Total adjustment to Indefinite-lived intangible assets

  $ 609,123  

        The pro forma fair value of Expedia's Indefinite-lived intangible assets was estimated based on the weighted average of indefinite-lived intangibles as a percentage of total purchase consideration for Expedia's 2013, 2014 and 2015 acquisitions. We believe such allocation is a reasonable estimate of fair value. The final allocation will be determined by independent appraisal and could be materially different.

    (d)
    Definite-Lived Intangible Assets

 
  June 30, 2016  
 
  amounts in thousands
 

To eliminate the historical net book value of Expedia's Definite-lived intangible assets

  $ (1,263,471 )

To record pro forma fair value of estimated Definite-lived intangible assets

    3,402,208  

Total adjustment to Definite-lived intangible assets

  $ 2,138,737  

        The pro forma fair value of Expedia's definite-lived intangible assets was estimated based on the weighted average of definite-lived intangibles as a percentage of total purchase consideration for Expedia's 2013, 2014 and 2015 acquisitions. We believe such allocation is a reasonable estimate of fair value. The final allocation will be determined by independent appraisal and could be materially different.

    (e)
    Deferred merchant bookings

        Expedia's travelers pay for merchant hotel transactions prior to departing on their trip, generally at the time of booking. Expedia records these payments in deferred merchant bookings until the stay

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Notes to Unaudited Pro Forma Condensed Combined Financial Information (Continued)

(3) Pro Forma Adjustments (Continued)

occurs, at which time they record revenue. Due to the minimal performance obligation associated with delivering these services, we estimated approximately 90% of the deferred merchant payable should be written off.

    (f)
    Deferred revenue

        Payments for term-based paid subscriptions received in advance of services being rendered are recorded as deferred revenue. Due to a continuing performance obligation associated with delivering these services, we estimated approximately 10% of the deferred revenue balance should be written off.

    (g)
    Debt

        Expedia's debt was adjusted to its estimated fair value as of June 30, 2016. The amount was estimated based on the fair value disclosed in the Expedia financial statements included on Form 10-Q as of June 30, 2016.

    (h)
    Deferred income tax liabilities

        The adjustment to deferred income taxes was calculated by applying Expedia's average effective tax rate for 2013, 2014 and 2015, 23%, to the taxable pro forma adjustments, such as indefinite-lived intangible assets, definite-lived intangible assets, deferred merchant bookings, deferred revenue, and debt.

    (i)
    Noncontrolling interests in equity of combined company

 
  June 30, 2016  
 
  amounts in thousands
 

Market value of Expedia

  $ 15,901,690  

Noncontrolling ownership

    84.2 %

Total noncontrolling interest in equity of combined company

    13,389,223  

Eliminate historical Expedia noncontrolling interest

    (64,618 )

Total adjustment to noncontrolling interest

  $ 13,324,605  
    (j)
    Margin Loan and Distribution to Liberty Interactive

        In connection with the Split-Off, Splitco expects to borrow $350 million under a margin loan agreement. Approximately $300 million will be distributed from Splitco to Liberty Interactive.

    (k)
    Income taxes payable

        The income taxes payable allocated to Splitco by Liberty Interactive are expected to be contributed to Splitco upon completion of the Split-Off.

    (l)
    Service revenue

        The adjustment represents the reversal of deferred merchant bookings and deferred revenue balances based on the explanations in (e) and (f) above. For the year ended December 31, 2015, revenue reversal was based on 90% of deferred merchant bookings and 10% of deferred revenue

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Notes to Unaudited Pro Forma Condensed Combined Financial Information (Continued)

(3) Pro Forma Adjustments (Continued)

balances as of December 31, 2014. For the six months ended June 30, 2016, revenue reversal was based on 50% of 90% of deferred merchant bookings and 50% of 10% of deferred revenue balances as of December 31, 2015.

    (m)
    Stock-based compensation

        Adjustment to record the incremental stock-based compensation for the difference in the fair value of stock based awards and the grant date fair value as recognized by Expedia.

    (n)
    Amortization of intangible assets

        The adjustment reverses Expedia's historical amortization of intangible assets and includes amortization of pro forma definite lived intangibles using the weighted average of the weighted average useful lives disclosed for Expedia's significant 2013, 2014 and 2015 acquisitions, 5.8 years.

    (o)
    Interest expense

        The adjustment for the Expedia business combination relates to the accretion of the premium resulting from adjusting Expedia's debt to its estimated fair value. The "other" adjustment relates to interest expense, based on current market rates, on expected borrowings of $350 million under the margin loan.

    (p)
    Net earnings attributable to the noncontrolling interests

        Adjustment reflects noncontrolling interest in Expedia based on noncontrolling ownership at June 30, 2016, 84.2%.

 
  June 30,
2016
  December 31,
2015
 
 
  amounts in thousands
 

Expedia's pro forma net earnings (loss)

  $ (877,965 )   (513,591 )

Noncontrolling ownership

    84.2 %   84.2 %

Total adjustment to net earnings attributable to noncontrolling interests

  $ (739,247 )   (432,444 )
    (q)
    Interest Expense—related party

        On October 26, 2015, Liberty Interactive and Bodybuilding entered into a contribution agreement, which resulted in the contribution of a related party note to equity. This adjustment reflects the elimination of interest on the note.

    (r)
    Income tax benefit (expense)

        Adjustment to record taxes at Splitco's expected blended tax rate.

    (s)
    Presentation Reclassifications

        Adjustments represent reclassifications to conform Splitco's financial statement presentation to Expedia's financial statement presentation.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Expedia, Inc.

        We have audited the accompanying consolidated balance sheets of Expedia, Inc. (the Company) as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Expedia, Inc. at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Expedia, Inc.'s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 10, 2016 expressed an unqualified opinion thereon.

  /s/ Ernst & Young LLP

Seattle, Washington
February 10, 2016

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Consolidated Financial Statements

EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 
  Year ended December 31,  
 
  2015   2014   2013  
 
  (In thousands, except for per share data)
 

Revenue

  $ 6,672,317   $ 5,763,485   $ 4,771,259  

Costs and expenses:

                   

Cost of revenue(1)

    1,309,559     1,179,081     1,038,034  

Selling and marketing(1)

    3,381,086     2,808,329     2,196,145  

Technology and content(1)

    830,244     686,154     577,820  

General and administrative(1)

    573,913     425,373     377,078  

Amortization of intangible assets

    163,665     79,615     71,731  

Legal reserves, occupancy tax and other

    (104,587 )   41,539     77,919  

Restructuring and related reorganization charges(1)

    104,871     25,630      

Acquisition-related and other(1)

            66,472  

Operating income

    413,566     517,764     366,060  

Other income (expense):

                   

Interest income

    16,695     27,288     24,779  

Interest expense

    (126,195 )   (98,089 )   (87,358 )

Gain on sale of business

    508,810          

Other, net

    113,086     17,678     (2,788 )

Total other income (expense), net

    512,396     (53,123 )   (65,367 )

Income before income taxes

    925,962     464,641     300,693  

Provision for income taxes

    (203,214 )   (91,691 )   (84,335 )

Net income

    722,748     372,950     216,358  

Net loss attributable to noncontrolling interests

    41,717     25,147     16,492  

Net income attributable to Expedia, Inc

  $ 764,465   $ 398,097   $ 232,850  

Earnings per share attributable to Expedia, Inc. available to common stockholders:

                   

Basic

  $ 5.87   $ 3.09   $ 1.73  

Diluted

    5.70     2.99     1.67  

Shares used in computing earnings per share:

                   

Basic

    130,159     128,912     134,912  

Diluted

    134,018     133,168     139,593  

Dividends declared per common share

  $ 0.84   $ 0.66   $ 0.56  

(1)
Includes stock-based compensation as follows:

 

Cost of revenue

  $ 5,307   $ 3,921   $ 3,752  
 

Selling and marketing

    33,164     18,067     16,190  
 

Technology and content

    26,766     22,100     20,465  
 

General and administrative

    80,082     40,923     33,123  
 

Restructuring and related reorganization charges

    32,749          
 

Acquisition-related and other

            56,643  

   

See notes to consolidated financial statements.

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EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
  Year ended December 31,  
 
  2015   2014   2013  
 
  (In thousands)
 

Net income

  $ 722,748   $ 372,950   $ 216,358  

Other comprehensive income (loss), net of tax

                   

Currency translation adjustments and other, net of taxes

    (147,815 )   (164,666 )   23,506  

Net reclassification of foreign currency translation adjustments into total other income (expenses), net

    (43,183 )        

Unrealized gains (losses) on available for sale securities, net of taxes

    (67 )   (60 )   (1,324 )

Other comprehensive income (loss), net of tax

    (191,065 )   (164,726 )   22,182  

Comprehensive income

    531,683     208,224     238,540  

Less: Comprehensive income (loss) attributable to noncontrolling interests

    (86,662 )   (32,902 )   (12,485 )

Comprehensive income attributable to Expedia, Inc. 

  $ 618,345   $ 241,126   $ 251,025  

   

See notes to consolidated financial statements.

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EXPEDIA, INC.

CONSOLIDATED BALANCE SHEETS

 
  December 31,  
 
  2015   2014  
 
  (In thousands, except per
share data)

 

ASSETS

             

Current assets:

   
 
   
 
 

Cash and cash equivalents

  $ 1,676,299   $ 1,402,700  

Restricted cash and cash equivalents

    11,324     34,888  

Short-term investments

    33,739     355,780  

Accounts receivable, net of allowance of $27,035 and $13,760

    1,082,406     778,334  

Deferred income taxes

        169,269  

Income taxes receivable

    13,805     17,161  

Prepaid expenses and other current assets

    161,188     166,357  

Total current assets

    2,978,761     2,924,489  

Property and equipment, net

    1,064,259     553,126  

Long-term investments and other assets

    658,439     286,882  

Deferred income taxes

    15,458     10,053  

Intangible assets, net

    2,793,954     1,290,087  

Goodwill

    7,992,941     3,955,901  

TOTAL ASSETS

  $ 15,503,812   $ 9,020,538  

LIABILITIES AND STOCKHOLDERS' EQUITY

             

Current liabilities:

   
 
   
 
 

Accounts payable, merchant

  $ 1,329,870   $ 1,188,483  

Accounts payable, other

    485,557     361,382  

Deferred merchant bookings

    2,337,037     1,761,258  

Deferred revenue

    235,809     62,206  

Income taxes payable

    68,019     59,661  

Accrued expenses and other current liabilities

    1,469,725     753,625  

Total current liabilities

    5,926,017     4,186,615  

Long-term debt

    3,201,277     1,746,787  

Deferred income taxes

    473,841     452,958  

Other long-term liabilities

    314,432     180,376  

Commitments and contingencies

             

Redeemable noncontrolling interests

    658,478     560,073  

Stockholders' equity:

             

Common stock $.0001 par value

    22     20  

Authorized shares: 1,600,000

             

Shares issued: 220,383 and 196,802

             

Shares outstanding: 137,459 and 114,267

             

Class B common stock $.0001 par value

    1     1  

Authorized shares: 400,000

             

Shares issued and outstanding: 12,800 and 12,800

             

Additional paid-in capital

    8,696,508     5,921,140  

Treasury stock—Common stock, at cost

    (4,054,909 )   (3,998,120 )

Shares: 82,924 and 82,535

             

Retained earnings

    507,666      

Accumulated other comprehensive income (loss)

    (284,894 )   (138,774 )

Total Expedia, Inc. stockholders' equity

    4,864,394     1,784,267  

Non-redeemable noncontrolling interest

    65,373     109,462  

Total stockholders' equity

    4,929,767     1,893,729  

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

  $ 15,503,812   $ 9,020,538  

   

See notes to consolidated financial statements.

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EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands, except share data)

 
   
   
  Class B
common stock
   
   
   
   
  Accumulated
other
comprehensive
income
(loss)
   
   
 
 
  Common stock    
  Treasury stock    
   
   
 
 
  Additional
paid-in
capital
  Retained
earnings
(deficit)
  Non-redeemable
noncontrolling
interest
   
 
 
  Shares   Amount   Shares   Amount   Shares   Amount   Total  

Balance as of December 31, 2012

    189,254,916   $ 19     12,799,999   $ 1   $ 5,675,075     66,725,321   $ (2,952,790 ) $ (442,068 ) $ 22   $ 109,129     2,389,388  

Net income (excludes $7,130 of net loss attributable to redeemable noncontrolling interests)

                                              232,850           (9,362 )   223,488  

Other comprehensive income, net of taxes

                                                    18,175     4,007     22,182  

Proceeds from exercise of equity instruments and employee stock purchase plans

    3,307,451                     52,081                                   52,081  

Tax benefits on equity awards

                            38,799                                   38,799  

Treasury stock activity related to vesting of equity instruments

                                  159,181     (7,993 )                     (7,993 )

Common stock repurchases

                                  9,259,400     (514,907 )                     (514,907 )

Proceeds from issuance of treasury stock

                            15,258     (467,672 )   10,015                       25,273  

Cash dividends

                            (75,760 )                                 (75,760 )

Adjustment to the fair value of redeemable noncontrolling interests

                            (26,614 )                                 (26,614 )

Changes in ownership of noncontrolling interests

                            6,928                             9,747     16,675  

Stock-based compensation expense

                            116,735                                   116,735  

Other

                            (362 )                                 (362 )

Balance as of December 31, 2013

    192,562,367     19     12,799,999     1     5,802,140     75,676,230     (3,465,675 )   (209,218 )   18,197     113,521     2,258,985  

Net income (excludes $9,690 of net loss attributable to redeemable noncontrolling interest)

                                              398,097           (15,457 )   382,640  

Other comprehensive income (loss), net of taxes

                                                    (156,971 )   10,465     (146,506 )

Proceeds from exercise of equity instruments and employee stock purchase plans

    4,064,829     1                 104,598                                   104,599  

Tax benefits on equity awards

                            57,132                                   57,132  

Issuance of common stock in connection with acquisition

    175,040                                                        

Treasury stock activity related to vesting of equity instruments

                                  9,689     (773 )                     (773 )

Common stock repurchases

                                  7,040,621     (537,088 )                     (537,088 )

Proceeds from issuance of treasury stock

                            14,988     (264,608 )   5,416                       20,404  

Cash dividends

                            (38,833 )               (45,864 )               (84,697 )

Adjustment to the fair value of redeemable noncontrolling interests

                            (116,969 )               (143,015 )               (259,984 )

Changes in ownership of noncontrolling interests

                            24,090                             933     25,023  

Stock-based compensation expense

                            69,620                                   69,620  

Other

                            4,374     73,464                           4,374  

Balance as of December 31, 2014

    196,802,236   $ 20     12,799,999   $ 1   $ 5,921,140     82,535,396   $ (3,998,120 ) $   $ (138,774 ) $ 109,462   $ 1,893,729  

See notes to consolidated financial statements.

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EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Continued)

(In thousands, except share data)

 
   
   
  Class B
common stock
   
   
   
   
   
   
   
 
 
  Common stock    
  Treasury stock    
  Accumulated
other
comprehensive
income (loss)
   
   
 
 
  Additional
paid-in
capital
  Retained
earnings
(deficit)
  Non-redeemable
noncontrolling
interest
   
 
 
  Shares   Amount   Shares   Amount   Shares   Amount   Total  

Net income (excludes $15,417 of net loss attributable to redeemable noncontrolling interest)

                                              764,465           (26,300 )   738,165  

Other comprehensive income (loss), net of taxes

                                                    (146,120 )   641     (145,479 )

Proceeds from exercise of equity instruments and employee stock purchase plans

    3,385,749                     96,534                                   96,534  

Withholding taxes for stock options

                            (85,033 )                                 (85,033 )

Tax benefits on equity awards

                            89,128                                   89,128  

Issuance of common stock in connection with acquisitions

    20,195,139     2                 2,552,340                                   2,552,342  

Treasury stock activity related to vesting of equity instruments

                                  127,712     (15,763 )                     (15,763 )

Common stock repurchases

                                  525,504     (44,822 )                     (44,822 )

Proceeds from issuance of treasury stock

                            18,779     (264,841 )   3,796                       22,575  

Cash dividends

                                            (108,778 )               (108,778 )

Adjustment to the fair value of redeemable noncontrolling interests

                            (40,558 )               (148,021 )               (188,579 )

Sale of controlling interest in eLong

                                                        (92,550 )   (92,550 )

Acquisition of noncontrolling interest

                                                        64,115     64,115  

Other changes in ownership of noncontrolling interests

                            (4,198 )                           10,005     5,807  

Stock-based compensation expense

                            147,988                                   147,988  

Other

                            388                                   388  

Balance as of December 31, 2015

    220,383,124   $ 22     12,799,999   $ 1   $ 8,696,508     82,923,771   $ (4,054,909 ) $ 507,666   $ (284,894 ) $ 65,373   $ 4,929,767  

See notes to consolidated financial statements.

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EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
  Year ended December 31,  
 
  2015   2014   2013  
 
  (In thousands)
 

Operating activities:

                   

Net income

  $ 722,748   $ 372,950   $ 216,358  

Adjustments to reconcile net income to net cash provided by operating activities:

                   

Depreciation of property and equipment, including internal-use software and website development

    336,680     265,817     211,744  

Amortization of stock-based compensation

    178,068     85,011     130,173  

Amortization of intangible assets

    163,665     79,615     71,731  

Deferred income taxes

    (21,635 )   (79,031 )   (772 )

Foreign exchange (gain) loss on cash, cash equivalents and short-term investments, net

    88,528     79,410     56,822  

Realized (gain) loss on foreign currency forwards

    (54,226 )   5,481     (40,850 )

Gain on sale of business

    (508,810 )        

Noncontrolling interest basis adjustment

    (77,400 )        

Other

    15,865     8,966     10,576  

Changes in operating assets and liabilities, net of effects from acquisitions and disposals:

                   

Accounts receivable

    (198,262 )   (157,957 )   (127,327 )

Prepaid expenses and other assets

    97,701     (65,203 )   (18,724 )

Accounts payable, merchant

    97,248     110,603     91,503  

Accounts payable, other, accrued expenses and other current liabilities

    194,458     271,454     (68,239 )

Tax payable/receivable, net

    39,776     39,971     (29,746 )

Deferred merchant bookings

    299,534     331,133     246,229  

Deferred revenue

    (5,893 )   18,739     13,722  

Net cash provided by operating activities from continuing operations

    1,368,045     1,366,959     763,200  

Investing activities:

                   

Capital expenditures, including internal-use software and website development

    (787,041 )   (328,387 )   (308,581 )

Purchases of investments

    (521,329 )   (1,194,210 )   (1,216,591 )

Sales and maturities of investments

    410,923     1,162,557     1,502,576  

Acquisitions, net of cash acquired

    (2,063,649 )   (560,668 )   (541,247 )

Proceeds from sale of business, net of cash divested and disposal costs

    523,882          

Net settlement of foreign currency forwards

    54,226     (5,481 )   40,850  

Other, net

    11,728     1,932     (2,520 )

Net cash used in investing activities from continuing operations

    (2,371,260 )   (924,257 )   (525,513 )

Financing activities:

                   

Proceeds from issuance of long-term debt, net of issuance costs            

    1,441,860     492,894      

Purchases of treasury stock

    (60,546 )   (537,861 )   (522,900 )

Proceeds from issuance of treasury stock

    22,575     20,404     25,273  

Payment of dividends to stockholders

    (108,527 )   (84,697 )   (75,760 )

Proceeds from exercise of equity awards and employee stock purchase plan

    97,716     108,121     56,836  

Excess tax benefit on equity awards

    90,855     58,156     39,606  

Withholding taxes for stock option exercises

    (85,033 )        

Other, net

    5,299     (8,868 )   (15,571 )

Net cash provided by (used in) financing activities from continuing operations

    1,404,199     48,149     (492,516 )

Net cash provided by (used in) continuing operations

    400,984     490,851     (254,829 )

Net cash provided by discontinued operations

            13,637  

Effect of exchange rate changes on cash and cash equivalents

    (127,385 )   (109,184 )   (30,936 )

Net increase (decrease) in cash and cash equivalents

    273,599     381,667     (272,128 )

Cash and cash equivalents at beginning of year

    1,402,700     1,021,033     1,293,161  

Cash and cash equivalents at end of year

  $ 1,676,299   $ 1,402,700   $ 1,021,033  

Supplemental cash flow information

                   

Cash paid for interest from continuing operations

  $ 109,507   $ 87,555   $ 84,136  

Income tax payments, net from continuing operations

    96,834     70,339     73,439  

   

See notes to consolidated financial statements.

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Expedia, Inc.

Notes to Consolidated Financial Statements

NOTE 1—Organization and Basis of Presentation

    Description of Business

        Expedia, Inc. and its subsidiaries provide travel products and services to leisure and corporate travelers in the United States and abroad as well as various media and advertising offerings to travel and non-travel advertisers. These travel products and services are offered through a diversified portfolio of brands including: Expedia.com®, Hotels.com®, Hotwire.com™, Travelocity®, Expedia® Affiliate Network, Classic Vacations®, Expedia Local Expert®, Egencia®, Expedia® CruiseShipCenters®, Venere Net SpA ("Venere"), trivago GmbH ("trivago"), CarRentals.com™, Wotif.com Holdings Limited ("Wotif Group"), Orbitz Worldwide, Inc. ("Orbitz") acquired in September 2015, HomeAway, Inc. acquired in December 2015, and eLong ™, Inc. ("eLong") through its sale on May 22, 2015. In addition, many of these brands have related international points of sale, including those as part of AirAsia-Expedia upon our acquisition of a controlling interest in March 2015. We refer to Expedia, Inc. and its subsidiaries collectively as "Expedia," the "Company," "us," "we" and "our" in these consolidated financial statements.

    Basis of Presentation

        The accompanying consolidated financial statements include Expedia, Inc., our wholly-owned subsidiaries, and entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses. We record our investments in entities that we do not control, but over which we have the ability to exercise significant influence, using the equity method. We have eliminated significant intercompany transactions and accounts.

        We believe that the assumptions underlying our consolidated financial statements are reasonable. However, these consolidated financial statements do not present our future financial position, the results of our future operations and cash flows.

    Seasonality

        We generally experience seasonal fluctuations in the demand for our travel products and services. For example, traditional leisure travel bookings are generally the highest in the first three quarters as travelers plan and book their spring, summer and holiday travel. The number of bookings typically decreases in the fourth quarter. Because revenue for most of our travel products, including merchant and agency hotel, is recognized when the travel takes place rather than when it is booked, revenue typically lags bookings by several weeks or longer. The seasonal revenue impact is exacerbated with respect to income by the nature of our variable cost of revenue and direct sales and marketing costs, which we typically realize in closer alignment to booking volumes, and the more stable nature of our fixed costs. Furthermore, operating profits for our primary advertising business, trivago, are experienced in the second half of the year as selling and marketing costs offset revenue in the first half of the year as we aggressively market during the busy booking period for summer travel. As a result, revenue and income are typically the lowest in the first quarter and highest in the third quarter. The continued growth of our international operations or a change in our product mix, including the assimilation, growth and shift to more of a transaction-based business model for the vacation rental listing business of HomeAway, may influence the typical trend of the seasonality in the future.

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies

    Consolidation

        Our consolidated financial statements include the accounts of Expedia, Inc., our wholly-owned subsidiaries, and entities for which we control a majority of the entity's outstanding common stock. We record noncontrolling interest in our consolidated financial statements to recognize the minority ownership interest in our consolidated subsidiaries. Noncontrolling interest in the earnings and losses of consolidated subsidiaries represent the share of net income or loss allocated to members or partners in our consolidated entities, which includes the noncontrolling interest share of net income or loss from our redeemable and non-redeemable noncontrolling interest entities.

        We characterize our minority interest in AirAsia-Expedia as a non-redeemable noncontrolling interest and classify it as a component of stockholders' equity in our consolidated financial statements. Noncontrolling interests with shares redeemable at the option of the minority holders, such as trivago, have been included in redeemable noncontrolling interests. See "Redeemable Noncontrolling Interest" below for further information.

        We have eliminated significant intercompany transactions and accounts in our consolidated financial statements.

    Accounting Estimates

        We use estimates and assumptions in the preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States ("GAAP"). Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our consolidated financial statements. These estimates and assumptions also affect the reported amount of net income or loss during any period. Our actual financial results could differ significantly from these estimates. The significant estimates underlying our consolidated financial statements include revenue recognition; recoverability of current and long-lived assets, intangible assets and goodwill; income and transactional taxes, such as potential settlements related to occupancy and excise taxes; loss contingencies; loyalty program liabilities; redeemable noncontrolling interests; acquisition purchase price allocations; stock-based compensation and accounting for derivative instruments.

    Reclassifications

        We have reclassified certain amounts related to our prior period results to conform to our current period presentation. We also included a reclassification on our consolidated balance sheet as of December 31, 2014 to correct the immaterial presentation of cash dividends as a reduction to retained earnings to the extent the Company maintained retained earnings instead of additional paid-in capital.

    Revenue Recognition

        We recognize revenue when it is earned and realizable based on the following criteria: persuasive evidence that an arrangement exists, services have been rendered, the price is fixed or determinable and collectability is reasonably assured.

        We also evaluate the presentation of revenue on a gross versus a net basis. The consensus of the authoritative accounting literature is that the presentation of revenue as "the gross amount billed to a customer because it has earned revenue from the sale of goods or services or the net amount retained

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies (Continued)

(that is, the amount billed to a customer less the amount paid to a supplier) because it has earned a commission or fee" is a matter of judgment that depends on the relevant facts and circumstances. In making an evaluation of this issue, some of the factors that should be considered are: whether we are the primary obligor in the arrangement (strong indicator); whether we have general supply risk (before customer order is placed or upon customer return) (strong indicator); and whether we have latitude in establishing price. The guidance clearly indicates that the evaluations of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity. If the conclusion drawn is that we perform as an agent or a broker without assuming the risks and rewards of ownership of goods, revenue should be reported on a net basis. For our primary transaction-based revenue models, discussed below, we have determined net presentation is appropriate for the majority of revenue transactions.

        We offer travel products and services on a stand-alone and package basis primarily through the following business models: the merchant model, the agency model and the advertising model. In addition, upon our acquisition of HomeAway on December 15, 2015, we also earn revenue related to vacation rental listing and other ancillary services provided to property owners and managers.

        Under the merchant model, we facilitate the booking of hotel rooms, airline seats, car rentals and destination services from our travel suppliers and we are the merchant of record for such bookings. The majority of our merchant transactions relate to hotel bookings.

        Under the agency model, we act as the agent in the transaction, passing reservations booked by the traveler to the relevant travel provider. We receive commissions or ticketing fees from the travel supplier and/or traveler. For certain agency airline, hotel and car transactions, we also receive fees from global distribution systems partners that control the computer systems through which these reservations are booked.

        Under the advertising model, we offer travel and non-travel advertisers access to a potential source of incremental traffic and transactions through our various media and advertising offerings on trivago and our transaction-based websites.

        Vacation rental listing revenue is primarily earned on a subscription basis where property owners or managers purchase in advance online advertising services related to the listing of their properties for rent over a fixed term (typically one year). Listing revenue is also generated on a commission basis, when traveler bookings are completed on our websites.

        Merchant Hotel.     Our travelers pay us for merchant hotel transactions prior to departing on their trip, generally when they book the reservation. We record the payment in deferred merchant bookings until the stay occurs, at which point we record the revenue. In certain nonrefundable, nonchangeable transactions where we have no significant post-delivery obligations, we record revenue when the traveler completes the transaction on our website, less a reserve for chargebacks and cancellations based on historical experience. Amounts received from customers are presented net of amounts paid to suppliers. In certain instances when a supplier invoices us for less than the cost we accrued, we generally recognize those amounts as revenue six months in arrears, net of an allowance, when we determine it is not probable that we will be required to pay the supplier, based on historical experience and contract terms. We generally contract in advance with lodging providers to obtain access to room allotments at wholesale rates. Certain contracts specifically identify the number of potential rooms and the negotiated rate of the rooms to which we may have access over the terms of the contracts, which

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies (Continued)

generally range from one to three years. Other contracts are not specific with respect to the number of rooms and the rates of the rooms to which we may have access over the terms of the contracts. In either case we may return unbooked hotel room allotments with no obligation to the lodging providers within a period specified in each contract. For hotel rooms that are cancelled by the traveler after the specified period of time, we charge the traveler a cancellation fee or penalty that approximates the amount a hotel may invoice us for the cancellation.

        Agency and Merchant Air.     We record revenue on air transactions when the traveler books the transaction, as we have no significant post-delivery obligations. We record a reserve for chargebacks and cancellations at the time of the transaction based on historical experience.

        Agency Hotel, Car and Cruise.     In addition to air tickets, our agency revenue comes from certain hotel transactions as well as cruise and car rental reservations. We generally record agency revenue from hotel, cruise and car reservations on an accrual basis when the travel occurs. We record an allowance for cancellations on this revenue based on historical experience.

        Packages.     Packages assembled by travelers through the packaging model on our websites generally include a merchant hotel component and some combination of an air, car or destination services component. The individual package components are recognized in accordance with our revenue recognition policies stated above.

        Advertising.     We record advertising revenue ratably over the advertising period or upon delivery of advertising impressions, depending on the terms of the advertising contract. We record revenue from click-through fees charged to our travel partners for traveler leads sent to the travel partners' websites. We record revenue from click-through fees after the traveler makes the click-through to the related travel partners' websites.

        Vacation Rental Listing and Other Ancillary Services.     Payments for term-based paid subscriptions received in advance of services being rendered are recorded as deferred revenue and recognized ratably on a straight-line basis over the listing period. Revenue for performance-based listings is calculated as a percentage of the traveler booking or a fixed fee-per-inquiry stated in the arrangement and recognized when the service has been performed or as the customers' refund privileges lapse, which is typically at check-in. Revenue from other ancillary vacation rental services or products are recorded either upon delivery or when we provide the service.

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

    Cash and Cash Equivalents

        Our cash and cash equivalents include cash and liquid financial instruments, including money market funds and time deposit investments, with maturities of three months or less when purchased.

    Short-term and Long-term Investments

        We determine the appropriate classification of our investments in marketable securities at the time of purchase and reevaluate such designation at each balance sheet date. Based on our intent and ability to hold certain assets until maturity, we may classify certain debt securities as held to maturity and

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies (Continued)

measure them at amortized cost. Investments classified as available for sale are recorded at fair value with unrealized holding gains and losses recorded, net of tax, as a component of accumulated other comprehensive income. Realized gains and losses from the sale of available for sale investments, if any, are determined on a specific identification basis. Investments with remaining maturities of less than one year are classified within short-term investments. All other investments with remaining maturities ranging from one year to five years are classified within long-term investments and other assets.

        We record investments using the equity method when we have the ability to exercise significant influence over the investee. Equity investments without readily determinable fair values for which we do not have the ability to exercise significant influence are accounted for using the cost method of accounting and classified within long-term investments and other assets. Under the cost method, investments are carried at cost and are adjusted only for other-than-temporary declines in fair value, certain distributions, and additional investments. As of December 31, 2015 and 2014, we had $299 million and $12 million of cost method investments.

        We periodically evaluate the recoverability of investments and record a write-down to fair value if a decline in value is determined to be other-than-temporary.

    Accounts Receivable

        Accounts receivable are generally due within thirty days and are recorded net of an allowance for doubtful accounts. We consider accounts outstanding longer than the contractual payment terms as past due. We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, previous loss history, a specific customer's ability to pay its obligations to us, and the condition of the general economy and industry as a whole.

    Property and Equipment

        We record property and equipment at cost, net of accumulated depreciation and amortization. We also capitalize certain costs incurred related to the development of internal use software. We capitalize costs incurred during the application development stage related to the development of internal use software. We expense costs incurred related to the planning and post-implementation phases of development as incurred.

        We compute depreciation using the straight-line method over the estimated useful lives of the assets, which is three to five years for computer equipment, capitalized software development and furniture and other equipment. We amortize leasehold improvement using the straight-line method, over the shorter of the estimated useful life of the improvement or the remaining term of the lease.

        We establish assets and liabilities for the present value of estimated future costs to return certain of our leased facilities to their original condition under the authoritative accounting guidance for asset retirement obligations. Such assets are depreciated over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated restoration costs.

    Business Combinations

        We assign the value of the consideration transferred to acquire a business to the tangible assets and identifiable intangible assets acquired and liabilities assumed on the basis of their fair values at the date of acquisition. Any excess purchase price over the fair value of the net tangible and intangible

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Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies (Continued)

assets acquired is allocated to goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from customer relationships and trade names, and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

        In September 2015, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") that simplifies the accounting for measurement-period adjustments in a business combination. Under the ASU, an acquirer must recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The effect on earnings as a result of the change to the provisional amounts, calculated as if the accounting had been completed as of the acquisition date, must be recorded in the reporting period in which the adjustment amounts are determined rather than retrospectively. The guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years with early adoption permitted for financial statements that have not been issued. We elected to early adopt the third quarter of 2015.

    Recoverability of Goodwill and Indefinite-Lived Intangible Assets

        Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business combination as of the acquisition date. We assess goodwill and indefinite-lived intangible assets, neither of which is amortized, for impairment annually as of October 1, or more frequently, if events and circumstances indicate impairment may have occurred. In the evaluation of goodwill for impairment, we typically first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount. If so, we perform a quantitative assessment and compare the fair value of the reporting unit to the carrying value. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired and we proceed to step two of the impairment analysis. In step two of the analysis, we will record an impairment loss equal to the excess of the carrying value of the reporting unit's goodwill over its implied fair value should such a circumstance arise. Periodically, we may choose to forgo the initial qualitative assessment and perform quantitative analysis to assist in our annual evaluation.

        We generally base our measurement of fair value of reporting units on a blended analysis of the present value of future discounted cash flows and market valuation approach. The discounted cash flows model indicates the fair value of the reporting units based on the present value of the cash flows that we expect the reporting units to generate in the future. Our significant estimates in the discounted cash flows model include: our weighted average cost of capital; long-term rate of growth and profitability of our business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the Company to comparable publicly traded firms in similar lines of business. Our significant estimates in the market approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting units.

        We believe the weighted use of discounted cash flows and market approach is the best method for determining the fair value of our reporting units because these are the most common valuation

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Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies (Continued)

methodologies used within the travel and internet industries; and the blended use of both models compensates for the inherent risks associated with either model if used on a stand-alone basis.

        In addition to measuring the fair value of our reporting units as described above, we consider the combined carrying and fair values of our reporting units in relation to the Company's total fair value of equity plus debt as of the assessment date. Our equity value assumes our fully diluted market capitalization, using either the stock price on the valuation date or the average stock price over a range of dates around the valuation date, plus an estimated acquisition premium which is based on observable transactions of comparable companies. The debt value is based on the highest value expected to be paid to repurchase the debt, which can be fair value, principal or principal plus a premium depending on the terms of each debt instrument.

        In our evaluation of our indefinite-lived intangible assets, we typically first perform a qualitative assessment to determine whether the fair value of the indefinite-lived intangible asset is more likely than not impaired. If so, we perform a quantitative assessment and an impairment charge is recorded for the excess of the carrying value of indefinite-lived intangible assets over their fair value. We base our measurement of fair value of indefinite-lived intangible assets, which primarily consist of trade name and trademarks, using the relief-from-royalty method. This method assumes that the trade name and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. As with goodwill, periodically, we may choose to forgo the initial qualitative assessment and perform quantitative analysis to assist in our annual evaluation of indefinite-lived intangible assets.

    Recoverability of Intangible Assets with Definite Lives and Other Long-Lived Assets

        Intangible assets with definite lives and other long-lived assets are carried at cost and are amortized on a straight-line basis over their estimated useful lives of less than one to twelve years. We review the carrying value of long-lived assets or asset groups, including property and equipment, to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset, or a significant decline in the observable market value of an asset, among others. If such facts indicate a potential impairment, we would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, we will estimate the fair value of the asset group using appropriate valuation methodologies which would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset groups carrying amount and its estimated fair value.

        Assets held for sale, to the extent we have any, are reported at the lower of cost or fair value less costs to sell.

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Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies (Continued)

    Redeemable Noncontrolling Interests

        We have noncontrolling interests in majority owned entities, which are carried at fair value as the noncontrolling interests contain certain rights, whereby we may acquire and the minority shareholders may sell to us the additional shares of the companies. Changes in fair value of the shares for which the minority holders may sell to us are recorded to the noncontrolling interest and as charges or credits to retained earnings (or additional paid-in capital in the absence of retained earnings). Fair value determinations require high levels of judgment ("Level 3" on the fair value hierarchy) and are based on various valuation techniques, including market comparables and discounted cash flow projections.

    Income Taxes

        We record income taxes under the liability method. Deferred tax assets and liabilities reflect our estimation of the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for book and tax purposes. We determine deferred income taxes based on the differences in accounting methods and timing between financial statement and income tax reporting. Accordingly, we determine the deferred tax asset or liability for each temporary difference based on the enacted tax rates expected to be in effect when we realize the underlying items of income and expense. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience by jurisdiction, expectations of future taxable income, and the carryforward periods available to us for tax reporting purposes, as well as other relevant factors. We may establish a valuation allowance to reduce deferred tax assets to the amount we believe is more likely than not to be realized. Due to inherent complexities arising from the nature of our businesses, future changes in income tax law, tax sharing agreements or variances between our actual and anticipated operating results, we make certain judgments and estimates. Therefore, actual income taxes could materially vary from these estimates.

        In November 2015, the FASB issued an ASU that simplified the presentation of deferred taxes by requiring all deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. Under the previous practice, the requirement was to separate deferred taxes into current and noncurrent amounts on the balance sheet. The new standard does not affect the requirement to offset deferred tax assets and liabilities for each taxpaying component within a tax jurisdiction. We elected to early adopt for the current reporting period ending December 31, 2015 on a prospective basis. Other than the revised balance sheet presentation of deferred income tax assets and liabilities, the adoption of this standard did not have an effect on our consolidated financial statements.

        We account for uncertain tax positions based on a two-step process of evaluating recognition and measurement criteria. The first step assesses whether the tax position is more likely than not to be sustained upon examination by the tax authority, including resolution of any appeals or litigation, based on the technical merits of the position. If the tax position meets the more likely than not criteria, the portion of the tax benefit greater than 50% likely to be realized upon settlement with the tax authority is recognized in the financial statements.

    Presentation of Taxes in the Income Statement

        We present taxes that we collect from customers and remit to government authorities on a net basis in our consolidated statements of operations.

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Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies (Continued)

    Discontinued Operations

        As of January 1, 2015, we adopted the ASU amending the requirements for reporting discontinued operations, which may include a component of an entity or a group of components of an entity. The amendment limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have, or will have, a major effect on an entity's operations and financial results and it also requires expanded disclosures surrounding discontinued operations. Upon adoption, the standard impacted how we assess and report discontinued operations, including our divestiture of eLong during the second quarter of 2015 as disclosed below in Note 4—Disposition of Business.

        On December 20, 2011, we completed the spin-off of TripAdvisor, which was accounted for as a discontinued operation. During 2013, we received an income tax refund of $14 million related to a tax benefit for extinguishment of debt, which was included within cash provided by discontinued operations in our consolidated statement of cash flows for the period.

    Derivative Instruments

        Derivative instruments are carried at fair value on our consolidated balance sheets. The fair values of the derivative financial instruments generally represent the estimated amounts we would expect to receive or pay upon termination of the contracts as of the reporting date.

        At December 31, 2015 and 2014, our derivative instruments primarily consisted of foreign currency forward contracts. We use foreign currency forward contracts to economically hedge certain merchant revenue exposures and in lieu of holding certain foreign currency cash for the purpose of economically hedging our foreign currency-denominated operating liabilities. Our goal in managing our foreign exchange risk is to reduce, to the extent practicable, our potential exposure to the changes that exchange rates might have on our earnings, cash flows and financial position. Our foreign currency forward contracts are typically short-term and, as they do not qualify for hedge accounting treatment, we classify the changes in their fair value in other, net. We do not hold or issue financial instruments for speculative or trading purposes.

        In June 2015, we issued Euro 650 million of registered senior unsecured notes that are due in June 2022 and bear interest at 2.5% (the "2.5% Notes"). The aggregate principal value of the 2.5% Notes is designated as a hedge of our net investment in certain Euro functional currency subsidiaries. The notes are measured at Euro to U.S. Dollar exchange rates at each balance sheet date and transaction gains or losses due to changes in rates are recorded in accumulated other comprehensive income (loss) ("OCI"). The Euro-denominated net assets of these subsidiaries are translated into U.S. Dollars at each balance sheet date, with effects of foreign currency changes also reported in accumulated OCI Since the notional amount of the recorded Euro-denominated debt is less than the notional amount of our net investment, we do not expect to incur any ineffectiveness on this hedge.

    Foreign Currency Translation and Transaction Gains and Losses

        Certain of our operations outside of the United States use the related local currency as their functional currency. We translate revenue and expense at average rates of exchange during the period. We translate assets and liabilities at the rates of exchange as of the consolidated balance sheet dates and include foreign currency translation gains and losses as a component of accumulated OCI. Due to the nature of our operations and our corporate structure, we also have subsidiaries that have significant

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Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies (Continued)

transactions in foreign currencies other than their functional currency. We record transaction gains and losses in our consolidated statements of operations related to the recurring remeasurement and settlement of such transactions.

        To the extent practicable, we attempt to minimize this exposure by maintaining natural hedges between our current assets and current liabilities of similarly denominated foreign currencies. Additionally, as discussed above, we use foreign currency forward contracts to economically hedge certain merchant revenue exposures and in lieu of holding certain foreign currency cash for the purpose of economically hedging our foreign currency-denominated operating liabilities.

    Debt Issuance Costs

        We defer costs we incur to issue debt and amortize these costs to interest expense over the term of the debt or, when the debt can be redeemed at the option of the holders, over the term of the redemption option.

    Marketing Promotions

        We periodically provide incentive offers to our customers to encourage booking of travel products and services. Generally, our incentive offers are as follows:

        Current Discount Offers.     These promotions include dollar off discounts to be applied against current purchases. We record the discounts as reduction in revenue at the date we record the corresponding revenue transaction.

        Inducement Offers.     These promotions include discounts granted at the time of a current purchase to be applied against a future qualifying purchase. We treat inducement offers as a reduction to revenue based on estimated future redemption rates. We allocate the discount amount at the time of the offer between the current purchase and the potential future purchase based on our expected relative value of the transactions. We estimate our redemption rates using our historical experience for similar inducement offers.

        Concession Offers.     These promotions include discounts to be applied against a future purchase to maintain customer satisfaction. Upon issuance, we record these concession offers as a reduction to revenue based on estimated future redemption rates. We estimate our redemption rates using our historical experience for concession offers.

        Loyalty and Points Based Offers.     We offer certain internally administered traveler loyalty programs to our customers, such as our Hotels.com Rewards® program, our Brand Expedia Expedia® + rewards program and our Orbitz rewards program. Hotels.com Rewards offers travelers one free night at any Hotels.com partner property after that traveler stays 10 nights, subject to certain restrictions. Expedia+ rewards enables participating travelers to earn points on all hotel, flight, package and activities made on over 20 Brand Expedia websites. Orbitz Rewards allows travelers to earn Orbucks SM , the currency of Orbitz Rewards, on flights, hotels and vacation packages and instantly redeem those Orbucks on future bookings at various hotels worldwide. As travelers accumulate points towards free travel products, we record a liability for the estimated future cost of redemptions. We determine the future redemption obligation based on factors that require significant judgment including: (i) the estimated cost of travel products to be redeemed, and (ii) an estimated redemption rate based on the overall

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Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies (Continued)

accumulation and usage of points towards free travel products, which is determined through current and historical trends as well as statistical modeling techniques. As of December 31, 2015 and 2014, we had a liability related to our loyalty programs of $364 million and $235 million included in accrued expenses and other current liabilities.

    Advertising Expense

        We incur advertising expense consisting of offline costs, including television and radio advertising, and online advertising expense to promote our brands. We expense the production costs associated with advertisements in the period in which the advertisement first takes place. We expense the costs of communicating the advertisement (e.g., television airtime) as incurred each time the advertisement is shown. For the years ended December 31, 2015, 2014 and 2013, our advertising expense was $2.1 billion, $1.6 billion and $1.2 billion. As of December 31, 2015 and 2014, we had $16 million and $24 million of prepaid marketing expenses included in prepaid expenses and other current assets.

    Stock-Based Compensation

        We measure and amortize the fair value of stock options and restricted stock units ("RSUs") as follows:

        Stock Options.     We measure the value of stock options issued or modified, including unvested options assumed in acquisitions, on the grant date (or modification or acquisition dates, if applicable) at fair value, using appropriate valuation techniques, including the Black-Scholes and Monte Carlo option pricing models. The valuation models incorporate various assumptions including expected volatility, expected term and risk-free interest rates. The expected volatility is based on historical volatility of our common stock and other relevant factors. We base our expected term assumptions on our historical experience and on the terms and conditions of the stock awards granted to employees. We amortize the fair value, net of estimated forfeitures, over the remaining vesting term on a straight-line basis. The majority of our stock options vest over four years.

        Restricted Stock Units.     RSUs are stock awards that are granted to employees entitling the holder to shares of common stock as the award vests, typically over a three or four-year period. We measure the value of RSUs at fair value based on the number of shares granted and the quoted price of our common stock at the date of grant. We amortize the fair value, net of estimated forfeitures, as stock-based compensation expense over the vesting term on a straight-line basis. We record RSUs that may be settled by the holder in cash, rather than shares, as a liability and we remeasure these instruments at fair value at the end of each reporting period. Upon settlement of these awards, our total compensation expense recorded over the vesting period of the awards will equal the settlement amount, which is based on our stock price on the settlement date. Performance-based RSUs vest upon achievement of certain company-based performance conditions. On the date of grant, we determine the fair value of the performance-based award based on the fair value of our common stock at that time and we assess whether it is probable that the performance targets will be achieved. If assessed as probable, we record compensation expense for these awards over the estimated performance period using the accelerated method. At each reporting period, we reassess the probability of achieving the performance targets and the performance period required to meet those targets. The estimation of whether the performance targets will be achieved and of the performance period required to achieve the targets requires judgment, and to the extent actual results or updated estimates differ from our

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Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies (Continued)

current estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised, or the change in estimate will be applied prospectively depending on whether the change affects the estimate of total compensation cost to be recognized or merely affects the period over which compensation cost is to be recognized. The ultimate number of shares issued and the related compensation expense recognized will be based on a comparison of the final performance metrics to the specified targets.

        Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive these awards, and subsequent events are not indicative of the reasonableness of our original estimates of fair value. In determining the estimated forfeiture rates for stock-based awards, we periodically conduct an assessment of the actual number of equity awards that have been forfeited to date as well as those expected to be forfeited in the future. We consider many factors when estimating expected forfeitures, including the type of award, the employee class and historical experience. The estimate of stock awards that will ultimately be forfeited requires significant judgment and to the extent that actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period such estimates are revised.

    Earnings Per Share

        We compute basic earnings per share by taking net income attributable to Expedia, Inc. available to common stockholders divided by the weighted average number of common and Class B common shares outstanding during the period excluding restricted stock and stock held in escrow. Diluted earnings per share include the potential dilution that could occur from stock-based awards and other stock-based commitments using the treasury stock or the as if converted methods, as applicable. For additional information on how we compute earnings per share, see Note 14—Earnings Per Share.

    Fair Value Recognition, Measurement and Disclosure

        The carrying amounts of cash and cash equivalents and restricted cash and cash equivalents reported on our consolidated balance sheets approximate fair value as we maintain them with various high-quality financial institutions. The accounts receivable are short-term in nature and are generally settled shortly after the sale.

        We disclose the fair value of our financial instruments based on the fair value hierarchy using the following three categories:

    Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

    Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

    Level 3—Valuations based on unobservable inputs reflecting the Company's own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies (Continued)

    Certain Risks and Concentrations

        Our business is subject to certain risks and concentrations including dependence on relationships with travel suppliers, primarily airlines and hotels, dependence on third-party technology providers, exposure to risks associated with online commerce security and payment related fraud. We also rely on global distribution system partners and third-party service providers for certain fulfillment services.

        Financial instruments, which potentially subject us to concentration of credit risk, consist primarily of cash and cash equivalents and corporate debt securities. We maintain some cash and cash equivalents balances with financial institutions that are in excess of Federal Deposit Insurance Corporation insurance limits. Our cash and cash equivalents are primarily composed of prime institutional money market funds as well as bank (both interest and non-interest bearing) account balances denominated in U.S. dollars, euros, Australian dollar, British pound sterling, Canadian dollar and Japanese yen.

    Contingent Liabilities

        We have a number of regulatory and legal matters outstanding, as discussed further in Note 17—Commitments and Contingencies. Periodically, we review the status of all significant outstanding matters to assess the potential financial exposure. When (i) it is probable that an asset has been impaired or a liability has been incurred and (ii) the amount of the loss can be reasonably estimated, we record the estimated loss in our consolidated statements of operations. We provide disclosure in the notes to the consolidated financial statements for loss contingencies that do not meet both of these conditions if there is a reasonable possibility that a loss may have been incurred that would be material to the financial statements. Significant judgment is required to determine the probability that a liability has been incurred and whether such liability is reasonably estimable. We base accruals made on the best information available at the time which can be highly subjective. The final outcome of these matters could vary significantly from the amounts included in the accompanying consolidated financial statements.

    Occupancy Tax

        Some states and localities impose a transient occupancy or accommodation tax on the use or occupancy of hotel accommodations. Generally, hotels collect taxes based on the room rate paid to the hotel and remit these taxes to the various tax authorities. When a customer books a room through one of our travel services, we collect a tax recovery charge from the customer which we pay to the hotel. We calculate the tax recovery charge by applying the occupancy tax rate supplied to us by the hotels to the amount that the hotel has agreed to receive for the rental of the room by the consumer. In all but a limited number of jurisdictions, we do not collect or remit occupancy taxes, nor do we pay occupancy taxes to the hotel operator on the portion of the customer payment we retain. Some jurisdictions have questioned our practice in this regard. While the applicable tax provisions vary among the jurisdictions, we generally believe that we are not required to collect and remit such occupancy taxes. We are engaged in discussions with tax authorities in various jurisdictions to resolve this issue. Some tax authorities have brought lawsuits or have levied assessments asserting that we are required to collect and remit occupancy tax. The ultimate resolution in all jurisdictions cannot be determined at this time. We have established a reserve for the potential settlement of issues related to hotel occupancy taxes

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Notes to Consolidated Financial Statements (Continued)

NOTE 2—Significant Accounting Policies (Continued)

when determined to be probable and estimable. See Note 17—Commitments and Contingencies for further discussion.

    Recent Accounting Policies Not Yet Adopted

        In May 2014, the FASB issued an ASU amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued an ASU deferring the effective date of the revenue standard so it would be effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption prohibited before December 15, 2016. We are in the process of evaluating the impact of the adoption of this new guidance on our consolidated financial statements.

        In April 2015, the FASB issued an ASU that requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The guidance is effective for annual and interim reporting periods beginning after December 15, 2015, but early adoption is permitted. We anticipate adopting this new guidance on January 1, 2016 with no material impact on our consolidated financial statements.

        In April 2015, the FASB issued guidance to clarify the accounting for fees paid by a customer in a cloud computing arrangement. This standard clarifies whether a customer should account for a cloud computing arrangement as an acquisition of a software license or as a service arrangement by providing characteristics that a cloud computing arrangement must have in order to be accounted for as a software license acquisition. This guidance is effective for annual periods beginning after December 15, 2015, but early adoption is permitted. Upon adoption, an entity may apply the new guidance prospectively or retrospectively to all prior periods presented in the financial statements. We anticipate adopting this new guidance prospectively on January 1, 2016 with no material impact on our consolidated financial statements.

        In January 2016, the FASB issued new guidance related to accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. We are in the process of evaluating the impact of adopting this new guidance on our consolidated financial statements.

NOTE 3—Acquisitions and Other Investments

    2015 Acquisition and Other Investment Activity

        HomeAway Acquisition.     On December 15, 2015, we completed our acquisition of HomeAway, Inc., including all of its brands, for total purchase consideration of $3.6 billion primarily in cash and Expedia common stock. With Expedia's expertise in powering global transactional platforms and our industry-leading technology capabilities, we will partner with HomeAway to accelerate their shift from a classified marketplace to an online, transactional model to create even better experiences for HomeAway's global traveler audience and the owners and managers of its properties around the world.

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Notes to Consolidated Financial Statements (Continued)

NOTE 3—Acquisitions and Other Investments (Continued)

        Each outstanding share of common stock of HomeAway immediately prior to the acquisition was exchanged for $10.15 in cash and 0.2065 of a share of Expedia common stock, with cash paid in lieu of fractional shares. The preliminary aggregate purchase consideration for HomeAway is as follows (in thousands):

Fair value of shares of Expedia common stock issued to HomeAway stockholders and equity award holders

  $ 2,515,755  

Cash consideration paid to HomeAway stockholders and equity award holders

    1,027,061  

Replacement restricted stock units and stock options attributable to pre-acquisition service

    19,513  

Total purchase consideration

  $ 3,562,329  

        The fair value of common stock shares issued was based on the closing price of Expedia's common stock at December 14, 2015 and included the fair value of shares of Expedia common stock issued to (i) HomeAway stockholders based on approximately 97 million HomeAway shares outstanding as of December 14, 2015 and (ii) holders of equity awards vested as of December 14, 2015. Approximately 20 million shares of Expedia common stock were issued in connection with the acquisition of HomeAway. Purchase consideration also included $20 million for the portion of certain unvested employee options and restricted stock unit awards of HomeAway attributable to pre-combination service, which were replaced with Expedia awards in conjunction with the acquisition and measured at fair value on the acquisition date. The fair value for the portion of the awards attributable to post-combination service was $106 million, net of estimated forfeitures.

        Due to the limited amount of time since the acquisition of HomeAway, the purchase price allocation was based on a preliminary valuation of the assets acquired and liabilities assumed and is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed become available. The final allocation may include changes to the acquisition date fair value of intangible assets, goodwill, deferred taxes, deferred

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Notes to Consolidated Financial Statements (Continued)

NOTE 3—Acquisitions and Other Investments (Continued)

revenue as well as operating assets and liabilities. The following summarizes the preliminary allocation of the purchase price for HomeAway, in thousands:

Cash

  $ 900,281  

Other current assets(1)

    54,665  

Long-term assets

    81,564  

Intangible assets with definite lives(2)

    555,600  

Intangible assets with indefinite lives(3)

    196,900  

Goodwill

    2,602,712  

Deferred revenue

    (182,978 )

Other current liabilities

    (104,316 )

Debt

    (402,500 )

Other long-term liabilities

    (31,122 )

Deferred tax liabilities, net

    (108,477 )

Total

  $ 3,562,329  

(1)
Gross accounts receivable was $25 million, of which $1 million was estimated to be uncollectible.

(2)
Acquired definite-lived intangible assets primarily consist of supplier relationships, customer relationships and developed technology assets with average lives ranging from less than one to twelve years and an estimated combined weighted average useful life of 5.73 years.

(3)
Acquired indefinite-lived intangible assets primarily consist of trade names and trademarks.

        The goodwill of $2.6 billion is primarily attributable to assembled workforce and operating synergies as it relates to the shift to a transaction model. The goodwill has been allocated to the new HomeAway reportable segment and is not expected to be deductible for tax purposes.

        We assumed approximately $403 million of 0.125% Convertible Senior Notes due 2019 (the "Convertible Notes") in connection with the HomeAway acquisition. However, following the consummation of the HomeAway acquisition, we subsequently delivered a notice to holders of the Convertible Notes, as required per the terms of the Convertible Notes indenture, to which each holder of the Convertible Notes had the right to (i) require the Company to repurchase its Convertible Notes for cash at a price equal to 100% of the principal amount of such notes plus accrued and unpaid interest or (ii) convert its Convertible Notes, at a specified conversion rate into HomeAway common stock (which, following consummation of the HomeAway acquisition, represented the right to receive the transaction consideration) or (iii) allow the Convertible Notes to remain outstanding for the remaining term. As a result, the majority of the Convertible Notes, or $377 million, were repurchased during the January 2016, and we have therefore determined the fair value of the Convertible Notes on the date of acquisition to be equal to the principal amount of the Convertible Notes.

        In connection with the issuance of the Convertible Notes, HomeAway also sold warrants (the "Warrants") to acquire approximately 7.7 million shares of HomeAway common stock. As a result of the merger, the Warrant holders had the right to terminate the Warrants at fair value as determined in

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Notes to Consolidated Financial Statements (Continued)

NOTE 3—Acquisitions and Other Investments (Continued)

a commercially reasonable manner. A portion of such Warrants were settled on December 16, 2015 for $23 million in cash, with the $8 million remainder settled in January 2016.

        Both the Convertible Notes and the Warrants outstanding as of December 31, 2015 were included in accrued expenses and other current liabilities.

        HomeAway was consolidated into our financial statements starting on the acquisition date and we have recognized a related $20 million in revenue and $14 million in operating losses, including fees related to the acquisition that are not allocated to the segment, for 2015.

        In connection with the acquisition, HomeAway incurred fees paid to financial advisors totaling approximately $33 million, which were contingent upon closing and were excluded from both Expedia's consolidated statement of operations and the pre-combination financial statements of HomeAway.

        Orbitz Acquisition.     On September 17, 2015, we completed our acquisition of Orbitz Worldwide, Inc., including all of its brands, including Orbitz, ebookers, HotelClub, CheapTickets, Orbitz Partner Network and Orbitz for Business, for a total purchase consideration of $1.8 billion. The acquisition provides Expedia the opportunity to deliver a better customer experience to Orbitz' loyal customer base and to further enhance the marketing and distribution capabilities we offer to our global supply partners.

        The purchase consideration consisted primarily of $1.4 billion in cash, or $12 per share for all shares of Orbitz common stock outstanding as of the purchase date, as well as the settlement of $432 million of pre-existing Orbitz debt at the closing of the acquisition. Purchase consideration also included $17 million for the portion of certain unvested employee restricted stock unit awards of Orbitz attributable to pre-combination service, which were replaced with Expedia awards in conjunction with the acquisition and measured at fair value on the acquisition date. The fair value for the portion of the awards attributable to post-combination service was $49 million, net of estimated forfeitures, of which $34 million was recognized during 2015.

        The purchase price allocation was based on a preliminary valuation of the assets acquired and liabilities assumed and is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed become available. The final allocation may include changes to the acquisition date fair value of intangible assets, goodwill, deferred taxes, deferred revenue, accounts receivable, loyalty liabilities and other current liabilities as well as

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Notes to Consolidated Financial Statements (Continued)

NOTE 3—Acquisitions and Other Investments (Continued)

other items. The following summarizes the preliminary allocation of the purchase price for Orbitz, in thousands:

Cash consideration for shares

  $ 1,362,362  

Settlement of Orbitz debt

    432,231  

Replacement restricted stock units attributable to pre-acquisition service

    16,717  

Other consideration

    2,214  

Total purchase consideration

  $ 1,813,524  

Cash

  $ 194,515  

Accounts receivable, net(1)

    147,517  

Other current assets

    33,728  

Long-term assets

    115,163  

Intangible assets with definite lives(2)

    515,384  

Intangible assets with indefinite lives(3)

    166,800  

Goodwill

    1,443,521  

Current liabilities

    (635,209 )

Other long-term liabilities

    (54,627 )

Deferred tax liabilities, net

    (113,268 )

Total

  $ 1,813,524  

(1)
Gross accounts receivable was $157 million, of which $9 million was estimated to be uncollectible.

(2)
Acquired definite-lived intangible assets primarily consist of customer relationship assets, developed technology assets and partner relationship assets with estimated useful lives ranging from less than one to ten years with a weighted average life of 6.03 years.

(3)
Acquired indefinite-lived intangible assets primarily consist of trade names and trademarks.

        The goodwill of $1.4 billion is primarily attributable to operating synergies. The goodwill has been allocated to the Core Online Travel Agencies ("Core OTA") segment and is not expected to be deductible for tax purposes. Orbitz was consolidated into our financial statements starting on the acquisition date and we have recognized a related $196 million in revenue and $163 million in operating losses, including restructuring charges of $92 million as well as fees related to the acquisition that are not allocated to the Core OTA segment, for 2015.

        In connection with the merger, Orbitz incurred fees paid to financial advisors totaling approximately $25 million, which were contingent upon closing and were excluded from both Expedia's consolidated statement of operations and the pre-combination financial statements of Orbitz. In addition, Orbitz offered certain employees a continuity incentive of approximately $30 million for continuing employment through the closing date and beyond. The first half of the incentives were contingent and paid upon the closing of the acquisition and related to service provided in the pre-acquisition period. The second half of the incentive is payable 180 days after the closing (or upon involuntary termination, if applicable) and is being expensed to restructuring and related reorganization charges over the applicable service period.

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Notes to Consolidated Financial Statements (Continued)

NOTE 3—Acquisitions and Other Investments (Continued)

        For information related to restructuring plans as a result of the merger, see Note 15—Restructuring and Related Reorganization Charges. For information related to claims, proceedings and inquiries related to hotel occupancy and other taxes for Orbitz, see Note 17—Commitments and Contingencies.

        Combined Pro forma Information (Unaudited).     Supplemental information on an unaudited combined pro forma basis, as if the HomeAway and Orbitz acquisitions had been consummated on January 1, 2014, is presented as follows, in thousands:

 
  Years Ended December 31,  
 
  2015   2014  

Revenue

  $ 7,838,863   $ 7,110,688  

Net income attributable to Expedia, Inc. 

    816,634     301,331  

        The pro forma results are not necessarily indicative of our consolidated results of operations in future periods or the results that actually would have been realized had the companies operated on a combined basis during the periods presented. The pro forma results include adjustments primarily related to amortization of acquired intangibles, depreciation of fixed assets, certain accounting policy alignments as well as direct and incremental acquisition related costs reflected in the historical financial statements. The preliminary purchase price allocation was used to prepare the pro forma adjustments. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments.

        Other 2015 Acquisitions.     On March 10, 2015, we completed the acquisition of an additional 25% equity interest of AAE Travel Pte. Ltd., the joint venture formed between Expedia and AirAsia Berhad in 2011, for cash consideration of approximately $94 million. This investment increased our total ownership in the venture from 50% to 75% and resulted in the consolidation of the entity. In conjunction with the acquisition of the additional interest, we remeasured our previously held equity interest to fair value, excluding any acquisition premium, and recognized a gain of $77 million in other, net during the period. The fair value of the 25% noncontrolling interest, including an acquisition premium, was estimated to be $64 million at the time of the acquisition. Both fair values were determined based on various valuation techniques, including market comparables and discounted cash flow projections (Level 3 inputs).

        On January 23, 2015, we acquired the Travelocity brand and other associated assets from Sabre for $280 million in cash consideration. As a result of the asset acquisition, the strategic marketing and other related agreements entered into in 2013 were terminated. Under the terms of the strategic marketing agreement, Travelocity was compensated through a performance-based marketing fee related to bookings powered by Expedia made through Travelocity-branded websites in the United States and Canada. Revenue earned on the Travelocity websites was recorded as a component of Expedia's net revenue in accordance with our revenue recognition policies and the related marketing fee paid to Travelocity was recorded as selling and marketing expense. In conjunction with the acquisition, we did not acquire any cash or working capital assets or assume any liabilities.

        In addition, we completed three other acquisitions during 2015 for a total purchase price of $9 million.

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Notes to Consolidated Financial Statements (Continued)

NOTE 3—Acquisitions and Other Investments (Continued)

        The following summarizes the allocation of the purchase price for the 2015 acquisitions, excluding HomeAway and Orbitz, in thousands:

Goodwill

  $ 196,431  

Intangible assets with indefinite lives

    163,400  

Intangible assets with definite lives(1)

    146,126  

Net assets and non-controlling interests acquired(2)

    (23,366 )

Deferred tax liabilities

    (7,910 )

Total(3)

  $ 474,681  

(1)
Acquired definite-lived intangible assets primarily consist of customer relationship, reacquired right and supplier relationship assets and have estimated useful lives of between four and ten years with a weighted average life of 5.8 years.

(2)
Includes cash acquired of $41 million.

(3)
The total purchase price includes noncash consideration of $99 million related to an equity method investment, which is currently consolidated upon our acquisition of a controlling interest, as discussed above, with the remainder paid in cash during the period.

        The goodwill of $196 million is primarily attributable to operating synergies and $82 million is expected to be deductible for tax purposes with the remainder not expected to be deductible.

        Business combination accounting is preliminary and subject to revision while we accumulate all relevant information regarding the fair values of the net assets acquired. The results of operations of the other acquired companies have been included in our consolidated results from the transaction closing dates forward. Pro forma results of operations have not been presented as such pro forma financial information would not be materially different from historical results.

        Other Investments.     On March 10, 2015, we announced that Expedia and Decolar.com, Inc. ("Decolar"), the Latin American online travel company that operates the Decolar.com and Despegar.com branded websites, have expanded our partnership to include deeper cooperation on hotel supply and we have made a $270 million cost method investment in Decolar, which is included within long-term investments and other assets on our consolidated balance sheet.

        Acquisition-related Costs.     Other than costs mentioned above related to Orbitz and HomeAway that were contingent upon closing and those costs related to cost method investments, total acquisition-related costs incurred by Expedia in 2015, which included legal, finance, consulting and other professional fees, were expensed as incurred within general and administrative expenses and were approximately $47 million.

    2014 Acquisition Activity

        In November 2014, we acquired Wotif Group, an Australian-based online travel company. The total consideration received by Wotif Group shareholders of $703 million Australian dollars ("A$") or A$3.30 per share (approximately $612 million or $2.87 per share based on November 13, 2014 exchange

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Notes to Consolidated Financial Statements (Continued)

NOTE 3—Acquisitions and Other Investments (Continued)

rates) was comprised of A$51 million special dividend distributed by the Wotif Group to its shareholders prior to the acquisition by Expedia, Inc. and A$652 million (or approximately $568 million) in cash from Expedia, Inc. The Wotif Group adds to our collection of travel's most trusted brands and enhances our supply in the Asia-Pacific region, while allowing Expedia to expose the Wotif Group to our world-class technology and its customers to our extensive global supply.

        The aggregate purchase price consideration of $568 million was allocated to the fair value of assets acquired and liabilities assumed as follows, in thousands:

Goodwill

  $ 350,093  

Intangible assets with indefinite lives

    125,762  

Intangible assets with definite lives(1)

    138,292  

Net liabilities(2)

    (43,429 )

Deferred tax liabilities

    (2,908 )

Total

  $ 567,810  

(1)
Acquired definite-lived intangible assets primarily consist of supplier contracts and customer relationships and have estimated useful lives of between less than one year and 10 years with a weighted average life of 7.8 years.

(2)
Includes cash acquired of $36 million.

        The goodwill of $350 million is primarily attributed to assembled workforce and operating synergies. The goodwill has been allocated to the Core OTA segment and is expected to be deductible for tax purposes. Acquisition-related costs were expensed as incurred within general and administrative expenses and were approximately $7 million.

        During 2014, we completed three other acquisitions, including a leading online car rental reservation company in Europe, for total consideration of $85 million, which included cash paid of $77 million and existing equity interest of $7 million. As a result of these acquisitions, we acquired net liabilities of $19 million, including cash of $48 million, as well as recorded deferred tax liabilities of $17 million, $70 million in goodwill and $51 million of intangible assets with definite lives with a weighted average amortization life of 6.1 years. In conjunction with our acquisition of a consolidating interest in one of the companies, we remeasured our previously held equity interest to fair value at the acquisition date and recognized a gain of $3 million in other, net during the period.

        The results of operations of the acquired companies, including the Wotif Group, have been included in our consolidated results from the transaction closing dates forward; the effect on consolidated revenue and operating income during 2014 was not significant. Pro forma results of operations have not been presented as such pro forma financial information would not be materially different from historical results.

    2013 Acquisition Activity

        During 2013, we completed the purchase of a 63% equity position (61.6% on a fully diluted basis) in trivago GmbH, a leading hotel metasearch company based in Germany. trivago was acquired due to the quality and strength of its product and brand and our belief that the company will continue to scale

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Notes to Consolidated Financial Statements (Continued)

NOTE 3—Acquisitions and Other Investments (Continued)

as it expands globally. In conjunction with the acquisition, we paid € 434 million in cash, or approximately $564 million based on March 8, 2013 exchange rates, of which $554 million was paid to the shareholders of trivago and $10 million was used to settle a portion of an employee compensation plan. In addition, we agreed to issue 875,200 shares of Expedia, Inc. common stock to certain employee stockholders in five equal increments on or about each of the first through fifth anniversaries of the acquisition. The number of shares of Expedia common stock was calculated based on the aggregate value of €43 million using a thirty-day trailing average of closing trading prices and exchange rates prior to acquisition. During the first quarter of 2014 and 2015, we issued the first two increments of 175,040 shares of Expedia, Inc. common stock. Also in conjunction with the acquisition, we replaced certain employee stock-based awards of the acquiree, which related to pre-combination service, for an acquisition date fair value of $15 million.

        As a result of the acquisition, we expensed $66 million to acquisition-related and other on the consolidated statements of operations during 2013, which included approximately $57 million in stock-based compensation related to the issuance of the 875,200 shares of common stock as the issuance was determined separate from the business combination and was not contingent upon any future service or other certain event except the passage of time as well as approximately $10 million for the amount paid to settle a portion of the employee compensation plan of trivago, which was considered separate from the business combination. The stock-based compensation expense was measured using the closing price of Expedia, Inc. common stock as of the acquisition date multiplied by the number of shares to be issued. Acquisition-related costs were expensed as incurred and were not significant. The aggregate purchase price consideration was $570 million, which included the cash paid to shareholders of trivago of $554 million as well as $15 million for replaced employee stock-based awards of the acquiree. The purchase price was allocated to the fair value of assets acquired and liabilities assumed as follows, in thousands:

Goodwill

  $ 633,436  

Intangible assets with indefinite lives

    220,416  

Intangible assets with definite lives(1)

    136,281  

Net assets(2)

    19,064  

Deferred tax liabilities

    (111,379 )

Redeemable noncontrolling interest

    (343,984 )

Total

  $ 553,834  

(1)
Acquired definite-lived intangible assets primarily consist of technology, partner relationship and non-compete agreement assets and have estimated useful lives of between three and seven years with a weighted average life of 3.7 years.

(2)
Includes cash acquired of $13 million.

        The value of the replaced employee stock-based awards of the acquiree was included in the purchase price allocation with a corresponding offset to redeemable noncontrolling interest, because the replacement awards were issued in subsidiary stock.

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Notes to Consolidated Financial Statements (Continued)

NOTE 3—Acquisitions and Other Investments (Continued)

        The goodwill of $633 million is primarily attributed to assembled workforce, operating synergies and potential expansion into other global markets. The goodwill has been allocated to the trivago segment and is not expected to be deductible for tax purposes.

        The fair value of the 37% noncontrolling interest was estimated to be $344 million at the time of acquisition based on the fair value per share, excluding the control premium. The control premium was derived directly based on the additional consideration paid to certain shareholders in order to obtain control. The additional consideration was determined to be the best estimate to represent the control premium as it was a premium paid only to the controlling shareholders. In addition, the purchase agreement contains certain put/call rights whereby we may acquire and the minority shareholders of trivago may sell to us up to 50% and 100% of the minority shares of the company at fair value during two windows, the first of which opens in the first quarter of 2016 and the second opens in 2018. As the noncontrolling interest is redeemable at the option of the minority holders, we classified the balance as redeemable noncontrolling interest with future changes in the fair value above the initial basis recorded as charges or credits to retained earnings (or additional paid-in capital in absence of retained earnings). The put/call arrangement includes certain rollover provisions that, if triggered, would cause the minority shares to be treated as though they become mandatorily redeemable, and to be reclassified as a liability at the time such trigger becomes certain to occur. Our redeemable noncontrolling interest balance related to trivago was $654 million as of December 31, 2015, which represents our best estimate of fair value. The final redemption amount could materially differ from this estimate based on the final negotiations. For further information on redeemable noncontrolling interest, see Note 12—Redeemable Noncontrolling Interests.

        trivago's results of operations have been included in our consolidated results from the transaction closing date forward. Pro forma results of operations have not been presented as such pro forma financial information would not be materially different from historical results. During 2013, the acquisition accounted for approximately 4% of consolidated revenue for the year.

NOTE 4—Disposition of Business

        On May 22, 2015, we completed the sale of our 62.4% ownership stake in eLong, Inc., which was a separate reportable segment, for approximately $671 million (or $666 million net of costs to sell and other transaction expenses) to several purchasers, including Ctrip.com International, Ltd. Of the total sales price, approximately $67 million was remitted directly to escrow for estimated tax obligations, and is recorded in long-term investments and other assets on our consolidated balance sheet as of December 31, 2015 and represents a noncash item in our consolidated statement of cash flows. As a result of the sale, we recognized a pre-tax gain of $509 million ($395 million after tax) during 2015 included in gain on sale of business in our consolidated statement of operations.

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Notes to Consolidated Financial Statements (Continued)

NOTE 4—Disposition of Business (Continued)

        The following table presents the carrying amounts of our eLong business immediately preceding the disposition on May 22, 2015, in thousands:

Total current assets(1)

  $ 350,196  

Total long-term assets

    137,709  

Total assets divested

  $ 487,905  

Total current liabilities

  $ 187,296  

Total long-term liabilities

    5,782  

Total liabilities divested

  $ 193,078  

Components of accumulated other comprehensive income divested

    45,259  

Non-redeemable noncontrolling interest divested

    92,550  

Net carrying value divested

  $ 157,018  

(1)
Includes cash and cash equivalents of approximately $74 million.

        We evaluated the disposition of eLong and determined it did not meet the "major effect" criteria for classification as a discontinued operation largely due to how recently it began having material impacts to our quarterly consolidated operating and net income. However, we determined that the disposition does represent an individually significant component of our business. The following table presents certain amounts related to eLong in our consolidated results of operations through its disposal on May 22, 2015:

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (In thousands)
 

Operating loss(1)

  $ (85,536 ) $ (50,757 ) $ (28,857 )

Income (loss) before taxes(2)

    438,843     (40,535 )   (17,031 )

Income (loss) before taxes attributable to Expedia, Inc.(2)

    465,400     (25,078 )   (7,669 )

Net income (loss) attributable to Expedia, Inc.(3)

    349,183     (27,119 )   (17,518 )

(1)
Includes stock-based compensation and amortization of intangible assets of approximately $20 million, $17 million and $11 million for 2015, 2014 and 2013, which are included within Corporate & Eliminations in Note 19—Segment Information.

(2)
The year ended December 31, 2015 includes the pre-tax gain of $509 million related to the gain on sale.

(3)
The year ended December 31, 2015 includes the after-tax gain of $395 million related to the gain on sale.

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Notes to Consolidated Financial Statements (Continued)

NOTE 5—Fair Value Measurements (Continued)

        Financial assets measured at fair value on a recurring basis as of December 31, 2015 are classified using the fair value hierarchy in the table below:

 
  Total   Level 1   Level 2  
 
  (In thousands)
 

Assets

                   

Cash equivalents:

                   

Money market funds

  $ 218,340   $ 218,340   $  

Time deposits

    29,126         29,126  

Derivatives:

                   

Foreign currency forward contracts

    8,045         8,045  

Investments:

                   

Corporate debt securities

    98,403         98,403  

Total assets

  $ 353,914   $ 218,340   $ 135,574  

        Financial assets measured at fair value on a recurring basis as of December 31, 2014 are classified using the fair value hierarchy in the table below:

 
  Total   Level 1   Level 2  
 
  (In thousands)
 

Assets

                   

Cash equivalents:

                   

Money market funds

  $ 161,059   $ 161,059   $  

Time deposits

    298,968         298,968  

Restricted cash:

                   

Time deposits

    19,980         19,980  

Derivatives:

                   

Foreign currency forward contracts

    9,176         9,176  

Investments:

                   

Time deposits

    312,762         312,762  

Corporate debt securities

    142,575         142,575  

Total assets

  $ 944,520   $ 161,059   $ 783,461  

        We classify our cash equivalents and investments within Level 1 and Level 2 as we value our cash equivalents and investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Valuation of the foreign currency forward contracts is based on foreign currency exchange rates in active markets, a Level 2 input.

        As of December 31, 2015 and 2014, our cash and cash equivalents consisted primarily of prime institutional money market funds with maturities of three months or less, time deposits as well as bank account balances.

        We invest in investment grade corporate debt securities, all of which are classified as available for sale. As of December 31, 2015, we had $34 million of short-term and $65 million of long-term available for sale investments and the amortized cost basis of the investments approximated their fair value with both gross unrealized gains and gross unrealized losses of less than $1 million. As of December 31,

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Notes to Consolidated Financial Statements (Continued)

NOTE 5—Fair Value Measurements (Continued)

2014, we had $43 million of short-term and $100 million of long-term available for sale investments and the amortized cost basis of the investments approximated their fair value with both gross unrealized gains and gross unrealized losses of less than $1 million.

        We also hold time deposit investments with financial institutions. Time deposits with original maturities of less than three months are classified as cash equivalents and those with remaining maturities of less than one year are classified within short-term investments.

        We use foreign currency forward contracts to economically hedge certain merchant revenue exposures and in lieu of holding certain foreign currency cash for the purpose of economically hedging our foreign currency-denominated operating liabilities. As of December 31, 2015, we were party to outstanding forward contracts hedging our liability exposures with a total net notional value of $1.9 billion. We had a net forward asset of $8 million and $9 million recorded in prepaid expenses and other current assets as of December 31, 2015 and 2014. We recorded $46 million, $10 million and $47 million in net gains (losses) from foreign currency forward contracts in 2015, 2014 and 2013.

NOTE 6—Property and Equipment, Net

        Our property and equipment consists of the following:

 
  December 31,  
 
  2015   2014  
 
  (In thousands)
 

Capitalized software development

  $ 1,220,822   $ 1,041,924  

Computer equipment

    485,074     313,738  

Furniture and other equipment

    65,939     42,110  

Buildings and leasehold improvements

    199,604     135,372  

Land

    130,725      

    2,102,164     1,533,144  

Less: accumulated depreciation

    (1,201,744 )   (1,011,085 )

Projects in progress

    163,839     31,067  

Property and equipment, net

  $ 1,064,259   $ 553,126  

        As of December 31, 2015 and 2014, our recorded capitalized software development costs, net of accumulated amortization, were $484 million and $386 million. For the years ended December 31, 2015, 2014 and 2013, we recorded amortization of capitalized software development costs of $230 million, $185 million and $139 million, most of which is included in technology and content expenses.

        On April 30, 2015, we acquired our future corporate headquarters for $229 million, consisting of multiple office and lab buildings located in Seattle, Washington. The acquired building assets are included in construction in process and will begin depreciating when the costs incurred related to the build out of the headquarters are complete and the building assets are ready for their intended use.

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Notes to Consolidated Financial Statements (Continued)

NOTE 7—Goodwill and Intangible Assets, Net

        The following table presents our goodwill and intangible assets as of December 31, 2015 and 2014:

 
  December 31,  
 
  2015   2014  
 
  (In thousands)
 

Goodwill

  $ 7,992,941   $ 3,955,901  

Intangible assets with indefinite lives

    1,459,854     976,638  

Intangible assets with definite lives, net

    1,334,100     313,449  

  $ 10,786,895   $ 5,245,988  

        Impairment Assessments.     We perform our annual assessment of possible impairment of goodwill and indefinite-lived intangible assets as of October 1, or more frequently if events and circumstances indicate that impairment may have occurred. As of October 1, 2015 and 2014, we had no impairments to goodwill.

        Goodwill.     The following table presents the changes in goodwill by reportable segment:

 
  Core OTA   trivago   Egencia   HomeAway   eLong   Total  
 
  (In thousands)
 

Balance as of January 1, 2014

  $ 2,781,296   $ 633,436   $ 194,651   $   $ 54,291   $ 3,663,674  

Additions

    402,752     1,045             14,611     418,408  

Foreign exchange translation

    (50,553 )   (41,062 )   (38,327 )       3,761     (126,181 )

Balance as of December 31, 2014

    3,133,495     593,419     156,324         72,663     3,955,901  

Additions

    1,633,711     6,241         2,602,712     469     4,243,133  

Deductions

                    (72,693 )   (72,693 )

Foreign exchange translation

    (49,835 )   (60,083 )   (23,043 )       (439 )   (133,400 )

Balance as of December 31, 2015

  $ 4,717,371   $ 539,577   $ 133,281   $ 2,602,712   $   $ 7,992,941  

        In 2015 and 2014, the additions to goodwill relate primarily to our acquisitions as described in Note 3—Acquisitions and Other Investments.

        As of December 31, 2015 and 2014, accumulated goodwill impairment losses in total were $2.5 billion, which was associated with our Core OTA segment.

        Indefinite-lived Intangible Assets.     Our indefinite-lived intangible assets relate principally to trade names and trademarks acquired in various acquisitions.

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 7—Goodwill and Intangible Assets, Net (Continued)

        Intangible Assets with Definite Lives.     The following table presents the components of our intangible assets with definite lives as of December 31, 2015 and 2014:

 
  December 31, 2015   December 31, 2014  
 
  Cost   Accumulated
Amortization
  Net   Cost   Accumulated
Amortization
  Net  
 
  (In thousands)
 

Supplier relationships

  $ 655,414   $ (223,666 ) $ 431,748   $ 357,022   $ (200,257 ) $ 156,765  

Technology

    490,584     (258,261 )   232,323     257,045     (216,841 )   40,204  

Customer relationships

    613,277     (73,248 )   540,029     110,302     (29,225 )   81,077  

Domain names

    115,102     (34,758 )   80,344     51,592     (28,630 )   22,962  

Other

    446,788     (397,132 )   49,656     404,441     (392,000 )   12,441  

Total

  $ 2,321,165   $ (987,065 ) $ 1,334,100   $ 1,180,402   $ (866,953 ) $ 313,449  

        Amortization expense was $164 million, $80 million and $72 million for the years ended December 31, 2015, 2014 and 2013. The estimated future amortization expense related to intangible assets with definite lives as of December 31, 2015, assuming no subsequent impairment of the underlying assets, is as follows, in thousands:

2016

  $ 317,909  

2017

    260,127  

2018

    247,729  

2019

    147,768  

2020

    113,183  

2021 and thereafter

    247,384  

Total

  $ 1,334,100  

NOTE 8—Debt

        The following table sets forth our outstanding debt:

 
  December 31,  
 
  2015   2014  
 
  (In thousands)
 

7.456% senior notes due 2018

  $ 500,000   $ 500,000  

5.95% senior notes due 2020, net of discount

    749,561     749,485  

4.5% senior notes due 2024, net of discount

    497,534     497,302  

2.5% (€650 million) senior notes due 2022, net of discount

    707,653      

5.0% senior notes due 2026, net of discount

    746,529      

Long-term debt(1)

  $ 3,201,277   $ 1,746,787  

(1)
Excludes debt acquired in the HomeAway acquisition included within accrued expenses and other current liabilities as of December 31, 2015. For further information, see Note 3—Acquisitions and Other Investments.

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 8—Debt (Continued)

Long-term Debt

        Our $500 million in registered senior unsecured notes outstanding at December 31, 2015 are due in August 2018 and bear interest at 7.456% (the "7.456% Notes"). Interest is payable semi-annually in February and August of each year. At any time Expedia may redeem the 7.456% Notes at a redemption price of 100% of the principal plus accrued interest, plus a "make-whole" premium, in whole or in part.

        Our $750 million in registered senior unsecured notes outstanding at December 31, 2015 are due in August 2020 and bear interest at 5.95% (the "5.95% Notes"). The 5.95% Notes were issued at 99.893% of par resulting in a discount, which is being amortized over their life. Interest is payable semi-annually in February and August of each year. We may redeem the 5.95% Notes at a redemption price of 100% of the principal plus accrued interest, plus a "make-whole" premium, in whole or in part.

        Our $500 million in registered senior unsecured notes outstanding at December 31, 2015 are due in August 2024 and bear interest at 4.5% (the "4.5% Notes"). The 4.5% Notes were issued at 99.444% of par resulting in a discount, which is being amortized over their life. Interest is payable semi-annually in February and August of each year, beginning February 15, 2015. We may redeem the 4.5% Notes at our option at any time in whole or from time to time in part. If we elect to redeem the 4.5% Notes prior to May 15, 2024, we may redeem them at a redemption price of 100% of the principal plus accrued interest, plus a "make-whole" premium. If we elect to redeem the 4.5% Notes on or after May 15, 2024, we may redeem them at a redemption price of 100% of the principal plus accrued interest.

        In June 2015, we issued Euro 650 million of registered senior unsecured notes that are due in June 2022 and bear interest at 2.5% (the "2.5% Notes"). The 2.5% Notes were issued at 99.525% of par resulting in a discount, which is being amortized over their life. Interest is payable annually in arrears in June of each year, beginning June 3, 2016. We may redeem the 2.5% Notes at our option, at whole or in part, at any time or from time to time. If we elect to redeem the 2.5% Notes prior to March 3, 2022, we may redeem them at a specified "make-whole" premium. If we elect to redeem the 2.5% Notes on or after March 3, 2022, we may redeem them at a redemption price of 100% of the principal plus accrued and unpaid interest. Subject to certain limited exceptions, all payments of interest and principal for the 2.5% Notes will be made in Euros.

        In December 2015, we privately placed $750 million of senior unsecured notes that are due in February 2026 and bear interest at 5.0% (the "5.0% Notes"). The 5.0% Notes were issued at 99.535% of par resulting in a discount, which is being amortized over their life. Interest is payable semi-annually in arrears in February and August of each year, beginning August 15, 2016. We may redeem the 5.0% Notes at our option at any time in whole or from time to time in part. If we elect to redeem the 5.0% Notes prior to November 12, 2025, we may redeem them at a redemption price of 100% of the principal plus accrued interest, plus a "make-whole" premium. If we elect to redeem the 5.0% Notes on or after November 12, 2025, we may redeem them at a redemption price of 100% of the principal plus accrued interest. We also entered into a registrations rights agreement under which we agreed to use commercially reasonable best efforts intend to file a registration statement to permit the exchange of the 5.0% Notes for registered notes having the same financial terms and covenants as the privately placed notes within 365 days of the issuance of the 5.0% Notes. If we fail to satisfy certain of its

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 8—Debt (Continued)

obligations under the registration rights agreement, we will be required to pay additional interest of 0.25% per annum to the holders of the 5.0% Notes until such registrations right default is cured.

        The 7.456%, 5.95%, 4.5%, 2.5% and 5.0% Notes (collectively the "Notes") are senior unsecured obligations issued by Expedia and guaranteed by certain domestic Expedia subsidiaries. The Notes rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations of Expedia and the guarantor subsidiaries. For further information, see Note 22—Guarantor and Non-Guarantor Supplemental Financial Information. In addition, the Notes include covenants that limit our ability to (i) create certain liens, (ii) enter into sale/leaseback transactions and (iii) merge or consolidate with or into another entity or transfer substantially all of our assets. Accrued interest related to the Notes was $52 million and $39 million as of December 31, 2015 and 2014. The 5.95%, 4.5%, 2.5% and 5.0% Notes are redeemable in whole or in part, at the option of the holders thereof, upon the occurrence of certain change of control triggering events at a purchase price in cash equal to 101% of the principal plus accrued and unpaid interest.

        The approximate fair value of 7.456% Notes was $555 million and $581 million as of December 31, 2015 and 2014. The approximate fair value of 5.95% Notes was $827 million and $840 million as of December 31, 2015 and 2014. The approximate fair value of 4.5% Notes was $487 million and $504 million as of December 31, 2015 and 2014. The approximate fair value of 2.5% Notes was Euro 644 million ($705 million) as of December 31, 2015. The approximate fair value of 5.0% Notes was $750 million as of December 31, 2015. These fair values were based on quoted market prices in less active markets (Level 2 inputs).

Credit Facility

        As of December 31, 2015, Expedia, Inc. maintained a $1 billion unsecured revolving credit facility with a group of lenders that had a September 2019 maturity date, which was unconditionally guaranteed by certain domestic Expedia subsidiaries that are the same as under the Notes. As of December 31, 2015 and 2014, we had no revolving credit facility borrowings outstanding. The amount of stand-by letters of credit ("LOCs") issued under the facility reduces the credit amount available. As of December 31, 2015 and 2014, there was $29 million and $15 million of outstanding stand-by LOCs issued under the facility. The facility contained various restrictive covenants, including a maximum permissible leverage ratio and a minimum permissible interest coverage ratio, and interest payable under the facility was based on the Company's credit ratings. As of December 31, 2015, the maximum permissible leverage ratio and the minimum interest coverage were both 3.25 to 1.00, the applicable interest rate on drawn amounts was LIBOR plus 150 basis points and the commitment fee on undrawn amounts was 20 basis points.

        In February 2016, we entered into an amendment to the revolving credit facility that, among other things, increased the aggregate commitments under the facility to $1.5 billion, extended the maturity date to February 2021, reduced the currently applicable interest rate on drawn amounts by 12.5 basis points to LIBOR plus 137.5 basis points and the commitment fee on undrawn amounts by 2.5 basis points to 17.5 basis points, increased the maximum permissible leverage ratio to 3.75 to 1.00 and reduced the minimum permissible interest coverage ratio to 3.00 to 1.00.

        In addition, one of our international subsidiaries maintains a Euro 50 million uncommitted credit facility, which is guaranteed by Expedia, Inc., that may be terminated at any time by the lender. As of December 31, 2015, we had Euro 20 million in borrowings outstanding included in accrued expenses

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 8—Debt (Continued)

and other current liabilities on the consolidated balance sheet. Another of our international subsidiaries maintains a $5.6 million uncommitted credit facility, which is guaranteed by Expedia, Inc., that may be terminated at any time by the lender. As of December 31, 2015, we had approximately $5 million in borrowings outstanding included in accrued expenses and other current liabilities on the consolidated balance sheet. As of December 31, 2014, we had no borrowings outstanding under either of these international credit facilities.

NOTE 9—Employee Benefit Plans

        Our U.S. employees are generally eligible to participate in a retirement and savings plan that qualifies under Section 401(k) of the Internal Revenue Code. Participating employees may contribute up to 50% of their pretax salary, but not more than statutory limits. We contribute fifty cents for each dollar a participant contributes in this plan, with a maximum contribution of 3% of a participant's earnings. Our contribution vests with the employee after the employee completes two years of service. Participating employees have the option to invest in our common stock, but there is no requirement for participating employees to invest their contribution or our matching contribution in our common stock. We also have various defined contribution plans for our international employees. Our contributions to these benefit plans were $41 million, $36 million and $28 million for the years ended December 31, 2015, 2014 and 2013.

NOTE 10—Stock-Based Awards and Other Equity Instruments

        Pursuant to the Amended and Restated Expedia, Inc. 2005 Stock and Annual Incentive Plan, we may grant restricted stock, restricted stock awards, RSUs, stock options and other stock-based awards to directors, officers, employees and consultants. As of December 31, 2015, we had approximately 10 million shares of common stock reserved for new stock-based awards under the 2005 Stock and Annual Incentive Plan. We issue new shares to satisfy the exercise or release of stock-based awards.

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 10—Stock-Based Awards and Other Equity Instruments (Continued)

        The following table presents a summary of our stock option activity:

 
  Options   Weighted
Average
Exercise
Price
  Remaining
Contractual
Life
  Aggregate
Intrinsic
Value
 
 
  (In thousands)
   
  (In years)
  (In thousands)
 

Balance as of January 1, 2013

    15,236   $ 25.24              

Granted

    4,016     65.29              

Exercised

    (2,730 )   18.10              

Cancelled

    (1,095 )   37.87              

Balance as of December 31, 2013

    15,427     36.03              

Granted

    4,113     78.70              

Exercised

    (3,804 )   25.66              

Cancelled

    (1,301 )   53.69              

Balance as of December 31, 2014

    14,435     49.33              

Granted

    7,572     94.13              

Exercised

    (4,201 )   34.57              

Cancelled

    (751 )   74.06              

Balance as of December 31, 2015

    17,055     71.77     4.9   $ 896,377  

Exercisable as of December 31, 2015

    4,880     42.32     3.2     400,120  

Vested and expected to vest after December 31, 2015

    15,980     70.70     4.9     856,574  

        The aggregate intrinsic value of outstanding options shown in the stock option activity table above represents the total pretax intrinsic value at December 31, 2015, based on our closing stock price of $124.30 as of the last trading date in 2015. The total intrinsic value of stock options exercised was $314 million, $208 million and $117 million for the years ended December 31, 2015, 2014 and 2013. Included within options granted for 2015 are 2.7 million options awarded to our Chief Executive Officer with his entry into a new five-year employment agreement, of which 1.1 million options are subject to a stock price performance goal.

        During the three years ended December 31, 2015, 2014 and 2013, we awarded stock options as our primary form of stock-based compensation. The fair value of stock options granted during the years ended December 31, 2015, 2014 and 2013 were estimated at the date of grant using appropriate valuation techniques, including the Black-Scholes and Monte Carlo option-pricing models, assuming the following weighted average assumptions:

 
  2015   2014   2013  

Risk-free interest rate

    1.19 %   1.13 %   0.71 %

Expected volatility

    41.48 %   42.97 %   44.81 %

Expected life (in years)

    4.06     4.04     4.07  

Dividend yield

    0.78 %   0.76 %   0.80 %

Weighted-average estimated fair value of options granted during the year

  $ 30.56   $ 25.80   $ 21.96  

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 10—Stock-Based Awards and Other Equity Instruments (Continued)

        The following table presents a summary of RSU activity:

 
  RSUs   Weighted
Average
Grant-Date
Fair Value
 
 
  (In thousands)
   
 

Balance as of January 1, 2013

    1,218     29.57  

Granted

    216     63.04  

Vested

    (480 )   23.29  

Cancelled

    (522 )   86.10  

Balance as of December 31, 2013

    432     50.64  

Granted

    108     80.94  

Vested

    (159 )   45.90  

Cancelled

    (44 )   55.52  

Balance as of December 31, 2014

    337     61.97  

Granted

    1,643     123.42  

Vested

    (493 )   103.73  

Cancelled

    (91 )   67.11  

Balance as of December 31, 2015

    1,396     119.20  

        RSUs, which are stock awards that are granted to employees entitling the holder to shares of our common stock as the award vests, were our primary form of stock-based award prior to 2009. Our RSUs generally vest over three or four-years, but may accelerate in certain circumstances, including certain changes in control. During 2015, in connection with the acquisitions disclosed in Note 3—Acquisition and Other Investments, we replaced certain unvested employee RSUs of the acquiree with Expedia awards the amount of which is included within granted in the above table.

        The total market value of shares vested during the years ended December 31, 2015, 2014 and 2013 was $60 million, $12 million and $29 million.

        In 2015, 2014 and 2013, we recognized total stock-based compensation expense of $178 million, $85 million and $130 million. The total income tax benefit related to stock-based compensation expense was $45 million, $20 million and $17 million for 2015, 2014 and 2013.

        Cash received from stock-based award exercises for the years ended December 31, 2015 and 2014 was $89 million and $101 million. Our employees that held IAC vested stock options prior to the IAC/InterActiveCorp ("IAC") spin-off in August 2005 received vested stock options in both Expedia and IAC. In addition, our employees that held vested Expedia options prior to the TripAdvisor, Inc. ("TripAdvisor") spin-off on December 20, 2011 received vested stock options in both Expedia and TripAdvisor. As these IAC and TripAdvisor stock options are exercised, we receive a tax deduction. Total current income tax benefits during the years ended December 31, 2015 and 2014 associated with the exercise of IAC, TripAdvisor and Expedia stock-based awards held by our employees were $130 million and $69 million.

        During 2015, our Chairman and Senior Executive exercised options to purchase 1.9 million shares. 0.5 million shares were withheld and concurrently cancelled by the Company to cover the weighted

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 10—Stock-Based Awards and Other Equity Instruments (Continued)

average exercise price of $30.38 per share and 0.8 million shares were withheld and concurrently cancelled to cover tax obligations, with a net delivery of 0.6 million shares.

        As of December 31, 2015, there was approximately $345 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to unvested stock-based awards, which is expected to be recognized in expense over a weighted-average period of 3.0 years.

Employee Stock Purchase Plan

        During 2013, we implemented our 2013 Employee Stock Purchase Plan ("ESPP"), which allows shares of our common stock to be purchased by eligible employees at three-month intervals at 85% of the fair market value of the stock on the last day of each three-month period. Eligible employees are allowed to contribute up to 10% of their base compensation. During 2015, 2014 and 2013, approximately 95,000, 102,000, and 69,000 shares were purchased under this plan for an average price of $93.30, $68.70 and $46.31 per share. As of December 31, 2015, we have reserved approximately 1.2 million shares of our common stock for issuance under the ESPP.

NOTE 11—Income Taxes

        The following table summarizes our U.S. and foreign income (loss) before income taxes:

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (In thousands)
 

U.S. 

  $ 24,397   $ 176,820   $ 26,888  

Foreign

    901,565     287,821     273,805  

Total

  $ 925,962   $ 464,641   $ 300,693  

    Provision for Income Taxes

        The following table summarizes our provision for income taxes:

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (In thousands)
 

Current income tax expense:

                   

Federal

  $ 154,050   $ 120,541   $ 38,209  

State

    1,440     6,645     (402 )

Foreign

    69,359     43,536     47,300  

Current income tax expense

    224,849     170,722     85,107  

Deferred income tax (benefit) expense:

                   

Federal

  $ (6,865 ) $ (47,390 ) $ 12,371  

State

    2,156     (2,419 )   445  

Foreign

    (16,926 )   (29,222 )   (13,588 )

Deferred income tax (benefit) expense:

    (21,635 )   (79,031 )   (772 )

Income tax expense

  $ 203,214   $ 91,691   $ 84,335  

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 11—Income Taxes (Continued)

        We reduced our current income tax payable by $130 million, $69 million and $52 million for the years ended December 31, 2015, 2014 and 2013 for tax deductions attributable to stock-based compensation.

    Deferred Income Taxes

        As of December 31, 2015 and 2014, the significant components of our deferred tax assets and deferred tax liabilities were as follows:

 
  December 31,  
 
  2015   2014  
 
  (In thousands)
 

Deferred tax assets:

             

Provision for accrued expenses

  $ 95,499   $ 85,778  

Loyalty rewards reserve

    132,980     84,373  

Occupancy tax reserve

    16,358     22,813  

Net operating loss and tax credit carryforwards

    202,220     49,091  

Stock-based compensation

    56,729     39,344  

Fair value of debt adjustment

    24,770      

Other

    28,766     21,637  

Total deferred tax assets

    557,322     303,036  

Less valuation allowance

    (122,850 )   (50,748 )

Net deferred tax assets

  $ 434,472   $ 252,288  

Deferred tax liabilities:

             

Prepaid merchant bookings and prepaid expenses

  $ (41,006 ) $ (61,737 )

Intangible assets

    (758,976 )   (387,124 )

Property and equipment

    (87,308 )   (70,497 )

Other

    (5,565 )   (6,566 )

Total deferred tax liabilities

  $ (892,855 ) $ (525,924 )

Net deferred tax liability

  $ (458,383 ) $ (273,636 )

        As of December 31, 2015, we had federal, state, and foreign net operating loss carryforwards ("NOLs") of approximately $186 million, $167 million and $541 million. The federal, state, and foreign NOL carryforwards increased from the amount recorded as of December 31, 2014 due primarily to the historic NOL carryforwards of Orbitz and HomeAway. If not utilized, the federal and state NOLs will expire at various times between 2019 and 2035. Foreign NOLs of $487 million may be carried forward indefinitely, and foreign NOLs of $54 million will expire at various times between 2017 and 2022.

        As of December 31, 2015, we had a valuation allowance of approximately $123 million related to certain NOL carryforwards for which it is more likely than not the tax benefit will not be realized. The valuation allowance increased by $72 million from the amount recorded as of December 31, 2014 due to valuation allowances recorded for historic state and foreign NOLs of Orbitz and HomeAway for which realization is not certain. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period change, or if

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 11—Income Taxes (Continued)

objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

        We have not provided deferred income taxes on taxable temporary differences related to investments in certain foreign subsidiaries where the foreign subsidiary has or will invest undistributed earnings indefinitely outside of the United States. The total amount of such undistributed earnings was $1.5 billion as of December 31, 2015, which approximates the related taxable temporary difference. In the event we distribute such earnings in the form of dividends or otherwise, we may be subject to income taxes. Further, a sale of these subsidiaries may cause these temporary differences to become taxable. Due to complexities in tax laws, uncertainties related to the timing and source of any potential distribution of such earnings, and other important factors such as the amount of associated foreign tax credits, it is not practicable to estimate the amount of unrecognized deferred taxes on these taxable temporary differences.

    Reconciliation of U.S. Federal Statutory Income Tax Rate to Effective Income Tax Rate

        A reconciliation of amounts computed by applying the federal statutory income tax rate to income from continuing operations before income taxes to total income tax expense is as follows:

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (In thousands)
 

Income tax expense at the federal statutory rate of 35%

  $ 324,087   $ 162,624   $ 105,243  

Foreign tax rate differential

    (162,784 )   (81,371 )   (87,729 )

Unrecognized tax benefits and related interest

    33,362     (1,625 )   12,096  

Change in valuation allowance

    27,320     13,914     19,167  

Pay-to-play penalties

    (11,222 )   1,322     14,404  

Acquisition related costs

    12,545     56      

trivago acquisition stock-based compensation

            19,825  

Other, net

    (20,094 )   (3,229 )   1,329  

Income tax expense

  $ 203,214   $ 91,691   $ 84,335  

        Our effective tax rate in 2015, 2014 and 2013 was lower than the 35% federal statutory income tax rate due to earnings in foreign jurisdictions, primarily Switzerland, where the statutory income tax rate is lower.

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 11—Income Taxes (Continued)

    Uncertain Tax Positions

        A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

 
  2015   2014   2013  
 
  (In thousands)
 

Balance, beginning of year

  $ 110,561   $ 109,712   $ 102,305  

Increases to tax positions related to the current year

    33,880     28,416     21,899  

Increases to tax positions related to prior years

    26,219     4,469     5,064  

Decreases to tax positions related to prior years

            (3,732 )

Reductions due to lapsed statute of limitations

    (2,525 )   (23,709 )   (4,134 )

Settlements during current year

    (100 )       (8,957 )

Interest and penalties

    3,142     (8,327 )   (2,733 )

Balance, end of year

  $ 171,177   $ 110,561   $ 109,712  

        As of December 31, 2015, we had $171 million of gross unrecognized tax benefits, $138 million of which, if recognized, would affect the effective tax rate. As of December 31, 2014, we had $111 million of gross unrecognized tax benefits, $86 million of which, if recognized, would affect the effective tax rate.

        We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2015 and 2014, total gross interest and penalties accrued was $10 million and $6 million, respectively. In connection with our unrecognized tax benefits, we recognized interest (benefit) expense in 2015, 2014 and 2013 of $3 million, $(8) million and $(3) million.

        The Company is routinely under audit by federal, state, local and foreign income tax authorities. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The IRS is currently examining Expedia's U.S. consolidated federal income tax returns for the periods ended December 31, 2009 through December 31, 2010, as well as HomeAway's pre-acquisition U.S. federal income tax returns for the periods ending December 31, 2011 through December 31, 2012. As of December 31, 2015, for the Expedia, Inc. and subsidiaries, statute of limitations for tax years 2009 through 2014 remain open to examination in the federal jurisdiction and most state jurisdictions. For the HomeAway and Orbitz groups, statutes of limitations for tax years 2001 through 2014 remain open to examination in the federal and most state jurisdictions due net operating loss carryforwards.

NOTE 12—Redeemable Noncontrolling Interests

        We have noncontrolling interests in majority owned entities, which are carried at fair value as the noncontrolling interests contain certain rights, whereby we may acquire and the minority shareholders

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 12—Redeemable Noncontrolling Interests (Continued)

may sell to us the additional shares of the companies. A reconciliation of redeemable noncontrolling interest for the years ended December 31, 2015, 2014 and 2013 is as follows:

 
  Year ended December 31,  
 
  2015   2014   2013  

Balance, beginning of the period

  $ 560,073   $ 364,871   $ 13,473  

Acquisition of redeemable noncontrolling interest

    6,829         343,984  

Purchase of subsidiary shares at fair value

            (14,923 )

Net loss attributable to noncontrolling interests

    (15,417 )   (9,690 )   (7,130 )

Fair value adjustments

    188,579     259,984     26,614  

Currency translation adjustments and other

    (81,586 )   (55,092 )   2,853  

Balance, end of period

  $ 658,478   $ 560,073   $ 364,871  

        For information on redeemable noncontrolling interest acquired during 2013, see Note 3—Acquisitions and Other Investments.

        The fair value of the redeemable noncontrolling interest was determined based on a blended analysis of the present value of future discounted cash flows and market value approach ("Level 3" on the fair value hierarchy). Our significant estimates in the discounted cash flow model include our weighted average cost of capital as well as long-term growth and profitability of the business. Our significant estimates in the market value approach include identifying similar companies with comparable business factors and assessing comparable revenue and operating multiples in estimating the fair value of the business.

NOTE 13—Stockholders' Equity

    Common Stock and Class B Common Stock

        Our authorized common stock consists of 1.6 billion shares of common stock with par value of $0.0001 per share, and 400 million shares of Class B common stock with par value of $0.0001 per share. Both classes of common stock qualify for and share equally in dividends, if declared by our Board of Directors, and generally vote together on all matters. Common stock is entitled to one vote per share and Class B common stock is entitled to 10 votes per share. Holders of common stock, voting as a single, separate class are entitled to elect 25% of the total number of directors. Class B common stockholders may, at any time, convert their shares into common stock, on a one for one share basis. Upon conversion, the Class B common stock is retired and is not available for reissue. In the event of liquidation, dissolution, distribution of assets or winding-up of Expedia, Inc., the holders of both classes of common stock have equal rights to receive all the assets of Expedia, Inc. after the rights of the holders of the preferred stock, if any, have been satisfied.

    Preferred Stock

        As of December 31, 2015 and 2014, we have no preferred stock outstanding.

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NOTE 13—Stockholders' Equity (Continued)

    Share Repurchases

        During 2012, 2010, and 2006, our Board of Directors, or the Executive Committee, acting on behalf of the Board of Directors, authorized a repurchase of up to 20 million outstanding shares of our common stock during each of the respective years and during 2015 authorized a repurchase of up to 10 million shares of our common stock for a total of 70 million shares. Shares repurchased under the authorized programs were as follows:

 
  Year ended December 31,  
 
  2015   2014   2013  

Number of shares repurchased

    0.5 million     7.0 million     9.3 million  

Average price per share

  $ 85.27   $ 76.26   $ 55.59  

Total cost of repurchases (in millions)(1)

  $ 45   $ 537   $ 515  

(1)
Amount excludes transaction costs.

        As of December 31, 2015, 11.2 million shares remain authorized for repurchase under the 2012 and 2015 authorizations with no fixed termination date for the repurchases.

    Dividends on our Common Stock

        In 2015, 2014 and 2013, the Executive Committee, acting on behalf of the Board of Directors, declared and paid the following dividends:

 
  Declaration
Date
  Dividend
Per Share
  Record
Date
  Total Amount
(in thousands)
  Payment
Date

Year ended December 31, 2015:

                       

  February 4, 2015   $ 0.18   March 10, 2015   $ 22,895   March 26, 2015

  April 29, 2015     0.18   May 28, 2015     23,096   June 18, 2015

  July 29, 2015     0.24   August 27, 2015     31,182   September 17, 2015

  October 29, 2015     0.24   November 19, 2015     31,354   December 10, 2015

Year ended December 31, 2014:

                       

  February 5, 2014   $ 0.15   March 10, 2014   $ 19,602   March 27, 2014

  April 30, 2014     0.15   May 30, 2014     19,231   June 19, 2014

  July 30, 2014     0.18   August 27, 2014     22,944   September 17, 2014

  October 27, 2014     0.18   November 20, 2014     22,920   December 11, 2014

Year ended December 31, 2013:

                       

  February 5, 2013   $ 0.13   March 11, 2013   $ 17,983   March 28, 2013

  April 24, 2013     0.13   May 30, 2013     17,638   June 19, 2013

  July 24, 2013     0.15   August 28, 2013     20,459   September 18, 2013

  October 28, 2013     0.15   November 21, 2013     19,680   December 12, 2013

        In addition, in February 2016, the Executive Committee, acting on behalf of the Board of Directors, declared a quarterly cash dividend of $0.24 per share of outstanding common stock payable

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NOTE 13—Stockholders' Equity (Continued)

on March 30, 2016 to the stockholders of record as of the close of business on March 10, 2016. Future declarations of dividends are subject to final determination by our Board of Directors.

    Accumulated Other Comprehensive Income (Loss)

        The balance for each class of accumulated other comprehensive loss as of December 31, 2015 and 2014 is as follows:

 
  December 31,  
 
  2015   2014  
 
  (In thousands)
   
 

Foreign currency translation adjustments, net of tax(1)

  $ (284,767 ) $ (138,715 )

Net unrealized gain (loss) on available for sale securities, net of tax

    (127 )   (59 )

Accumulated other comprehensive loss

  $ (284,894 ) $ (138,774 )

(1)
Foreign currency translation adjustments, net of tax, includes foreign currency transaction losses at December 31, 2015 of $1 million ($2 million before tax) associated with our 2.5% Notes. The 2.5% Notes are Euro-denominated debt designated as hedges of certain of our Euro-denominated net assets. See Note 2—Significant Accounting Policies for more information. The remaining balance in currency translation adjustments excludes income taxes as a result of our current intention to indefinitely reinvest the earnings of our international subsidiaries outside of the United States.

    Non-redeemable Noncontrolling Interests

        As of December 31, 2015, our ownership interest in AirAsia-Expedia was approximately 75%. As of December 31, 2014, our ownership interest in eLong was approximately 64%. Amounts paid in excess of the respective noncontrolling interest were recorded to additional paid-in capital. The following table shows the effects of the changes in noncontrolling interest on our equity for the respective periods, in thousands:

 
  2015   2014   2013  

Net income attributable to Expedia, Inc. 

  $ 764,465   $ 398,097   $ 232,850  

Transfers (to) from the noncontrolling interest due to:

                   

Net increase (decrease) in Expedia, Inc.'s paid-in capital for newly issued eLong shares and other equity activity

    (4,198 )   24,090     6,928  

Net transfers from noncontrolling interest

    (4,198 )   24,090     6,928  

Change from net income attributable to Expedia, Inc. and transfers from noncontrolling interest

  $ 760,267   $ 422,187   $ 239,778  

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NOTE 14—Earnings Per Share

    Basic Earnings Per Share

        Basic earnings per share was calculated for the years ended December 31, 2015, 2014 and 2013 using the weighted average number of common and Class B common shares outstanding during the period excluding restricted stock and stock held in escrow.

    Diluted Earnings Per Share

        For the years ended December 31, 2015, 2014 and 2013, we computed diluted earnings per share using (i) the number of shares of common stock and Class B common stock used in the basic earnings per share calculation as indicated above (ii) if dilutive, the incremental common stock that we would issue upon the assumed exercise of stock options and stock warrants and the vesting of RSUs using the treasury stock method, and (iii) other stock-based commitments.

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

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (In thousands, except per share data)
 

Net income attributable to Expedia, Inc

  $ 764,465   $ 398,097   $ 232,850  

Earnings per share attributable to Expedia, Inc. available to common stockholders:

                   

Basic

  $ 5.87   $ 3.09   $ 1.73  

Diluted

    5.70     2.99     1.67  

Weighted average number of shares outstanding:

                   

Basic

    130,159     128,912     134,912  

Dilutive effect of:

                   

Options to purchase common stock

    3,685     4,149     4,495  

Other dilutive securities

    174     107     186  

Diluted

    134,018     133,168     139,593  

        Outstanding stock awards that have been excluded from the calculations of diluted earnings per share attributable to common stockholders because their effect would have been antidilutive were approximately two million for 2015 and approximately four million for both 2014 and 2013.

        The earnings per share amounts are the same for common stock and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

NOTE 15—Restructuring and Related Reorganization Charges

        In connection with the migration of technology platforms and centralization of technology, supply and other operations, primarily related to acquisition integrations including Orbitz and the Wotif Group, we recognized $105 million in restructuring and related reorganization charges during 2015 as well as $26 million during the fourth quarter ended December 31, 2014. The 2015 charges were primarily related to employee severance and benefits related to the Orbitz integration and represent estimated severance amounts under pre-existing written plans and contracts Orbitz had with its

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NOTE 15—Restructuring and Related Reorganization Charges (Continued)

employees, as well as stock-compensation charges for acceleration of replacement awards pursuant to certain of these agreements. We expect to incur approximately $30 million to $40 million in 2016 related to these integrations.

        The following table summarizes the restructuring and related reorganization activity for 2014 and 2015:

 
  Employee
Severance
and Benefits
  Stock-based
Compensation
  Other   Total  
 
  (In thousands)
 

Accrued liability as of January 1, 2014

  $   $   $   $  

Charges

    10,783         14,847     25,630  

Payments

    (572 )       (540 )   (1,112 )

Non-cash items

    (94 )       (649 )   (743 )

Accrued liability as of December 31, 2014

    10,117         13,658     23,775  

Charges

    66,255     32,749     5,867     104,871  

Payments

    (29,388 )       (18,408 )   (47,796 )

Non-cash items

    (1,095 )   (32,749 )   6     (33,838 )

Accrued liability as of December 31, 2015

  $ 45,889   $   $ 1,123   $ 47,012  

        The majority of the other activity in the above table relates to Australian stamp duty tax that was paid to certain Australian jurisdictions related to business restructuring events.

NOTE 16—Other Income (Expense)

    Other, net

        The following table presents the components of other, net:

 
  For the Year Ended December 31,  
 
  2015   2014   2013  
 
  (In thousands)
 

Foreign exchange rate gains ( losses), net

  $ 24,787   $ 6,069   $ (473 )

Noncontrolling investment basis adjustment

    77,400     2,783      

Equity gains (losses) in unconsolidated affiliates

    (13 )   2,743     2,909  

Other

    10,912     6,083     (5,224 )

Total

  $ 113,086   $ 17,678   $ (2,788 )

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NOTE 17—Commitments and Contingencies

    Letters of Credit, Purchase Obligations and Guarantees

        We have commitments and obligations that include purchase obligations, guarantees and LOCs, which could potentially require our payment in the event of demands by third parties or contingent events. The following table presents these commitments and obligations as of December 31, 2015:

 
   
  By Period  
 
  Total   Less than
1 year
  1 to 3
years
  3 to 5
years
  More than
5 years
 
 
  (In thousands)
 

Purchase obligations

  $ 244,848   $ 157,071   $ 82,043   $ 5,734   $  

Guarantees

    192,155     179,348     12,807          

Letters of credit

    55,062     51,209     3,285     503     65  

  $ 492,065   $ 387,628   $ 98,135   $ 6,237   $ 65  

        Our purchase obligations represent the minimum obligations we have under agreements with certain of our vendors. These minimum obligations are less than our projected use for those periods. Payments may be more than the minimum obligations based on actual use.

        We have guarantees which consist primarily of bonds relating to tax assessments that we are contesting as well as bonds required by certain foreign countries' aviation authorities for the potential non-delivery, by us, of packaged travel sold in those countries. The authorities also require that a portion of the total amount of packaged travel sold be bonded. Our guarantees also include certain surety bonds related to various company performance obligations.

        Our LOCs consist of stand-by LOCs, underwritten by a group of lenders, which we primarily issue for certain regulatory purposes as well as to certain hotel properties to secure our payment for hotel room transactions. The contractual expiration dates of these LOCs are shown in the table above. There were no material claims made against any stand-by LOCs during the years ended December 31, 2015, 2014 and 2013.

        In addition, our redeemable noncontrolling interest in trivago contains certain put/call rights whereby we may acquire and the minority shareholders may sell to us the minority shares of the company. See Note 3—Acquisitions and Other Investments for further information.

    Lease Commitments

        We have contractual obligations in the form of operating leases for office space and related office equipment for which we record the related expense on a monthly basis. Certain leases contain periodic rent escalation adjustments and renewal options. Rent expense related to such leases is recorded on a straight-line basis. Operating lease obligations expire at various dates with the latest maturity in 2026. For the years ended December 31, 2015, 2014 and 2013, we recorded rental expense of $109 million, $96 million and $84 million.

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NOTE 17—Commitments and Contingencies (Continued)

        The following table presents our estimated future minimum rental payments under operating leases with noncancelable lease terms that expire after December 31, 2015, in thousands:

Year ending December 31,
   
 

2016

  $ 111,645  

2017

    101,878  

2018

    92,621  

2019

    65,842  

2020

    45,236  

2021 and thereafter

    109,075  

  $ 526,297  

    Legal Proceedings

        In the ordinary course of business, we are a party to various lawsuits. Management does not expect these lawsuits to have a material impact on the liquidity, results of operations, or financial condition of Expedia. We also evaluate other potential contingent matters, including value-added tax, excise tax, sales tax, transient occupancy or accommodation tax and similar matters. In addition, we assumed liability for ongoing lawsuits involving Orbitz Worldwide, Inc. and its subsidiaries in connection with our acquisition of Orbitz on September 17, 2015, and for ongoing lawsuits involving HomeAway, Inc. and its subsidiaries in connection with our acquisition of HomeAway on December 15, 2015. We do not believe that the aggregate amount of liability that could be reasonably possible with respect to these matters would have a material adverse effect on our financial results; however, litigation is inherently uncertain and the actual losses incurred in the event that our legal proceedings were to result in unfavorable outcomes could have a material adverse effect on our business and financial performance.

        Litigation Relating to Occupancy Taxes.     Ninety-four lawsuits have been filed by cities, counties and states involving hotel occupancy and other taxes. Twenty-three lawsuits are currently active. These lawsuits are in various stages and we continue to defend against the claims made in them vigorously. With respect to the principal claims in these matters, we believe that the statutes or ordinances at issue do not apply to the services we provide and, therefore, that we do not owe the taxes that are claimed to be owed. We believe that the statutes or ordinances at issue generally impose occupancy and other taxes on entities that own, operate or control hotels (or similar businesses) or furnish or provide hotel rooms or similar accommodations. To date, thirty-nine of these lawsuits have been dismissed. Some of these dismissals have been without prejudice and, generally, allow the governmental entity or entities to seek administrative remedies prior to pursuing further litigation. Twenty five dismissals were based on a finding that we and the other defendants were not subject to the local hotel occupancy tax ordinance or that the local government lacked standing to pursue their claims. As a result of this litigation and other attempts by certain jurisdictions to levy such taxes, we have established a reserve for the potential settlement of issues related to hotel occupancy taxes, consistent with applicable accounting principles and in light of all current facts and circumstances, in the amount of $43 million and $62 million as of December 31, 2015 and 2014. Our settlement reserve is based on our best estimate of probable losses and the ultimate resolution of these contingencies may be greater or less than the liabilities recorded. An estimate for a reasonably possible loss or range of loss in excess of the amount reserved cannot be

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NOTE 17—Commitments and Contingencies (Continued)

made. Changes to the settlement reserve are included within legal reserves, occupancy tax and other in the consolidated statements of operations.

        Pay-to-Play.     Certain jurisdictions may assert that we are required to pay any assessed taxes prior to being allowed to contest or litigate the applicability of the ordinances. This prepayment of contested taxes is referred to as "pay-to-play." Payment of these amounts is not an admission that we believe we are subject to such taxes and, even when such payments are made, we continue to defend our position vigorously. If we prevail in the litigation, for which a pay-to-play payment was made, the jurisdiction collecting the payment will be required to repay such amounts and also may be required to pay interest.

        Hawaii (General Excise Tax).     On January 31, 2011, the online travel companies received final notices of assessment for general excise taxes for the tax years 2000 to 2011 on their services relating to non-commissioned hotel room reservations. The companies appealed these assessments to the Hawaii tax court. On January 11, 2013, the Hawaii tax court ruled that the online travel companies are obligated to remit past Hawaii general excise taxes with interest on both the amount paid to the online travel companies for their services and the amount paid to the hotel for the room; thus subjecting the hotel's charge for the room to double taxation because general excise taxes on the hotel room had already been paid for all of the years at issue. On March 15, 2013, the Hawaii tax court issued penalties against the online travel companies for their failure to file returns and pay general excise taxes. On August 12, 2013, the court further held that interest is due on such penalties. The case proceeded directly to the Hawaii Supreme Court for review and was not considered by the Hawaii Court of Appeals. On March 17, 2015, the Hawaii Supreme Court issued a decision on the pending appeal. The court affirmed in part and reversed in part the Hawaii tax court's decision. Specifically, the court ruled that while the online travel companies are obligated to remit past Hawaii general excise taxes with interest on the amount paid to them for their services, along with penalties, the online travel companies are not liable for general excise taxes, interest or penalties on the amount paid to the hotel for the room. The Department of Taxation dismissed without prejudice its common law claims for the recovery of general excise taxes.

        As a pre-condition to appealing the tax court rulings, the Expedia companies and Orbitz were required to "pay-to-play." The total amount that the Expedia companies paid in 2013 to appeal the tax court ruling was $171 million, comprised of $78 million in taxes, $41 million in penalties and $52 million in interest. In light of the Hawaii Supreme Court decision, the State agreed to refund the Expedia companies $132 million, which was subsequently paid to Expedia in September 2015. As a result, we recognized a gain in legal reserves, occupancy tax and other during 2015 related to this matter. Also in September 2015, Orbitz received a similar refund of $22 million from the State of Hawaii. The amount paid, net of refunds, by the Expedia companies and Orbitz to the State of Hawaii in satisfaction of past general excise taxes on their services was $44 million.

        In addition, the Department of Taxation has issued final assessments for general excise taxes against the Expedia companies, including Orbitz, for (i) non-commissioned hotel reservations for the tax year 2012 totaling $26 million, which includes $6 million for Orbitz, (ii) non-commissioned travel agency services relating to rental cars for the tax years 2000 through 2012 totaling $39 million, which includes $10 million for Orbitz and a duplicative assessment for Expedia and Hotels.com totaling $9.3 million and thus are overstated, and (iii) non-commissioned travel agency services relating to hotel reservations and car rental for the tax year 2013 totaling $34 million, which includes $5 million for

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NOTE 17—Commitments and Contingencies (Continued)

Orbitz. Similar assessments also have been issued against other online travel companies. These assessments are currently under review in tax court.

        The Department of Taxation has issued final assessments for general excise taxes against the Expedia companies, including Orbitz, dated December 23, 2015 for the time period 2000 to 2014 for hotel and car rental revenue for "agency model" transactions, and hotel and car rental revenue for "merchant model" transactions for 2014. These assessments total $12 million, including tax, interest and penalties.

        San Francisco.     During 2009, we were required to "pay-to-play" and paid $48 million in advance of litigation relating to occupancy tax proceedings with the city of San Francisco. The city of San Francisco subsequently issued additional assessments of tax, penalties and interest for the time period from the fourth quarter of 2007 through the fourth quarter of 2011 against the online travel companies, including against certain Expedia companies. The additional assessments, including the prepayment of such assessments, were contested by the Expedia companies on the basis that the court has already ruled that taxes are not due from the online travel companies and that binding precedent by the California Court of Appeals precludes the city's claim for taxes. On May 14, 2014, the court heard oral argument on the Expedia companies' contest of the prepayment requirement for the additional assessments and held that the Expedia companies were required to prepay in order to litigate the legality of the assessments. On May 26, 2014, the Expedia companies paid $25.5 million under protest in order to contest the additional assessments. The additional assessments were expensed during the second quarter of 2014. In addition, Orbitz in total has paid $4.6 million to the city of San Francisco to contest these assessments issued against it by the city. On August 6, 2014, the California Court of Appeals stayed this case pending review and decision by the California Supreme Court of the City of San Diego, California Litigation.

        Other Jurisdictions.     We are also in various stages of inquiry or audit with domestic and foreign tax authorities, some of which, including in the United Kingdom regarding the application of value added tax ("VAT") to our European Union related transactions as discussed below, impose a pay-to-play requirement to challenge an adverse inquiry or audit result in court.

        The ultimate resolution of these contingencies may be greater or less than the pay-to-play payments made and our estimates of additional assessments mentioned above.

        During 2015, we recorded a $24 million benefit, net of contingency fees, in legal reserves, occupancy tax and other for the recovery of costs related to occupancy tax litigation matters.

        Matters Relating to International VAT.     We are in various stages of inquiry or audit in multiple European Union jurisdictions, including in the United Kingdom, regarding the application of VAT to our European Union related transactions. While we believe we comply with applicable VAT laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine that we owe additional taxes. In certain jurisdictions, including the United Kingdom, we may be required to "pay-to-play" any VAT assessment prior to contesting its validity. While we believe that we will be successful based on the merits of our positions with regard to the United Kingdom and other VAT audits in pay-to-play jurisdictions, it is nevertheless reasonably possible that we could be required to pay any assessed amounts in order to contest or litigate the applicability of any assessments and an estimate for a reasonably possible amount of any such payments cannot be made.

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NOTE 17—Commitments and Contingencies (Continued)

        Matters Relating to Hotel Booking Practices.     On July 31, 2012, the United Kingdom Office of Fair Trading ("OFT") issued a Statement of Objections alleging that Expedia, Booking.com B.V. and InterContinental Hotels Group PLC ("IHG") have infringed European Union and United Kingdom competition law in relation to the online supply of hotel room accommodations. The Statement of Objections alleged that Expedia and Booking.com entered into separate agreements with IHG that restricted each online travel company's ability to discount the price of IHG hotel rooms. The parties proposed to address the OFT's concerns by offering commitments, and on January 31, 2014, the OFT announced that it had formally accepted the commitments offered by the parties, with no finding of fault or liability. The commitments were intended to be binding on the parties through January 31, 2016. On April 2, 2014, Skyscanner Limited filed an appeal challenging the OFT's January 31, 2014 decision to accept the parties' commitments. On September 26, 2014, the United Kingdom's Competition Appeal Tribunal ("CAT") granted Skyscanner Limited's appeal. This judgment required the Competition & Markets Authority ("CMA"), the United Kingdom's competition authority, to review the decision of its predecessor body, the OFT. The CMA did not appeal the CAT's decision and subsequently announced that it is considering next steps in the investigation in light of the CAT judgment and market developments, including developments relating to the investigations of other European competition authorities described below. On September 16, 2015, the CMA announced that it has closed its investigation without a finding of infringement on grounds of administrative priority and also that it is not opening a distinct new case into parity provisions in contracts between hotels and online travel companies, including Expedia.

        In addition, the Directorate General for Competition, Consumer Affairs and Repression of Fraud (the "DGCCRF"), a directorate of the French Ministry of Economy and Finance with authority over unfair trading practices, brought a lawsuit in France against Expedia entities objecting to certain parity clauses in contracts between Expedia entities and French hotels. In May 2015, the French court ruled that certain of the parity provisions in certain contracts that were the subject of the lawsuit were not in compliance with French commercial law, but imposed no fine and no injunction. The DGCCRF has appealed the decision. A number of competition authorities, such as those in Australia, Austria, Belgium, China, Czech Republic, Denmark, France, Germany, Greece, Hungary, Ireland, Italy, New Zealand, Poland, Sweden and Switzerland, have also inquired or initiated investigations into the travel industry and, in particular, in relation to parity provisions in contracts between hotels and online travel companies, including Expedia.

        While the ultimate outcomes of these lawsuits, inquiries or investigations are uncertain and our circumstances are distinguishable from those of other online travel agencies subject to similar lawsuits, inquiries or investigations, we note in this context that on April 21, 2015 the competition authorities in France, Italy and Sweden announced a proposed set of commitments offered by Booking.com to resolve the parity clause cases brought by these authorities against it. The German Federal Cartel Office ("FCO") also has required another online travel company, Hotel Reservation Service ("HRS"), to remove certain clauses from its contracts with hotels. HRS appealed this decision, which the Higher Regional Court Düsseldorf rejected on January 9, 2015. On December 23, 2015, the FCO announced that it had also required Booking.com to remove certain clauses from its contracts with German hotels. Booking.com announced that it will appeal this decision. In addition, with effect from August 1, 2015, Expedia waived certain rate, conditions and availability parity clauses in its agreements with its European hotel partners for a period of five years. While Expedia maintains that its parity clauses have always been lawful and in compliance with competition law, Expedia considers that this waiver is a

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NOTE 17—Commitments and Contingencies (Continued)

positive step towards facilitating the closure of the open investigations into such clauses on a harmonized pan-European basis. It is not certain what the outcome will be of the competition authorities' assessment of Expedia's announcement. Since Expedia's waivers were implemented, the competition authorities in Denmark, United Kingdom, Greece, Norway, Sweden, Poland and Ireland have announced either the closure of their investigation against Expedia or a decision not to open an investigation against Expedia, in each case having had regard to the changes implemented by Expedia. On November 6, 2015, the Swiss competition authority announced that it had issued a final decision finding certain parity terms existing in previous versions of agreements between Swiss hotels and each of Expedia, Booking.com and Hotel Reservation Service to be prohibited under Swiss law. The decision explicitly notes that Expedia's current contract terms with Swiss hotels are not subject to this prohibition. The Swiss competition authority imposed no fines or other sanctions against Expedia and did not find an abuse of a dominant market position by Expedia.

        On July 9, 2015, the French National Assembly adopted Article 133 of the Loi Macron ("Article 133") that seeks to define the nature of the relationship between online reservation platforms and French hotels. Article 133 became effective on August 8, 2015. Expedia considers that Article 133 was drafted ambiguously and can be interpreted in a way that violates both European Union and French legal principles. Therefore Expedia has initiated a complaint with the European Commission relating to Article 133. However, following the effective date, Expedia has been in contact with its hotel partners in France regarding the impact of Article 133.

NOTE 18—Related Party Transactions

        Mr. Diller, our Chairman of the Board of Directors and Senior Executive, through shares he owns beneficially as well as those subject to an irrevocable proxy granted by Liberty Interactive Corporation ("Liberty"), controlled approximately 54% of the combined voting power of the outstanding Expedia capital stock as of December 31, 2015. Mr. Diller effectively controls the outcome of all matters submitted to a vote or for the consent of our stockholders (other than with respect to the election by the holders of common stock of 25% of the members of our Board of Directors and matters as to which Delaware law requires a separate class vote). Upon Mr. Diller's permanent departure from Expedia, the irrevocable proxy would terminate and depending on the capitalization of Expedia at such time, Liberty could effectively control the voting power of our capital stock.

        In addition to serving as our Chairman and Senior Executive, Mr. Diller also serves as Chairman of the Board of Directors and Senior Executive at IAC. Mr. Kaufman, a member of our Board of Directors and Vice Chairman, currently serves as a member of the Board of Directors and Vice Chairman at IAC. Our certificate of incorporation provides that no officer or director of Expedia who is also an officer or director of IAC will be liable to Expedia or its stockholders for breach of any fiduciary duty by reason of the fact that any such individual directs a corporate opportunity to IAC instead of Expedia, or does not communicate information regarding a corporate opportunity to Expedia because the officer or director has directed the corporate opportunity to IAC, which could have the effect of increasing the risk of conflicts of interest between the companies.

        IAC/InterActiveCorp.     In connection with and following the IAC spin-off in August 2005, we entered into various commercial agreements with IAC, a related party due to common ownership. On August 20, 2008, IAC completed its plan to separate into five publicly traded companies. With this separation, our related party transactions with the newly constituted IAC have been immaterial and we expect this trend to continue on a go-forward basis.

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 18—Related Party Transactions (Continued)

        In addition, in conjunction with the IAC spin-off, we entered into a joint ownership and cost sharing agreement with IAC, under which IAC transferred to us 50% ownership in an airplane, which is available for use by both companies. In February 2013, Expedia and IAC completed the purchase of an additional aircraft in which each company has a 50% ownership interest. We paid $25 million (50% of the total purchase price and refurbishment costs) for our interest. In August 2013, the airplane was placed in service and is being depreciated over 10 years. We share equally in fixed and nonrecurring costs for both planes; direct operating costs are pro-rated based on actual usage. As of December 31, 2015 and 2014, the net basis in our ownership interest in both planes was $34 million and $36 million recorded in long-term investments and other assets. In 2015, 2014 and 2013, operating and maintenance costs paid directly to the jointly-owned subsidiary for the airplanes were nominal.

        Liberty Interactive Corporation.     Based on information filed with the Securities and Exchange Commission, Liberty USA Holdings, LLC, a wholly owned subsidiary of Liberty, holds 10.8 million shares of Expedia, Inc. common stock and 12.8 million shares of Expedia, Inc. Class B common stock, which shares are subject to the irrevocable proxy described above. In addition, pursuant to an Amended and Restated Governance Agreement among Expedia, Liberty Interactive and Mr. Diller dated December 20, 2011 (the " Governance Agreement "), Liberty Interactive has the right to nominate up to a number of directors equal to 20% of the total number of the directors on the Board (rounded up to the next whole number if the number of directors on the Board is not an even multiple of five) for election to the Board and has certain other rights regarding committee participation, so long as certain stock ownership requirements applicable to Liberty are satisfied.

        During 2015, 2014 and 2013, we issued 264,841 shares, 264,608 shares and 467,672 shares of common stock from treasury stock to Liberty at a price per share of $85.24, $77.11 and $54.04 and an aggregate value of approximately $23 million, $20 million and $25 million pursuant to and in accordance with the preemptive rights as detailed by the Governance Agreement with Liberty.

NOTE 19—Segment Information

        Beginning in the first quarter of 2015, we had four reportable segments: Core OTA, trivago, Egencia and eLong through its disposal on May 22, 2015. The change from two reportable segments, Leisure and Egencia, resulted in our previously disclosed Leisure reportable segment being disaggregated into three segments as a result of the Company's focus on providing additional information to reflect the unique market opportunities and competitive dynamics inherent in our eLong and trivago businesses. The acquisition of HomeAway on December 15, 2015 resulted in the creation of an additional segment. Our Core OTA segment, which consists of the aggregation of operating segments, provides a full range of travel and advertising services to our worldwide customers through a variety of brands including: Expedia.com and Hotels.com in the United States and localized Expedia and Hotels.com websites throughout the world, Orbitz.com, Expedia Affiliate Network, Hotwire.com, Travelocity, Venere, Wotif Group, CarRentals.com, and Classic Vacations. Our trivago segment generates advertising revenue primarily from sending referrals to online travel companies and travel service providers from its hotel metasearch websites. Our Egencia segment, which also includes Orbitz for Business, provides managed travel services to corporate customers worldwide. Our HomeAway segment operates an online marketplace for the vacation rental industry. Our eLong segment specialized in mobile and online travel services in China through its disposal on May 22, 2015.

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 19—Segment Information (Continued)

        We determined our operating segments based on how our chief operating decision makers manage our business, make operating decisions and evaluate operating performance. Our primary operating metric is adjusted EBITDA. Adjusted EBITDA for our Core OTA and Egencia segments includes allocations of certain expenses, primarily cost of revenue and facilities, and our Core OTA segment includes the total costs of our global supply organizations as well as the realized foreign currency gains or losses related to the forward contracts hedging a component of our net merchant hotel revenue. We base the allocations primarily on transaction volumes and other usage metrics. We do not allocate certain shared expenses such as accounting, human resources, information technology and legal to our reportable segments. We include these expenses in Corporate and Eliminations. Our allocation methodology is periodically evaluated and may change.

        Our segment disclosure includes intersegment revenues, which primarily consist of advertising and media services provided by our trivago segment to our Core OTA segment. These intersegment transactions are recorded by each segment at amounts that approximate fair value as if the transactions were between third parties, and therefore, impact segment performance. However, the revenue and corresponding expense are eliminated in consolidation. The elimination of such intersegment transactions is included within Corporate and Eliminations in the table below.

        Corporate and Eliminations also includes unallocated corporate functions and expenses. In addition, we record amortization of intangible assets and any related impairment, as well as stock-based compensation expense, restructuring and related reorganization charges, legal reserves, occupancy tax and other, and other items excluded from segment operating performance in Corporate and Eliminations. Such amounts are detailed in our segment reconciliation below. Included with eLong's standalone financial statements for 2015 (through its disposal on May 22, 2015), 2014 and 2013 was approximately $20 million, $17 million and $11 million of stock-based compensation and intangible amortization.

        The following tables present our segment information for 2015, 2014 and 2013. As a significant portion of our property and equipment is not allocated to our operating segments and depreciation is

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 19—Segment Information (Continued)

not included in our segment measure, we do not report the assets by segment as it would not be meaningful. We do not regularly provide such information to our chief operating decision makers.

 
  Year ended December 31, 2015  
 
  Core
OTA
  trivago   Egencia   HomeAway(1)   eLong(2)   Corporate &
Eliminations
  Total  
 
  (In thousands)
 

Third-party revenue

  $ 5,877,213   $ 333,024   $ 400,115   $ 20,222   $ 41,743   $   $ 6,672,317  

Intersegment revenue

        214,632                 (214,632 )    

Revenue

  $ 5,877,213   $ 547,656   $ 400,115   $ 20,222   $ 41,743   $ (214,632 ) $ 6,672,317  

Adjusted EBITDA

  $ 1,600,042   $ 2,856   $ 68,116   $ 4,011   $ (62,167 ) $ (509,747 ) $ 1,103,111  

Depreciation

    (189,318 )   (2,113 )   (24,394 )   (742 )   (3,263 )   (116,850 )   (336,680 )

Amortization of intangible assets

                        (163,665 )   (163,665 )

Stock-based compensation

                        (178,068 )   (178,068 )

Legal reserves, occupancy tax and other

                        104,587     104,587  

Restructuring and related reorganization charges

                        (72,122 )   (72,122 )

Realized (gain) loss on revenue hedges

    (43,597 )                       (43,597 )

Operating income (loss)

  $ 1,367,127   $ 743   $ 43,722   $ 3,269   $ (65,430 ) $ (935,865 )   413,566  

Other income, net

                                        512,396  

Income before income taxes

                                        925,962  

Provision for income taxes

                                        (203,214 )

Net income

                                        722,748  

Net loss attributable to noncontrolling interests

                                        41,717  

Net income attributable to Expedia, Inc

                                      $ 764,465  

(1)
Includes results since our acquisition of HomeAway on December 15, 2015.

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 19—Segment Information (Continued)

(2)
Includes results through our disposal of eLong on May 22, 2015.

 
  Year ended December 31, 2014  
 
  Core
OTA
  trivago   Egencia   eLong   Corporate &
Eliminations
  Total  
 
  (In thousands)
 

Third-party revenue

  $ 4,905,150   $ 280,555   $ 399,704   $ 178,076   $   $ 5,763,485  

Intersegment revenue

        132,964             (132,964 )    

Revenue

  $ 4,905,150   $ 413,519   $ 399,704   $ 178,076   $ (132,964 ) $ 5,763,485  

Adjusted EBITDA

  $ 1,387,386   $ 3,917   $ 60,933   $ (26,660 ) $ (400,788 ) $ 1,024,788  

Depreciation

    (139,509 )   (1,360 )   (20,032 )   (6,710 )   (98,206 )   (265,817 )

Amortization of intangible assets

                    (79,615 )   (79,615 )

Stock-based compensation

                    (85,011 )   (85,011 )

Legal reserves, occupancy tax and other

                    (41,539 )   (41,539 )

Restructuring and related reorganization charges

                    (25,630 )   (25,630 )

Realized (gain) loss on revenue hedges

    (9,412 )                   (9,412 )

Operating income (loss)

  $ 1,238,465   $ 2,557   $ 40,901   $ (33,370 ) $ (730,789 )   517,764  

Other expense, net

                                  (53,123 )

Income before income taxes

                                  464,641  

Provision for income taxes

                                  (91,691 )

Net income

                                  372,950  

Net loss attributable to noncontrolling interests

                                  25,147  

Net income attributable to Expedia, Inc

                                $ 398,097  

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 19—Segment Information (Continued)


 
  Year ended December 31, 2013  
 
  Core
OTA
  trivago   Egencia   eLong   Corporate &
Eliminations
  Total  
 
  (In thousands)
 

Third-party revenue

  $ 4,069,284   $ 173,039   $ 364,923   $ 164,013   $   $ 4,771,259  

Intersegment revenue

        42,755             (42,755 )    

Revenue

  $ 4,069,284   $ 215,794   $ 364,923   $ 164,013   $ (42,755 ) $ 4,771,259  

Adjusted EBITDA

  $ 1,171,863   $ 18,450   $ 59,801   $ (11,991 ) $ (359,400 ) $ 878,723  

Depreciation

    (108,459 )   (570 )   (15,797 )   (5,442 )   (81,476 )   (211,744 )

Amortization of intangible assets

                    (71,731 )   (71,731 )

Stock-based compensation

                    (130,173 )   (130,173 )

Acquisition-related and other

                    (9,829 )   (9,829 )

Legal reserves, occupancy tax and other

                    (77,919 )   (77,919 )

Realized (gain) loss on revenue hedges

    (11,267 )                   (11,267 )

Operating income (loss)

  $ 1,052,137   $ 17,880   $ 44,004   $ (17,433 ) $ (730,528 )   366,060  

Other expense, net

                                  (65,367 )

Income before income taxes

                                  300,693  

Provision for income taxes

                                  (84,335 )

Net income

                                  216,358  

Net loss attributable to noncontrolling interests

                                  16,492  

Net income attributable to Expedia, Inc

                                $ 232,850  

    Geographic Information

        The following table presents revenue by geographic area, the United States and all other countries, based on the geographic location of our websites or points of sale for the years ended December 31, 2015, 2014 and 2013:

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (In thousands)
 

Revenue

                   

United States

  $ 3,703,302   $ 3,046,520   $ 2,510,162  

All other countries

    2,969,015     2,716,965     2,261,097  

  $ 6,672,317   $ 5,763,485   $ 4,771,259  

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 19—Segment Information (Continued)

        The following table presents property and equipment, net for the United States and all other countries, as of December 31, 2015 and 2014:

 
  As of December 31,  
 
  2015   2014  
 
  (In thousands)
 

Property and equipment, net

             

United States

  $ 944,208   $ 446,044  

All other countries

    120,051     107,082  

  $ 1,064,259   $ 553,126  

NOTE 20—Valuation and Qualifying Accounts

        The following table presents the changes in our valuation and qualifying accounts. Other reserves primarily include our accrual of the cost associated with purchases made on our website related to the use of fraudulent credit cards "charged-back" due to payment disputes and cancellation fees.

Description
  Balance of
Beginning of
Period
  Charges to
Earnings
  Charges to
Other
Accounts(1)
  Deductions   Balance at End
of Period
 
 
  (In thousands)
 

2015

                               

Allowance for doubtful accounts

  $ 13,760   $ 11,513   $ 10,309   $ (8,547 ) $ 27,035  

Other reserves

    25,258                       29,959  

2014

   
 
   
 
   
 
   
 
   
 
 

Allowance for doubtful accounts

  $ 11,555   $ 11,176   $ 440   $ (9,411 ) $ 13,760  

Other reserves

    15,891                       25,258  

2013

   
 
   
 
   
 
   
 
   
 
 

Allowance for doubtful accounts

  $ 10,771   $ 6,706   $ 3,410   $ (9,332 ) $ 11,555  

Other reserves

    11,195                       15,891  

(1)
Charges to other accounts primarily relates to amounts acquired through acquisitions and net translation adjustments.

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 21—Quarterly Financial Information (Unaudited)

 
  Three Months Ended  
 
  December 31   September 30   June 30   March 31  
 
  (In thousands, except per share data)
 

Year ended December 31, 2015

                         

Revenue

  $ 1,698,567   $ 1,937,753   $ 1,662,600   $ 1,373,397  

Operating income (loss)(1)

    29,477     344,998     90,092     (51,001 )

Net income (loss) attributable to Expedia, Inc. 

    (12,538 )   283,216     449,644     44,143  

Basic earnings (loss) per share(2)

  $ (0.09 ) $ 2.18   $ 3.49   $ 0.35  

Diluted earnings (loss) per share(2)

    (0.09 )   2.12     3.38     0.34  

Year ended December 31, 2014

   
 
   
 
   
 
   
 
 

Revenue

  $ 1,355,978   $ 1,712,504   $ 1,494,632   $ 1,200,371  

Operating income (loss)(1)

    94,706     296,836     129,220     (2,998 )

Net income (loss) attributable to Expedia, Inc. 

    65,969     257,059     89,373     (14,304 )

Basic earnings (loss) per share(2)

    0.52   $ 2.01   $ 0.69   $ (0.11 )

Diluted earnings (loss) per share(2)

    0.50     1.94     0.67     (0.11 )

(1)
During the fourth quarters of 2015 and 2014, we recognized $23 million and $26 million related to restructuring and related reorganization charges.

(2)
Earnings per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share may not equal the total computed for the year.

NOTE 22—Guarantor and Non-Guarantor Supplemental Financial Information

        Condensed consolidating financial information of Expedia, Inc. (the "Parent"), our subsidiaries that are guarantors of our debt facility and instruments (the "Guarantor Subsidiaries"), and our subsidiaries that are not guarantors of our debt facility and instruments (the "Non-Guarantor Subsidiaries") is shown below. The debt facility and instruments are guaranteed by certain of our wholly-owned domestic subsidiaries and rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations. The guarantees are full, unconditional, joint and several with the exception of certain customary automatic subsidiary release provisions. In this financial information, the Parent and Guarantor Subsidiaries account for investments in their wholly-owned subsidiaries using the equity method.

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 22—Guarantor and Non-Guarantor Supplemental Financial Information (Continued)


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended December 31, 2015

 
  Parent   Guarantor
Subsidiaries
  Non-Guarantor
Subsidiaries(1)
  Eliminations   Consolidated  
 
  (In thousands)
 

Revenue

  $   $ 5,194,549   $ 1,682,677   $ (204,909 ) $ 6,672,317  

Costs and expenses:

   
 
   
 
   
 
   
 
   
 
 

Cost of revenue

        1,009,785     308,463     (8,689 )   1,309,559  

Selling and marketing

        2,347,919     1,230,059     (196,892 )   3,381,086  

Technology and content

        584,560     245,495     189     830,244  

General and administrative

        373,162     200,268     483     573,913  

Amortization of intangible assets

        58,524     105,141         163,665  

Legal reserves, occupancy tax and other

        (104,587 )           (104,587 )

Restructuring and related reorganization charges

        76,422     28,449         104,871  

Intercompany (income) expense, net

        742,010     (742,010 )        

Operating income

        106,754     306,812         413,566  

Other income (expense):

   
 
   
 
   
 
   
 
   
 
 

Equity in pre-tax earnings of consolidated subsidiaries

    839,779     870,108         (1,709,887 )    

Gain on sale of business

            508,810         508,810  

Other, net

    (119,451 )   64,576     58,461         3,586  

Total other income, net

    720,328     934,684     567,271     (1,709,887 )   512,396  

Income before income taxes

    720,328     1,041,438     874,083     (1,709,887 )   925,962  

Provision for income taxes

    44,137     (194,251 )   (53,100 )       (203,214 )

Net income

    764,465     847,187     820,983     (1,709,887 )   722,748  

Net loss attributable to noncontrolling interests

            41,717         41,717  

Net income attributable to Expedia, Inc

  $ 764,465   $ 847,187   $ 862,700   $ (1,709,887 ) $ 764,465  

Comprehensive income attributable to Expedia, Inc. 

  $ 763,202   $ 822,898   $ 742,132   $ (1,709,887 ) $ 618,345  

(1)
Includes results through our disposal of eLong on May 22, 2015.

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 22—Guarantor and Non-Guarantor Supplemental Financial Information (Continued)


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended December 31, 2014

 
  Parent   Guarantor
Subsidiaries
  Non-Guarantor
Subsidiaries
  Eliminations   Consolidated  
 
  (In thousands)
 

Revenue

  $   $ 4,500,723   $ 1,389,979   $ (127,217 ) $ 5,763,485  

Costs and expenses:

   
 
   
 
   
 
   
 
   
 
 

Cost of revenue

        898,647     274,788     5,646     1,179,081  

Selling and marketing

        1,913,719     1,027,798     (133,188 )   2,808,329  

Technology and content

        472,762     213,159     233     686,154  

General and administrative

        243,793     181,228     352     425,373  

Amortization of intangible assets

        1,848     77,767         79,615  

Legal reserves, occupancy tax and other

        41,539             41,539  

Restructuring and related reorganization charges

        5,020     20,610         25,630  

Intercompany (income) expense, net

        666,675     (666,415 )   (260 )    

Operating income

        256,720     261,044         517,764  

Other income (expense):

   
 
   
 
   
 
   
 
   
 
 

Equity in pre-tax earnings of consolidated subsidiaries

    455,831     282,769         (738,600 )    

Other, net

    (91,569 )   34,223     4,223         (53,123 )

Total other income (expense), net

    364,262     316,992     4,223     (738,600 )   (53,123 )

Income before income taxes

    364,262     573,712     265,267     (738,600 )   464,641  

Provision for income taxes

    33,835     (110,929 )   (14,597 )       (91,691 )

Net income

    398,097     462,783     250,670     (738,600 )   372,950  

Net loss attributable to noncontrolling interests

            25,147         25,147  

Net income attributable to Expedia, Inc

  $ 398,097   $ 462,783   $ 275,817   $ (738,600 ) $ 398,097  

Comprehensive income attributable to Expedia, Inc. 

  $ 398,097   $ 463,075   $ 118,554   $ (738,600 ) $ 241,126  

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 22—Guarantor and Non-Guarantor Supplemental Financial Information (Continued)


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended December 31, 2013

 
  Parent   Guarantor
Subsidiaries
  Non-Guarantor
Subsidiaries
  Eliminations   Consolidated  
 
  (In thousands)
 

Revenue

  $   $ 3,849,746   $ 970,087   $ (48,574 ) $ 4,771,259  

Costs and expenses:

   
 
   
 
   
 
   
 
   
 
 

Cost of revenue

        797,801     235,753     4,480     1,038,034  

Selling and marketing

        1,492,370     756,767     (52,992 )   2,196,145  

Technology and content

        399,763     178,052     5     577,820  

General and administrative

        216,551     160,594     (67 )   377,078  

Amortization of intangible assets

        3,042     68,689         71,731  

Acquisition-related and other

            66,472         66,472  

Legal reserves, occupancy tax and other

        77,919             77,919  

Intercompany (income) expense, net

        731,867     (731,867 )        

Operating income

        130,433     235,627         366,060  

Other income (expense):

   
 
   
 
   
 
   
 
   
 
 

Equity in pre-tax earnings of consolidated subsidiaries

    285,456     234,869         (520,325 )    

Other, net

    (83,006 )   7,394     10,245         (65,367 )

Total other income (expense), net

    202,450     242,263     10,245     (520,325 )   (65,367 )

Income before income taxes

    202,450     372,696     245,872     (520,325 )   300,693  

Provision for income taxes

    30,400     (81,170 )   (33,565 )       (84,335 )

Net income

    232,850     291,526     212,307     (520,325 )   216,358  

Net loss attributable to noncontrolling interests

            16,492         16,492  

Net income attributable to Expedia, Inc

  $ 232,850   $ 291,526   $ 228,799   $ (520,325 ) $ 232,850  

Comprehensive income attributable to Expedia, Inc. 

  $ 232,850   $ 290,857   $ 247,643   $ (520,325 ) $ 251,025  

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 22—Guarantor and Non-Guarantor Supplemental Financial Information (Continued)

CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2015

 
  Parent   Guarantor
Subsidiaries
  Non-Guarantor
Subsidiaries
  Eliminations   Consolidated  
 
  (In thousands)
 

ASSETS

                               

Total current assets

  $ 233,340   $ 2,261,450   $ 1,201,064   $ (717,093 ) $ 2,978,761  

Investment in subsidiaries

    8,420,890     3,106,719         (11,527,609 )    

Intangible assets, net

        1,974,968     818,986         2,793,954  

Goodwill

        5,859,457     2,133,484         7,992,941  

Other assets, net

    15,670     1,381,837     354,482     (13,833 )   1,738,156  

TOTAL ASSETS

  $ 8,669,900   $ 14,584,431   $ 4,508,016   $ (12,258,535 ) $ 15,503,812  

LIABILITIES AND STOCKHOLDERS' EQUITY

                               

Total current liabilities

  $ 538,856   $ 5,511,639   $ 592,615   $ (717,093 ) $ 5,926,017  

Long-term debt

    3,201,277                 3,201,277  

Other liabilities

        620,685     181,421     (13,833 )   788,273  

Redeemable noncontrolling interests

            658,478         658,478  

Stockholders' equity

    4,929,767     8,452,107     3,075,502     (11,527,609 )   4,929,767  

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

  $ 8,669,900   $ 14,584,431   $ 4,508,016   $ (12,258,535 ) $ 15,503,812  

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 22—Guarantor and Non-Guarantor Supplemental Financial Information (Continued)


CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2014

 
  Parent   Guarantor
Subsidiaries
  Non-Guarantor
Subsidiaries
  Eliminations   Consolidated  
 
  (In thousands)
 

ASSETS

                               

Total current assets

  $ 189,203   $ 3,938,831   $ 1,064,981   $ (2,268,526 ) $ 2,924,489  

Investment in subsidiaries

    4,689,302     1,338,089         (6,027,391 )    

Intangible assets, net

        637,986     652,101         1,290,087  

Goodwill

        2,436,533     1,519,368         3,955,901  

Other assets, net

    7,082     583,782     259,197         850,061  

TOTAL ASSETS

  $ 4,885,587   $ 8,935,221   $ 3,495,647   $ (8,295,917 ) $ 9,020,538  

LIABILITIES AND STOCKHOLDERS' EQUITY

                               

Total current liabilities

  $ 1,245,071   $ 3,707,638   $ 1,502,432   $ (2,268,526 ) $ 4,186,615  

Long-term debt

    1,746,787                 1,746,787  

Other liabilities

        516,365     116,969         633,334  

Redeemable noncontrolling interests

            560,073         560,073  

Stockholders' equity

    1,893,729     4,711,218     1,316,173     (6,027,391 )   1,893,729  

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

  $ 4,885,587   $ 8,935,221   $ 3,495,647   $ (8,295,917 ) $ 9,020,538  

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 22—Guarantor and Non-Guarantor Supplemental Financial Information (Continued)


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2015

 
  Parent   Guarantor
Subsidiaries
  Non-Guarantor
Subsidiaries
  Consolidated  
 
  (In thousands)
 

Operating activities:

                         

Net cash provided by operating activities

  $   $ 624,327   $ 743,718   $ 1,368,045  

Investing activities:

                         

Capital expenditures, including internal-use software and website development               

        (709,679 )   (77,362 )   (787,041 )

Purchases of investments

        (473,538 )   (47,791 )   (521,329 )

Sales and maturities of investments

        327,191     83,732     410,923  

Acquisitions, net of cash acquired

    (126,779 )   (1,873,079 )   (63,791 )   (2,063,649 )

Transfers (to) from related parties

    126,779     (303,846 )   177,067      

Proceeds from sale of business, net of cash divested and disposal costs

            523,882     523,882  

Other, net

        54,226     11,728     65,954  

Net cash provided by (used in) investing activities

        (2,978,725 )   607,465     (2,371,260 )

Financing activities:

                         

Proceeds from issuance of long-term debt, net of debt issuance costs

    1,441,860             1,441,860  

Purchases of treasury stock

    (60,546 )           (60,546 )

Proceeds from issuance of treasury stock

    22,575             22,575  

Payment of dividends to stockholders

    (108,527 )           (108,527 )

Proceeds from exercise of equity awards and employee stock purchase plan

    96,526         1,190     97,716  

Withholding taxes for stock option exercises

    (85,033 )           (85,033 )

Transfers (to) from related parties

    (1,396,210 )   2,350,385     (954,175 )    

Other, net

    89,355     (11,998 )   18,797     96,154  

Net cash provided by (used in) financing activities

        2,338,387     (934,188 )   1,404,199  

Effect of exchange rate changes on cash and cash equivalents

        (86,269 )   (41,116 )   (127,385 )

Net increase (decrease) in cash and cash equivalents

        (102,280 )   375,879     273,599  

Cash and cash equivalents at beginning of year

        943,976     458,724     1,402,700  

Cash and cash equivalents at end of year

  $   $ 841,696   $ 834,603   $ 1,676,299  

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 22—Guarantor and Non-Guarantor Supplemental Financial Information (Continued)


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2014

 
  Parent   Guarantor
Subsidiaries
  Non-Guarantor
Subsidiaries
  Consolidated  
 
  (In thousands)
 

Operating activities:

                         

Net cash provided by operating activities from continuing operations

  $   $ 1,027,571   $ 339,388   $ 1,366,959  

Investing activities:

                         

Capital expenditures, including internal-use software and website development

        (281,696 )   (46,691 )   (328,387 )

Purchases of investments

        (913,205 )   (281,005 )   (1,194,210 )

Sales and maturities of investments          

        861,744     300,813     1,162,557  

Acquisitions, net of cash acquired

            (560,668 )   (560,668 )

Other, net

        (2,805 )   (744 )   (3,549 )

Net cash used in investing activities from continuing operations

        (335,962 )   (588,295 )   (924,257 )

Financing activities:

                         

Proceeds from issuance of long-term debt, net of issuance costs

    492,894             492,894  

Purchases of treasury stock

    (537,861 )           (537,861 )

Proceeds from issuance of treasury stock

    20,404                 20,404  

Payment of dividends to stockholders

    (84,697 )           (84,697 )

Proceeds from exercise of equity awards and employee stock purchase plan

    104,598         3,523     108,121  

Transfers (to) from related parties

    (53,494 )   (287,394 )   340,888      

Other, net

    58,156     (2,124 )   (6,744 )   49,288  

Net cash provided by (used in) financing activities from continuing operations

        (289,518 )   337,667     48,149  

Effect of exchange rate changes on cash and cash equivalents

        (64,798 )   (44,386 )   (109,184 )

Net increase in cash and cash equivalents

        337,293     44,374     381,667  

Cash and cash equivalents at beginning of year

        606,683     414,350     1,021,033  

Cash and cash equivalents at end of year

  $   $ 943,976   $ 458,724   $ 1,402,700  

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Expedia, Inc.

Notes to Consolidated Financial Statements (Continued)

NOTE 22—Guarantor and Non-Guarantor Supplemental Financial Information (Continued)


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2013

 
  Parent   Guarantor
Subsidiaries
  Non-Guarantor
Subsidiaries
  Consolidated  
 
  (In thousands)
 

Operating activities:

                         

Net cash provided by operating activities from continuing operations

  $   $ 305,174   $ 458,026   $ 763,200  

Investing activities:

                         

Capital expenditures, including internal-use software and website development

        (243,428 )   (65,153 )   (308,581 )

Purchases of investments

        (932,011 )   (284,580 )   (1,216,591 )

Sales and maturities of investments          

        1,193,948     308,628     1,502,576  

Acquisitions, net of cash acquired

            (541,247 )   (541,247 )

Other, net

        40,850     (2,520 )   38,330  

Net cash provided by (used in) investing activities from continuing operations

        59,359     (584,872 )   (525,513 )

Financing activities:

                         

Purchases of treasury stock

    (522,900 )           (522,900 )

Proceeds from issuance of treasury stock

    25,273             25,273  

Payment of dividends to stockholders

    (75,760 )           (75,760 )

Proceeds from exercise of equity awards and employee stock purchase plan

    52,134         4,702     56,836  

Transfers (to) from related parties

    482,975     (754,948 )   271,973      

Other, net

    38,278     7,565     (21,808 )   24,035  

Net cash provided by (used in) financing activities from continuing operations

        (747,383 )   254,867     (492,516 )

Net cash provided by (used in) continuing operations

        (382,850 )   128,021     (254,829 )

Net cash provided by discontinued operations

        13,637         13,637  

Effect of exchange rate changes on cash and cash equivalents

        (31,260 )   324     (30,936 )

Net increase (decrease) in cash and cash equivalents

        (400,473 )   128,345     (272,128 )

Cash and cash equivalents at beginning of year

        1,007,156     286,005     1,293,161  

Cash and cash equivalents at end of year

  $   $ 606,683   $ 414,350   $ 1,021,033  

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PART II—INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20.    Indemnification of Directors and Officers

        Section 145 of the DGCL provides, generally, that a corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (except actions by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation against all expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. A corporation may similarly indemnify such person for expenses actually and reasonably incurred by such person in connection with the defense or settlement of any action or suit by or in the right of the corporation, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, in the case of claims, issues and matters as to which such person shall have been adjudged liable to the corporation, provided that a court shall have determined, upon application, that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

        Section 102(b)(7) of the DGCL provides, generally, that the certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision may not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section 174 of Title 8 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. No such provision may eliminate or limit the liability of a director for any act or omission occurring prior to the date when such provision became effective.

        Article V, Section E of the Splitco charter will provide as follows:

        1.     Limitation On Liability.     To the fullest extent permitted by the DGCL as the same exists or may hereafter be amended, a director of Splitco will not be liable to Splitco or any of its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of this paragraph 1 will be prospective only and will not adversely affect any limitation, right or protection of a director of Splitco existing at the time of such repeal or modification.

        2.     Indemnification.

            (a)     Right to Indemnification.     Splitco will indemnify, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a proceeding ) by reason of the fact that he, or a person for whom he is the legal representative, is or was a director or officer of Splitco or is or was serving at the request of Splitco as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) incurred by such person. Such right of indemnification will inure whether or not the claim asserted is based on matters which antedate the adoption of Article V, Section E of the charter. Splitco will be required to indemnify or make advances to a person in connection with a proceeding (or part thereof) initiated by such person only if the proceeding (or part thereof) was authorized by the board of directors of Splitco.

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            (b)     Prepayment of Expenses.     Splitco will pay the expenses (including attorney's fees) incurred by a director or officer in defending any proceeding in advance of its final disposition; provided, however, that the payment of expenses incurred by a director or officer in advance of the final disposition of the proceeding will be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this paragraph or otherwise.

            (c)     Claims.     If a claim for indemnification or payment of expenses under this paragraph is not paid in full within 60 days after a written claim therefor has been received by Splitco, the claimant may file suit to recover the unpaid amount of such claim and, if successful, will be entitled to be paid the expense (including attorney's fees) of prosecuting such claim to the fullest extent permitted by Delaware law. In any such action Splitco will have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.

            (d)     Non-Exclusivity of Rights.     The rights conferred on any person by this paragraph will not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the charter, the bylaws of Splitco, agreement, vote of stockholders or resolution of disinterested directors or otherwise.

            (e)     Other Indemnification.     Splitco's obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity will be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or nonprofit entity.

        3.     Amendment or Repeal.     Any amendment, modification or repeal of the foregoing provisions of Article V, Section E of the charter will not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.

Item 21.    Exhibits and Financial Statement Schedules

        (a)     Exhibits.     The following documents are filed as exhibits hereto.

Exhibit
Number
  Exhibit Description
  2.1   Form of Reorganization Agreement by and between Liberty Interactive Corporation and the Registrant.

 

3.1

 

Form of Restated Certificate of Incorporation of the Registrant to be in effect at the time of the Split-Off.

 

3.2

 

Form of Bylaws of the Registrant to be in effect at the time of the Split-Off.

 

4.1

 

Specimen Certificate for shares of Series A Common Stock, par value $0.01 per share, of the Registrant.

 

4.2

 

Specimen Certificate for shares of Series B Common Stock, par value $0.01 per share, of the Registrant.

 

5.1

 

Opinion of Baker Botts L.L.P. as to the legality of the securities being registered.

 

8.1

 

Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding certain tax matters.*

 

10.1

 

Form of Liberty Expedia Holdings, Inc. 2016 Omnibus Incentive Plan.

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Exhibit
Number
  Exhibit Description
  10.2   Form of Liberty Expedia Holdings, Inc. Transitional Stock Adjustment Plan.

 

10.3

 

Form of Tax Sharing Agreement by and between the Registrant and Liberty Interactive Corporation.

 

10.4

 

Form of Services Agreement by and between the Registrant and Liberty Media Corporation.

 

10.5

 

Form of Facilities Agreement by and among the Registrant, Liberty Media Corporation and Liberty Property Holdings, Inc.

 

10.6

 

Form of Indemnification Agreement by and between the Registrant and its executive officers/directors.

 

10.7

 

Amended and Restated Governance Agreement among Expedia, Inc., Liberty Interactive Corporation and Barry Diller, dated as of December 20, 2011, (incorporated by reference to Exhibit 10.1 to Expedia,  Inc.'s Current Report on Form 8-K (File No. 000-51447), filed with the Securities and Exchange Commission (the SEC ) on December 27, 2011).

 

10.8

 

Form of Assignment and Assumption of Governance Agreement, by and among Liberty Expedia Holdings, Inc., Liberty Interactive Corporation, Barry Driller and Expedia, Inc.

 

10.9

 

Forms of Aircraft Time Sharing Agreements.

 

10.10

 

Amended and Restated Stockholders Agreement between Liberty Interactive Corporation and Barry Diller, dated as of December 20, 2011 (incorporated by reference to Exhibit 10.11 to Expedia Inc.'s Annual Report on Form 10-K (File No. 000-51447), filed with the SEC on February 9, 2012).

 

10.11

 

Form of Assignment and Assumption of Stockholders Agreement, by and among Liberty Expedia Holdings, Inc., Liberty Interactive Corporation and Barry Diller.

 

10.12

 

Form of Amendment No. 1 to Stockholders Agreement, by and between Liberty Expedia Holdings, Inc. and Barry Diller.

 

10.13

 

Amended and Restated Transaction Agreement, dated as of September 22, 2016, by and among Liberty Interactive Corporation, Liberty Expedia Holdings, Inc., Barry Diller, John C. Malone and Leslie Malone.

 

10.14

 

Form of Proxy and Voting Agreement, by and among Barry Diller, John C. Malone and Leslie Malone.

 

10.15

 

Form of Assignment Agreement, by and between Barry Diller and Liberty Expedia Holdings, Inc.

 

21.1

 

List of Subsidiaries.

 

23.1

 

Consent of KPMG LLP.

 

23.2

 

Consent of Ernst & Young LLP.

 

23.3

 

Consent of Baker Botts L.L.P. (included in Exhibit 5.1)

 

23.4

 

Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 8.1)

 

24.1

 

Power of Attorney**

 

99.1

 

Executive and Director Compensation, extracted from the annual reports on Form 10-K/A for the year ended December 31, 2016 of each of Liberty Media Corporation and Liberty Interactive Corporation, filed on April 29, 2016**

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Exhibit
Number
  Exhibit Description
  99.2   Form of Proxy Card

*
An executed opinion will be delivered in connection with completion of the Split-Off and will be filed as an exhibit to a post-effective amendment to this Registration Statement.

**
Previously filed

        (b)     Financial Statement Schedules.     

        (b)(1)     Financial Statements     

Included in this Registration Statement on Form S-4:

Liberty Expedia Holdings, Inc .

   

Unaudited Financial Statements:

   

Condensed Combined Balance Sheets, March 31, 2016 and December 31, 2015

  F-2

Condensed Combined Statements of Operations, Three months ended March 31, 2016 and 2015

  F-3

Condensed Combined Statements of Comprehensive Earnings (Loss), Three months ended March 31, 2016 and 2015

  F-4

Condensed Combined Statements of Cash Flows, Three months ended March 31, 2016 and 2015

  F-5

Condensed Combined Statement of Equity, Three months ended March 31, 2016

  F-6

Notes to Condensed Combined Financial Statements, March 31, 2016

  F-7

Audited Financial Statements:

   

Report of Independent Registered Public Accounting Firm

  F-18

Combined Balance Sheets, December 31, 2015 and 2014

  F-19

Combined Statements of Operations, Years ended December 31, 2015, 2014 and 2013

  F-20

Combined Statements of Comprehensive Earnings (Loss), Years ended December 31, 2015, 2014 and 2013

  F-21

Combined Statements of Cash Flows, Years ended December 31, 2015, 2014 and 2013

  F-22

Combined Statement of Equity, Years ended December 31, 2015, 2014 and 2013

  F-23

Notes to Combined Financial Statements, December 31, 2015, 2014 and 2013

  F-24

Unaudited Pro Forma Condensed Combined Financial Statements:

   

Condensed Combined Balance Sheet, March 31, 2016

  F-50

Condensed Combined Statement of Operations, Three months ended March 31, 2016

  F-51

Condensed Combined Statement of Operations, Year ended December 31, 2015

  F-52

Expedia, Inc.:

 
 

Audited Financial Statements:

   

Report of Independent Registered Public Accounting Firm

  F-58

Consolidated Statements of Operations, Years ended December 31, 2015, 2014 and 2013

  F-59

Consolidated Statements of Comprehensive Income, Years ended December 31, 2015, 2014 and 2013

  F-60

Consolidated Balance Sheets, December 31, 2015 and 2014

  F-61

Consolidated Statements of Changes in Stockholders' Equity, Years ended December 31, 2015, 2014 and 2013

  F-62

Consolidated Statements of Cash Flows, Years ended December 31, 2015, 2014 and 2013

  F-64

Notes to Consolidated Financial Statements, December 31, 2015, 2014 and 2013

  F-65

        (b)(2)     Financial Statement Schedules     

        All schedules have been omitted because they are not applicable, not material or the required information is set forth in the financial statements or notes thereto.

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Item 22.    Undertakings

        Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

        The undersigned registrant hereby undertakes:

            (1)   To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

                (i)  To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

               (ii)  To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;

              (iii)  To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

            (2)   That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

            (3)   To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

            (4)   That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided , however , that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

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            (5)   That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

                (i)  Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

               (ii)  Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

              (iii)  The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

              (iv)  Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

            (6)   To deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given the latest annual report, to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information.

            (7)   That, for purposes of determining any liability under the Securities Act of 1933, each filing of the undersigned registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

            (8)   That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of the registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.

            (9)   That every prospectus (i) that is filed pursuant to paragraph (8) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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            (10) To respond to requests for information that is incorporated by reference into this prospectus pursuant to Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means; this includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

            (11) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Englewood, State of Colorado, on September 22, 2016.

    LIBERTY EXPEDIA HOLDINGS, INC.

 

 

By:

 

/s/ RICHARD N. BAER

        Name:   Richard N. Baer
        Title:   Chief Legal Officer

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature
 
Title
 
Date

 

 

 

 

 

 

 
*

Christopher W. Shean
  President and Chief Executive Officer (Principal Executive Officer)    

*

Wade Haufschild

 

Chief Financial Officer (Principal Financial and Principal Accounting Officer)

 

 

/s/ RICHARD N. BAER

Richard N. Baer

 

Director

 

September 22, 2016

*By

 

/s/ RICHARD N. BAER

Richard N. Baer
Attorney-in-fact

 

 

 

September 22, 2016

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EXHIBIT INDEX

Exhibit
Number
  Exhibit Description
  2.1   Form of Reorganization Agreement by and between Liberty Interactive Corporation and the Registrant.

 

3.1

 

Form of Restated Certificate of Incorporation of the Registrant to be in effect at the time of the Split-Off.

 

3.2

 

Form of Bylaws of the Registrant to be in effect at the time of the Split-Off.

 

4.1

 

Specimen Certificate for shares of Series A Common Stock, par value $0.01 per share, of the Registrant.

 

4.2

 

Specimen Certificate for shares of Series B Common Stock, par value $0.01 per share, of the Registrant.

 

5.1

 

Opinion of Baker Botts L.L.P. as to the legality of the securities being registered.

 

8.1

 

Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding certain tax matters.*

 

10.1

 

Form of Liberty Expedia Holdings, Inc. 2016 Omnibus Incentive Plan.

 

10.2

 

Form of Liberty Expedia Holdings, Inc. Transitional Stock Adjustment Plan.

 

10.3

 

Form of Tax Sharing Agreement by and between the Registrant and Liberty Interactive Corporation.

 

10.4

 

Form of Services Agreement by and between the Registrant and Liberty Media Corporation.

 

10.5

 

Form of Facilities Agreement by and among the Registrant, Liberty Media Corporation and Liberty Property Holdings, Inc.

 

10.6

 

Form of Indemnification Agreement by and between the Registrant and its executive officers/directors.

 

10.7

 

Amended and Restated Governance Agreement among Expedia, Inc., Liberty Interactive Corporation and Barry Diller, dated as of December 20, 2011, (incorporated by reference to Exhibit 10.1 to Expedia,  Inc.'s Current Report on Form 8-K (File No. 000-51447), filed with the Securities and Exchange Commission (the SEC ) on December 27, 2011).

 

10.8

 

Form of Assignment and Assumption of Governance Agreement, by and among Liberty Expedia Holdings, Inc., Liberty Interactive Corporation, Barry Driller and Expedia, Inc.

 

10.9

 

Forms of Aircraft Time Sharing Agreements.

 

10.10

 

Amended and Restated Stockholders Agreement between Liberty Interactive Corporation and Barry Diller, dated as of December 20, 2011 (incorporated by reference to Exhibit 10.11 to Expedia Inc.'s Annual Report on Form 10-K (File No. 000-51447), filed with the SEC on February 9, 2012).

 

10.11

 

Form of Assignment and Assumption of Stockholders Agreement, by and among Liberty Expedia Holdings, Inc., Liberty Interactive Corporation and Barry Diller.

 

10.12

 

Form of Amendment No. 1 to Stockholders Agreement, by and between Liberty Expedia Holdings, Inc. and Barry Diller.

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Exhibit
Number
  Exhibit Description
  10.13   Amended and Restated Transaction Agreement, dated as of September 22, 2016, by and among Liberty Interactive Corporation, Liberty Expedia Holdings, Inc., Barry Diller, John C. Malone and Leslie Malone.

 

10.14

 

Form of Proxy and Voting Agreement, by and among Barry Diller, John C. Malone and Leslie Malone.

 

10.15

 

Form of Assignment Agreement, by and between Barry Diller and Liberty Expedia Holdings, Inc.

 

21.1

 

List of Subsidiaries.

 

23.1

 

Consent of KPMG LLP.

 

23.2

 

Consent of Ernst & Young LLP.

 

23.3

 

Consent of Baker Botts L.L.P. (included in Exhibit 5.1)

 

23.4

 

Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 8.1)

 

24.1

 

Power of Attorney**

 

99.1

 

Executive and Director Compensation, extracted from the annual reports on Form 10-K/A for the year ended December 31, 2016 of each of Liberty Media Corporation and Liberty Interactive Corporation, filed on April 29, 2016**

 

99.2

 

Form of Proxy Card

*
An executed opinion will be delivered in connection with completion of the Split-Off and will be filed as an exhibit to a post-effective amendment to this Registration Statement.

**
Previously filed

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Exhibit 2.1

 

FORM OF REORGANIZATION AGREEMENT

 

between

 

LIBERTY INTERACTIVE CORPORATION

 

and

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

Dated as of [  ], 2016

 



 

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

ARTICLE I REORGANIZATION AND DISTRIBUTION

 

2

1.1

Restructuring

 

2

1.2

Transfer of Splitco Assets and Splitco Businesses; Assumption of Splitco Liabilities

 

2

1.3

Third Party Consents and Government Approvals

 

3

1.4

Further Actions

 

3

1.5

Reorganization and Redemption Documents

 

3

1.6

Qualification as Reorganization

 

3

 

 

 

 

ARTICLE II REDEMPTION

 

4

2.1

The Redemption

 

4

2.2

Conditions to the Redemption

 

5

2.3

Treatment of Outstanding Equity Awards

 

6

 

 

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES

 

8

3.1

Representations and Warranties of the Parties

 

8

3.2

No Approvals or Notices Required; No Conflict with Instruments

 

8

3.3

No Other Reliance

 

9

 

 

 

 

ARTICLE IV COVENANTS

 

9

4.1

Cross-Indemnities

 

9

4.2

Financing

 

13

4.3

Further Assurances

 

13

4.4

Specific Performance

 

13

4.5

Access to Information

 

13

4.6

Confidentiality

 

14

4.7

Notices Regarding Transferred Assets

 

15

4.8

Treatment Of Payments

 

15

 

 

 

 

ARTICLE V CLOSING

 

15

5.1

Closing

 

15

5.2

Conditions to Closing

 

15

5.3

Deliveries at Closing

 

16

 

 

 

 

ARTICLE VI TERMINATION

 

17

6.1

Termination

 

17

6.2

Effect of Termination

 

17

 

 

 

 

ARTICLE VII MISCELLANEOUS

 

17

7.1

Definitions

 

17

7.2

No Third-Party Rights

 

23

7.3

Notices

 

23

7.4

Entire Agreement

 

24

7.5

Binding Effect; Assignment

 

24

 

i



 

7.6

Governing Law; Jurisdiction

 

24

7.7

Waiver of Jury Trial

 

25

7.8

Severability

 

25

7.9

Amendments; Waivers

 

25

7.10

No Strict Construction; Interpretation

 

26

7.11

Conflicts with Tax Sharing Agreement

 

26

7.12

Counterparts

 

26

 

EXHIBIT A-1 and A-2 — Forms of Aircraft Time Sharing Agreements

EXHIBIT B — Form of Facilities Sharing Agreement

EXHIBIT C — Form of Services Agreement

EXHIBIT D — Form of Splitco Charter

EXHIBIT E — Form of Tax Sharing Agreement

 

SCHEDULE 1.1 — Restructuring Plan

 

ii



 

REORGANIZATION AGREEMENT

 

This REORGANIZATION AGREEMENT (together with all Schedules and Exhibits hereto, this “ Agreement ”), dated as of [  ], 2016, is entered into by and between LIBERTY INTERACTIVE CORPORATION , a Delaware corporation (“ LIC ”), and LIBERTY EXPEDIA HOLDINGS, INC ., a Delaware corporation (“ Splitco ”).  Certain capitalized terms used herein have the meanings ascribed thereto in Section 7.1.

 

RECITALS:

 

WHEREAS , Splitco is and prior to the Redemption (as defined below) will be a wholly owned Subsidiary of LIC;

 

WHEREAS , the LIC Board has determined that it is appropriate and in the best interests of LIC and its stockholders to reorganize its assets and liabilities by means of the Split-Off (as defined below) of Splitco, the assets and liabilities of which would consist of LIC’s 15.8% ownership interest and 52.4% voting interest in Expedia, Inc., a Delaware corporation (“ Expedia ”), all of LIC’s rights, benefits and obligations under the Stockholders Agreement and the Governance Agreement (each as defined below), LIC’s wholly owned subsidiary Bodybuilding.com, LLC, as well as anticipated corporate level cash and cash equivalents of $100 million, and $400 million in indebtedness at the Effective Time (as defined below);

 

WHEREAS , LIC and Splitco have heretofore entered into (i) the Transaction Agreement, dated March 24, 2016, as amended (the “ Transaction Agreement ”), among LIC, Splitco, Barry Diller (“ Diller ”), and John Malone (“ Malone ”) and Leslie Malone (“ Leslie Malone ” and together with Malone, the “ Malone Group ”) and (ii) the Reimbursement Agreement, dated as of March 24, 2016 (the “ Reimbursement Agreement ”), among LIC, Splitco and Expedia, in each case as amended to the date hereof;

 

WHEREAS , pursuant to the Transaction Agreement the applicable parties thereto have agreed to enter into certain transactions contemplated by this Agreement, including the Restructuring (as defined below) and the redemption (the “ Redemption ”) of 40% of LIC’s Series A Liberty Ventures common stock, par value $0.01 per share (“ LVNTA ”), and Series B Liberty Ventures common stock, par value $0.01 per share (“ LVNTB ” and together with LVNTA, the “ Liberty Ventures Common Stock ”), for stock of Splitco, a wholly owned subsidiary of LIC immediately prior to the effectiveness of the Redemption, subject to the conditions described herein;

 

WHEREAS, the transactions contemplated by this Agreement, including the Restructuring and the Redemption, have been approved by the LIC Board and, to the extent applicable, the Splitco Board, and are motivated in whole or substantial part by certain substantial corporate business purposes of LIC and Splitco;

 

WHEREAS , the transactions contemplated by this Agreement, including the Contribution and the Redemption (together, the “ Split-Off ”) are intended to qualify under, among other provisions, Sections 355 and 368 of the Internal Revenue Code of 1986, as amended (the “ Code ”), and are expected to accomplish certain corporate business purposes of

 

1



 

LIC and Splitco (which corporate business purposes are substantially unrelated to U.S. federal tax matters);

 

WHEREAS , this Agreement constitutes a “plan of reorganization” within the meaning of Section 368 of the Code and the Treasury Regulations promulgated thereunder; and

 

WHEREAS , the parties wish to set forth in this Agreement the terms on which, and the conditions subject to which, they intend to implement the measures referred to above and elsewhere herein.

 

NOW, THEREFORE , in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, the parties to this Agreement hereby agree as follows:

 

ARTICLE I
REORGANIZATION AND DISTRIBUTION

 

1.1                                Restructuring .

 

(a)                                  The parties have taken or will take, and have caused or will cause their respective Subsidiaries to take, all actions that are necessary or appropriate to implement and accomplish the transactions contemplated by each of the steps set forth in the Restructuring Plan (collectively, the “ Restructuring ”); provided, that all of such steps (other than Step [  ] in the Restructuring Plan) shall be completed by no later than the Effective Time.

 

(b)                                  The Contribution and the Redemption are intended to be part of the same plan of reorganization, even though there may be delays between the completion of certain of the transactions.

 

1.2                                Transfer of Splitco Assets and Splitco Businesses; Assumption of Splitco Liabilities .

 

On the terms and subject to the conditions of this Agreement, and in furtherance of the Restructuring and the Split-Off:

 

(a)                                  LIC, by no later than immediately before the Effective Time, shall cause all of its (or its Subsidiaries’) rights, title and interest in and to all of the Splitco Assets and Splitco Businesses to be contributed, assigned, transferred, conveyed and delivered, directly or indirectly, to Splitco, and Splitco agrees to accept or cause to be accepted all such rights, title and interest in and to all the Splitco Assets and Splitco Businesses.  All Splitco Assets are being transferred on an “as is, where is” basis, without any warranty whatsoever on the part of LIC.

 

(b)                                  LIC, by no later than immediately before the Effective Time, shall cause all of the Splitco Liabilities to be assigned, directly or indirectly, to or to be incurred by, Splitco or its Subsidiaries, and Splitco agrees to accept, assume, perform, discharge and fulfill all of the Splitco Liabilities in accordance with their respective terms.

 

2



 

(c)                                   Upon completion of the transactions contemplated by Sections 1.2(a) and (b) above: (i) Splitco will own, directly or indirectly, the Splitco Businesses and the Splitco Assets and be subject to the Splitco Liabilities; and (ii) LIC will continue to own, directly or indirectly, the LIC Retained Businesses and the LIC Retained Assets and continue to be subject to the LIC Retained Liabilities.

 

(d)                                  In connection with the Split-Off, prior to the Effective Time, the applicable parties will execute and deliver the agreements and instruments specified in the Transaction Agreement with the effect that:

 

(i)                                      LIC’s rights, benefits and obligations under the Shareholders Agreement will be assigned to and assumed by Splitco;

 

(ii)                                   LIC’s rights, benefits and obligations under the Governance Agreement will be assigned to and assumed by Splitco;

 

(iii)                                Diller will assign the proxy granted to him by LIC in the Shareholder Agreement to Splitco, effective immediately following the Effective Time, on the terms provided in the Diller Assignment; and

 

(iv)                               the Malone Group will grant a proxy to Diller to vote their shares of Splitco Common Stock, effective immediately following the Effective Time, subject to the terms and conditions set forth in the Malone Proxy.

 

1.3                                Third Party Consents and Government Approvals .  To the extent that either the Redemption or any step in the Restructuring Plan requires a consent of any third party or a Governmental Authorization, the parties will use commercially reasonable efforts to obtain each such consent and Governmental Authorization at or prior to the time such consent or Governmental Authorization is required in order to lawfully effect the Redemption and each step in the Restructuring Plan.

 

1.4                                Further Actions .  From and after the Redemption Date, upon the reasonable request of a party hereto, each other party hereto will promptly take, or cause its wholly owned Subsidiaries to promptly take and will use reasonable best efforts to cause its non-wholly owned subsidiaries to take, all commercially reasonable actions necessary or appropriate to fully accomplish the Restructuring and the Redemption and to give effect to the transactions provided for in this Agreement, including each step in the Restructuring Plan, in accordance with the purposes hereof.

 

1.5                                Reorganization and Redemption Documents .  All documents and instruments used to effect the Restructuring and the Redemption and otherwise to comply with this Agreement shall be in form satisfactory to LIC, Splitco and any additional signatories thereto, as applicable.

 

1.6                                Qualification as Reorganization .  For U.S. federal income tax purposes, (1) each step of the Restructuring is generally intended to be undertaken in a manner so that no gain or loss is recognized (and no income is taken into account) by LIC, Splitco or their respective

 

3



 

Subsidiaries, and (2) the Contribution and the Redemption are intended to qualify as a tax-free reorganization under Sections 368(a)(1)(D) and 355 of the Code.

 

ARTICLE II
REDEMPTION

 

2.1                                The Redemption .

 

(a)                                  The LIC Board will have the authority (i) to (x) effect the Redemption, subject to the conditions set forth in Section 2.2, or (y) terminate the Redemption at any time prior to the Effective Time, (ii) to establish or change the record date for the meeting of stockholders (the “ Stockholder Meeting ”) at which the holders of record of Liberty Ventures Common Stock will be asked to vote on the Redemption in accordance with Section A.2.(f)(i) of the LIC Charter, (iii) to establish or change the date of the Stockholder Meeting, (iv) to establish or change the date (the “ Redemption Date ”) and time (the “ Effective Time ”) at which the Redemption will be effective, and (v) prior to the Effective Time to establish or change the procedures for effecting the Redemption, subject to, in all cases, any applicable provisions of the DGCL and the LIC Charter;

 

(b)                                  On the Redemption Date, subject to the satisfaction or waiver, as applicable, of the conditions to the Redemption set forth in Section 2.2, LIC will redeem (i) 0.4 of each outstanding share of LVNTA for 0.4 of a share of Splitco’s Series A common stock, par value $0.01 per share (“ Splitco Series A Common Stock ”), with 0.6 of each share of LVNTA remaining outstanding, and (ii) 0.4 of each outstanding share of LVNTB for 0.4 of a share of Splitco’s Series B common stock, par value $0.01 per share (“ Splitco Series B Common Stock ” and together with the Splitco Series A Stock, the “ Splitco Common Stock ”), with 0.6 of each share of LVNTB remaining outstanding.  In connection with the Restructuring, Splitco will issue to LIC the applicable series and number of shares of Splitco Common Stock necessary to effect the Redemption on the Redemption Date;

 

(c)                                   No fractional shares of Liberty Ventures Common Stock will be retained by holders of Liberty Ventures Common Stock and no fractional share of Splitco Common Stock will be distributed, in each case, in connection with the Redemption.  If any record holder of Liberty Ventures Common Stock otherwise would be entitled to retain a fractional share of Liberty Ventures Common Stock or receive a fractional share of Splitco Common Stock in the Redemption, such record holder will instead receive cash in an amount based on the aggregation and sale of all fractional shares by the Redemption Agent at prevailing market prices on behalf of such holders. Any amounts payable in lieu of fractional shares pursuant to this Section 2.1(c) will be payable from the proceeds of the aggregation and sale of fractional shares by the Redemption Agent as soon as practicable after the Split-Off is completed;

 

(d)                                  LIC will provide notice of the Effective Time and Redemption Date to holders of Liberty Ventures Common Stock in accordance with the requirements of Section A.2.(f)(iv) of the LIC Charter;

 

4



 

(e)                                   LIC will take all such action as may be necessary or appropriate under state and foreign securities and “blue sky” laws to permit the Redemption to be effected in compliance, in all material respects, with such laws;

 

(f)                                    Promptly following the Effective Time, LIC will cause the Redemption Agent (i) to exchange the applicable series and number of shares of Liberty Ventures Common Stock held in book-entry form as of the Effective Time for the applicable series and number of shares of Splitco Common Stock, and (ii) to mail to the holders of record of certificated shares of Liberty Ventures Common Stock as of the Redemption Date a letter of transmittal (which will specify that delivery will be effected, and risk of loss and title to the redeemed shares of Liberty Ventures Common Stock will pass, only upon proper delivery of the certificates representing such shares to the Redemption Agent) with instructions for use in effecting the surrender of the redeemed shares of Liberty Ventures Common Stock;

 

(g)                                   Shares of Splitco Common Stock that are exchanged in the Redemption for shares of Liberty Ventures Common Stock will be deemed to have been issued as of the Effective Time; provided , that until the surrender of any certificate representing redeemed shares of Liberty Ventures Common Stock for shares of Splitco Common Stock, Splitco may withhold and accumulate any dividends or distributions which become payable with respect to such shares of Splitco Common Stock pending the surrender of such certificate.

 

2.2                                Conditions to the Redemption .  The obligation of LIC to effect the Redemption is subject to the following conditions:

 

(a)                                  a proposal to approve the Redemption shall have been approved by a majority of the aggregate voting power of the shares of Liberty Ventures Common Stock that are present, in person or by proxy, and entitled to vote at the Stockholder Meeting or any adjournment or postponement thereof, voting together as a single class;

 

(b)                                  LIC shall have received the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, in form and substance reasonably acceptable to LIC, providing to the effect that the Split-Off will qualify as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Code, and that, for U.S. federal income tax purposes, (i) no gain or loss will be recognized by LIC upon the distribution of shares of Splitco Common Stock in the Split-Off, and (ii) no gain or loss will be recognized by, and no amount will be included in the income of, holders of Liberty Ventures Common Stock upon the receipt of shares of Splitco Common Stock in the Split-Off (except with respect to the receipt of cash in lieu of fractional shares);

 

(c)                                   (i) the Registration Statement on Form S-4 (the “ Registration Statement ”) of Splitco relating to the distribution of shares of Splitco Common Stock in the Redemption shall be effective under the Securities Act and (ii) the registration of the Splitco Common Stock under Section 12(b) of the Exchange Act shall be effective;

 

(d)                                  the execution of the Proxy Arrangements in accordance with the Transaction Agreement;

 

(e)                                   the Splitco Common Stock shall have been approved for listing on The NASDAQ Stock Market;

 

5



 

(f)                                    Splitco and one or more of its Subsidiaries shall have entered into the Margin Loan Agreement, secured by certain of the Expedia Securities, in an aggregate principal amount of $400 million; and

 

(g)                                   any other regulatory or contractual approvals that a committee of the Board determines to obtain shall have been so obtained and be in full force and effect.

 

The foregoing conditions are for the sole benefit of LIC and shall not in any way limit LIC’s right to amend, modify or terminate this Agreement in accordance with Section 6.1.  Any of the foregoing conditions set forth in Section (f) and (g) may be waived by the LIC Board and any determination made by the LIC Board prior to the Redemption concerning the satisfaction or waiver of any condition set forth in this Section 2.2 shall be final and conclusive.

 

2.3                                Treatment of Outstanding Equity Awards .

 

(a)                                  Certain current and former employees, non-employee directors and consultants of LIC, the Qualifying Subsidiaries and their respective Subsidiaries have been granted options, restricted stock units and restricted shares in respect of LIC Common Stock pursuant to various stock incentive plans of LIC administered by the LIC Board (collectively, “ Awards ”).  LIC and Splitco shall use commercially reasonable efforts to take all actions necessary or appropriate so that Awards that are outstanding immediately prior to the Effective Time are adjusted as set forth in this Section 2.3.

 

(b)                                  Options .   As of the Effective Time, and as determined by the LIC Board pursuant to its authority granted under the applicable stock incentive plan of LIC, each holder of a Liberty Ventures Option (whether unvested, partially vested or fully vested) (x) who is a member of the LIC Board or an officer of LIC holding the position of Vice President or above (each such Liberty Ventures Option, an “ Outstanding Liberty Ventures Option ”), will receive (i) an option to purchase shares of the corresponding series of Splitco Common Stock (a “ Splitco Option ”) and (ii) an adjustment to the exercise price of and the number of shares subject to the Outstanding Liberty Ventures Option (as so adjusted, an “ Adjusted Liberty Ventures Option ”) such that the pre-Split-Off intrinsic value of the Outstanding Liberty Ventures Option is allocated between the Splitco Option and the Adjusted Liberty Ventures Option, and (y) who is any other Person will receive an adjustment to his or her Liberty Ventures Option only and will not be entitled to receive a Splitco Option.

 

Except as described herein, all other terms of the Splitco Options and the Adjusted Liberty Ventures Options (including the vesting terms thereof) will, in all material respects, be the same as those of the corresponding Outstanding Liberty Ventures Options; provided , that the terms and conditions of exercise of the Splitco Options shall in any event be determined in a manner consistent with Section 409A of the Code.

 

(c)                                   Restricted Stock Awards .  Shares of Liberty Ventures Common Stock that are subject to a restricted stock award granted under a stock incentive plan of LIC (“ Liberty Ventures Restricted Stock Awards ”) will participate in the Redemption in the same manner as other outstanding shares of Liberty Ventures Common Stock.  Except as described herein, shares of Splitco Common Stock received by such holders of Liberty Ventures Restricted Stock Awards

 

6



 

(“ Splitco Restricted Stock Awards ”) will otherwise be subject, in all material respects, to the same terms and conditions (including the vesting terms thereof) as those applicable to such shares of Liberty Ventures Restricted Stock Awards immediately prior to the Effective Time.

 

(d)                                  Restricted Stock Units .  As of the Effective Time, and as determined by the LIC Board pursuant to its authority granted under the applicable stock incentive plan of LIC, each holder of a restricted stock unit with respect to shares of Liberty Ventures Common Stock (an “ Outstanding Liberty Ventures Restricted Stock Unit Award ”) will receive in the Redemption (a) an award of restricted stock units with respect to the corresponding series of Splitco Common Stock (a “ Splitco Restricted Stock Unit ”) and (ii) an adjustment to the number of Outstanding Liberty Ventures Restricted Stock Unit Awards held by such holder (as so adjusted, an “ Adjusted Liberty Ventures Restricted Stock Unit Award ”) such that the pre-Split-Off intrinsic value of the Outstanding Liberty Ventures Restricted Stock Unit Award is allocated between the Splitco Restricted Stock Unit and the Adjusted Liberty Ventures Restricted Stock Unit Award. Except as described herein, Splitco Restricted Stock Units and Adjusted Liberty Ventures Restricted Stock Unit Awards will otherwise be subject, in all material respects, to the same terms and conditions (including the vesting terms thereof) as those applicable to Outstanding Liberty Ventures Restricted Stock Unit Awards immediately prior to the Effective Time.

 

(e)                                   From and after the Effective Time, Splitco Options, Splitco Restricted Stock Awards and Splitco Restricted Stock Units, regardless of by whom held, shall be settled by Splitco pursuant to the terms of the Splitco Transitional Plan.  The obligation to deliver (i) shares of Splitco Common Stock upon the exercise of Splitco Options or (ii) shares of Splitco Common Stock upon vesting of Splitco Restricted Stock Awards or Splitco Restricted Stock Units shall be the sole obligation of Splitco, and LIC shall have no Liability in respect thereof.

 

(f)                                    It is intended that the Splitco Transitional Plan be considered, as to any Splitco Option, Splitco Restricted Stock Award or Splitco Restricted Stock Unit that is issued as part of the adjustment provisions of this Section 2.3, to be a successor plan to the stock incentive plan of LIC pursuant to which the corresponding Liberty Ventures Option, Liberty Ventures Restricted Stock Award or Liberty Ventures Restricted Stock Unit Award was issued, and Splitco shall be deemed to have assumed the obligations under the applicable stock incentive plans of LIC to make the adjustments to the Awards set forth in this Section 2.3.

 

(g)                                   With respect to Awards adjusted and any equity awards issued as a result of such adjustments (collectively, “ Post Split Awards ”), in each case, pursuant to this Section 2.3, service after the Effective Time as an employee or non-employee director of, or consultant to, LIC, Splitco, any Qualifying Subsidiary or any of their respective Subsidiaries shall be treated as service to LIC and Splitco and their respective Subsidiaries for all purposes under such Post Split Awards following the Effective Time.

 

(h)                                  Neither the Effective Time nor any other transaction contemplated by the Restructuring Plan or this Agreement shall be considered a termination of employment for any employee of LIC, Splitco or any of their respective Subsidiaries for purposes of any Post Split Award.

 

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(i)                                      Splitco agrees that, on and after the Effective Date, it shall use its reasonable efforts to cause to be effective under the Securities Act, on a continuous basis, a registration statement on Form S-8 with respect to shares of Splitco Common Stock issuable upon exercise of Splitco Options or settlement of Splitco SARs.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES

 

3.1                                Representations and Warranties of the Parties .  Each party hereto represents and warrants to the other as follows:

 

(a)                                  Organization and Qualification .  Such party is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware, has all requisite corporate power and authority to own, use, lease or operate its properties and assets, and to conduct the business heretofore conducted by it, and is duly qualified to do business and is in good standing in each jurisdiction in which the properties owned, used, leased or operated by it or the nature of the business conducted by it requires such qualification, except in such jurisdictions where the failure to be so qualified and in good standing would not have a material adverse effect on its business, financial condition or results of operations or its ability to perform its obligations under this Agreement.

 

(b)                                  Authorization and Validity of Agreement .  Such party has all requisite power and authority to execute, deliver and perform its obligations under this Agreement, the agreements and instruments to which it is to be a party required to effect the Restructuring (the “ Restructuring Agreements ”) and the agreements to be delivered by it at the Closing pursuant to Section 5.3 (the “ Other Agreements ”; provided , that such term will be deemed not to include the Proxy Arrangements executed or to be executed by such party).  The execution, delivery and performance by such party of this Agreement, the Restructuring Agreements and the Other Agreements and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by the board of directors, managing members or analogous governing body of such party and, to the extent required by law, its stockholders or members, and no other corporate or other action on its part is necessary to authorize the execution and delivery by such party of this Agreement, the Restructuring Agreements and the Other Agreements, the performance by it of its obligations hereunder and thereunder and the consummation by it of the transactions contemplated hereby and thereby. This Agreement has been, and each of the Restructuring Agreements and each of the Other Agreements, when executed and delivered, will be, duly executed and delivered by such party and each is, or will be, a valid and binding obligation of such party, enforceable in accordance with its terms.

 

3.2                                No Approvals or Notices Required; No Conflict with Instruments .  The execution, delivery and performance by such party of this Agreement, the Restructuring Agreements and the Other Agreements, and the consummation of the transactions contemplated hereby and thereby, do not and will not conflict with or result in a breach or violation of any of the terms or provisions of, constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of its assets pursuant to the terms of, the charter or bylaws (or similar formation or governance instruments) of such party, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it or any of its

 

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assets are bound, or any law, rule, regulation, or Order of any court or governmental authority having jurisdiction over it or its properties.

 

3.3                                No Other Reliance .  In determining to enter into this Agreement, the Restructuring Agreements and the Other Agreements, and to consummate the transactions contemplated hereby and thereby, such party has not relied on any representation, warranty, promise or agreement other than those expressly contained herein or therein, and no other representation, warranty, promise or agreement has been made or will be implied.  Except as otherwise expressly set forth herein or in the Restructuring Agreements or the Other Agreements, all Splitco Assets and Splitco Businesses are being transferred on an “as is, where is” basis, at the risk of the transferee, without any warranty whatsoever on the part of the transferor and from and after the Effective Time.

 

ARTICLE IV
COVENANTS

 

4.1                                Cross-Indemnities .

 

(a)                                  Splitco hereby covenants and agrees, on the terms and subject to the limitations set forth in this Article IV, from and after the Closing, to indemnify and hold harmless LIC, its Subsidiaries and their respective current and former directors, officers and employees, and each of the heirs, executors, trustees, administrators, successors and assigns of any of the foregoing (the “ LIC Indemnified Parties ”) from and against any Losses incurred by the LIC Indemnified Parties (in their capacities as such) to the extent arising out of or resulting from any of the following:

 

(i)                                      the conduct of the Splitco Businesses (whether before or after the Closing);

 

(ii)                                   the Splitco Assets, including any Losses arising under or with respect to any of the Proxy Arrangements;

 

(iii)                                the Splitco Liabilities (whether incurred before or after the Closing); or

 

(iv)                               any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of Splitco or any of its Subsidiaries under this Agreement, any Restructuring Agreement or any Other Agreement.

 

(b)                                  LIC hereby covenants and agrees, on the terms and subject to the limitations set forth in this Article IV, from and after the Closing, to indemnify and hold harmless Splitco, its wholly-owned Subsidiaries and their respective current and former directors, officers and employees, and each of the heirs, executors, trustees, administrators, successors and assigns of any of the foregoing (the “ Splitco Indemnified Parties ”) from and against any Losses incurred by the Splitco Indemnified Parties (in their capacities as such) to the extent arising out of or resulting from:

 

(i)                                      the conduct of the LIC Retained Businesses (whether before or after the Closing);

 

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(ii)                                   the LIC Retained Assets;

 

(iii)                                the LIC Retained Liabilities (whether incurred before or after the Closing); or

 

(iv)                               any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of LIC or any of its Subsidiaries (other than the Splitco Entities) under this Agreement, any Restructuring Agreement or any Other Agreement.

 

(c)                                   The indemnification provisions set forth in Sections 4.1(a) and (b) shall not apply to: (i) any Losses incurred by any Splitco Entity pursuant to any contractual obligation (other than this Agreement, the Restructuring Agreements, the Other Agreements, the Transaction Agreement, the Transaction Instruments (as defined in the Transaction Agreement) or the Reimbursement Agreement) existing on or after the Closing Date between (x) LIC or any of its Subsidiaries or Affiliates, on the one hand, and (y) Splitco or any of its Subsidiaries or Affiliates, on the other hand; and (ii) any Losses incurred by any LIC Entity pursuant to any contractual obligation (other than this Agreement, the Restructuring Agreements, the Other Agreements, the Transaction Agreement, the Transaction Instruments or the Reimbursement Agreement) existing on or after the Closing Date between (x) LIC or any of its Subsidiaries or Affiliates, on the one hand, and (y) Splitco or any of its Subsidiaries or Affiliates, on the other hand.

 

(d)                                  (i)                                      In connection with any indemnification provided for in this Section 4.1, the party seeking indemnification (the “ Indemnitee ”) will give the party from which indemnification is sought (the “ Indemnitor ”) prompt notice whenever it comes to the attention of the Indemnitee that the Indemnitee has suffered or incurred, or may suffer or incur, any Losses for which it is entitled to indemnification under this Section 4.1, and, if and when known, the facts constituting the basis for such claim and the projected amount of such Losses (which shall not be conclusive as to the amount of such Losses), in each case in reasonable detail. Without limiting the generality of the foregoing, in the case of any Action commenced by a third party for which indemnification is being sought (a “ Third-Party Claim ”), such notice will be given no later than ten Business Days following receipt by the Indemnitee of written notice of such Third-Party Claim.  Failure by any Indemnitee to so notify the Indemnitor will not affect the rights of such Indemnitee hereunder except to the extent that such failure has a material prejudicial effect on the defenses or other rights available to the Indemnitor with respect to such Third-Party Claim.  The Indemnitee will deliver to the Indemnitor as promptly as practicable, and in any event within five Business Days after Indemnitee’s receipt, copies of all notices, court papers and other documents received by the Indemnitee relating to any Third-Party Claim.

 

(ii)                                   After receipt of a notice pursuant to Section 4.1(d)(i) with respect to any Third-Party Claim, the Indemnitor will be entitled, if it so elects, to take control of the defense and investigation with respect to such Third-Party Claim and to employ and engage attorneys reasonably satisfactory to the Indemnitee to handle and defend such claim, at the Indemnitor’s cost, risk and expense, upon written notice to the Indemnitee of such election, which notice acknowledges the Indemnitor’s obligation to provide indemnification under this Agreement with respect to any Losses arising out of or relating to such Third-Party Claim. The Indemnitor will not settle any Third-Party Claim that is the subject of indemnification without the written consent of the Indemnitee, which consent will not be unreasonably withheld, conditioned or delayed;

 

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provided, however , that, after reasonable notice, the Indemnitor may settle a claim without the Indemnitee’s consent if such settlement (A) makes no admission or acknowledgment of Liability or culpability with respect to the Indemnitee, (B) includes a complete release of the Indemnitee and (C) does not seek any relief against the Indemnitee other than the payment of money damages to be borne by the Indemnitor. The Indemnitee will cooperate in all reasonable respects with the Indemnitor and its attorneys in the investigation, trial and defense of any lawsuit or action with respect to such claim and any appeal arising therefrom (including the filing in the Indemnitee’s name of appropriate cross-claims and counterclaims).  The Indemnitee may, at its own cost, participate in any investigation, trial and defense of any Third-Party Claim controlled by the Indemnitor and any appeal arising therefrom, including participating in the process with respect to the potential settlement or compromise thereof.  If the Indemnitee has been advised by its counsel that there may be one or more legal defenses available to the Indemnitee that conflict with those available to, or that are not available to, the Indemnitor (“ Separate Legal Defenses ”), or that there may be actual or potential differing or conflicting interests between the Indemnitor and the Indemnitee in the conduct of the defense of such Third-Party Claim, the Indemnitee will have the right, at the expense of the Indemnitor, to engage separate counsel reasonably acceptable to the Indemnitor to handle and defend such Third-Party Claim, provided , that, if such Third-Party Claim can be reasonably separated between those portion(s) for which Separate Legal Defenses are available (“ Separable Claims ”) and those for which no Separate Legal Defenses are available, the Indemnitee will instead have the right, at the expense of the Indemnitor, to engage separate counsel reasonably acceptable to the Indemnitor to handle and defend the Separable Claims, and the Indemnitor will not have the right to control the defense or investigation of such Separable Claims (and, in which case, the Indemnitor will have the right to control the defense or investigation of the remaining portion(s) of such Third-Party Claim).

 

(iii)                                If, after receipt of a notice pursuant to Section 4.1(d)(i) with respect to any Third-Party Claim as to which indemnification is available hereunder, the Indemnitor does not undertake to defend the Indemnitee against such Third-Party Claim, whether by not giving the Indemnitee timely notice of its election to so defend or otherwise, the Indemnitee may, but will have no obligation to, assume its own defense, at the expense of the Indemnitor (including attorneys’ fees and costs), it being understood that the Indemnitee’s right to indemnification for such Third-Party Claim shall not be adversely affected by its assuming the defense of such Third-Party Claim.  The Indemnitor will be bound by the result obtained with respect thereto by the Indemnitee; provided , that the Indemnitee may not settle any lawsuit or action with respect to which the Indemnitee is entitled to indemnification hereunder without the consent of the Indemnitor, which consent will not be unreasonably withheld, conditioned or delayed; provided further , that such consent shall not be required if (i) the Indemnitor had the right under this Section 4.1 to undertake control of the defense of such Third-Party Claim and, after notice, failed to do so within thirty days of receipt of such notice (or such lesser period as may be required by court proceedings in the event of a litigated matter), or (ii) (x) the Indemnitor does not have the right to control the defense of the entirety of such Third-Party Claim pursuant to Section 4.1(d)(ii) or (y) the Indemnitor does not have the right to control the defense of any Separable Claim pursuant to Section 4.1(d)(ii) (in which case such settlement may only apply to such Separable Claims), the Indemnitee provides reasonable notice to Indemnitor of the settlement, and such settlement (A) makes no admission or acknowledgment of Liability or culpability with respect to the Indemnitor, (B) does not seek any relief against the Indemnitor and (C) does not

 

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seek any relief against the Indemnitee for which the Indemnitor is responsible other than the payment of money damages.

 

(e)                                   In no event will the Indemnitor be liable to any Indemnitee for any special, consequential, indirect, collateral, incidental or punitive damages, however caused and on any theory of liability arising in any way out of this Agreement, whether or not such Indemnitor was advised of the possibility of any such damages;  provided , that the foregoing limitations shall not limit a party’s indemnification obligations for any Losses incurred by an Indemnitee as a result of the assertion of a Third-Party Claim.

 

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

 

(g)                                   The Indemnitor shall pay all amounts payable pursuant to this Section 4.1 by wire transfer of immediately available funds, promptly following receipt from an Indemnitee of a bill, together with all accompanying reasonably detailed backup documentation, for any Losses that are the subject of indemnification hereunder, unless the Indemnitor in good faith disputes the amount of such Losses or whether such Losses are covered by the Indemnitor’s indemnification obligation in which event the Indemnitor shall promptly so notify the Indemnitee. In any event, the Indemnitor shall pay to the Indemnitee, by wire transfer of immediately available funds, the amount of any Losses for which it is liable hereunder no later than three (3) days following any final determination of the amount of such Losses and the Indemnitor’s liability therefor. A “final determination” shall exist when (a) the parties to the dispute have reached an agreement in writing or (b) a court of competent jurisdiction shall have entered a final and non-appealable order or judgment.

 

(h)                                  If the indemnification provided for in this Section 4.1 shall, for any reason, be unavailable or insufficient to hold harmless an Indemnitee in respect of any Losses for which it is entitled to indemnification hereunder, then the Indemnitor shall contribute to the amount paid or payable by such Indemnitee as a result of such Losses, in such proportion as shall be appropriate to reflect the relative benefits received by and the relative fault of the Indemnitor on the one hand and the Indemnitee on the other hand with respect to the matter giving rise to such Losses.

 

(i)                                      The remedies provided in this Section 4.1 shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against an Indemnitor, subject to Section 4.1(e).

 

(j)                                     The rights and obligations of the LIC Indemnified Parties and the Splitco Indemnified Parties under this Section 4.1 shall survive the Split-Off.

 

(k)                                  For the avoidance of doubt, the provisions of this Section 4.1 are not intended to, and shall not, apply to any Loss, claim or Liability to which the provisions of the Tax Sharing Agreement are applicable.

 

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(l)                                      To the fullest extent permitted by applicable law, the Indemnitor will indemnify the Indemnitee against any and all reasonable fees, costs and expenses (including attorneys’ fees), incurred in connection with the enforcement of his, her or its rights under this Section 4.1.

 

4.2                                Financing .  Prior to the Closing, Splitco and one or more of its Subsidiaries shall enter into a margin loan agreement (the “ Margin Loan Agreement ”) with certain lenders pursuant to which Splitco and one or more of its Subsidiaries will borrow up to an aggregate principal amount of $400 million, secured by certain of the Expedia Securities and guaranteed by Splitco (the “ Margin Loan ”).

 

4.3                                Further Assurances .  At any time before or after the Closing, each party hereto covenants and agrees to make, execute, acknowledge and deliver such instruments, agreements, consents, assurances and other documents, and to take all such other commercially reasonable actions, as any other party may reasonably request and as may reasonably be required in order to carry out the purposes and intent of this Agreement and to implement the terms hereof.

 

4.4                                Specific Performance .  Each party hereby acknowledges that the benefits to the other party of the performance by such party of its obligations under this Agreement are unique and that the other party is willing to enter into this Agreement only in reliance that such party will perform such obligations, and agrees that monetary damages may not afford an adequate remedy for any failure by such party to perform any of such obligations. Accordingly, each party hereby agrees that the other party will have the right to enforce the specific performance of such party’s obligations hereunder and irrevocably waives any requirement for the securing or posting of any bond or other undertaking in connection with the obtaining by the other party of any injunctive or other equitable relief to enforce their rights hereunder.

 

4.5                                Access to Information .

 

(a)                                  Each party will provide to the other party, at any time before or after the Redemption Date, upon written request and promptly after the request therefor (subject in all cases, to any bona fide concerns of attorney-client or work-product privilege that any party may reasonably have and any restrictions contained in any agreements or contracts to which any party or its Subsidiaries is a party (it being understood that each of LIC and Splitco will use its reasonable best efforts to provide any such information in a manner that does not result in a violation of a privilege)), any information in its possession or under its control that the requesting party reasonably needs (i) to comply with reporting, filing or other requirements imposed on the requesting party by a foreign or U.S. federal, state or local judicial, regulatory or administrative authority having jurisdiction over the requesting party, (ii) to enable the requesting party to institute or defend against any action, suit or proceeding in any foreign or U.S. federal, state or local court or (iii) to enable the requesting party to implement the transactions contemplated hereby, including but not limited to performing its obligations under this Agreement, the Restructuring Agreements and the Other Agreements.

 

(b)                                  Any information belonging to a party that is provided to another party pursuant to Section 4.5(a) will remain the property of the providing party.  The parties agree to cooperate in good faith to take all reasonable efforts to maintain any legal privilege that may attach to any information delivered pursuant to this Section 4.5 or which otherwise comes into the receiving

 

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party’s possession and control pursuant to this Agreement.  Nothing contained in this Agreement will be construed as granting or conferring license or other rights in any such information.

 

(c)                                   The party requesting any information under this Section 4.5 will reimburse the providing party for the reasonable out of pocket costs, if any, of creating, gathering and copying such information, to the extent that such costs are incurred for the benefit of the requesting party. No party will have any Liability to any other party if any information exchanged or provided pursuant to this Agreement that is an estimate or forecast, or is based on an estimate or forecast, is found to be inaccurate, absent willful misconduct or fraud by the party providing such information.

 

(d)                                  For the avoidance of doubt, the provisions of this Section 4.5 are not intended to, and shall not, apply to any information relating to matters governed by the Tax Sharing Agreement, which shall be subject to the provisions thereof in lieu of this Section 4.5.

 

4.6                                Confidentiality .  Each party will keep confidential for five years following the Closing Date (or for three years following disclosure to such party, whichever is longer), and will use reasonable efforts to cause its officers, directors, members, employees, controlled Affiliates and agents to keep confidential during such period, all Proprietary Information of the other party, in each case to the extent permitted by applicable law.

 

(a)                                  Proprietary Information ” means any proprietary ideas, plans and information, including information of a technological or business nature, of a party (in this context, the “ Disclosing Party ”) (including all trade secrets, intellectual property, data, summaries, reports or mailing lists, in whatever form or medium whatsoever, including oral communications, and however produced or reproduced), that is marked proprietary or confidential, or that bears a marking of like import, or that the Disclosing Party states is to be considered proprietary or confidential, or that a reasonable and prudent person would consider proprietary or confidential under the circumstances of its disclosure. Without limiting the foregoing, all information of the types referred to in the immediately preceding sentence to the extent used by Splitco or the Splitco Businesses or which constitute Splitco Assets on or prior to the Closing Date will constitute Proprietary Information of Splitco for purposes of this Section 4.6.

 

(b)                                  Anything contained herein to the contrary notwithstanding, information of a Disclosing Party will not constitute Proprietary Information (and the other party (in this context, the “ Receiving Party ”) will have no obligation of confidentiality with respect thereto), to the extent such information: (i) is in the public domain other than as a result of disclosure made in breach of this Agreement or breach of any other agreement relating to confidentiality between the Disclosing Party and the Receiving Party; (ii) was lawfully acquired by the Disclosing Party from a third party not bound by a confidentiality obligation; (iii) is approved for release by prior written authorization of the Disclosing Party, or (iv) is disclosed in order to comply with a judicial order issued by a court of competent jurisdiction, or to comply with the laws or regulations of any governmental authority having jurisdiction over the Receiving Party, in which event the Receiving Party will give prior written notice to the Disclosing Party of such disclosure as soon as or to the extent practicable and will cooperate with the Disclosing Party in using reasonable efforts to disclose the least amount of such information required and to obtain an

 

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appropriate protective order or equivalent, and provided that the information will continue to be Proprietary Information to the extent it is covered by a protective order or equivalent or is not so disclosed.

 

4.7                                Notices Regarding Transferred Assets .  Any transferor of an Asset or Liability in the Restructuring that receives a notice or other communication from any third party, or that otherwise becomes aware of any fact or circumstance, after the Restructuring, relating to such Asset or Liability, will use commercially reasonable efforts to promptly forward the notice or other communication to the transferee thereof or give notice to such transferee of such fact or circumstance of which it has become aware. The parties will cause their respective Subsidiaries to comply with this Section 4.7.

 

4.8                                Treatment Of Payments .  The parties agree to treat all payments made pursuant to this Agreement in accordance with Section 4.4 of the Tax Sharing Agreement and to increase or reduce any amount paid hereunder if such payment would have been required to be increased or reduced under such section if it were a payment made pursuant to the Tax Sharing Agreement.

 

ARTICLE V
CLOSING

 

5.1                                Closing .  Unless this Agreement is terminated and the transactions contemplated by this Agreement abandoned pursuant to the provisions of Article VI, and subject to the satisfaction or waiver of all conditions set forth in each of Sections 2.2 and 5.2, the closing of the Redemption (the “ Closing ”) will take place at the offices of LIC, at 12300 Liberty Boulevard, Englewood, Colorado, at a mutually acceptable time and date to be determined by LIC (the “ Closing Date ”).

 

5.2                                Conditions to Closing .

 

(a)                                  The obligations of the parties to complete the transactions provided for herein are conditioned upon the satisfaction or, if applicable, waiver of the conditions set forth in Section 2.2.

 

(b)                                  The performance by each party of its obligations hereunder is further conditioned upon:

 

(i)                                      the performance in all material respects by the other party of its covenants and agreements contained herein to the extent such are required to be performed at or prior to the Closing;

 

(ii)                                   the representations and warranties of the other party being true and complete in all material respects as of the Closing Date with the same force and effect as if made at and as of the Closing Date; and

 

(iii)                                the Transaction Agreement remaining in full force and effect.

 

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5.3                                Deliveries at Closing .

 

(a)                                  LIC .  At the Closing, LIC will deliver or cause to be delivered to Splitco:

 

(i)                                      the Tax Sharing Agreement duly executed by an authorized officer of LIC;

 

(ii)                                   the Services Agreement duly executed by an authorized officer of LMC;

 

(iii)                                the Facilities Sharing Agreement duly executed by an authorized officer of Liberty Property Holdings, Inc. and an authorized officer of LMC;

 

(iv)                               each Aircraft Time Sharing Agreement duly executed by an officer of LMC or one or more of its Subsidiaries, as applicable;

 

(v)                                  the Governance Agreement Assignment, substantially in the form of Exhibit E to the Transaction Agreement, duly executed by an authorized officer of LIC;

 

(vi)                               the Stockholders Agreement Assignment, substantially in the form of Exhibit F to the Transaction Agreement, duly executed by an authorized officer of LIC;

 

(vii)                            a secretary’s certificate certifying that the LIC Board has authorized the execution, delivery and performance by LIC of this Agreement, the Restructuring Agreements and the Other Agreements, which authorization will be in full force and effect at and as of the Closing; and

 

(viii)                         such other documents and instruments as Splitco may reasonably request.

 

(b)                                  Splitco .  At the Closing, Splitco will deliver or cause to be delivered to LIC:

 

(i)                                      the Tax Sharing Agreement duly executed by an authorized officer of Splitco;

 

(ii)                                   the Services Agreement duly executed by an authorized officer of Splitco;

 

(iii)                                the Facilities Sharing Agreement duly executed by an authorized officer of Splitco;

 

(iv)                               each Aircraft Time Sharing Agreement duly executed by an authorized officer of Splitco;

 

(v)                                  the Margin Loan Agreement duly executed by Splitco, a newly-formed, wholly-owned special purpose subsidiary of Splitco and the financial counterparties thereto;

 

(vi)                               the amended and restated certificate of incorporation of Splitco, substantially in the form attached as Exhibit A to the Transaction Agreement, duly executed by an authorized officer of Splitco;

 

(vii)                            the amended and restated bylaws of Splitco, substantially in the form attached as Exhibit B to the Transaction Agreement, duly adopted by Splitco;

 

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(viii)                         the Diller Assignment, substantially in the form of Exhibit C to the Transaction Agreement, duly executed by an authorized officer of Splitco;

 

(ix)                               the Governance Agreement Assignment, substantially in the form of Exhibit E to the Transaction Agreement, duly executed by an authorized officer of Splitco;

 

(x)                                  the Stockholders Agreement Assignment, substantially in the form of Exhibit F to the Transaction Agreement, duly executed by an authorized officer of Splitco;

 

(xi)                               the Stockholders Agreement Amendment, substantially in the form of Exhibit G to the Transaction Agreement, duly executed by an authorized officer of Splitco;

 

(xii)                            a secretary’s certificate certifying that the Splitco Board has authorized the execution, delivery and performance by Splitco of this Agreement, the Restructuring Agreements and the Other Agreements, which authorizations will be in full force and effect at and as of the Closing; and

 

(xiii)                         such other documents and instruments as LIC may reasonably request.

 

ARTICLE VI
TERMINATION

 

6.1                                Termination .  This Agreement may be terminated and the transactions contemplated hereby may be amended, modified, supplemented or abandoned at any time prior to the Effective Time by and in the sole and absolute discretion of LIC without the approval of Splitco. For the avoidance of doubt, from and after the Effective Time, this Agreement may not be terminated (or any provision hereof modified, amended or waived) without the written agreement of all the parties.

 

6.2                                Effect of Termination .  In the event of any termination of this Agreement in accordance with Section 6.1, this Agreement will immediately become void and the parties will have no Liability whatsoever to each other with respect to the transactions contemplated hereby.

 

ARTICLE VII
MISCELLANEOUS

 

7.1                                Definitions .

 

(a)                                  For purposes of this Agreement, the following terms have the corresponding meanings:

 

Action ” means any demand, action, claim, suit, countersuit, litigation, arbitration, prosecution, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation whether or not commenced, brought, conducted or heard by or before, or

 

17


 

otherwise involving, any court, grand jury or other governmental authority or any arbitrator or arbitration panel.

 

Affiliates ” 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 first Person; provided , that, for any purpose hereunder, in each case both before and after the Effective Time, none of the Persons listed in clauses (i)–(ix) shall be deemed to be Affiliates of any Person listed in any other such clause: (i) LIC taken together with its Subsidiaries and any of their respective Investees, (ii) Splitco taken together with its Subsidiaries and any of their respective Investees, (iii) LMC taken together with its Subsidiaries and any of their respective Investees, (iv) TripCo taken together with its Subsidiaries and any of their respective Investees, (v) Starz taken together with its Subsidiaries and any of their respective Investees, (vi) Broadband taken together with its Subsidiaries and any of their respective Investees, (vii) Discovery Communications Inc. taken together with its Subsidiaries and any of their respective Investees, (viii) CommerceHub, Inc. taken together with its Subsidiaries and any of their respective Investees and (ix) Liberty Global plc taken together with its Subsidiaries and any of their respective Investees.

 

Aircraft Time Sharing Agreement ” means the Aircraft Time Sharing Agreements to be entered into between LMC and Splitco, one for each of the two aircraft owned by LMC, substantially in the form attached hereto as Exhibit A-1 and the Aircraft Time Sharing Agreement to be entered into among Subsidiaries of LMC and Splitco for the NetJets aircraft in which such Subsidiaries of LMC have ownership or management rights, as applicable, substantially in the form attached hereto as Exhibit A-2 .

 

Assets ” means assets, properties, interests and rights (including goodwill), wherever located, whether real, personal or mixed, tangible or intangible, movable or immovable, in each case whether or not required by GAAP to be reflected in financial statements or disclosed in the notes thereto.

 

Broadband ” means Liberty Broadband Corporation.

 

Business Day ” means 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.

 

Contribution ” has the meaning given to such term in the Restructuring Plan.

 

Control ” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of securities or partnership, membership, limited liability company, or other ownership interests, by contract or otherwise. The terms “ Controlling ” and “ Controlled ” have meanings correlative to the foregoing.

 

DGCL ” means the Delaware General Corporation Law.

 

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Diller Assignment ” means the Assignment Agreement, substantially in the form of Exhibit C to the Transaction Agreement, dated as of [  ], 2016, between Diller and Splitco.

 

Expedia Securities ” means all of the shares of common stock, par value $0.0001 per share, and Class B common stock, par value $0.0001 per share, in each case, of Expedia, owned by LIC immediately prior to the Effective Time of the Split-Off.

 

Facilities Sharing Agreement ” means the Facilities Sharing Agreement to be entered into between Liberty Property Holdings, Inc., LMC and Splitco, substantially in the form attached hereto as Exhibit B.

 

GAAP ” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

 

Governance Agreement ” means the Amended and Restated Governance Agreement, dated as of December 20, 2011, among Expedia, LIC and Barry Diller, as amended.

 

Governmental Authorization ” means any authorization, approval, consent, license, certificate or permit issued, granted, or otherwise made available under the authority of any court, governmental or regulatory authority, agency, stock exchange, commission or body.

 

Investee ” of any Person means any Person in which such first Person owns or controls an equity or voting interest.

 

Liabilities ” means any and all debts, liabilities, commitments and obligations, whether or not fixed, contingent or absolute, matured or unmatured, direct or indirect, liquidated or unliquidated, accrued or unaccrued, known or unknown, and whether or not required by GAAP to be reflected in financial statements or disclosed in the notes thereto (other than taxes).

 

LIC Board ” means the Board of Directors of LIC or a duly authorized committee thereof.

 

LIC Charter ” means the Restated Certificate of Incorporation of LIC, as in effect immediately prior to the Redemption Date.

 

LIC Common Stock ” means QVCA, QVCB, LVNTA and LVNTB.

 

LIC Entity ” or “ LIC Entities ” means and includes each of LIC and its Subsidiaries (other than the Splitco Entities), after giving effect to the Restructuring.

 

LIC Retained Assets ” means all Assets which are held at the Effective Time by LIC and its Subsidiaries.

 

19



 

LIC Retained Businesses ” means all businesses which are held at the Effective Time by LIC and its Subsidiaries.

 

LIC Retained Liabilities ” means all Liabilities of LIC and its Subsidiaries at the Effective Time.

 

Liberty Ventures Option ” means an option to purchase shares of Liberty Ventures Common Stock pursuant to a stock incentive plan of LIC.

 

LMC ” means Liberty Media Corporation.

 

Losses ” means any and all damages, losses, deficiencies, Liabilities, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including the fees and expenses of any and all actions and demands, assessments, judgments, settlements and compromises relating thereto and the costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or in asserting, preserving or enforcing an Indemnitee’s rights hereunder), whether in connection with a Third-Party Claim or otherwise.

 

Malone Proxy ” means the irrevocable proxy, substantially in the form of Exhibit D to the Transaction Agreement, dated as of [  ], 2016, among Diller and the Malone Group.

 

Order ” means any order, injunction, judgment, decree or ruling of any court, governmental or regulatory authority, agency, commission or body.

 

Person ” means any individual, corporation, company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.

 

Proxy Arrangements ” means the Transaction Agreement and the agreements and arrangements contemplated thereby, including the Reimbursement Agreement.

 

Qualifying Subsidiary ” means a former direct or indirect Subsidiary of LIC, any successor of any such former Subsidiary, and the parent company (directly or indirectly) of any such former Subsidiary or successor, including Splitco, LMC, TripCo, Broadband, Ascent Capital Group, Inc., Discovery Communications, Inc., Liberty Global, Inc., CommerceHub, Inc. and Starz.

 

QVCA ” means LIC’s Series A QVC Group common stock, par value $0.01 per share.

 

QVCB ” means LIC’s Series B QVC Group common stock, par value $0.01 per share.

 

Redemption Agent ” means Computershare Trust Company, N.A., 250 Royall Street, Canton, MA 02121.

 

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Restructuring Plan ” means the Restructuring Plan attached hereto as Schedule 1.1.

 

Securities Act ” means the Securities Act of 1933, as amended, together with all rules and regulations promulgated thereunder.

 

Services Agreement ” means the Services Agreement to be entered into between LMC and Splitco, substantially in the form attached hereto as Exhibit C .

 

Stockholders Agreement ” means the Amended and Restated Stockholders Agreement, dated as of December 20, 2011, by and between LIC and Barry Diller, as amended.

 

Splitco Assets ” means Bodybuilding.com, LLC and the Expedia Securities and all Assets related thereto.

 

Splitco Board ” means the Board of Directors of Splitco or a duly authorized committee thereof.

 

Splitco Businesses ” means Splitco’s wholly owned Subsidiary Bodybuilding.com, LLC.

 

Splitco Charter ” means the Restated Certificate of Incorporation of Splitco to be filed with the Delaware Secretary of State immediately prior to the Effective Time, substantially in the form attached hereto as Exhibit D.

 

Splitco Entity ” or “ Splitco Entities ” means and includes each of Splitco and its Subsidiaries, after giving effect to the Restructuring.

 

Splitco Liabilities ” means all Liabilities of LIC and its Subsidiaries relating to Bodybuilding.com, LLC and to the Expedia Securities.

 

Splitco Transitional Plan ” means the Liberty Expedia Holdings, Inc. Transitional Stock Adjustment Plan.

 

Subsidiary ” when used with respect to any Person, means (i)(A) a corporation a majority in voting power of whose share capital or capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, (B) a partnership or limited liability company in which such Person or a Subsidiary of such Person is, at the date of determination, (1) in the case of a partnership, a general partner of such partnership with the power affirmatively to direct the policies and management of such partnership or (2) in the case of a limited liability company, the managing member or, in the absence of a managing member, a member with the power affirmatively to direct the policies and management of such limited liability company, or (C) any other Person (other than a corporation) in which such Person, one or more Subsidiaries of such Person or such Person and one or

 

21



 

more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has or have (1) the power to elect or direct the election of a majority of the members of the governing body of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, or (2) in the absence of such a governing body, at least a majority ownership interest or (ii) any other Person of which an aggregate of 50% or more of the equity interests are, at the time, directly or indirectly, owned by such Person and/or one or more Subsidiaries of such Person.  For purposes of this Agreement, both prior to and after the Effective Time, none of Splitco and its Subsidiaries shall be deemed to be Subsidiaries of LIC or any of its Subsidiaries.

 

Tax Sharing Agreement ” means the Tax Sharing Agreement to be entered into between LIC and Splitco, substantially in the form attached hereto as Exhibit E .

 

Treasury Regulations ” means the Treasury regulations promulgated under the Code.

 

TripCo ” means Liberty TripAdvisor Holdings, Inc.

 

(b)                                  As used herein, the following terms will have the meanings set forth in the applicable section of this Agreement set forth below:

 

Adjusted Liberty Ventures Option

 

Section 2.3(b)

Adjusted Liberty Ventures Restricted Stock Unit Award

 

Section 2.3(d)

Agreement

 

Preamble

Awards

 

Section 2.3(a)

Closing

 

Section 5.1

Closing Date

 

Section 5.1

Code

 

Recitals

Diller

 

Recitals

Disclosing Party

 

Section 4.6(a)

Effective Time

 

Section 2.1(a)

Expedia

 

Recitals

Indemnitee

 

Section 4.1(d)(i)

Indemnitor

 

Section 4.1(d)(i)

Leslie Malone

 

Recitals

Liberty Ventures Common Stock

 

Recitals

Liberty Ventures Restricted Stock Awards

 

Section 2.3(c)

LIC

 

Preamble

LIC Indemnified Parties

 

Section 4.1(a)

LVNTA

 

Recitals

LVNTB

 

Recitals

Malone

 

Recitals

Malone Group

 

Recitals

Margin Loan Agreement

 

Section 4.2

Margin Loan

 

Section 4.2

Other Agreements

 

Section 3.1(b)

 

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Outstanding Liberty Ventures Option

 

Section 2.3(b)

Outstanding Liberty Ventures Restricted Stock Unit Award

 

Section 2.3(d)

Post Split Awards

 

Section 2.3(g)

Proprietary Information

 

Section 4.6(a)

Receiving Party

 

Section 4.6(b)

Redemption

 

Recitals

Redemption Date

 

Section 2.1(a)

Registration Statement

 

Section 2.2(c)

Reimbursement Agreement

 

Recitals

Restructuring

 

Section 1.1(a)

Restructuring Agreements

 

Section 3.1(b)

Separable Claims

 

Section 4.1(d)(ii)

Separate Legal Defenses

 

Section 4.1(d)(ii)

Split-Off

 

Recitals

Splitco

 

Preamble

Splitco Option

 

Section 2.3(b)

Splitco Common Stock

 

Section 2.1(b)

Splitco Indemnified Parties

 

Section 4.1(b)

Splitco Restricted Stock Awards

 

Section 2.3(c)

Splitco Restricted Stock Unit

 

Section 2.3(d)

Splitco Series A Common Stock

 

Section 2.1(b)

Splitco Series B Common Stock

 

Section 2.1(b)

Stockholder Meeting

 

Section 2.1(a)

Third-Party Claim

 

Section 4.1(d)(i)

Transaction Agreement

 

Recitals

 

7.2                                No Third-Party Rights .  Except for the indemnification rights of the LIC Indemnified Parties and the Splitco Indemnified Parties pursuant to Section 4.1, nothing expressed or referred to in this Agreement is intended or will be construed to give any Person other than the parties hereto and their respective successors and assigns any legal or equitable right, remedy or claim under or with respect to this Agreement, or any provision hereof, it being the intention of the parties hereto that this Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their respective successors and assigns.

 

7.3                                Notices .  All notices and other communications hereunder shall be in writing and shall be delivered in person, by facsimile (with confirming copy sent by one of the other delivery methods specified herein), by overnight courier or sent by certified, registered or express air mail, postage prepaid, and shall be deemed given when so delivered in person, or when so received by facsimile or courier, or, if mailed, three (3) calendar days after the date of mailing, as follows:

 

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if to any LIC Entity :

Liberty Interactive Corporation

 

12300 Liberty Boulevard

 

Englewood, Colorado 80112

 

Facsimile (720) 875-5401

 

Attention: General Counsel

 

 

if to any Splitco Entity :

Liberty Expedia Holdings, Inc.
12300 Liberty Boulevard

 

Englewood, Colorado 80112

 

Facsimile (720) 875-5401

 

Attention: General Counsel

 

or to such other address as the party to whom notice is given may have previously furnished to the other party in writing in the manner set forth above.

 

7.4                                Entire Agreement .  This Agreement (including the Exhibits and Schedules attached hereto) together with the Restructuring Agreements and the Other Agreements (including the Tax Sharing Agreement) embodies the entire understanding among the parties relating to the subject matter hereof and thereof and supersedes and terminates any prior agreements and understandings among the parties with respect to such subject matter, and no party to this Agreement shall have any right, responsibility or Liability under any such prior agreement or understanding.  Any and all prior correspondence, conversations and memoranda are merged herein and shall be without effect hereon.  No promises, covenants or representations of any kind, other than those expressly stated herein, have been made to induce either party to enter into this Agreement.

 

7.5                                Binding Effect; Assignment .  This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except with respect to a merger of a party, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other parties; provided , however , that LIC and Splitco may assign their respective rights, interests, duties, liabilities and obligations under this Agreement to any of their respective wholly-owned Subsidiaries, but such assignment shall not relieve LIC or Splitco, as the assignor, of its obligations hereunder.

 

7.6                                Governing Law; Jurisdiction .  This Agreement and the legal relations among the parties hereto will be governed in all respects, including validity, interpretation and effect, by the laws of the State of Delaware applicable to contracts made and performed wholly therein, without giving effect to any choice or conflict of laws provisions or rules that would cause the application of the laws of any other jurisdiction. Each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement, and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement, and the rights and obligations arising hereunder brought by the other party hereto or its successors or assigns, shall be brought and determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware).  Each of the parties hereto hereby irrevocably

 

24



 

submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or the transactions contemplated hereby in any court other than the aforesaid courts.  Each of the parties hereto hereby irrevocably waives, and agrees not to assert as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement (a) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to serve in accordance with Section 7.3 and this Section 7.6, (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by applicable law, any claim that (i) the suit, action or proceeding in such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement or the subject matter hereof may not be enforced in or by such courts.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 7.3 shall be deemed effective service of process on such party.

 

7.7                                Waiver of Jury Trial .  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH ACTION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.7.

 

7.8                                Severability .  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  Upon a determination that any provision of this Agreement is prohibited or unenforceable in any jurisdiction, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the provisions contemplated hereby are consummated as originally contemplated to the fullest extent possible.

 

7.9                                Amendments; Waivers .  Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an

 

25



 

amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  Except as otherwise provided herein, the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by applicable law.  Any consent provided under this Agreement must be in writing, signed by the party against whom enforcement of such consent is sought.

 

7.10                         No Strict Construction; Interpretation .

 

(a)                                  LIC and Splitco each acknowledge that this Agreement has been prepared jointly by the parties hereto and shall not be strictly construed against any party hereto.

 

(b)                                  When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes 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.”  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.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term.  Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein.  References to a Person are also to its permitted successors and assigns and references to a party means a party to this Agreement.

 

7.11                         Conflicts with Tax Sharing Agreement .  In the event of a conflict between this Agreement and the Tax Sharing Agreement, the provisions of the Tax Sharing Agreement shall prevail.

 

7.12                         Counterparts .  This Agreement may be executed in two or more identical counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same agreement. The Agreement may be delivered by facsimile transmission of a signed copy thereof.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

 

LIBERTY INTERACTIVE CORPORATION

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

[SIGNATURE PAGE TO REORGANIZATION AGREEMENT]

 



 

List of Omitted Exhibits and Schedules

 

The following exhibits and schedules to the Reorganization Agreement, dated as of [  ], 2016, by and between Liberty Interactive Corporation and Liberty Expedia Holdings, Inc. have not been provided herein:

 

Exhibit A-1 — Form of Aircraft Time Sharing Agreement (LMC Owned Aircraft) (See Exhibit 10.9 to Amendment No. 4 to Form S-1 on Form S-4 filed herewith)

 

Exhibit A-2 — Form of Aircraft Time Sharing Agreement (NetJets Aircraft) (See Exhibit 10.9 to Amendment No. 4 to Form S-1 on Form S-4 filed herewith)

 

Exhibit B — Form of Facilities Sharing Agreement (See Exhibit 10.5 to Amendment No. 4 to Form S-1 on Form S-4 filed herewith)

 

Exhibit C — Form of Services Agreement (See Exhibit 10.4 to Amendment No. 4 to Form S-1 on Form S-4 filed herewith)

 

Exhibit D — Form of Splitco Charter (See Exhibit 3.1 to Amendment No. 4 to Form S-1 on Form S-4 filed herewith)

 

Exhibit E — Form of Tax Sharing Agreement (See Exhibit 10.3 to Amendment No. 4 to Form S-1 on Form S-4 filed herewith)

 

Schedule 1.1 — Restructuring Plan

 

The undersigned registrant hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.

 




Exhibit 3.1

 

AGREED FORM

 

FORM OF RESTATED CERTIFICATE OF INCORPORATION

 

OF

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

LIBERTY EXPEDIA HOLDINGS, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

 

(1)                                  The name of the Corporation is Liberty Expedia Holdings, Inc.  The original Certificate of Incorporation of the Corporation was filed on March 15, 2016.

 

(2)                                  This Restated Certificate of Incorporation restates and amends the Certificate of Incorporation of the Corporation.

 

(3)                                  This Restated Certificate of Incorporation has been duly adopted in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware.

 

(4)                                  This Restated Certificate of Incorporation will become effective on [ · ] at [ · ] p.m. Eastern Time.

 

(5)                                  Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, the text of the Certificate of Incorporation is hereby amended and restated to read in its entirety as follows:

 

ARTICLE I

 

NAME

 

The name of the corporation is Liberty Expedia Holdings, Inc. (the “ Corporation ”).

 

ARTICLE II

 

REGISTERED OFFICE

 

The address of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle, 19808.  The name of its registered agent at such address is the Corporation Service Company.

 

ARTICLE III

 

PURPOSE

 

The purpose of the Corporation is to engage in any lawful act or activity for which

 



 

corporations may be organized under the General Corporation Law of the State of Delaware (as the same may be amended from time to time, the “ DGCL ”).

 

ARTICLE IV

 

AUTHORIZED STOCK

 

The total number of shares of capital stock which the Corporation will have authority to issue is three hundred seventy six million (376,000,000) shares, of which:

 

(1)                                  three hundred twenty six million (326,000,000) shares will be of a class designated as Common Stock, par value $0.01 per share (“ Common Stock ”), and such class will be divided into series as follows:

 

a.               one hundred sixty million (160,000,000) shares of Common Stock will be of a series designated as “Series A Common Stock” (the “ Series A Common Stock ”);

 

b.               six million (6,000,000) shares of Common Stock will be of a series designated as “Series B Common Stock” (the “ Series B Common Stock ”);

 

c.                one hundred sixty million (160,000,000) shares of Common Stock will be of a series designated as “Series C Common Stock” (the “ Series C Common Stock ”); and

 

(2)                                  fifty million (50,000,000) shares will be of a class designated as Preferred Stock, par value $0.01 per share (“ Preferred Stock ”), which are undesignated as to series and are issuable in accordance with the provisions of Article IV, Section C hereof and the DGCL.

 

Upon this Restated Certificate of Incorporation (as it may from time to time hereafter be amended or restated, this “ Restated Certificate ”) becoming effective pursuant to the DGCL (the “ Effective Time ”), the shares of Common Stock, par value $0.01 per share, issued and outstanding immediately prior to the Effective Time shall automatically be reclassified as (i) X (as defined below) number of shares of the Series A Common Stock, par value $0.01 per share, (ii) Y (as defined below) number of shares of the Series B Common Stock, par value $0.01 per share, and (iii) Z (as defined below) number of shares of the Series C Common Stock, par value $0.01 per share, in each case, without any action by the holder thereof.  As used in this paragraph, “X” means the product, rounded down to the nearest whole share, of (i) the number of outstanding shares of Liberty Interactive Corporation’s Series A Liberty Ventures Common Stock, par value $0.01 per share, and (ii) 0.4, “Y” means the product, rounded down to the nearest whole share, of (i) the number of outstanding shares of Liberty Interactive Corporation’s Series B Liberty Ventures Common Stock, par value $0.01 per share, and (ii) 0.4, and “Z” means the product, rounded down to the nearest whole share, of (i) the number of outstanding shares of Liberty Interactive Corporation’s Series C Liberty Ventures Common Stock, par value $0.01 per share, and (ii) 0.4, in each case, as of 5:00 p.m., New York City time, on [•].

 

The description of the Common Stock and the Preferred Stock, and the powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations

 

2



 

or restrictions thereof, or the method of fixing and establishing the same, are as hereinafter set forth in this Article IV.

 

SECTION A

 

CERTAIN DEFINITIONS AND INTERPRETATIONS

 

Unless the context otherwise requires, the terms defined below will have, for all purposes of this Restated Certificate, the meanings herein specified:

 

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 Person.

 

Board of Directors ” or “ Board ” means the Board of Directors of the Corporation and, unless the context indicates otherwise, also means, to the extent permitted by law, any committee thereof authorized, with respect to any particular matter, to exercise the power of the Board of Directors of the Corporation with respect to such matter.  The term “entire Board” means the total number of directors that the Corporation would have if there were no vacancies.

 

Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by agreement, or otherwise. The terms “Controls”, “Controlled” and “Controlling” will have corresponding meanings.

 

Convertible Securities ” means (x) any securities of the Corporation (other than any series of Common Stock) that are directly or indirectly convertible into or exchangeable for, or that evidence the right to purchase, directly or indirectly, securities of the Corporation or any other Person, whether upon conversion, exercise, exchange, pursuant to anti-dilution provisions of such securities or otherwise, and (y) any securities of any other Person that are directly or indirectly convertible into or exchangeable for, or that evidence the right to purchase, directly or indirectly, securities of such Person or any other Person (including the Corporation), whether upon conversion, exercise, exchange, pursuant to anti-dilution provisions of such securities or otherwise.

 

Diller Assignment ” means that certain Assignment Agreement, dated as of [ · ], between Barry Diller and the Corporation, as such agreement may be amended from time to time.

 

Expedia ” means Expedia, Inc., a Delaware corporation, or any successor to all or substantially all of the assets of Expedia, whether by operation of law or otherwise.

 

Governance Agreement ” means that certain Amended and Restated Governance Agreement, dated as of December 20, 2011, among Expedia, Liberty Interactive Corporation and Barry Diller, as assigned to the Corporation pursuant to the Assignment and Assumption of Governance Agreement, dated as of [ · ], as such agreement may be further amended.

 

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Person ” means a natural person, corporation, limited liability company, partnership, joint venture, trust, unincorporated association or other legal entity.

 

Series A Convertible Securities means Convertible Securities convertible into or exercisable or exchangeable for Series A Common Stock.

 

Series B Convertible Securities means Convertible Securities convertible into or exercisable or exchangeable for Series B Common Stock.

 

Series C Convertible Securities means Convertible Securities convertible into or exercisable or exchangeable for Series C Common Stock.

 

Stockholders Agreement ” means that certain Amended and Restated Stockholders Agreement, dated as of December 20, 2011, between Liberty Interactive Corporation and Barry Diller, as assigned to the Corporation pursuant to the Assignment and Assumption of Stockholders Agreement, dated as of [ · ], and as amended pursuant to Amendment No. 1 to Stockholders Agreement, dated as of [ · ], as such agreement may be further amended.

 

Subsidiary ” when used with respect to any Person, means any other Person (1) of which (x) in the case of a corporation, at least (A) 50% of the equity or (B) 50% of the voting interests are owned or Controlled, directly or indirectly, by such first Person, by any one or more of its Subsidiaries, or by such first Person and one or more of its Subsidiaries or (y) in the case of any Person other than a corporation, such first Person, one or more of its Subsidiaries, or such first Person and one or more of its Subsidiaries (A) owns at least 50% of the equity interests thereof or (B) has the power to elect or direct the election of at least 50% of the members of the governing body thereof or otherwise has Control over such organization or entity; or (2) that is required to be consolidated with such first Person for financial reporting purposes under U.S. Generally Accepted Accounting Principles, as in effect from to time.

 

Transaction Agreement ” means that certain Amended and Restated Transaction Agreement, dated as of September 22, 2016, by and among Liberty Interactive Corporation, the Corporation, Barry Diller, John C. Malone and Leslie Malone, as such agreement may be amended, restated or amended and restated from time to time in accordance with the terms thereof.

 

Underlying Securities ” means, with respect to any class or series of Convertible Securities, the class or series of securities into which such class or series of Convertible Securities are directly or indirectly convertible, or for which such Convertible Securities are directly or indirectly exchangeable, or that such Convertible Securities evidence the right to purchase or otherwise receive, directly or indirectly.

 

Voting Securities ” means the Series A Common Stock, the Series B Common Stock and any series of Preferred Stock which by the terms of its Preferred Stock Designation is designated as a Voting Security; provided, that, each such series of Preferred Stock will be entitled to vote together with the other Voting Securities only as and to the extent expressly provided for in the applicable Preferred Stock Designation.

 

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SECTION B

 

SERIES A COMMON STOCK, SERIES B COMMON STOCK AND
SERIES C COMMON STOCK

 

Each share of Series A Common Stock, each share of Series B Common Stock and each share of Series C Common Stock will, except as otherwise provided in this Restated Certificate, be identical in all respects and will have equal rights, powers and privileges.

 

1.                                       Voting Rights .  Holders of Series A Common Stock will be entitled to one (1) vote for each share of such stock held of record, and holders of Series B Common Stock will be entitled to ten (10) votes for each share of such stock held of record, in each case on all matters on which they are entitled to vote, that are submitted to a vote of stockholders of the Corporation (regardless of whether such holders are voting together with the holders of all Voting Securities, or as a separate class with the holders of one or more series of Common Stock or Preferred Stock, or as a separate series of Common Stock or Preferred Stock, or otherwise); provided , however , that notwithstanding the foregoing, with respect to any vote of stockholders with respect to the election or removal of Common Stock Directors (as defined below) occurring prior to the Series B Director Termination Time (as defined below), holders of Series A Common Stock will be entitled to one (1) vote for each share of such stock held of record, and holders of Series B Common Stock will be entitled to two (2) votes for each share of such stock held of record, with the holders of Series A Common Stock and Series B Common Stock voting together as a separate class.  Holders of Series C Common Stock will not be entitled to any voting powers, except as (and then only to the extent) otherwise required by the laws of the State of Delaware.  If a vote or consent of the holders of Series C Common Stock should at any time be required by the laws of the State of Delaware on any matter, the holders of Series C Common Stock will be entitled to one-hundredth (1/100) of a vote on such matter for each share of Series C Common Stock held of record.

 

Except (A) as may otherwise be required by the laws of the State of Delaware, (B) as may otherwise be provided in this Restated Certificate, or (C) as may otherwise be provided in any Preferred Stock Designation (as defined in Article IV, Section C hereof), the holders of outstanding shares of Series A Common Stock, the holders of outstanding shares of Series B Common Stock and the holders of outstanding shares of each series of Preferred Stock that is designated as a Voting Security and is entitled to vote thereon in accordance with the terms of the applicable Preferred Stock Designation, will vote as one class with respect to the election of directors and with respect to all other matters to be voted on by stockholders of the Corporation (including, without limitation, and irrespective of the provisions of Section 242(b)(2) of the DGCL, any proposed amendment to this Restated Certificate required to be voted on by the stockholders of the Corporation that would (x) increase (i) the number of authorized shares of Common Stock or any series thereof, (ii) the number of authorized shares of Preferred Stock or any series thereof or (iii) the number of authorized shares of any other class or series of capital stock of the Corporation hereafter established or (y) decrease (i) the number of authorized shares of Common Stock or any series thereof, (ii) the number of authorized shares of Preferred Stock or any series thereof or (iii) the number of authorized shares of any other class or series of capital stock of the Corporation hereafter established (but, in each case, not below the number of shares

 

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of such class or series of capital stock, as the case may be, then outstanding)) and no separate class or series vote or consent of the holders of shares of any class or series of capital stock of the Corporation will be required for the approval of any such matter.  In the event the holders of the Series C Common Stock are entitled to vote on any matter that may be submitted to a vote of stockholders of the Corporation, such holders will vote as one class with all other stockholders of the Corporation entitled to vote on such matter, unless otherwise required by this Restated Certificate, the laws of the State of Delaware or any Preferred Stock Designation.

 

2.                                       Conversion Rights .

 

(a)                                  Each share of Series B Common Stock will be convertible, at the option of the holder thereof, into one fully paid and non-assessable share of Series A Common Stock.  Any such conversion may be effected by any holder of Series B Common Stock by (i) if such holder’s shares of Series B Common Stock are certificated, surrendering such holder’s certificate or certificates for the Series B Common Stock to be converted, duly endorsed, at the office of the Corporation or any transfer agent for the Series B Common Stock, and (ii) providing a written notice to the Corporation at the office of the Corporation or any transfer agent for the Series B Common Stock that such holder elects to convert all or a specified number of shares of Series B Common Stock, which shall state such holder’s name or the names of the nominees in which such holder desires the shares of Series A Common Stock to be issued and, shall, if required by the last sentence of Article IV, Section B.2(b) of this Restated Certificate, be accompanied by payment, or evidence of payment, of applicable issue or transfer taxes.  If required by the Corporation, any certificate representing shares surrendered for conversion in accordance with this Article IV, Section B.2(a) will be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder of such shares or the duly authorized representative of such holder.  Promptly thereafter, if the shares of Series A Common Stock will be represented by a certificate or certificates, the Corporation will issue and deliver to such holder or such holder’s nominee or nominees, a certificate or certificates representing the number of shares of Series A Common Stock to which such holder will be entitled as herein provided.  If less than all of the shares of Series B Common Stock represented by any one certificate (if any) are to be converted, the Corporation will issue and deliver to such holder or such holder’s nominee or nominees a new certificate representing the shares of Series B Common Stock not converted.  If the shares of Series A Common Stock to be issued upon the conversion of the Series B Common Stock are uncertificated, the Corporation shall promptly issue and deliver to such holder, or to his, her or its nominees, a notice of issuance of uncertificated shares or other evidence of shares held in book-entry form.  Such conversion will be deemed to have been made at the close of business on the date of receipt by the Corporation or any such transfer agent of the certificate or certificates (if any), notice and, if required, instruments of transfer and payment or evidence of payment of taxes referred to above, and the Person or Persons entitled to receive the Series A Common Stock issuable on such conversion will be treated for all purposes as the record holder or holders of such Series A Common Stock on that date.  A number of shares of Series A Common Stock equal to the number of shares of Series B Common Stock outstanding from time to time will be set aside and reserved for issuance upon conversion of shares of Series B Common Stock.  Shares of Series A Common Stock and shares of Series C Common Stock are not convertible into shares of any other series of Common Stock.

 

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(b)                                  The Corporation will pay any and all documentary, stamp or similar issue or transfer taxes that may be payable in respect of the issue or delivery of shares of Series A Common Stock on conversion of shares of Series B Common Stock pursuant to this Article IV, Section B.2.  The Corporation will not, however, be required to pay any tax that may be payable in respect of any issue or delivery of any shares of Series A Common Stock in a name other than that in which the shares of Series B Common Stock so converted were registered and no such issue or delivery will be made unless and until the Person requesting the same has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid.

 

3.                                       Dividends .

 

Whenever a dividend, other than a dividend that constitutes a Share Distribution, is paid to the holders of any series of Common Stock then outstanding, the Corporation will also pay to the holders of each other series of Common Stock then outstanding an equal dividend per share.  Dividends will be payable only if, as and when declared by the Board of Directors out of assets of the Corporation legally available therefor.  Whenever a Share Distribution is paid to the holders of any series of Common Stock then outstanding, the Corporation will also pay a Share Distribution to the holders of each other series of Common Stock then outstanding, as provided in Article IV, Section B.4 below.  For purposes of this Article IV, Section B.3 and Article IV, Section B.4 below, a “ Share Distribution ” means a dividend or distribution (including a distribution made in connection with any stock-split, reclassification, recapitalization, dissolution, winding up or full or partial liquidation of the Corporation) payable in shares of any class or series of capital stock, Convertible Securities or other securities of the Corporation or any other Person.

 

4.                                       Share Distributions .

 

If at any time a Share Distribution is to be made with respect to any series of Common Stock, such Share Distribution may be declared and paid only as follows:

 

(a)                                  a Share Distribution (i) consisting solely of shares of Series C Common Stock or Series C Convertible Securities may be declared and paid to holders of Series A Common Stock, Series B Common Stock and Series C Common Stock, on an equal per share basis, or (ii) consisting of (x) shares of Series A Common Stock or Series A Convertible Securities may be declared and paid to holders of Series A Common Stock, on an equal per share basis, (y) shares of Series B Common Stock or Series B Convertible Securities may be declared and paid to holders of Series B Common Stock, on an equal per share basis, and (z) shares of Series C Common Stock or Series C Convertible Securities may be declared and paid to holders of Series C Common Stock, on an equal per share basis; or

 

(b)                                  a Share Distribution consisting of any class or series of securities of the Corporation or any other Person, other than solely Series A Common Stock, Series B Common Stock or Series C Common Stock (or Series A Convertible Securities, Series B Convertible Securities or Series C Convertible Securities), may be declared and paid on the basis of a distribution of (i) identical securities, on an equal per share basis, to holders of Series A

 

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Common Stock, Series B Common Stock and Series C Common Stock, (ii) separate classes or series of securities, on an equal per share basis, to the holders of each such series of Common Stock or (iii) a separate class or series of securities to the holders of one or more series of Common Stock and, on an equal per share basis, a different class or series of securities to the holders of all other series of Common Stock; provided , that , in connection with a Share Distribution pursuant to clause (ii) or clause (iii), (1) such separate classes or series of securities (and, if the distribution consists of Convertible Securities, the Underlying Securities) do not differ in any respect other than their relative voting rights (and any related differences in designation, conversion and share distribution provisions, as applicable), with holders of shares of Series B Common Stock receiving the class or series of securities having (or convertible into or exercisable or exchangeable for securities having) the highest relative voting rights and the holders of shares of each other series of Common Stock receiving securities of a class or series having (or convertible into or exercisable or exchangeable for securities having) lesser relative voting rights, in each case, without regard to whether such rights differ to a greater or lesser extent than the corresponding differences in voting rights (and any related differences in designation, conversion and share distribution, as applicable) among the Series A Common Stock, the Series B Common Stock and the Series C Common Stock, and (2) in the event the securities to be received by the holders of shares of Common Stock other than the Series B Common Stock consist of different classes or series of securities, with each such class or series of securities (or the Underlying Securities into which such class or series is convertible or for which such class or series is exercisable or exchangeable) differing only with respect to the relative voting rights of such class or series (and any related differences in designation, conversion and share distribution provisions, as applicable), then such classes or series of securities will be distributed to the holders of each series of Common Stock (other than the Series B Common Stock) (A) as the Board of Directors determines or (B) such that the relative voting rights (and any related differences in designation, conversion and share distribution provisions, as applicable) of the class or series of securities (or the Underlying Securities) to be received by the holders of each series of Common Stock (other than the Series B Common Stock) corresponds to the extent practicable to the relative voting rights (and any related differences in designation, conversion and share distribution provisions, as applicable) of such series of Common Stock, as compared to the other series of Common Stock (other than the Series B Common Stock).

 

5.                                       Reclassification .

 

The Corporation will not reclassify, subdivide or combine one series of Common Stock without reclassifying, subdividing or combining each other series of Common Stock, on an equal per share basis.  Any such reclassification, subdivision or combination is subject to Article IX of this Restated Certificate.

 

6.                                       Liquidation and Dissolution .

 

In the event of a liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and liabilities of the Corporation and subject to the payment in full of the preferential or other amounts to which any series of Preferred Stock are entitled, the holders of shares of Series A Common Stock, the

 

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holders of shares of Series B Common Stock and the holders of shares of Series C Common Stock will share equally, on a share for share basis, in the assets of the Corporation remaining for distribution to the holders of Common Stock.  Neither the consolidation or merger of the Corporation with or into any other Person or Persons nor the sale, transfer or lease of all or substantially all of the assets of the Corporation will itself be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Article IV, Section B.6.

 

7.                                       Protective Covenants .

 

Notwithstanding the powers, designations, preferences, and relative, participating, optional or other rights and qualifications, limitations or restrictions of any class or series of Preferred Stock or Common Stock then outstanding, from and after the Effective Time until the Series B Director Termination Time, the Corporation shall not (and the Board shall not resolve to):

 

(a)                                  issue any shares of Series B Common Stock, other than upon exercise in accordance with the terms of Series B Convertible Securities of the Corporation which are outstanding immediately following the Effective Time, without the approval of a majority of the Series B Directors then in office at such time as there is at least one (1) Series B Director in office, in addition to any other vote of the stockholders of the Corporation otherwise required by any applicable law or regulation;

 

(b)                                  change the number of directors specified herein as constituting the entire Board, including the relative number of Series B Directors and Common Stock Directors constituting such entire Board; and

 

(c)                                   authorize any merger or consolidation of this Corporation with or into any other corporation or other entity in which the entity surviving such merger or consolidation is not a corporation organized under the laws of the State of Delaware.

 

SECTION C

 

PREFERRED STOCK

 

The Preferred Stock may be issued in one or more series from time to time, with such powers, designations, preferences and relative, participating, optional or other rights and qualifications, limitations or restrictions thereof, as will be stated and expressed in a resolution or resolutions providing for the issue of each such series adopted by the Board of Directors, a copy of which will be filed as required by law (a “ Preferred Stock Designation ”).  The Board of Directors, in the Preferred Stock Designation with respect to a series of Preferred Stock, may, without limitation of the foregoing, fix the following with respect to any such series of Preferred Stock:

 

(i)                                      the distinctive serial designations and the number of authorized shares of such series, which may be increased or decreased, but not below the number of shares thereof then outstanding, in the manner permitted by law (except where otherwise provided in a Preferred Stock Designation);

 

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(ii)                                   the dividend rate or amounts, if any, for such series, the date or dates from which dividends on all shares of such series will be cumulative, if dividends on stock of such series will be cumulative, and the relative preferences or rights of priority, if any, or participation, if any, with respect to payment of dividends on shares of such series;

 

(iii)                                the rights of the shares of such series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, if any, and the relative preferences or rights of priority, if any, of payment of shares of such series;

 

(iv)                               the right, if any, of the holders of such series to convert or exchange such stock into or for other classes or series of a class of stock or indebtedness of the Corporation or of another Person, and the terms and conditions of such conversion or exchange, including provision for the adjustment of the conversion or exchange rate in such events as the Board of Directors may determine;

 

(v)                                  the voting powers, if any, of the holders of such series, including whether such series will be a Voting Security and, if so designated, the terms and conditions on which the holders of such series may vote together with the holders of any other class or series of capital stock of the Corporation; provided , however , that no class or series of Preferred Stock which is issued and outstanding prior to the Series B Director Termination Time may be granted the right to vote in the election or removal of directors of the Corporation or to elect or appoint any directors;

 

(vi)                               the terms and conditions, if any, for the Corporation to purchase or redeem shares of such series; and

 

(vii)                            any other relative rights, powers, preferences and limitations, if any, of such series.

 

The Board of Directors is hereby expressly authorized to exercise its authority with respect to fixing, designating and issuing various series of the Preferred Stock and determining the powers, designations, preferences and relative, participating, optional or other rights of such series of Preferred Stock, if any, and the qualifications, restrictions or limitations thereof, if any, to the full extent permitted by applicable law, subject to any stockholder vote that may be required by this Restated Certificate or any Preferred Stock Designation.  All shares of any one series of the Preferred Stock will be alike in every particular.  Except to the extent otherwise expressly provided in the Preferred Stock Designation for a series of Preferred Stock, the holders of shares of such series will have no voting rights except as may be required by the laws of the State of Delaware.  Further, unless otherwise expressly provided in the Preferred Stock Designation for a series of Preferred Stock, no consent or vote of the holders of shares of Preferred Stock or any series thereof will be required for any amendment to this Restated Certificate that would increase the number of authorized shares of Preferred Stock or the number of authorized shares of any series thereof or decrease the number of authorized shares of Preferred Stock or the number of authorized shares of any series thereof (but not below the number of authorized shares of Preferred Stock or such series, as the case may be, then outstanding).

 

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Except as may be provided by the Board of Directors in a Preferred Stock Designation or by law, shares of any series of Preferred Stock that have been redeemed (whether through the operation of a sinking fund or otherwise) or purchased by the Corporation, or which, if convertible or exchangeable, have been converted into or exchanged for shares of stock of any other class or classes will have the status of authorized and unissued shares of Preferred Stock and may be reissued as a part of the series of which they were originally a part or may be reissued as part of a new series of Preferred Stock to be created by a Preferred Stock Designation or as part of any other series of Preferred Stock.

 

ARTICLE V

 

DIRECTORS

 

SECTION A

 

NUMBER OF DIRECTORS

 

The governing body of the Corporation will be the Board of Directors.  Prior to the Series B Director Termination Time, the number of directors constituting the entire Board will be fixed at seven (7), with two (2) directors being Series B Directors and five (5) directors being Common Stock Directors. Following the Series B Director Termination Time, subject to any rights of the holders of any series of Preferred Stock to elect additional directors, the number of directors will not be less than three (3) and the exact number of directors will be fixed by the Board of Directors by resolution from time to time.  Election of directors need not be by written ballot.

 

SECTION B

 

DESIGNATION OF DIRECTORS AND CLASSIFICATION OF THE BOARD

 

1.                                       Series B Directors .

 

At all times prior to the Series B Director Termination Time, the holders of the outstanding shares of Series B Common Stock, voting or acting by written consent and as a separate class of Common Stock, will have the exclusive right to elect two (2) directors (such directors elected or to be elected by the holders of Series B Common Stock, the “ Series B Directors ,” which term includes those persons serving as the Series B Directors immediately following the Effective Time).  The term of office of each of the Series B Directors will expire at the earlier of (x) the Proxy Swap Termination Date (as defined in the Transaction Agreement) (the date and time of such Proxy Swap Termination Date, the “ Series B Director Termination Time ”), and (y) the second (2 nd ) annual meeting of stockholders of the Corporation following the election of each Series B Director or, with respect to each initial Series B Director, the second (2 nd ) annual meeting of stockholders of the Corporation following the Effective Time.  At the Series B Director Termination Time, the right of the holders of the Series B Common Stock to elect the Series B Directors and the term of office of all Series B Directors will immediately expire, and the persons then serving as Series B Directors will immediately cease to be directors

 

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of the Corporation.  At the Series B Director Termination Time, the total authorized number of directorships of the Corporation shall be automatically reduced by the total number of authorized Series B Director directorships.  Until the Series B Director Termination Time, each Series B Director will hold office until the earliest of the Series B Director Termination Time, the expiration of his or her term and until his or her respective successor is elected and qualified or until such Series B Director’s earlier death, resignation or removal.

 

2.                                       Common Stock Directors .

 

Prior to the Series B Director Termination Time, five (5) directors of the Corporation will be elected by the holders of the outstanding shares of Series A Common Stock and the holders of the outstanding shares of Series B Common Stock, voting together as a single class (such directors elected or to be elected in such manner, the “ Common Stock Directors ,” which term includes those persons serving as the Common Stock Directors immediately following the Effective Time).  Commencing with the annual meeting of stockholders held in 2017, until the Series B Director Termination Time, the term of office of the Common Stock Directors will expire at each annual meeting of stockholders following the Effective Time.  At the Series B Director Termination Time, the Common Stock Directors then in office will become the entire Board and will be classified in accordance with Section B.3(a) of Article V.  Following the Series B Director Termination Time, the directors of the Corporation will hold office in accordance with this Section B of Article V for the applicable term set forth in Section B.3(a) of Article V.  Each Common Stock Director will hold office until the expiration of his or her term and until his or her respective successor is elected and qualified or until such Common Stock Director’s earlier death, resignation or removal.

 

3.                                       Classified Board of Directors following the Series B Director Termination Time .

 

(a)                                  Upon the Series B Director Termination Time, the Board shall become classified into three (3) classes:  Class I, Class II and Class III; provided , that any directors elected after the Series B Director Termination Time solely by the holders of any series of Preferred Stock (any such directors, the “ Preferred Stock Directors ”) will not be so classified unless so provided in the Preferred Stock Designation for such series of Preferred Stock.  Each class of directors will consist, as nearly as possible, of a number of directors equal to one-third (1/3) of the then authorized number of members of the Board of Directors (other than any Preferred Stock Directors) authorized as provided in Section A of this Article V.  The Board of Directors is authorized to assign those directors already in office to such classes upon the Series B Director Termination Time.  The term of office of the initial Class I directors will expire at the first (1 st ) annual meeting of stockholders following the Series B Director Termination Time; the term of office of the initial Class II directors will expire at the second (2 nd ) annual meeting of stockholders following the Series B Director Termination Time; and the term of office of the initial Class III directors will expire at the third (3 rd ) annual meeting of stockholders following the Series B Director Termination Time.  At each annual meeting of stockholders of the Corporation following the Series B Director Termination Time, the successors of that class of directors whose term expires at that meeting will be elected to hold office in accordance with this Section B of Article V for a term expiring at the third (3 rd ) annual meeting of stockholders following the year of their election.  The directors of each class will hold office until the

 

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expiration of the term of such class and until their respective successors are elected and qualified or until such director’s earlier death, resignation or removal.

 

(b)                                  Following the Series B Director Termination Time, the directors of the Corporation, other than any Preferred Stock Directors, shall be elected by the holders of the outstanding Voting Securities, voting together as a single class.

 

SECTION C

 

DIRECTOR VOTING POWERS

 

Except (x) as otherwise required by law or (y) with respect to voting on any matter that is an Expedia Board Voting Determination (as defined below) or a Splitco Director Determination (as defined below), each director (regardless of whether such director is a Series B Director, a Common Stock Director or a Preferred Stock Director) shall be entitled to one (1) vote on each matter considered by the Board of Directors.  In connection with an election occurring prior to the Series B Director Termination Time of persons (other than persons to be designated as Splitco Directors (as such term is defined in the Governance Agreement)) to serve on the board of directors of Expedia, the Corporation will vote the shares of common stock, par value $0.0001 per share, of Expedia and the shares of Class B common stock, par value $0.0001 per share, of Expedia and any other Common Shares (as defined in the Stockholders Agreement), in each case, which are beneficially owned by the Corporation (and any other Common Shares with respect to which it has the power to vote, whether by proxy or otherwise) and which are entitled to vote in the election of the board of directors of Expedia (collectively, the “ Corporation Expedia Shares ”), only in accordance with a resolution (x) approved by a majority of the votes cast by directors of the Corporation at a meeting at which at least one (1) Series B Director is present or (y) set forth in a unanimous written consent of the Board of Directors at a time when there is at least one (1) Series B Director in office (an “ Expedia Board Voting Determination ”).  For the avoidance of doubt, (x) an Expedia Board Voting Determination will not include the Splitco Director Determination, (y) the Corporation shall not have the power to vote the Corporation Expedia Shares if an Expedia Board Voting Determination has not been made or, if made, holders of Series B Common Stock have taken action subsequent to the making of such Expedia Board Voting Determination and prior to the applicable meeting of Expedia stockholders to remove any Series B Director, in which case the Corporation will not have the power to vote such Corporation Expedia Shares until such time as holders of Series B Common Stock have replaced such removed Series B Director(s) and the Board of Directors has taken action to amend, modify or ratify the Expedia Board Voting Determination and (z) any purported vote of Corporation Expedia Shares in any manner other than as set forth in the Expedia Board Voting Determination shall be null and void and of no force or effect.  With respect to the votes of directors with respect to an Expedia Board Voting Determination occurring prior to the Series B Director Termination Time, (i) each Common Stock Director will be entitled to cast one (1) vote and (ii) each Series B Director present at the meeting will be entitled to cast a number of votes equal to the quotient of (A) the total number of Common Stock Directors then authorized, plus one (1), divided by (B) the number of Series B Directors present at such meeting (rounded up to the next whole number of votes).

 

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The Expedia Board Voting Determination (i) shall be made not less than twenty-four (24) business days prior to the date set by Expedia for any annual or special meeting of stockholders of Expedia at which directors are to be elected ( provided , that , in the event the proxy statement for the applicable Expedia stockholder meeting has not been filed with the Securities and Exchange Commission (the “ SEC ”) on or prior to the thirtieth (30 th ) business day prior to the date set by Expedia for the applicable Expedia stockholder meeting, the Expedia Board Voting Determination shall be made as promptly as practical following the filing of such proxy statement with the SEC, and in any event not later than the close of business, New York City time, on the third (3 rd ) Business Day after such proxy statement is filed with the SEC), (ii) may not be made by or delegated to a committee of the Board, and (iii) will be reflected in a resolution or unanimous written consent of the Board as provided in the prior paragraph which, upon adoption, may only be modified, amended or otherwise changed (A) by a resolution approved either (x) unanimously by directors constituting the entire Board (and not by a committee of the Board) or (y) in the event holders of Series B Common Stock have taken action by written consent to fill any vacancy in the Series B Director directorships resulting from removal pursuant to Article V, Section D which action shall have become effective, by a majority of the votes entitled to be cast with respect to an Expedia Board Voting Determination as provided in the prior paragraph, or (B) in a unanimous written consent of the Board at a time when there is at least one (1) Series B Director in office (and not by a committee of the Board) and, in each of clause (A) and clause (B), which will instruct the officers of the Corporation to vote or cause to be voted all Corporation Expedia Shares in accordance with such resolution or unanimous written consent (subject to any action specified in the Splitco Director Determination with respect to the Splitco Directors); provided , that in the event that after the Expedia Board Voting Determination is so adopted, any candidate for election to the board of directors of Expedia for whom the Corporation Expedia Shares are to be voted as specified in the Expedia Board Voting Determination does not stand for election for any reason, then all Corporation Expedia Shares will be voted in favor of the replacement nominee proposed by the Person who nominated the person for whom the Corporation Expedia Shares were to be originally voted.

 

In connection with decisions relating to the selection of persons to stand for election as Splitco Directors pursuant to the Governance Agreement or the voting of Corporation Expedia Shares with respect to the election of such Splitco Directors to the board of directors of Expedia (each, a “ Splitco Director Determination ”), the Corporation will designate the persons to stand for election as Splitco Directors and will vote the Corporation Expedia Shares for the election of such Splitco Directors only in accordance with a resolution (x) approved by a majority of the votes cast by directors of the Corporation at a meeting or (y) set forth in a unanimous written consent of the Board of Directors.  With respect to the votes of directors with respect to a Splitco Director Determination occurring prior to the Series B Director Termination Time, (i) each Common Stock Director will be entitled to cast three (3) votes and (ii) each Series B Director will be entitled to cast one (1) vote.

 

Splitco Director Determinations relating to the voting of Corporation Expedia Shares with respect to the election of Splitco Directors shall be made at the same meeting (or be set forth in a unanimous written consent on the same date) as the Expedia Board Voting Determination; provided , that in the event that after the Splitco Director Determination is so adopted, any candidate for election to the board of directors of Expedia for whom the

 

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Corporation Expedia Shares are to be voted as specified in the Splitco Director Determination does not stand for election for any reason, then all Corporation Expedia Shares will be voted in favor of the replacement nominee proposed by the Board in accordance with the procedures set forth in this Section C with respect to the original candidate for election to the board of directors of Expedia.

 

Notwithstanding the foregoing, prior to the Series B Director Termination Time, the Corporation will not have the power or authority to vote the Corporation Expedia Shares in the election of directors to serve on the board of directors of Expedia pursuant to the Expedia Board Voting Determination unless, if applicable, the Corporation simultaneously votes the Corporation Expedia Shares in favor of the Splitco Directors designated in accordance with the Governance Agreement and the Splitco Director Determination.

 

SECTION D

 

REMOVAL OF DIRECTORS

 

Prior to the Series B Director Termination Time, (i) any or all Series B Directors may be removed from office, with or without cause, only by the affirmative vote (or written consent) of the holders of at least a majority of the total voting power of the then outstanding shares of Series B Common Stock, voting as a separate class, and (ii) any and all Common Stock Directors may be removed from office, with or without cause, only by the affirmative vote of the holders of at least a majority of the total voting power of the outstanding shares of Series A Common Stock and Series B Common Stock (voting as provided in Article IV, Section B.1), voting together as a single class.  Following the Series B Director Termination Time and subject to the rights of the holders of any series of Preferred Stock, directors may be removed from office only for cause upon the affirmative vote of the holders of at least a majority of the total voting power of the then outstanding Voting Securities entitled to vote thereon, voting together as a single class.

 

SECTION E

 

NEWLY CREATED DIRECTORSHIPS AND VACANCIES

 

1.                                       Common Stock Directors .

 

Prior to the Series B Director Termination Time, vacancies in the Common Stock Director directorships on the Board of Directors resulting from death, resignation, removal, disqualification or other cause will be filled only by the affirmative vote of a majority of the Common Stock Directors then in office or, in the event only one (1) Common Stock Director remains in office, by the sole remaining Common Stock Director.  Any Common Stock Director appointed in accordance with the preceding sentence will hold office for the remainder of the term of his or her predecessor, and until such director’s successor will have been elected and qualified or until such director’s earlier death, resignation or removal.

 

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2.                                       Series B Directors .

 

Prior to the Series B Director Termination Time and subject to the right of holders of Series B Common Stock to remove and replace Series B Directors pursuant to this Restated Certificate, (a) vacancies in the Series B Director directorships on the Board of Directors resulting from removal pursuant to Article V, Section D will be filled only by the affirmative vote (or written consent) of the holders of at least a majority of the total voting power of the then outstanding shares of Series B Common Stock, voting as a separate class, and (b) vacancies in the Series B Director directorships on the Board of Directors resulting from death, resignation, disqualification or other cause (excluding removal) will be filled either (i) by the affirmative vote (or written consent) of the holders of at least a majority of the total voting power of the then outstanding shares of Series B Common Stock, voting as a separate class, or (ii) by a majority of the Series B Directors then in office or, in the event only one (1) Series B Director remains in office, by the sole remaining Series B Director.  Any Series B Director elected or appointed in accordance with the preceding sentence will hold office for the remainder of the term of his or her predecessor, and until such director’s successor will have been elected and qualified or until such director’s earlier death, resignation or removal; provided , that , upon the Series B Director Termination Time, any such Series B Director’s term of office shall immediately expire and such person will immediately cease to be a director of the Corporation.

 

3.                                       Stockholder Meeting .

 

In the event that, at any time prior to the Series B Director Termination Time, (i) there remain on the Board of Directors no Series B Directors or no Common Stock Directors, or (ii) a Series B Director is removed pursuant to Article V, Section D, then the Corporation will promptly call and hold a special meeting of stockholders (of the series or series of Common Stock necessary to elect directors to fill such vacancies) for the purpose of electing Series B Directors or Common Stock Directors, as the case may be, to fill such vacancies; provided , however, that in the case of Series B Directors, such vacancies may be filled by written consent as provided in Article V, Section E.2 of this Restated Certificate in lieu of holding a special meeting of stockholders for the purpose of electing Series B Directors.

 

4.                                       Newly Created Directorships and Vacancies Following the Series B Director Termination Time .

 

Following the Series B Director Termination Time, subject to the rights of holders of any series of Preferred Stock, vacancies on the Board of Directors resulting from death, resignation, removal, disqualification or other cause, and newly created directorships resulting from any increase in the number of directors on the Board of Directors, will be filled only by the affirmative vote of a majority of the remaining directors then in office (even though less than a quorum) or by the sole remaining director.  Any director appointed in accordance with the preceding sentence will hold office for the remainder of the full term of the class of directors in which the vacancy occurred or to which the new directorship is apportioned, and until such director’s successor will have been elected and qualified or until such director’s earlier death, resignation or removal.  No decrease in the number of directors constituting the Board of Directors will shorten the term of any incumbent director, except as may be provided with

 

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respect to any additional director elected by the holders of the applicable series of Preferred Stock.

 

SECTION F

 

LIMITATION ON LIABILITY AND INDEMNIFICATION

 

1.                                       Limitation On Liability .

 

To the fullest extent permitted by the DGCL as the same exists or may hereafter be amended, a director of the Corporation will not be liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director.  Any repeal or modification of this paragraph 1 will be prospective only and will not adversely affect any limitation, right or protection of a director of the Corporation existing at the time of such repeal or modification.

 

2.                                       Indemnification .

 

(a)                                  Right to Indemnification .  The Corporation will indemnify, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ proceeding ”) by reason of the fact that he, or a person for whom he is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) incurred by such person.  Such right of indemnification will inure whether or not the claim asserted is based on matters which antedate the adoption of this Section F.  The Corporation will be required to indemnify or make advances to a person in connection with a proceeding (or part thereof) initiated by such person only if the proceeding (or part thereof) was authorized by the Board of Directors.

 

(b)                                  Prepayment of Expenses .  The Corporation will pay the expenses (including attorneys’ fees) incurred by a director or officer in defending any proceeding in advance of its final disposition; provided , however , that the payment of expenses incurred by a director or officer in advance of the final disposition of the proceeding will be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this paragraph or otherwise.

 

(c)                                   Claims .  If a claim for indemnification or payment of expenses under this paragraph is not paid in full within sixty (60) days after a written claim therefor has been received by the Corporation, the claimant may file suit to recover the unpaid amount of such claim and, if successful, will be entitled to be paid the expense (including attorney’s fees) of prosecuting such claim to the fullest extent permitted by Delaware law.  In any such action the Corporation will have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.

 

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(d)                                  Non-Exclusivity of Rights .  The rights conferred on any person by this paragraph will not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of this Restated Certificate, the Bylaws, agreement, vote of stockholders or resolution of disinterested directors or otherwise.

 

(e)                                   Other Indemnification .  The Corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity will be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or nonprofit entity.

 

3.                                       Amendment or Repeal .

 

Any amendment, modification or repeal of the foregoing provisions of this Section F will not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.

 

SECTION G

 

AMENDMENT OF BYLAWS

 

In furtherance and not in limitation of the powers conferred by the DGCL, the Board of Directors, by action taken by the affirmative vote of not less than, if prior to the Series B Director Termination Time, at least 80% of the members of the entire Board, or, if following the Series B Director Termination Time, at least 75% of the members of the entire Board (in either case, rounded up to the next whole number) (such percentage of the entire Board, the “ Applicable Percentage ”), is hereby expressly authorized and empowered to adopt, amend or repeal any provision of the Bylaws of this Corporation; provided that p rior to the Series B Director Termination Time, the provisions of the third to the last paragraph of Article II, Section 2.8 of the Bylaws relating to the Series B Director Committee may not be amended without the approval of a majority of the Series B Directors then in office at such time as there is at least one (1) Series B Director in office.

 

ARTICLE VI

 

TERM

 

The term of existence of this Corporation shall be perpetual.

 

ARTICLE VII

 

STOCK NOT ASSESSABLE

 

The capital stock of this Corporation shall not be assessable.  It shall be issued as fully paid, and the private property of the stockholders shall not be liable for the debts, obligations or liabilities of this Corporation.  This Restated Certificate shall not be subject to amendment in this respect.

 

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ARTICLE VIII

 

MEETINGS OF STOCKHOLDERS

 

SECTION A

 

ANNUAL AND SPECIAL MEETINGS

 

Except as otherwise provided in a Preferred Stock Designation or unless otherwise prescribed by law or by another provision of this Restated Certificate, special meetings of the stockholders of the Corporation, for any purpose or purposes, will only be called by the Secretary of the Corporation (i) upon the written request of the holders of not less than 70% of the total voting power of the then outstanding Voting Securities entitled to vote thereon or (ii) at the request of at least the Applicable Percentage of the members of the entire Board.

 

SECTION B

 

ACTION WITHOUT A MEETING

 

Except as provided in a Preferred Stock Designation, no action required to be taken or which may be taken at any annual meeting or special meeting of stockholders may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied; provided , however , that notwithstanding the foregoing, prior to the Series B Director Termination Time, holders of Series B Common Stock may take action by written consent with respect to the election, appointment, or removal of any or all Series B Directors or the filling of any vacancy in a Series B Director directorship in accordance with this Restated Certificate.

 

ARTICLE IX

 

ACTIONS REQUIRING SUPERMAJORITY STOCKHOLDER VOTE

 

Subject to the rights of the holders of any series of Preferred Stock, in addition to any other vote of the stockholders of the Corporation (or the holders of any class or series) otherwise required by any applicable law or regulation or this Restated Certificate, the affirmative vote of the holders of at least 70% of the total voting power of the then outstanding Voting Securities entitled to vote thereon, voting together as a single class at a meeting specifically called for such purpose, will be required in order for the Corporation to take any action to authorize:

 

(i)                                      the amendment, alteration or repeal of any provision of this Restated Certificate or the addition or insertion of other provisions herein, whether by amendment, merger, consolidation or otherwise; provided , however , that this clause (i) will not apply to any such amendment, alteration, repeal, addition or insertion (A) as to which the laws of the State of Delaware, as then in effect, do not require the consent of this Corporation’s stockholders, or (B) that at least the Applicable Percentage of the members of the entire Board has approved;

 

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(ii)                                   the adoption, amendment or repeal of any provision of the Bylaws of the Corporation; provided , however , that this clause (ii) will not apply to, and no vote of the stockholders of the Corporation will be required to authorize, the adoption, amendment or repeal of any provision of the Bylaws of the Corporation by the Board of Directors in accordance with the power conferred upon it pursuant to Section G of Article V of this Restated Certificate;

 

(iii)                                the merger or consolidation of this Corporation with or into any other corporation (including a merger consummated pursuant to Section 251(h) of the DGCL and notwithstanding the exception to a vote of the stockholders for such a merger set forth therein); provided , however , that this clause (iii) will not apply to any such merger or consolidation (A) as to which the laws of the State of Delaware, as then in effect, do not require the vote of this Corporation’s stockholders (other than Section 251(h) of the DGCL), or (B) that at least the Applicable Percentage of the members of the entire Board has approved;

 

(iv)                               the sale, lease or exchange of all, or substantially all, of the property or assets of the Corporation; provided , however , that this clause (iv) will not apply to any such sale, lease or exchange that at least the Applicable Percentage of the members of the entire Board has approved;

 

(v)                                  the dissolution of the Corporation; provided , however , that this clause (v) will not apply to such dissolution if at least the Applicable Percentage of the members of the entire Board has approved such dissolution; or

 

(vi)                               until the Series B Director Termination Time, the sale, assignment, transfer or conveyance of all or any portion of the Class B common stock of Expedia held by the Corporation; provided , however , that a business combination in which a third party acquires control of the Corporation prior to the Series B Director Termination Time will not be deemed a sale, assignment, transfer or conveyance of the Class B common stock of Expedia only if (i) the business combination gives rise to (x) a right of Barry Diller to terminate the Diller Assignment which right he declines or fails to exercise within the required time period or (y) the automatic termination of the Diller Assignment which Barry Diller waives prior to such termination and (ii) Barry Diller’s rights under the Stockholders Agreement and Governance Agreement are not diminished or impaired (other than in a de minimis manner).

 

Subject to the foregoing provisions of this Article IX, the Corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in this Restated Certificate, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other Persons whomsoever by and pursuant to this Restated Certificate in its present form or as hereafter amended are granted subject to the rights reserved in this Article IX.

 

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ARTICLE X

 

CERTAIN BUSINESS OPPORTUNITIES

 

1.                                       Certain Acknowledgements; Definitions .

 

In recognition and anticipation that:

 

(a)                                  directors and officers of the Corporation may serve as directors, officers, employees and agents of any other corporation, company, partnership, association, firm or other entity, including, without limitation, Subsidiaries and Affiliates of the Corporation (“ Other Entity ”),

 

(b)                                  the Corporation, directly or indirectly, may engage in the same, similar or related lines of business as those engaged in by any Other Entity and other business activities that overlap with or compete with those in which such Other Entity may engage,

 

(c)                                   the Corporation may have an interest in the same areas of business opportunity as any Other Entity, and

 

(d)                                  the Corporation may engage in material business transactions with any Other Entity and its Affiliates, including, without limitation, receiving services from, providing services to or being a significant customer or supplier to such Other Entity and its Affiliates, and that the Corporation and such Other Entity or one or more of their respective Subsidiaries or Affiliates may benefit from such transactions,

 

and as a consequence of the foregoing, it is in the best interests of the Corporation that the rights of the Corporation, and the duties of any directors or officers of the Corporation (including any such persons who are also directors, officers or employees of any Other Entity), be determined and delineated, as set forth herein, in respect of (x) any transactions between the Corporation and its Subsidiaries or Affiliates, on the one hand, and such Other Entity and its Subsidiaries or Affiliates, on the other hand, and (y) any potential transactions or matters that may be presented to officers or directors of the Corporation, or of which such officers or directors may otherwise become aware, which potential transactions or matters may constitute business opportunities of the Corporation or any of its Subsidiaries or Affiliates.

 

In recognition of the benefits to be derived by the Corporation through its continued contractual, corporate and business relations with any Other Entity and of the benefits to be derived by the Corporation by the possible service as directors or officers of the Corporation and its Subsidiaries of persons who may also serve from time to time as directors, officers or employees of any Other Entity, the provisions of this Article X will, to the fullest extent permitted by law, regulate and define the conduct of the business and affairs of the Corporation in relation to such Other Entity and its Affiliates, and as such conduct and affairs may involve such Other Entity’s respective directors, officers or employees, and the powers, rights, duties and liabilities of the Corporation and its officers and directors in connection therewith and in connection with any potential business opportunities of the Corporation.

 

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Any Person purchasing, receiving, holding or otherwise becoming the owner of any shares of capital stock of the Corporation, or any interest therein, will be deemed to have notice of and to have consented to the provisions of this Article X. References in this Article X to “directors,” “officers” or “employees” of any Person will be deemed to include those Persons who hold similar positions or exercise similar powers and authority with respect to any Other Entity that is a limited liability company, partnership, joint venture or other non-corporate entity.

 

2.                                       Duties of Directors and Officers Regarding Potential Business Opportunities; No Liability for Certain Acts or Omissions .

 

If a director or officer of the Corporation is offered, or otherwise acquires knowledge of, a potential transaction or matter that may constitute or present a business opportunity for the Corporation or any of its Subsidiaries or Affiliates, in which the Corporation could, but for the provisions of this Article X, have an interest or expectancy (any such transaction or matter, and any such actual or potential business opportunity, a “ Potential Business Opportunity ”):

 

(a)                                  such director or officer will, to the fullest extent permitted by law, have no duty or obligation to refer such Potential Business Opportunity to the Corporation, or to refrain from referring such Potential Business Opportunity to any Other Entity, or to give any notice to the Corporation regarding such Potential Business Opportunity (or any matter related thereto),

 

(b)                                  such director or officer will, to the fullest extent permitted by law, not be liable to the Corporation or any of its Subsidiaries or any of its stockholders, as a director, officer, stockholder or otherwise, for any failure to refer such Potential Business Opportunity to the Corporation or any of its Subsidiaries, or for referring such Potential Business Opportunity to any Other Entity, or for any failure to give any notice to or otherwise inform the Corporation or any of its Subsidiaries regarding such Potential Business Opportunity or any matter relating thereto,

 

(c)                                   any Other Entity may engage or invest in, independently or with others, any such Potential Business Opportunity,

 

(d)                                  the Corporation shall not have any right in or to such Potential Business Opportunity or to receive any income or proceeds derived therefrom, and

 

(e)                                   the Corporation shall have no interest or expectancy, and hereby specifically renounces any interest or expectancy, in any such Potential Business Opportunity,

 

unless both the following conditions are satisfied: (A) such Potential Business Opportunity was expressly offered to a director or officer of the Corporation solely in his or her capacity as a director or officer of the Corporation or as a director or officer of any Subsidiary of the Corporation and (B) such opportunity relates to a line of business in which the Corporation or any of its Subsidiaries is then directly engaged.

 

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3.                                       Amendment of Article X .

 

No alteration, amendment or repeal, or adoption of any provision inconsistent with, any provision of this Article X will have any effect upon

 

(a)                                  any agreement between the Corporation or an Affiliate thereof and any Other Entity or an Affiliate thereof, that was entered into before the time of such alteration, amendment or repeal or adoption of any such inconsistent provision (the “ Amendment Time ”), or any transaction entered into in connection with the performance of any such agreement, whether such transaction is entered into before or after the Amendment Time,

 

(b)                                  any transaction entered into between the Corporation or an Affiliate thereof and any Other Entity or an Affiliate thereof, before the Amendment Time,

 

(c)                                   the allocation of any business opportunity between the Corporation or any Subsidiary or Affiliate thereof and any Other Entity before the Amendment Time, or

 

(d)                                  any duty or obligation owed by any director or officer of the Corporation or any Subsidiary of the Corporation (or the absence of any such duty or obligation) with respect to any Potential Business Opportunity which such director or officer was offered, or of which such director or officer otherwise became aware, before the Amendment Time (regardless of whether any proceeding relating to any of the above is commenced before or after the Amendment Time).

 

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IN WITNESS WHEREOF , the undersigned has executed this Restated Certificate of Incorporation this [ · ] day of [ · ].

 

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

 

By:

 

 

Name:

 

Title:

 




Exhibit 3.2

 

AGREED FORM

 

LIBERTY EXPEDIA HOLDINGS, INC.

A Delaware Corporation

(the “ Corporation ”)

 

FORM OF BYLAWS

 


 

ARTICLE I

 

STOCKHOLDERS

 

Section 1.1             Annual Meeting .

 

An annual meeting of stockholders for the purpose of electing directors and of transacting any other business properly brought before the meeting pursuant to these Bylaws shall be held each year at such date, time and place, either within or without the State of Delaware or, if so determined by the Board of Directors of the Corporation (the “ Board of Directors ”) in its sole discretion, at no place (but rather by means of remote communication), as may be specified by the Board of Directors in the notice of meeting.

 

Section 1.2             Special Meetings .

 

Except as otherwise provided in the terms of any series of preferred stock or unless otherwise provided by law or by the Corporation’s Certificate of Incorporation (the “ Certificate of Incorporation ”), special meetings of stockholders of the Corporation, for the transaction of such business as may properly come before the meeting, may be called by the Secretary of the Corporation (the “ Secretary ”) only (i) upon written request received by the Secretary at the principal executive offices of the Corporation by or on behalf of the holder or holders of record of outstanding shares of capital stock of the Corporation, representing collectively not less than 70% of the total voting power of the outstanding capital stock of the Corporation entitled to vote at such meeting or (ii) at the request of not less than, if prior to the Series B Director Termination Time (as defined in the Certificate of Incorporation), 80% of the members of the entire Board (as defined in the Certificate of Incorporation), or, if following the Series B Director Termination Time, 75% of the members of the entire Board (such percentage of the members of the entire Board, the “ Applicable Percentage ”).  Only such business may be transacted as is specified in the notice of the special meeting.  The Board of Directors shall have the sole power to determine the time, date and place, either within or without the State of Delaware, or, if so determined by the Board of Directors in its sole discretion, at no place (but rather by means of remote communication), for any special meeting of stockholders (including those properly called by the Secretary in accordance with Section 1.2(i) hereof).  Following such determination, it shall be the duty of the Secretary to cause notice to be given to the stockholders entitled to vote at such meeting that a meeting will be held at the time, date and place, if any, and in accordance with the record date, if any, determined by the Board of Directors.

 



 

Section 1.3             Record Date .

 

In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) calendar days nor less than ten (10) calendar days before the date of such meeting.  If the Board of Directors so fixes a record date for determining the stockholders entitled to notice of any meeting of stockholders, such date shall be the record date for determining the stockholders entitled to vote at such meeting, unless the Board of Directors determines, at the time it fixes the record date for determining the stockholders entitled to notice of such meeting, that a later date on or before the date of the meeting shall be the record date for determining stockholders entitled to vote at such meeting.  In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) calendar days prior to such action.  If no record date is fixed by the Board of Directors:  (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting in accordance with this Section 1.3.

 

Section 1.4             Notice of Meetings .

 

Notice of all stockholders meetings, stating the place, if any, date and hour thereof, as well as the record date for determining stockholders entitled to vote at such meeting (if such record date is different from the record date for determining stockholders entitled to notice of the meeting); the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting; and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered by the Corporation in accordance with Section 5.4 of these Bylaws, applicable law and applicable stock exchange rules and regulations by the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Secretary or an Assistant Secretary, to each stockholder entitled to notice of such meeting, unless otherwise provided by applicable law or the Certificate of Incorporation, at least ten (10) calendar days but not more than sixty (60) calendar days before the date of the meeting.

 

Section 1.5             Notice of Stockholder Business .

 

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(a)            Annual Meetings of Stockholders .

 

(1)            At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting.  To be properly brought before an annual meeting, nominations for persons for election to the Board of Directors and the proposal of business to be considered by the stockholders must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof), or (iii) otherwise properly be requested to be brought before the meeting by a stockholder (x) who complies with the procedures set forth in this Section 1.5 and (y) who was a stockholder of record of the Corporation (and, with respect to any beneficial owner, if different, on whose behalf such business is proposed or such nomination or nominations made, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time the notice provided for in Section 1.5(a)(2) is delivered to the Secretary and on the record date for the determination of stockholders entitled to vote at the meeting, and (z) who is entitled to vote at the meeting upon such election of directors or upon such business, as the case may be.

 

(2)            In addition to any other requirements under applicable law and the Certificate of Incorporation, for a nomination for election to the Board of Directors or the proposal of business to be properly requested to be brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary and any such proposed business, other than the nominations of persons for election to the Board of Directors, must constitute a proper matter for stockholder action pursuant to the Certificate of Incorporation, these Bylaws, and applicable law.  To be timely, a stockholder’s notice must be received at the principal executive offices of the Corporation (x) in the case of an annual meeting that is called for a date that is within thirty (30) calendar days before or after the anniversary date of the immediately preceding annual meeting of stockholders, not less than sixty (60) calendar days nor more than ninety (90) calendar days prior to the meeting and (y) in the case of an annual meeting that is called for a date that is not within thirty (30) calendar days before or after the anniversary date of the immediately preceding annual meeting, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the meeting was communicated to stockholders or public announcement (as defined below) of the date of the meeting was made, whichever occurs first.  In no event shall the public announcement of an adjournment or postponement of a meeting of stockholders commence a new time period (or extend any time period) for the giving of a stockholder notice as described herein.

 

To be in proper written form, such stockholder’s notice to the Secretary must be submitted by a holder of record of stock entitled to vote on the nomination of directors of the Corporation and shall set forth in writing and describe in fair, accurate, and material detail (A) as to each person whom the stockholder proposes to nominate for election as a director (a “ nominee ”) (i) all information relating to such nominee that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and (ii) such nominee’s written

 

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consent to being named in the proxy statement as a nominee and to serving as a director if elected; (B) as to any other business that the stockholder proposes to bring before the annual meeting, (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment), and (iii) any material interest of the stockholder and beneficial owner, if any, on whose behalf the proposal is made, in such business; and (C) as to such stockholder giving notice and the beneficial owner or owners, if different, on whose behalf the nomination or proposal is made, and any affiliates or associates (each within the meaning of Rule 12b-2 under the Exchange Act) of such stockholder or beneficial owner (each a “ Proposing Person ”) (i) the name and address, as they appear on the Corporation’s books, of such stockholder and the name and address of each such Proposing Person, (ii) the class or series and number of shares of the capital stock of the Corporation that are owned beneficially and of record by such Proposing Person, (iii) a description of all arrangements or understandings between such Proposing Person and any other person or persons (including their names) pursuant to which the proposals are to be made by such stockholder, (iv) a representation by each Proposing Person who is a holder of record of stock of the Corporation (A) that the notice the Proposing Person is giving to the Secretary is being given on behalf of (x) such holder of record and/or (y) if different than such holder of record, one or more beneficial owners of stock of the Corporation held of record by such holder of record, (B) as to each such beneficial owner, the number of shares held of record by such holder of record that are beneficially owned by such beneficial owner, with documentary evidence of such beneficial ownership, and (C) that such holder of record is entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination set forth in its notice, (v) a representation (I) whether any such Proposing Person or nominee has received any financial assistance, funding or other consideration from any other person in respect of the nomination (and the details thereof) (a “ Stockholder Associated Person ”) and (II) whether and the extent to which any hedging, derivative or other transaction has been entered into with respect to the Corporation within the past six (6) months by, or is in effect with respect to, such stockholder, any person to be nominated by such stockholder or any Stockholder Associated Person, the effect or intent of which transaction is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such stockholder, nominee or any such Stockholder Associated Person, and (vi) a representation whether any Proposing Person intends or is part of a group that intends to (I) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding voting power required to approve or adopt the proposal or elect the nominee and/or (II) otherwise solicit proxies from stockholders in support of such proposal, and (vii) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies in support of such proposal pursuant to Section 14 of the Exchange Act, and any rules and regulations promulgated thereunder.  The foregoing notice requirements of this Section 1.5 shall not apply to any proposal made pursuant to Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act.  A proposal to be made pursuant to Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act shall be deemed satisfied if the stockholder making such proposal complies with the provisions of Rule 14a-8 and has notified the Corporation of his or her intention to present a proposal at an annual meeting in compliance with

 

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Rule 14a-8 and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting.  The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine (x) the eligibility of such proposed nominee to serve as a director of the Corporation and (y) whether the nominee would qualify as an “independent director” or “audit committee financial expert” under applicable law, securities exchange rule or regulation, or any publicly disclosed corporate governance guideline or committee charter of the Corporation.

 

(3)            Notwithstanding anything in paragraph (a)(2) of this Section 1.5 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation at an annual meeting is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least one hundred (100) calendar days prior to the first anniversary date of the immediately preceding annual meeting, a stockholder’s notice required by this Section 1.5 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation. For purposes of the foregoing determinations in Section 1.5(a)(2) and this Section 1.5(a)(3) with respect to the first annual meeting of stockholders of the Corporation following the Effective Time, the date of the immediately preceding annual meeting will be the date of the Effective Time (as defined in the Certificate of Incorporation).

 

(b)            Special Meetings of Stockholders .  Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting.  In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder entitled to vote at such meeting who was a stockholder of record of the Corporation (and, with respect to any beneficial owner, if different, on whose behalf such nomination or nominations are made, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time the notice provided for in paragraph (a)(2) of this Section 1.5 is delivered to the Secretary and on the record date for the determination of stockholders entitled to vote at the special meeting may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice meeting the requirements of paragraph (a)(2) of this Section 1.5 (substituting special meeting for annual meeting as applicable) shall be received by the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the ninetieth (90th) day prior to such special meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting; provided, however, that a stockholder may nominate persons for election at a special meeting only to such directorship(s) as specified in the Corporation’s notice of the meeting.  In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

 

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(c)            Updating and Supplementing of Stockholder Information .  A stockholder providing notice of nominations of persons for election to the Board of Directors at an annual or special meeting of stockholders or notice of business proposed to be brought before an annual meeting of stockholders in accordance with this Section 1.5 shall further update and supplement such notice so that the information provided or required to be provided in such notice pursuant to paragraph (a)(2) of this Section 1.5 shall be true and correct both as of the record date for the determination of stockholders entitled to notice of the meeting and as of the date that is ten (10) business days before the meeting or any adjournment or postponement thereof, and such updated and supplemental information shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation (a) in the case of information that is required to be updated and supplemented to be true and correct as of the record date for the determination of stockholders entitled to notice of the meeting, not later than the later of five (5) business days after such record date or five (5) business days after the public announcement of such record date, and (b) in the case of information that is required to be updated and supplemented to be true and correct as of ten (10) business days before the meeting or any adjournment or postponement thereof, not later than eight (8) business days before the meeting or any adjournment or postponement thereof (or if not practicable to provide such updated and supplemental information not later than eight (8) business days before any adjournment or postponement, on the first practicable date before any such adjournment or postponement).

 

(d)            General .

 

(1)            Except as otherwise provided by law or in the Certificate of Incorporation or these Bylaws, only such persons who are nominated in accordance with the procedures set forth in this Section 1.5 shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.5.  Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (i) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.5 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s nominee or proposal in compliance with such stockholder’s representation as required by clause (a)(2)(C)(vi) of this Section 1.5) and (ii) if any proposed nomination or proposed business was not made or proposed in compliance with this Section 1.5, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted.  Notwithstanding the foregoing provisions of this Section 1.5, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present the nomination to the Board of Directors or to present the proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.  For purposes of this Section 1.5, to be considered a qualified representative of the stockholder, a person must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such

 

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stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.

 

(2)            For purposes of this Section 1.5, (i) “ public announcement ” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to the Exchange Act, and (ii) “ business day ” shall mean any day, other than Saturday, Sunday and any day on which banks located in the State of New York are authorized or obligated by applicable law to close.

 

(3)            Notwithstanding the foregoing provisions of this Section 1.5, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 1.5.  Nothing in this Section 1.5 shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of preferred stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation.

 

(4)            For purposes of nominations by stockholders pursuant to this Section 1.5, until the Series B Director Termination Time, (i) only holders of Series B common stock of the Corporation, par value $0.01 per share (the “ Series B Common Stock ”), shall be entitled to nominate persons for election to the Board of Directors as Series B Directors (as defined in the Certificate of Incorporation) in accordance with this Section 1.5, and (ii) only holders of Series A common stock of the Corporation, par value $0.01 per share (the “ Series A Common Stock ”), and holders of Series B Common Stock shall be entitled to nominate persons for election to the Board of Directors as Common Stock Directors (as defined in the Certificate of Incorporation) in accordance with this Section 1.5.

 

Section 1.6             Quorum .

 

Subject to the rights of the holders of any series of preferred stock and except as otherwise provided by law or in the Certificate of Incorporation or these Bylaws, at any meeting of stockholders, the holders of a majority in total voting power of the outstanding shares of stock entitled to vote at the meeting shall be present or represented by proxy in order to constitute a quorum for the transaction of any business; provided , that prior to the Series B Director Termination Time, at any meeting of stockholders, the holders of a majority in total voting power of the outstanding shares of stock entitled to vote at the meeting and the holders of a majority in total voting power of the outstanding shares of Series B Common Stock entitled to vote at the meeting shall be present or represented by proxy in order to constitute a quorum for the transaction of any business.  The chairman of the meeting shall have the power and duty to determine whether a quorum is present at any meeting of the stockholders.  Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided,

 

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however, that the foregoing shall not limit the right of the Corporation or any subsidiary of the Corporation to vote stock, including, but not limited to, its own stock, held by it in a fiduciary capacity.  In the absence of a quorum, the chairman of the meeting may adjourn the meeting from time to time in the manner provided in Section 1.7 hereof until a quorum shall be present.

 

Section 1.7             Adjournment .

 

Any meeting of stockholders, annual or special, may be adjourned from time to time solely by the chairman of the meeting because of the absence of a quorum or for any other reason and to reconvene at the same or some other time, date and place, if any, or by means of remote communication.  Unless otherwise determined by the Board of Directors, the chairman of the meeting shall have the exclusive power and authority to recess or adjourn a stockholder meeting in his or her sole and absolute discretion.  The stockholders present at a meeting shall not have the authority to adjourn the meeting.  If the time, date and place, if any, thereof, and the means of remote communication, if any, by which the stockholders and the proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken and the adjournment is for less than thirty (30) calendar days, no notice need be given of any such adjourned meeting.  If the adjournment is for more than thirty (30) calendar days or if after the adjournment a new record date for determining stockholders entitled to vote at the adjourned meeting is fixed for the adjourned meeting, then notice shall be given to each stockholder entitled to vote at the meeting.  At the adjourned meeting, the stockholders may transact any business that might have been transacted at the original meeting.

 

Section 1.8             Organization .

 

The Chairman of the Board, or in his absence the Chief Executive Officer, or in their absence the President, or in their absence any Vice President, shall call to order meetings of stockholders and preside over and act as chairman of such meetings.  The Board of Directors or, if the Board fails to act, the stockholders, may appoint any stockholder, director or officer of the Corporation to act as chairman of any meeting in the absence of the Chairman of the Board, the Chief Executive Officer, the President and all Vice Presidents.  The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at a meeting shall be determined by the chairman of the meeting and announced at the meeting.  The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate.  Unless otherwise determined by the Board of Directors, the chairman of the meeting shall have the exclusive right and authority to determine the agenda and order of business and to prescribe other such rules, regulations and procedures and shall have the authority in his or her discretion to convene and regulate the conduct of any such meeting.  Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following:  (i) rules and procedures for maintaining order at the meeting and the safety of those present; (ii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iii) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (iv) limitations on the time allotted to questions or comments by

 

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participants.  Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

The Secretary shall act as secretary of all meetings of stockholders, but, in the absence of the Secretary, the chairman of the meeting may appoint any other person to act as secretary of the meeting.

 

Section 1.9             Rescheduling, Postponement or Cancellation of Meeting .

 

Any previously scheduled annual or special meeting of the stockholders may be rescheduled, postponed or canceled by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of stockholders.

 

Section 1.10           Voting .

 

Subject to the rights of the holders of any series of preferred stock and except as otherwise provided by law, the Certificate of Incorporation or these Bylaws and except for the election of directors, at any meeting duly called and held at which a quorum is present, the affirmative vote of a majority of the combined voting power of the outstanding shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders.  Following the Series B Director Termination Time and subject to the rights of the holders of any series of preferred stock, at any meeting duly called and held for the election of directors at which a quorum is present, directors shall be elected by a plurality of the combined voting power of the outstanding shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.

 

Notwithstanding the foregoing, until the Series B Director Termination Time, at any meeting of stockholders of the Corporation duly called and held at which a quorum is present, and at which directors are to be elected, (1) Series B Directors shall be elected by a plurality of the voting power of the outstanding shares of Series B Common Stock, present in person or represented by proxy at the meeting and entitled to vote on the election of directors, voting as a separate class, and (2) Common Stock Directors shall be elected by a plurality of the voting power of the outstanding shares of Series A Common Stock and the outstanding shares of Series B Common Stock, present in person or represented by proxy at the meeting and entitled to vote on the election of directors, voting together as a single class.

 

Section 1.11         List of Stockholders .

 

It shall be the duty of the Secretary or other officer of the Corporation who shall have charge of the stock ledger to prepare and make, at least ten (10) calendar days before every meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the stockholder’s name; provided, however, if the record date for determining the stockholders entitled to vote at the meeting is fewer than ten (10) calendar days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth (10th) calendar

 

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day before the meeting date.  Nothing contained in this Section 1.11 shall require the Corporation to include electronic mail addresses or other electronic contact information on such list.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) calendar days prior to the meeting:  (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation.  If the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation.  If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.  If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible network, and the information required to access such list shall be provided with the notice of the meeting.  The stock ledger shall be the only evidence of the identity of the stockholders entitled to examine such list.

 

Section 1.12         Remote Communications .

 

For purposes of these Bylaws, if authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may adopt, stockholders and proxyholders may, by means of remote communication:

 

(a)            participate in a meeting of stockholders; and

 

(b)            be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrent with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Corporation.

 

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ARTICLE II

 

BOARD OF DIRECTORS

 

Section 2.1             Number and Term of Office .

 

Subject to any limitations set forth in the Certificate of Incorporation and to any provision of the Delaware General Corporation Law relating to the powers or rights conferred upon or reserved to the stockholders or the holders of any class or series of the issued and outstanding stock of the Corporation, the business and affairs of the Corporation shall be managed, and all corporate powers shall be exercised, by or under the direction of the Board of Directors.  The number of directors shall be fixed as set forth in the Certificate of Incorporation.  Directors need not be stockholders of the Corporation.  The Corporation shall nominate the persons serving as Chairman of the Board and Chief Executive Officer for election as directors at any meeting at which such persons are subject to election as directors.

 

Section 2.2             Resignations .

 

Any director of the Corporation, or any member of any committee, may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors, the Chairman of the Board, the Chief Executive Officer, or the President or Secretary.  Any such resignation shall take effect at the time specified therein or, if the time be not specified therein, then upon receipt thereof.  The acceptance of such resignation shall not be necessary to make it effective unless otherwise stated therein.

 

Section 2.3             Removal of Directors .

 

Prior to the Series B Director Termination Time, (i) any or all Series B Directors may be removed from office, with or without cause, only by the affirmative vote (or written consent) of the holders of at least a majority of the total voting power of the then outstanding shares of Series B Common Stock, voting as a separate class, and (ii) any and all Common Stock Directors may be removed from office, with or without cause, only by the affirmative vote of the holders of at least a majority of the total voting power of the outstanding shares of Series A Common Stock and Series B Common Stock (voting as provided in Article IV, Section B.1 of the Certificate of Incorporation), voting together as a single class.  Following the Series B Director Termination Time and subject to the rights of the holders of any series of Preferred Stock, directors may be removed from office only for cause upon the affirmative vote of the holders of at least a majority of the total voting power of the then outstanding Voting Securities entitled to vote thereon, voting together as a single class.

 

Section 2.4             Newly Created Directorships and Vacancies .

 

Newly created directorships and vacancies on the Board shall be filled as provided in the Certificate of Incorporation.

 

Section 2.5             Meetings .

 

Regular meetings of the Board of Directors shall be held on such dates and at such times and places, within or without the State of Delaware, as shall from time to time be determined by the Board of Directors, such determination to constitute the only notice of such regular meetings to which any director shall be entitled.  In the absence of any such

 

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determination, such meeting shall be held, upon notice to each director in accordance with Section 2.6 of these Bylaws, at such times and places, within or without the State of Delaware, as shall be designated in the notice of meeting.

 

Special meetings of the Board of Directors shall be held at such times and places, if any, within or without the State of Delaware, as shall be designated in the notice of the meeting in accordance with Section 2.6 hereof.  Special meetings of the Board of Directors may be called by the Chairman of the Board, and shall be called by the Chief Executive Officer, President or Secretary upon the written request of not less than the Applicable Percentage of the members of the entire Board of Directors. Notwithstanding (and not in limitation of) the foregoing, at any time prior to the Series B Director Termination Time, any Series B Director may call a special meeting of the Board of Directors for the purpose of voting on an Expedia Board Voting Determination (as defined in the Certificate of Incorporation) or filling a vacancy in any Series B Director directorship, in each case as provided in the Certificate of Incorporation.

 

Section 2.6             Notice of Meetings .

 

The Secretary, or in his absence any other officer of the Corporation, shall give each director notice of the time and place of holding of any regular meetings (if required) or special meetings of the Board of Directors, in accordance with Section 5.4 of these Bylaws, by mail at least ten (10) calendar days before the meeting, or by courier service at least three (3) calendar days before the meeting, or by facsimile transmission, electronic mail or other electronic transmission, or personal service, in each case, at least twenty-four (24) hours before the meeting, unless notice is waived in accordance with Section 5.4 of these Bylaws.  Unless otherwise stated in the notice thereof, any and all business may be transacted at any meeting without specification of such business in the notice.

 

Section 2.7             Meetings by Conference Telephone or Other Communications .

 

Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of telephone conference or other communications equipment by means of which all persons participating in the meeting can hear each other and communicate with each other, and such participation in a meeting by such means shall constitute presence in person at such meeting.

 

Section 2.8             Quorum and Organization of Meetings ; Committees .

 

A majority of the total number of members of the Board of Directors as constituted from time to time shall constitute a quorum for the transaction of business, but, if at any meeting of the Board of Directors (whether or not adjourned from a previous meeting) there shall be less than a quorum present, a majority of those present may adjourn the meeting to another time, date and place, and the meeting may be held as adjourned without further notice or waiver; provided , that at any meeting of the Board of Directors prior to the Series B Director Termination Time at which any Expedia Board Voting Determination or any Splitco Director Determination (as defined in the Certificate of Incorporation) will be determined, directors representing a majority of the votes entitled to be cast on such Expedia Board Voting

 

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Determination (provided that a quorum to act with respect to an Expedia Board Voting Determination may be constituted only at a time when there is at least one Series B Director in office) or Splitco Director Determination shall constitute a quorum for the transaction of such business but, if at any such meeting of the Board of Directors (whether or not adjourned from a previous meeting) there shall be less than a quorum present, those directors holding a majority of the votes to be cast on such matter may adjourn the meeting to another time, date and place, and the meeting may be held as adjourned without further notice or waiver.  Meetings shall be presided over by the Chairman of the Board or in his absence by such other person as the directors may select.  The Board of Directors shall keep written minutes of its meetings.  The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

 

Except as otherwise required (x) by law or (y) by the Certificate of Incorporation (including, without limitation, with respect to voting on any matter that is an Expedia Board Voting Determination or a Splitco Director Determination) or these Bylaws, a majority of the directors (without regard to the classification of such directors as a Series B Director, a Common Stock Director or a Preferred Stock Director (as defined in the Certificate of Incorporation)) present at any meeting at which a quorum is present may decide any question brought before such meeting.  The taking of any board action relating to an Expedia Board Voting Determination or a Splitco Director Determination shall be subject to the requirements set forth in the Certificate of Incorporation, which are incorporated by reference herein as if fully set forth herein.

 

In addition to the Series B Director Committee and the Common Stock Director Committee, the Board may designate one (1) or more committees, each committee to consist of one (1) or more of the directors of the Corporation.  The Board may designate one (1) or more Directors as alternate members of any committee to replace absent or disqualified members at any meeting of such committee, provided that, prior to the Series B Director Termination Time, (i) only the Series B Director Committee shall have the power to designate one or more Directors as alternate members of such Series B Director Committee, and (ii) only the Common Stock Director Committee shall have the power to designate one (1) or more Directors as alternate members of such Common Stock Director Committee.  If a member of a committee shall be absent from any meeting, or disqualified from voting thereat, the remaining member or members present and not disqualified from voting, whether or not such member or members constitute a quorum, may, by a unanimous vote, appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member.  Any such committee, to the extent provided in a resolution of the Board of Directors passed as aforesaid, except as otherwise provided in Sections 2.9 and 2.10 of these Bylaws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be impressed on all papers that may require it, but no such committee shall have the power or authority of the Board of Directors in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the laws of the State of Delaware to be submitted to the stockholders for approval or (ii) adopting, amending or repealing any Bylaw of the Corporation.  Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.  Unless otherwise specified in the

 

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resolution of the Board of Directors designating a committee (and in any case with respect to the Series B Director Committee), at all meetings of such committee a majority of the total number of members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of the committee.  Each committee shall keep regular minutes of its meetings.  Unless the Board of Directors otherwise provides (and in any case with respect to the Series B Director Committee), each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business.  In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these Bylaws.

 

Prior to the Series B Director Termination Time, there shall be a standing committee of the Board of Directors whose members shall be all of the Series B Directors then in office (the “ Series B Director Committee ”). The Series B Director Committee shall, to the fullest extent permitted by law and the Certificate of Incorporation, have the power and authority to take all such actions as are specified in the Certificate of Incorporation or these Bylaws as to be taken by the Series B Directors (or a committee consisting solely of Series B Directors) and such other powers as may be delegated to such committee from time to time by resolution adopted by the Board of Directors.  In connection with each annual or special meeting of stockholders of the Corporation from the Effective Time (as defined in the Certificate of Incorporation) until the Series B Director Termination Time at which Common Stock Directors or Series B Directors are to be elected (each such annual or special meeting, an “ Election Meeting ”), the Series B Director Committee shall have the power and authority to propose persons for nomination for election as Series B Directors to the Nominating and Corporate Governance Committee (and if the Series B Director Committee does not propose any nominees, such committee will be deemed to have proposed the incumbent Series B Directors for re-election).

 

Prior to the Series B Director Termination Time, there shall be a standing committee of the Board of Directors whose members shall be all of the Common Stock Directors then in office (the “ Common Stock Director Committee ”). The Common Stock Director Committee shall, to the fullest extent permitted by law, have the power and authority to take all such actions as are specified in the Certificate of Incorporation or these Bylaws as to be taken by the Common Stock Directors (or a committee consisting solely of Common Stock Directors) and such other powers as may be delegated to such committee from time to time by resolution adopted by the Board of Directors.  In connection with each Election Meeting from the Effective Time until the Series B Director Termination Time, the Common Stock Director Committee shall have the power and authority to propose persons for nomination for election as Common Stock Directors to the Nominating and Corporate Governance Committee (and if the Common Stock Director Committee does not propose any nominees, such committee will be deemed to have proposed the incumbent Common Stock Directors for re-election.)

 

The Series B Director Committee and the Common Stock Director Committee shall give written notice to the Nominating and Corporate Governance Committee of each such proposed nominee no later than the date that is one hundred (100) calendar days prior to the anniversary of the date of the immediately preceding Election Meeting; provided , that with

 

14



 

respect to the Series B Directors, such directors will stand for election at every second (2 nd ) Election Meeting.  For purposes of the foregoing determinations with respect to the first Election Meeting following the Effective Time, the date of the immediately preceding annual meeting will be the date of the Effective Time.

 

Section 2.9             Executive Committee of the Board of Directors .

 

The Board of Directors, by the affirmative vote of not less than the Applicable Percentage of the members of the entire Board, may designate an executive committee, all of whose members shall be directors, to manage and operate the affairs of the Corporation or particular properties or enterprises of the Corporation, provided that, prior to the Series B Director Termination Time, such executive committee shall not have the authority to take action with respect to any Expedia Board Voting Determination, any Splitco Director Determination or any action specified under these Bylaws or the Certificate of Incorporation to be taken by the Series B Directors or the Series B Director Committee.  Subject to the limitations of the law of the State of Delaware and the Certificate of Incorporation and the proviso in the foregoing sentence, such executive committee shall exercise all powers and authority of the Board of Directors in the management of the business and affairs of the Corporation including, but not limited to, the power and authority to authorize the issuance of shares of common or preferred stock.  The executive committee shall keep minutes of its meetings and report to the Board of Directors not less often than quarterly on its activities and shall be responsible to the Board of Directors for the conduct of the enterprises and affairs entrusted to it.  Regular meetings of the executive committee, of which no notice shall be necessary, shall be held at such time, dates and places, if any, as shall be fixed by resolution adopted by the executive committee.  Special meetings of the executive committee shall be called at the request of the Chief Executive Officer or of any member of the executive committee, and shall be held upon such notice as is required by these Bylaws for special meetings of the Board of Directors, provided that oral notice by telephone or otherwise, or notice by electronic transmission shall be sufficient if received not later than the day immediately preceding the day of the meeting.

 

Section 2.10           Other Committees of the Board of Directors .

 

The Board of Directors may by resolution establish committees other than an executive committee, the Common Stock Director Committee and the Series B Director Committee and shall specify with particularity the powers and duties of any such committee.  Subject to the limitations of the laws of the State of Delaware and the Certificate of Incorporation, any such committee shall exercise all powers and authority specifically granted to it by the Board of Directors, which powers may include the authority to authorize the issuance of shares of common or preferred stock, provided that, prior to the Series B Director Termination Time, (i) no such committee other than a committee consisting solely of Series B Directors shall be authorized to take any action specified under these Bylaws or the Certificate of Incorporation to be taken by the Series B Directors or the Series B Director Committee, (ii) no such committee other than a committee consisting solely of Common Stock Directors shall be authorized to take any action specified under these Bylaws or the Certificate of Incorporation to be taken by the Common Stock Directors or the Common Stock Director Committee and (iii) no such committee shall be authorized to take any action with respect to any Expedia Board Voting Determination.

 

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Such committees (other than the Series B Director Committee and the Common Stock Director Committee, as specified in the Certificate of Incorporation) shall serve at the pleasure of the Board of Directors, and all such committees will keep minutes of their meetings and have such names as the Board of Directors by resolution may determine and shall be responsible to the Board of Directors for the conduct of the enterprises and affairs entrusted to them.

 

Section 2.11           Directors’ Compensation .

 

Directors shall receive such compensation for attendance at any meetings of the Board and any expenses incidental to the performance of their duties as the Board of Directors shall determine by resolution.  Such compensation may be in addition to any compensation received by the members of the Board of Directors in any other capacity.

 

Section 2.12           Action Without Meeting .

 

Nothing contained in these Bylaws shall be deemed to restrict the power of members of the Board of Directors or any committee designated by the Board of Directors to take any action required or permitted to be taken by them without a meeting; provided , however , that if such action is taken without a meeting by consent by electronic transmission or transmissions, such electronic transmission or transmissions must either set forth or be submitted with information from which it can be determined that the electronic transmission or transmissions were authorized by the director.

 

Section 2.13           Chairman of the Board of Directors.

 

The Board of Directors shall elect a Chairman of the Board from among the members of the Board of Directors.  The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors, at which he is present, and perform such other duties and exercise such other powers as from time to time may be assigned to him by these Bylaws or by the Board of Directors.

 

ARTICLE III

 

OFFICERS

 

Section 3.1             Executive Officers .

 

The Board of Directors shall elect a Chief Executive Officer and a President.  The Board of Directors may also elect such Vice Presidents as in the opinion of the Board of Directors the business of the Corporation requires, a Treasurer and a Secretary, any of whom may or may not be directors.  The Board of Directors may also elect, from time to time, such other or additional officers as in its opinion are desirable for the conduct of business of the Corporation and such officers shall hold office at the pleasure of the Board of Directors;

 

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provided, however, that the Chief Executive Officer shall not hold any other office except that the Chief Executive Officer may serve as President.

 

Section 3.2             Powers and Duties of Officers .

 

The Chief Executive Officer shall have overall responsibility for the management and direction of the business and affairs of the Corporation and shall exercise such duties as customarily pertain to the office of chief executive officer and such other duties as may be prescribed from time to time by the Board of Directors.  He shall be the senior officer of the Corporation and in case of the inability or failure of the President to perform his duties, he shall perform the duties of the President.  In the absence or disability of the Chairman of the Board, the Chief Executive Officer shall perform the duties and exercise the powers of the Chairman of the Board.  He may appoint and terminate the appointment or election of officers, agents or employees other than those appointed or elected by the Board of Directors.  He may sign, execute and deliver, in the name of the Corporation, powers of attorney, contracts, bonds and other obligations.  The Chief Executive Officer shall perform such other duties as may be prescribed from time to time by the Board of Directors or these Bylaws.

 

The President of the Corporation shall be under the direction of the Chief Executive Officer and shall exercise such powers and duties as may be delegated by the Chief Executive Officer and such other duties as may be prescribed from time to time by the Board of Directors or assigned to him or her by these Bylaws.  The President may sign, execute and deliver, in the name of the Corporation, powers of attorney, contracts, bonds and other obligations.

 

Vice Presidents shall have such powers and perform such duties as may be assigned to them by the Chief Executive Officer, the President, the executive committee, if any, or the Board of Directors.  A Vice President may sign and execute contracts and other obligations pertaining to the regular course of his duties which implement policies established by the Board of Directors.

 

Unless the Board of Directors otherwise declares by resolution, the Treasurer shall have general custody of all the funds and securities of the Corporation and general supervision of the collection and disbursement of funds of the Corporation.  He shall endorse for collection on behalf of the Corporation checks, notes and other obligations, and shall deposit the same to the credit of the Corporation in such bank or banks or depository as the Board of Directors may designate.  He may sign, with the Chief Executive Officer, President or such other person or persons as may be designated for the purpose by the Board of Directors, all bills of exchange or promissory notes of the Corporation.  He shall enter or cause to be entered regularly in the books of the Corporation a full and accurate account of all moneys received and paid by him on account of the Corporation, shall at all reasonable times exhibit his books and accounts to any director of the Corporation upon application at the office of the Corporation during business hours and, whenever required by the Board of Directors, the Chief Executive Officer, or the President, shall render a statement of his accounts.  He shall perform such other duties as may be prescribed from time to time by the Board of Directors or by these Bylaws.  He may be required to give bond for the faithful performance of his duties in such sum and with such surety as shall

 

17



 

be approved by the Board of Directors.  Any Assistant Treasurer shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

 

The Secretary shall keep the minutes of all meetings of the stockholders and of the Board of Directors.  The Secretary shall cause notice to be given of meetings of stockholders, of the Board of Directors, and of any committee appointed by the Board of Directors.  He shall have custody of the corporate seal, minutes and records relating to the conduct and acts of the stockholders and Board of Directors, which shall, at all reasonable times, be open to the examination of any director.  The Secretary or any Assistant Secretary may certify the record of proceedings of the meetings of the stockholders or of the Board of Directors or resolutions adopted at such meetings, may sign or attest certificates, statements or reports required to be filed with governmental bodies or officials, may sign acknowledgments of instruments, may give notices of meetings and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

 

Section 3.3             Bank Accounts .

 

In addition to such bank accounts as may be authorized in the usual manner by resolution of the Board of Directors, the Treasurer, with approval of the Chief Executive Officer or the President, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he may deem necessary or appropriate, provided payments from such bank accounts are to be made upon and according to the check of the Corporation, which may be signed jointly or singularly by either the manual or facsimile signature or signatures of such officers or bonded employees of the Corporation as shall be specified in the written instructions of the Treasurer or Assistant Treasurer of the Corporation with the approval of the Chief Executive Officer or the President of the Corporation.

 

Section 3.4             Proxies; Stock Transfers .

 

Unless otherwise provided in the Certificate of Incorporation or directed by the Board of Directors, the Chief Executive Officer or the President or any Vice President or their designees shall have full power and authority on behalf of the Corporation to attend and to vote upon all matters and resolutions at any meeting of stockholders of any corporation in which this Corporation may hold stock, and may exercise on behalf of this Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, whether regular or special, and at all adjournments thereof, and shall have power and authority to execute and deliver proxies and consents on behalf of this Corporation in connection with the exercise by this Corporation of the rights and powers incident to the ownership of such stock, with full power of substitution or revocation.  Unless otherwise provided in the Certificate of Incorporation or directed by the Board of Directors, the Chief Executive Officer or the President or any Vice President or their designees shall have full power and authority on behalf of the Corporation to transfer, sell or dispose of stock of any corporation in which this Corporation may hold stock.

 

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ARTICLE IV

 

CAPITAL STOCK

 

Section 4.1             Shares .

 

The shares of the Corporation shall be represented by a certificate or may be uncertificated.  Certificates shall be signed by the Chief Executive Officer or the President and by the Secretary or the Treasurer, and may be sealed with the seal of the Corporation.  Such seal may be a facsimile, engraved or printed.  Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the Delaware General Corporation Law or a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights.

 

Any of or all the signatures on a certificate may be facsimile.  In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such an officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such officer, transfer agent or registrar had not ceased to hold such position at the time of its issuance.

 

Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

 

Section 4.2             Transfer of Shares .

 

(a)            Upon surrender to the Corporation or the transfer agent of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.  Upon receipt of proper transfer instructions from the registered owner of uncertificated shares such uncertificated shares shall be cancelled, and the issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the Corporation.

 

(b)            The person in whose name shares of stock stand on the books of the Corporation shall be deemed by the Corporation to be the owner thereof for all purposes, and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

 

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Section 4.3             Lost Certificates .

 

The Board of Directors or any transfer agent of the Corporation may direct a new certificate or certificates or uncertificated shares representing stock of the Corporation to be issued in place of any certificate or certificates theretofore issued by the Corporation, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed.  When authorizing such issue of a new certificate or certificates or uncertificated shares, the Board of Directors (or any transfer agent of the Corporation authorized to do so by a resolution of the Board of Directors) may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to give the Corporation a bond in such sum as the Board of Directors (or any transfer agent so authorized) shall direct to indemnify the Corporation and the transfer agent against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed or the issuance of such new certificates or uncertificated shares, and such requirement may be general or confined to specific instances.

 

Section 4.4             Transfer Agent and Registrar .

 

The Board of Directors may appoint one or more transfer agents and one or more registrars, and may require all certificates for shares to bear the manual or facsimile signature or signatures of any of them.

 

Section 4.5             Regulations .

 

The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer, registration, cancellation and replacement of certificates representing stock of the Corporation or uncertificated shares, which rules and regulations shall comply in all respects with applicable law and the rules and regulations of the transfer agent.

 

ARTICLE V

 

GENERAL PROVISIONS

 

Section 5.1             Offices .

 

The Corporation shall maintain a registered office in the State of Delaware as required by the laws of the State of Delaware.  The Corporation may also have offices in such other places, either within or without the State of Delaware, as the Board of Directors may from time to time designate or as the business of the Corporation may require.

 

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Section 5.2             Corporate Seal .

 

The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization, and the words “Corporate Seal” and “Delaware.”

 

Section 5.3             Fiscal Year .

 

The fiscal year of the Corporation shall be determined by resolution of the Board of Directors.

 

Section 5.4             Notices and Waivers Thereof .

 

Whenever any notice is required by the laws of the State of Delaware, the Certificate of Incorporation or these Bylaws to be given by the Corporation to any stockholder, director or officer, such notice, except as otherwise provided by law, may be given personally, or by mail, or, in the case of directors or officers, or stockholders who consent thereto, by electronic transmission in accordance with applicable law.  Any notice given by electronic transmission shall be deemed to have been given when it shall have been transmitted and any notice given by mail shall be deemed to have been given when deposited in the United States mail with postage thereon prepaid directed to such stockholder, director, or officer, as the case may be, at such stockholder’s, director’s, or officer’s, as the case may be, address as it appears in the records of the Corporation.  An affidavit of the Secretary or Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given by personal delivery, by mail, or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

Whenever any notice is required to be given by law, the Certificate of Incorporation, or these Bylaws to the person entitled to such notice, a waiver thereof, in writing signed by the person, or by electronic transmission, whether before or after the meeting or the time stated therein, shall be deemed equivalent in all respects to such notice to the full extent permitted by law.  If such waiver is given by electronic transmission, the electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the person waiving notice.  In addition, notice of any meeting of the Board of Directors, or any committee thereof, need not be given to any director if such director shall sign the minutes of such meeting or attend the meeting, except that if such director attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened, then such director shall not be deemed to have waived notice of such meeting.

 

Section 5.5             Saving Clause .

 

These Bylaws are subject to the provisions of the Certificate of Incorporation and applicable law.  In the event any provision (or part thereof) of these Bylaws is inconsistent with the Certificate of Incorporation or the corporate laws of the State of Delaware, such provision (or part thereof) shall be invalid to the extent only of such conflict, and such conflict shall not affect the validity of any other provision of these Bylaws.

 

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Section 5.6             Amendments .

 

In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors, by action taken by the affirmative vote of not less than the Applicable Percentage of the members of the entire Board, is hereby expressly authorized and empowered to adopt, amend or repeal any provision of the Bylaws of this Corporation.

 

Subject to the rights of the holders of any series of preferred stock, these Bylaws may be adopted, amended or repealed by the affirmative vote of the holders of not less than 70% of the total voting power of the then outstanding capital stock of the Corporation entitled to vote thereon; provided, however, that this paragraph shall not apply to, and no vote of the stockholders of the Corporation shall be required to authorize, the adoption, amendment or repeal of any provision of the Bylaws by the Board of Directors in accordance with the preceding paragraph.

 

Prior to the Series B Director Termination Time, the provisions of Section 2.8 of these Bylaws relating to the Series B Director Committee may not be amended without the approval of a majority of the Series B Directors then in office at such time as there is at least one (1) Series B Director in office.

 

Section 5.7           Gender/Number .

 

As used in these Bylaws, the masculine, feminine, or neuter gender, and the singular and plural number, shall include the other whenever the context so indicates.

 

Section 5.8           Electronic Transmission .

 

For purposes of these Bylaws, “ electronic transmission ” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such recipient through an automated process.

 

Section 5.9            Forum Selection

 

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, any state or federal court located within the State of Delaware) shall, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants, be the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of the Corporation, (2) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, (3) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware, or (4) any action asserting a claim governed by the internal affairs doctrine.  Any person or entity

 

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purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 5.9.

 

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EXHIBIT 4.1

 

Number
A-

Incorporated Under the Laws of the State of Delaware

Shares
-0-

 

 

 

 

 

Cusip No.

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

Series A Common Stock, par value $0.01 per share

 

Specimen Certificate

 

This Certifies that [                    ] is the owner of [                    ] FULLY PAID AND NON-ASSESSABLE SHARES OF SERIES A COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF LIBERTY EXPEDIA HOLDINGS, INC. (hereinafter called the “Corporation”) transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of the Certificate properly endorsed. This Certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar.

 

Witness, the seal of the Corporation and the signatures of its duly authorized officers.

 

Dated:

 

Liberty Expedia Holdings, Inc.

 

[Corporate Seal]

 

 

 

 

 

 

 

 

President

 

Secretary

 




EXHIBIT 4.2

 

Number
B-

Incorporated Under the Laws of the State of Delaware

Shares
-0-

 

 

 

 

 

Cusip No.

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

Series B Common Stock, par value $0.01 per share

 

Specimen Certificate

 

This Certifies that [                    ]  is the owner of [                    ] FULLY PAID AND NON-ASSESSABLE SHARES OF SERIES B COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF LIBERTY EXPEDIA HOLDINGS, INC. (hereinafter called the “Corporation”) transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of the Certificate properly endorsed. This Certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar.

 

Witness, the seal of the Corporation and the signatures of its duly authorized officers.

 

Dated:

 

Liberty Expedia Holdings, Inc.

 

[Corporate Seal]

 

 

 

 

 

 

 

President

 

Secretary

 




Exhibit 5.1

 

 

 

September 22, 2016

 

Liberty Expedia Holdings, Inc.

12300 Liberty Boulevard

Englewood, Colorado 80112

 

Ladies and Gentlemen:

 

As counsel for Liberty Expedia Holdings, Inc., a Delaware corporation, (the “ Company ”), we have examined and are familiar with the Registration Statement on Form S-4, as amended (File No. 333-210377) (the “ Registration Statement ”), filed with the Securities and Exchange Commission for the purpose of registering under the Securities Act of 1933, as amended (the “ Securities Act ”), shares (the “ Series A Shares ”) of the Company’s Series A common stock, par value $0.01 per share (the “ Series A Common Stock ”), and shares (the “ Series B Shares ” and together with the Series A Shares, the “ Shares ”) of the Company’s Series B common stock, par value $0.01 per share (the “ Series B Common Stock ” and together with the Series A Common Stock, the “ Common Stock ”), to be issued by the Company in connection with the redemption by Liberty Interactive Corporation (“ Liberty ”)  of a portion of the outstanding shares of its Series A Liberty Ventures common stock, par value $0.01 per share (“ LVNTA ”), and Series B Liberty Ventures common stock, par value $0.01 per share (“ LVNTB ”), for all of the outstanding Shares, which will result in the separation of the Company (the “ Split-Off ”) from Liberty, in accordance with and as more fully set forth in the prospectus forming part of the Registration Statement. The Company will enter into a Reorganization Agreement with Liberty, a form of which is included as Exhibit 2.1 to the Registration Statement, which provides for, among other things, the Split-Off.

 

Subject to the satisfaction or, if applicable, waiver of the conditions to the Split-Off, Liberty will redeem, on a pro rata basis and on the date designated by Liberty’s board of directors (the “ Redemption Date ”), (i) 0.4 of each outstanding share of LVNTA for 0.4 of a Series A Share, with 0.6 of each share of LVNTA remaining outstanding as Liberty Ventures common stock, and (ii) 0.4 of each outstanding share of LVNTB for 0.4 of a Series B Share, with 0.6 of each share of LVNTB remaining outstanding as Liberty Ventures common stock, subject, in each case, to the payment of cash in lieu of any fractional shares.

 

In connection with rendering our opinion, we have examined, among other things, originals, certified copies or copies otherwise identified to us as being copies of originals, of (i) the form of the Restated Certificate of Incorporation of the Company to be in effect upon its filing with the Secretary of State of the State of Delaware on the Redemption Date; (ii) the form of Bylaws of the Company to be in effect on the Redemption Date; (iii) the form of stock certificates representing the Series A Common Stock and the Series B Common Stock included as Exhibits 4.1 and 4.2 to the Registration Statement, respectively; (iv) records of proceedings of the boards of directors of the Company and Liberty; and (v) such other documents, records and

 



 

certificates of public officials as we deemed necessary or appropriate for the purpose of rendering this opinion. In rendering this opinion, we have relied, to the extent we deem such reliance appropriate, on certificates of officers of the Company and Liberty as to factual matters regarding the Company and the transactions described in the Registration Statement that were not readily ascertainable by us. We have assumed the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as copies.

 

On the basis of such examination and review, we advise you that, in our opinion, upon the issuance and delivery of the Shares in accordance with the terms of the Split-Off as described in the prospectus forming part of the Registration Statement, the Shares will be duly authorized, fully paid, validly issued and non-assessable.

 

This opinion is limited to the corporate laws of the state of Delaware and the laws of the United States of America. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to us under the heading “Additional Information—Legal Matters” in the Registration Statement. In giving the foregoing consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission promulgated thereunder .

 

 

 

Sincerely,

 

 

 

/s/ Baker Botts L.L.P.

 

 

 

BAKER BOTTS L.L.P.

 

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Exhibit 8.1

 

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

FOUR TIMES SQUARE

 

NEW YORK 10036-6522

 


 

TEL: (212) 735-3000

FAX: (212) 735-2000

www.skadden.com

 

            [ · ], 2016

FIRM/AFFILIATE

OFFICES


 

BOSTON

CHICAGO

HOUSTON

LOS ANGELES

PALO ALTO

WASHINGTON, D.C.

WILMINGTON


 

BEIJING

BRUSSELS

FRANKFURT

HONG KONG

LONDON

MOSCOW

MUNICH

PARIS

SÃO PAULO

SEOUL

SHANGHAI

SINGAPORE

SYDNEY

TOKYO

TORONTO

 

Liberty Interactive Corporation

12300 Liberty Boulevard

Englewood, Colorado 80112

 

Ladies and Gentlemen:

 

We have acted as special tax counsel to you, Liberty Interactive Corporation (“ Liberty ”), in connection with specified aspects of (i) the internal restructuring of certain assets owned by Liberty and its subsidiaries (the “ Contributed Assets ”), (ii) the contribution of the Contributed Assets by Liberty to Liberty Expedia Holdings, Inc. (“ SplitCo ”), a newly formed subsidiary of Liberty (the “ Contribution ”), (iii) the recapitalization of SplitCo’s outstanding stock into Series A common stock and Series B common stock (collectively, “ SplitCo Common Stock ”), and (iv) the distribution by Liberty of all of the outstanding shares of SplitCo Common Stock to holders of Liberty’s Liberty Ventures common stock (“ Liberty Ventures Common Stock ”) in exchange for a pro rata portion of such stock (the “ Split-off ”).  You have requested our opinion regarding certain U.S. federal income tax consequences of the Contribution and the Split-off (the “ Opinion ”).(1)

 

In rendering this Opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of (i) the letter furnished to Liberty by its financial advisor with respect to the Split-off, dated as of [•], 2016; (ii) the registration statement on Form S-1 filed by SplitCo with the Securities and Exchange Commission (the “ SEC ”) on March 24, 2016, together with the exhibits

 


(1)          All “section” references in this Opinion are to the Internal Revenue Code of 1986, as amended (the “ Code ”), or to the Treasury Department regulations promulgated thereunder (the “ Treasury Regulations ”).

 



 

attached thereto, and Amendment No. 1 to Form S-1 on Form S-4 filed by SplitCo with the SEC on June 10, 2016, together with the exhibits attached thereto, as further amended through the date hereof (collectively, the “ Registration Statement ”); (iii) the definitive proxy statement on Schedule 14A filed by Liberty with the SEC on June 10, 2016, together with the exhibits attached thereto, as amended through the date hereof (together with the Registration Statement, the “ Split-off SEC Filings ”); (iv) all other submissions to the SEC related to the Split-off SEC Filings; (v) the agreements listed on Schedule A attached hereto (collectively, the “ Agreements ”); (vi) the officer’s certificate furnished to us by Liberty, dated as of the date hereof, together with the exhibits attached thereto (the “ Liberty Officer’s Certificate ”); (vii) the officer’s certificate furnished to us by SplitCo, dated as of the date hereof, together with the exhibits attached thereto (the “ SplitCo Officer’s Certificate ,” and together with the Liberty Officer’s Certificate, the “ Officer’s Certificates ”); (viii) the representation letter furnished to us by Mr. John C. Malone, dated as of the date hereof (the “ Malone Representation Letter ”); and (ix) such other documents as we have considered necessary or appropriate as a basis for this Opinion.  In our examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to originals of all documents submitted to us as certified, photostatic, electronic, or facsimile copies, and the authenticity of the originals of such documents.

 

As to certain facts material to this Opinion, we have relied upon the statements and representations set forth in the Officer’s Certificates and the Malone Representation Letter.  We have assumed that such statements and representations are true, correct, and complete as of the date hereof and will continue to be true, correct, and complete without regard to any qualification as to knowledge, belief, or otherwise.  We have also assumed that the Contribution, the Split-off, and the other transactions contemplated by the Agreements will be consummated in accordance with their terms and in the manner described in the Split-off SEC Filings and the Agreements, and that none of the material terms or conditions contained therein will be waived or modified in any respect.  This Opinion is expressly conditioned upon, among other things, the initial and continuing accuracy of the facts, information, covenants, representations, and warranties set forth in the documents referred to above, including those contained in the Officer’s Certificates and the Malone Representation Letter.  Any change or inaccuracy in or to such facts, information, covenants, representations, or warranties (including on account of events occurring after the consummation of the Split-off) could affect one or more of the conclusions stated herein.

 

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This Opinion is based on the Code, the Treasury Regulations, judicial decisions, published rulings and procedures of the Internal Revenue Service, and such other authorities as we have considered relevant, all as in effect on the date hereof.  It should be noted that the authorities upon which this Opinion is based are subject to change at any time, possibly with retroactive effect.  Any change in such authorities could affect one or more of the conclusions expressed herein.  Moreover, there can be no assurance that this Opinion will be accepted by the Service or, if challenged, by a court.

 

Based upon and subject to the foregoing, it is our opinion that, under current U.S. federal income tax law:

 

1.                                       The Contribution, followed by the Split-off, will qualify as a reorganization under section 368(a)(1)(D).  Liberty and SplitCo will each be a “party to the reorganization” within the meaning of section 368(b).

 

2.                                       Liberty will not recognize any gain or loss on the Contribution.  Sections 361(a) and (b)(1)(A) and 357(a).

 

3.                                       SplitCo will not recognize any gain or loss on the Contribution.  Section 1032(a).

 

4.                                       SplitCo’s basis in each asset received from Liberty in the Contribution will be equal to Liberty’s basis in such asset immediately before the Contribution.  Section 362(b).

 

5.                                       SplitCo’s holding period in each asset received from Liberty in the Contribution will include Liberty’s holding period in such asset.  Section 1223(2).

 

6.                                       Liberty will not recognize any gain or loss on the Split-off.  Section 361(c).

 

7.                                       Except with respect to cash received in lieu of fractional shares of SplitCo Common Stock, holders of Liberty Ventures Common Stock will not recognize any gain or loss, and will not otherwise be required to include any amount in income, upon the exchange of Liberty Ventures Common Stock for SplitCo Common Stock in the Split-off.  Section 355(a)(1).

 

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8.                                       The aggregate basis of the SplitCo Common Stock received by each holder of Liberty Ventures Common Stock in the Split-off will be the same as the shareholder’s aggregate basis in the Liberty Ventures Common Stock surrendered in exchange for such SplitCo Common Stock.  Section 358(a)(1).

 

9.                                       The holding period of the SplitCo Common Stock received by each holder of Liberty Ventures Common Stock in the Split-off will include the holding period of the Liberty Ventures Common Stock surrendered in exchange for such SplitCo Common Stock, provided that the shareholder holds such Liberty Ventures Common Stock as a capital asset on the date of the Split-off.  Section 1223(1).

 

*                                               *                                               *

 

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Except as set forth above, we express no opinion or other views regarding the tax consequences of the Contribution, the Split-off, or any related transactions.  This Opinion relates solely to certain U.S. federal income tax consequences of the Contribution and the Split-off, and no opinion is expressed as to the tax consequences of the Contribution and the Split-off under any state, local, or foreign tax laws or under any federal tax laws other than those pertaining to income taxation.  This Opinion is expressed as of the date hereof, and we are under no obligation to supplement or revise this Opinion to reflect any legal developments or factual matters or changes arising after the date hereof.

 

We are furnishing this Opinion to you solely in connection with the Contribution, the Split-off, and the Registration Statement.  We hereby consent to the use of our name under the caption “U.S. Federal Income Tax Consequences of the Split-off” in the Registration Statement and to the filing of this Opinion as an exhibit to the Registration Statement.  In giving this consent, we do not admit that we come within the category of persons whose consent is required under section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the SEC thereunder.

 

 

 

Very truly yours,

 

 

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Schedule A

 

1.                                       Reorganization Agreement, dated as of [ · ], 2016, by and between Liberty Interactive Corporation and Liberty Expedia Holdings, Inc.

 

2.                                       Tax Sharing Agreement, dated as of [ · ], 2016, by and between Liberty Interactive Corporation and Liberty Expedia Holdings, Inc.

 

3.                                       Services Agreement, dated as of [ · ], 2016, by and between Liberty Media Corporation and Liberty Expedia Holdings, Inc.

 

4.                                       Facilities Sharing Agreement, dated as of [ · ], 2016, by and among Liberty Expedia Holdings, Inc., Liberty Media Corporation, and Liberty Property Holdings, Inc.

 

5.                                       Aircraft Time Sharing Agreement, dated as of [ · ], 2016, by and between Liberty Media Corporation and Liberty Expedia Holdings, Inc.

 

6.                                       Aircraft Time Sharing Agreement, dated as of [ · ], 2016, by and between Liberty Media Corporation and Liberty Expedia Holdings, Inc.

 

7.                                       Aircraft Time Sharing Agreement, dated as of [ · ], 2016, by and among Liberty Citation, Inc., Liberty Denver Arena, LLC, and Liberty Expedia Holdings, Inc.

 

8.                                       Amended and Restated Transaction Agreement, dated as of September 22, 2016, by and among Liberty Interactive Corporation, Liberty Expedia Holdings, Inc., Barry Diller, John C. Malone, and Leslie Malone, and the schedules and exhibits attached thereto.

 

9.                                       Amended and Restated Reimbursement Agreement, dated as of September 22, 2016, by and among Liberty Interactive Corporation, Liberty Expedia Holdings, Inc., and Expedia, Inc., and the exhibits attached thereto.

 

10.                                Amended and Restated Governance Agreement, dated as of December 20, 2011, by and among Expedia, Inc., Liberty Interactive Corporation, and Barry Diller.

 

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11.                                Amended and Restated Stockholders Agreement, dated as of December 20, 2011, by and between Liberty Interactive Corporation and Barry Diller.

 

2




Exhibit 10.1

 

FORM OF LIBERTY EXPEDIA HOLDINGS, INC.
2016 OMNIBUS INCENTIVE PLAN

 

ARTICLE I

 

PURPOSE OF PLAN; EFFECTIVE DATE

 

1.1                                Purpose .  The purpose of the Plan is to promote the success of the Company by providing a method whereby (i)  eligible officers and employees of the Company and its Subsidiaries, (ii) directors and independent contractors, and (iii) employees of Liberty Media Corporation or Liberty Interactive Corporation, in each case, providing services to the Company and its Subsidiaries, may be awarded additional remuneration for services rendered and may be encouraged to invest in capital stock of the Company, thereby increasing their proprietary interest in the Company’s businesses, encouraging them to remain in the employ or service of the Company or its Subsidiaries, and increasing their personal interest in the continued success and progress of the Company and its Subsidiaries.  The Plan is also intended to aid in (i) attracting Persons of exceptional ability to become officers and employees of the Company and its Subsidiaries and (ii) inducing directors, independent contractors, or employees of Liberty Media Corporation or Liberty Interactive Corporation to agree to provide services to the Company and its Subsidiaries.

 

1.2                                Effective Date .  The Plan shall be effective as of [ · ], 2016 (the “Effective Date”).

 

ARTICLE II

 

DEFINITIONS

 

2.1                                Certain Defined Terms .  Capitalized terms not defined elsewhere in the Plan shall have the following meanings (whether used in the singular or plural):

 

“Account” has the meaning ascribed thereto in Section 8.2.

 

“Affiliate” of the Company means any corporation, partnership or other business association that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the Company.

 

“Agreement” means a stock option agreement, stock appreciation rights agreement, restricted shares agreement, restricted stock units agreement, cash award agreement or an agreement evidencing more than one type of Award, specified in Section 10.5, as any such Agreement may be supplemented or amended from time to time.

 

“Approved Transaction” means any transaction in which the Board (or, if approval of the Board is not required as a matter of law, the stockholders of the Company) shall approve (i) any consolidation or merger of the Company, or binding share exchange, pursuant to which shares of Common Stock of the Company would be changed or converted into or exchanged for cash, securities, or other property, other than

 



 

any such transaction in which the common stockholders of the Company immediately prior to such transaction have the same proportionate ownership of the Common Stock of, and voting power with respect to, the surviving corporation immediately after such transaction, (ii) any merger, consolidation or binding share exchange to which the Company is a party as a result of which the Persons who are common stockholders of the Company immediately prior thereto have less than a majority of the combined voting power of the outstanding capital stock of the Company ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of directors immediately following such merger, consolidation or binding share exchange, (iii) the adoption of any plan or proposal for the liquidation or dissolution of the Company, or (iv) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company.

 

“Award” means a grant of Options, SARs, Restricted Shares, Restricted Stock Units, Performance Awards, Cash Awards and/or cash amounts under the Plan.

 

“Board” means the Board of Directors of the Company.

 

“Board Change” means, (x) prior to the Proxy Swap Termination Date (as defined in the Amended and Restated Transaction Agreement, dated as of September [  ], 2016, by and among Liberty Interactive Corporation, the Company, Barry Diller, John C. Malone and Leslie Malone (the “Transaction Agreement”)), during any one year period, and (y) following the Proxy Swap Termination Date, during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board cease for any reason to constitute a majority thereof unless the election, or the nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; provided, that for the avoidance of doubt, neither the execution of nor the termination of any of the Subject Instruments (as defined in the Transaction Agreement), including but not limited to, any change in the composition of the Board resulting from such termination, shall constitute a Board Change.

 

“Cash Award” means an Award made pursuant to Section 9.1 of the Plan to a Holder that is paid solely on account of the attainment of one or more Performance Objectives that have been pre-established by the Committee.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute or statutes thereto.  Reference to any specific Code section shall include any successor section.

 

“Committee” means the committee of the Board appointed pursuant to Section 3.1 to administer the Plan.

 

“Common Stock” means each or any (as the context may require) series of the Company’s common stock.

 

“Company” means Liberty Expedia Holdings, Inc., a Delaware corporation.

 

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“Control Purchase” means any transaction (or series of related transactions) in which any person (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity (other than the Company, any Subsidiary of the Company or any employee benefit plan sponsored by the Company or any Subsidiary of the Company or any Exempt Person (as defined below)) shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the then outstanding securities of the Company ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) under the Exchange Act in the case of rights to acquire the Company’s securities), other than in a transaction (or series of related transactions) approved by the Board.  For purposes of this definition, “Exempt Person” means each of (a) the Chairman of the Board, the President and each of the directors of the Company as of the Effective Date, and, until the Proxy Swap Termination Date, Barry Diller, and (b) the respective family members, estates and heirs of each of the Persons referred to in clause (a) above and any trust or other investment vehicle for the primary benefit of any of such Persons or their respective family members or heirs.  As used with respect to any Person, the term “family member” means the spouse, siblings and lineal descendants of such Person.

 

“Director Award Limitation” has the meaning ascribed thereto in Section 4.1.

 

“Disability” means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

 

“Dividend Equivalents” means, with respect to Restricted Stock Units, to the extent specified by the Committee only, an amount equal to all dividends and other distributions (or the economic equivalent thereof) which are payable to stockholders of record during the Restriction Period on a like number and kind of shares of Common Stock.  Notwithstanding any provision of the Plan to the contrary, Dividend Equivalents with respect to a Performance Award may only be paid to the extent the Performance Award is actually paid to the Holder.

 

“Domestic Relations Order” means a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder.

 

“Equity Security” shall have the meaning ascribed to such term in Section 3(a)(11) of the Exchange Act, and an equity security of an issuer shall have the meaning ascribed thereto in Rule 16a-1 promulgated under the Exchange Act, or any successor Rule.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute or statutes thereto.  Reference to any specific Exchange Act section shall include any successor section.

 

3



 

“Fair Market Value” of a share of any series of Common Stock on any day means (i) for Option and SAR exercise transactions effected on any third-party incentive award administration system provided by the Company, the current high bid price of a share of any series of Common Stock as reported on the consolidated transaction reporting system on the principal national securities exchange on which shares of such series of Common Stock are listed on such day or if such shares are not then listed on a national securities exchange, then as quoted by OTC Markets Group Inc., or (ii) for all other purposes under the Plan, the closing price of a share of such series of Common Stock on such day (or if such day is not a trading day, on the next preceding trading day) as reported on the consolidated transaction reporting system for the principal national securities exchange on which shares of such series of Common Stock are listed on such day or if such shares are not then listed on a national securities exchange, then as quoted by OTC Markets Group Inc.  If for any day the Fair Market Value of a share of the applicable series of Common Stock is not determinable by any of the foregoing means, or if there is insufficient trading volume in the applicable series of Common Stock on such trading day, then the Fair Market Value for such day shall be determined in good faith by the Committee on the basis of such quotations and other considerations as the Committee deems appropriate.

 

“Free Standing SAR” has the meaning ascribed thereto in Section 7.1.

 

“Holder” means a Person who has received an Award under the Plan.

 

“Nonemployee Director” means an individual who is a member of the Board and who is neither an officer nor an employee of the Company or any Subsidiary.

 

“Option” means a stock option granted under Article VI.

 

“Performance Award” means an Award made pursuant to Article IX of the Plan to a Holder that is subject to the attainment of one or more Performance Objectives.

 

“Performance Objective” means a standard established by the Committee to determine in whole or in part whether a Performance Award shall be earned.

 

“Person” means an individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.

 

“Plan” means this Liberty Expedia Holdings, Inc. 2016 Omnibus Incentive Plan.

 

“Restricted Shares” means shares of any series of Common Stock awarded pursuant to Section 8.1.

 

“Restricted Stock Unit” means a unit evidencing the right to receive in specified circumstances one share of the specified series of Common Stock or the equivalent value in cash, which right may be subject to a Restriction Period or forfeiture provisions.

 

4



 

“Restriction Period” means a period of time beginning on the date of each Award of Restricted Shares or Restricted Stock Units and ending on the Vesting Date with respect to such Award.

 

“Retained Distribution” has the meaning ascribed thereto in Section 8.3.

 

“SARs” means stock appreciation rights, awarded pursuant to Article VII, with respect to shares of any specified series of Common Stock.

 

“Section 409A” has the meaning ascribed thereto in Section 10.17.

 

“Subsidiary” of a Person means any present or future subsidiary (as defined in Section 424(f) of the Code) of such Person or any business entity in which such Person owns, directly or indirectly, 50% or more of the voting, capital or profits interests.  An entity shall be deemed a subsidiary of a Person for purposes of this definition only for such periods as the requisite ownership or control relationship is maintained.

 

“Tandem SARs” has the meaning ascribed thereto in Section 7.1.

 

“Vesting Date,” with respect to any Restricted Shares or Restricted Stock Units awarded hereunder, means the date on which such Restricted Shares or Restricted Stock Units cease to be subject to a risk of forfeiture, as designated in or determined in accordance with the Agreement with respect to such Award of Restricted Shares or Restricted Stock Units pursuant to Article VIII.  If more than one Vesting Date is designated for an Award of Restricted Shares or Restricted Stock Units, reference in the Plan to a Vesting Date in respect of such Award shall be deemed to refer to each part of such Award and the Vesting Date for such part. The Vesting Date for a particular Award will be established by the Committee and, for the avoidance of doubt, may be contemporaneous with the date of grant.

 

ARTICLE III

 

ADMINISTRATION

 

3.1                                Committee.   The Plan shall be administered by the Compensation Committee of the Board unless a different committee is appointed by the Board.  The Committee shall be comprised of not less than two Persons.  The Board may from time to time appoint members of the Committee in substitution for or in addition to members previously appointed, may fill vacancies in the Committee and may remove members of the Committee.  The Committee shall select one of its members as its chairman and shall hold its meetings at such times and places as it shall deem advisable.  A majority of its members shall constitute a quorum and all determinations shall be made by a majority of such quorum.  Any determination reduced to writing and signed by all of the members shall be as fully effective as if it had been made by a majority vote at a meeting duly called and held.

 

3.2                                Power s.  The Committee shall have full power and authority to grant to eligible Persons Options under Article VI of the Plan, SARs under Article VII of the Plan, Restricted Shares under Article VIII of the Plan, Restricted Stock Units under Article VIII of the Plan, Cash

 

5



 

Awards under Article IX of the Plan and/or Performance Awards under Article IX of the Plan, to determine the terms and conditions (which need not be identical) of all Awards so granted, to interpret the provisions of the Plan and any Agreements relating to Awards granted under the Plan and to supervise the administration of the Plan.  The Committee in making an Award may provide for the granting or issuance of additional, replacement or alternative Awards upon the occurrence of specified events, including the exercise of the original Award.  The Committee shall have sole authority in the selection of Persons to whom Awards may be granted under the Plan and in the determination of the timing, pricing and amount of any such Award, subject only to the express provisions of the Plan.  In making determinations hereunder, the Committee may take into account the nature of the services rendered by the respective employees, officers, independent contractors and Nonemployee Directors, their present and potential contributions to the success of the Company and its Subsidiaries, and such other factors as the Committee in its discretion deems relevant.

 

3.3                                Interpretation .  The Committee is authorized, subject to the provisions of the Plan, to establish, amend and rescind such rules and regulations as it deems necessary or advisable for the proper administration of the Plan and to take such other action in connection with or in relation to the Plan as it deems necessary or advisable.  Each action and determination made or taken pursuant to the Plan by the Committee, including any interpretation or construction of the Plan, shall be final and conclusive for all purposes and upon all Persons.  No member of the Committee shall be liable for any action or determination made or taken by such member or the Committee in good faith with respect to the Plan.

 

3.4                                Awards to Nonemployee Directors .  The Board shall have the same powers as the Committee with respect to awards to Nonemployee Directors and may exercise such powers in lieu of action by the Committee.

 

ARTICLE IV

 

SHARES SUBJECT TO THE PLAN

 

4.1                                Number of Shares .  Subject to the provisions of this Article IV, the maximum number of shares of Common Stock with respect to which Awards may be granted during the term of the Plan shall be 3,700,000 shares.  Shares of Common Stock will be made available from the authorized but unissued shares of the Company or from shares reacquired by the Company, including shares purchased in the open market.  The shares of Common Stock subject to (i) any Award granted under the Plan that shall expire, terminate or be cancelled or annulled for any reason without having been exercised (or considered to have been exercised as provided in Section 7.2), (ii) any Award of any SARs granted under the Plan the terms of which provide for settlement in cash, and (iii) any Award of Restricted Shares or Restricted Stock Units granted under the Plan that shall be forfeited prior to becoming vested (provided that the Holder received no benefits of ownership of such Restricted Shares or Restricted Stock Units other than voting rights and the accumulation of Retained Distributions and unpaid Dividend Equivalents that are likewise forfeited) shall again be available for purposes of the Plan.  Notwithstanding the foregoing, the following shares of Common Stock may not again be made available for issuance as Awards under the Plan: (a) shares of Common Stock not issued or delivered as a result of the net settlement of an outstanding Option or SAR, (b) shares of Common Stock used to pay the

 

6



 

purchase price or withholding taxes related to an outstanding Award, or (c) shares of Common Stock repurchased on the open market with the proceeds of an Option purchase price.  Except for Awards described in Section 10.1, no Person may be granted in any calendar year Awards covering more than 500,000 shares of Common Stock (as such amount may be adjusted from time to time as provided in Section 4.2).  No Person shall receive payment for Cash Awards during any calendar year aggregating in excess of $10 million.  No Nonemployee Director may be granted during any calendar year Awards having a value determined on the date of grant in excess of $1.5 million (the “ Director Award Limitation ”). Awards granted to Nonemployee Directors shall only be subject to the Director Award Limitation.

 

4.2                                Adjustments .

 

(a)                                  If the Company subdivides its outstanding shares of any series of Common Stock into a greater number of shares of such series of Common Stock (by stock dividend, stock split, reclassification, or otherwise) or combines its outstanding shares of any series of Common Stock into a smaller number of shares of such series of Common Stock (by reverse stock split, reclassification, or otherwise) or if the Committee determines that any stock dividend, extraordinary cash dividend, reclassification, recapitalization, reorganization, stock redemption, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase such series of Common Stock or other similar corporate event (including mergers or consolidations other than those which constitute Approved Transactions, adjustments with respect to which shall be governed by Section 10.1(b)) affects any series of Common Stock so that an adjustment is required to preserve the benefits or potential benefits intended to be made available under the Plan, then the Committee, in such manner as the Committee, in its sole discretion, deems equitable and appropriate, shall make such adjustments to any or all of (i) the number and kind of shares of stock which thereafter may be awarded, optioned or otherwise made subject to the benefits contemplated by the Plan, (ii) the number and kind of shares of stock subject to outstanding Awards, and (iii) the purchase or exercise price and the relevant appreciation base with respect to any of the foregoing, provided, however, that the number of shares subject to any Award shall always be a whole number.  The Committee may, if deemed appropriate, provide for a cash payment to any Holder of an Award in connection with any adjustment made pursuant to this Section 4.2.

 

(b)                                  Notwithstanding any provision of the Plan to the contrary, in the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Committee shall be authorized, in its discretion, (i) to provide, prior to the transaction, for the acceleration of the vesting and exercisability of, or lapse of restrictions with respect to, the Award and, if the transaction is a cash merger, provide for the termination of any portion of the Award that remains unexercised at the time of such transaction, or (ii) to cancel any such Awards and to deliver to the Holders cash in an amount that the Committee shall determine in its sole discretion is equal to the fair market value of such Awards on the date of such event, which in the case of Options or SARs shall be the excess of the Fair Market Value (as determined in sub-section (ii) of the definition of such term) of Common Stock on such date over the purchase price of the Options or the base price of the SARs, as applicable. For the avoidance of doubt, if the purchase price of the Options or base price of the SARs, as applicable, is greater than

 

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such Fair Market Value, the Options or SARs may be canceled for no consideration pursuant to this section.

 

(c)                                   No adjustment or substitution pursuant to this Section 4.2 shall be made in a manner that results in noncompliance with the requirements of Section 409A, to the extent applicable.

 

ARTICLE V

 

ELIGIBILITY

 

5.1                                General .  The Persons who shall be eligible to participate in the Plan and to receive Awards under the Plan shall be such Persons who are employees (including officers) of, or Nonemployee Directors, independent contractors or employees of Liberty Media Corporation or Liberty Interactive Corporation providing services to, the Company or its Subsidiaries as the Committee shall select.  Awards may be made to employees, Nonemployee Directors or independent contractors who hold or have held Awards under the Plan or any similar or other awards under any other plan of the Company or any of its Affiliates.

 

ARTICLE VI

 

STOCK OPTIONS

 

6.1                                Grant of Options .  Subject to the limitations of the Plan, the Committee shall designate from time to time those eligible Persons to be granted Options, the time when each Option shall be granted to such eligible Persons, the series and number of shares of Common Stock subject to such Option, and, subject to Section 6.2, the purchase price of the shares of Common Stock subject to such Option.

 

6.2                                Option Price .  The price at which shares may be purchased upon exercise of an Option shall be fixed by the Committee and may be no less than the Fair Market Value of the shares of the applicable series of Common Stock subject to the Option as of the date the Option is granted.

 

6.3                                Term of Options .  Subject to the provisions of the Plan with respect to death, retirement and termination of employment or service, the term of each Option shall be for such period as the Committee shall determine as set forth in the applicable Agreement; provided that such term may not exceed ten years. However, if the term of an Option expires when trading in the Common Stock is prohibited by law or the Company’s insider trading policy, then the term of such Option shall expire on the 30th day after the expiration of such prohibition.

 

6.4                                Exercise of Options .  An Option granted under the Plan shall become (and remain) exercisable during the term of the Option to the extent provided in the applicable Agreement and the Plan and, unless the Agreement otherwise provides, may be exercised to the extent exercisable, in whole or in part, at any time and from time to time during such term; provided, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of such Option, may accelerate the time or times at which such Option may be exercised in whole or in part (without reducing the term of such Option).

 

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6.5                                Manner of Exercise .

 

(a)                                  Form of Payment .  An Option shall be exercised by written notice to the Company upon such terms and conditions as the Agreement may provide and in accordance with such other procedures for the exercise of Options as the Committee may establish from time to time.  The method or methods of payment of the purchase price for the shares to be purchased upon exercise of an Option and of any amounts required by Section 10.9 shall be determined by the Committee and may consist of (i) cash, (ii) check, (iii) promissory note (subject to applicable law), (iv) whole shares of any series of Common Stock, (v) the withholding of shares of the applicable series of Common Stock issuable upon such exercise of the Option, (vi) the delivery, together with a properly executed exercise notice, of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds required to pay the purchase price, or (vii) any combination of the foregoing methods of payment, or such other consideration and method of payment as may be permitted for the issuance of shares under the Delaware General Corporation Law.  The permitted method or methods of payment of the amounts payable upon exercise of an Option, if other than in cash, shall be set forth in the applicable Agreement and may be subject to such conditions as the Committee deems appropriate.

 

(b)                                  Value of Shares .  Unless otherwise determined by the Committee and provided in the applicable Agreement, shares of any series of Common Stock delivered in payment of all or any part of the amounts payable in connection with the exercise of an Option, and shares of any series of Common Stock withheld for such payment, shall be valued for such purpose at their Fair Market Value as of the exercise date.

 

(c)                                   Issuance of Shares .  The Company shall effect the transfer of the shares of Common Stock purchased under the Option as soon as practicable after the exercise thereof and payment in full of the purchase price therefor and of any amounts required by Section 10.9, and within a reasonable time thereafter, such transfer shall be evidenced on the books of the Company.  Unless otherwise determined by the Committee and provided in the applicable Agreement, (i) no Holder or other Person exercising an Option shall have any of the rights of a stockholder of the Company with respect to shares of Common Stock subject to an Option granted under the Plan until due exercise and full payment has been made, and (ii) no adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such due exercise and full payment.

 

ARTICLE VII

 

SARS

 

7.1                                Grant of SARs .  Subject to the limitations of the Plan, SARs may be granted by the Committee to such eligible Persons in such numbers, with respect to any specified series of Common Stock, and at such times during the term of the Plan as the Committee shall determine.  A SAR may be granted to a Holder of an Option (hereinafter called a “related Option”) with respect to all or a portion of the shares of Common Stock subject to the related Option (a “Tandem SAR”) or may be granted separately to an eligible Person (a “Free Standing SAR”).

 

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Subject to the limitations of the Plan, SARs shall be exercisable in whole or in part upon notice to the Company upon such terms and conditions as are provided in the Agreement.

 

7.2                                Tandem SARs .  A Tandem SAR may be granted either concurrently with the grant of the related Option or at any time thereafter prior to the complete exercise, termination, expiration or cancellation of such related Option.  Tandem SARs shall be exercisable only at the time and to the extent that the related Option is exercisable (and may be subject to such additional limitations on exercisability as the Agreement may provide) and in no event after the complete termination or full exercise of the related Option.  Upon the exercise or termination of the related Option, the Tandem SARs with respect thereto shall be canceled automatically to the extent of the number of shares of Common Stock with respect to which the related Option was so exercised or terminated. Subject to the limitations of the Plan, upon the exercise of a Tandem SAR and unless otherwise determined by the Committee and provided in the applicable Agreement, (i) the Holder thereof shall be entitled to receive from the Company, for each share of the applicable series of Common Stock with respect to which the Tandem SAR is being exercised, consideration (in the form determined as provided in Section 7.4) equal in value to the excess of the Fair Market Value of a share of the applicable series of Common Stock with respect to which the Tandem SAR was granted on the date of exercise over the related Option purchase price per share, and (ii) the related Option with respect thereto shall be canceled automatically to the extent of the number of shares of Common Stock with respect to which the Tandem SAR was so exercised.

 

7.3                                Free Standing SARs .  Free Standing SARs shall be exercisable at the time, to the extent and upon the terms and conditions set forth in the applicable Agreement.  The base price of a Free Standing SAR may be no less than the Fair Market Value of the applicable series of Common Stock with respect to which the Free Standing SAR was granted as of the date the Free Standing SAR is granted.  Subject to the limitations of the Plan, upon the exercise of a Free Standing SAR and unless otherwise determined by the Committee and provided in the applicable Agreement, the Holder thereof shall be entitled to receive from the Company, for each share of the applicable series of Common Stock with respect to which the Free Standing SAR is being exercised, consideration (in the form determined as provided in Section 7.4) equal in value to the excess of the Fair Market Value of a share of the applicable series of Common Stock with respect to which the Free Standing SAR was granted on the date of exercise over the base price per share of such Free Standing SAR.  The term of a Free Standing SAR may not exceed ten years. However, if the term of a Free Standing SAR expires when trading in the Common Stock is prohibited by law or the Company’s insider trading policy, then the term of such Free Standing SAR shall expire on the 30th day after the expiration of such prohibition.

 

7.4                                Consideration .  The consideration to be received upon the exercise of a SAR by the Holder shall be paid in cash, shares of the applicable series of Common Stock with respect to which the SAR was granted (valued at Fair Market Value on the date of exercise of such SAR), a combination of cash and such shares of the applicable series of Common Stock or such other consideration, in each case, as provided in the Agreement.  No fractional shares of Common Stock shall be issuable upon exercise of a SAR, and unless otherwise provided in the applicable Agreement, the Holder will receive cash in lieu of fractional shares.  Unless the Committee shall otherwise determine, to the extent a Free Standing SAR is exercisable, it will be exercised automatically for cash on its expiration date.

 

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7.5                                Limitations .  The applicable Agreement may provide for a limit on the amount payable to a Holder upon exercise of SARs at any time or in the aggregate, for a limit on the number of SARs that may be exercised by the Holder in whole or in part for cash during any specified period, for a limit on the time periods during which a Holder may exercise SARs, and for such other limits on the rights of the Holder and such other terms and conditions of the SAR, including a condition that the SAR may be exercised only in accordance with rules and regulations adopted from time to time, as the Committee may determine.  Unless otherwise so provided in the applicable Agreement, any such limit relating to a Tandem SAR shall not restrict the exercisability of the related Option.  Such rules and regulations may govern the right to exercise SARs granted prior to the adoption or amendment of such rules and regulations as well as SARs granted thereafter.

 

7.6                                Exercise.   For purposes of this Article VII, the date of exercise of a SAR shall mean the date on which the Company shall have received notice from the Holder of the SAR of the exercise of such SAR (unless otherwise determined by the Committee and provided in the applicable Agreement).

 

ARTICLE VIII

 

RESTRICTED SHARES AND RESTRICTED STOCK UNITS

 

8.1                                Grant of Restricted Shares .  Subject to the limitations of the Plan, the Committee shall designate those eligible Persons to be granted Awards of Restricted Shares, shall determine the time when each such Award shall be granted, and shall designate (or set forth the basis for determining) the Vesting Date or Vesting Dates for each Award of Restricted Shares, and may prescribe other restrictions, terms and conditions applicable to the vesting of such Restricted Shares in addition to those provided in the Plan.  The Committee shall determine the price, if any, to be paid by the Holder for the Restricted Shares; provided, however, that the issuance of Restricted Shares shall be made for at least the minimum consideration necessary to permit such Restricted Shares to be deemed fully paid and nonassessable.  All determinations made by the Committee pursuant to this Section 8.1 shall be specified in the Agreement.

 

8.2                                Issuance of Restricted Shares .  An Award of Restricted Shares shall be registered in a book entry account (the “Account”) in the name of the Holder to whom such Restricted Shares shall have been awarded.  During the Restriction Period, the Account, any statement of ownership representing the Restricted Shares that may be issued during the Restriction Period and any securities constituting Retained Distributions shall bear a restrictive legend to the effect that ownership of the Restricted Shares (and such Retained Distributions), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms and conditions provided in the Plan and the applicable Agreement.

 

8.3                                Restrictions with Respect to Restricted Shares .  During the Restriction Period, Restricted Shares shall constitute issued and outstanding shares of the applicable series of Common Stock for all corporate purposes.  The Holder will have the right to vote such Restricted Shares, to receive and retain such dividends and distributions, as the Committee may designate, paid or distributed on such Restricted Shares, and to exercise all other rights, powers and privileges of a Holder of shares of the applicable series of Common Stock with respect to

 

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such Restricted Shares; except, that, unless otherwise determined by the Committee and provided in the applicable Agreement, (i) the Holder will not be entitled to delivery of the Restricted Shares until the Restriction Period shall have expired and unless all other vesting requirements with respect thereto shall have been fulfilled or waived; (ii) the Company or its designee will retain custody of the Restricted Shares during the Restriction Period as provided in Section 8.2; (iii) other than such dividends and distributions as the Committee may designate, the Company or its designee will retain custody of all distributions (“Retained Distributions”) made or declared with respect to the Restricted Shares (and such Retained Distributions will be subject to the same restrictions, terms and vesting, and other conditions as are applicable to the Restricted Shares) until such time, if ever, as the Restricted Shares with respect to which such Retained Distributions shall have been made, paid or declared shall have become vested, and such Retained Distributions shall not bear interest or be segregated in a separate account; (iv) the Holder may not sell, assign, transfer, pledge, exchange, encumber or dispose of the Restricted Shares or any Retained Distributions or such Holder’s interest in any of them during the Restriction Period; and (v) a breach of any restrictions, terms or conditions provided in the Plan or established by the Committee with respect to any Restricted Shares or Retained Distributions will cause a forfeiture of such Restricted Shares and any Retained Distributions with respect thereto.

 

8.4                                Grant of Restricted Stock Units .  Subject to the limitations of the Plan, the Committee shall designate those eligible Persons to be granted Awards of Restricted Stock Units, the value of which is based, in whole or in part, on the Fair Market Value of the shares of any specified series of Common Stock.  Subject to the provisions of the Plan, including any rules established pursuant to Section 8.5, Awards of Restricted Stock Units shall be subject to such terms, restrictions, conditions, vesting requirements and payment rules as the Committee may determine in its discretion, which need not be identical for each Award.  Such Awards may provide for the payment of cash consideration by the Person to whom such Award is granted or provide that the Award, and any shares of Common Stock to be issued in connection therewith, if applicable, shall be delivered without the payment of cash consideration; provided, however, that the issuance of any shares of Common Stock in connection with an Award of Restricted Stock Units shall be for at least the minimum consideration necessary to permit such shares to be deemed fully paid and nonassessable.  The determinations made by the Committee pursuant to this Section 8.4 shall be specified in the applicable Agreement.

 

8.5                                Restrictions with Respect to Restricted Stock Units .  Any Award of Restricted Stock Units, including any shares of Common Stock which are part of an Award of Restricted Stock Units, may not be assigned, sold, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued or, if later, the date provided by the Committee at the time of the Award.  A breach of any restrictions, terms or conditions provided in the Plan or established by the Committee with respect to any Award of Restricted Stock Units will cause a forfeiture of such Restricted Stock Units and any Dividend Equivalents with respect thereto.

 

8.6                                Issuance of Restricted Stock Units .  Restricted Stock Units shall be issued at the beginning of the Restriction Period, shall not constitute issued and outstanding shares of the applicable series of Common Stock, and the Holder shall not have any of the rights of a stockholder with respect to the shares of Common Stock covered by such an Award of Restricted Stock Units, in each case until such shares shall have been issued to the Holder at the end of the

 

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Restriction Period.  If and to the extent that shares of Common Stock are to be issued at the end of the Restriction Period, the Holder shall be entitled to receive Dividend Equivalents with respect to the shares of Common Stock covered thereby either (i) during the Restriction Period or (ii) in accordance with the rules applicable to Retained Distributions, as the Committee may specify in the Agreement.

 

8.7                                Cash Payments .  In connection with any Award of Restricted Shares or Restricted Stock Units, an Agreement may provide for the payment of a cash amount to the Holder of such Awards at any time after such Awards shall have become vested.  Such cash amounts shall be payable in accordance with such additional restrictions, terms and conditions as shall be prescribed by the Committee in the Agreement and shall be in addition to any other salary, incentive, bonus or other compensation payments which such Holder shall be otherwise entitled or eligible to receive from the Company.

 

8.8                                Completion of Restriction Period .  On the Vesting Date with respect to each Award of Restricted Shares or Restricted Stock Units and the satisfaction of any other applicable restrictions, terms and conditions, (i) all or the applicable portion of such Restricted Shares or Restricted Stock Units shall become vested, (ii) any Retained Distributions with respect to such Restricted Shares and any unpaid Dividend Equivalents with respect to such Restricted Stock Units shall become vested to the extent that the Awards related thereto shall have become vested, and (iii) any cash amount to be received by the Holder with respect to such Restricted Shares or Restricted Stock Units shall become payable, all in accordance with the terms of the applicable Agreement.  Any such Restricted Shares, Restricted Stock Units, Retained Distributions and any unpaid Dividend Equivalents that shall not become vested shall be forfeited to the Company, and the Holder shall not thereafter have any rights (including dividend and voting rights) with respect to such Restricted Shares, Restricted Stock Units, Retained Distributions and any unpaid Dividend Equivalents that shall have been so forfeited.  The Committee may, in its discretion, provide that the delivery of any Restricted Shares, Restricted Stock Units, Retained Distributions and unpaid Dividend Equivalents that shall have become vested, and payment of any related cash amounts that shall have become payable under this Article VIII, shall be deferred until such date or dates as the recipient may elect.  Any election of a recipient pursuant to the preceding sentence shall be filed in writing with the Committee in accordance with such rules and regulations, including any deadline for the making of such an election, as the Committee may provide, and shall be made in compliance with Section 409A.

 

ARTICLE IX

 

CASH AWARDS AND PERFORMANCE AWARDS

 

9.1                                Cash Awards .  In addition to granting Options, SARs, Restricted Shares and Restricted Stock Units, the Committee shall, subject to the limitations of the Plan, have authority to grant to eligible Persons Cash Awards.  Each Cash Award shall be subject to such terms and conditions, restrictions and contingencies, if any, as the Committee shall determine.  Restrictions and contingencies limiting the right to receive a cash payment pursuant to a Cash Award shall be based upon the achievement of single or multiple Performance Objectives over a performance period established by the Committee.  The determinations made by the Committee pursuant to this Section 9.1 shall be specified in the applicable Agreement.

 

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9.2                                Designation as a Performance Award .  The Committee shall have the right to designate any Award of Options, SARs, Restricted Shares or Restricted Stock Units as a Performance Award.  All Cash Awards shall be designated as Performance Awards.

 

9.3                                Performance Objectives .  The grant or vesting of a Performance Award shall be subject to the achievement of Performance Objectives over a performance period established by the Committee based upon one or more of the following business criteria that apply to the Holder, one or more business units, divisions or Subsidiaries of the Company or the applicable sector of the Company, or the Company as a whole, and if so desired by the Committee, by comparison with a peer group of companies: increased revenue; net income measures (including income after capital costs and income before or after taxes); stock price measures (including growth measures and total stockholder return); price per share of Common Stock; market share; earnings per share (actual or targeted growth); earnings before interest, taxes, depreciation and amortization (EBITDA); operating income before depreciation and amortization (OIBDA); economic value added (or an equivalent metric); market value added; debt to equity ratio; cash flow measures (including cash flow return on capital, cash flow return on tangible capital, net cash flow and net cash flow before financing activities); return measures (including return on equity, return on average assets, return on capital, risk-adjusted return on capital, return on investors’ capital and return on average equity); operating measures (including operating income, funds from operations, cash from operations, after-tax operating income, sales volumes, production volumes and production efficiency); expense measures (including overhead cost and general and administrative expense); margins; stockholder value; total stockholder return; proceeds from dispositions; total market value and corporate values measures (including ethics compliance, environmental and safety).  Unless otherwise stated, such a Performance Objective need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria).  The Committee shall have the authority to determine whether the Performance Objectives and other terms and conditions of the Award are satisfied, and the Committee’s determination as to the achievement of Performance Objectives relating to a Performance Award shall be made in writing.

 

9.4                                Section 162(m) of the Code .  Notwithstanding the foregoing provisions, if the Committee intends for a Performance Award to be granted and administered in a manner designed to preserve the deductibility of the compensation resulting from such Award in accordance with Section 162(m) of the Code, then the Performance Objectives for such particular Performance Award relative to the particular period of service to which the Performance Objectives relate shall be established by the Committee in writing (i) no later than 90 days after the beginning of such period and (ii) prior to the completion of 25% of such period.

 

9.5                                Waiver of Performance Objectives .  The Committee shall have no discretion to modify or waive the Performance Objectives or conditions to the grant or vesting of a Performance Award unless such Award is not intended to qualify as qualified performance-based compensation under Section 162(m) of the Code and the relevant Agreement provides for such discretion.

 

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ARTICLE X

 

GENERAL PROVISIONS

 

10.1                         Acceleration of Awards .

 

(a)                                  Death or Disability .  If a Holder’s employment or service shall terminate by reason of death or Disability, notwithstanding any contrary waiting period, installment period, vesting schedule or Restriction Period in any Agreement or in the Plan, unless the applicable Agreement provides otherwise:  (i) in the case of an Option or SAR, each outstanding Option or SAR granted under the Plan shall immediately become exercisable in full in respect of the aggregate number of shares covered thereby; (ii) in the case of Restricted Shares, the Restriction Period applicable to each such Award of Restricted Shares shall be deemed to have expired and all such Restricted Shares and any related Retained Distributions shall become vested and any related cash amounts payable pursuant to the applicable Agreement shall be adjusted in such manner as may be provided in the Agreement; and (iii) in the case of Restricted Stock Units, the Restriction Period applicable to each such Award of Restricted Stock Units shall be deemed to have expired and all such Restricted Stock Units and any unpaid Dividend Equivalents shall become vested and any related cash amounts payable pursuant to the applicable Agreement shall be adjusted in such manner as may be provided in the Agreement.

 

(b)                                  Approved Transactions; Board Change; Control Purchase .  In the event of any Approved Transaction, Board Change or Control Purchase, notwithstanding any contrary waiting period, installment period, vesting schedule or Restriction Period in any Agreement or in the Plan, unless the applicable Agreement provides otherwise:  (i) in the case of an Option or SAR, each such outstanding Option or SAR granted under the Plan shall become exercisable in full in respect of the aggregate number of shares covered thereby; (ii) in the case of Restricted Shares, the Restriction Period applicable to each such Award of Restricted Shares shall be deemed to have expired and all such Restricted Shares and any related Retained Distributions shall become vested and any related cash amounts payable pursuant to the applicable Agreement shall be adjusted in such manner as may be provided in the Agreement; and (iii) in the case of Restricted Stock Units, the Restriction Period applicable to each such Award of Restricted Stock Units shall be deemed to have expired and all such Restricted Stock Units and any unpaid Dividend Equivalents shall become vested and any related cash amounts payable pursuant to the applicable Agreement shall be adjusted in such manner as may be provided in the Agreement, in each case effective upon the Board Change or Control Purchase or immediately prior to consummation of the Approved Transaction.  The effect, if any, on a Cash Award of an Approved Transaction, Board Change or Control Purchase shall be prescribed in the applicable Agreement.  Notwithstanding the foregoing, unless otherwise provided in the applicable Agreement, the Committee may, in its discretion, determine that any or all outstanding Awards of any or all types granted pursuant to the Plan will not vest or become exercisable on an accelerated basis in connection with an Approved Transaction if effective provision has been made for the taking of such action which, in the opinion of the Committee, is equitable and appropriate to substitute a new Award for such Award or to assume such Award and to make such new or assumed Award, as

 

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nearly as may be practicable, equivalent to the old Award (before giving effect to any acceleration of the vesting or exercisability thereof), taking into account, to the extent applicable, the kind and amount of securities, cash or other assets into or for which the applicable series of Common Stock may be changed, converted or exchanged in connection with the Approved Transaction.

 

10.2                         Termination of Employment or Service .

 

(a)                                  General .  If a Holder’s employment or service shall terminate prior to an Option or SAR becoming exercisable or being exercised (or deemed exercised, as provided in Section 7.2) in full, or during the Restriction Period with respect to any Restricted Shares or any Restricted Stock Units, then such Option or SAR shall thereafter become or be exercisable, and the Holder’s rights to any unvested Restricted Shares, Retained Distributions and related cash amounts and any unvested Restricted Stock Units, unpaid Dividend Equivalents and related cash amounts shall thereafter vest, in each case solely to the extent provided in the applicable Agreement; provided, however, that, unless otherwise determined by the Committee and provided in the applicable Agreement, (i) no Option or SAR may be exercised after the scheduled expiration date thereof; (ii) if the Holder’s employment or service terminates by reason of death or Disability, the Option or SAR shall remain exercisable for a period of at least one year following such termination (but not later than the scheduled expiration of such Option or SAR); and (iii) any termination of the Holder’s employment or service for cause will be treated in accordance with the provisions of Section 10.2(b).  The effect on a Cash Award of the termination of a Holder’s employment or service for any reason, other than for cause, shall be prescribed in the applicable Agreement. For the avoidance of doubt, in the discretion of the Committee, an Award may provide that a Holder’s service shall be deemed to have continued for purposes of the Award while a Holder provides services to the Company, any Subsidiary, or any former affiliate of the Company or any Subsidiary.

 

(b)                                  Termination for Cause .  If a Holder’s employment or service with the Company or a Subsidiary of the Company shall be terminated by the Company or such Subsidiary for “cause” during the Restriction Period with respect to any Restricted Shares or Restricted Stock Units or prior to any Option or SAR becoming exercisable or being exercised in full or prior to the payment in full of any Cash Award (for these purposes, “cause” shall have the meaning ascribed thereto in any employment or consulting agreement to which such Holder is a party or, in the absence thereof, shall include insubordination, dishonesty, incompetence, moral turpitude, other misconduct of any kind and the refusal to perform such Holder’s duties and responsibilities for any reason other than illness or incapacity; provided, however, that if such termination occurs within 12 months after an Approved Transaction or Control Purchase or Board Change, termination for “cause” shall mean only a felony conviction for fraud, misappropriation, or embezzlement), then, unless otherwise determined by the Committee and provided in the applicable Agreement, (i) all Options and SARs and all unpaid Cash Awards held by such Holder shall immediately terminate, and (ii) such Holder’s rights to all Restricted Shares, Restricted Stock Units, Retained Distributions, any unpaid Dividend Equivalents and any related cash amounts shall be forfeited immediately

 

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(c)                                   Miscellaneous .  The Committee may determine whether any given leave of absence constitutes a termination of employment or service; provided, however, that for purposes of the Plan, (i) a leave of absence, duly authorized in writing by the Company for military service or sickness, or for any other purpose approved by the Company if the period of such leave does not exceed 90 days, and (ii) a leave of absence in excess of 90 days, duly authorized in writing by the Company provided the employee’s right to reemployment is guaranteed either by statute or contract, shall not be deemed a termination of employment.  Unless otherwise determined by the Committee and provided in the applicable Agreement, Awards made under the Plan shall not be affected by any change of employment or service so long as the Holder continues to be an employee, director or independent contractor of the Company.

 

10.3                         Right of Company to Terminate Employment or Service .  Nothing contained in the Plan or in any Award, and no action of the Company or the Committee with respect thereto, shall confer or be construed to confer on any Holder any right to continue in the employ or service of the Company or any of its Subsidiaries or interfere in any way with the right of the Company or any Subsidiary of the Company to terminate the employment or service of the Holder at any time, with or without cause, subject, however, to the provisions of any employment or consulting agreement between the Holder and the Company or any Subsidiary of the Company, or in the case of a director, to the charter and bylaws, as the same may be in effect from time to time.

 

10.4                         Nonalienation of Benefits .  Except as set forth herein, no right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, hypothecation, pledge, exchange, transfer, garnishment, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer, garnish, encumber or charge the same shall be void.  No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the Person entitled to such benefits.

 

10.5                         Written Agreement .  Each Award under the Plan shall be evidenced by a written agreement, in such form as the Committee shall approve from time to time in its discretion, specifying the terms and provisions of such Award which may not be inconsistent with the provisions of the Plan; provided, however, that if more than one type of Award is made to the same Holder, such Awards may be evidenced by a single Agreement with such Holder.  Each grantee of an Option, SAR, Restricted Shares, Restricted Stock Units or Performance Award (including a Cash Award) shall be notified promptly of such grant, and a written Agreement shall be promptly delivered by the Company.  Any such written Agreement may contain (but shall not be required to contain) such provisions as the Committee deems appropriate to insure that the penalty provisions of Section 4999 of the Code will not apply to any stock or cash received by the Holder from the Company.  Any such Agreement may be supplemented or amended from time to time as approved by the Committee as contemplated by Section 10.7(b).

 

10.6                         Nontransferability . Unless otherwise determined by the Committee and expressly provided for in an Agreement, Awards are not transferable (either voluntarily or involuntarily), before or after a Holder’s death, except as follows: (a) during the Holder’s lifetime, pursuant to a Domestic Relations Order, issued by a court of competent jurisdiction, that is not contrary to the terms and conditions of the Plan or any applicable Agreement, and in a form acceptable to the Committee; or (b) after the Holder’s death, by will or pursuant to the applicable laws of descent

 

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and distribution, as may be the case. Any person to whom Awards are transferred in accordance with the provisions of the preceding sentence shall take such Awards subject to all of the terms and conditions of the Plan and any applicable Agreement.

 

10.7                         Termination and Amendment .

 

(a)                                  General .  Unless the Plan shall theretofore have been terminated as hereinafter provided, no Awards may be made under the Plan on or after the fifth anniversary of the Effective Date.  The Plan may be terminated at any time prior to such date and may, from time to time, be suspended or discontinued or modified or amended if such action is deemed advisable by the Committee.

 

(b)                                  Modification .  No termination, modification or amendment of the Plan may, without the consent of the Person to whom any Award shall theretofore have been granted, adversely affect the rights of such Person with respect to such Award.  No modification, extension, renewal or other change in any Award granted under the Plan shall be made after the grant of such Award, unless the same is consistent with the provisions of the Plan.  With the consent of the Holder and subject to the terms and conditions of the Plan (including Section 10.7(a)), the Committee may amend outstanding Agreements with any Holder, including any amendment which would (i) accelerate the time or times at which the Award may be exercised and/or (ii) extend the scheduled expiration date of the Award.  Without limiting the generality of the foregoing, the Committee may, but solely with the Holder’s consent unless otherwise provided in the Agreement, agree to cancel any Award under the Plan and grant a new Award in substitution therefor, provided that the Award so substituted shall satisfy all of the requirements of the Plan as of the date such new Award is made.  Nothing contained in the foregoing provisions of this Section 10.7(b) shall be construed to prevent the Committee from providing in any Agreement that the rights of the Holder with respect to the Award evidenced thereby shall be subject to such rules and regulations as the Committee may, subject to the express provisions of the Plan, adopt from time to time or impair the enforceability of any such provision.

 

10.8                         Government and Other Regulations .  The obligation of the Company with respect to Awards shall be subject to all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including the effectiveness of any registration statement required under the Securities Act of 1933, and the rules and regulations of any securities exchange or association on which the Common Stock may be listed or quoted.  For so long as any series of Common Stock are registered under the Exchange Act, the Company shall use its reasonable efforts to comply with any legal requirements (i) to maintain a registration statement in effect under the Securities Act of 1933 with respect to all shares of the applicable series of Common Stock that may be issuable, from time to time, to Holders under the Plan and (ii) to file in a timely manner all reports required to be filed by it under the Exchange Act.

 

10.9                         Withholding .  The Company’s obligation to deliver shares of Common Stock or pay cash in respect of any Award under the Plan shall be subject to applicable federal, state and local tax withholding requirements.  Federal, state and local withholding tax due at the time of an Award, upon the exercise of any Option or SAR or upon the vesting of, or expiration of

 

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restrictions with respect to, Restricted Shares or Restricted Stock Units or the satisfaction of the Performance Objectives applicable to a Performance Award, as appropriate, may, in the discretion of the Committee, be paid in shares of Common Stock already owned by the Holder or through the withholding of shares otherwise issuable to such Holder, upon such terms and conditions (including the conditions referenced in Section 6.5) as the Committee shall determine.  If the Holder shall fail to pay, or make arrangements satisfactory to the Committee for the payment to the Company of, all such federal, state and local taxes required to be withheld by the Company, then the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to such Holder an amount equal to any federal, state or local taxes of any kind required to be withheld by the Company with respect to such Award.

 

10.10                  Nonexclusivity of the Plan .  The adoption of the Plan by the Board shall not be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including the granting of stock options and the awarding of stock and cash otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

 

10.11                  Exclusion from Other Plans .  By acceptance of an Award, unless otherwise provided in the applicable Agreement, each Holder shall be deemed to have agreed that such Award is special incentive compensation that will not be taken into account, in any manner, as salary, compensation or bonus in determining the amount of any payment under any pension, retirement or other employee benefit plan, program or policy of the Company or any Subsidiary of the Company.  In addition, each beneficiary of a deceased Holder shall be deemed to have agreed that such Award will not affect the amount of any life insurance coverage, if any, provided by the Company on the life of the Holder which is payable to such beneficiary under any life insurance plan of the Company or any Subsidiary of the Company.

 

10.12                  Unfunded Plan .  Neither the Company nor any Subsidiary of the Company shall be required to segregate any cash or any shares of Common Stock which may at any time be represented by Awards, and the Plan shall constitute an “unfunded” plan of the Company.  Except as provided in Article VIII with respect to Awards of Restricted Shares and except as expressly set forth in an Agreement, no Holder shall have voting or other rights with respect to the shares of Common Stock covered by an Award prior to the delivery of such shares.  Neither the Company nor any Subsidiary of the Company shall, by any provisions of the Plan, be deemed to be a trustee of any shares of Common Stock or any other property, and the liabilities of the Company and any Subsidiary of the Company to any Holder pursuant to the Plan shall be those of a debtor pursuant to such contract obligations as are created by or pursuant to the Plan, and the rights of any Holder, former service provider or beneficiary under the Plan shall be limited to those of a general creditor of the Company or the applicable Subsidiary of the Company, as the case may be.  In its sole discretion, the Board may authorize the creation of trusts or other arrangements to meet the obligations of the Company under the Plan, provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.

 

10.13                  Governing Law .  The Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware.

 

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10.14                  Accounts .  The delivery of any shares of Common Stock and the payment of any amount in respect of an Award shall be for the account of the Company or the applicable Subsidiary of the Company, as the case may be, and any such delivery or payment shall not be made until the recipient shall have paid or made satisfactory arrangements for the payment of any applicable withholding taxes as provided in Section 10.9.

 

10.15                  Legends .  Any statement of ownership evidencing shares of Common Stock subject to an Award shall bear such legends as the Committee deems necessary or appropriate to reflect or refer to any terms, conditions or restrictions of the Award applicable to such shares, including any to the effect that the shares represented thereby may not be disposed of unless the Company has received an opinion of counsel, acceptable to the Company, that such disposition will not violate any federal or state securities laws.

 

10.16                  Company’s Rights .  The grant of Awards pursuant to the Plan shall not affect in any way the right or power of the Company to make reclassifications, reorganizations or other changes of or to its capital or business structure or to merge, consolidate, liquidate, sell or otherwise dispose of all or any part of its business or assets.

 

10.17                  Section 409A .  The Plan and the Awards made hereunder are intended to be (i) “stock rights” exempt from Section 409A of the Code (“Section 409A”) pursuant to Treasury Regulations § 1.409A-1(b)(5), (ii) “short-term deferrals” exempt from Section 409A or (iii) payments which are deferred compensation and paid in compliance with Section 409A, and the Plan and each Agreement shall be interpreted and administered accordingly. Any adjustments of Awards intended to be “stock rights” exempt from Section 409A pursuant to Treasury Regulations § 1.409A-1(b)(5) shall be conducted in a manner so as not to constitute a grant of a new stock right or a change in the time and form of payment pursuant to Treasury Regulations §1.409A-1(b)(5)(v). In the event an Award is not exempt from Section 409A, (x) payment pursuant to the relevant Agreement shall be made only on a permissible payment event or at a specified time in compliance with Section 409A, (y) no accelerated payment shall be made pursuant to Section 10.1(b) unless the Board Change, Approved Transaction or Control Purchase constitutes a “change in control event” under Treasury Regulations §1.409A-3(i)(5) or otherwise constitutes a permissible payment event under Section 409A and (z) no amendment or modification of such Award may be made except in compliance with the anti-deferral and anti-acceleration provisions of Section 409A. No deferrals of compensation otherwise payable under the Plan or any Award shall be allowed, whether at the discretion of the Company or the Holder, except in a manner consistent with the requirements of Section 409A.  If a Holder is identified by the Company as a “specified employee” within the meaning of Code Section 409A(a)(2)(B)(i) on the date on which such Holder has a “separation from service” (other than due to death) within the meaning of Treasury Regulation § 1.409A-1(h), any Award payable or settled on account of a separation from service that is deferred compensation subject to Section 409A shall be paid or settled on the earliest of (1) the first business day following the expiration of six months from the Holder’s separation from service, (2) the date of the Holder’s death, or (3) such earlier date as complies with the requirements of Section 409A.

 

10.18                  Administrative Blackouts .  In addition to its other powers hereunder, the Committee has the authority to suspend (i) the exercise of Options or SARs and (ii) any other transactions under the Plan as it deems necessary or appropriate for administrative reasons.

 

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10.19                  Clawback Policy .  Notwithstanding any other provisions in this Plan, any Award shall be subject to recovery or clawback by the Company under any clawback policy adopted by the Company in accordance with SEC regulations or other applicable law, as amended or superseded from time to time.

 

10.20                  Stock Ownership Guidelines . Any Award shall be subject to any applicable stock ownership guidelines adopted by the Company, as amended or superseded from time to time.

 

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Exhibit 10.2

 

FORM OF LIBERTY EXPEDIA HOLDINGS, INC.

 

TRANSITIONAL STOCK ADJUSTMENT PLAN

 

ARTICLE I

 

PURPOSE AND AMENDMENT OF PLAN

 

1.1                                Purpose . The purpose of the Plan is to provide for the supplemental grant of stock options to purchase the common stock of Liberty Expedia Holdings, Inc, a Delaware corporation (together with any successor thereto, the “Company”) and restricted shares and restricted stock units of the Company’s common stock to holders of certain outstanding options, restricted shares and restricted stock units issued under certain stock-based plans administered by Liberty Interactive Corporation, a Delaware corporation (“LIC”), in connection with adjustments made to outstanding options, restricted shares and restricted stock units of LIC Common Stock (as defined below) as a result of the spin-off of the Company from LIC.

 

ARTICLE II

 

DEFINITIONS

 

2.1                                Certain Defined Terms . For purposes of the Plan, the following terms shall have the meanings below stated.

 

“Approved Transaction” means any transaction in which the Board (or, if approval of the Board is not required as a matter of law, the stockholders of the Company) shall approve (i) any consolidation or merger of the Company, or binding share exchange, pursuant to which shares of Common Stock of the Company would be changed or converted into or exchanged for cash, securities, or other property, other than any such transaction in which the common stockholders of the Company immediately prior to such transaction have the same proportionate ownership of the Common Stock of, and voting power with respect to, the surviving corporation immediately after such transaction, (ii) any merger, consolidation or binding share exchange to which the Company is a party as a result of which the Persons who are common stockholders of the Company immediately prior thereto have less than a majority of the combined voting power of the outstanding capital stock of the Company ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of directors immediately following such merger, consolidation or binding share exchange, (iii) the adoption of any plan or proposal for the liquidation or dissolution of the Company, or (iv) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company.

 

“Awards” means collectively the Restricted Stock Awards, Restricted Stock Units and Options.

 

“Board” means the Board of Directors of the Company.

 



 

“Board Change” means, (x) prior to the Proxy Swap Termination Date (as defined in the Amended and Restated Transaction Agreement, dated as of September [  ], 2016, by and among Liberty Interactive Corporation, the Company, Barry Diller, John C. Malone and Leslie Malone (the “Transaction Agreement”)), during any one year period, and (y) following the Proxy Swap Termination Date, during any period of two consecutive years, in the case of clause (x) and clause (y), individuals who at the beginning of such period constituted the entire Board cease for any reason to constitute a majority thereof unless the election, or the nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; provided, that for the avoidance of doubt, neither the execution of nor the termination of any of the Subject Instruments (as defined in the Transaction Agreement), including but not limited to, any change in the composition of the Board resulting from such termination, shall constitute a Board Change.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Code section shall include any successor section.

 

“Committee” means the committee of the Board appointed to administer this Plan pursuant to Article VII.

 

“Common Stock” means each or any (as the context may require) series of the Company’s common stock.

 

“Control Purchase” means any transaction (or series of related transactions) in which (1) any person (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity (other than the Company, any Subsidiary of the Company or any employee benefit plan sponsored by the Company or any Subsidiary of the Company) shall purchase any Common Stock of the Company (or securities convertible into Common Stock of the Company) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, without the prior consent of the Board, or (2) any person (as such term is so defined), corporation or other entity (other than the Company, any Subsidiary of the Company, any employee benefit plan sponsored by the Company or any Subsidiary of the Company or any Exempt Person (as defined below)) shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the then outstanding securities of the Company ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) under the Exchange Act in the case of rights to acquire the Company’s securities), other than in a transaction (or series of related transactions) approved by the Board. For purposes of this definition, “Exempt Person” means each of (a) the Chairman of the Board, the President and each of the directors of the Company as of the Redemption Date, and, until the Proxy Swap Termination Date, Barry Diller, and (b) the respective family members, estates and heirs of each of the persons referred to in clause (a) above and any trust or other investment vehicle for the primary benefit of any of such persons or their respective family members or heirs. As used with respect to any person, the term “family member” means the spouse, siblings and lineal descendants of such person.

 

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

 

“Fair Market Value” of a share of any series of Common Stock on any day means (i) for Option exercise transactions effected on any third-party incentive award administration system provided by the Company, the current high bid price of a share of any series of Common Stock as reported on the consolidated transaction reporting system on the principal national securities exchange on which shares of such series of Common Stock are listed on such day or if such shares are not then listed on a national securities exchange, then as quoted by OTC Markets Group Inc., or (ii) for all other purposes under this Plan, the last sale price (or, if no last sale price is reported, the average of the high bid and low asked prices) for a share of such series of Common Stock on such day (or, if such day is not a trading day, on the next preceding trading day) as reported on the consolidated transaction reporting system for the principal national securities exchange on which shares of such series of Common Stock are listed on such day or if such shares are not then listed on a national securities exchange, then as quoted by OTC Markets Group Inc.  If for any day the Fair Market Value of a share of the applicable series of Common Stock is not determinable by any of the foregoing means, or if there is insufficient trading volume in the applicable series of Common Stock on such trading day, then the Fair Market Value for such day shall be determined in good faith by the Committee on the basis of such quotations and other considerations as the Committee deems appropriate.

 

“Incentive Plan” means the Liberty Interactive Corporation 2000 Incentive Plan (As Amended and Restated Effective November 7, 2011), as amended, the Liberty Interactive Corporation 2002 Nonemployee Director Incentive Plan (As Amended and Restated Effective November 7, 2011), as amended, the Liberty Interactive Corporation 2007 Incentive Plan (As Amended and Restated Effective November 7, 2011), as amended, the Liberty Interactive Corporation 2010 Incentive Plan (As Amended and Restated Effective November 7, 2011), as amended, the Liberty Interactive Corporation 2012 Incentive Plan (As Amended and Restated Effective March 31, 2015), the Liberty Interactive Corporation 2011 Nonemployee Director Plan, (As Amended and Restated Effective December 17, 2015), the Liberty Interactive Corporation 2016 Omnibus Incentive Plan and any other stock option or incentive plan adopted or assumed by LIC pursuant to which any Participant holds an outstanding LIC Award as of the Redemption Date. Depending on the context, “Incentive Plan” shall mean all of such plans or a particular one of such plans.

 

“LIC Award” means (1)  an unexercised and unexpired option to purchase LIC Common Stock, (2) an unvested award of restricted shares of LIC Common Stock or (3) an unvested award of restricted stock units of LIC Common Stock.

 

“LIC Common Stock” means shares of each or any (as the context may require) series of LIC’s Liberty Ventures common stock, par value $.01 per share.

 

“LIC Corporate Holder” means an individual who, as of the Redemption Date, is or formerly was (1) an employee or consultant of LIC or a Qualifying Subsidiary or (2) a member of the board of directors of LIC or a Qualifying Subsidiary.  The Committee may, in its discretion, determine that (i) an individual who does not meet any of the foregoing criteria should be classified as an LIC Corporate Holder or (ii) an individual who otherwise would qualify as an LIC Corporate Holder should not be classified as such.

 

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“Option” means an option to purchase Common Stock, granted by the Company to a Participant pursuant to Section 6.1 of the Plan.

 

“Participant” means a person who is an LIC Corporate Holder and who, as of the Redemption Date, holds an outstanding LIC Award.

 

“Person” means an individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.

 

“Plan” means this Liberty Expedia Holdings, Inc. Transitional Stock Adjustment Plan, as set forth herein and as from time to time amended.

 

“Qualifying Subsidiary” means a former direct or indirect subsidiary of LIC, any successor of any such former subsidiary, and the parent company (directly or indirectly) of any such former subsidiary or successor, including without limitation the Company, Liberty Media Corporation, Ascent Capital Group, Inc., Discovery Communications, Inc., Liberty Global, Inc., Liberty TripAdvisor Holdings, Inc., Liberty Broadband Corporation, CommerceHub, Inc. and Starz.

 

“Redemption Date” means [ · ] p.m. New York City time, on [ · ], 2016.

 

“Restricted Stock Award” means an award of restricted shares of Common Stock, granted by the Company to a Participant pursuant to Section 5.1.

 

“Restricted Stock Units” means an award of restricted stock units of Common Stock, granted by the Company to a Participant pursuant to Section 5.2.

 

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

 

“Subsidiary” of a Person means any present or future subsidiary (as defined in Section 424(f) of the Code) of such Person or any business entity in which such Person owns, directly or indirectly, 50% or more of the voting, capital or profits interests. An entity shall be deemed a subsidiary of a Person for purposes of this definition only for such periods as the requisite ownership or control relationship is maintained.

 

ARTICLE III

 

RESERVATION OF SHARES

 

The aggregate number of shares of Common Stock which may be issued under this Plan shall not exceed [ · ] shares, subject to adjustment as hereinafter provided. Any part of such [ · ] shares of Common Stock may be issued pursuant to Restricted Stock Awards. The shares of Common Stock which may be granted pursuant to Awards will consist of either authorized but unissued shares of Common Stock or shares of Common Stock which have been issued and reacquired by the Company, including shares purchased in the open market. The total number of shares authorized under this Plan shall be subject to increase or decrease in order to give effect to the adjustment provision of Section 9.3 and to give effect to any amendment adopted as provided in Section 9.1.

 

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ARTICLE IV

 

PARTICIPATION IN PLAN

 

4.1                                Eligibility to Receive Awards . Awards under this Plan may be granted only to persons who are Participants.

 

4.2                                Participation Not Guarantee of Employment . Nothing in this Plan or in the instrument evidencing the grant of an Award shall in any manner be construed to limit in any way the right of the Company, LIC or any of their respective Subsidiaries to terminate the employment of a Participant at any time, without regard to the effect of such termination on any rights such Participant would otherwise have under the Plan or any Incentive Plan, or give any right to such a Participant to remain employed by the Company, LIC or any of their respective Subsidiaries in any particular position or at any particular rate of compensation.

 

ARTICLE V

 

STOCK AWARDS

 

5.1                                Grant of Restricted Stock Awards .

 

(a)                                  Grant . Restricted Stock Award(s) shall be granted to each Participant who, as of the Redemption Date, holds an outstanding LIC Award(s) consisting of unvested restricted shares of LIC Common Stock.

 

(b)                                  Award of Shares . Each Restricted Stock Award shall be for the number and series of shares of Common Stock determined by the Committee.  Each Restricted Stock Award and the restricted shares of Common Stock issued thereunder shall continue to be subject to all the terms and conditions of the applicable Incentive Plan and associated instrument under which the corresponding award of restricted shares of LIC Common Stock was made and any such terms, conditions and restrictions as may be determined to be appropriate by the Committee.

 

(c)                                   Lapse of Restrictions . The restrictions on each Restricted Stock Award shall lapse in accordance with the terms and conditions of the applicable Incentive Plan and associated instrument under which the corresponding award of restricted shares of LIC Common Stock was made; provided, however, that a Participant’s employment or service, at the request of or with the consent of LIC, with the Company, LIC, a Qualifying Subsidiary or any of their respective Subsidiaries shall be deemed to be employment or service with the Company and LIC for all purposes under a Restricted Stock Award.

 

(d)                                  Award Documentation . Restricted Stock Awards shall be evidenced in such form as the Committee shall approve and contain such terms and conditions as shall be contained therein or incorporated by way of reference to the Incentive Plan or any associated instrument governing the corresponding award of restricted shares of LIC Common Stock, which need not be the same for all Restricted Stock Awards.

 

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(e)                                   Rights with Respect to Shares. No Participant who is granted a Restricted Stock Award shall have any rights as a stockholder by virtue of such grant until shares are actually issued or delivered to the Participant.

 

5.2                                Grant of Restricted Stock Units .

 

(a)                                  Grant . Restricted Stock Units shall be granted to each Participant who, as of the Redemption Date, holds an outstanding LIC Award(s) consisting of unvested restricted stock units of LIC Common Stock.

 

(b)                                  Award of Shares . Each award of Restricted Stock Units shall be for the number and series of shares of Common Stock determined by the Committee.  The Restricted Stock Units and the restricted shares of Common Stock issued thereunder shall continue to be subject to all the terms and conditions of the applicable Incentive Plan and associated instrument under which the corresponding restricted stock units of LIC Common Stock was made and any such terms, conditions and restrictions as may be determined to be appropriate by the Committee.

 

(c)                                   Completion of Restriction Period . The Restricted Stock Units shall vest and become payable in accordance with the terms and conditions of the applicable Incentive Plan and associated instrument under which the corresponding award of restricted stock units of LIC Common Stock was made; provided, however, that a Participant’s employment or service, at the request of or with the consent of LIC, with the Company, LIC, a Qualifying Subsidiary or any of their respective Subsidiaries shall be deemed to be employment or service with the Company and LIC for all purposes under an Award of Restricted Stock Units.

 

(d)                                  Award Documentation . Restricted Stock Units shall be evidenced in such form as the Committee shall approve and contain such terms and conditions as shall be contained therein or incorporated by way of reference to the Incentive Plan or any associated instrument governing the corresponding award of restricted shares of LIC Common Stock, which need not be the same for all Restricted Stock Units.

 

(e)                                   Issuance of Restricted Stock Units. Restricted Stock Units shall not constitute issued and outstanding shares of the applicable series of Common Stock, and the Participant shall not have any of the rights of a stockholder with respect to the shares of Common Stock covered by such an Award of Restricted Stock Units, in each case until such shares shall have vested and been issued to the Participant.

 

ARTICLE VI

 

OPTIONS

 

6.1                                Grant of Options .

 

(a)                                  Grant . Option(s) shall be granted to each Participant who, as of the Redemption Date, holds an outstanding LIC Award(s) consisting of an option to purchase shares of LIC Common Stock. Except as otherwise provided in this Plan, each Option shall continue to be subject to all the terms and conditions of the applicable Incentive Plan and associated instrument

 

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under which the corresponding option to purchase LIC Common Stock was made and any such terms, conditions and restrictions as may be determined to be appropriate by the Committee.

 

(b)                                  Option Shares . Each Option shall be for the number and series of shares of Common Stock determined by the Committee.

 

(c)                                   Option Price . The purchase price per share of Common Stock under each Option shall be determined by the Committee. The Option price shall be subject to adjustment in accordance with the provisions of Section 9.3 hereof.

 

(d)                                  Option Documentation . Options shall be evidenced in such form as the Committee shall approve and contain such terms and conditions as shall be contained therein or incorporated by way of reference to the Incentive Plan or any associated instrument governing the corresponding option to purchase LIC Common Stock which need not be the same for all Options.

 

6.2                                Exercise and/or Termination of Options .

 

(a)                                  Terms of Option . Options granted under this Plan may be exercised at the same time and in the same manner as the corresponding option to purchase LIC Common Stock.  Options granted under this Plan shall expire at the same time and in the same manner as the corresponding option to purchase LIC Common Stock, as provided in the applicable Incentive Plan and any associated instrument governing such option to purchase LIC Common Stock; provided, however, that a Participant’s employment or service, at the request of or with the consent of LIC, with the Company, LIC, a Qualifying Subsidiary or any of their respective Subsidiaries shall be deemed to be employment or service with the Company and LIC for all purposes under an Option.

 

(b)                                  Payment on Exercise . No shares of Common Stock shall be issued on the exercise of an Option unless paid for in full at the time of purchase. Payment for shares of Common Stock purchased upon the exercise of an Option and any amounts required under Section 9.4 shall be determined by the Committee and may consist of (i) cash, (ii) check, (iii) promissory note (subject to applicable law), (iv) whole shares of any series of Common Stock, (v) the withholding of shares of the applicable series of Common Stock issuable upon such exercise of the Option, (vi) the delivery, together with a properly executed exercise notice, of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds required to pay the purchase price, or (vii) any combination of the foregoing methods of payment, or such other consideration and method of payment as may be permitted for the issuance of shares under the Delaware General Corporation Law. The permitted method or methods of payment of the amounts payable upon exercise of an Option, if other than in cash, shall be set forth in the applicable Option agreement and may be subject to such conditions as the Committee deems appropriate.

 

(c)                                   Value of Shares . Unless otherwise determined by the Committee and provided in the applicable Option agreement, shares of any series of Common Stock delivered in payment of all or any part of the amounts payable in connection with the exercise of an Option, and shares of

 

7



 

any series of Common Stock withheld for such payment, shall be valued for such purpose at their Fair Market Value as of the exercise date.

 

(d)                                  Issuance of Shares . The Company shall effect the transfer of the shares of Common Stock purchased under the Option as soon as practicable after the exercise thereof and payment in full of the purchase price therefor and of any amounts required by Section 9.4, and within a reasonable time thereafter, such transfer shall be evidenced on the books of the Company. Unless otherwise determined by the Committee and provided in the applicable Option agreement, (i) no Participant or other person exercising an Option shall have any of the rights of a stockholder of the Company with respect to shares of Common Stock subject to an Option granted under the Plan until due exercise and full payment has been made, and (ii) no adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such due exercise and full payment.

 

(e)                                   Exercise .  For purposes of this Article VI, the date of exercise of an Option shall mean the date on which the Company shall have received notice from the holder of the Option of the exercise of such Option (unless otherwise determined by the Committee and provided in the applicable Option agreement).

 

ARTICLE VII

 

ADMINISTRATION OF PLAN

 

7.1                                The Committee . This Plan shall be administered solely by the Compensation Committee of the Board or such other committee of the Board as the Board shall designate to administer the Plan. A majority of the Committee shall constitute a quorum thereof and the actions of a majority of the Committee at a meeting at which a quorum is present, or actions unanimously approved in writing by all members of the Committee, shall be the actions of the Committee. Vacancies occurring on the Committee shall be filled by the Board. The Committee shall have full and final authority to interpret this Plan and any instruments evidencing Awards granted hereunder, to prescribe, amend and rescind rules and regulations, if any, relating to this Plan and to make all determinations necessary or advisable for the administration of this Plan. The Committee’s determination in all matters referred to herein shall be conclusive and binding for all purposes and upon all persons including, but without limitation, the Company, LIC, the shareholders of the Company, the shareholders of LIC, the Committee and each of the members thereof, and the Participants, and their respective successors in interest. The Committee may delegate any of its rights, powers and duties to any one or more of its members, or to any other person, by written action as provided herein, acknowledged in writing by the delegate or delegates, except that the Committee may not delegate to any person the authority to grant Awards to, or take other action with respect to, Participants who are subject to Section 16 of the Exchange Act. Such delegation may include, without limitation, the power to execute any documents on behalf of the Committee.

 

7.2                                Liability of Committee . No member of the Committee shall be liable for any action or determination made or taken by him or the Committee in good faith with respect to the Plan. The Committee shall have the power to engage outside consultants, auditors or other

 

8



 

professionals to assist in the fulfillment of the Committee’s duties under this Plan at the Company’s expense.

 

7.3                                Determinations of the Committee . The Committee may, in its sole discretion, waive any provisions of any Award, provided such waiver is not inconsistent with the terms of the applicable Incentive Plan, any associated instrument or this Plan as then in effect.

 

ARTICLE VIII

 

AMENDMENT AND TERMINATION OF PLAN

 

8.1                                Amendment, Modification, Suspension or Termination . The Board may from time to time amend, modify, suspend or terminate the Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law except that (i) subject to Section 9.6, no amendment or alteration that would impair the rights of any Participant under any Award awarded to such Participant shall be made without such Participant’s consent and (ii) no amendment or alteration shall be effective prior to approval by the Company’s shareholders to the extent such approval is then required pursuant to applicable legal requirements or the applicable requirements of the securities exchange on which the Company’s Common Stock is listed. With the consent of the Participant, or as otherwise permitted under Section 9.6, and subject to the terms and conditions of the Plan, the Committee may amend outstanding Award agreements with any Participant, including any amendment which would (i) accelerate the time or times at which the Award may be exercised and/or (ii) extend the scheduled expiration date of the Award.

 

8.2                                Termination . The Board may at any time terminate this Plan as of any date specified in a resolution adopted by the Board. If not earlier terminated, this Plan shall terminate on the last date that any Option granted hereunder may be exercised, any restriction applicable to a Restricted Stock Award granted hereunder has lapsed or any Restricted Stock Unit vests, whichever occurs later.

 

ARTICLE IX

 

MISCELLANEOUS PROVISIONS

 

9.1                                Exclusion from Pension and Profit-Sharing Computation . By acceptance of an Award, unless otherwise provided in the applicable Award agreement, each Participant shall be deemed to have agreed that such Award is special incentive compensation that will not be taken into account, in any manner, as salary, compensation or bonus in determining the amount of any payment under any pension, retirement or other employee benefit plan, program or policy of the Company or any Subsidiary of the Company. In addition, each beneficiary of a deceased Participant shall be deemed to have agreed that such Award will not affect the amount of any life insurance coverage, if any, provided by the Company on the life of the Participant which is payable to such beneficiary under any life insurance plan covering employees of the Company or any Subsidiary of the Company.

 

9



 

9.2                                Government and Other Regulations . The obligation of the Company with respect to Awards shall be subject to all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including the effectiveness of any registration statement required under the Securities Act, and the rules and regulations of any securities exchange or association on which the Common Stock may be listed or quoted. For so long as any series of Common Stock is registered under the Exchange Act, the Company shall use its reasonable efforts to comply with any legal requirements (i) to maintain a registration statement in effect under the Securities Act with respect to all shares of the applicable series of Common Stock that may be issued to Participants under the Plan and (ii) to file in a timely manner all reports required to be filed by it under the Exchange Act.

 

9.3                                Adjustments .

 

(a)                                  (i)  If the Company subdivides its outstanding shares of any series of Common Stock into a greater number of shares of such series of Common Stock (by stock dividend, stock split, reclassification, or otherwise) or combines its outstanding shares of any series of Common Stock into a smaller number of shares of such series of Common Stock (by reverse stock split, reclassification, or otherwise) or if the Committee determines that any stock dividend, extraordinary cash dividend, reclassification, recapitalization, reorganization, stock redemption, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase such series of Common Stock or other similar corporate event (including mergers or consolidations other than those which constitute Approved Transactions, adjustments with respect to which shall be governed by Section 9.3(b)) affects any series of Common Stock so that an adjustment is required to preserve the benefits or potential benefits intended to be made available under the Plan, then the Committee, in such manner as the Committee, in its sole discretion, deems equitable and appropriate, shall make such adjustments to any or all of (i) the number and kind of shares of stock which thereafter may be awarded, optioned or otherwise made subject to the benefits contemplated by the Plan, (ii) the number and kind of shares of stock subject to outstanding Awards and (iii) the purchase or exercise price and the relevant appreciation base with respect to any of the foregoing, provided, however, that the number of shares subject to any Award shall always be a whole number. The Committee may, if deemed appropriate, provide for a cash payment to a Participant in connection with any adjustment made pursuant to this Section 9.3(a).

 

(ii)                                   Notwithstanding any provision of the Plan to the contrary, in the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Committee shall be authorized, in its discretion, (i) to provide, prior to the transaction, for the acceleration of the vesting and exercisability of, or lapse of restrictions with respect to, the Award and, if the transaction is a cash merger, provide for the termination of any portion of the Award that remains unexercised at the time of such transaction, or (ii) to cancel any such Awards and to deliver to the Holders cash in an amount that the Committee shall determine in its sole discretion is equal to the fair market value of such Awards on the date of such event, which in the case of Options shall be the excess of the Fair Market Value (as determined in sub-section (ii) of the definition of such term) of Common Stock on such date over the purchase price of the Options.

 

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(b)                                  Approved Transactions; Board Change; Control Purchase . In the event of any Approved Transaction, Board Change or Control Purchase, notwithstanding any contrary waiting period, installment period, vesting schedule or restriction period in any Award agreement or in the Plan, unless the applicable Award agreement provides otherwise: (i) in the case of an Option, each such outstanding Option granted under the Plan shall become exercisable in full in respect of the aggregate number of shares covered thereby, (ii) in the case of Common Stock awarded under a Restricted Stock Award, any restriction period applicable to each such Common Stock shall be deemed to have expired and all such Common Stock shall become vested, and (iii) in the case of Restricted Stock Units, the restriction period applicable to each such Award of Restricted Stock Units shall be deemed to have expired and all such Restricted Stock Units shall become vested.  Notwithstanding the foregoing, unless otherwise provided in the applicable Award agreement, the Committee may, in its discretion, determine that any or all outstanding Awards of any or all types granted pursuant to the Plan will not vest or become exercisable on an accelerated basis in connection with an Approved Transaction if effective provision has been made for the taking of such action which, in the opinion of the Committee, is equitable and appropriate to substitute a new Award or to assume such Award and to make such new or assumed Award, as nearly as may be practicable, equivalent to the old Award (before giving effect to any acceleration of the vesting or exercisability thereof), taking into account, to the extent applicable, the kind and amount of securities, cash or other assets into or for which the applicable series of Common Stock may be changed, converted or exchanged in connection with the Approved Transaction.

 

(c)                                   Compliance with Section 409A .  No adjustment or substitution pursuant to this Section 9.3 shall be made in a manner that results in noncompliance with the requirements of Section 409A, to the extent applicable.

 

9.4                                Withholding of Taxes . The Company’s obligation to deliver shares of Common Stock or pay cash in respect of any Awards under the Plan shall be subject to applicable federal, state and local tax withholding requirements. Federal, state and local withholding tax due upon the exercise of any Option or upon the vesting of, or expiration of restrictions with respect to Restricted Stock Awards or Restricted Stock Units, may, in the discretion of the Committee, be paid in shares of the applicable series of Common Stock already owned by the Participant or through the withholding of shares otherwise issuable to such Participant, upon such terms and conditions (including the conditions referenced in Section 6.2) as the Committee shall determine. If the Participant shall fail to pay, or make arrangements satisfactory to the Committee for the payment of, all such federal, state and local taxes required to be withheld with respect to an Award, then the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to such Participant an amount equal to any federal, state or local taxes of any kind required to be withheld with respect to such Award.

 

9.5                                Restrictions on Benefit .  Notwithstanding any provision of this Plan to the contrary, the provisions of any Incentive Plan concerning restrictions on benefits (in order to avoid excise taxes on the Participant under Section 4999 of the Code or the disallowance of a deduction to the Company pursuant to Section 280G of the Code) are specifically incorporated by this reference.

 

11



 

9.6                                Section 409A . It is the intent of the Company that Awards under this Plan comply with the requirements of, or be exempt from the application of, Section 409A of the Code and related regulations and United States Department of the Treasury pronouncements (“Section 409A”), and the provisions of this Plan will be administered, interpreted and construed accordingly.  Notwithstanding any provision in this Plan or any Incentive Plan to the contrary, if any Plan or Incentive Plan provision or any Award thereunder would result in the imposition of an additional tax under Section 409A, that Plan or Incentive Plan provision and/or that Award will be reformed to avoid imposition of the applicable tax and no action taken to comply with Section 409A shall be deemed to adversely affect the Participant’s right to an Award(s) or require the consent of the Participant.

 

12


 



Exhibit 10.3

 

FORM OF TAX SHARING AGREEMENT

 

BETWEEN

 

LIBERTY INTERACTIVE CORPORATION

 

AND

 

LIBERTY EXPEDIA HOLDINGS, INC.

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

SECTION 1.         Definition of Terms

1

 

 

 

SECTION 2.         Allocation of Taxes and Tax-Related Losses

8

 

 

 

2.1

Allocation of Taxes

8

2.2

Special Rules

9

2.3

Tax Payments

9

 

 

 

SECTION 3.         Preparation and Filing of Tax Returns

9

 

 

 

3.1

Combined Returns

9

3.2

Separate Returns

9

3.3

Provision of Information

10

3.4

Special Rules Relating to the Preparation of Tax Returns

10

3.5

Refunds, Credits or Offsets

12

3.6

Carrybacks

12

3.7

Amended Returns

13

 

 

 

SECTION 4.         Tax Payments

13

 

 

 

4.1

Payment of Taxes to Tax Authority

13

4.2

Indemnification Payments

13

4.3

Interest on Late Payments

14

4.4

Tax Consequences of Payments

14

 

 

 

SECTION 5.         Assistance and Cooperation

14

 

 

 

5.1

Cooperation

14

 

 

 

SECTION 6.         Tax Records

15

 

 

 

6.1

Retention of Tax Records

15

6.2

Access to Tax Records

15

6.3

Confidentiality

15

6.4

Delivery of Tax Records

15

 

 

 

SECTION 7.         Restriction on Certain Actions of Distributing and Splitco; Indemnity

16

 

 

 

7.1

Restrictive Covenants

16

7.2

Distributing Indemnity

17

7.3

Splitco Indemnity

17

7.4

Scope

18

 

i



 

7.5

Notices of Tax Contests (Other than Joint Claims)

18

7.6

Control of Tax Contests (Other than Joint Claims)

18

7.7

Cooperation

19

7.8

Joint Claims

19

 

 

 

SECTION 8.         General Provisions

19

 

 

 

8.1

Termination

19

8.2

Predecessors or Successors

19

8.3

Expenses

20

8.4

Governing Law

20

8.5

Waiver of Jury Trial

20

8.6

Notices

20

8.7

Counterparts

21

8.8

Binding Effect; Assignment

21

8.9

Severability

21

8.10

Amendments; Waivers

22

8.11

Effective Date

22

8.12

Change in Law

22

8.13

Authorization, Etc.

22

8.14

No Third Party Beneficiaries

22

8.15

Entire Agreement

22

8.16

No Strict Construction; Interpretation

23

8.17

Headings

23

 

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TAX SHARING AGREEMENT

 

THIS TAX SHARING AGREEMENT (this “Agreement”) is entered into as of [   ], between Liberty Interactive Corporation, a Delaware corporation (“Distributing”), and Liberty Expedia Holdings, Inc., a Delaware corporation (“Splitco”).  Unless otherwise indicated, all “Section” references in this Agreement are to sections of this Agreement.

 

RECITALS

 

WHEREAS, Splitco is a wholly owned subsidiary of Distributing; and

 

WHEREAS, the Board of Directors of Distributing has determined that it would be appropriate and desirable for Distributing to separate the Splitco Group from the Distributing Group; and

 

WHEREAS, the Board of Directors of Splitco has also approved such transaction; and

 

WHEREAS, following the Contribution, Distributing intends to distribute its entire interest in the stock of Splitco to holders of Liberty Ventures Common Stock  in exchange for a portion of their shares of Liberty Ventures Common Stock (the “Distribution”), in what is intended to qualify as a tax-free transaction described under Sections 368(a)(1)(D), 355, and 361 of the Code; and

 

WHEREAS, the parties set forth in the Reorganization Agreement the principal arrangements between them regarding the separation of the Splitco Group from the Distributing Group; and

 

WHEREAS, the parties desire to provide for and agree upon the allocation between the parties of liabilities for Taxes arising prior to, as a result of, and subsequent to the Distribution, and to provide for and agree upon other matters relating to Taxes.

 

NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, and intending to be legally bound hereby, Distributing and Splitco hereby agree as follows:

 

SECTION 1.         Definition of Terms .  For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings:

 

“Affiliate” means with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.  For the avoidance of doubt, (x) no member of the Splitco Group will be treated as an Affiliate of any member of the Distributing Group and (y) no member of the Distributing Group will be treated as an Affiliate of any member of the Splitco Group.

 

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“Agreement” has the meaning set forth in the preamble hereof.

 

“business day” means any day other than a Saturday, Sunday or a day on which banking institutions in New York City, New York or London, England are authorized or required by law or executive order to close.

 

“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor law.

 

“Combined Return” means a consolidated, combined or unitary Tax Return that includes, by election or otherwise, one or more members of the Distributing Group and one or more members of the Splitco Group.

 

“Company” means Distributing or Splitco, as the context requires.

 

“Compensatory Equity Interests” means options, stock appreciation rights, restricted stock, stock units or other rights with respect to Distributing Stock or Splitco Stock that are granted on or prior to the Distribution Date by Distributing, Splitco or any of their respective Subsidiaries in connection with employee, independent contractor or director compensation or other employee benefits (including, for the avoidance of doubt, options, stock appreciation rights, restricted stock, stock units or other rights issued in respect of any of the foregoing by reason of the Distribution or any subsequent transaction).

 

“Contribution” has the meaning given to such term in the Reorganization Agreement.

 

“Control” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of securities or partnership, membership, limited liability company, or other ownership interests, by contract or otherwise and the terms “Controlling” and “Controlled” have meanings correlative to the foregoing.

 

“Delaware Chancery Court” has the meaning set forth in Section 8.4.

 

“Disclosing Party” has the meaning set forth in Section 6.3.

 

“Distributing” has the meaning set forth in the preamble hereof.

 

“Distributing Group” means Distributing and each Subsidiary of Distributing (but only while such Subsidiary is a Subsidiary of Distributing) other than any Person that is a member of the Splitco Group (but only during the period such Person is treated as a member of the Splitco Group).

 

“Distributing Indemnitees” has the meaning set forth in Section 7.3.

 

“Distributing Stock” means (x) the Series A QVC Group common stock, par value $.01 per share, the Series B QVC Group common stock, par value $.01 per

 

2



 

share, the Series A Liberty Ventures common stock, par value $.01 per share, and the Series B Liberty Ventures common stock, par value $.01 per share, (y) if and when issued, the Series C QVC Group common stock, par value $.01 per share, and the Series C Liberty Ventures common stock, par value $.01 per share, and (z) any series or class of stock into which the Series A, Series B, or Series C QVC Group common stock or the Series A, Series B, or Series C Liberty Ventures common stock is redesignated, reclassified, converted or exchanged following the Effective Time.

 

“Distribution” has the meaning set forth in the recitals hereof.

 

“Distribution Date” means the date on which the Distribution occurs.

 

“Due Date” has the meaning set forth in Section 4.3.

 

“Effective Time” means the time at which the Distribution is effected on the Distribution Date.

 

“Employing Party” has the meaning set forth in Section 3.4(d)(i).

 

“Expedia” means Expedia, Inc., a Delaware corporation.

 

“Final Determination” means a determination within the meaning of Section 1313 of the Code or any similar provision of state or local Tax Law.

 

“Group” means the Distributing Group or the Splitco Group, as the context requires.

 

“Income Tax” means all Taxes (i) based upon, measured by, or calculated with respect to, net income, net profits or deemed net profits (including any capital gains Tax, minimum Tax based upon, measured by, or calculated with respect to, net income, net profits or deemed net profits, any Tax on items of Tax preference and depreciation recapture or clawback, but not including sales, use, real or personal property, gross or net receipts, gross profits, transfer and similar Taxes), (ii) imposed by a foreign country which qualify under Section 903 of the Code or (iii) based upon, measured by, or calculated with respect to multiple bases (including, but not limited to, corporate franchise and occupation Taxes) if such Taxes may be based upon, measured by, or calculated with respect to one or more bases described in clause (i) above.

 

“Interest Rate” means the Rate determined below, as adjusted as of each Interest Rate Determination Date.  The “Rate,” means, with respect to each period between two consecutive Interest Rate Determination Dates, a rate determined at approximately 11:00 a.m., London time, two London business days before the first Interest Rate Determination Date equal to the greater of:  (x) the sum of (i) the six month dollar LIBOR rate as displayed on page “LR” of Bloomberg (or such other appropriate page as may replace such page), plus (ii) 2%, and (y) the interest rate that would be applicable at such time to a “large corporate underpayment” (within the meaning of Section 6621(c) of the Code) under Sections 6601 and 6621 of the Code.  Interest will be

 

3



 

calculated on the basis of a year of 365 days and the actual number of days for which due.

 

“Interest Rate Determination Date” means the Due Date and each March 31, June 30, September 30 and December 31 thereafter.

 

“IRS” means the Internal Revenue Service.

 

“issuing corporation” has the meaning set forth in Section 3.4(d)(ii).

 

“Joint Claim” has the meaning set forth in Section 7.8.

 

“Liberty Ventures Common Stock” means the Series A Liberty Ventures common stock, par value $.01 per share, and the Series B Liberty Ventures common stock, par value $.01 per share.

 

“Losses” means any and all damages, losses, deficiencies, liabilities, obligations, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including the fees and expenses of any and all actions and demands, assessments, judgments, settlements and compromises relating thereto and the costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder); provided, however , that “Losses” shall exclude any special or punitive damages; provided, further , that the foregoing proviso will not be interpreted to limit indemnification for Losses incurred as a result of the assertion by a claimant (other than the parties hereto and their successors and assigns) in a third-party claim for special or punitive damages.

 

“Non-Preparer” means the Company that is not responsible for the preparation and filing of the applicable Tax Return pursuant to Sections 3.1 or 3.2.

 

“Payment Date” means (x) with respect to any U.S. federal income tax return, the due date for any required installment of estimated taxes determined under Code Section 6655, the due date (determined without regard to extensions) for filing the return determined under Code Section 6072, and the date the return is filed, and (y) with respect to any other Tax Return, the corresponding dates determined under the applicable Tax Law.

 

“Person” means any individual, corporation, company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.

 

“Post-Distribution Period” means any Tax Year or other Taxable period beginning after the Distribution Date and, in the case of any Straddle Period, that part of the Tax Year or other taxable period that begins at the beginning of the day after the Distribution Date.

 

“Pre-Distribution Period” means any Tax Year or other taxable period that ends on or before the Distribution Date and, in the case of any Straddle Period, that part

 

4



 

of the Tax Year or other taxable period through the end of the day on the Distribution Date.

 

“Preparer” means the Company that is responsible for the preparation and filing of the applicable Tax Return pursuant to Sections 3.1 or 3.2.

 

“Protective Election” has the meaning set forth in Section 3.4(a).

 

“Receiving Party” has the meaning set forth in Section 6.3.

 

“Reorganization Agreement” means the Reorganization Agreement between Distributing and Splitco dated [        ].

 

“Restructuring” has the meaning assigned to such term in the Reorganization Agreement.

 

“Separate Return” means (a) in the case of any Tax Return required to be filed by any member of the Distributing Group (including any consolidated, combined or unitary Tax Return), any such Tax Return that does not include any member of the Splitco Group, and (b) in the case of any Tax Return required to be filed by any member of the Splitco Group (including any consolidated, combined or unitary Tax Return), any such Tax Return that does not include any member of the Distributing Group.

 

“Splitco” has the meaning set forth in the preamble hereof.

 

“Splitco Group” means (x) with respect to any Tax Year (or portion thereof) ending at or before the Effective Time, Splitco and each of its Subsidiaries at the Effective Time; and (y) with respect to any Tax Year (or portion thereof) beginning after the Effective Time, Splitco and each Subsidiary of Splitco (but only while such Subsidiary is a Subsidiary of Splitco).

 

“Splitco Indemnitees” has the meaning set forth in Section 7.2.

 

“Splitco Section 355(e) Event” means the application of Section 355(e) of the Code to the Distribution as a result of the Distribution being “part of a plan (or series of related transactions) pursuant to which 1 or more persons acquire directly or indirectly stock representing a 50-percent or greater interest” in Splitco (within the meaning of Section 355(e) of the Code).

 

“Splitco Stock” means Splitco’s Series A common stock, par value $.01 per share, and Series B common stock, par value $.01 per share, and if and when issued, Splitco’s Series C common stock, par value $.01 per share, and any series or class of stock into which Splitco’s Series A, Series B, or Series C common stock is redesignated, reclassified, converted or exchanged following the Effective Time.

 

“Straddle Period” means any Taxable period commencing on or prior to, and ending after, the Distribution Date.

 

5



 

“Subsidiary” when used with respect to any Person, means (i)(A) a corporation a majority in voting power of whose share capital or capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, (B) a partnership or limited liability company in which such Person or a Subsidiary of such Person is, at the date of determination, (1) in the case of a partnership, a general partner of such partnership with the power affirmatively to direct the policies and management of such partnership or (2) in the case of a limited liability company, the managing member or, in the absence of a managing member, a member with the power affirmatively to direct the policies and management of such limited liability company, or (C) any other Person (other than a corporation) in which such Person, one or more Subsidiaries of such Person or such Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has or have (1) the power to elect or direct the election of a majority of the members of the governing body of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, or (2) in the absence of such a governing body, at least a majority ownership interest or (ii) any other Person of which an aggregate of 50% or more of the equity interests are, at the time, directly or indirectly, owned by such Person and/or one or more Subsidiaries of such Person.  For purposes of the foregoing, neither Expedia nor any of its Subsidiaries will be treated as Subsidiaries of Distributing or Splitco during any period in which such party beneficially owns less than 50% of the outstanding common stock of Expedia by value.

 

“Tax” or “Taxes” means any net income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, employment, unemployment, disability, property, ad valorem, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value added, alternative minimum, estimated or other similar tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax) imposed by any Tax Authority and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.

 

“Tax Authority” means, with respect to any Tax, the governmental entity or political subdivision, agency, commission or authority thereof that imposes such Tax, and the agency, commission or authority (if any) charged with the assessment, determination or collection of such Tax for such entity or subdivision.

 

“Tax Contest” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose, potential or effect of redetermining Taxes of any member of either Group (including any administrative or judicial review of any claim for refund).

 

“Tax Counsel” means Skadden, Arps, Slate, Meagher & Flom LLP.

 

6



 

“Tax Item” means, with respect to any Tax, any item of income, gain, loss, deduction, credit or other attribute that may have the effect of increasing or decreasing any Tax.

 

“Tax Law” means the law of any governmental entity or political subdivision thereof, and any controlling judicial or administrative interpretations of such law, relating to any Tax.

 

“Tax Materials” means (i) the representation letters delivered to Tax Counsel in connection with the delivery of the Tax Opinion, and (ii) any other materials delivered or deliverable by Distributing, Splitco and others in connection with the rendering by Tax Counsel of the Tax Opinion.

 

“Tax Opinion” means the opinion to be delivered by Tax Counsel to Distributing in connection with the Distribution to the effect that the Contribution and the Distribution will qualify as a tax-free transaction described under Sections 368(a)(1)(D), 355 and 361 of the Code to Distributing and the holders of Liberty Ventures Common Stock (except with respect to the receipt of cash in lieu of fractional shares).

 

“Tax Records” means Tax Returns, Tax Return work papers, documentation relating to any Tax Contests, and any other books of account or records required to be maintained under applicable Tax Laws (including but not limited to Section 6001 of the Code) or under any record retention agreement with any Tax Authority.

 

“Tax Return” means any report of Taxes due, any claims for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document filed or required to be filed (by paper, electronically or otherwise) under any applicable Tax Law, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

 

“Tax Year” means, with respect to any Tax, the year, or shorter period, if applicable, for which the Tax is reported as provided under applicable Tax Law.

 

“Transaction Taxes” means any Taxes resulting from the Restructuring and the Distribution, other than Transfer Taxes.

 

“Transaction Tax-Related Losses” means any Losses resulting from the failure of (i) the Restructuring to qualify in whole for nonrecognition of income, gain and loss for U.S. federal income tax purposes to Distributing, Splitco and each of their respective Subsidiaries immediately prior to the Distribution, (ii) the Contribution and Distribution to qualify as a tax-free transaction described under Sections 368(a)(1)(D), 355 and 361 of the Code (except with respect to the receipt of cash in lieu of fractional shares), or (iii) the Contribution and Distribution to qualify in whole for nonrecognition of income, gain and loss for U.S. federal income tax purposes to Distributing, Splitco, each of their respective Subsidiaries at the Effective Time, and the holders of Liberty

 

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Ventures Common Stock that receive stock of Splitco in the Distribution (except with respect to the receipt of cash in lieu of fractional shares).

 

“Transfer Taxes” means all U.S. federal, state, local or foreign transfer, documentary, stamp, duties, recording, and similar Taxes and fees (including any penalties, interest or additions thereto) imposed upon any party hereto or any of its Subsidiaries in connection with the Restructuring or the Distribution.

 

“Treasury Regulations” means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Year.

 

SECTION 2.         Allocation of Taxes and Tax-Related Losses

 

2.1           Allocation of Taxes .  Except as provided in Section 2.2 (Special Rules) and Section 3.4(d) (Compensatory Equity Interests), Taxes shall be allocated as follows:

 

(a)            Combined Returns .

 

(i)             Allocation of Taxes for Combined Returns .  Distributing shall be allocated: (A) all Taxes that are attributable to members of the Distributing Group and reported on, or required to be reported on, a Combined Return; and (B) all Taxes that are attributable to members of the Splitco Group for the Pre-Distribution Period and reported on, or required to be reported on, a Combined Return.  Splitco shall be allocated all Taxes that are attributable to members of the Splitco Group for the Post-Distribution Period and reported on, or required to be reported on, a Combined Return.

 

(ii)            Transactions Occurring on the Distribution Date .  Notwithstanding the provisions of Section 2.1(a)(i) (but subject to the provisions of Section 2.2), Taxes attributable to any transaction or action taken by or with respect to any member of the Splitco Group outside the ordinary course of business before the Distribution on the Distribution Date shall be allocated to the Pre-Distribution Period, and Taxes attributable to any transaction or action taken by or with respect to any member of the Splitco Group outside the ordinary course of business after the Distribution on the Distribution Date shall be allocated to the Post-Distribution Period.

 

(b)            Separate Returns .

 

(i)             Splitco Separate Returns .  Splitco shall be allocated all Taxes that are attributable to members of the Splitco Group and reported on, or required to be reported on, a Separate Return that is required to be filed by a member of the Splitco Group.

 

(ii)            Distributing Separate Returns .  Distributing shall be allocated all Taxes that are attributable to members of the Distributing Group and reported on, or required to be reported on, a Separate Return that is required to be filed by a member of the Distributing Group.

 

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(c)            Taxes Not Reported on Tax Returns .   Splitco shall be allocated any Tax attributable to members of the Splitco Group that is not required to be reported on a Tax Return, and Distributing shall be allocated any Tax attributable to members of the Distributing Group that is not required to be reported on a Tax Return.

 

2.2           Special Rules .

 

(a)            Transaction Taxes and Transaction Tax-Related Losses .  Notwithstanding any other provision in this Section 2:

 

(i)             Distributing shall be allocated all Transaction Taxes and Transaction Tax-Related Losses other than any Transaction Taxes and Transaction Tax-Related Losses allocated to Splitco pursuant to clause (ii) of this Section 2.2(a).

 

(ii)            Splitco will be allocated any Transaction Taxes (including corresponding state and local Taxes) and Transaction Tax-Related Losses that (x) result primarily from, individually or in the aggregate, any breach by Splitco of any of its covenants set forth in Section 7.1 hereof, or (y) result from a Splitco Section 355(e) Event.

 

(b)            Transfer Taxes .  Notwithstanding any other provision in this Section 2, all Transfer Taxes shall be allocated 50% to Splitco and 50% to Distributing.

 

2.3           Tax Payments .  Each Company shall pay the Taxes allocated to it by this Section 2 either to the applicable Tax Authority or to the other Company in accordance with Section 4 and the other applicable provisions of this Agreement.

 

SECTION 3.         Preparation and Filing of Tax Returns .

 

3.1           Combined Returns .

 

(a)            Preparation of Combined Returns .  Distributing shall be responsible for preparing and filing (or causing to be prepared and filed) all Combined Returns for any Tax Year.

 

3.2           Separate Returns .

 

(a)            Tax Returns to be Prepared by Distributing .  Distributing shall be responsible for preparing and filing (or causing to be prepared and filed) all Separate Returns which relate to one or more members of the Distributing Group for any Tax Year.

 

(b)            Tax Returns to be Prepared by Splitco .  Splitco shall be responsible for preparing and filing (or causing to be prepared and filed) all Separate Returns which relate to one or more members of the Splitco Group for any Tax Year.

 

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3.3           Provision of Information .

 

(a)            Distributing shall provide to Splitco, and Splitco shall provide to Distributing, any information about members of the Distributing Group or the Splitco Group, respectively, that the Preparer needs to determine the amount of Taxes due on any Payment Date with respect to a Tax Return for which the Preparer is responsible pursuant to Section 3.1 or 3.2 and to properly and timely file all such Tax Returns.

 

(b)            If a member of the Splitco Group supplies information to a member of the Distributing Group, or a member of the Distributing Group supplies information to a member of the Splitco Group, and an officer of the requesting member intends to sign a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then a duly authorized officer of the member supplying such information shall certify, to the best of such officer’s knowledge, the accuracy of the information so supplied.

 

3.4           Special Rules Relating to the Preparation of Tax Returns .

 

(a)            In General .  All Tax Returns that include any members of the Splitco Group or Distributing Group, or any of their respective Affiliates, shall be prepared in a manner that is consistent with the Tax Opinion; provided, however , that Distributing and Splitco may agree to make protective elections under Sections 336(e) and/or 338 of the Code (and any similar provisions of state, local and foreign Tax law) with respect to Splitco and its Subsidiaries in connection with the Distribution (any such election, a “Protective Election”) and to prepare and file Tax Returns consistent with such Protective Elections.  Except as otherwise set forth in this Agreement, and subject to Sections 3.4(b) through (d), the Company responsible for preparing and filing (or causing to be prepared and filed) a Tax Return pursuant to Sections 3.1 or 3.2 shall have the right with respect to such Tax Return to determine (i) the manner in which such Tax Return shall be prepared and filed, including the elections, methods of accounting, positions, conventions and principles of taxation to be used and the manner in which any Tax Item shall be reported, (ii) whether any extensions may be requested, (iii) whether an amended Tax Return shall be filed, (iv) whether any claims for refund shall be made, (v) whether any refunds shall be paid by way of refund or credited against any liability for the related Tax and (vi) whether to retain outside firms to prepare or review such Tax Return.

 

(b)            Splitco Tax Returns .  With respect to any Separate Return for which Splitco is responsible pursuant to Section 3.2(b), Splitco and the other members of the Splitco Group must allocate Tax Items between such Separate Return for which Splitco is responsible pursuant to Section 3.2(b) and any related Combined Return for which Distributing is responsible pursuant to Section 3.1 that are filed with respect to the same Tax Year in a manner that is consistent with the reporting of such Tax Items on the related Combined Return for which Distributing is responsible pursuant to Section 3.1.

 

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(c)            Election to File Consolidated, Combined or Unitary Tax Returns .  Distributing shall have the sole discretion of filing any Tax Return on a consolidated, combined or unitary basis, if such Tax Return would include at least one member of each Group and the filing of such Tax Return is elective under the relevant Tax Law.

 

(d)            Compensatory Equity Interests .

 

(i)             Deductions Related to Compensatory Equity Interests .  To the extent permitted by applicable Tax Law, Income Tax deductions with respect to the issuance, exercise, vesting or settlement after the Distribution Date of any Compensatory Equity Interests held by any Person shall be claimed (A) in the case of an active officer or employee, solely by the Group that employs such Person at the time of such issuance, exercise, vesting, or settlement, as applicable; (B) in the case of a former officer or employee, solely by the Group that was the last to employ such Person; and (C) in the case of a director or former director (who is not an officer or employee or former officer or employee of a member of either Group), (x) solely by the Distributing Group if such person was, at any time before or after the Distribution, a director of any member of the Distributing Group, and (y) in any other case, solely by the Splitco Group (the party whose Group is described in (A), (B), or (C), the “Employing Party”).

 

(ii)            Withholding and Reporting .  For any Tax Year (or portion thereof), the Employing Party shall (A) satisfy, or shall cause to be satisfied, all applicable Tax reporting obligations with respect to the issuance, exercise, vesting or settlement of Compensatory Equity Interests and (B) satisfy, or cause to be satisfied, all liabilities for Taxes imposed in connection with such issuance, exercise, vesting or settlement (including the employer portion of any employment taxes); provided that , (x) in the event Compensatory Equity Interests are settled by the corporation that is the issuer or obligor under the Compensatory Equity Interest (the “issuing corporation”) and the issuing corporation is not a member of the same Group as the Employing Party, the issuing corporation shall promptly remit to the Employing Party an amount of cash equal to the amount required to be withheld in respect of any withholding Taxes, and (y) the Employing Party shall not be liable for failure to remit to the applicable Tax Authority any amount required to have been withheld from the recipient of the Compensatory Equity Interest in connection with such issuance, exercise, vesting or settlement, except to the extent that the issuing corporation shall have remitted such amount to the Employing Party.  Distributing shall promptly notify Splitco, and Splitco shall promptly notify Distributing, regarding the exercise of any option or the issuance, vesting, exercise or settlement of any other Compensatory Equity Interest to the extent that, as a result of such issuance, exercise, vesting or settlement, any other party may be entitled to a deduction or required to pay any Tax, or such information otherwise may be relevant to the preparation of any Tax Return or payment of any Tax by such other party or parties.

 

(iii)           Distributing Employees .  For purposes of this Section 3.4(d), if a Person is an officer or employee of Distributing or any member of the Distributing Group for any Tax Year (or portion thereof), then such officer or employee

 

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will exclusively be considered to be employed by Distributing (or the applicable member of the Distributing Group) for such Tax Year (or portion thereof).

 

3.5           Refunds, Credits or Offsets .

 

(a)            Except as otherwise contemplated by this Section 3.5 or Section 3.6, any refunds, credits or offsets with respect to Taxes of any member of (i) the Distributing Group that were reported on any Combined Return shall be for the account of Distributing, (ii) the Splitco Group that were reported on any Combined Return and are attributable to the Pre-Distribution Period shall be for the account of Distributing, (iii) the Splitco Group that were reported on any Combined Return and are attributable to the Post-Distribution Period shall be for the account of Splitco, (iv) the Distributing Group that were reported on any Separate Return required to be filed by a member of the Distributing Group shall be for the account of Distributing, and (v) the Splitco Group that were reported on any Separate Return required to be filed by a member of the Splitco Group shall be for the account of Splitco.

 

(b)            Notwithstanding Section 3.5(a), (i) any refunds, credits or offsets with respect to Taxes, including Transaction Taxes, allocated to, and actually paid by, Distributing pursuant to this Agreement shall be for the account of Distributing, and (ii) any refunds, credits or offsets with respect to Taxes, including Transaction Taxes, allocated to, and actually paid by, Splitco pursuant to this Agreement shall be for the account of Splitco.

 

(c)            Distributing shall forward to Splitco, or reimburse Splitco for, any such refunds, credits or offsets, plus any interest received thereon, net of any Taxes incurred with respect to the receipt or accrual thereof and any expenses incurred in connection therewith, that are for the account of Splitco within five business days from receipt thereof by Distributing or any of its Affiliates.  Splitco shall forward to Distributing, or reimburse Distributing for, any refunds, credits or offsets, plus any interest received thereon, net of any Taxes incurred with respect to the receipt or accrual thereof and any expenses incurred in connection therewith, that are for the account of Distributing within five business days from receipt thereof by Splitco or any of its Affiliates.  Any refunds, credits or offsets, plus any interest received thereon, or reimbursements not forwarded or made within the five business day period specified above shall bear interest from the date received by the refunding or reimbursing party (or its Affiliates) through and including the date of payment at the Interest Rate (treating the date received as the Due Date for purposes of determining such Interest Rate).  If, subsequent to a Tax Authority’s allowance of a refund, credit or offset, such Tax Authority reduces or eliminates such allowance, any refund, credit or offset, plus any interest received thereon, forwarded or reimbursed under this Section 3.5 shall be returned to the party who had forwarded or reimbursed such refund, credit or offset and interest upon the request of such forwarding party in an amount equal to the applicable reduction, including any interest received thereon.

 

3.6           Carrybacks .  If and to the extent that Splitco requests in writing that Distributing or any of its Affiliates obtain a refund, credit or offset of Taxes with

 

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respect to the carryback of any Tax attribute of the members of the Splitco Group arising in a Post-Distribution Period to a Pre-Distribution Period, and provided that Distributing or any of its Affiliates would not otherwise be required to forego a refund, credit or offset of Taxes for its own account or otherwise be adversely affected as a result of such carryback, then (i) Distributing (or its Affiliate) shall take all reasonable measures to obtain a refund, credit or offset of Tax with respect to such carryback (including by filing an amended Tax Return), and (ii) to the extent that Distributing or any of its Affiliates receives any refund, credit or offset of Taxes attributable (on a last dollar basis) to such carryback, Distributing shall pay such refund, credit or offset, plus any interest received thereon, to Splitco within five business days from receipt thereof by Distributing or any of its Affiliates; provided, however , that Distributing shall be entitled to reduce the amount of any such refund, credit or offset for its reasonable out-of-pocket costs and expenses incurred in connection therewith and any Taxes incurred with respect to the receipt or accrual thereof; and provided further , that Splitco, upon the request of Distributing, agrees to repay such refund, credit or offset, plus any interest received thereon and net of Taxes, to Distributing in the event, and to the extent, that Distributing is required to repay such refund, credit or offset, plus any interest received thereon, to a Tax Authority.

 

3.7           Amended Returns .  Any amended Tax Return or claim for Tax refund, credit or offset with respect to any member of the Splitco Group may be made only by the Company (or its Subsidiaries) responsible for preparing the original Tax Return with respect to such member pursuant to Sections 3.1 and 3.2.  Splitco (or its Subsidiaries) shall not, without the prior written consent of Distributing (which consent shall not be unreasonably withheld or delayed), file, or cause to be filed, any such amended Tax Return or claim for Tax refund, credit or offset to the extent that such filing, if accepted, is likely to increase the Taxes allocated to, or the Tax indemnity obligations under this Agreement of, Distributing for any Tax Year (or portion thereof) by more than a de minimis amount; provided, however , that such consent need not be obtained if Splitco agrees to indemnify Distributing for the incremental Taxes allocated to, or the incremental Tax indemnity obligation resulting under this Agreement to, Distributing as a result of the filing of such amended Tax Return.

 

SECTION 4.         Tax Payments .

 

4.1           Payment of Taxes to Tax Authority .  Distributing shall be responsible for remitting to the proper Tax Authority the Tax shown on any Tax Return for which it is responsible for the preparation and filing pursuant to Section 3.1 or Section 3.2, and Splitco shall be responsible for remitting to the proper Tax Authority the Tax shown on any Tax Return for which it is responsible for the preparation and filing pursuant to Section 3.2.

 

4.2           Indemnification Payments .

 

(a)            Tax Payments Made by the Distributing Group .  If any member of the Distributing Group is required to make a payment to a Tax Authority for Taxes allocated to Splitco under this Agreement, Splitco will pay the amount of Taxes

 

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allocated to it to Distributing not later than the later of (i) five business days after receiving notification requesting such amount, and (ii) one business day prior to the date such payment is required to be made to such Tax Authority.

 

(b)            Tax Payments Made by the Splitco Group .  If any member of the Splitco Group is required to make a payment to a Tax Authority for Taxes allocated to Distributing under this Agreement, Distributing will pay the amount of Taxes allocated to it to Splitco not later than the later of (i) five business days after receiving notification requesting such amount, and (ii) one business day prior to the date such payment is required to be made to such Tax Authority.

 

4.3           Interest on Late Payments .  Payments pursuant to this Agreement that are not made by the date prescribed in this Agreement or, if no such date is prescribed, not later than five business days after demand for payment is made (the “Due Date”) shall bear interest for the period from and including the date immediately following the Due Date through and including the date of payment at the Interest Rate.  Such interest will be payable at the same time as the payment to which it relates.

 

4.4           Tax Consequences of Payments .  For all Tax purposes and to the extent permitted by applicable Tax Law, the parties hereto shall treat any payment made pursuant to this Agreement as a capital contribution or a distribution, as the case may be, immediately prior to the Distribution.  If the receipt or accrual of any indemnity payment under this Agreement causes, directly or indirectly, an increase in the taxable income of the recipient under one or more applicable Tax Laws, such payment shall be increased so that, after the payment of any Taxes with respect to the payment, the recipient thereof shall have realized the same net amount it would have realized had the payment not resulted in taxable income.  To the extent that Taxes for which any party hereto (the indemnifying party) is required to pay another party (the indemnified party) pursuant to this Agreement may be deducted or credited in determining the amount of any other Taxes required to be paid by the indemnified party (for example, state Taxes which are permitted to be deducted in determining federal Taxes), the amount of any payment made to the indemnified party by the indemnifying party shall be decreased by taking into account any resulting reduction in other Taxes of the indemnified party.  If such a reduction in Taxes of the indemnified party occurs following the payment made to the indemnified Party with respect to the relevant indemnified Taxes, the indemnified party shall promptly repay the indemnifying party the amount of such reduction when actually realized.  If the Tax benefit arising from the foregoing reduction of Taxes described in this Section 4.4 is subsequently decreased or eliminated, then the indemnifying party shall promptly pay the indemnified party the amount of the decrease in such Tax benefit.

 

SECTION 5.         Assistance and Cooperation .

 

5.1           Cooperation .  In addition to the obligations enumerated in Sections 3.3 and 7.7, Distributing and Splitco will cooperate (and cause their respective Subsidiaries and Affiliates to cooperate) with each other and with each other’s agents, including accounting firms and legal counsel, in connection with Tax matters, including provision of relevant documents and information in their possession and making

 

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available to each other, as reasonably requested and available, personnel (including officers, directors, employees and agents of the parties or their respective Subsidiaries or Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes.

 

SECTION 6.         Tax Records .

 

6.1           Retention of Tax Records .  Each of Distributing and Splitco shall preserve, and shall cause their respective Subsidiaries to preserve, all Tax Records that are in their possession, and that could affect the liability of any member of the other Group for Taxes, for as long as the contents thereof may become material in the administration of any matter under applicable Tax Law, but in any event until the later of (x) the expiration of any applicable statutes of limitation, as extended, and (y) seven years after the Distribution Date.

 

6.2           Access to Tax Records .  Splitco shall make available, and cause its Subsidiaries to make available, to members of the Distributing Group for inspection and copying (x) all Tax Records in their possession that relate to a Pre-Distribution Period, and (y) the portion of any Tax Record in their possession that relates to a Post-Distribution Period and which is reasonably necessary for the preparation of a Tax Return by a member of the Distributing Group or any of their Affiliates or with respect to a Tax Contest by a Tax Authority of such return.  Distributing shall make available, and cause its Subsidiaries to make available, to members of the Splitco Group for inspection and copying the portion of any Tax Record in their possession that relates to a Pre-Distribution Period and which is reasonably necessary for the preparation of a Tax Return by a member of the Splitco Group or any of their Affiliates or with respect to a Tax Contest by a Tax Authority of such return.

 

6.3           Confidentiality .  Each party hereby agrees that it will hold, and shall use its reasonable best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence all records and information prepared and shared by and among the parties in carrying out the intent of this Agreement, except as may otherwise be necessary in connection with the filing of Tax Returns or any administrative or judicial proceedings relating to Taxes or unless disclosure is compelled by a governmental authority.  Information and documents of one party (the “Disclosing Party”) shall not be deemed to be confidential for purposes of this Section 6.3 to the extent such information or document (i) is previously known to or in the possession of the other party or parties (the “Receiving Party”) and is not otherwise subject to a requirement to be kept confidential, (ii) becomes publicly available by means other than unauthorized disclosure under this Agreement by the Receiving Party or (iii) is received from a third party without, to the knowledge of the Receiving Party after reasonable diligence, a duty of confidentiality owed to the Disclosing Party.

 

6.4           Delivery of Tax Records .  Within five business days after receiving notification from Splitco requesting any applicable Tax Records described

 

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below which are in the possession of a member of the Distributing Group, Distributing shall provide to Splitco (to the extent not previously provided or held by any member of the Splitco Group on the Distribution Date) copies of (i) the Separate Returns of any member of the Splitco Group, (ii) the relevant portions of any other Tax Returns with respect to any member of the Splitco Group, and (iii) other existing Tax Records (or the relevant portions thereof) reasonably necessary to prepare and file any Tax Returns of, or with respect to, the members of the Splitco Group, or to defend or contest Tax matters relevant to the members of the Splitco Group, including in each case, all Tax Records related to Tax attributes of the members of the Splitco Group and any and all communications or agreements with, or rulings by, any Tax Authority with respect to any member of the Splitco Group.

 

SECTION 7.         Restriction on Certain Actions of Distributing and Splitco; Indemnity .

 

7.1           Restrictive Covenants .

 

(a)            General Restrictions .  Following the Effective Time, and except as contemplated by the provisions of Section 7.1(e), Splitco shall not, and shall cause the members of the Splitco Group and their Affiliates not to, and Distributing shall not, and shall cause the members of the Distributing Group and their Affiliates not to, take any action that, or fail to take any action the failure of which, (i) would cause Distributing or any Subsidiary of Distributing immediately prior to the Distribution to recognize gain or loss, or otherwise include any amount in income, as a result of the Restructuring for U.S. federal income tax purposes, (ii) would be inconsistent with the Contribution and Distribution qualifying, or would preclude the Contribution and Distribution from qualifying, as a tax-free transaction described under Sections 368(a)(1)(D), 355 and 361 of the Code (except with respect to the receipt of cash in lieu of fractional shares), or (iii) would cause Distributing, Splitco, any of their respective Subsidiaries at the Effective Time, or the holders of Liberty Ventures Common Stock that receive stock of Splitco in the Distribution, to recognize gain or loss, or otherwise include any amount in income, as a result of the Contribution and/or the Distribution for U.S. federal income tax purposes (except with respect to the receipt of cash in lieu of fractional shares).

 

(b)            Restricted Actions .  Without limiting the provisions of Section 7.1(a) hereof, following the Effective Time, Splitco shall not, and shall cause the members of the Splitco Group and their Affiliates not to, and Distributing shall not, and shall cause the members of the Distributing Group and their Affiliates not to, take any action that, or fail to take any action the failure of which, would be inconsistent with, or would cause any Person to be in breach of, any representation or covenant, or any material statement, made in the Tax Materials (except as contemplated by the provisions of Section 7.1(e)).

 

(c)            Reporting .  Unless and until there has been a Final Determination to the contrary, each party agrees not to take any position on any Tax Return, in connection with any Tax Contest, or otherwise for Tax purposes (in each case,

 

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excluding any position taken for financial accounting purposes) that is inconsistent with the Tax Opinion, except as contemplated pursuant to the provisions of Section 7.1(e).

 

(d)            Election under Code Section 851(b) .  Splitco shall not make any election, or file any election with any Tax Return, under Section 851(b) of the Code and the Treasury Regulations promulgated thereunder to be treated as a regulated investment company for U.S. federal income tax purposes with respect to any taxable period (or portion thereof) ending prior to the five year anniversary of the Distribution Date, unless Distributing has provided its written consent to the making or filing of such election.

 

(e)            Protective Elections.  Notwithstanding anything herein to the contrary, any actions taken by Distributing, Splitco or any members of their respective Groups with respect to the making of any Protective Elections in respect of the Distribution, and the preparation and filing of any forms, schedules, Tax Returns, and other materials in accordance therewith, shall not be considered a breach or nonperformance of any covenant or agreement made or to be performed by Distributing or Splitco contained in this Agreement.

 

7.2           Distributing Indemnity .  Distributing agrees to indemnify and hold harmless each member of the Splitco Group and their respective directors, officers, employees, agents, successors and assigns (the “Splitco Indemnitees”) from and against any and all (without duplication) (a) Taxes allocated to Distributing pursuant to Section 2.1, (b) Transaction Taxes and Transaction Tax-Related Losses allocated to Distributing pursuant to Section 2.2, (c) Taxes and Losses arising out of or based upon any breach or nonperformance of any covenant or agreement made or to be performed by Distributing contained in this Agreement, (d) Transfer Taxes allocated to Distributing pursuant to Section 2.2, and (e) reasonable out-of-pocket legal, accounting and other advisory and court fees and expenses incurred in connection with the items described in clauses (a) through (d); provided, however , that notwithstanding clauses (a), (c) and (e) of this Section 7.2, Distributing shall not be responsible for, and shall have no obligation to indemnify or hold harmless any Splitco Indemnitee for, (x) any Transaction Taxes or Transaction Tax-Related Losses that are allocated to Splitco pursuant to Section 2.2, or (y) any Taxes or Losses arising out of or based upon any breach or nonperformance of any covenant or agreement made or to be performed by Splitco contained in this Agreement.

 

7.3           Splitco Indemnity .  Splitco agrees to indemnify and hold harmless each member of the Distributing Group and their respective directors, officers, employees, agents, successors and assigns (the “Distributing Indemnitees”) from and against any and all (without duplication) (a) Taxes allocated to Splitco pursuant to Section 2.1, (b) Transaction Taxes and Transaction Tax-Related Losses allocated to Splitco pursuant to Section 2.2, (c) Taxes and Losses arising out of or based upon any breach or nonperformance of any covenant or agreement made or to be performed by Splitco contained in this Agreement, (d) Transfer Taxes allocated to Splitco pursuant to Section 2.2, and (e) reasonable out-of-pocket legal, accounting and other advisory and court fees and expenses incurred in connection with the items described in clauses (a) 

 

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through (d); provided, however , that notwithstanding clauses (a), (c) and (e) of this Section 7.3, Splitco shall not be responsible for, and shall have no obligation to indemnify or hold harmless any Distributing Indemnitee for, (x) any Transaction Taxes or Transaction Tax-Related Losses that are allocated to Distributing pursuant to Section 2.2, or (y) any Taxes or Losses arising out of or based upon any breach or nonperformance of any covenant or agreement made or to be performed by Distributing contained in this Agreement.

 

7.4           Scope .  The provisions of this Section 7 are intended to be for the benefit of, and shall be enforceable by, each Distributing Indemnitee and its successors in interest and each Splitco Indemnitee and its successors in interest.

 

7.5           Notices of Tax Contests (Other than Joint Claims) .  Each Company shall provide prompt notice to the other Company of any pending or threatened Tax audit, assessment or proceeding or other Tax Contest of which it becomes aware relating to Taxes for which it is or may be indemnified by such other Company hereunder (other than any Transaction Taxes or Transaction Tax-Related Losses which shall be governed by Section 7.8).  Such notice shall contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except, and only to the extent that, the indemnifying Company shall have been actually prejudiced as a result of such failure.  Thereafter, the indemnified Company shall deliver to the indemnifying Company such additional information with respect to such Tax Contest in its possession that the indemnifying Company may reasonably request.

 

7.6           Control of Tax Contests (Other than Joint Claims) .

 

(a)            General Rule .  Except as provided in Sections 7.6(b) and 7.8, each Company (or the appropriate member of its Group) shall have full responsibility, control and discretion in handling, defending, settling or contesting any Tax Contest involving a Tax reported (or that, it is asserted, should have been reported) on a Tax Return for which such Company is responsible for preparing and filing (or causing to be prepared and filed) pursuant to Section 3 of this Agreement.

 

(b)            Non-Preparer Participation Rights .  With respect to a Tax Contest (other than with respect to a Joint Claim) of any Tax Return which could result in a Tax liability for which the Non-Preparer may be liable under this Agreement, (i) the Non-Preparer shall, at its own cost and expense, be entitled to participate in such Tax Contest, (ii) the Preparer shall keep the Non-Preparer updated and informed, and shall consult with the Non-Preparer, (iii) the Preparer shall act in good faith with a view to the merits in connection with the Tax Contest, and (iv) the Preparer shall not settle or compromise such Tax Contest without the prior written consent of the Non-Preparer (which consent shall not be unreasonably withheld or delayed) if the settlement or compromise could have a more than de minimis impact on the Non-Preparer or its Affiliates.

 

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7.7           Cooperation .  The parties shall provide each other with all information relating to a Tax Contest which is needed by the other party to handle, participate in, defend, settle or contest the Tax Contest.  At the request of any party, the other party shall take any action ( e.g., executing a power of attorney) that is reasonably necessary in order for the requesting party to exercise its rights under this Agreement in respect of a Tax Contest.  Splitco shall assist Distributing, and Distributing shall assist Splitco, in taking any remedial actions that are necessary or desirable to minimize the effects of any adjustment made by a Tax Authority.  The indemnifying party shall reimburse the indemnified party for any reasonable out-of-pocket costs and expenses incurred in complying with this Section 7.7.

 

7.8           Joint Claims .  Each Company shall promptly give notice to the other Company of any pending or threatened Tax Contest, claim, action, suit, investigation or proceeding brought by a third party relating to any Transaction Taxes or Transaction Tax-Related Losses for which such Company is or may be indemnified by the other Company under this Section 7 (each, a “Joint Claim”).  Such notice shall contain (i) factual information (to the extent known) describing any asserted Tax liability or other claim in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority or third party relating to the Joint Claim, and (ii) the amount of the Joint Claim.  Such notice shall be given within a reasonable period of time after notice thereof was received by such Company, but any failure to give timely notice shall not affect the indemnities given hereunder except, and only to the extent that, the indemnifying Company shall have been actually prejudiced as a result of such failure.  Thereafter, each Company shall deliver to the other Company such additional information with respect to such Joint Claim in its possession that the other Company may reasonably request.  Distributing and Splitco will have the right to jointly control the defense, compromise or settlement of any Joint Claim.  No indemnified Company shall settle or compromise or consent to entry of any judgment with respect to any such Joint Claim without the prior written consent of the indemnifying Company, which consent may be withheld in the indemnifying Company’s sole discretion.  No indemnifying Company shall settle or compromise or consent to entry of any judgment with respect to any such Joint Claim without the prior written consent of the indemnified Company, which consent may not be unreasonably withheld or delayed.

 

SECTION 8.         General Provisions .

 

8.1           Termination .  This Agreement shall terminate at such time as all obligations and liabilities of the parties hereto have been satisfied.  The obligations and liabilities of the parties arising under this Agreement shall continue in full force and effect until all such obligations have been satisfied and such liabilities have been paid in full, whether by expiration of time, operation of law, or otherwise.

 

8.2           Predecessors or Successors .  Any reference to Distributing, Splitco, Expedia, a Person, or a Subsidiary in this Agreement shall include any predecessors or successors ( e.g. , by merger or other reorganization, liquidation,

 

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conversion, or election under Treasury Regulations Section 301.7701-3) of Distributing, Splitco, Expedia, such Person, or such Subsidiary, respectively.

 

8.3           Expenses .  Except as otherwise expressly provided for herein, each party and its Subsidiaries shall bear their own expenses incurred in connection with preparation of Tax Returns and other matters related to Taxes under the provisions of this Agreement for which they are liable.

 

8.4           Governing Law .  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 THEREOF.  Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement will be brought exclusively in the Court of Chancery of the State of Delaware (the “Delaware Chancery Court”), or, if the Delaware Chancery Court does not have subject matter jurisdiction, in the federal courts located in the State of Delaware.  Each of the parties hereby consents to personal jurisdiction in any such action, suit or proceeding brought in any such court (and of the appropriate appellate courts therefrom) and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 8.6 shall be deemed effective service of process on such party.

 

8.5           Waiver of Jury Trial .  EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT.  EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH ACTION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.5.

 

8.6           Notices .  All notices and other communications hereunder shall be in writing and shall be delivered in person, by facsimile (with confirming copy sent by

 

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one of the other delivery methods specified herein), by overnight courier or sent by certified, registered or express air mail, postage prepaid, and shall be deemed given when so delivered in person, or when so received by facsimile or courier, or, if mailed, three (3) calendar days after the date of mailing, as follows:

 

(a)            If to Distributing, to:

 

Liberty Interactive Corporation

12300 Liberty Boulevard

Englewood, Colorado  80112

 

Attn:  Albert Rosenthaler

Facsimile: 

 

(b)            If to Splitco, to:

 

Liberty Expedia Holdings, Inc.

12300 Liberty Boulevard

Englewood, Colorado  80112

 

Attn:  Tim Lenneman

Facsimile: 

 

or to such other address as the party to whom notice is given may have previously furnished to the other parties in writing in the manner set forth above.

 

8.7           Counterparts .  This Agreement may be executed in two or more identical counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same agreement. The Agreement may be delivered by facsimile transmission of a signed copy thereof.

 

8.8           Binding Effect; Assignment .  This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except with respect to a merger of a party, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other party; provided, however, that each of Distributing and Splitco may assign its respective rights, interests, duties, liabilities and obligations under this Agreement to any other member of their Group, but such assignment shall not relieve Distributing or Splitco, as the assignor, of its liabilities or obligations hereunder.

 

8.9           Severability .  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  Upon a determination that any provision of this Agreement is prohibited or unenforceable in any jurisdiction, the parties shall negotiate in good faith to modify this Agreement so as to

 

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effect the original intent of the parties as closely as possible in an acceptable manner in order that the provisions contemplated hereby are consummated as originally contemplated to the fullest extent possible.

 

8.10         Amendments; Waivers .  Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  Except as otherwise provided herein, the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by applicable law.  Any consent provided under this Agreement must be in writing, signed by the party against whom enforcement of such consent is sought.

 

8.11         Effective Date .  This Agreement shall become effective on the date recited above on which the parties entered into this Agreement.

 

8.12         Change in Law .  Any reference to a provision of the Code or any other Tax Law shall include a reference to any applicable successor provision or law.

 

8.13         Authorization, Etc.   Each of the parties hereto hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such party, that this Agreement constitutes a legal, valid and binding obligation of such party and that the execution, delivery and performance of this Agreement by such party does not contravene or conflict with any provision of law or of its charter or bylaws or any agreement, instrument or order binding such party.

 

8.14         No Third Party Beneficiaries .  Except as provided in Sections 7.2 and 7.3 of this Agreement, this Agreement is solely for the benefit of Distributing, Splitco, and their Subsidiaries and is not intended to confer upon any other Person any rights or remedies hereunder.  Notwithstanding anything in this Agreement to the contrary, this Agreement is not intended to confer upon any Splitco Indemnitees any rights or remedies against Splitco hereunder, and this Agreement is not intended to confer upon any Distributing Indemnitees any rights or remedies against Distributing hereunder.

 

8.15         Entire Agreement .  This Agreement embodies the entire understanding among the parties relating to its subject matter and supersedes and terminates any prior agreements and understandings among the parties with respect to such subject matter, and no party to this Agreement shall have any right, responsibility, obligation or liability under any such prior agreement or understanding.  Any and all prior correspondence, conversations and memoranda are merged herein and shall be without effect hereon.  No promises, covenants or representations of any kind, other than those expressly stated herein, have been made to induce any party to enter into this Agreement.

 

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8.16         No Strict Construction; Interpretation .

 

(a)            Distributing and Splitco each acknowledge that this Agreement has been prepared jointly by the parties hereto and shall not be strictly construed against any party hereto.

 

(b)            When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes 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”.  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.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term.  Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein.  References to a Person are also to its permitted successors and assigns.

 

8.17         Headings .  The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by the respective officers as of the date set forth above.

 

 

 

LIBERTY INTERACTIVE CORPORATION

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

Name:  Albert Rosenthaler

 

 

Title:  Chief Corporate Development Officer

 

 

 

 

 

 

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

Name:  Tim Lenneman

 

 

Title:  Senior Vice President

 

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Exhibit 10.4

 

FORM OF SERVICES AGREEMENT

 

SERVICES AGREEMENT (this “ Agreement ”), dated as of [    ], 2016, by and between Liberty Media Corporation, a Delaware corporation (the “ Provider ”), and Liberty Expedia Holdings, Inc., a Delaware corporation (“ SplitCo ”).

 

RECITALS

 

WHEREAS, on the date hereof SplitCo is a wholly owned Subsidiary of Liberty Interactive Corporation, a Delaware corporation (“ LIC ”), and holds, among other things, LIC’s ownership interest in Expedia, Inc. and LIC’s ownership interest in Bodybuilding.com, LLC as a result of the consummation of the transactions described in the plan of restructuring set forth in Schedule 1.1 to the Reorganization Agreement, dated as of [    ], 2016 (the “ Reorganization Agreement ”), to which LIC and SplitCo are each parties;

 

WHEREAS, in accordance with the Reorganization Agreement, LIC will effect the redemption of a portion of the issued and outstanding shares of LIC’s Liberty Ventures common stock for all of the issued and outstanding shares of common stock of SplitCo, subject to the conditions set forth in the Reorganization Agreement, with the effect that SplitCo will be split-off (the “ Split-Off ”) from LIC, and LIC will cease to have an equity interest in SplitCo;

 

WHEREAS, Provider currently provides services to LIC pursuant to an existing services agreement, and LIC has requested that Provider provide similar services directly to SplitCo following the Split-Off, and that SplitCo compensate the Provider for the performance of such services, in each case, on the terms and condition set forth herein; and

 

WHEREAS, on the date hereof a Subsidiary of the Provider is also entering into a facilities sharing agreement with SplitCo with respect to 12300 Liberty Boulevard, Englewood, Colorado (the “ Facilities Sharing Agreement ”).

 

AGREEMENT

 

NOW THEREFORE, in consideration of the foregoing recitals, the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be bound legally, agree as follows:

 



 

ARTICLE I

 

ENGAGEMENT AND SERVICES

 

Section 1.1                                     Engagement .  SplitCo engages the Provider to provide to SplitCo, commencing on the date of the Split-Off (the “ Split-Off Effective Date ”), the services set forth in Section 1.2 (collectively, the “ Services ”), and the Provider accepts such engagement, subject to and upon the terms and conditions of this Agreement.  The parties acknowledge that certain of the Services will be performed by officers, employees or consultants of the Provider, who may also serve, from time to time, as officers, employees or consultants of other companies, including, without limitation, SplitCo, Liberty Broadband Corporation (“ LBC ”), CommerceHub, Inc. (“ CH ”), LIC and Liberty TripAdvisor Holdings, Inc. (“ LTAH ”).

 

Section 1.2                                     Services .

 

(a)                                  The Services will include the following, if and to the extent requested by SplitCo during the Term of this Agreement:

 

(i)                                      insurance administration and risk management services;

 

(ii)                                   technical and information technology assistance (including management information systems, computer, data storage network and telecommunications services), computers, office supplies, postage, courier service and other office services;

 

(iii)                                services performed by the Provider’s finance, accounting, payroll, treasury, cash management, legal, disclosure compliance, human resources, employee benefits, investor relations, tax and real estate management departments; and

 

(iv)                               such other services as the Provider may obtain from its officers, employees and consultants in the management of its own operations that SplitCo may from time to time request or require.

 

(b)                                  The Services are intended to be those services and functions that are appropriate for the operation and management of SplitCo as a publicly-traded company, and are not intended to be duplicative of services and functions for the operating Subsidiaries of SplitCo that are to be performed by officers, employees and consultants of those companies.

 

Section 1.3                                     Services Not to Interfere with the Provider’s Business .  SplitCo acknowledges and agrees that in providing Services hereunder the Provider will not be required to take any action that would disrupt, in any material respect, the orderly operation of the Provider’s business activities.

 

Section 1.4                                     Books and Records .   The Provider will maintain books and records, in reasonable detail in accordance with the Provider’s standard business practices, with respect to its provision of Services to SplitCo pursuant to this Agreement, including records supporting the determination of the Services Fee and other costs and expenses to SplitCo pursuant to Article II (collectively, “ Supporting Records ”). The Provider will give SplitCo and its duly authorized

 

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representatives, agents, and attorneys reasonable access to all such Supporting Records during the Provider’s regular business hours upon SplitCo’s request after reasonable advance notice.

 

ARTICLE II

 

COMPENSATION

 

Section 2.1                                     Services Fee .   SplitCo agrees to pay, and the Provider agrees to accept, a fee (the “ Services Fee ”) equal to $[    ], payable in monthly installments in arrears as set forth in Section 2.3.  The initial Services Fee will be determined by the Provider, in consultation with LIC, on or prior to the Split-Off Effective Date. Provider and SplitCo will review and evaluate the Services Fee for reasonableness semiannually during the Term and will negotiate in good faith to reach agreement on any appropriate adjustments to the Services Fee. Based on such review and evaluation, Provider and SplitCo will agree on the appropriate effective date (which may be retroactive) of any such adjustment to the Services Fee.  For the avoidance of doubt, the determination of the Services Fee and any future adjustment thereto does not and will not include charges included under the Annual Allocation Expense (as such term is defined in the Facilities Sharing Agreement) payable by SplitCo under the Facilities Sharing Agreement.

 

Section 2.2                                     Cost Reimbursement .  In addition to (and without duplication of) the Services Fee payable pursuant to Section 2.1, SplitCo also will reimburse the Provider for all direct out-of-pocket costs, with no markup (“ Out-of-Pocket Costs ”), incurred by the Provider in performing the Services (e.g., postage and courier charges, travel, meals and entertainment expenses, and other miscellaneous expenses that are incurred by the Provider in the conduct of the Services).

 

Section 2.3                                     Payment Procedures .

 

(a)                                  SplitCo will pay the Provider, by wire or intrabank transfer of funds or in such other manner specified by the Provider to SplitCo, in arrears on or before the last day of each calendar month beginning with [    ], 2016, the Services Fee then in effect, in monthly installments.

 

(b)                                  Any reimbursement to be made by SplitCo to the Provider pursuant to Section 2.2 will be paid by SplitCo to the Provider within 15 days after receipt by SplitCo of an invoice therefor, by wire or intrabank transfer of funds or in such other manner specified by the Provider to SplitCo.  The Provider will invoice SplitCo monthly for reimbursable expenses incurred by the Provider on behalf of SplitCo during the preceding calendar month as contemplated in Section 2.2; provided, however , that the Provider may separately invoice SplitCo at any time for any single reimbursable expense incurred by the Provider on behalf of SplitCo in an amount equal to or greater than $25,000. Any invoice or statement pursuant to this Section 2.3(b) will be accompanied by supporting documentation in reasonable detail consistent with Provider’s own expense reimbursement policy.

 

(c)                                   Any payments not made when due under this Section 2.3 will bear interest at the rate of 1.5% per month on the outstanding amount from and including the due date to but excluding the date paid.

 

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Section 2.4                                     Survival .  The terms and conditions of this Article II will survive the expiration or earlier termination of this Agreement.

 

ARTICLE III

 

TERM

 

Section 3.1                                     Term Generally .  The term of this Agreement will commence on the Split-Off Effective Date and will continue until the third anniversary of the Split-Off Effective Date (the “ Term ”).  This Agreement is subject to termination prior to the end of the Term in accordance with Section 3.3.

 

Section 3.2                                     Discontinuance of Select Services .  At any time during the Term, on not less than 30 days’ prior notice by SplitCo to the Provider, SplitCo may elect to discontinue obtaining any of the Services from the Provider.  In such event, the Provider’s obligation to provide Services that have been discontinued pursuant to this Section 3.2, and SplitCo’s obligation to compensate the Provider for such Services, will cease as of the end of such 30-day period (or such later date as may be specified in the notice), and this Agreement will remain in effect for the remainder of the Term with respect to those Services that have not been so discontinued.  The Provider and SplitCo will promptly evaluate the Services Fee for reasonableness following the discontinuance of any Services and will negotiate in good faith to reach agreement on any appropriate adjustment to the Services Fee.  Each party will remain liable to the other for any required payment or performance accrued prior to the effective date of discontinuance of any Service.

 

Section 3.3                                     Termination .  This Agreement will be terminated prior to the expiration of the Term in the following events:

 

(a)                                  at any time upon at least 30 days’ prior written notice by SplitCo to the Provider;

 

(b)                                  immediately upon written notice (or at any later time specified in such notice) by the Provider to SplitCo if a Change in Control or Bankruptcy Event (both as hereinafter defined) occurs with respect to SplitCo; or

 

(c)                                   immediately upon written notice (or at any later time specified in such notice) by SplitCo to the Provider if a Change in Control or Bankruptcy Event occurs with respect to the Provider.

 

For purposes of this Section 3.3, a “ Change in Control ” will be deemed to have occurred with respect to a party if a merger, consolidation, binding share exchange, acquisition, or similar transaction (each, a “ Transaction ”), or series of related Transactions, involving such party occurs as a result of which the voting power of all voting securities of such party outstanding immediately prior thereto represent (either by remaining outstanding or being converted into voting securities of the surviving entity) less than 75% of the voting power of such party or the surviving entity of the Transaction outstanding immediately after such Transaction (or if such party or the surviving entity after giving effect to such Transaction is a Subsidiary of the issuer of securities in such Transaction, then the voting power of all voting securities of such party

 

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outstanding immediately prior to such Transaction represent (by being converted into voting securities of such issuer) less than 75% of the voting power of the issuer outstanding immediately after such Transaction).

 

For purposes of this Section 3.3, a “ Bankruptcy Event ” will be deemed to have occurred with respect to a party upon such party’s insolvency, general assignment for the benefit of creditors, such party’s voluntary commencement of any case, proceeding, or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution, or consolidation of such party’s debts under any law relating to bankruptcy, insolvency, or reorganization, or relief of debtors, or seeking appointment of a receiver, trustee, custodian, or other similar official for such party or for all or any substantial part of such party’s assets (each, a “ Bankruptcy Proceeding ”), or the involuntary filing against SplitCo or the Provider, as applicable, of any Bankruptcy Proceeding that is not stayed within 60 days after such filing.

 

Each party will remain liable to the other for any required payment accrued prior to the termination of this Agreement.

 

ARTICLE IV

 

PERSONNEL AND EMPLOYEES

 

Section 4.1                                     Personnel to Provide Services .

 

(a)                                  The Provider will make available to SplitCo, on a non-exclusive basis, the appropriate personnel (the “ Personnel ”) to perform the Services.  The personnel made available to perform selected Services are expected to be substantially the same personnel who provide similar services in connection with the management and administration of the business and operations of the Provider.

 

(b)                                  SplitCo acknowledges that:

 

(i)                                      certain of the Personnel also will be performing services for the Provider, LIC, LTAH, LBC, CH and/or other companies, from time to time, including certain Subsidiaries and Affiliates of each of the foregoing, in each case, while also potentially performing services directly for SplitCo and certain of its Subsidiaries and Affiliates under a direct employment, consultancy or other service relationship between such Person and SplitCo and irrespective of this Agreement; and

 

(ii)                                   the Provider may elect, in its discretion, to utilize independent contractors rather than employees of the Provider to perform Services from time to time, and such independent contractors will be deemed included within the definition of “Personnel” for all purposes of this Agreement.

 

Section 4.2                                     Provider as Payor .  The parties acknowledge and agree that the Provider, and not SplitCo, will be solely responsible for the payment of salaries, wages, benefits (including health insurance, retirement, and other similar benefits, if any) and other compensation applicable to all Personnel; provided, however , that (a) SplitCo is responsible for the payment of the Services Fee in accordance with Section 2.1, and (b) SplitCo is responsible for the payment

 

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of (i) all compensation based on, comprised of or related to the equity securities of SplitCo and (ii) any bonus amounts payable to any Personnel who holds the office of Vice President or higher of SplitCo (each, a “ SplitCo Officer ”) with respect to services performed for the benefit of SplitCo (together with (i), “ Excluded Compensation ”).  The parties acknowledge that Personnel may provide services directly to SplitCo in consideration for the receipt of Excluded Compensation pursuant to such Personnel’s separate employment, consultancy or other service relationship with SplitCo.  All Personnel will be subject to the personnel policies of the Provider and will be eligible to participate in the Provider’s employee benefit plans to the same extent as similarly situated employees of the Provider performing services in connection with the Provider’s business.  Except as otherwise provided by the Tax Sharing Agreement, (i) the Provider will be responsible for the payment of all federal, state, and local withholding taxes on the compensation of all Personnel (other than Excluded Compensation) and other such employment related taxes as are required by law, and (ii) SplitCo will be responsible for the payment of all federal, state, and local withholding taxes on Excluded Compensation paid to any Personnel by SplitCo and other such employment related taxes as are required by law.  Each of SplitCo and Provider will cooperate with the other to facilitate the other’s compliance with applicable federal, state, and local laws, rules, regulations, and ordinances applicable to the employment or engagement of all Personnel by either party.

 

Section 4.3                                     Additional Employee Provisions .  The Provider will have the right to terminate its employment of any Personnel at any time.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES

 

Section 5.1                                     Representations and Warranties of the Provider .  The Provider represents and warrants to SplitCo as follows:

 

(a)                                  The Provider is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware.

 

(b)                                  The Provider has the power and authority to enter into this Agreement and to perform its obligations under this Agreement, including the Services.

 

(c)                                   The Provider is not subject to any contractual or other legal obligation that materially interferes with its full, prompt, and complete performance under this Agreement.

 

(d)                                  The individual executing this Agreement on behalf of the Provider has the authority to do so.

 

Section 5.2                                     Representations and Warranties of SplitCo .  SplitCo represents and warrants to the Provider as follows:

 

(a)                                  SplitCo is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware.

 

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(b)                                  SplitCo has the power and authority to enter into this Agreement and to perform its obligations under this Agreement.

 

(c)                                   SplitCo is not subject to any contractual or other legal obligation that materially interferes with its full, prompt, and complete performance under this Agreement.

 

(d)                                  The individual executing this Agreement on behalf of SplitCo has the authority to do so.

 

ARTICLE VI

 

INDEMNIFICATION

 

Section 6.1                                     Indemnification by the Provider .  The Provider will indemnify, defend, and hold harmless SplitCo and each of its Subsidiaries receiving Services hereunder, officers, directors, employees and agents, successors and assigns (collectively, the “ SplitCo Indemnitees ”), from and against any and all Actions, judgments, Liabilities, losses, costs, damages, or expenses, including reasonable counsel fees, disbursements, and court costs (collectively, “ Losses ”), that any SplitCo Indemnitee may suffer arising from or out of, or relating to, (a) any material breach by the Provider of its obligations under this Agreement, or (b) the gross negligence, willful misconduct, fraud, or bad faith of the Provider in connection with the performance of any provision of this Agreement except to the extent such Losses (i) are fully covered by insurance maintained by SplitCo or such other SplitCo Indemnitee or (ii) are payable by SplitCo pursuant to Section 7.11.

 

Section 6.2                                     Indemnification by SplitCo .  SplitCo will indemnify, defend, and hold harmless the Provider and its Subsidiaries, officers, directors, employees and agents, successors and assigns (collectively, the “ Provider Indemnitees ”), from and against any and all Losses that any Provider Indemnitee may suffer arising from or out of, or relating to (a) any material breach by SplitCo of its obligations under this Agreement, or (b) any acts or omissions of the Provider in providing the Services pursuant to this Agreement (except to the extent such Losses (i) arise from or relate to any material breach by the Provider of its obligations under this Agreement, (ii) are attributable to the gross negligence, willful misconduct, fraud, or bad faith of the Provider or any other Provider Indemnitee seeking indemnification under this Section 6.2, (iii) are fully covered by insurance maintained by the Provider or such other Provider Indemnitee, or (iv) are payable by the Provider pursuant to Section 7.11).

 

Section 6.3                                     Indemnification Procedures .

 

(a)                                  (i)                                      In connection with any indemnification provided for in Section 6.1 or Section 6.2, the party seeking indemnification (the “ Indemnitee ”) will give the party from which indemnification is sought (the “ Indemnitor ”) prompt notice whenever it comes to the attention of the Indemnitee that the Indemnitee has suffered or incurred, or may suffer or incur, any Losses for which it is entitled to indemnification under Section 6.1 or Section 6.2, and, if and when known, the facts constituting the basis for such claim and the projected amount of such Losses (which shall not be conclusive as to the amount of such Losses), in each case in reasonable detail. Without limiting the generality of the foregoing, in the case of any Action commenced by

 

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a third party for which indemnification is being sought (a “ Third-Party Claim ”), such notice will be given no later than ten business days following receipt by the Indemnitee of written notice of such Third-Party Claim.  Failure by any Indemnitee to so notify the Indemnitor will not affect the rights of such Indemnitee hereunder except to the extent that such failure has a material prejudicial effect on the defenses or other rights available to the Indemnitor with respect to such Third-Party Claim.  The Indemnitee will deliver to the Indemnitor as promptly as practicable, and in any event within five business days after Indemnitee’s receipt, copies of all notices, court papers and other documents received by the Indemnitee relating to any Third-Party Claim.

 

(ii)                                   After receipt of a notice pursuant to Section 6.3(a)(i) with respect to any Third-Party Claim, the Indemnitor will be entitled, if it so elects, to take control of the defense and investigation with respect to such Third-Party Claim and to employ and engage attorneys reasonably satisfactory to the Indemnitee to handle and defend such claim, at the Indemnitor’s cost, risk and expense, upon written notice to the Indemnitee of such election, which notice acknowledges the Indemnitor’s obligation to provide indemnification under this Agreement with respect to any Losses arising out of or relating to such Third-Party Claim. The Indemnitor will not settle any Third-Party Claim that is the subject of indemnification without the written consent of the Indemnitee, which consent will not be unreasonably withheld, conditioned or delayed; provided, however , that, after reasonable notice, the Indemnitor may settle a claim without the Indemnitee’s consent if such settlement (A) makes no admission or acknowledgment of Liability or culpability with respect to the Indemnitee, (B) includes a complete release of the Indemnitee and (C) does not seek any relief against the Indemnitee other than the payment of money damages to be borne by the Indemnitor. The Indemnitee will cooperate in all reasonable respects with the Indemnitor and its attorneys in the investigation, trial and defense of any lawsuit or action with respect to such claim and any appeal arising therefrom (including the filing in the Indemnitee’s name of appropriate cross-claims and counterclaims).  The Indemnitee may, at its own cost, participate in any investigation, trial and defense of any Third-Party Claim controlled by the Indemnitor and any appeal arising therefrom, including participating in the process with respect to the potential settlement or compromise thereof.  If the Indemnitee has been advised by its counsel that there may be one or more legal defenses available to the Indemnitee that conflict with those available to, or that are not available to, the Indemnitor (“ Separate Legal Defenses ”), or that there may be actual or potential differing or conflicting interests between the Indemnitor and the Indemnitee in the conduct of the defense of such Third-Party Claim, the Indemnitee will have the right, at the expense of the Indemnitor, to engage separate counsel reasonably acceptable to the Indemnitor to handle and defend such Third-Party Claim, provided , that, if such Third-Party Claim can be reasonably separated between those portion(s) for which Separate Legal Defenses are available (“ Separable Claims ”) and those for which no Separate Legal Defenses are available, the Indemnitee will instead have the right, at the expense of the Indemnitor, to engage separate counsel reasonably acceptable to the Indemnitor to handle and defend the Separable Claims, and the Indemnitor will not have the right to control the defense or investigation of such Third-Party Claim or such Separable Claims, as the case may be (and, in which latter case, the Indemnitor will have the right to control the defense or investigation of the remaining portion(s) of such Third-Party Claim).

 

(iii)                                If, after receipt of a notice pursuant to Section 6.3(a)(i) with respect to any Third-Party Claim as to which indemnification is available hereunder, the Indemnitor does not undertake to defend the Indemnitee against such Third-Party Claim, whether by not giving the

 

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Indemnitee timely notice of its election to so defend or otherwise, the Indemnitee may, but will have no obligation to, assume its own defense, at the expense of the Indemnitor (including attorneys fees and costs), it being understood that the Indemnitee’s right to indemnification for such Third-Party Claim shall not be adversely affected by its assuming the defense of such Third-Party Claim.  The Indemnitor will be bound by the result obtained with respect thereto by the Indemnitee; provided , that the Indemnitee may not settle any lawsuit or action with respect to which the Indemnitee is entitled to indemnification hereunder without the consent of the Indemnitor, which consent will not be unreasonably withheld, conditioned or delayed; provided further , that such consent shall not be required if (i) the Indemnitor had the right under this Section 6.3 to undertake control of the defense of such Third-Party Claim and, after notice, failed to do so within thirty days of receipt of such notice (or such lesser period as may be required by court proceedings in the event of a litigated matter), or (ii) (x) the Indemnitor does not have the right to control the defense of the entirety of such Third-Party Claim pursuant to Section 6.3(a)(ii) or (y) the Indemnitor does not have the right to control the defense of any Separable Claim pursuant to Section 6.3(a)(ii) (in which case such settlement may only apply to such Separable Claims), the Indemnitee provides reasonable notice to Indemnitor of the settlement, and such settlement (A) makes no admission or acknowledgment of Liability or culpability with respect to the Indemnitor, (B) does not seek any relief against the Indemnitor and (C) does not seek any relief against the Indemnitee for which the Indemnitor is responsible other than the payment of money damages.

 

(b)                                  In no event will the Indemnitor be liable to any Indemnitee for any special, consequential, indirect, collateral, incidental or punitive damages, however caused and on any theory of liability arising in any way out of this Agreement, whether or not such Indemnitor was advised of the possibility of any such damages;  provided , that the foregoing limitations shall not limit a party’s indemnification obligations for any Losses incurred by an Indemnitee as a result of the assertion of a Third-Party Claim.

 

(c)                                   The Indemnitor and the Indemnitee shall use commercially reasonable efforts to avoid production of Confidential Information, and to cause all communications among employees, counsel and others representing any party with respect to a Third-Party Claim to be made so as to preserve any applicable attorney-client or work-product privilege.

 

(d)                                  The Indemnitor shall pay all amounts payable pursuant to this Section 6.3 by wire transfer of immediately available funds, promptly following receipt from an Indemnitee of a bill, together with all accompanying reasonably detailed backup documentation, for any Losses that are the subject of indemnification hereunder, unless the Indemnitor in good faith disputes the amount of such Losses or whether such Losses are covered by the Indemnitor’s indemnification obligation in which event the Indemnitor shall promptly so notify the Indemnitee. In any event, the Indemnitor shall pay to the Indemnitee, by wire transfer of immediately available funds, the amount of any Losses for which it is liable hereunder no later than three (3) days following any final determination of the amount of such Losses and the Indemnitor’s liability therefor. A “final determination” shall exist when (a) the parties to the dispute have reached an agreement in writing or (b) a court of competent jurisdiction shall have entered a final and non-appealable order or judgment.

 

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(e)                                   If the indemnification provided for in this Section 6.3 shall, for any reason, be unavailable or insufficient to hold harmless an Indemnitee in respect of any Losses for which it is entitled to indemnification hereunder, then the Indemnitor shall contribute to the amount paid or payable by such Indemnitee as a result of such Losses, in such proportion as shall be appropriate to reflect the relative benefits received by and the relative fault of the Indemnitor on the one hand and the Indemnitee on the other hand with respect to the matter giving rise to such Losses.

 

(f)                                    The remedies provided in this Section 6.3 shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against an Indemnitor, subject to Section 6.3(b).

 

(g)                                   To the fullest extent permitted by applicable law, the Indemnitor will indemnify the Indemnitee against any and all reasonable fees, costs and expenses (including attorneys’ fees), incurred in connection with the enforcement of his, her or its rights under this Article VI.

 

Section 6.4                                     Survival .  The terms and conditions of this Article VI will survive the expiration or termination of this Agreement.

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.1                                     Defined Terms .

 

(a)                                  The following terms will have the following meanings for all purposes of this Agreement:

 

Action ” means any demand, action, claim, suit, countersuit, litigation, arbitration, prosecution, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court, grand jury or other governmental authority or any arbitrator or arbitration panel.

 

Affiliate ” means, with respect to any Person, any other Person controlled by such first Person, with “control” for such purpose meaning the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or voting interests, by contract, or otherwise. Notwithstanding the foregoing, for purposes of this Agreement, none of the Persons listed in clause (i), (ii), (iii) or (iv) shall be deemed to be Affiliates of any Person listed in any other such clause: (i) Provider taken together with its Subsidiaries, (ii) SplitCo taken together with its Subsidiaries, (iii) LIC taken together with its Subsidiaries, (iv) LTAH taken together with its Subsidiaries, (v) Starz (formerly named Liberty Media Corporation) taken together with its Subsidiaries, (vi) LBC taken together with its Subsidiaries and (vii) CH taken together with its Subsidiaries.

 

Confidential Information ” means any information marked, noticed, or treated as confidential by a party which such party holds in confidence, including all trade secrets, technical, business, or other information, including customer or client information, however

 

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communicated or disclosed, relating to past, present and future research, development and business activities.

 

Liabilities ” means any and all debts, liabilities, commitments and obligations, whether or not fixed, contingent or absolute, matured or unmatured, direct or indirect, liquidated or unliquidated, accrued or unaccrued, known or unknown, and whether or not required by GAAP to be reflected in financial statements or disclosed in the notes thereto (other than taxes).

 

Person ” means any natural person, corporation, limited liability corporation, partnership, trust, unincorporated organization, association, governmental authority, or other entity.

 

Subsidiary ” when used with respect to any Person, means (i)(A) a corporation a majority in voting power of whose share capital or capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, (B) a partnership or limited liability company in which such Person or a Subsidiary of such Person is, at the date of determination, (1) in the case of a partnership, a general partner of such partnership with the power affirmatively to direct the policies and management of such partnership or (2) in the case of a limited liability company, the managing member or, in the absence of a managing member, a member with the power to affirmatively direct the policies and management of such limited liability company, or (C) any other Person (other than a corporation) in which such Person, one or more Subsidiaries of such Person or such Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has or have (1) the power to elect or direct the election of a majority of the members of the governing body of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, or (2) in the absence of such a governing body, at least a majority ownership interest or (ii) any other Person of which an aggregate of 50% or more of the equity interests are, at the time, directly or indirectly, owned by such Person and/or one or more Subsidiaries of such Person.  Notwithstanding the foregoing, for purposes of this Agreement, none of the Subsidiaries of the Provider will be deemed to be Subsidiaries of SplitCo or any of its Subsidiaries, nor will any of SplitCo’s Subsidiaries be deemed to be Subsidiaries of the Provider or any of its Subsidiaries.

 

Tax Sharing Agreement ” means the Tax Sharing Agreement, dated [  ], 2016, between LIC and SplitCo.

 

(b)                                  The following terms will have the meanings for all purposes of this Agreement set forth in the Section reference provided next to such term:

 

Definition

 

Section Reference

Agreement

 

Preamble

Bankruptcy Event

 

Section 3.3

Bankruptcy Proceeding

 

Section 3.3

CH

 

Section 1.1

Change in Control

 

Section 3.3

Excluded Compensation

 

Section 4.2

 

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Definition

 

Section Reference

Facilities Sharing Agreement

 

Recitals

Indemnitee

 

Section 6.3(a)(i)

Indemnitor

 

Section 6.3(a)(i)

LBC

 

Section 1.1

LIC

 

Recitals

Losses

 

Section 6.1

LTAH

 

Section 1.1

Out-of-Pocket Costs

 

Section 2.2

Personnel

 

Section 4.1

Provider

 

Preamble

Provider Indemnitees

 

Section 6.2

Reorganization Agreement

 

Recitals

Separable Claims

 

Section 6.3(a)(ii)

Separate Legal Defenses

 

Section 6.3(a)(ii)

Services

 

Section 1.1

Services Fee

 

Section 2.1

SplitCo

 

Preamble

SplitCo Indemnitees

 

Section 6.1

SplitCo Officer

 

Section 4.2

Split-Off

 

Recitals

Split-Off Effective Date

 

Section 1.1

Supporting Records

 

Section 1.4

Term

 

Section 3.1

Third- Party Claim

 

Section 6.3(a)(i)

Transaction

 

Section 3.3

 

Section 7.2                                     Entire Agreement; Severability .  This Agreement, the Facilities Sharing Agreement, the Tax Sharing Agreement and the Reorganization Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings, oral and written, among the parties hereto with respect to such subject matter. It is the intention of the parties hereto that the provisions of this Agreement will be enforced to the fullest extent permissible under all applicable laws and public policies, but that the unenforceability of any provision hereof (or the modification of any provision hereof to conform with such laws or public policies, as provided in the next sentence) will not render unenforceable or impair the remainder of this Agreement. Accordingly, if any provision is determined to be invalid or unenforceable either in whole or in part, this Agreement will be deemed amended to delete or modify, as necessary, the invalid or unenforceable provisions and to alter the balance of this Agreement in order to render the same valid and enforceable, consistent (to the fullest extent possible) with the intent and purposes hereof.  If the provisions of this Agreement conflict with any provisions of the Facilities Sharing Agreement, the provisions of this Agreement shall control.

 

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Section 7.3                                     Notices .  All notices and communications hereunder will be in writing and will be deemed to have been duly given if delivered personally or mailed, certified or registered mail with postage prepaid, or sent by confirmed facsimile, addressed as follows:

 

If to the Provider:

 

Liberty Media Corporation
12300 Liberty Boulevard
Englewood, Colorado 80112
Attention: Chief Legal Officer
Facsimile: (720) 875-5401

 

 

 

If to SplitCo:

 

Liberty Expedia Holdings, Inc.
12300 Liberty Boulevard
Englewood, Colorado 80112
Attention: Chief Legal Officer
Facsimile: (720) 875-5401

 

or to such other address (or to the attention of such other person) as the parties may hereafter designate in writing.  All such notices and communications will be deemed to have been given on the date of delivery if sent by facsimile or personal delivery, or the third day after the mailing thereof, except that any notice of a change of address will be deemed to have been given only when actually received.

 

Section 7.4                                     Governing Law .  This Agreement and the legal relations among the parties hereto will be governed in all respects, including validity, interpretation and effect, by the laws of the State of Colorado applicable to contracts made and performed wholly therein, without giving effect to any choice or conflict of laws provisions or rules that would cause the application of the laws of any other jurisdiction.

 

Section 7.5                                     Rules of Construction .  The descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.  Words used in this Agreement, regardless of the gender and number specifically used, will be deemed and construed to include any other gender, masculine, feminine, or neuter, and any other number, singular or plural, as the context requires.  As used in this Agreement, the word “including” or any variation thereof is not limiting, and the word “or” is not exclusive.  The word day means a calendar day.  If the last day for giving any notice or taking any other action is a Saturday, Sunday, or a day on which banks in New York, New York or Denver, Colorado are closed, the time for giving such notice or taking such action will be extended to the next day that is not such a day.

 

Section 7.6                                     No Third-Party Rights .  Nothing expressed or referred to in this Agreement is intended or will be construed to give any Person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, remedy or claim under or with respect to this Agreement, or any provision hereof, it being the intention of the parties hereto that this Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their respective successors and assigns.

 

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Section 7.7                                     Counterparts .  This Agreement may be executed in one or more counterparts, each of which will be an original and all of which together will constitute one and the same instrument.

 

Section 7.8                                     Payment of Expenses . From and after the Split-Off Effective Date, and except as otherwise expressly provided in this Agreement, each of the parties to this Agreement will bear its own expenses, including the fees of any attorneys and accountants engaged by such party, in connection with this Agreement.

 

Section 7.9                                     Binding Effect; Assignment .

 

(a)                                  This Agreement will inure to the benefit of and be binding on the parties to this Agreement and their respective legal representatives, successors and permitted assigns.

 

(b)                                  Except as expressly contemplated hereby (including by Section 4.1), this Agreement, and the obligations arising hereunder, may not be assigned by either party to this Agreement, provided , however , that SplitCo and Provider may assign their respective rights, interests, duties, liabilities and obligations under this Agreement to any of their respective wholly-owned Subsidiaries, but such assignment shall not relieve SplitCo or the Provider, as the assignor, of its obligations hereunder.

 

Section 7.10                              Amendment, Modification, Extension or Waiver .  Any amendment, modification or supplement of or to any term or condition of this Agreement will be effective only if in writing and signed by both parties hereto.  Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party to this Agreement, or (b) waive compliance by the other party with any of the agreements or conditions contained herein or any breach thereof. Any agreement on the part of either party to any such extension or waiver will be valid only if set forth in an instrument in writing signed on behalf of such party. No waiver of any term, provision or condition of this Agreement, whether by conduct or otherwise, in any one or more instance, will be deemed or construed as a further or continuing waiver of any such term, provision or condition or of any other term, provision or condition, but any party hereto may waive its rights in any particular instance by written instrument of waiver.

 

Section 7.11                              Legal Fees; Costs .  If either party to this Agreement institutes any action or proceeding to enforce any provision of this Agreement, the prevailing party will be entitled to receive from the other party reasonable attorneys’ fees, disbursements and costs incurred in such action or proceeding, whether or not such action or proceeding is prosecuted to judgment.

 

Section 7.12                              Force Majeure .  Neither party will be liable to the other party with respect to any nonperformance or delay in performance of its obligations under this Agreement to the extent such failure or delay is due to any action or claims by any third party, labor dispute, labor strike, weather conditions or any cause beyond a party’s reasonable control.  Each party agrees that it will use all commercially reasonable efforts to continue to perform its obligations under this Agreement, to resume performance of its obligations under this Agreement, and to minimize any delay in performance of its obligations under this Agreement notwithstanding the occurrence of any such event beyond such party’s reasonable control.

 

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Section 7.13                              Specific Performance .  Each party agrees that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that each of the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity.

 

Section 7.14                              Further Actions .  The parties will execute and deliver all documents, provide all information, and take or forbear from all actions that may be necessary or appropriate to achieve the purposes of this Agreement.

 

Section 7.15                              Confidentiality .

 

(a)                                  Except with the prior consent of the disclosing party, each party will:

 

(i)                                      limit access to the Confidential Information of the other party disclosed to such party hereunder to its employees, agents, representatives, and consultants on a need-to-know basis;

 

(ii)                                   advise its employees, agents, representatives, and consultants having access to such Confidential Information of the proprietary nature thereof and of the obligations set forth in this Agreement; and

 

(iii)                                safeguard such Confidential Information by using a reasonable degree of care to prevent disclosure of the Confidential Information to third parties, but not less than that degree of care used by that party in safeguarding its own similar information or material.

 

(b)                                  A party’s obligations respecting confidentiality under Section 7.15(a) will not apply to any of the Confidential Information of the other party that a party can demonstrate: (i) was, at the time of disclosure to it, in the public domain; (ii) after disclosure to it, is published or otherwise becomes part of the public domain through no fault of the receiving party; (iii) was in the possession of the receiving party at the time of disclosure to it without being subject to any obligation of confidentiality; (iv) was received after disclosure to it from a third party who, to its knowledge, had a lawful right to disclose such information to it; (v) was independently developed by the receiving party without reference to the Confidential Information; (vi) was required to be disclosed to any regulatory body having jurisdiction over a party or any of their respective clients; or (vii) was required to be disclosed by reason of legal, accounting, or regulatory requirements beyond the reasonable control of the receiving party.  In the case of any disclosure pursuant to clauses (vi) or (vii) of this paragraph (b), to the extent practical, the receiving party will give prior notice to the disclosing party of the required disclosure and will use commercially reasonable efforts to obtain a protective order covering such disclosure.

 

(c)                                   The provisions of this Section 7.15 will survive the expiration or termination of this Agreement.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each of the parties has signed this Agreement, or has caused this Agreement to be signed by its duly authorized officer, as of the date first above written.

 

 

 

PROVIDER:

 

 

 

LIBERTY MEDIA CORPORATION

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

SPLITCO:

 

 

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 




Exhibit 10.5

 

LIBERTY PROPERTY HOLDINGS, INC.

12300 LIBERTY BOULEVARD

ENGLEWOOD, CO 80112

 

[    ], 2016

 

Liberty Expedia Holdings, Inc.

12300 Liberty Boulevard

Englewood, CO 80112

Attention: Legal Department

 

Re:                              Facilities Sharing Agreement.

 

Ladies and Gentlemen:

 

Liberty Interactive Corporation, a Delaware corporation (“ LIC ”), has, or will shortly, effect the split-off (the “ Split-off ”) of Liberty Expedia Holdings, Inc., a Delaware corporation (“ SplitCo ”), by means of the redemption of a portion of the issued and outstanding shares of LIC’s Liberty Ventures common stock in exchange for all of the issued and outstanding shares of common stock of SplitCo.  To that end, LIC and SplitCo have entered into a Reorganization Agreement, dated as of [  ], 2016 (the “ Reorganization Agreement ”), pursuant to which various assets and businesses of LIC and its subsidiaries have been, or will be, transferred to SplitCo and its subsidiaries.

 

As you are aware, Liberty Property Holdings, Inc., a Delaware corporation (“ LPH ”), which is the owner of 12300 Liberty Boulevard, Englewood, Colorado (the “ Premises ”) and a wholly-owned subsidiary of Liberty Media Corporation (“ Liberty Media ” or “ Provider ”), permits LIC to occupy and use certain office and parking facilities within the Premises for a fee.  In connection with the Split-off, LIC has requested that Liberty Media permit SplitCo directly to occupy and use a portion of such office and parking facilities within the Premises following the Split-off, and SplitCo desires to so occupy and use such facilities.  Liberty Media and LPH are amenable to such a sharing arrangement, on the terms and subject to the conditions set forth in this Agreement.

 

As you are also aware, Liberty Media provides services to LIC pursuant to an existing services agreement, and LIC has requested that Liberty Media provide similar services directly to SplitCo following the Split-off.  Accordingly, Liberty Media and SplitCo have entered into a services agreement, dated [  ], 2016 (the “ Services Agreement ”), pursuant to which Liberty Media will provide to SplitCo the services described therein on the terms set forth therein from and after the date of the Split-off (the “ Split-off Effective Date ”).

 



 

Based on the premises and the mutual agreements of the parties, and for other good and valuable consideration the receipt of which is hereby acknowledged, SplitCo, LPH and Liberty Media hereby agree as follows:

 

Section 1. Use of Facilities . The shared facilities consist of 40,115 square feet, in the aggregate, of fully-furnished executive offices, working stations for secretarial and other support staff and common areas, including the main reception area, conference facilities, hallways, stairways, restrooms, kitchenettes, the employee cafeteria, the fitness area and parking facilities (collectively, the “ Shared Facilities Space ”), located within the Premises.

 

Section 2. Sharing Fee . SplitCo will pay to LPH a monthly fee (the “ Sharing Fee ”), by wire or intrabank transfer of funds or in such other manner as may be agreed upon by the parties, in arrears on or before the last day of each calendar month beginning with the first full calendar month following the date of the Split-off, equal to one-twelfth of the sum of (A) the product of (i) an agreed-upon Facilities Percentage (as defined below) multiplied by (ii) the product of the total square footage of space within the Shared Facilities Space and the Square Foot Rate (as defined below), plus (B) the Annual Allocation Expense (as defined below). For this purpose, SplitCo and LPH agree that, until [  ], the fair market “fully loaded” rental rate per square foot, including parking facilities, for space comparable to the Shared Facilities Space in Englewood, Colorado will be $[  ] per square foot (the “ Square Foot Rate ”). The Square Foot Rate will be automatically increased on the first day of the first month of each calendar year thereafter in an amount equal to the percentage increase in the U.S. Department of Labor Consumer Price Index All Items, All Urban Consumers Denver-Boulder-Greeley for the same period. The Square Foot Rate does not include charges for expenses related to the use of the Shared Facilities Space, including, but not limited to, utilities, security and janitorial services, office equipment rent, office supplies, use of the cafeteria facilities onsite at the Shared Facilities Space, maintenance and repairs, telephone, satellite, video and information technology (including network maintenance and data storage, computer and telephone support and maintenance, and management and information systems (servers, hardware and related software)) (the “ Allocations ”). With respect to each calendar year during the term of this facilities sharing agreement (this “ Agreement ”), SplitCo shall reimburse LPH in an amount (the “ Annual Allocation Expense ”) equal to the product of (x) the aggregate amount of the estimated Allocations for such year, as determined in good faith by LPH and notified to SplitCo prior to the commencement of such calendar year, and (y) the Facilities Percentage applicable to such calendar year; provided that, if the Facilities Percentage changes during any calendar year, the Annual Allocation Expense applicable to such calendar year shall be adjusted accordingly.

 

The “ Facilities Percentage ” is the percentage of the Shared Facilities Space that Provider estimates, in good faith, will be used to provide services to SplitCo under the Services Agreement.  The initial Facilities Percentage will be determined by the Provider, in consultation with LIC, on or prior to the Split-off Effective Date, and Provider and SplitCo will review and evaluate the Facilities Percentage for reasonableness semiannually during the Term and will negotiate in good faith to reach agreement on any appropriate adjustments to the Facilities Percentage. Based on such review and evaluation, Provider and SplitCo will agree on the appropriate effective date (which may be retroactive) of any such adjustment to the Facilities Percentage.

 

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Provider and SplitCo will also review and evaluate the Annual Allocation Expense for reasonableness semi-annually during the term of this Agreement, and will negotiate in good faith to reach agreement on any appropriate adjustments to the Annual Allocation Expense based on such review and evaluation.

 

The terms and conditions of this Section 2 will survive the expiration or earlier termination of this Agreement.

 

Section 3.  Term .

 

(i)                                      The term of this Agreement will commence on the Split-off Effective Date and will continue until the third anniversary of the Split-off Effective Date (the “ Term ”).  This Agreement is subject to termination prior to the end of the Term in accordance with Section 3(ii).

 

(ii)                                   This Agreement will be terminated prior to the expiration of the Term in the following events:

 

·                   by SplitCo or LPH at any time upon at least 30 days’ prior written notice to LPH or SplitCo, respectively (provided the Services Agreement is not then still in effect);

·                   concurrently with the termination of the Services Agreement;

·                   immediately upon written notice (or any time specified in such notice) by LPH to SplitCo if SplitCo shall default in the performance of any of its material obligations hereunder and such default shall remain unremedied for a period of 30 days after written notice thereof is given by LPH to SplitCo;

·                   immediately upon written notice (or at any time specified in such notice) by LPH to SplitCo if a Change in Control or Bankruptcy Event occurs with respect to SplitCo; or

·                   immediately upon written notice (or at any time specified in such notice) by SplitCo to LPH if a Change in Control or Bankruptcy Event occurs with respect to Liberty Media.

 

For purposes of this Section 3(ii), a “ Change in Control ” will have the meaning ascribed thereto in the Services Agreement.

 

For purposes of this Section 3(ii), a “ Bankruptcy Event ” will have the meaning ascribed thereto in the Services Agreement.

 

Section 4.   Miscellaneous .

 

(i)  Entire Agreement; Severability . This Agreement, the Services Agreement, the Reorganization Agreement and the Tax Sharing Agreement between LIC and SplitCo, dated as of [  ], 2016, constitute the entire agreement among the parties hereto or thereto, as applicable with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings, oral and written, among the parties hereto with respect to such subject matter. It is the intention of the parties hereto that the provisions of this Agreement will be enforced to the fullest extent permissible under all applicable laws and public policies, but that the

 

3



 

unenforceability of any provision hereof (or the modification of any provision hereof to conform with such laws or public policies, as provided in the next sentence) will not render unenforceable or impair the remainder of this Agreement. Accordingly, if any provision is determined to be invalid or unenforceable either in whole or in part, this Agreement will be deemed amended to delete or modify, as necessary, the invalid or unenforceable provisions and to alter the balance of this Agreement in order to render the same valid and enforceable, consistent (to the fullest extent possible) with the intent and purposes hereof. If the cost of any service to be provided to SplitCo under the Services Agreement is included in the Annual Allocation Expense payable hereunder, then the cost of such service shall not also be payable by SplitCo under the Services Agreement.

 

(ii)  Notices .  All notices and communications hereunder will be in writing and will be deemed to have been duly given if delivered personally or mailed, certified or registered mail with postage prepaid, or sent by confirmed facsimile, addressed as follows:

 

If to LPH:

 

Liberty Property Holdings, Inc.

c/o Liberty Media Corporation

12300 Liberty Boulevard

Englewood, Colorado 80112

Attention:  Chief Legal Officer

Facsimile:  (720) 875-5401

 

If to SplitCo:

 

Liberty Expedia Holdings, Inc.

12300 Liberty Boulevard

Englewood, Colorado 80112

Attention:  Chief Legal Officer

Facsimile:  (720) 875-5401

 

or to such other address (or to the attention of such other person) as the parties may hereafter designate in writing.  All such notices and communications will be deemed to have been given on the date of delivery if sent by facsimile or personal delivery, or the third day after the mailing thereof, except that any notice of a change of address will be deemed to have been given only when actually received.

 

(iii)  Governing Law .  This Agreement and the legal relations among the parties hereto will be governed in all respects, including validity, interpretation and effect, by the laws of the State of Colorado applicable to contracts made and performed wholly therein, without giving effect to any choice or conflict of laws provisions or rules that would cause the application of the laws of any other jurisdiction.

 

(iv)  No Third-Party Rights .  Nothing expressed or referred to in this Agreement is intended or will be construed to give any person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, remedy or claim under or with respect to this Agreement, or any provision hereof, it being the intention of the parties

 

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hereto that this Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their respective successors and assigns.

 

(v)   Assignment .  This Agreement will inure to the benefit of and be binding on the parties to this Agreement and their respective legal representatives, successors and permitted assigns.  Except as expressly contemplated hereby, this Agreement, and the obligations arising hereunder, may not be assigned by either party to this Agreement, provided, however , that LPH and SplitCo may assign their respective rights, interests, duties, liabilities and obligations under this Agreement to any of their respective wholly-owned subsidiaries, but such assignment shall not relieve the assignor of its obligations hereunder.

 

(vi)  Amendment . Any amendment, modification or supplement of or to any term or condition of this Agreement will be effective only if in writing and signed by both parties hereto.

 

(vii)  Further Actions .  The parties will execute and deliver all documents, provide all information, and take or forbear from all actions that may be necessary or appropriate to achieve the purposes of this Agreement.

 

(viii)  Force Majeure .  Neither party will be liable to the other party with respect to any nonperformance or delay in performance of its obligations under this Agreement to the extent such failure or delay is due to any action or claims by any third party, labor dispute, labor strike, weather conditions or any cause beyond a party’s reasonable control.  Each party agrees that it will use all commercially reasonable efforts to continue to perform its obligations under this Agreement, to resume performance of its obligations under this Agreement, and to minimize any delay in performance of its obligations under this Agreement notwithstanding the occurrence of any such event beyond such party’s reasonable control.

 

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If the foregoing meets with your approval, kindly execute below and return a copy to the undersigned.

 

 

Very truly yours,

 

 

 

LIBERTY PROPERTY HOLDINGS, INC.

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

Accepted and agreed this [    ] day of [    ], 2016:

 

 

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

LIBERTY MEDIA CORPORATION

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

6




Exhibit 10.6

 

FORM OF INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is made and entered into as of this [   ] day of [                   ], by and between Liberty Expedia Holdings, Inc., a Delaware corporation (the “Company”), and [                      ] (the “Indemnitee”).

 

WHEREAS, it is essential to the Company and its mission to retain and attract as officers and directors the most capable persons available;

 

WHEREAS, the Company has asked Indemnitee to serve as a(n) [officer]/[director] of the Company;

 

WHEREAS, both the Company and Indemnitee recognize the omnipresent risk of litigation and other claims that are routinely asserted against officers and directors of companies operating in the public arena in the current environment, and the attendant costs of defending even wholly frivolous claims;

 

WHEREAS, it has become increasingly difficult to obtain insurance against the risk of personal liability of officers and directors on terms providing reasonable protection to the individual at reasonable cost to the companies;

 

WHEREAS, the certificate of incorporation and Bylaws of the Company provide certain indemnification rights to the officers and directors of the Company, as provided by Delaware law;

 

WHEREAS, to induce Indemnitee to become a(n) [officer]/[director] of the Company, in recognition of Indemnitee’s need for substantial protection against personal liability in order to enhance Indemnitee’s continued service to the Company in an effective manner, the increasing difficulty in obtaining and maintaining satisfactory insurance coverage, and Indemnitee’s reliance on assurance of indemnification, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent permitted by law (whether partial or complete) and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies;

 

NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements contained herein and Indemnitee’s continuing to serve as an officer of the Company, the parties hereto agree as follows:

 

1.                                                                                       Certain Definitions.

 

(a) Change in Control: shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under such Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by

 



 

the Company’s then outstanding Voting Securities, or (ii) (x) prior to the Proxy Swap Termination Date (as defined in the Amended and Restated Transaction Agreement, dated as of September 22, 2016, by and among Liberty Interactive Corporation, the Company, Barry Diller, John C. Malone and Leslie Malone (the “Transaction Agreement”)), during any one year period, and (y) following the Proxy Swap Termination Date, during any period of two consecutive years, in the case of clause (x) and clause (y), individuals who at the beginning of such period constituted the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (66-2/3%) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all the Company’s assets; provided, that for the avoidance of doubt, neither the execution of nor the termination of any of the Subject Instruments (as defined in the Transaction Agreement), including but not limited to, any change in the composition of the Board of Directors resulting from such termination, shall constitute a Change of Control.

 

(b) Claim:  any threatened, pending or completed action, suit or proceeding, whether instituted by the Company or any other party, or any inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil (including intentional and unintentional tort claims), criminal, administrative, investigative or other.

 

(c) Expenses:  include attorneys’ fees and all other costs, expenses and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in, any Claim relating to any Indemnifiable Event.

 

(d) Indemnifiable Event:  any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity.

 

(e) Independent Legal Counsel:  an attorney or firm of attorneys, selected in accordance with the provisions of Section 3, who shall not have otherwise performed services for the Company or Indemnitee within the last five years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements).

 

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(f) Reviewing Party:  any appropriate person or body consisting of a member or members of the Company’s Board of Directors or any other person or body appointed by the Company’s Board of Directors who is not a party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal Counsel.

 

(g) Voting Securities:  shares of any series or class of common stock or preferred stock of the Company, in each case, entitled to vote generally upon all matters that may be submitted to a vote of stockholders of the Company at any annual or special meeting thereof.

 

2.                                                                                       Basic Indemnification Arrangement.

 

(a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by law as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim. If so requested by Indemnitee, the Company shall advance (within two business days of such request) any and all Expenses to Indemnitee as incurred (an “Expense Advance”).

 

(b) Notwithstanding the foregoing, (i) the obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 3 hereof is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 2(a) shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). If there has not been a Change in Control, the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company’s Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the Independent Legal Counsel referred to in Section 3 hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in Delaware having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or

 

3



 

factual bases therefor, and the Company hereby consents to service of process and agrees to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee.

 

3.  Change in Control. The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company’s Board of Directors who were directors immediately prior to such Change in Control) then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or Company Bylaw or charter provision now or hereafter in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

4. Indemnification for Additional Expenses. The Company shall indemnify Indemnitee against any and all expenses (including attorneys’ fees) and, if requested by Indemnitee, shall (within two business days of such request) advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee (whether pursuant to Section 17 of this Agreement or otherwise) for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or Company Bylaw or charter provision now or hereafter in effect relating to Claims for Indemnifiable Events or (ii) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, to the fullest extent permitted by law, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be.

 

5. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.

 

6. Burden of Proof. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled.

 

7. No Presumptions. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption

 

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that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief.

 

8. Nonexclusivity; Subsequent Change in Law. The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company’s Bylaws or certificate of incorporation, under Delaware law or otherwise. To the extent that a change in Delaware law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company’s Bylaws and certificate of incorporation and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.

 

9. Liability Insurance. To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director or officer.

 

10. Amendments; Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

11. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

 

12. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder.

 

13. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer, employee, agent or fiduciary of the Company or of any other enterprise at the Company’s request.

 

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14. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired and shall remain enforceable to the fullest extent permitted by law.

 

15. Effective Date. This Agreement shall be effective as of the date hereof and shall apply to any claim for indemnification by the Indemnitee on or after such date.

 

16. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.

 

17. Injunctive Relief. The parties hereto agree that Indemnitee may enforce this Agreement by seeking specific performance hereof, without any necessity of showing irreparable harm or posting a bond, which requirements are hereby waived, and that by seeking specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth above.

 

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

INDEMNITEE

 

 

 

 

 

 

 

Name:

 

6




Exhibit 10.8

 

AGREED FORM

 

ASSIGNMENT AND ASSUMPTION OF GOVERNANCE AGREEMENT

 

This Assignment and Assumption of Governance Agreement (this “ Assignment ”) is made as of [ · ] by and among Liberty Expedia Holdings, Inc., a Delaware corporation (“ Splitco ”), LEXE Marginco, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Splitco (“ Marginco ”), LEXEB, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Splitco (“ LEXEB ”, and together with Splitco and Marginco, the “ Assignees ”), Liberty Interactive Corporation, a Delaware corporation (“ Liberty ”), Barry Diller, an individual (“ Diller ”), and Expedia, Inc., a Delaware corporation (“ Expedia ”).  Capitalized terms used and not otherwise defined herein have the meanings given such terms in the Governance Agreement (as defined below).

 

W I T N E S S E T H :

 

WHEREAS, Expedia, Diller and Liberty are parties to that certain Amended and Restated Governance Agreement, dated as of December 20, 2011 (the “ Governance Agreement ”);

 

WHEREAS, Liberty has determined to engage in the Split-Off (as defined in the Transaction Agreement, dated as of March 24, 2016, as amended and restated as of September 22, 2016, and as may be further amended in accordance with the terms thereof, by and among Liberty, Splitco, Diller, John C. Malone, an individual, and Leslie Malone, an individual (the “ Transaction Agreement ”)) which Liberty has represented will constitute a Distribution Transaction involving a Qualified Distribution Transferee;

 

WHEREAS, in accordance with Section 5.01 of the Governance Agreement, the parties desire to effect the assignment by Liberty and assumption by Splitco of Liberty’s rights, benefits and obligations under the Governance Agreement in connection with the Split-Off and to provide for the other Assignees to become parties to the Governance Agreement as so assigned; and

 

WHEREAS, on or prior to the date hereof, pursuant to Section 5.01(b)(ii) of the Governance Agreement, the Executive Committee of the Board of Directors of Expedia has approved the Split-Off and the transactions related thereto as contemplated by the Transaction Agreement for purposes of Section 203(a)(1) of the Delaware General Corporation Law.

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.                                       Representations and Warranties of Expedia .  Expedia represents and warrants to Diller, Liberty and Assignees that:

 

a.                                       Expedia is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to enter into this Assignment and to carry out its obligations hereunder and under the Governance Agreement;

 

b.                                       the execution, delivery and performance of this Assignment by Expedia has been duly authorized by all necessary corporate action on the part of Expedia and no other

 



 

corporate proceedings on the part of Expedia are necessary to authorize this Assignment or the matters contemplated hereby or by the Governance Agreement;

 

c.                                        this Assignment has been duly executed and delivered by Expedia and constitutes a valid and binding obligation of Expedia, and, assuming this Assignment constitutes a valid and binding obligation of Diller, Liberty and Assignees, is enforceable against Expedia in accordance with its terms;

 

d.                                       the execution and delivery of this Assignment by Expedia, and the performance of its obligations hereunder and under the Governance Agreement, do not constitute a breach or violation of, or conflict with, Expedia’s restated certificate of incorporation or amended and restated by-laws or any material agreement to which Expedia is a party; and

 

e.                                        prior to the date of this Assignment, the Executive Committee of the board of directors of Expedia has duly adopted the resolution set forth on Exhibit J to the Transaction Agreement, which resolution has not been amended, modified or rescinded.

 

2.                                       Representations and Warranties of Diller .  Diller represents and warrants to Expedia, Liberty and Assignees that:

 

a.                                       he has the power and authority to enter into this Assignment and to carry out his obligations hereunder and under the Governance Agreement;

 

b.                                       the execution, delivery and performance of this Assignment by Diller has been duly authorized by all necessary action on the part of Diller and no other actions on the part of Diller are necessary to authorize this Assignment or the matters contemplated hereby or by the Governance Agreement;

 

c.                                        this Assignment has been duly executed and delivered by Diller and constitutes a valid and binding obligation of Diller, and, assuming this Assignment constitutes a valid and binding obligation of Expedia, Liberty and Assignees, is enforceable against Diller in accordance with its terms; and

 

d.                                       the execution and delivery of this Assignment by Diller, and the performance of his obligations hereunder and under the Governance Agreement, do not constitute a breach or violation of, or conflict with, any material agreement to which Diller is a party.

 

3.                                       Representations and Warranties of Liberty .  Liberty represents and warrants to Diller and Expedia that:

 

a.                                       Liberty is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to enter into this Assignment and to carry out its obligations hereunder and under the Governance Agreement;

 

b.                                       the execution, delivery and performance of this Assignment by Liberty has been duly authorized by all necessary corporate action on the part of Liberty and no other

 

2



 

corporate proceedings on the part of Liberty are necessary to authorize this Assignment or the matters contemplated hereby or by the Governance Agreement;

 

c.                                        this Assignment has been duly executed and delivered by Liberty and constitutes a valid and binding obligation of Liberty, and, assuming this Assignment constitutes a valid and binding obligation of Expedia and Diller, is enforceable against Liberty in accordance with its terms;

 

d.                                       the execution and delivery of the Assignment by Liberty and the performance of its obligations hereunder and under the Governance Agreement, do not constitute a breach or violation of, or conflict with, Liberty’s restated certificate of incorporation, as amended, or amended and restated bylaws;

 

e.                                        this Assignment is being entered into in connection with the Split-Off, which constitutes a Distribution Transaction involving Splitco, the Liberty Splitco, and its wholly owned subsidiaries LEXEB and Marginco, the Qualified Distribution Transferees, pursuant to Section 5.01 of the Governance Agreement; and

 

f.                                         in connection with the Split-Off, Liberty has contributed all Company Common Shares Beneficially Owned by it to Splitco, which has in turn contributed such shares to Marginco and LEXEB.

 

4.                                       Representations and Warranties of Assignees and Liberty .  Assignees and Liberty each represent and warrant to Expedia and Diller that:

 

a.                                       each Assignee is duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate or other power and authority to enter into this Assignment and to carry out its obligations hereunder and, following the Split-Off, under the Governance Agreement;

 

b.                                       the execution, delivery and performance of this Assignment by each Assignee has been duly authorized by all necessary corporate or other action on the part of each Assignee and no other corporate proceedings on the part of any Assignee are necessary to authorize this Assignment or the matters contemplated hereby or by the Governance Agreement;

 

c.                                        this Assignment has been duly executed and delivered by each Assignee and constitutes a valid and binding obligation of each Assignee, and, assuming this Assignment constitutes a valid and binding obligation of Diller and Expedia, is enforceable against each Assignee in accordance with its terms; and

 

d.                                       the execution and delivery of this Assignment by Assignees, and, following the Split-Off, the performance by the Assignees of their obligations hereunder and under the Governance Agreement, do not constitute a breach or violation of, or conflict with, any Assignee’s organizational documents.

 

3



 

5.                                       Assignment and Assumption, Certain Acknowledgements .

 

a.                                       Effective immediately prior to the Split-Off (but subject to the consummation of the Split-Off):

 

i.                   Liberty assigns all of its rights and obligations under the Governance Agreement (including its rights pursuant to Articles II and III and Section 7.08 thereof) to Splitco;

 

ii.                Splitco accepts such assignment of rights hereunder and assumes and agrees to perform all liabilities and obligations of Liberty under the Governance Agreement to be performed following the effectiveness of the Split-Off;

 

iii.             Splitco is substituted for Liberty as “Splitco” for all purposes under the Governance Agreement and upon the Split-Off, (I) all references in the Governance Agreement to “Liberty” will be deemed to refer to Splitco, (II) all references to the “Liberty Stockholder Group” will be deemed to refer to the “Splitco Stockholder Group,” meaning the stockholder group composed of Splitco and those Subsidiaries of Splitco, that, from time to time, hold Equity Securities of Expedia, and (III) all references to the “Liberty Directors” will be deemed to refer to the “Splitco Directors,” meaning the directors nominated by Splitco pursuant to Section 2.01; and

 

iv.            Marginco and LEXEB acknowledge and agree that they are members of the Splitco Stockholder Group at the effective time of the Split-Off.

 

b.                                       Liberty acknowledges that (i) it shall not be entitled to any benefits under the Governance Agreement following the Split-Off and (ii) neither Expedia nor Diller shall be subject to any liability to Liberty under the Governance Agreement following the Split-Off (except for any liability arising from any breach of the Governance Agreement by Expedia or Diller, as applicable, or relating to any actions or events occurring, in each case, on or prior to the date of the Split-Off).

 

c.                                        Each of Expedia and Diller acknowledges that Liberty shall not be subject to any liability to it or him, as applicable, under the Governance Agreement following the Split-Off (except for any liability arising from any breach of the Governance Agreement by Liberty or relating to any actions or events occurring, in each case, on or prior to the date of the Split-Off).

 

d.                                       Splitco acknowledges and confirms that the persons serving as “Liberty Directors” (as such term is used prior to the effectiveness of this Assignment) on the Board of Directors at the effective time of the Split-Off will become the “Splitco Directors” (as such term is used following the effectiveness of this Assignment) pursuant to Section 2.01(a) of the Governance Agreement.

 

4



 

e.                                        Pursuant to Section 7.01 of the Governance Agreement, effective upon the completion of the Split-Off, the address for all notices, requests and other communications to Assignees pursuant to the Governance Agreement will be:

 

Liberty Expedia Holdings, Inc.

12300 Liberty Boulevard

Englewood, CO 80112

Attention: Richard N. Baer, Chief Legal Officer

Facsimile:

 

6.                                       Miscellaneous .

 

a.                                       From and after the execution and delivery of this Assignment, the Governance Agreement shall be deemed to be assigned and assumed as herein provided (it being understood that no assignment, assumption or substitution hereunder shall be effective until immediately prior to the Split-Off (and subject to the consummation of the Split-Off)), and the Governance Agreement shall continue in full force and effect and is hereby ratified and confirmed.

 

b.                                       This Assignment may be amended, modified and supplemented, and any of the provisions contained herein may be waived, only by a written instrument signed by the parties hereto or their successors and permitted assigns; provided , however , that following the Split-Off, Liberty’s execution of such amendment, modification or supplement will not be required for the effectiveness thereof, except to the extent such amendment, modification or supplement would have, or would reasonably be expected to have, an adverse effect upon Liberty.

 

c.                                        Neither this Assignment nor any of the rights, interests or obligations under this Assignment will be assigned, in whole or in part, by any party hereto without the prior written consent of the other parties hereto; provided , however , that following the Split-Off, Liberty’s consent will not be required for such assignment, except to the extent such assignment would have, or would reasonably be expected to have, an adverse effect upon Liberty.  Any purported assignment without such prior written consent will be void.  Subject to the preceding sentences, this Assignment will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.  This Assignment shall not confer any rights or remedies upon any Person other than the parties to this Assignment and their respective successors and permitted assigns.

 

d.                                       This Assignment sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior representations, agreements and understandings, written or oral, of any and every nature among them, other than as set forth in the Governance Agreement.

 

e.                                        This Assignment shall be governed by and construed in accordance with the Laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Law of any jurisdiction other than the State of Delaware.

 

5



 

f.                                         The headings in this Assignment are for convenience of reference only and shall not constitute a part of this Assignment, nor shall they affect its meaning, construction or effect.

 

g.                                        This Assignment may be executed via facsimile or .pdf and in any number of counterparts, each of which shall be deemed to be an original instrument and all of which together shall constitute one and the same instrument.

 

[Signature Page Follows]

 

6



 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed by their respective authorized officers and made effective as of the day and year first above written.

 

 

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

LEXE MARGINCO, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

LEXEB, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

LIBERTY INTERACTIVE CORPORATION

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

EXPEDIA, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

BARRY DILLER

 

 

 

 

 

 

 

[Signature Page to Assignment and Assumption of Governance Agreement]

 




Exhibit 10.9

 

NETJETS CHALLENGER 650
N212QS

 

FORM OF AIRCRAFT TIME SHARING AGREEMENT

 

This Aircraft Time Sharing Agreement (“Agreement”) is effective as of the [    ] day of [            ], 2016 (“Effective Date”), by and among Liberty Citation, Inc., with an address of 12300 Liberty Boulevard, Englewood, Colorado 80112 (“Owner”), Liberty Denver Arena, LLC, with an address of 12300 Liberty Boulevard, Englewood, Colorado 80112 (the “Sublessor”), and Liberty Expedia Holdings, Inc., with an address of 12300 Liberty Boulevard, Englewood, Colorado 80112 (“Lessee”).

 

RECITALS

 

WHEREAS, Owner is the owner of an undivided 12.5% interest in that certain 2016 Bombardier CL-600-2B16 (Challenger 650) aircraft, bearing manufacturer’s serial number 6066 (the “Aircraft”), currently registered with the Federal Aviation Administration (“FAA”) as N212QS;

 

WHEREAS, Owner has dry leased the Aircraft to Sublessor pursuant to an Aircraft Dry Lease dated March 28, 2016 (the “Dry Lease”); and

 

WHEREAS, Owner is a party to a NetJets Fractional Program Agreement dated March 28, 2016 (the “Program Agreement”), with NetJets Sales, Inc. (“Sales”), NetJets Aviation, Inc. (“NJA”) and NetJets Services, Inc. (“NJS,” and collectively with NJA and Sales, “NetJets”);

 

WHEREAS, Owner has assigned Exhibit B (the “Management Terms”) and Exhibit C (the “Exchange Terms”) of the Program Agreement to Sublessor (with the consent of NetJets); and

 

WHEREAS, Sublessor has signed an “Acknowledgement of Fractional Owner Lessee’s Operational Control Responsibilities” with NetJets and exercises operational control over the Aircraft when Sublessor is operating the Aircraft in accordance with 14 C.F.R. Sections (“FAR”) 91.1003 through 91.1013; and

 

WHEREAS, pursuant to the Management Terms, the Sublessor (as assignee of Owner) has contracted with NJA to manage the use, maintenance and other matters pertaining to the operation of the Aircraft, including providing a fully qualified flight crew to operate the Aircraft; and

 

WHEREAS, pursuant to the Exchange Terms, the Sublessor (as assignee of Owner) has contracted with NJS with respect to matters related to the joint ownership and operation of the Aircraft and the inclusion of the Aircraft in the aircraft exchange program operated by NetJets, and the term “Aircraft,” when used in this Agreement, shall include the Aircraft and any other aircraft made available by NetJets to Sublessor (through the Dry Lease with Owner) under the Management Terms and the Exchange Terms; and

 



 

WHEREAS, Sublessor desires to lease the Aircraft, including the flight crew provided to Sublessor pursuant to the Management Terms, to Lessee on a time sharing basis as defined in Section 91.501(c)(1) of the FAR; and

 

WHEREAS, the use of the Aircraft by Lessee shall at all times be pursuant to and in full compliance with the requirements of FAR Sections 91.501(b)(6), 91.501(c)(1) and 91.501(d).

 

NOW, THEREFORE, in consideration of the mutual promises and considerations contained in this Agreement, the parties agree as follows:

 

1.                                       Sublessor agrees to lease the Aircraft to Lessee on a periodic, non-exclusive basis, and to arrange with NJS through the Management Terms to provide a fully qualified flight crew for all operations of the Aircraft, pursuant and subject to the provisions of FAR Section 91.501(c)(1) and the terms of this Agreement, the Management Terms and the Exchange Terms.  The parties expressly acknowledge and agree that, regardless of any employment, contractual or other relationship of any kind or nature, at all times that the Aircraft is operated under this Agreement, Sublessor, as the party furnishing the Aircraft and flight crew and exercising complete control over all phases of aircraft operation through the Management Terms, shall be deemed to have operational control of the Aircraft as such term is defined in FAR Section 1.1 and 91.1003 through 91.1013.  This Agreement will commence on the Effective Date and continue until the first anniversary of the Effective Date.  Thereafter, this Agreement shall be automatically renewed on a month-to-month basis, unless sooner terminated by either party as hereinafter provided.  Any party may at any time terminate this Agreement (including during the initial term) upon 30 days’ prior written notice to the other parties.

 

2.                                       Lessee shall pay Sublessor an amount equal to (i) 200% of the actual expenses for fuel for each flight conducted under this Agreement, and (ii) those charges specifically permitted in FAR Section 91.501(d) that are separately invoiced by NetJets to Owner, Sublessor or any of their respective affiliates for any flight conducted under this Agreement, as permitted by FAR Section 91.501(d) and in no event an amount in excess of such charges (the “Time Sharing Charge”), which are as follows:

 

(a)                                  Fuel, oil, lubricants, and other additives;

(b)                                  Travel expenses of the crew, including food, lodging and ground transportation;

(c)                                   Hangar and tie down costs away from the Aircraft’s base of operation;

(d)                                  Insurance obtained for the specific flight;

(e)                                   Landing fees, airport taxes and similar assessments;

(f)                                    Customs, foreign permit, and similar fees directly related to the flight;

(g)                                   In-flight food and beverages;

(h)                                  Passenger ground transportation;

(i)                                      Flight planning and weather contract services; and

(j)                                     An additional charge equal to 100% of the expenses listed in subparagraph (a) of this paragraph.

 

3.                                       Sublessor will pay (directly or through the Owner) all expenses related to the operation of the Aircraft when incurred, and will bill Lessee on a monthly basis as soon as

 

2



 

practicable after the last day of each calendar month for the Time Sharing Charge for any and all flights for the account of Lessee pursuant to this Agreement during the preceding month.  Lessee shall pay Sublessor for all flights for the account of Lessee pursuant to this Agreement within 30 days of receipt of the invoice therefor.  If requested by Lessee, Sublessor will provide Lessee with a detailed accounting of the expenses composing the Time Sharing Charge for each flight for the account of Lessee pursuant to this Agreement.  Without limiting the foregoing, amounts payable by Lessee to Sublessor under this Agreement may include any federal excise tax that may be imposed under Internal Revenue Code Section 4261 or any similar excise taxes, if any.

 

4.                                       Lessee will provide Sublessor with requests for flight time and proposed flight schedules as far in advance of any given flight as possible, and in any case, at least 24 hours in advance of Lessee’s planned departure unless Sublessor agrees otherwise.  Requests for flight time shall be in a form, whether written or oral, mutually convenient to, and agreed upon by the parties.  In addition to the proposed schedules and flight times, Lessee shall provide at least the following information for each proposed flight at some time prior to scheduled departure as required by the Sublessor or the flight crew:

 

(a)                                  proposed departure point;

(b)                                  destinations;

(c)                                   date and time of flight;

(d)                                  the number of anticipated passengers;

(e)                                   the identity of each anticipated passenger;

(f)                                    the nature and extent of luggage and/or cargo to be carried;

(g)                                   the date and time of return flight, if any; and

(h)                                  any other information concerning the proposed flight that may be pertinent or required by the Sublessor or the flight crew.

 

5.                                       Sublessor shall have sole and exclusive authority over the scheduling of the Aircraft, including any limitations on the number of passengers on any flight; provided, however, that Sublessor will use commercially reasonable efforts to accommodate Lessee’s needs and to avoid conflicts in scheduling between Sublessor and Lessee.

 

6.                                       As between Sublessor and Lessee,  Sublessor shall be solely responsible for causing NetJets to secure maintenance, preventive maintenance and required or otherwise necessary inspections on the Aircraft, and shall take such requirements into account in scheduling the Aircraft.  No period of maintenance, preventive maintenance or inspection shall be delayed or postponed for the purpose of scheduling the Aircraft, unless said maintenance or inspection can be safely conducted at a later time in compliance with all applicable laws and regulations, and within the sound discretion of the pilot in command.  The pilot in command shall have final and complete authority to cancel any flight for any reason or condition that in his judgment would compromise the safety of the flight.

 

7.                                       In accordance with applicable FARs, the qualified flight crew provided pursuant to this Agreement will exercise all of its duties and responsibilities in regard to the safety of each flight conducted hereunder.  Lessee specifically agrees that the flight crew, in its sole discretion, may terminate any flight, refuse to commence any flight or take other action which in the considered judgment of the pilot in command is necessitated by considerations of safety.  No

 

3



 

such action of the pilot in command shall create or support any liability for loss, injury, damage or delay to Lessee or any other person.  The parties further agree that neither Owner nor the Sublessor shall be liable for delay or failure to furnish the Aircraft and crew pursuant to this Agreement when such failure is caused by NetJets, government regulation or authority, mechanical difficulty, war, civil commotion, strikes or labor disputes, weather conditions, or acts of God or any other event or circumstance beyond the reasonable control of Owner or the Sublessor.

 

8.                                       At all times during the term of this Agreement, Owner or the Sublessor shall cause to be carried and maintained through NetJets, at the cost and expense of Owner or Sublessor, physical damage insurance with respect to the Aircraft, third party aircraft liability insurance, passenger legal liability insurance, property damage liability insurance, and medical expense insurance in such amounts and on such terms and conditions as Owner or the Sublessor shall determine in its sole discretion in amounts no less than those required under the Program Agreement.  Owner or the Sublessor shall also bear the cost of paying any deductible amount on any policy of insurance in the event of a claim or loss.

 

9.                                       (a)                                  Except for the gross negligence or willful misconduct of Owner or Sublessor, Lessee agrees that the proceeds of insurance will be Lessee’s sole recourse against Owner and the Sublessor with respect to any claims that Lessee may have under this Agreement.

 

(b)                                  THE PROVISIONS OF THIS SECTION 9 SHALL SURVIVE INDEFINITELY THE TERMINATION OR EXPIRATION OF THIS AGREEMENT .

 

10.                                Lessee warrants that:

 

(a)                                  It will not use the Aircraft for the purpose of providing transportation of passengers or cargo in air commerce for compensation or hire, for any illegal purpose, or in violation of any insurance policies with respect to the Aircraft;

 

(b)                                  It will refrain from incurring any mechanics, international interest, prospective international interest or other lien and shall not attempt to convey, mortgage, assign, lease or grant or obtain an international interest or prospective international interest or in any way alienate the Aircraft or create any kind of lien or security interest involving the Aircraft or do anything or take any action that might mature into such a lien;

 

(c)                                   It will comply with all applicable laws, governmental and airport orders, rules and regulations, as shall from time-to-time be in effect relating in any way to the operation and use of the Aircraft under this Agreement; and

 

(d)                                  It will not use the Aircraft in any manner that would result in a violation of any of the requirements of the Management Terms or the Exchange Terms, as the same may be amended and in effect from time-to-time, to the extent notified of such requirements from time-to-time.

 

11.                                Lessee shall not assign this Agreement or its interest herein to any other person or entity without the prior written consent of Owner and the Sublessor, which may be granted or

 

4



 

denied in their sole discretion.  Subject to the preceding sentence, this Agreement shall inure to the benefit of and be binding upon the parties hereto, and their respective heirs, representatives, successors and assigns, and does not confer any rights on any other person.

 

12.                                This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes any prior understandings and agreements between the parties respecting such subject matter.  This Agreement may be amended or supplemented and any provision hereof waived only by a written instrument signed by all parties.  The failure or delay on the part of any party to insist on strict performance of any of the terms and conditions of this Agreement or to exercise any rights or remedies hereunder shall not constitute a waiver of any such provisions, rights or remedies.  This Agreement may be executed in counterparts, which shall, singly or in the aggregate, constitute a fully executed and binding Agreement.  Words of gender used in this Agreement may be read as masculine, feminine or neuter as required by the context.  Words of number may be read as singular or plural, as required by the context.  The word “include” and derivatives of that word are used in this Agreement in an illustrative sense rather than a limiting sense.  The word “or” is not exclusive and shall be interpreted as meaning “and/or.”  The words “shall” and “will” are used interchangeably and are intended to have the same meaning.  Where applicable, this Agreement may be referred to as “this Lease.”

 

13.                                Except as otherwise set forth in Section 4, all communications and notices provided for herein shall be in writing and shall become effective when delivered by facsimile transmission or by personal delivery, Federal Express or other overnight courier or four days following deposit in the United States mail, with correct postage for first-class mail prepaid, addressed to the parties at their respective addresses set forth above, or else as otherwise directed by any party from time-to-time in writing.

 

14.                                If any one or more provisions of this Agreement shall be held invalid, illegal or unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provisions shall be replaced by a mutually acceptable provision, which, being valid, legal and enforceable, comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision.  To the extent permitted by applicable law, the parties hereby waive any provision of law that renders any provision of this Agreement prohibited or unenforceable in any respect.

 

15.                                This Agreement is entered into under, and is to be construed in accordance with, the laws of the State of Colorado, without reference to conflicts of laws.

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

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16.                                TRUTH IN LEASING STATEMENT UNDER FAR SECTION 91.23

 

THE AIRCRAFT, A 2016 BOMBARDIER CL-600-2B16 (CHALLENGER 650), MANUFACTURER’S SERIAL NO. 6066, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS N212QS, EITHER HAS BEEN DELIVERED FROM ITS MANUFACTURER OR HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 SUBPART K DURING THE 12 MONTH PERIOD PRECEDING THE DATE OF THIS LEASE, BASED ON REQUIREMENTS UNDER THE MANAGEMENT TERMS.

 

THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 SUBPART K FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE, BASED ON REQUIREMENTS UNDER THE MANAGEMENT TERMS.  DURING THE DURATION OF THIS LEASE, LIBERTY DENVER ARENA, LLC, 12300 LIBERTY BOULEVARD, ENGLEWOOD, COLORADO 80112 IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE.

 

AN EXPLANATION OF THE FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE.

 

THE “INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASING REQUIREMENTS” ATTACHED HERETO ARE INCORPORATED HEREIN BY REFERENCE.

 

LIBERTY DENVER ARENA, LLC, LOCATED AT 12300 LIBERTY BOULEVARD, ENGLEWOOD, COLORADO 80112, THROUGH ITS UNDERSIGNED AUTHORIZED SIGNATORY BELOW, CERTIFIES THAT IT IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT AND THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.

 

IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the date first above written.

 

OWNER

 

SUBLESSOR

 

LESSEE

 

 

 

 

 

LIBERTY CITATION, INC.

 

LIBERTY DENVER ARENA, LLC

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

 

 

 

 

 

 

By:

 

 

By:

 

 

By:

 

Name: Craig Troyer

 

Name: Craig Troyer

 

Name:

Title:   Vice President

 

Title:   Vice President

 

Title:

 



 

INSTRUCTIONS FOR COMPLIANCE WITH “TRUTH IN LEASING” REQUIREMENTS

 

1.                                       Mail a copy of the lease to the following address via certified mail, return receipt requested, immediately upon execution of the lease (14 C.F.R. 91.23 requires that the copy be sent within 24 hours after it is signed):

 

Federal Aviation Administration

Aircraft Registration Branch

ATTN:  Technical Section

P.O. Box 25724

Oklahoma City, Oklahoma  73125

 

2.                                       Telephone the nearest Flight Standards District Office at least 48 hours prior to the first flight under this lease.

 

3.                                       Carry a copy of the lease in the aircraft at all times.

 


 

FALCON 900EX  N730LM

 

FORM OF AIRCRAFT TIME SHARING AGREEMENT

 

This Aircraft Time Sharing Agreement (“Agreement”) is entered into as of the [    ] day of [              ], 2016 (“Effective Date”), by and between Liberty Media Corporation, with an address of 12300 Liberty Boulevard, Englewood, Colorado 80112 (“Lessor”), and Liberty Expedia Holdings, Inc., with an address of 12300 Liberty Boulevard, Englewood, Colorado 80112 (“Lessee”).

 

RECITALS

 

WHEREAS, Lessor is the owner of that certain Dassault Falcon 900EX aircraft, bearing manufacturer’s serial number 101, currently registered with the Federal Aviation Administration (“FAA”) as N730LM (the “Aircraft”);

 

WHEREAS, Lessor employs a fully qualified flight crew to operate the Aircraft;

 

WHEREAS, Lessor desires to lease the Aircraft to Lessee and to provide a fully qualified flight crew for all operations on a periodic, non-exclusive time sharing basis, as defined in Section 91.501(c)(1) of the Federal Aviation Regulations (“FAR”); and

 

WHEREAS, the use of the Aircraft by Lessee shall at all times be pursuant to and in full compliance with the requirements of FAR Sections 91.501(b)(6), 91.501(c)(1) and 91.501(d).

 

NOW, THEREFORE, in consideration of the mutual promises and considerations contained in this Agreement, the parties agree as follows:

 

1.                                       Lessor agrees to lease the Aircraft to Lessee on a periodic, non-exclusive basis, and to provide a fully qualified flight crew for all operations, pursuant and subject to the provisions of FAR Section 91.501(c)(1) and the terms of this Agreement.  The parties expressly acknowledge and agree that, regardless of any employment, contractual or other relationship of any kind or nature, at all times that the Aircraft is operated under this Agreement, Lessor, as the party furnishing the Aircraft and flight crew and exercising complete control over all phases of aircraft operation, shall be deemed to have operational control of the Aircraft as such term is defined in 14 C.F.R. Section 1.1.  This Agreement will commence on the Effective Date and continue until the first anniversary of the Effective Date.  Thereafter, this Agreement shall be automatically renewed on a month-to-month basis, unless sooner terminated by either party as hereinafter provided.  Either party may at any time terminate this Agreement (including during the initial term) upon 30 days’ prior written notice to the other party.

 

2.                                       Lessee shall pay Lessor for each flight conducted under this Agreement an amount equal to those charges specifically permitted by FAR Section 91.501(d) and in no event an amount in excess of such charges (the “Time Sharing Charge”), which are as follows:

 



 

(a)                                  Fuel, oil, lubricants, and other additives;

(b)                                  Travel expenses of the crew, including food, lodging and ground transportation;

(c)                                   Hangar and tie down costs away from the Aircraft’s base of operation;

(d)                                  Insurance obtained for the specific flight;

(e)                                   Landing fees, airport taxes and similar assessments;

(f)                                    Customs, foreign permit, and similar fees directly related to the flight;

(g)                                   In-flight food and beverages;

(h)                                  Passenger ground transportation;

(i)                                      Flight planning and weather contract services; and

(j)                                     An additional charge equal to 100% of the expenses listed in subparagraph (a) of this paragraph.

 

3.                                       Lessor will pay all expenses related to the operation of the Aircraft when incurred, and will bill Lessee on a monthly basis as soon as practicable after the last day of each calendar month for the Time Sharing Charge for any and all flights for the account of Lessee pursuant to this Agreement during the preceding month.  Lessee shall pay Lessor for all flights for the account of Lessee pursuant to this Agreement within 30 days of receipt of the invoice therefor.  If requested by Lessee, Lessor will provide Lessee with a detailed accounting of the expenses composing the Time Sharing Charge for each flight for the account of Lessee pursuant to this Agreement.  Without limiting the foregoing, amounts payable by Lessee to Lessor under this Agreement may include any federal excise tax that may be imposed under Internal Revenue Code Section 4261 or any similar excise taxes, if any.

 

4.                                       Lessee will provide Lessor with requests for flight time and proposed flight schedules as far in advance of any given flight as possible, and in any case, at least 24 hours in advance of Lessee’s planned departure unless Lessor otherwise agrees.  Requests for flight time shall be in a form, whether written or oral, mutually convenient to, and agreed upon by the parties.  In addition to the proposed schedules and flight times, Lessee shall provide at least the following information for each proposed flight at some time prior to scheduled departure as required by Lessor or Lessor’s flight crew:

 

(a)                                  proposed departure point;

(b)                                  destinations;

(c)                                   date and time of flight;

(d)                                  the number of anticipated passengers;

(e)                                   the identity of each anticipated passenger;

(f)                                    the nature and extent of luggage and/or cargo to be carried;

(g)                                   the date and time of return flight, if any; and

(h)                                  any other information concerning the proposed flight that may be pertinent or required by Lessor or Lessor’s flight crew.

 

5.                                       Lessor shall have sole and exclusive authority over the scheduling of the Aircraft, including any limitations on the number of passengers on any flight; provided, however, that Lessor will use commercially reasonable efforts to accommodate Lessee’s needs and to avoid conflicts in scheduling.

 

2



 

6.                                       As between Lessor and Lessee, Lessor shall be solely responsible for securing maintenance, preventive maintenance and required or otherwise necessary inspections on the Aircraft, and shall take such requirements into account in scheduling the Aircraft.  No period of maintenance, preventative maintenance or inspection shall be delayed or postponed for the purpose of scheduling the Aircraft, unless said maintenance or inspection can be safely conducted at a later time in compliance with all applicable laws and regulations, and within the sound discretion of the pilot in command.  The pilot in command shall have final and complete authority to cancel any flight for any reason or condition that in his judgment would compromise the safety of the flight.

 

7.                                       Lessor shall employ, pay for and provide to Lessee a qualified flight crew for each flight undertaken under this Agreement.

 

8.                                       In accordance with applicable FARs, the qualified flight crew provided by Lessor will exercise all of its duties and responsibilities in regard to the safety of each flight conducted hereunder.  Lessee specifically agrees that the flight crew, in its sole discretion, may terminate any flight, refuse to commence any flight or take other action which in the considered judgment of the pilot in command is necessitated by considerations of safety.  No such action of the pilot in command shall create or support any liability for loss, injury, damage or delay to Lessee or any other person.  The parties further agree that Lessor shall not be liable for delay or failure to furnish the Aircraft and crew pursuant to this Agreement when such failure is caused by government regulation or authority, mechanical difficulty, war, civil commotion, strikes or labor disputes, weather conditions, or acts of God or any other event or circumstance beyond the reasonable control of Lessor.

 

9.                                       (a)                                  At all times during the term of this Agreement, Lessor shall cause to be carried and maintained, at Lessor’s cost and expense, physical damage insurance with respect to the Aircraft, third party aircraft liability insurance, passenger legal liability insurance, property damage liability insurance, and medical expense insurance in such amounts and on such terms and conditions as Lessor shall determine in its sole discretion.  Lessor shall also bear the cost of paying any deductible amount on any policy of insurance in the event of a claim or loss.

 

(b)                                  Any policies of insurance carried in accordance with this Agreement:  (i) shall name Lessee as an additional insured; (ii) shall contain a waiver by the underwriter thereof of any right of subrogation against Lessee; and (iii) shall require the insurers to provide at least 30 days’ prior written notice (or at least seven days’ in the case of any war-risk insurance) to Lessee if the insurers cancel insurance for any reason whatsoever; provided, however, that the insurers shall provide at least ten days’ prior written notice if the same is allowed to lapse for non-payment of premium.  Each liability policy shall be primary without right of contribution from any other insurance that is carried by Lessee or Lessor and shall expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured.

 

(c)                                   Lessor shall obtain the approval of this Agreement by the insurance carrier for each policy of insurance on the Aircraft.  If requested by Lessee, Lessor shall arrange for a Certificate of Insurance evidencing the insurance coverage with respect to the Aircraft carried and maintained by Lessor to be given by its insurance carriers to Lessee or will provide Lessee

 

3



 

with a copy of such insurance policies.  Lessor will give Lessee reasonable advance notice of any material modifications to insurance coverage relating to the Aircraft.

 

10.                                (a)                                  Lessee agrees that the proceeds of insurance will be Lessee’s sole recourse against Lessor with respect to any claims that Lessee may have under this Agreement, except in the event of gross negligence or willful misconduct by Lessor.

 

(b)                                  THE PROVISIONS OF THIS SECTION 10 SHALL SURVIVE INDEFINITELY THE TERMINATION OR EXPIRATION OF THE AGREEMENT .

 

11.                                Lessee warrants that:

 

(a)                                  It will not use the Aircraft for the purpose of providing transportation of passengers or cargo in air commerce for compensation or hire, for any illegal purpose, or in violation of any insurance policies with respect to the Aircraft;

 

(b)                                  It will refrain from incurring any mechanics, international interest, prospective international interest or other lien and shall not attempt to convey, mortgage, assign, lease or grant or obtain an international interest or prospective international interest or in any way alienate the Aircraft or create any kind of lien or security interest involving the Aircraft or do anything or take any action that might mature into such a lien; and

 

(c)                                   It will comply with all applicable laws, governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in any way to the operation and use of the Aircraft under this Agreement.

 

12.                                For purposes of this Agreement, the permanent base of operation of the Aircraft shall be Centennial Airport, Englewood, Colorado.

 

13.                                A copy of this Agreement shall be carried in the Aircraft and available for review upon the request of the Federal Aviation Administration on all flights conducted pursuant to this Agreement.

 

14.                                Lessee shall not assign this Agreement or its interest herein to any other person or entity without the prior written consent of Lessor, which may be granted or denied in Lessor’s sole discretion.  Subject to the preceding sentence, this Agreement shall inure to the benefit of and be binding upon the parties hereto, and their respective heirs, representatives, successors and assigns, and does not confer any rights on any other person.

 

15.                                This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes any prior understandings and agreements between the parties respecting such subject matter.  This Agreement may be amended or supplemented and any provision hereof waived only by a written instrument signed by all parties.  The failure or delay on the part of any party to insist on strict performance of any of the terms and conditions of this Agreement or to exercise any rights or remedies hereunder shall not constitute a waiver of any such provisions, rights or remedies.  This Agreement may be executed in counterparts, which shall, singly or in the aggregate, constitute a fully executed and binding Agreement.  Words of gender used in this Agreement may be read as masculine, feminine or

 

4



 

neuter as required by the context.  Words of number may be read as singular or plural, as required by the context.  The word “include” and derivatives of that word are used in this Agreement in an illustrative sense rather than a limiting sense.  The word “or” is not exclusive and shall be interpreted as meaning “and/or.”  The words “shall” and “will” are used interchangeably and are intended to have the same meaning.  Where applicable, this Agreement may be referred to as “this Lease.”

 

16.                                Except as otherwise set forth in Section 4, all communications and notices provided for herein shall be in writing and shall become effective when delivered by facsimile transmission or by personal delivery, Federal Express or other overnight courier or four days following deposit in the United States mail, with correct postage for first-class mail prepaid, addressed to Lessor or Lessee at their respective addresses set forth above, or else as otherwise directed by the other party from time to time in writing.

 

17.                                If any one or more provisions of this Agreement shall be held invalid, illegal or unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provisions shall be replaced by a mutually acceptable provision, which, being valid, legal and enforceable, comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision.  To the extent permitted by applicable law, the parties hereby waive any provision of law, that renders any provision of this Agreement prohibited or unenforceable in any respect.

 

18.                                This Agreement is entered into under, and is to be construed in accordance with, the laws of the State of Colorado, without reference to conflicts of laws.

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

5



 

19.                                TRUTH IN LEASING STATEMENT UNDER FAR SECTION 91.23

 

THE AIRCRAFT, A DASSAULT FALCON 900EX, MANUFACTURER’S SERIAL NO. 101, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS N730LM, HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTH PERIOD PRECEDING THE DATE OF THIS LEASE.

 

THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE.  DURING THE DURATION OF THIS LEASE, LIBERTY MEDIA CORPORATION, 12300 LIBERTY BOULEVARD, ENGLEWOOD, COLORADO 80112 IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE.

 

AN EXPLANATION OF THE FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE.

 

THE “INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASING REQUIREMENTS” ATTACHED HERETO ARE INCORPORATED HEREIN BY REFERENCE.

 

LIBERTY MEDIA CORPORATION, LOCATED AT 12300 LIBERTY BOULEVARD, ENGLEWOOD, COLORADO 80112, THROUGH ITS UNDERSIGNED AUTHORIZED SIGNATORY BELOW, CERTIFIES THAT LESSOR IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT AND THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.

 

IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the date first above written.

 

LESSOR

 

LESSEE

 

 

 

LIBERTY MEDIA CORPORATION

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

 

 

 

By:

 

 

By:

 

 

 

 

 

 

Name:

Craig Troyer

 

Name:

 

 

 

 

 

 

Title:

Vice President

 

Title:

 

 



 

INSTRUCTIONS FOR COMPLIANCE WITH “TRUTH IN LEASING” REQUIREMENTS

 

1.                                       Mail a copy of the lease to the following address via certified mail, return receipt requested, immediately upon execution of the lease (14 C.F.R. 91.23 requires that the copy be sent within 24 hours after it is signed):

 

Federal Aviation Administration

Aircraft Registration Branch

ATTN:  Technical Section

P.O. Box 25724

Oklahoma City, Oklahoma  73125

 

2.                                       Telephone the nearest Flight Standards District Office at least 48 hours prior to the first flight under this lease.

 

3.                                       Carry a copy of the lease in the aircraft at all times.

 


 

FALCON 7X N770LM

 

FORM OF AIRCRAFT TIME SHARING AGREEMENT

 

This Aircraft Time Sharing Agreement (“Agreement”) is entered into as of the [    ] day of [              ], 2016 (“Effective Date”), by and between Liberty Media Corporation, with an address of 12300 Liberty Boulevard, Englewood, Colorado 80112 (“Lessor”), and Liberty Expedia Holdings, Inc., with an address of 12300 Liberty Boulevard, Englewood, Colorado 80112 (“Lessee”).

 

RECITALS

 

WHEREAS, Lessor is the owner of that certain Dassault Falcon 7X aircraft, bearing manufacturer’s serial number 262 (the “Aircraft”), registered with the Federal Aviation Administration (“FAA”) as N770LM;

 

WHEREAS, Lessor employs a fully qualified flight crew to operate the Aircraft;

 

WHEREAS, Lessor desires to lease the Aircraft to Lessee and to provide a fully qualified flight crew for all operations on a periodic, non-exclusive time sharing basis, as defined in Section 91.501(c)(1) of the Federal Aviation Regulations (“FAR”); and

 

WHEREAS, the use of the Aircraft by Lessee shall at all times be pursuant to and in full compliance with the requirements of FAR Sections 91.501(b)(6), 91.501(c)(1) and 91.501(d).

 

NOW, THEREFORE, in consideration of the mutual promises and considerations contained in this Agreement, the parties agree as follows:

 

1.                                       Lessor agrees to lease the Aircraft to Lessee on a periodic, non-exclusive basis, and to provide a fully qualified flight crew for all operations, pursuant and subject to the provisions of FAR Section 91.501(c)(1) and the terms of this Agreement.  The parties expressly acknowledge and agree that, regardless of any employment, contractual or other relationship of any kind or nature, at all times that the Aircraft is operated under this Agreement, Lessor, as the party furnishing the Aircraft and flight crew and exercising complete control over all phases of aircraft operation, shall be deemed to have operational control of the Aircraft as such term is defined in 14 C.F.R. Section 1.1.  This Agreement will commence on the Effective Date and continue until the first anniversary of the Effective Date.  Thereafter, this Agreement shall be automatically renewed on a month-to-month basis, unless sooner terminated by either party as hereinafter provided.  Either party may at any time terminate this Agreement (including during the initial term) upon 30 days’ prior written notice to the other party.

 

2.                                       Lessee shall pay Lessor for each flight conducted under this Agreement an amount equal to those charges specifically permitted by FAR Section 91.501(d) and in no event an amount in excess of such charges (the “Time Sharing Charge”), which are as follows:

 



 

(a)                                  Fuel, oil, lubricants, and other additives;

(b)                                  Travel expenses of the crew, including food, lodging and ground transportation;

(c)                                   Hangar and tie down costs away from the Aircraft’s base of operation;

(d)                                  Insurance obtained for the specific flight;

(e)                                   Landing fees, airport taxes and similar assessments;

(f)                                    Customs, foreign permit, and similar fees directly related to the flight;

(g)                                   In-flight food and beverages;

(h)                                  Passenger ground transportation;

(i)                                      Flight planning and weather contract services; and

(j)                                     An additional charge equal to 100% of the expenses listed in subparagraph (a) of this paragraph.

 

3.                                       Lessor will pay all expenses related to the operation of the Aircraft when incurred, and will bill Lessee on a monthly basis as soon as practicable after the last day of each calendar month for the Time Sharing Charge for any and all flights for the account of Lessee pursuant to this Agreement during the preceding month.  Lessee shall pay Lessor for all flights for the account of Lessee pursuant to this Agreement within 30 days of receipt of the invoice therefor.  If requested by Lessee, Lessor will provide Lessee with a detailed accounting of the expenses composing the Time Sharing Charge for each flight for the account of Lessee pursuant to this Agreement.  Without limiting the foregoing, amounts payable by Lessee to Lessor under this Agreement may include any federal excise tax that may be imposed under Internal Revenue Code Section 4261 or any similar excise taxes, if any.

 

4.                                       Lessee will provide Lessor with requests for flight time and proposed flight schedules as far in advance of any given flight as possible, and in any case, at least 24 hours in advance of Lessee’s planned departure unless Lessor otherwise agrees.  Requests for flight time shall be in a form, whether written or oral, mutually convenient to, and agreed upon by the parties.  In addition to the proposed schedules and flight times, Lessee shall provide at least the following information for each proposed flight at some time prior to scheduled departure as required by Lessor or Lessor’s flight crew:

 

(a)                                  proposed departure point;

(b)                                  destinations;

(c)                                   date and time of flight;

(d)                                  the number of anticipated passengers;

(e)                                   the identity of each anticipated passenger;

(f)                                    the nature and extent of luggage and/or cargo to be carried;

(g)                                   the date and time of return flight, if any; and

(h)                                  any other information concerning the proposed flight that may be pertinent or required by Lessor or Lessor’s flight crew.

 

5.                                       Lessor shall have sole and exclusive authority over the scheduling of the Aircraft, including any limitations on the number of passengers on any flight; provided, however, that Lessor will use commercially reasonable efforts to accommodate Lessee’s needs and to avoid conflicts in scheduling.

 

2



 

6.                                       As between Lessor and Lessee, Lessor shall be solely responsible for securing maintenance, preventive maintenance and required or otherwise necessary inspections on the Aircraft, and shall take such requirements into account in scheduling the Aircraft.  No period of maintenance, preventative maintenance or inspection shall be delayed or postponed for the purpose of scheduling the Aircraft, unless said maintenance or inspection can be safely conducted at a later time in compliance with all applicable laws and regulations, and within the sound discretion of the pilot in command.  The pilot in command shall have final and complete authority to cancel any flight for any reason or condition that in his judgment would compromise the safety of the flight.

 

7.                                       Lessor shall employ, pay for and provide to Lessee a qualified flight crew for each flight undertaken under this Agreement.

 

8.                                       In accordance with applicable FARs, the qualified flight crew provided by Lessor will exercise all of its duties and responsibilities in regard to the safety of each flight conducted hereunder.  Lessee specifically agrees that the flight crew, in its sole discretion, may terminate any flight, refuse to commence any flight or take other action which in the considered judgment of the pilot in command is necessitated by considerations of safety.  No such action of the pilot in command shall create or support any liability for loss, injury, damage or delay to Lessee or any other person.  The parties further agree that Lessor shall not be liable for delay or failure to furnish the Aircraft and crew pursuant to this Agreement when such failure is caused by government regulation or authority, mechanical difficulty, war, civil commotion, strikes or labor disputes, weather conditions, or acts of God or any other event or circumstance beyond the reasonable control of Lessor.

 

9.                                       (a)                                  At all times during the term of this Agreement, Lessor shall cause to be carried and maintained, at Lessor’s cost and expense, physical damage insurance with respect to the Aircraft, third party aircraft liability insurance, passenger legal liability insurance, property damage liability insurance, and medical expense insurance in such amounts and on such terms and conditions as Lessor shall determine in its sole discretion.  Lessor shall also bear the cost of paying any deductible amount on any policy of insurance in the event of a claim or loss.

 

(b)                                  Any policies of insurance carried in accordance with this Agreement:  (i) shall name Lessee as an additional insured; (ii) shall contain a waiver by the underwriter thereof of any right of subrogation against Lessee; and (iii) shall require the insurers to provide at least 30 days’ prior written notice (or at least seven days’ in the case of any war-risk insurance) to Lessee if the insurers cancel insurance for any reason whatsoever; provided, however, that the insurers shall provide at least ten days’ prior written notice if the same is allowed to lapse for non-payment of premium.  Each liability policy shall be primary without right of contribution from any other insurance that is carried by Lessee or Lessor and shall expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured.

 

(c)                                   Lessor shall obtain the approval of this Agreement by the insurance carrier for each policy of insurance on the Aircraft.  If requested by Lessee, Lessor shall arrange for a Certificate of Insurance evidencing the insurance coverage with respect to the Aircraft carried and maintained by Lessor to be given by its insurance carriers to Lessee or will provide Lessee

 

3



 

with a copy of such insurance policies.  Lessor will give Lessee reasonable advance notice of any material modifications to insurance coverage relating to the Aircraft.

 

10.                                (a)                                  Lessee agrees that the proceeds of insurance will be Lessee’s sole recourse against Lessor with respect to any claims that Lessee may have under this Agreement, except in the event of gross negligence or willful misconduct by Lessor.

 

(b)                                  THE PROVISIONS OF THIS SECTION 10 SHALL SURVIVE INDEFINITELY THE TERMINATION OR EXPIRATION OF THE AGREEMENT .

 

11.                                Lessee warrants that:

 

(a)                                  It will not use the Aircraft for the purpose of providing transportation of passengers or cargo in air commerce for compensation or hire, for any illegal purpose, or in violation of any insurance policies with respect to the Aircraft;

 

(b)                                  It will refrain from incurring any mechanics, international interest, prospective international interest or other lien and shall not attempt to convey, mortgage, assign, lease or grant or obtain an international interest or prospective international interest or in any way alienate the Aircraft or create any kind of lien or security interest involving the Aircraft or do anything or take any action that might mature into such a lien; and

 

(c)                                   It will comply with all applicable laws, governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in any way to the operation and use of the Aircraft under this Agreement.

 

12.                                For purposes of this Agreement, the permanent base of operation of the Aircraft shall be Centennial Airport, Englewood, Colorado.

 

13.                                A copy of this Agreement shall be carried in the Aircraft and available for review upon the request of the Federal Aviation Administration on all flights conducted pursuant to this Agreement.

 

14.                                Lessee shall not assign this Agreement or its interest herein to any other person or entity without the prior written consent of Lessor, which may be granted or denied in Lessor’s sole discretion.  Subject to the preceding sentence, this Agreement shall inure to the benefit of and be binding upon the parties hereto, and their respective heirs, representatives, successors and assigns, and does not confer any rights on any other person.

 

15.                                This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes any prior understandings and agreements between the parties respecting such subject matter.  This Agreement may be amended or supplemented and any provision hereof waived only by a written instrument signed by all parties.  The failure or delay on the part of any party to insist on strict performance of any of the terms and conditions of this Agreement or to exercise any rights or remedies hereunder shall not constitute a waiver of any such provisions, rights or remedies.  This Agreement may be executed in counterparts, which shall, singly or in the aggregate, constitute a fully executed and binding Agreement.  Words of gender used in this Agreement may be read as masculine, feminine or

 

4



 

neuter as required by the context.  Words of number may be read as singular or plural, as required by the context.  The word “include” and derivatives of that word are used in this Agreement in an illustrative sense rather than a limiting sense.  The word “or” is not exclusive and shall be interpreted as meaning “and/or.”  The words “shall” and “will” are used interchangeably and are intended to have the same meaning.  Where applicable, this Agreement may be referred to as “this Lease.”

 

16.                                Except as otherwise set forth in Section 4, all communications and notices provided for herein shall be in writing and shall become effective when delivered by facsimile transmission or by personal delivery, Federal Express or other overnight courier or four days following deposit in the United States mail, with correct postage for first-class mail prepaid, addressed to Lessor or Lessee at their respective addresses set forth above, or else as otherwise directed by the other party from time to time in writing.

 

17.                                If any one or more provisions of this Agreement shall be held invalid, illegal or unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provisions shall be replaced by a mutually acceptable provision, which, being valid, legal and enforceable, comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision.  To the extent permitted by applicable law, the parties hereby waive any provision of law, that renders any provision of this Agreement prohibited or unenforceable in any respect.

 

18.                                This Agreement is entered into under, and is to be construed in accordance with, the laws of the State of Colorado, without reference to conflicts of laws.

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

5



 

19.                                TRUTH IN LEASING STATEMENT UNDER FAR SECTION 91.23

 

THE AIRCRAFT, A DASSAULT FALCON 7X, MANUFACTURER’S SERIAL NO. 262, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS N770LM, EITHER HAS BEEN DELIVERED FROM ITS MANUFACTURER OR HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTH PERIOD PRECEDING THE DATE OF THIS LEASE.

 

THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE.  DURING THE DURATION OF THIS LEASE, LIBERTY MEDIA CORPORATION, 12300 LIBERTY BOULEVARD, ENGLEWOOD, COLORADO 80112 IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE.

 

AN EXPLANATION OF THE FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE.

 

THE “INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASING REQUIREMENTS” ATTACHED HERETO ARE INCORPORATED HEREIN BY REFERENCE.

 

LIBERTY MEDIA CORPORATION, LOCATED AT 12300 LIBERTY BOULEVARD, ENGLEWOOD, COLORADO 80112, THROUGH ITS UNDERSIGNED AUTHORIZED SIGNATORY BELOW, CERTIFIES THAT LESSOR IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT AND THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.

 

IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the date first above written.

 

LESSOR

LESSEE

 

 

LIBERTY MEDIA CORPORATION

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

 

 

By:

 

 

By:

 

 

 

 

 

 

Name:

Craig Troyer

 

Name:

 

 

 

 

 

 

Title:

Vice President

 

Title:

 

 



 

INSTRUCTIONS FOR COMPLIANCE WITH “TRUTH IN LEASING” REQUIREMENTS

 

1.                                       Mail a copy of the lease to the following address via certified mail, return receipt requested, immediately upon execution of the lease (14 C.F.R. 91.23 requires that the copy be sent within 24 hours after it is signed):

 

Federal Aviation Administration

Aircraft Registration Branch

ATTN:  Technical Section

P.O. Box 25724

Oklahoma City, Oklahoma  73125

 

2.                                       Telephone the nearest Flight Standards District Office at least 48 hours prior to the first flight under this lease.

 

3.                                       Carry a copy of the lease in the aircraft at all times.

 




Exhibit 10.11

 

AGREED FORM

 

ASSIGNMENT AND ASSUMPTION OF STOCKHOLDERS AGREEMENT

 

This Assignment and Assumption of Stockholders Agreement (this “ Assignment ”) is made as of [ · ] by and among Liberty Expedia Holdings, Inc., a Delaware corporation (“ Splitco ”), LEXE Marginco, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Splitco (“ Marginco ”), LEXEB, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Splitco (“ LEXEB ”, and together with Splitco and Marginco, the “ Assignees ”), Liberty Interactive Corporation, a Delaware corporation (“ Liberty ”), and Barry Diller, an individual (“ Diller ”).  Capitalized terms used and not otherwise defined herein have the meanings given such terms in the Stockholders Agreement (as defined below).

 

W I T N E S S E T H :

 

WHEREAS, Diller and Liberty are parties to that certain Amended and Restated Stockholders Agreement, dated as of December 20, 2011 (the “ Stockholders Agreement ”), and Diller, Liberty and Expedia, Inc., a Delaware corporation (“ Expedia ”), are parties to that certain Amended and Restated Governance Agreement, dated as of December 20, 2011 (the “ Governance Agreement ”);

 

WHEREAS, Liberty has determined to engage in the Split-Off (as defined in the Transaction Agreement, dated as of March 24, 2016, as amended and restated as of September 22, 2016, and as may be further amended in accordance with the terms thereof, by and among Liberty, Splitco, Diller, John C. Malone, an individual, and Leslie Malone, an individual (the “ Transaction Agreement ”)) which Liberty has represented will constitute a Distribution Transaction involving a Qualified Distribution Transferee (as such terms are defined in the Governance Agreement);

 

WHEREAS, the parties desire, in accordance with Section 5.1 of the Stockholders Agreement, to effect the assignment by Liberty and assumption by Splitco of Liberty’s rights, benefits and obligations under the Stockholders Agreement in connection with the Split-Off and to provide for the other Assignees to become parties to the Stockholders Agreement as so assigned;

 

WHEREAS, on or prior to the date hereof, Liberty and Diller will execute a letter agreement in the form of Exhibit A to the Stockholders Agreement; and

 

WHEREAS, on or prior to the date hereof, pursuant to Section 5.01(b)(ii) of the Governance Agreement, the Executive Committee of the Board of Expedia has adopted the resolution set forth on Exhibit J to the Transaction Agreement.

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.              Representations and Warranties of Diller .  Diller represents and warrants to Liberty and Assignees that:

 



 

a.              he has the power and authority to enter into this Assignment and to carry out his obligations hereunder and under the Stockholders Agreement;

 

b.              the execution, delivery and performance of this Assignment by Diller has been duly authorized by all necessary action on the part of Diller and no other actions on the part of Diller are necessary to authorize this Assignment or the matters contemplated hereby or by the Stockholders Agreement;

 

c.              this Assignment has been duly executed and delivered by Diller and constitutes a valid and binding obligation of Diller, and, assuming this Assignment constitutes a valid and binding obligation of Liberty and Assignees, is enforceable against Diller in accordance with its terms; and

 

d.              the execution and delivery of this Assignment by Diller, and the performance of his obligations hereunder and under the Stockholders Agreement, do not constitute a breach or violation of, or conflict with, any material agreement to which Diller is a party.

 

2.              Representations and Warranties of Liberty .  Liberty represents and warrants to Diller that:

 

a.              Liberty is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to enter into this Assignment and to carry out its obligations hereunder and under the Stockholders Agreement;

 

b.              the execution, delivery and performance of this Assignment by Liberty has been duly authorized by all necessary corporate action on the part of Liberty and no other corporate proceedings on the part of Liberty are necessary to authorize this Assignment or the matters contemplated hereby or by the Stockholders Agreement;

 

c.              this Assignment has been duly executed and delivered by Liberty and constitutes a valid and binding obligation of Liberty, and, assuming this Assignment constitutes a valid and binding obligation of Diller, is enforceable against Liberty in accordance with its terms;

 

d.              the execution and delivery of the Assignment by Liberty and the performance of its obligations hereunder and under the Stockholders Agreement, do not constitute a breach or violation of, or conflict with, Liberty’s restated certificate of incorporation, as amended, or amended and restated bylaws;

 

e.              this Assignment is being entered into in connection with the Split-Off, which constitutes a Distribution Transaction involving Splitco, the Liberty Splitco and Qualified Distribution Transferee, and its wholly-owned subsidiaries LEXEB and Marginco, pursuant to Section 5.01 of the Governance Agreement; and

 

2



 

f.              in connection with the Split-Off, Liberty has contributed all Company Common Shares Beneficially Owned by it to Splitco, which has in turn contributed such shares to Marginco and LEXEB.

 

3.              Representations and Warranties of Assignees and Liberty .  Assignees and Liberty each represent and warrant to Diller that:

 

a.              each Assignee is duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate or other power and authority to enter into this Assignment and to carry out its obligations hereunder and, following the Split-Off, under the Stockholders Agreement;

 

b.              the execution, delivery and performance of this Assignment by each Assignee has been duly authorized by all necessary corporate or other action on the part of each Assignee and no other corporate proceedings on the part of any Assignee are necessary to authorize this Assignment or the matters contemplated hereby or by the Stockholders Agreement;

 

c.              this Assignment has been duly executed and delivered by each Assignee and constitutes a valid and binding obligation of each Assignee, and, assuming this Assignment constitutes a valid and binding obligation of Diller, is enforceable against each Assignee in accordance with its terms; and

 

d.              the execution and delivery of this Assignment by Assignees, and, following the Split-Off, the performance by the Assignees of their obligations hereunder and under the Stockholders Agreement, do not constitute a breach or violation of, or conflict with, any Assignee’s organizational documents.

 

4.              Assignment and Assumption, Certain Acknowledgements and Agreements .

 

a.              Effective immediately prior to the Split-Off (but subject to the consummation of the Split-Off):

 

i.       Liberty assigns all of its and the Liberty Stockholder Group’s rights and obligations under the Stockholders Agreement to Splitco;

 

ii.      Splitco accepts such assignment of rights hereunder and assumes and agrees to perform all liabilities and obligations of Liberty and the Liberty Stockholder Group under the Stockholders Agreement to be performed following the effective time of the Split-Off, including the obligation to ensure the compliance of the Splitco Stockholder Group with all obligations of the Liberty Stockholder Group under the Stockholders Agreement;

 

iii.     Splitco is substituted for Liberty as “Splitco” (and the stockholder group of Splitco is substituted for the Liberty Stockholder Group) for all purposes under the Stockholders Agreement and upon the

 

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Split-Off, all references in the Stockholders Agreement to “Liberty” will be deemed to refer to Splitco, and references to the “Liberty Stockholder Group” will be deemed to refer to the “Splitco Stockholder Group,” meaning the stockholder group composed of those Subsidiaries of Splitco, that, from time to time, hold Equity of Expedia; and

 

iv.     Marginco and LEXEB acknowledge and agree that they are members of the Splitco Stockholder Group at the effective time of the Split-Off.

 

b.              Liberty acknowledges that it shall not be entitled to any benefits under the Stockholders Agreement following the Split-Off.

 

c.              In connection with the Transfer of Common Shares to Marginco and LEXEB in connection with the Split-Off, Liberty and Diller will execute a letter agreement in the form of Exhibit A to the Stockholders Agreement.

 

d.              The parties hereto agree that Section 4.1(a)(vi) of the Stockholders Agreement shall hereby be amended and restated in its entirety to read as follows:

 

“(vi) a pledge or grant of a security interest in Common Stock to secure bona fide indebtedness and any related Transfers of Common Stock including to a secured party at a foreclosure sale or similar liquidation sale or by deed, transfer, assignment or other conveyance in-lieu of foreclosure or otherwise in connection with the enforcement of any such lien on, pledge of or security interest in the Common Stock (any such event, a “ Foreclosure Event ”) and provided that the terms of such indebtedness and security interest shall permit the Splitco Stockholder Group to exercise voting rights and to take consensual action with respect to the Common Stock so securing such indebtedness prior to a Foreclosure Event, and”

 

e.              Pursuant to Section 6.12 of the Stockholders Agreement, effective upon the completion of the Split-Off, the address for all notices, requests and other communications to Assignees pursuant to the Stockholders Agreement will be:

 

Liberty Expedia Holdings, Inc.

12300 Liberty Boulevard

Englewood, CO 80112

Attention: Richard N. Baer, Chief Legal Officer

Facsimile:

 

5.              Miscellaneous .

 

a.              From and after the execution and delivery of this Assignment, the Stockholders Agreement shall be deemed to be assigned and assumed as herein provided (it being understood that no assignment, assumption or substitution hereunder shall be effective until immediately prior to the Split-Off (and subject to the consummation of the Split-Off)), and

 

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the Stockholders Agreement shall continue in full force and effect and is hereby ratified and confirmed.

 

b.              This Assignment may be amended, modified and supplemented, and any of the provisions contained herein may be waived, only by a written instrument signed by the parties hereto or their successors and permitted assigns; provided , however , that following the Split-Off, Liberty’s execution of such amendment, modification or supplement will not be required for the effectiveness thereof, except to the extent such amendment, modification or supplement would have, or would reasonably be expected to have, an adverse effect upon Liberty.

 

c.              Neither this Assignment nor any of the rights, interests or obligations under this Assignment will be assigned, in whole or in part, by any party hereto without the prior written consent of the other parties hereto; provided , however , that following the Split-Off, Liberty’s consent will not be required for such assignment, except to the extent such assignment would have, or would reasonably be expected to have, an adverse effect upon Liberty.  Any purported assignment without such prior written consent will be void.  Subject to the preceding sentences, this Assignment will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.  This Assignment shall not confer any rights or remedies upon any Person other than the parties to this Assignment and their respective successors and permitted assigns.

 

d.              This Assignment sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior representations, agreements and understandings, written or oral, of any and every nature among them, other than as set forth in the Stockholders Agreement.

 

e.              This Assignment shall be governed by and construed in accordance with the Laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Law of any jurisdiction other than the State of Delaware.

 

f.              The headings in this Assignment are for convenience of reference only and shall not constitute a part of this Assignment, nor shall they affect its meaning, construction or effect.

 

g.              This Assignment may be executed via facsimile or .pdf and in any number of counterparts, each of which shall be deemed to be an original instrument and all of which together shall constitute one and the same instrument.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed by their respective authorized officers and made effective as of the day and year first above written.

 

 

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

LEXE MARGINCO, LLC

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

LEXEB, LLC

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

LIBERTY INTERACTIVE CORPORATION

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

BARRY DILLER

 

 

 

 

 

[Signature Page to Assignment and Assumption of Stockholders Agreement]

 




Exhibit 10.12

 

AGREED FORM

 

AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT

 

This Amendment No. 1 to Stockholders Agreement, dated as of [       ] , (this “ Amendment ”), is by and between Barry Diller (“ Diller ”), for himself and on behalf of the members of the Diller Stockholder Group, and Liberty Expedia Holdings, Inc., a Delaware corporation (“ Splitco ”), for itself and on behalf of the members of the Splitco Stockholder Group, and amends that certain Amended and Restated Stockholders Agreement, dated as of December 20, 2011 (the “ Original Stockholders Agreement ”), as amended by the Stockholders Agreement Assignment (as defined below) (the “ Assigned Stockholders Agreement ”).  Capitalized terms used but not defined herein have the meanings ascribed to such terms in the Assigned Stockholders Agreement.

 

WHEREAS, Liberty has determined to engage in the Split-Off (as defined in the Transaction Agreement) and has received the approval of the holders of Liberty Ventures Series A common stock, par value $0.01 per share, and Liberty Ventures Series B common stock, par value $0.01 per share, to redeem a portion of such shares in order to effect the Split-Off;

 

WHEREAS, in connection with the Split-Off, Liberty, Splitco, Diller, and the Malone Group have previously entered into a transaction agreement, dated as of March 24, 2016, as amended and restated as of September 22, 2016, and as may be further amended in accordance with the terms thereof (the “ Transaction Agreement ”), pursuant to which the parties thereto agreed to enter into or effect the Transaction Instruments in connection with the Split-Off and the other matters contemplated by the Transaction Agreement.

 

WHEREAS, in connection with and subject to the completion of the Split-Off, and in accordance with the terms of the Transaction Agreement, immediately prior to the execution of this Amendment, (i) Diller, Splitco and Liberty entered into an Assignment and Assumption of Governance Agreement with the Company (the “ Governance Agreement Assignment ”), pursuant to which, in accordance with Section 5.01 of the Amended and Restated Governance Agreement, dated as of December 20, 2011 (the “ Governance Agreement ”), all rights and obligations of Liberty under the Governance Agreement, were assigned to Splitco and Splitco assumed such rights and obligations and (ii) Liberty, Diller and Splitco entered into an Assignment and Assumption of Stockholders Agreement (the “ Stockholders Agreement Assignment ”), pursuant to which, in accordance with Section 5.1 of the Stockholders Agreement, all rights and obligations of Liberty under the Stockholders Agreement were assigned to Splitco and Splitco assumed such rights and obligations.

 

WHEREAS, in connection with and subject to the completion of the Split-Off, and in accordance with the terms of the Transaction Agreement, immediately prior to the execution of this Amendment, (i) Diller, John C. Malone (“ Malone ”) and Leslie Malone (“ Mrs. Malone ” and together with Malone, the “ Malone Group ”) will enter into a Proxy and Voting Agreement (the “ Malone Proxy ”), pursuant to which the Malone Group will grant an irrevocable proxy to Diller to vote, subject to certain limitations, all Covered Shares (as defined therein), and (ii) Diller and Splitco will enter into an Assignment Agreement (the “ Diller Assignment ”) pursuant to which Diller will until the Proxy Swap Termination Date irrevocably assign to Splitco the Liberty Proxy (as defined in the Original Stockholders Agreement) (as assigned to and assumed by Splitco pursuant to the Stockholders Agreement Assignment); and

 

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WHEREAS, Splitco and Diller are entering into this Amendment to provide for certain waivers under the Stockholders Agreement and agreements relating to the voting of Common Shares beneficially owned by such parties or with respect to which they have the power to vote.

 

NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.              CERTAIN DEFINITIONS .

 

As used in this Amendment, the following terms have the respective meanings set forth below, and, to the extent any such term has not heretofore been defined in Section 1.1 of the Assigned Stockholders Agreement, then Section 1.1 of the Assigned Stockholders Agreement is deemed amended by adding such terms in their respective alphabetical order position, or, in the event any such term is already defined in Section 1.1 of the Assigned Stockholders Agreement, then the meaning of such term is amended and restated as follows, with such amendments and deemed amendments to be applicable only during the Assignment Period in accordance with Section 6 of this 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 affiliated to the specified Person. For purposes of this definition, (i) natural persons shall not be deemed to be Affiliates of each other, (ii) no member of the Malone Group shall be deemed to be an Affiliate of Liberty, Splitco, the Company or Diller, (iii) none of Liberty, Splitco, the Company or Diller shall be deemed to be an Affiliate of any of such other persons, (iv) none of Liberty Media Corporation, Liberty Broadband Corporation, Liberty TripAdvisor Holdings, Inc., Discovery Communications Inc., Starz, CommerceHub, Inc. or Liberty Global plc and, following the Split-Off, Liberty, shall be deemed to be an Affiliate of Splitco or any member of the Malone Group and (v) IAC/InterActiveCorp shall not be deemed to be an Affiliate of the Company or Diller.

 

Amendment ” has the meaning set forth in the Preamble.

 

Assigned Stockholders Agreement ” has the meaning set forth in the Preamble.

 

Assignment Period ” means the period from the Effective Time to the Proxy Swap Termination Date.

 

Certificate ” means the Amended and Restated Certificate of Incorporation of Splitco, as in effect at the Effective Time (as the same may be amended from time to time).

 

Chairman Termination Date ” means the later of (i) such time as Diller no longer serves as Chairman and (ii) such time as Diller no longer holds the Splitco Proxy (other than suspension of such proxy pursuant to Section 3.3(e) of the Assigned Stockholders Agreement or pursuant to the terms of the Diller Assignment).

 

Diller ” has the meaning set forth in the Preamble.

 

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Diller Assignment ” has the meaning set forth in the Recitals.

 

Effective Time ” has the meaning set forth in the Transaction Agreement.

 

Expedia Reimbursement Agreement ” has the meaning set forth in the Transaction Agreement.

 

Interim Amendments ” means the amendments to the Assigned Stockholders Agreement set forth in Sections 1 and 2 of this Amendment.

 

Governance Agreement ” has the meaning set forth in the Recitals.

 

Governance Agreement Assignment ” has the meaning set forth in the Recitals.

 

Letter Agreement ” means that certain letter agreement from Diller to Liberty, to be delivered in connection with the Split-Off pursuant to the Stockholders Agreement.

 

Malone ” has the meaning set forth in the Recitals.

 

Malone Group ” has the meaning set forth in the Recitals.

 

Malone Proxy ” has the meaning set forth in the Recitals.

 

Mrs. Malone ” has the meaning set forth in the Recitals.

 

NASDAQ ” means The Nasdaq Global Select Market.

 

Original Stockholders Agreement ” has the meaning set forth in the Preamble.

 

Proxy Swap Certificate and Bylaw Provisions ” has the meaning assigned to it in the Transaction Agreement.

 

Proxy Swap Termination Date ” has the meaning assigned to it in the Transaction Agreement.

 

Specified Corporate Action ” means any of the following actions proposed for approval by the Company’s stockholders (whether by vote or written consent): (i) any recapitalization, reclassification or other change in the existing capital structure of the Company or the voluntary commencement of any liquidation, dissolution or winding up of the Company, (ii) any merger or other business combination involving the Company or its Subsidiaries (other than solely among Subsidiaries of the Company) or any sale of all or substantially all of the Company’s assets, (iii) the creation of any new class or series of the Company’s Capital Stock or the issuance (other than pursuant to options, warrants or other rights outstanding at the Effective Time) of Common Shares (including to the extent stockholder approval is required for NASDAQ purposes); (iv) any amendment to the Company’s certificate of incorporation or bylaws as then in effect; and (v) any removal of a Director from the Board (other than (x) the Splitco Directors elected pursuant to the Governance Agreement, as amended by the Governance Agreement Assignment, or (y) for Cause).

 

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Splitco ” has the meaning set forth in the Preamble.

 

Splitco Board ” means the board of directors of Splitco.

 

Splitco Bylaws ” means the amended and restated bylaws of Splitco as in effect at the Effective Time, as the same may be amended from time to time in compliance with the Certificate and such bylaws.

 

Splitco Director ” has the meaning set forth in the Governance Agreement, as amended by the Governance Agreement Assignment.

 

Split-Off ” has the meaning set forth in the Recitals.

 

Stockholders Agreement ” means the Original Stockholders Agreement, as amended by the Stockholders Agreement Assignment and as further amended by this Amendment.

 

Stockholders Agreement Assignment ” has the meaning set forth in the Recitals.

 

Subject Instruments ” means the Diller Assignment, the Malone Proxy, the Transaction Agreement, this Amendment and the Proxy Swap Certificate and Bylaw Provisions.

 

Subject Waivers ” has the meaning set forth in Section 3(a).

 

Transaction Agreement ” has the meaning set forth in the Recitals.

 

Transaction Instruments ” means this Amendment, the Certificate, the Splitco Bylaws, the Malone Proxy, the Diller Assignment, the Stockholders Agreement, the Stockholders Agreement Assignment, the Governance Agreement, the Governance Agreement Assignment, the Letter Agreement, the Transaction Agreement and the other agreements contemplated by the matters contemplated hereby and thereby.

 

2.              ADDITIONAL AMENDMENTS .

 

(a)            Subject to Section 6 of this Agreement and paragraph (d) of this Section 2, Section 3.1(a) of the Assigned Stockholders Agreement is amended and restated in its entirety to read as follows:

 

“(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, Splitco 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 or otherwise), (x) to vote against (and not act by written consent to approve) such Contingent Matter unless Splitco and Diller (or, if the consent of one but not both Stockholders is required pursuant to the Governance Agreement, the Stockholder whose consent is then required) have consented to such Contingent Matter in

 

4



 

accordance with the provisions of the Governance Agreement and, if applicable, this 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 Splitco and/or Diller (as applicable).”

 

(b)            Subject to Section 6 of this Agreement and paragraph (d) of this Section 2, Section 3.1(b) of the Assigned Stockholders Agreement is amended and restated in its entirety to read as follows:

 

“(b)          The Splitco Board will select those persons who are to serve as the Splitco Directors to stand for election to the Board pursuant to the Certificate.  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 or otherwise) in favor of each of the nominees for a Splitco Director as selected by the Splitco Board pursuant this Section 3.1(b) and which Splitco has a right to designate pursuant to the Governance Agreement, subject, however, to the terms of the Transaction Agreement.  With respect to any election of Directors by action of the stockholders of the Company, Splitco will vote (or refrain from voting), or act (or not act) by written consent with respect to, any Common Shares as to which it has the power to vote (whether by proxy or otherwise) as directed by the Splitco Board pursuant to the Certificate and in accordance with the Transaction Agreement.  Subject to the election of Diller as a Director, Splitco will use its reasonable best efforts to cause Diller to be elected and continue to serve as Chairman.  For the avoidance of doubt, Diller will not be deemed to be a Splitco Director for purposes of the Governance Agreement.”

 

(c)            Subject to Section 6 of this Agreement and paragraph (d) of this Section 2, Section 3.1 of the Assigned Stockholders Agreement is amended by adding the following subsections (e), (f), and (g) at the end thereof:

 

“(e)          Subject to Section 3.1(a), with respect to any matter to be presented for approval at any stockholders meeting of the Company, prior to any vote of the Company’s stockholders, Splitco and Diller (or their respective representatives) will meet and use their respective reasonable best efforts to agree on a common position for such matters to be presented for approval and, if they agree on such a common position, each Stockholder will vote all of its Common Shares (and any Common Shares with respect to which it has the power to vote (whether by proxy or otherwise)) as so agreed; provided , however , that notwithstanding the foregoing, with respect to any vote to elect Directors of the Company, Splitco will vote all Common Shares in accordance with Article V, Section C of the Certificate.  If Splitco and Diller are unable to agree on such a common position with respect to any matter other than a Specified Corporate Action, each may vote their respective Common Shares with respect to which it or he has the power to vote (whether by proxy or otherwise) as each may determine

 

5



 

in its or his sole discretion, subject to Section 3.1(a) and any restrictions set forth in the Governance Agreement or this Agreement.”

 

“(f)           Without Diller’s prior written consent, Splitco shall not execute any written consent in connection with any action proposed to be taken by written consent of the Company’s stockholders.”

 

“(g)          In the event a Specified Corporate Action is to be presented for approval by the Company’s stockholders at any meeting of the Company’s stockholders or pursuant to a written consent of the Company’s stockholders, unless Splitco and Diller agree pursuant to Section 3.1(e) (each in its sole discretion) as to the manner in which their respective Common Shares (and any Common Shares with respect to which it or he has the power to vote (whether by proxy or otherwise)) will be voted on any such Specified Corporate Action, then Splitco and Diller will vote all of their respective Common Shares (and any Common Shares with respect to which it or he has the power to vote (whether by proxy or otherwise)) against the approval of such Specified Corporate Action.  Notwithstanding the foregoing, with respect to any proposal to be presented for approval by the Company’s stockholders at any meeting of the Company’s stockholders regarding a merger, share exchange, tender offer or other business combination in which a third party, other than Splitco, an Affiliate of Diller or any Person in which Diller has a direct or indirect financial interest (including, for this purpose, IAC), is proposing to acquire the Company, any of its Subsidiaries or all or substantially all of its or their assets, if (x) Splitco and Diller are unable to agree as to how their respective Common Shares are to be voted pursuant to Section 3.1(e), (y) Diller has expressed in writing his intention to vote in favor of such transaction and he commits in writing to vote in favor of such transaction and (z) such transaction has been recommended by the Board (or a committee thereof), then Splitco will vote all of its Common Shares (and any Common Shares with respect to which it has the power to vote (whether by proxy or otherwise)) in favor of such transaction (or transaction agreement, if applicable); provided , that if the Splitco Board determines, by the affirmative vote of 70% or more of the entire Board (as defined in the Certificate) that Splitco should vote all such Common Shares against such transaction (or transaction agreement), then Splitco will vote all of its Common Shares (and any Common Shares with respect to which it has the power to vote (whether by proxy or otherwise)) against such transaction.”

 

(d)            (i) The amended and restated provisions referred to in paragraphs (a) and (b) of this Section 2 will be effective only during the Assignment Period and, upon the Interim Amendments ceasing to be effective in accordance with Section 6 hereof, the text of such provisions will revert back to the provisions as set forth in the Assigned Stockholders Agreement, and (ii) the additional provisions added to Section 3.1 of the Assigned Stockholders Agreement pursuant to paragraph (c) of this Section 2 will be effective only during the Assignment Period and, upon the Interim Amendments ceasing to be effective in accordance with Section 6 hereof, such provisions will be deleted and cease to have any force or effect after such time except as provided in such Section 6; provided , that all such amended and restated

 

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provisions and additional provisions shall be suspended during any period of deemed suspension of the Diller Assignment and the Malone Proxy described in clause (iv) of Section 15(b) of the Transaction Agreement.

 

3.              SUBJECT WAIVERS .

 

(a)            (1)            In order to permit the arrangements contemplated by the Subject Instruments, the parties to the Stockholders Agreement hereby waive the following requirements set forth in the Assigned Stockholders Agreement; provided , that , such waivers will be effective only with respect to actions taken or matters occurring during the Assignment Period (and upon the expiration of the Assignment Period, such waivers will cease to be of any force and effect with respect to actions taken or matters occurring after the Assignment Period):

 

(i)             the agreement to vote (and cause each member of its or his Stockholder Group to vote, if applicable), or act by written consent, pursuant to Section 3.1(b) of the Stockholders Agreement, but solely to comply with Section 3(d) of the Transaction Agreement and Article V, Section C of the Certificate;

 

(ii)            the requirements set forth in Section 3.2 of the Stockholders Agreement, prohibiting any stockholder agreements or arrangements of any kind with any Person with respect to any Equity, but solely with respect to any stockholder agreement or arrangement contemplated by the Subject Instruments;

 

(iii)           the termination provision relating to the Splitco Proxy set forth in Section 3.3(a)(x) of the Stockholders Agreement (and the reference thereto in the lead-in to Section 3.3(c) of the Stockholders Agreement), other than if Diller ceases to be Chairman as a result of his death, Disability (but subject to the proviso to Section 3.3(a) of the Stockholders Agreement) or his volitional failure to stand for election;

 

(iv)           the termination provisions relating to the Splitco Proxy set forth in Section 3.3(c)(i) of the Stockholders Agreement, (i)  to the extent any action taken (or failure to take action) by Diller pursuant to the Subject Instruments would constitute a material breach by Diller of Section 3.1(a), Section 3.1(b), Section 3.1(c) or Section 3.3(b) of the Stockholders Agreement and (ii) to the extent any action taken (or failure to take action) by Splitco, whether or not pursuant to the Subject Agreements, would constitute a material breach by Diller of Section 3.1(a), Section 3.1(b), Section 3.1(c) or Section 3.3(b) of the Stockholders Agreement;

 

(v)            the prohibition on assignment of the Splitco Proxy set forth in Section 3.3(d) of the Stockholders Agreement to the extent the Diller Assignment is or would constitute a prohibited assignment thereunder; and

 

(vi)           the representations and warranties of each party set forth in Section 6.1 of the Stockholders Agreement, but solely to the extent contemplated by the Subject Instruments.

 

(2)            In addition, in the event that during the Assignment Period Diller ceases to be Chairman as a result of (x) his failure to be elected to the Board at any meeting of

 

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stockholders of the Company at which directors are to be elected or (y) if so elected or if otherwise serving on the Board, he is (i) subsequently removed as a Director or as Chairman other than for Cause or (ii) not elected to serve as Chairman (other than, in all such cases, as a result of his death or Disability), then the Splitco Proxy will not be terminated upon the expiration or termination of the Assignment Period as a result of Diller ceasing to be Chairman in the circumstances referred to in clauses (x) or (y) above, but will instead terminate upon the first to occur of (A) such time following the Proxy Swap Termination Date as Diller has abandoned efforts to become Chairman (but in no event earlier than the 30 th  day following the date on which Splitco has provided notice to Diller of its intention to terminate the Splitco Proxy, which notice shall not be given prior to the Proxy Swap Termination Date), (B) the close of business on the 75 th  day following the Proxy Swap Termination Date, provided that in the event any lawsuit or other proceeding or action shall have been instituted which delays, enjoins, interferes with or prevents Diller from exercising such efforts, such period shall be tolled during the pendency of any such lawsuit or other proceeding and (C) any court or other governmental agency rendering a final judgment (not subject to further appeal) in any lawsuit or other proceeding referred to in clause (B) above, the effect of which is to enjoin or prevent Diller from exercising such efforts or otherwise becoming Chairman.

 

The waivers set forth in clauses (i), (ii), (iii), (iv), (v) and (vi) of this Section 3(a)(1) and in this Section 3(a)(2)  are referred to as the “ Subject Waivers .”

 

(b)            For the avoidance of doubt, the foregoing Subject Waivers will not affect any other provision of the Stockholders Agreement, and such other provisions will continue in full force and effect, in accordance with their respective terms, including (i) the termination of the Splitco Proxy in accordance with its terms pursuant to the Stockholders Agreement (other than as expressly contemplated by the Subject Waivers), (ii) the continuation of the Splitco Proxy in accordance with Section 3.3(a) of the Stockholders Agreement in the event Diller is removed by the Board as Chairman other than for Cause, (iii) the suspension and reinstatement of the Splitco Proxy pursuant to Section 3.3(e) of the Stockholders Agreement and (iv) the restrictions on Transfers of shares of Class B Common Stock, the right of first refusal and the exchange right set forth in Article IV of the Stockholders Agreement.

 

(c)            The parties hereby acknowledge and agree that the Subject Waivers serve as valid waivers by the applicable parties with respect to the requirements expressly waived herein, and this Section 3 fully complies with the terms and conditions of the Stockholders Agreement with respect to the waiver of such requirements expressly waived herein, including Section 6.4 thereof.

 

4.              REPRESENTATIONS AND WARRANTIES OF SPLITCO .  Splitco hereby represents and warrants to Diller that (a) it is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and it has the corporate power and authority to enter into this Amendment and to carry out its obligations hereunder, (b) the execution and delivery of this Amendment by Splitco have been duly authorized by all necessary action on the part of Splitco and no other proceedings on the part of Splitco are necessary to authorize this Amendment, (c) this Amendment has been duly executed and delivered by Splitco

 

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and constitutes a valid and binding obligation of Splitco, and, assuming this Amendment constitutes a valid and binding obligation of Diller, is enforceable against Splitco in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity), (d) neither the execution, delivery or performance of this Amendment by Splitco constitutes a breach or violation of conflicts with its Certificate or by-laws (or similar governing documents) or any material agreement to which Splitco is a party and (e) none of such material agreements would impair in any material respect the ability of Splitco to perform its obligations hereunder.

 

5.              REPRESENTATIONS AND WARRANTIES OF DILLER . Diller hereby represents and warrants to Splitco that (a) Diller has the power and authority to enter into this Amendment and to carry out his obligations hereunder, (b) the execution and delivery of this Amendment by Diller have been duly authorized by all necessary action on the part of Diller and no other proceedings on the part of Diller are necessary to authorize this Amendment, (c) this Amendment has been duly executed and delivered by Diller and constitutes a valid and binding obligation of Diller, and, assuming this Amendment constitutes a valid and binding obligation of Splitco, is enforceable against Diller in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity), (d) neither the execution, delivery or performance of this Amendment by Diller constitutes a breach or violation of or conflicts with any material agreement to which Diller is a party and (e) none of such material agreements would impair in any material respect the ability of Diller to perform his obligations hereunder.

 

6.              EFFECTIVENESS OF AMENDMENTS .  The Interim Amendments will by their terms cease to be effective upon the Proxy Swap Termination Date and, thereafter, shall be of no further force and effect and their effectiveness shall be suspended during any period of deemed suspension of the Diller Assignment and/or the Malone Proxy described in clause (iv) of Section 15(b) of the Transaction Agreement.  No party hereto will be relieved from any liability for breach of an Interim Amendment occurring prior to the Proxy Swap Termination Date or prior to the end of any such period of suspension by reason of such provision ceasing to be effective at such time or having been suspended, as the case may be.  Following the Proxy Swap Termination Date, the Assigned Stockholders Agreement shall continue in full force and effect.

 

7.              MISCELLANEOUS .

 

(a)            Assigned Stockholders Agreement in Effect .  Other than as specified in this Amendment, the terms of the Assigned Stockholders Agreement are unmodified and remain in full force and effect and will continue to govern the relationship between Diller and Splitco as to the other matters contained therein.  This Amendment, together with the Assigned Stockholders Agreement, shall constitute one and the same agreement.

 

(b)            Remedies .  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 Amendment 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

 

9



 

hereof.  All rights, powers and remedies provided under this Amendment or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.  In the event that a party institutes any suit or action under this Amendment, including for specific performance or injunctive relief pursuant to this Section 7, the prevailing party in such proceeding shall be entitled to receive the costs incurred thereby in conducting the suit or action, including reasonable fees and expenses of counsel, accountants, consultants and other experts.

 

(c)            Conflicts .  In the event of a conflict between the terms of this Amendment and the Assigned Stockholders Agreement, the provisions of this Amendment will control and the relevant provisions of the Assigned Stockholders Agreement will be deemed to be suspended, in each case until the Proxy Swap Termination Date.

 

(d)            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 matters contemplated hereby and to otherwise carry out the intent of the parties hereunder.

 

(e)            Expenses .  Except as otherwise provided in any Transaction Instrument, all costs and expenses incurred in connection with the matters contemplated by this Amendment shall be paid by the party incurring such costs and expenses.

 

(f)             Governing Law ; Jurisdiction and Venue .  This Amendment 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. The parties hereto hereby irrevocably submit to the jurisdiction of the Delaware Court of Chancery or, in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware in respect of the interpretation and enforcement of the provisions of this Amendment and of the documents referred to in this Amendment, and in respect of the matters contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in the Delaware Court of Chancery, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware, or that this Amendment or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined exclusively in the Delaware Court of Chancery, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware. The parties hereto hereby consent to and grant the Delaware Court of Chancery, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, the United States District Court for the District of Delaware, jurisdiction over the person of such parties and, to the extent permitted by Law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided herein or in such other

 

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manner as may be permitted by Law shall be valid and sufficient service thereof. 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 PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE MATTERS CONTEMPLATED HEREBY.

 

(g)            Assignment; Successors .  Except as otherwise provided herein, neither this Amendment nor any of the rights or obligations under this Amendment shall be assigned, in whole or in part (except by operation of law pursuant to a merger that gives rise to a right of Diller to terminate the Transaction Agreement pursuant to Section 15(b) thereof which right he fails to exercise pursuant to the terms of Section 15(b) thereof (or pursuant to a merger which would terminate the Transaction Agreement pursuant to Section 15(b) thereof which termination Diller has waived)), by any party without the prior written consent of the other party hereto. Subject to the foregoing, this Amendment shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns.

 

(h)            Descriptive Headings .  Headings of Sections and subsections of this Amendment are for convenience of the parties only, and shall be given no substantive or interpretive effect whatsoever.

 

(j)             Entire Agreement; No Third-Party Beneficiaries .  Except as otherwise expressly set forth herein or therein, (i) this Amendment and (ii) the other Transaction Instruments and the Expedia Reimbursement Agreement, including any exhibits and schedules thereto, 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.

 

(k)            Notices .  Any notices or other communications required or permitted under, or otherwise in connection with this Amendment, shall be in writing and shall be deemed to have been duly given (A) when delivered in person, (B) upon transmission by electronic mail or facsimile transmission as evidenced by confirmation of transmission to the sender (but only if followed by transmittal of a copy thereof by (x) national overnight courier or (y) hand delivery with receipt, in each case, for delivery by the second (2 nd ) Business Day following such electronic mail or facsimile transmission), (C) on receipt after dispatch by registered or certified mail, postage prepaid and addressed, or (D) on the next Business Day if transmitted by national overnight courier, in each case as set forth to the parties as set forth below:

 

If to Splitco, to:

 

Liberty Expedia Holdings, Inc.
12300 Liberty Boulevard

Englewood, CO 80112
Facsimile:

Attention:       Richard N. Baer
E-Mail:

 

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with a copy (which shall not constitute notice) to:

 

Baker Botts L.L.P.

30 Rockefeller Plaza

New York, New York 10112

Facsimile: (212) 259-2500

Attention:       Frederick H. McGrath

Renee L. Wilm

E-Mail:           frederick.mcgrath@bakerbotts.com

renee.wilm@bakerbotts.com

 

If to Diller, to:

 

c/o Arrow Investments, Inc.

555 West 18th Street

New York, NY 10011

Attention:       Barry Diller

Facsimile:

E-mail:

 

with a copy (which shall not constitute notice) to:

 

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, NY 10019

Attention:       Andrew J. Nussbaum, Esq.

Facsimile:       (212) 403-2000

E-mail:            AJNussbaum@wlrk.com

 

or such other address, email address or facsimile number as such party may hereafter specify by like notice to the other parties hereto.

 

(l)             Severability .  Whenever possible, each provision (or portion thereof) of this Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision (or portion thereof) of this Amendment is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, then (subject to Section 6 hereof, insofar as a finding of invalidity or unenforceability of a Subject Instrument gives rise to the Proxy Swap Termination Date) such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Amendment shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

(m)           Amendments and Waivers .  This Amendment 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 Amendment 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 Amendment in accordance with its terms.

 

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(n)            No Implied Waivers .  No action taken pursuant to this Amendment, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein or made pursuant hereto.  The waiver by any party hereto of a breach of any provision of this Amendment shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by any party to exercise any right or privilege hereunder shall be deemed a waiver of such party’s rights or privileges hereunder or shall be deemed a waiver of such party’s rights to exercise the same at any subsequent time or times hereunder.

 

(o)            Interpretation .  When a reference is made in this Amendment to a Section, such reference shall be to a Section of this Amendment unless otherwise indicated.  The headings contained in this Amendment are for reference purposes only and shall not affect in any way the meaning or interpretation of this Amendment.  Whenever the words “include”, “includes” or “including” are used in this Amendment, they shall be deemed to be followed by the words “without limitation”.  The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Amendment shall refer to this Amendment as a whole and not to any particular provision of this Amendment.  In the event of any ambiguity or claimed ambiguity in any provision of a Subject Instrument, such provision shall be construed in light of the purpose acknowledged and agreed by the parties that Diller’s rights and interests, including without limitation with respect to the control of the Company by virtue of the proxy granted to Diller pursuant to Section 3.3 of the Assigned Stockholders Agreement, shall not be affected or changed by any of the Subject Instruments, except to the extent clearly and unequivocally set forth therein.

 

(p)            Counterparts .  This Amendment 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.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each of the undersigned has executed this Amendment as of the date first above written.

 

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

Barry Diller

 

[Signature Page to Amendment No. 1 to Stockholders Agreement]

 




Exhibit 10.13

 

EXECUTION VERSION

 

AMENDED AND RESTATED TRANSACTION AGREEMENT

 

This Amended and Restated Transaction Agreement (this “ Agreement ”), dated as of September 22, 2016, is entered into by and among Liberty Interactive Corporation, a Delaware corporation (“ Liberty ”), Liberty Expedia Holdings, Inc., a Delaware corporation and wholly owned subsidiary of Liberty (“ Splitco ”), Barry Diller, an individual (“ Diller ”), John C. Malone, an individual (“ Malone ”), and Leslie Malone, an individual (“ Mrs. Malone ” and together with Malone, the “ Malone Group ”) and amends and restates in its entirety that certain Transaction Agreement, dated as of March 24, 2016 (the “ Original Transaction Agreement ”), entered into by and among Liberty, Splitco, Diller and the Malone Group.

 

RECITALS

 

WHEREAS, Liberty beneficially owns an aggregate of 10,807,026 shares (“ Liberty Expe Common Shares ”) of common stock, par value $0.0001 per share, of Expedia, Inc., a Delaware corporation (“ Expedia ,” which term will include any successor by merger, consolidation or other business combination), and 12,799,999 shares (“ Liberty Expe B Shares ” and together with the Liberty Expe Common Shares, the “ Liberty Expe Shares ”) of Class B Common Stock, par value $0.0001 per share, of Expedia;

 

WHEREAS, Liberty has determined, to effect the distribution of shares of Splitco Common Stock referenced in the Original Transaction Agreement through a redemption of shares of Liberty Ventures Stock in exchange for shares of the corresponding series of Splitco Common Stock rather than as a dividend of such shares of Splitco Common Stock as provided in the Original Transaction Agreement;

 

WHEREAS, pursuant to such determination and subject to the approval of the holders of shares of Liberty Ventures Stock, Liberty will redeem a portion of each share of Series A Liberty Ventures common stock and Series B Liberty Ventures common stock in exchange for a portion of a share of the corresponding series of Splitco Common Stock (the “ Split-Off ”), which Liberty has represented will constitute a Distribution Transaction involving a Qualified Distribution Transferee (as such terms are defined in the Governance Agreement);

 

WHEREAS, the parties to this Agreement have entered into the Original Transaction Agreement and desire to amend and restate the Original Transaction Agreement to reflect the terms of the Split-Off

 

WHEREAS, in connection with and subject to the completion of the Split-Off, and in accordance with the terms of this Agreement, (i) Diller, Splitco and Liberty will enter into an Assignment and Assumption of Governance Agreement with Expedia (the “ Governance Agreement Assignment ”), pursuant to which, in accordance with Section 5.01 of the Governance Agreement, among other things, all rights and obligations of Liberty under the Amended and Restated Governance Agreement, dated as of December 20, 2011 (the “ Governance Agreement ”), will be assigned to Splitco, Splitco will assume such rights and obligations and Expedia will consent to such assignment, (ii) Liberty, Diller and Splitco will enter into an Assignment and Assumption of Stockholders Agreement (the “ Stockholders Agreement Assignment ”), pursuant to which, in accordance with Section 5.1 of the Stockholders Agreement,

 



 

all rights and obligations of Liberty under the Amended and Restated Stockholders Agreement, dated as of December 20, 2011 (the “ Stockholders Agreement ”), will be assigned to Splitco, Splitco will assume such rights and obligations and Diller will consent to such assignment, (iii) Splitco and Diller will enter into an amendment to the Stockholders Agreement (the “ Stockholders Agreement Amendment ”) to provide for certain waivers under the Stockholders Agreement and agreements relating to the voting of shares of common stock of Expedia beneficially owned by such parties or with respect to which such parties have the power to vote, (iv) Diller and the Malone Group will enter into a Proxy and Voting Agreement (the “ Malone Proxy ”), pursuant to which the Malone Group will until the Proxy Swap Termination Date grant an irrevocable proxy to Diller to vote, subject to certain limitations, all Covered Shares (as defined therein), and (v) Diller and Splitco will enter into an Assignment Agreement (the “ Diller Assignment ”) pursuant to which Diller will until the Proxy Swap Termination Date irrevocably assign to Splitco the Liberty Proxy (as defined in the Stockholders Agreement as it will have been assigned to Splitco pursuant to the Stockholders Agreement Assignment);

 

WHEREAS, prior to the parties’ entry into this Agreement, the Executive Committee of the Expedia Board (as defined herein), on the recommendation of its Audit Committee, has duly adopted the resolutions set forth on Exhibit J hereto; and

 

WHEREAS, the parties are entering into this Agreement to set forth certain agreements in connection with the Split-Off and the other Transaction Instruments.

 

NOW, THEREFORE, the parties hereto hereby agree as follows:

 

1.      Definitions .  For purposes of this Agreement, the following terms will have the following meanings:

 

40 Act ” means the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.

 

40 Act Event ” means (i) a determination by Splitco to file an application to voluntarily register under the 40 Act or (ii) any action, event, change in law, change in composition of assets or other occurrence which in the reasonable opinion of Splitco’s outside counsel results or will result in Splitco becoming required to register as an investment company under the 40 Act; provided , that in making such determination pursuant to this clause (ii) any potential grace period between the date that Splitco determines that it is required to register as an investment company under the 40 Act (or the date the applicable Governmental Entity makes such a determination with respect to Splitco) and the date such registration becomes, or if earlier is required to become, effective under the 40 Act shall be disregarded.

 

Actions ” has the meaning set forth in Section 8(a).

 

Agreement ” has the meaning set forth in the Preamble.

 

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 affiliated to the specified Person. For purposes of this definition, (i) natural persons shall not be deemed to be

 

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Affiliates of each other, (ii) no member of the Malone Group shall be deemed to be an Affiliate of Liberty, Splitco, Expedia or Diller, (iii) none of Liberty, Splitco, Expedia or Diller shall be deemed to be an Affiliate of any of such other persons, (iv) none of Liberty Media Corporation, Liberty Broadband Corporation, Liberty TripAdvisor Holdings, Inc., Discovery Communications Inc., Starz, CommerceHub, Inc. or Liberty Global plc and, following the Split-Off, Liberty, shall be deemed to be an Affiliate of Splitco or any member of the Malone Group and (v) IAC/InterActiveCorp shall not be deemed to be an Affiliate of Expedia or Diller.

 

Amended Governance Agreement ” means the Governance Agreement, as amended by the Governance Agreement Assignment (as the same may be amended from time to time).

 

Amended Stockholders Agreement ” means the Stockholders Agreement, as amended by the Stockholders Agreement Assignment, and as further amended by the Stockholders Agreement Amendment (as the same may be amended from time to time).

 

beneficial owner ” and “ beneficial ownership ” have the meaning given such terms in Rule 13d-3 under the Exchange Act and a Person’s beneficial ownership of Capital Stock which is then entitled to vote generally in the election of directors 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 sixty (60) days or thereafter, upon the conversion, exchange or exercise of any warrants, options, rights or other securities issued by a Person, (ii) no Person shall be deemed to beneficially own any Equity solely as a result of such Person’s execution of any Transaction Instrument (including by virtue of holding a proxy with respect to any shares) or such Person’s filing of any reports, forms or schedules with the Securities and Exchange Commission in connection with any of the matters contemplated hereby or thereby and (iii) no member of the Malone Group will be deemed to beneficially own any Equity held by The Tracy M. Amonette Trust A (also known as the Tracy L. Neal Trust A) or The Evan D. Malone Trust A, unless and until a member of the Malone Group exercises its right of substitution and acquires such Equity from The Tracy M. Amonette Trust A (also known as the Tracy L. Neal Trust A) or The Evan D. Malone Trust A, respectively.

 

Business Day ” means 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.

 

Bylaws ” means the bylaws of Splitco, to be in effect at the Effective Time, as set forth in Exhibit B (as the same may be amended from time to time in compliance with the Certificate and such bylaws).

 

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.

 

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Capitalization Time ” has the meaning set forth in Section 14(a).

 

Certificate ” means the Amended and Restated Certificate of Incorporation of Splitco, to be in effect at the Effective Time, as set forth in Exhibit A (as the same may be amended from time to time).

 

Common Stock Director ” has the meaning ascribed to such term in the Certificate.

 

Common Stock Director Committee ” has the meaning set forth in Section 4(b).

 

Convertible Securities ” means (x) any securities of a Person that are convertible into or exercisable or exchangeable for any shares of any class or series of common stock of such Person or any other Person, whether upon conversion, exercise, or exchange, pursuant to antidilution provisions of such securities or otherwise (other than, for purposes of this Agreement, the Class B common stock of Expedia or the Splitco Series B Stock), and (y) any subscriptions, options, rights, warrants or calls (or any similar securities) or agreements or arrangements of any character, in each case to acquire common stock, preferred stock or other Capital Stock.

 

Covered Expenses ” means any amounts due to Expedia pursuant to the Expedia Reimbursement Agreement, subject to the limitations set forth therein.

 

Covered Shares ” has the meaning set forth in the Malone Proxy.

 

DGCL ” means the Delaware General Corporation Law.

 

Diller ” has the meaning set forth in the Preamble.

 

Diller Assignment ” has the meaning set forth in the Recitals.

 

Disabled ,” when used with reference to Malone, means a mental or physical disability arising following the date hereof that prevents Malone from (x) engaging reasonably with Diller, or instructing Diller, as to the matters contemplated by Section 2 of the Malone Proxy for a continuous period exceeding ninety (90) days or (y) from performing his duties as chairman of the Splitco Board for a continuous period exceeding ninety (90) days; with such disability to be determined for purposes of clauses (x) and (y) above by a physician selected by Diller and reasonably acceptable to Malone, his spouse or a personal representative designated by Malone.

 

Effective Time ” means the time at which Liberty effects the redemption of a portion of each outstanding share of Ventures Series A Stock and Ventures Series B Stock in exchange for the issuance of a portion of a share of the corresponding series of Splitco Common Stock in accordance with Section A.2(f)(i) of Liberty’s restated certificate of incorporation, as amended, thereby consummating the Split-Off.  In the event that Malone dies or has been determined to be Disabled prior to the completion of the Split-Off, Liberty will take such actions as are necessary to prevent the Effective Time from occurring prior to the earlier of the tenth (10 th ) Business Day following notice to Diller of Malone’s death or determination

 

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that he is Disabled and the date Diller affirmatively waives his right to terminate this Agreement pursuant to Section 15(a)(x).

 

Equity ” means any and all shares of Capital Stock of the applicable Person and Convertible Securities of such Person.

 

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

 

Expedia ” has the meaning set forth in the Recitals.

 

Expedia Board ” means the board of directors of Expedia.

 

Expedia Board Voting Determination ” has the meaning ascribed to such term in the Certificate.

 

Expedia Board Voting Determination Notice ” means written notice, delivered by Splitco to Diller in accordance with clause (A) or (B) of Section 16(j) of this Agreement, of (i) a resolution (including the text thereof) adopted by the Splitco Board with respect to an Expedia Board Voting Determination as contemplated by Article V, Section C of the Certificate, (ii) the failure by the Splitco Board to adopt a resolution with respect to an Expedia Board Voting Determination at a meeting of the Splitco Board at which an Expedia Board Voting Determination is to be considered or (iii) an adjournment of the meeting of the Splitco Board at which an Expedia Board Voting Determination is to be considered due to the absence of a quorum to act with respect to an Expedia Board Voting Determination.

 

Expedia Election Meeting ” has the meaning set forth in Section 3(d).

 

Expedia Reimbursement Agreement ” means that certain reimbursement agreement among Liberty, Splitco and Expedia, dated March 24, 2016, as amended and restated as of the date hereof, and as it may thereafter be amended in accordance with the terms thereof.

 

Expense Advance ” has the meaning set forth in Section 8(h).

 

Governance Agreement ” has the meaning set forth in the Recitals.

 

Governance Agreement Assignment ” has the meaning set forth in the Recitals.

 

Governmental Authority ” means any supranational, national, federal, state, county, municipal, local or foreign government, or other political subdivision thereof, or any arbitral body and any entity exercising executive, legislative, judicial, regulatory, taxing, administrative, prosecutorial or arbitral functions of or pertaining to government, provided that such term shall not include any stock exchange.

 

Group ” shall have the meaning assigned to it in Section 13(d)(3) of the Exchange Act.

 

Indemnifiable Claim ” has the meaning set forth in Section 8(d).

 

Indemnified Party ” has the meaning set forth in Section 8(a).

 

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Indemnifying Party ” has the meaning set forth in Section 8(a).

 

Independent Party ” means any Person other than Liberty or a Liberty Related Entity.

 

Letter Agreement ” means that certain letter agreement from Diller to Liberty, to be delivered in connection with the Split-Off pursuant to the last sentence of Section 5.1 of the Stockholders Agreement.

 

Liberty ” has the meaning set forth in the Preamble.

 

Liberty Expe B Shares ” has the meaning set forth in the Recitals.

 

Liberty Expe Common Shares ” has the meaning set forth in the Recitals.

 

Liberty Expe Shares ” has the meaning set forth in the Recitals.

 

Liberty Proxy ” has the meaning ascribed to such term in the Stockholders Agreement (where the context requires, as it will have been assigned to Splitco pursuant to the Stockholders Agreement Assignment).

 

Liberty Related Entity ” means any Person in which Malone beneficially owns Capital Stock representing at least 25% of the outstanding voting power of such Person.

 

Liberty Ventures Stock ” has the meaning set forth in Section 14(a).

 

Losses ” means any loss, liability, cost, damage or expense (including, without duplication, reasonable fees and expenses of counsel, accountants, consultants and other experts) related to an Action for which an Indemnified Party is entitled to indemnification pursuant to Section 8 of this Agreement; provided that (i) any diminution in value of the Capital Stock of Expedia or Splitco shall not constitute a Loss and (ii) Covered Expenses will not be included (directly or indirectly) in the definition of “Loss” for any purpose hereunder.

 

Malone ” has the meaning set forth in the Preamble.

 

Malone Group ” has the meaning set forth in the Preamble.

 

Malone Proxy ” has the meaning set forth in the Recitals.

 

Mrs. Malone ” has the meaning set forth in the Preamble.

 

Nasdaq ” means The Nasdaq Global Select Market.

 

Permitted Assigns ” means (i) in the event of the death of one or both of Malone and Mrs. Malone, his, her or their, as applicable, respective estate, executor or personal representative; provided , that in the event Mrs. Malone predeceases Malone, Malone (or a trust referred to and complying with clause (ii) below) will be deemed the exclusive Permitted Assign of Mrs. Malone, or (ii) following the death of Malone or Mrs. Malone, a trust of which the beneficiary is a member of the Malone Group; provided , that (x) any such trust shall have delivered to the other parties hereto a joinder to this Agreement agreeing to become a

 

6



 

member of the Malone Group and (y) Malone or Mrs. Malone will have the sole right to vote the Covered Shares held by such trust on any Excluded Matter (as defined in the Malone Proxy).

 

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.

 

Preferred Stock ” has the meaning set forth in Section 14(a).

 

Proxy Swap Certificate and Bylaw Provisions ” means (i) Sections A and B of Article IV, Sections A through E and Section G of Article V, Article VIII, and Article IX of the Certificate and (ii) Article I, Section 2.1 through 2.10 and Section 2.12 of Article II, Section 3.4 of Article III, and Sections 5.4, 5.5, 5.6 and 5.9 of Article V of the Bylaws.

 

Proxy Swap Termination Date ” has the meaning set forth in Section 15.

 

Proxy Voting Power ” means the percentage of the outstanding Voting Power of Splitco represented from time to time by the Covered Shares.

 

Recommended Slate ” has the meaning set forth in Section 4(d).

 

Removal Consent ” has the meaning set forth in Section 3(d).

 

Restriction ” has the meaning set forth in Section 15(b)(iv).

 

Series B Director ” has the meaning ascribed to such term in the Certificate.

 

Series B Director Committee ” has the meaning set forth in Section 4(b).

 

Splitco ” has the meaning set forth in the Preamble.

 

Splitco Board ” means the board of directors of Splitco.

 

Splitco Common Stock ” means the Splitco Series A Stock and the Splitco Series B Stock.

 

Splitco Proxy ” means the irrevocable proxy granted to Diller by Splitco, pursuant to Section 3.3 of the Stockholders Agreement (as assigned to Splitco pursuant to the Stockholders Agreement Assignment).

 

Splitco Series A Stock ” means Series A common stock, par value $0.01 per share, of Splitco and any securities of Splitco 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.

 

Splitco Series B Stock ” means Series B common stock, par value $0.01 per share, of Splitco and any securities of Splitco issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification,

 

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recapitalization, merger, consolidation, exchange or other similar reorganization (other than Splitco Series A Stock issued upon conversion of Splitco Series B Stock).

 

Split-Off ” has the meaning set forth in the Recitals.

 

Stockholder Approval ” has the meaning set forth in Section 13(a).

 

Stockholder Meeting ” has the meaning set forth in Section 13(a).

 

Stockholders Agreement ” has the meaning set forth in the Recitals.

 

Stockholders Agreement Amendment ” has the meaning set forth in the Recitals.

 

Stockholders Agreement Assignment ” has the meaning set forth in the Recitals.

 

Subject Instruments ” means the Diller Assignment, the Malone Proxy, this Agreement, the Stockholders Agreement Amendment and the Proxy Swap Certificate and Bylaw Provisions.

 

Temporary Disability ” (i) with respect to Malone, has the meaning set forth in the Malone Proxy and (ii) during any period during which Malone is suffering from a Temporary Disability, with respect to Mrs. Malone, means a mental or physical disability as determined in good faith by Diller preventing Mrs. Malone from voting Covered Shares or taking action by written consent with respect to Covered Shares on any Excluded Matter.

 

Third Party Indemnifiable Claim ” has the meaning set forth in Section 8(e).

 

Transaction Instruments ” means this Agreement, the Certificate, the Bylaws, the Diller Assignment, the Malone Proxy, the Governance Agreement, the Governance Agreement Assignment, the Stockholders Agreement, the Stockholders Agreement Assignment, the Stockholders Agreement Amendment, the Letter Agreement and the other agreements contemplated by the matters contemplated hereby and thereby.

 

Triggering Transaction ” has the meaning set forth in Section 15(b)(v).

 

Ventures Series A Stock ” has the meaning set forth in Section 14(a).

 

Ventures Series B Stock ” has the meaning set forth in Section 14(a).

 

Ventures Series C Stock ” has the meaning set forth in Section 14(a).

 

Voting Power ,” when used in reference to shares of Splitco Common Stock beneficially owned by any Person or Group, means the aggregate voting power of the shares of Splitco Series A Stock and Splitco Series B Stock beneficially owned by such Person or Group as a percentage of the aggregate voting power of the outstanding shares of Splitco Series A Stock and Splitco Series B Stock, in each case, which are entitled to vote on any matter prior to the Series B Director Termination Time on which the holders of Splitco Series A Stock and Splitco Series B Stock vote together as a single class, other than the election of directors of Splitco.

 

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2.      Transaction Instruments .

 

(a)            Unless this Agreement has been previously terminated, prior to the Effective Time Liberty will:

 

(i)             cause the Certificate of Incorporation of Splitco to be amended and restated substantially in the form of the Certificate as set forth in Exhibit A and to be filed with the Delaware Secretary of State; and

 

(ii)            cause the bylaws of Splitco to be amended and restated substantially in the form of the Bylaws as set forth in Exhibit B .

 

(b)            Diller acknowledges and agrees that the form of Certificate and Bylaws set forth in Exhibits A and B , respectively, are acceptable to him.

 

(c)            Unless this Agreement has been previously terminated, immediately prior to the Effective Time, subject to the completion of the Split-Off, the parties will enter into the agreements and instruments listed below, with the effectiveness of each, unless otherwise specified therein, to be at the Effective Time:

 

(i)             Diller and Splitco will enter into the Diller Assignment substantially in the form as set forth in Exhibit C ;

 

(ii)            Diller and the Malone Group will enter into the Malone Proxy substantially in the form as set forth in Exhibit D ;

 

(iii)           Liberty, Diller, and Splitco will enter into the Governance Agreement Assignment with Expedia substantially in the form as set forth in Exhibit E ;

 

(iv)           Liberty, Diller and Splitco will enter into the Stockholders Agreement Assignment substantially in the form as set forth in Exhibit F ;

 

(v)            Splitco and Diller will enter into the Stockholders Agreement Amendment substantially in the form as set forth in Exhibit G ; and

 

(vi)           Liberty and Diller will enter into the Letter Agreement substantially in the form as set forth in Exhibit H .

 

(d)            In the event this Agreement is terminated pursuant to Section 15(a) prior to the Effective Time, the covenants and acknowledgements set forth in subsections (a), (b) and (c) of this Section 2 will be void ab initio and of no further effect, and the Transaction Instruments specified in subsections (a) and (c) of this Section 2 (which for the avoidance of doubt, exclude the Governance Agreement and the Stockholders Agreement), to the extent already executed and delivered prior to such date, shall be void ab initio and of no further effect; provided , however , to the extent already filed with the Delaware Secretary of State and effective, the Certificate may thereafter be amended or restated in its entirety without regard to any requirement as to the contents of such Certificate set forth in any Transaction Instrument; and provided , further , that the consent of Liberty set forth in Section 12 of this Agreement shall be

 

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irrevocable upon the execution of this Agreement and shall not be so void or otherwise affected.  For the avoidance of doubt, in the event this Agreement is terminated pursuant to Section 15(a) prior to the Effective Time, the obligations of each of the parties thereto under each of the Governance Agreement and Stockholders Agreement, including with respect to any future proposed Distribution Transaction, will remain in full force and effect in accordance with their terms.

 

3.      Splitco Board Matters and Undertakings .

 

(a)            Splitco represents and warrants to Diller and the Malone Group that, prior to the date hereof, and prior to the existence of any agreement, arrangement or understanding among the parties hereto for the purpose of acquiring, holding, voting or disposing of any shares of Splitco Common Stock, and prior to the execution of the Original Transaction Agreement, the Splitco Board adopted the resolutions set forth on Exhibit I with respect to the Original Transaction Agreement and prior to the execution of this Agreement the Splitco Board adopted the resolutions set forth as Exhibit I with respect to this Agreement, with the effect that the restrictions on “business combinations” set forth in Section 203 of the DGCL will not apply to Diller as set forth in such resolutions.

 

(b)            As of the Effective Time, Splitco covenants to Diller that it will comply, following the Effective Time, with the Proxy Swap Certificate and Bylaw Provisions.

 

(c)            Splitco shall deliver to Diller an Expedia Board Voting Determination Notice as promptly as practical following the scheduled date for a meeting of the Splitco Board at which an Expedia Board Voting Determination is to be considered, and in any event not later than the close of business, New York City time, on the twenty-fourth (24 th ) Business Day prior to the date set by Expedia for the applicable Expedia stockholder meeting; provided , that , in the event the proxy statement for the applicable Expedia stockholder meeting has not been filed with the SEC on or prior to the thirtieth (30 th ) Business Day prior to the date set by Expedia for the applicable Expedia stockholder meeting, Splitco shall deliver to Diller such Expedia Board Voting Determination Notice as promptly as practical following the filing of such proxy statement with the SEC, and in any event not later than the close of business, New York City time, on the third (3 rd ) Business Day after such proxy statement is filed with the SEC.

 

(d)            In the event that Malone or, in the event of Malone’s Temporary Disability, Mrs. Malone takes action by written consent to remove any Series B Director (a “ Removal Consent ”), then Diller, pursuant to his rights under the Malone Proxy, will promptly, but in any event within fifteen (15) Business Days of the date of the written consent to remove such Series B Director, take action by written consent pursuant to the Certificate to appoint a replacement Series B Director.  In the event that, prior to such removal, the Splitco Board has made an Expedia Board Voting Determination in respect of an upcoming meeting of Expedia stockholders at which directors of Expedia are to be elected (an “ Expedia Election Meeting ”), then until such time as the removal of Series B Directors and the replacement(s) thereof have become effective pursuant to DGCL Section 228 and Regulation 14C of the Exchange Act and such existing Expedia Board Voting Determination has been amended, modified or ratified by the Splitco Board in accordance with the Certificate (at a time when the replacement Series B Director or Series B Directors have become members of the Splitco Board), Splitco will cause

 

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the Liberty Expe Shares and any other securities of Expedia which it has the power to vote not to be present at any such Expedia Election Meeting (or any adjournment or postponement thereof) for purposes of determining whether a quorum is present and shall not vote the Liberty Expe Shares or any such other securities at such Expedia Election Meeting (or any adjournment or postponement thereof). In addition, in the event that each of Malone and Mrs. Malone has a Temporary Disability following an Expedia Board Determination, until such time as one or both of them no longer has a Temporary Disability, Splitco will cause the Liberty Expe Shares and any other securities of Expedia which it has the power to vote not to be present at the applicable Expedia Election Meeting (or any adjournment or postponement thereof) for purposes of determining whether a quorum is present and shall not vote the Liberty Expe Shares or any such other securities at such Expedia Election Meeting (or any adjournment or postponement thereof).

 

4.      Splitco Directors and Officers .

 

(a)            Immediately following the Effective Time, the Splitco Board will consist of seven (7) persons, with five (5) individuals to be designated by Liberty prior to the Effective Time and reasonably satisfactory to Diller to serve as Common Stock Directors and two (2) individuals to be designated by Diller prior to the Effective Time (or, if after such designation and prior to the Effective Time any such individual becomes unable or unwilling to serve, another individual(s) promptly designated by Diller to replace such individual) and reasonably satisfactory to Liberty and Splitco to serve as Series B Directors.  Liberty, as the sole stockholder of Splitco, will cause such persons to be appointed as members of the Splitco Board prior to the Effective Time, in the case of such Series B Directors, such appointment to be effective as of the Effective Time.  Three (3) of the Common Stock Directors and one (1) of the Series B Directors will be “independent” as to Splitco within the meaning of the rules and regulations of Nasdaq.

 

(b)            Promptly following the Effective Time, the Splitco Board shall (i) establish a standing committee of the Splitco Board (the “ Series B Director Committee ”) in accordance with the fourth paragraph of Section 2.8 of the Bylaws and appoint only the Series B Directors then in office to such Series B Director Committee and (ii) establish a standing committee of the Splitco Board (the “ Common Stock Director Committee ”) in accordance with the fifth paragraph of Section 2.8 of the Bylaws and appoint only some or all of the Common Stock Directors then in office to such Common Stock Director Committee.  The Splitco Board shall maintain such Series B Director Committee and such Common Stock Director Committee in accordance with Section 2.8 of the Bylaws until the Proxy Swap Termination Date.

 

(c)            Immediately following the Effective Time, the executive officers of Splitco will be those persons selected by Liberty prior to the Effective Time from among the persons listed on Schedule 4(b) to this Agreement.

 

(d)            Subject to Section 4(a), Splitco and the Splitco Board, including the Nominating and Corporate Governance Committee, shall cause each proposed Common Stock Director or proposed Series B Director designated in accordance with Section 2.8 of the Bylaws to be nominated for election and included in the slate of nominees recommended by the Splitco Board (or a committee thereof) (the “ Recommended Slate ”) for election at the applicable Election Meeting (as defined in the Bylaws), and Splitco will use reasonable efforts to cause the election of such nominees, including soliciting proxies in favor of the election of such persons.

 

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(e)           Diller will (i) vote (or act or not act by written consent with respect to, as the case may be) all Covered Shares subject to the Malone Proxy, (ii) attend all meetings of Splitco stockholders in person or by proxy for purposes of obtaining a quorum, and (iii) execute or not execute, as the case may be, all written consents in lieu of meetings (other than any Removal Consent), as applicable, in each case in accordance with the terms of the Malone Proxy and this Agreement.

 

5.             Notice .  If, prior to the Effective Time, the board of directors of Liberty determines to (x) register Splitco as an investment company pursuant to the 40 Act or (y) abandon the Split-Off, Liberty will so notify each of Diller and Malone, and, to the extent any of the Transaction Instruments shall have been executed prior to the delivery of such notice, such Transaction Instruments (other than the Governance Agreement, the Stockholders Agreement and, to the extent already filed with the Delaware Secretary of State and effective, the Certificate (which, for the avoidance of doubt, may thereafter be amended or restated in its entirety without regard to any requirement as to the contents of such Certificate set forth in any Transaction Instrument)) will be void ab initio and of no further effect; provided , that the consent of Liberty set forth in Section 12 of this Agreement shall be irrevocable upon the execution of this Agreement and shall not be so void or otherwise affected; and provided , further , that in the case of clause (x), if Liberty determines to proceed with the Split-Off, the Letter Agreement, the Governance Agreement Assignment and the Stockholders Agreement Assignment, to the extent then executed and delivered, shall not be so voided, and to the extent such agreements have not yet been executed and delivered, the obligations of the parties thereto to execute such documents pursuant to the Governance Agreement and the Stockholders Agreement shall remain in effect in accordance with the terms thereof.  For the avoidance of doubt, in the event the Split-Off is abandoned pursuant to clause (y) of the preceding sentence, the obligations of each of the parties thereto under each of the Governance Agreement and Stockholders Agreement, including with respect to any Distribution Transaction (as defined therein) proposed by Liberty in the future, will remain in full force and effect in accordance with the terms thereof.

 

6.             Splitco Indebtedness .  Prior to the Effective Time, Liberty will cause Splitco not to, and from the Effective Time until the Proxy Swap Termination Date, Splitco will not, incur any indebtedness which would (i) be secured by the Liberty Expe B Shares, (ii) contradict, violate or result in a breach of the Amended Stockholders Agreement or the Amended Governance Agreement, or (iii) restrict or impair Diller’s (A) rights under this Agreement (including his rights with respect to the Proxy Swap Certificate and Bylaw Provisions pursuant to Section 3(b) hereof), the Amended Stockholder Agreement or the Malone Proxy or Diller’s ability to enforce his rights hereunder or thereunder or (B) rights under the Diller Assignment, including the automatic termination of, or Diller’s right to terminate, the Diller Assignment in accordance with the terms described therein or Diller’s ability to enforce his rights thereunder.  For the avoidance of doubt, prior to the Effective Time, subject to the terms of the Stockholders Agreement and the Governance Agreement, Splitco may incur indebtedness which is secured by the Liberty Expe Common Shares.

 

7.             Non Circumvention .  Prior to the Proxy Swap Termination Date, Diller, on the one hand, and Splitco, Liberty and the members of the Malone Group, on the other hand, will not take any action (and will refrain from taking any action) a primary or significant purpose of which is, or which would reasonably be expected to have the effect of, circumventing or adversely impacting

 

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Diller’s or the Malone Group’s, as applicable, rights and protections set forth in the Transaction Instruments (subject to the parties’ respective rights under such Transaction Instruments).

 

8.               Indemnification .

 

(a)           Liberty and Splitco (each, an “ Indemnifying Party ”) jointly and severally covenant and agree, on the terms and subject to the limitations set forth in this Agreement, to indemnify and hold harmless (x) Diller and (y) each member of the Malone Group (each, an “ Indemnified Party ”), from and against any and all Losses incurred in connection with, arising out of or resulting from any claims, demands, actions, proceedings or investigations (collectively, “ Actions ”) relating to (i) the matters contemplated by the Subject Instruments (including any Actions brought by any of the stockholders, directors, officers or employees of any of Expedia, Liberty or Splitco relating thereto) or (ii) the exercise by any Indemnified Party of its rights under any Subject Instrument.

 

(b)           Notwithstanding anything herein to the contrary, the Indemnifying Parties will not be obligated to provide indemnity hereunder to any Indemnified Party with respect to any Losses which (i)(x) result from such Indemnified Party’s willful misconduct or gross negligence, including any willful breach of any representation and warranty of such Indemnified Party contained in any Subject Instrument to which it is a party or any willful breach of any covenant or agreement made or to be performed by such Indemnified Party pursuant to any Subject Instrument to which it is a party or (y) result primarily from any breach, other than a willful breach, of any representation and warranty of such Indemnified Party contained in any Subject Instrument to which it is a party or any breach, other than a willful breach, of any covenant or agreement made or to be performed by such Indemnified Party under any Subject Instrument, or (ii) are incurred in connection with, arising out of or resulting from Actions based upon or relating to such Indemnified Party’s actions taken (or refrained from taking) in such Indemnified Party’s capacity as a director or officer of Expedia, Splitco or Liberty, as applicable.

 

(c)           The Indemnifying Parties will indemnify the Indemnified Parties pursuant to this Section 8 regardless of whether such Losses are incurred prior to or after the Effective Time.  The indemnification provided pursuant to this Section 8 is in addition to, and not in derogation of, any other rights an Indemnified Party may have under applicable law, the certificate of incorporation or bylaws of Expedia or Splitco, or pursuant to any contract, agreement or arrangement; provided , that Losses will not be duplicated.

 

(d)           Promptly after the receipt by any Indemnified Party of notice of any Action that is or may be subject to indemnification hereunder (each, an “ Indemnifiable Claim ”) (and in no event more than ten (10) Business Days after the Indemnified Party’s receipt of written notice of such Indemnifiable Claim), such Indemnified Party shall give written notice thereof to the Indemnifying Parties, which notice will include, to the extent known, the basis for such Indemnifiable Claim and copies of any pleadings or written demands relating to such Indemnifiable Claim and, promptly following request therefor, shall provide any additional information in respect thereof that either Indemnifying Party may reasonably request; provided , however , that (i) any delay in giving or failure to give such notice will not affect the obligations of any Indemnifying Party hereunder except to the extent such Indemnifying Party is actually prejudiced as a result of such delay in or failure to notify and (ii) no such notice shall be required

 

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to be given to any Indemnifying Party to the extent that such Indemnifying Party or any of its respective Affiliates is a party to any such Indemnifiable Claim.

 

(e)           Subject to Section 8(f) and Section 8(g), the Indemnifying Parties shall be entitled to exercise full control of the defense, compromise or settlement of any Indemnifiable Claim in respect of an Action commenced or made by a Person who is not a party to this Agreement or an Affiliate of a party to this Agreement (a “ Third Party Indemnifiable Claim ”) so long as, within ten (10) calendar days after the receipt of notice of such Third Party Indemnifiable Claim from the Indemnified Party (pursuant to Section 8(d)), the Indemnifying Parties:  (i) deliver a written confirmation to such Indemnified Party that the indemnification provisions of Section 8 are applicable, subject only to the limitations set forth in this Agreement, to such Third Party Indemnifiable Claim and that the Indemnifying Parties will indemnify such Indemnified Party in respect of such Third Party Indemnifiable Claim pursuant to the terms of this Section 8, and (ii) notify such Indemnified Party in writing that the Indemnifying Parties will assume the control of the defense thereof.  Following notification to such Indemnified Party of the assumption of the defense of such Third Party Indemnifiable Claim, the Indemnifying Parties shall retain legal counsel reasonably satisfactory to such Indemnified Party to conduct the defense of such Third Party Indemnifiable Claim.  If the Indemnifying Parties so assume the defense of any such Third Party Indemnifiable Claim in accordance herewith, subject to the provisions of clauses (d) through (g) of this Section 8, (A) the Indemnifying Parties shall be entitled to exercise full control of the defense, compromise or settlement of such Third Party Indemnifiable Claim and such Indemnified Party shall cooperate (subject to the Indemnifying Parties’ agreement to reimburse such Indemnified Party for all reasonable out-of-pocket expenses incurred by such Indemnified Party in connection with such cooperation) with the Indemnifying Parties in any manner that the Indemnifying Parties reasonably may request in connection with the defense, compromise or settlement thereof (subject to the last sentence of this Section 8(e)), and (B) such Indemnified Party shall have the right to employ separate counsel selected by such Indemnified Party and to participate in (but not control) the defense, compromise or settlement thereof and the Indemnifying Parties shall pay the reasonable fees and expenses of one (1) such separate counsel, and, if reasonably necessary, one (1) local counsel.  No Indemnified Party shall settle or compromise or consent to entry of any judgment with respect to any such Action for which it is entitled to indemnification without the prior written consent of the Indemnifying Parties, unless the Indemnifying Parties shall have failed to assume the defense thereof as contemplated in this Section 8(e), in which case such Indemnified Party will be entitled to control the defense, compromise or settlement thereof at the expense of the Indemnifying Parties.  Without the prior written consent of each of the Indemnified Parties who are named in the Action subject to the Third Party Indemnifiable Claim (which consent shall not be unreasonably withheld, delayed or conditioned), the Indemnifying Parties will not settle or compromise or consent to the entry of judgment with respect to any Indemnifiable Claim (or part thereof) unless such settlement, compromise or consent (x) includes an unconditional release of such Indemnified Parties, (y) does not include any admission of wrongdoing on the part of such Indemnified Parties and (z) does not enjoin or restrict in any way the future actions or conduct of such Indemnified Parties (other than in a manner consistent with the terms of the Subject Instruments).

 

(f)            Notwithstanding Section 8(e), an Indemnified Party, at the expense of the Indemnifying Parties, (i) shall, subject to the last sentence of this Section 8(f), be entitled to

 

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separately control the defense, compromise or settlement of any Third Party Indemnifiable Claim as to such Indemnified Party if, in the judgment of counsel to the Indemnified Party, there exists any actual conflict of interest relating to the defense of such Action between the Indemnified Party and one or more Indemnifying Parties and (ii) shall be entitled to assume control of the defense, compromise and settlement of any Third Party Indemnifiable Claim as to which the Indemnifying Parties have previously assumed control in the event the Indemnifying Parties are not timely and diligently pursuing such defense.  No Indemnified Party shall settle or compromise or consent to entry of any judgment with respect to any Action with respect to which it controls the defense thereof pursuant to this Section 8(f) and for which it is entitled to indemnification without the prior written consent of the Indemnifying Parties, which consent shall not be unreasonably withheld, conditioned or delayed.

 

(g)           In all instances under this Section 8 where any Indemnifying Party has agreed to pay the fees, costs and expenses of the Indemnified Parties, such fees, costs and expenses shall be reasonable.  The parties agree to cooperate and coordinate in connection with the defense, compromise or settlement of any Indemnifiable Claims.

 

(h)           In addition to (but without duplication of) the Indemnified Party’s right to indemnification as set forth in this Section 8, if so requested by an Indemnified Party, the Indemnifying Parties shall also advance to such Indemnified Party (within five (5) Business Days of such request) any and all reasonable fees, costs and expenses incurred by an Indemnified Party in accordance with this Section 8 in connection with investigating, defending, being a witness in or participating in (including any appeal), or preparing to defend, be a witness in or participate in, any Indemnifiable Claim, including, without duplication, reasonable fees and expenses of counsel, accountants, consultants and other experts (an “ Expense Advance ”).

 

(i)            Each of Diller, Malone and Mrs. Malone agrees that he or she will repay Expense Advances made to him or her (or paid on his or her behalf) by any Indemnifying Party pursuant to this Section 8 if it is ultimately finally determined by a court of competent jurisdiction that he or she is not entitled to be indemnified pursuant to this Section 8.

 

(j)            The failure of any Indemnifying Party to (x) comply with the terms of this Section 8 or (y) exercise its rights hereunder (including pursuant to Section 8(e)), in each case, shall not affect, restrict or diminish the obligations or rights of the other Indemnifying Party to perform its obligations or exercise its rights hereunder (including pursuant to Section 8(e)).  The failure of any Indemnified Party to (x) comply with the terms of this Section 8 or (y) exercise his rights hereunder, in each case, shall not affect, restrict or diminish the obligations or rights of the other Indemnified Party to perform its obligations or exercise its rights hereunder.

 

9.               Expenses .

 

(a)           Liberty and Splitco jointly and severally covenant and agree that they will promptly reimburse each of Diller and the Malone Group, upon written request from any such party, for their respective reasonable, documented costs, fees and expenses incurred in connection with the Subject Instruments (including reasonable fees and expenses of counsel, accountants, consultants and other experts and including such fees and expenses related to any filing pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in

 

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connection with the Split-Off), irrespective of whether the Split-Off is completed (including if the Split-Off is not completed by December 31, 2016), subject to, with respect to Diller, a cap of $3.75 million, and, with respect to the Malone Group, a cap of $3.75 million.

 

(b)           Except as described in the preceding Section 9(a) or Section 8 or as otherwise provided in a Transaction Instrument, all costs and expenses incurred in connection with the Transaction Instruments shall be paid by the party incurring such cost or expense.

 

(c)           Notwithstanding anything to the contrary contained herein, (i) any Losses for which indemnification is available pursuant to Section 8 shall not be subject to expense reimbursement pursuant to this Section 9, and (ii) in no event will any Covered Expense constitute a reimbursable expense pursuant to this Section 9.

 

10.        Reserved .

 

11.        No Limitations in Capacity as Director or Officer .  Each of Diller and Malone is signing this Agreement solely in his capacity as an individual, and nothing contained in this Agreement shall be deemed to limit or restrict either Diller or Malone from the exercise of his fiduciary duties in accordance with applicable law in his capacity as a member of the board of directors or an officer of Expedia or Splitco, respectively.

 

12.        Liberty Consent .  To the extent this Agreement or the Diller Assignment constitutes a prohibited assignment of the Liberty Proxy pursuant to Section 3.3(d) of the Stockholders Agreement, Liberty hereby consents to the assignment of the Liberty Proxy upon the execution of and pursuant to the terms of this Agreement and the Diller Assignment.  For the avoidance of doubt, the foregoing consent does not affect any other provision of the Stockholders Agreement, which shall continue in full force and effect.

 

13.        Representations and Warranties.

 

(a)           Representations and Warranties of Liberty and Splitco .  Each of Liberty and Splitco represent and warrant as of the date hereof and as of the Effective Time to each other party hereto that (i) it is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and it has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunder, (ii) the execution and delivery of this Agreement by it have been duly authorized by all necessary action and no other proceedings are necessary to authorize this Agreement, (iii) this Agreement has been duly executed and delivered by it and constitutes a valid and binding obligation of it, and, assuming this Agreement constitutes a valid and binding obligation of each other party hereto, is enforceable against it in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity), (iv) neither the execution, delivery or performance of this Agreement by it constitutes a breach or violation of or conflicts with its certificate of incorporation or by-laws (or similar governing documents) or any material agreement to which it is a party, it being understood that the receipt of the approval of the holders of record, as of the record date for the Stockholder Meeting, of Ventures Series A Stock and Ventures Series B Stock representing a majority of the aggregate voting power of the Ventures Series A Stock and

 

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Ventures Series B Stock that are present in person or by proxy, voting together as a separate class, at the meeting of stockholders (the “ Stockholder Meeting ”) at which the proposal to redeem a portion of the Ventures Series A Stock and Ventures Series B Stock in order to effect the Split-Off is presented for stockholder approval (the “ Stockholder Approval ”) is a condition to the Split-Off and (v) none of such material agreements would impair in any material respect its ability to perform any of its obligations hereunder.

 

(b)           Representations and Warranties of Diller . Diller represents and warrants, as of the date hereof and as of the Effective Time, to each other party hereto that (i) Diller has the power and authority to enter into this Agreement and to carry out his obligations hereunder, (ii) the execution and delivery of this Agreement by Diller have been duly authorized by all necessary action on the part of Diller and no other proceedings on the part of Diller are necessary to authorize this Agreement, (iii) this Agreement has been duly executed and delivered by Diller and constitutes a valid and binding obligation of Diller, and, assuming this Agreement constitutes a valid and binding obligation of the other parties hereto, is enforceable against Diller in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity), (iv) neither the execution, delivery or performance of this Agreement by Diller constitutes a breach or violation of, or conflicts with any material agreement to which Diller is a party and (v) none of such material agreements would impair in any material respect the ability of Diller to perform his obligations hereunder.

 

(c)           Representations and Warranties of the Malone Group . Each member of the Malone Group represents and warrants, as of the date hereof and as of the Effective Time, to each other party hereto that (i) each member of the Malone Group has the power and authority to enter into this Agreement and to carry out his or her obligations hereunder, (ii) the execution and delivery of this Agreement by each member of the Malone Group have been duly authorized by all necessary action on the part of each member of the Malone Group and no other proceedings on the part of any member of the Malone Group are necessary to authorize this Agreement, (iii) this Agreement has been duly executed and delivered by each member of the Malone Group and constitutes a valid and binding obligation of each member of the Malone Group, and, assuming this Agreement constitutes a valid and binding obligation of the other parties hereto, is enforceable against each member of the Malone Group in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity), (iv) neither the execution, delivery or performance of this Agreement by any member of the Malone Group constitutes a breach or violation of, or conflicts with any material agreement to which any member of the Malone Group is a party and (v) none of such material agreements would impair in any material respect the ability of each of the members of the Malone Group to perform his or her obligations hereunder.

 

14.        Liberty and Splitco Capitalization .

 

(a)           Liberty hereby represents and warrants to each other party hereto that, as of the date hereof, Liberty has 400,000,000 shares of Series A Liberty Ventures common stock (the “ Ventures Series A Stock ”), 15,000,000 shares of Series B Liberty Ventures common stock (the “ Ventures Series B Stock ”) and 400,000,000 shares of Series C Liberty Ventures common

 

17



 

stock (the “ Ventures Series C Stock ,” and together with the Ventures Series A Stock, the Ventures Series B Stock, the “ Liberty Ventures Stock ”) and 50,000,000 shares of preferred stock, par value $0.01 per share (“ Preferred Stock ”), authorized.  As of the close of business on March 18, 2016 (such date and time, the “ Capitalization Time ”), there were (i) 135,025,846 shares of Ventures Series A Stock issued and outstanding, 7,103,609 shares of Ventures Series B Stock issued and outstanding, no shares of Ventures Series C Stock issued and outstanding and no shares of Preferred Stock issued and outstanding, including, in each case, outstanding restricted shares, and (ii) 3,670,410 shares of Ventures Series A Stock and 1,522,102 shares of Ventures Series B Stock, in each case, issuable upon either the exercise of outstanding stock options to acquire shares of such series of Liberty Ventures Stock (whether or not presently vested or exercisable) and outstanding restricted stock units (including performance stock units) with respect to Liberty Ventures Stock (whether or not presently vested).  Except as set forth above, and for shares of Liberty Ventures Stock reserved for issuance under Liberty’s equity plans, as of the Capitalization Time, no other shares of Liberty Ventures Stock are issued, reserved for issuance or outstanding.

 

(b)           From the Capitalization Time through the Effective Time, Liberty will not issue, sell or authorize or propose the issuance or sale of (i) any shares of Ventures Series A Stock or Ventures Series B Stock or (ii) any other Equity (other than Ventures Series C Stock) in respect of, in lieu of, or in substitution for, any shares of Ventures Series A Stock or Ventures Series B Stock outstanding on such date, in each case, outside the ordinary course of business consistent with past practice, other than in connection with Liberty’s spin-off of its subsidiary, CommerceHub, Inc.  For the avoidance of doubt, subject to paragraph (c) of this Section 14 (solely with respect to shares of Ventures Series A Stock and shares of Ventures Series B Stock), Liberty may issue, sell, or authorize or propose the issuance or sale of shares of Liberty Ventures Stock pursuant to the grant, issuance or exercise of stock incentive awards relating to Liberty Ventures Stock in the ordinary course of business consistent with past practice or pursuant to agreements entered into prior to the date hereof.

 

(c)           As of immediately following the Effective Time, (i) the outstanding shares of Splitco Series A Stock and Splitco Series B Stock that are Covered Shares subject to the Malone Proxy will represent not less than 30% of the outstanding Voting Power of Splitco and (ii) the outstanding shares of Splitco Series B Stock that are Covered Shares subject to the Malone Proxy will represent not less than 70% of the aggregate of (A) the outstanding shares of Splitco Series B Stock at such time plus (B) any shares of Splitco Series B Stock issuable upon the exercise, exchange or conversion of, or otherwise issuable under (whether upon the passage of time, subject to conditions or otherwise), Convertible Securities of Splitco outstanding as of such time (whether or not then exercisable, exchangeable or convertible).

 

15.        Termination .

 

(a)           Prior to the Effective Time, this Agreement will terminate and cease to be of further effect (except as otherwise specifically provided herein) upon the earliest of (w) December 31, 2016; (x) the delivery by Diller to the other parties hereto of a notice of termination following Malone’s death or a determination that Malone is Disabled, which notice shall have been delivered by Diller not later than the tenth (10 th ) Business Day following Diller’s actual knowledge of such occurrence; provided , that if Diller fails to deliver a notice of

 

18



 

termination pursuant to and in accordance with the terms of this clause (x) prior to the Effective Time and provided that Splitco shall have complied with the second sentence of the definition of “Effective Time,” to the extent applicable, Diller will be deemed to have waived his right to deliver a termination notice pursuant to this clause (x) and clause (b)(ix) below and the Malone Proxy will be amended to be executed by the entity or entities then beneficially owning the Covered Shares at the Effective Time; (y) the date Liberty delivers notice to the other parties hereto that it has determined to (1) abandon the Split-Off or (2) terminate this Agreement (which, for the avoidance of doubt, may result in the continuation of the Split-Off without execution of the Diller Assignment); and (z) the termination of the Liberty Proxy pursuant to the terms of the Stockholders Agreement; provided , that the suspension of the Liberty Proxy pursuant to Section 3.3(e) of the Stockholders Agreement shall not result in the termination of this Agreement pursuant to the preceding clause (z) unless the Stockholders Agreement is otherwise terminated in accordance with the terms thereof; provided , further , however that the applicable parties’ obligations under Sections 2(d), 8, 9 and 16 will survive such termination and the consent of Liberty set forth in Section 12 of this Agreement shall be irrevocable upon the execution of this Agreement and shall not be void or otherwise affected by such termination.

 

(b)           Following the Effective Time, this Agreement shall terminate automatically and without the requirement of notice, unless otherwise specified herein, upon the first to occur of:

 

(i)            the eighteen (18) month anniversary of the Effective Time;

 

(ii)           the termination of the Splitco Proxy, pursuant to the terms of the Amended Stockholders Agreement, taking into account the Subject Waivers (as defined therein); provided , that the suspension of the Splitco Proxy pursuant to Section 3.3(e) of the Amended Stockholders Agreement shall not result in the termination of this Agreement unless the Amended Stockholders Agreement is otherwise terminated in accordance with the terms thereof;

 

(iii)          the close of business on the tenth (10 th ) day following receipt of written notice delivered to all parties hereto, which may be delivered no earlier than the one (1) year anniversary of the Effective Time, from (x) Diller to terminate the Diller Assignment or (y) Malone, on behalf of the Malone Group, to terminate the Malone Proxy;

 

(iv)          any court of competent jurisdiction or other Governmental Authority (x) finding that any Subject Instrument is invalid or unenforceable in any respect (other than in a de minimis respect and other than a finding or determination that any provision of Article VII of the Certificate is unenforceable) or (y) preliminarily or permanently enjoining the exercise of the parties’ respective rights under any of the Subject Instruments or otherwise restricting or limiting any term of a Subject Instrument (a “ Restriction ”); provided , however , that in the event of the entry of a temporary injunction or other order enjoining the exercise of the parties’ rights under any Subject Instrument, the parties agree that (A) such temporary injunction or other order will not result in the termination of this Agreement or the occurrence of the Proxy Swap Termination Date and (B) during the period from the date of effectiveness of such temporary injunction or order

 

19



 

to the earlier of (x) the date upon which such temporary injunction or order expires or ceases to be effective such that there is no longer any Restriction in effect or (y) the date a preliminary injunction is issued in replacement thereof, to the extent that any matter is presented to stockholders of Expedia or Splitco for a vote (or to act by written consent), the Diller Assignment and the Malone Proxy will be deemed suspended;

 

(v)           (except if earlier terminated as contemplated by Section 15(b)(vi)) following the entry by Splitco into a definitive agreement providing for the acquisition, including pursuant to any merger, share exchange or other business combination, by a third party (which, for the avoidance of doubt, will include Expedia, Liberty or any Liberty Related Entity) or Group, or upon the consummation of the transactions contemplated thereby, whereby a third party or Group would own, Capital Stock of Splitco representing Voting Power in excess of the Proxy Voting Power or all or substantially all of the assets of Splitco (a “ Triggering Transaction ”), the receipt of written notice from (x) Diller to terminate the Diller Assignment or (y) the Malone Group to terminate the Malone Proxy, in which case, the Proxy Swap Termination Date will occur immediately prior to the consummation of the Triggering Transaction, provided that no such notice shall be required (and in such case the Proxy Swap Termination Date shall occur immediately prior to the consummation of the Triggering Transaction) in the event the date of first public announcement by Splitco of the entry into such definitive agreement is less than ten (10) Business Days prior to the date on which the Triggering Transaction is consummated;

 

(vi)          commencement of a tender or exchange offer with respect to the Splitco Common Stock by an Independent Party which, if consummated at the maximum number of shares sought, would result in such Independent Party beneficially owning shares of Splitco Common Stock having Voting Power which exceeds the Proxy Voting Power, unless within ten (10) Business Days following the commencement of such tender or exchange offer Splitco has taken action reasonably sufficient to deter such Independent Party from consummating such tender offer or exchange offer (including through implementation of a stockholder rights plan or similar plan or agreement), in which case the Proxy Swap Termination Date shall not be deemed to have occurred until immediately prior to such Independent Party accepting for payment or exchange tendered shares, which shares, together with shares beneficially owned by such Independent Party and its Affiliates, represent Voting Power in excess of the Proxy Voting Power;

 

(vii)         delivery by a non-breaching party of a notice of termination to the other parties hereto and Expedia following a breach by Splitco, Liberty or the Malone Group (or any member thereof), on the one hand, or Diller, on the other hand, of any of their respective material representations or warranties, or a default or breach by any of Splitco, Liberty or the Malone Group (or any member thereof), on the one hand, or Diller, on the other hand, in the performance of any of their respective material covenants or other material obligations, contained in any Subject Instrument to which the Person seeking termination is a party, or, in the case of the Proxy Swap Certificate and Bylaw Provisions, a provision benefitting such party, which breach or default is not cured within five (5) Business Days of written notice from any non-breaching party to the breaching party of such breach or default; provided , that , if such termination notice is not delivered by the

 

20



 

non-breaching party within ten (10) Business Days following notice to the non-breaching party regarding such breach or default or the non-breaching party’s actual knowledge of such breach, the non-breaching party shall be deemed to have waived its right to termination with respect to such breach or default;

 

(viii)        (A) a 40 Act Event or (B) as a result of changes in the composition of Splitco’s assets, changes in applicable law or interpretations thereof, or changes in Splitco’s capital structure, and assuming the termination of the Diller Assignment, Splitco would not be required to register as an investment company (without giving effect to any cure or grace period or delay in the requirement to become registered under the 40 Act);

 

(ix)          delivery by Diller to the other parties hereto of a notice of termination (A) following Malone’s death or a determination that Malone is Disabled (except to the extent this termination right previously has been waived pursuant to Section 15(a)) or (B) in the event that Malone is not serving as chairman of the Splitco Board immediately following the Effective Time or thereafter ceases to be chairman of Splitco (other than as a result of his death or a determination that he is Disabled); provided that, in the case of each of clause (A) and clause (B), Diller shall have delivered such notice of termination within ten (10) Business Days of notice to him of such occurrence or his actual knowledge of such occurrence;

 

(x)           the date on which no shares of Splitco Series B Stock remain outstanding;

 

(xi)          any transfer or assignment of (x) the Proxy (as defined in the Malone Proxy) without the consent of Malone in violation of the Malone Proxy or (y) the Assignment (as defined in the Diller Assignment) without the consent of Diller in violation of the Diller Assignment;

 

(xii)         if and to the extent a court of competent jurisdiction makes a final determination that the Assignment (as defined in the Diller Assignment) renders the Splitco Proxy invalid; and

 

(xiii)        delivery by Diller of a notice of termination within ten (10) Business Days following any failure by Splitco to timely deliver any Expedia Board Voting Determination Notice pursuant to Section 3(c).

 

The date on which such termination occurs is referred to as the “ Proxy Swap Termination Date .”  In the event of termination of this Agreement, there shall be no further liability or obligation hereunder on the part of any party hereto, and this Agreement shall thereafter be null and void; provided , that the rights and obligations of the parties contained in Sections 8, 9, 10 and 16 of this Agreement shall survive such termination (whether or not such rights and obligations have been invoked prior to such termination), and that no party hereto will be relieved from any liability for breach of this Agreement occurring prior to the Proxy Swap Termination Date by reason of such termination; and provided , further , that the consent of Liberty set forth in Section 12 of this Agreement shall be irrevocable upon the execution of this Agreement and shall not be affected by the

 

21


 

foregoing.  For the avoidance of doubt, termination of this Agreement following the Effective Time will not affect the continued effectiveness of or the parties’ obligations under the Stockholders Agreement, the Governance Agreement, the Stockholders Agreement Assignment, the Governance Agreement Assignment, and the Letter Agreement, in each case, in accordance with their respective terms.

 

16.        Miscellaneous .

 

(a)                                  Public Announcement .  No party hereto shall issue any press release or make any other public statement with respect to any Transaction Instrument or the matters contemplated thereby substantially inconsistent with the understanding of the parties with respect to such matters as of the date hereof without the prior written consent of the other parties hereto, except as may be required by applicable law.  The parties acknowledge that a breach of the covenants in this Section 16(a) shall constitute a material breach of this Agreement.

 

(b)                                  Further Assurances .  At any time or from time to time after the date hereof, the applicable parties agree to cooperate with each other, and at the request of any other applicable party, to execute and deliver any further instruments or documents and to take all such further actions as the other party may reasonably request in order to evidence or effectuate the matters contemplated by the Transaction Instruments and to otherwise carry out the intent of the parties hereunder and thereunder.

 

(c)                                   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.

 

(d)                                  No Implied Waivers .  No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein or made pursuant hereto.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by any party to exercise any right or privilege hereunder shall be deemed a waiver of such party’s rights or privileges hereunder or shall be deemed a waiver of such party’s rights to exercise the same at any subsequent time or times hereunder.

 

(e)                                   Severability .  Whenever possible, each provision (or portion thereof) of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision (or portion thereof) of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, then (subject to Section 15(b)(iv) hereof) 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.

 

22



 

(f)                                    Entire Agreement; Third Party Beneficiaries .  Except as otherwise expressly set forth herein or therein, the Transaction Instruments and the Expedia Reimbursement Agreement, including any exhibits and schedules thereto, (i) embody the complete agreement and understanding among the parties hereto and thereto 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 and (ii) are not intended to confer any rights, benefits, remedies, obligations or liabilities upon any Person other than the parties hereto and their respective successors and permitted assigns.

 

(g)                                   Assignment; Successors . Except as otherwise provided herein, neither this Agreement nor any of the rights or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any party without the prior written consent of the other parties hereto; provided , that no such consent will be required for an assignment (i) by operation of law pursuant to a merger that gives rise to a right of Diller to terminate this Agreement pursuant to Section 15(b) which right he fails to exercise pursuant to the terms of Section 15(b) (or pursuant to a merger which would terminate this Agreement pursuant to Section 15(b) which termination Diller has waived) or (ii) in the case of a member of the Malone Group, to a Permitted Assign.  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 permitted assigns.  All authority conferred herein shall survive the death of any member of the Malone Group and in the event of any member of the Malone Group’s death, any rights or obligation of the Malone Group or such member thereof under this Agreement shall be for the benefit of and binding upon the estate, executor(s) and personal representative(s) of such member of the Malone Group.

 

(h)                                  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.

 

(i)                                      Remedies . 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.  All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.  In the event that a party institutes any suit or action under this Agreement, including for specific performance or injunctive relief pursuant to this Section 16, the prevailing party in such proceeding shall be entitled to receive the costs incurred thereby in conducting the suit or action, including reasonable fees and expenses of counsel, accountants, consultants and other experts.

 

(j)                                     Notices .  Any notices or other communications required or permitted under, or otherwise in connection with this Agreement, shall be in writing and shall be deemed to

 

23



 

have been duly given (A) when delivered in person, (B) upon transmission by electronic mail or facsimile transmission as evidenced by confirmation of transmission to the sender (but only if followed by transmittal of a copy thereof by (x) national overnight courier or (y) hand delivery with receipt, in each case, for delivery by the second (2nd) Business Day following such electronic mail or facsimile transmission), (C) on receipt after dispatch by registered or certified mail, postage prepaid and addressed, or (D) on the next Business Day if transmitted by national overnight courier, in each case as set forth to the parties as set forth below:

 

If to Liberty, or to Splitco prior to the Effective Time:

 

Liberty Interactive Corporation

12300 Liberty Boulevard

Englewood, CO 80112

Attention:                                                                  Richard N. Baer

Facsimile:

E-mail:

 

with a copy to:

 

Baker Botts L.L.P.

30 Rockefeller Plaza

New York, NY 10112

Attention:                                                                  Frederick McGrath

Renee L. Wilm

Facsimile:                                                                  (212) 259-2500

E-mail:                                                                                 frederick.mcgrath@bakerbotts.com

renee.wilm@bakerbotts.com

 

If to Splitco following the Effective Time:

 

Liberty Expedia Holdings, Inc.

12300 Liberty Boulevard

Englewood, CO 80112

Attention:                                                                  Richard N. Baer

Facsimile:

E-mail:

 

with a copy to:

 

Baker Botts L.L.P.

30 Rockefeller Plaza

New York, NY 10112

Attention:                                                                  Frederick McGrath

Renee L. Wilm

Facsimile:                                                                  (212) 259-2500

E-mail:                                                                                 frederick.mcgrath@bakerbotts.com

renee.wilm@bakerbotts.com

 

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If to Diller:

 

c/o Arrow Investments, Inc.

555 West 18 th  Street

New York, NY 10011

Attention:                                                                  Barry Diller

Facsimile:

E-mail:

 

With a copy to:

 

Wachtell, Lipton, Rosen & Katz

51 West 52 nd  Street

New York, NY 10019

Attention:                                                                  Andrew J. Nussbaum, Esq.

Facsimile:                                                                  (212) 403-2000

E-mail:                                                                                 AJNussbaum@wlrk.com

 

If to the Malone Group, to:

 

John C. Malone

c/o Liberty Media Corporation

12300 Liberty Boulevard

Englewood, CO 80112

Facsimile:

E-Mail:

 

with a copy to:

 

Sherman & Howard L.L.C.

633 Seventeenth Street

Suite 3000

Denver, CO 80202

Attention:                                                                  Steven D. Miller

Facsimile:                                                                  (303) 298-0940

E-Mail:                                                                                smiller@shermanhoward.com

 

or such other address, email address or facsimile number as such party may hereafter specify by like notice to the other parties hereto.

 

(k)                                  Governing Law; Jurisdiction and Venue .  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. The parties hereto hereby irrevocably submit to the jurisdiction of the Delaware Court of Chancery or, in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in

 

25



 

respect of the matters contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in the Delaware Court of Chancery, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware, or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined exclusively  in the Delaware Court of Chancery, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware. The parties hereto hereby consent to and grant the Delaware Court of Chancery, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, the United States District Court for the District of Delaware, jurisdiction over the person of such parties and, to the extent permitted by law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided herein or in such other manner as may be permitted by Law shall be valid and sufficient service thereof. 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 PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

 

(l)                                      Certain Cooperation .  In the event that any Covered Shares are not at any time following the Effective Time held of record by a member of the Malone Group, then Splitco and the Malone Group shall cooperate reasonably with Diller, including by obtaining any requested written confirmation to Splitco’s inspector of elections or other action on the part of the Depositary Trust Company, any custodian of such Covered Shares or other applicable Person, to facilitate and ensure Diller’s ability to vote the Covered Shares as contemplated by this Agreement and the Malone Proxy.  For the avoidance of doubt, the foregoing is not intended to and shall not create any inference that any Covered Shares may be transferred or held in any manner except in compliance with the Malone Proxy.

 

(m)                              Interpretation . To the extent any consent of, or action or instruction by, the Malone Group is required by this Agreement, the consent, action or instruction by Malone, or the executor of Malone’s estate or personal representative following Malone’s death, or the Permitted Assignee of Malone, shall be deemed to be the consent, action or instruction by the Malone Group.  When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated.  The headings contained in this Agreement are for reference purposes 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”.  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.  When this Agreement contemplates a certain number of securities, as of a particular date, such number of securities shall be deemed to be appropriately adjusted to account for stock splits, dividends, recapitalizations, combinations of shares or other change affecting the such securities.  In the event of any ambiguity or claimed ambiguity in any provision of a Subject

 

26



 

Instrument, such provision shall be construed in light of the purpose acknowledged and agreed by the parties that Diller’s rights and interests, including without limitation with respect to the control of Expedia by virtue of the irrevocable proxy granted to Diller pursuant to Section 3.3 of the Stockholders Agreement, subject to the terms thereof, shall not be affected or changed by any of the Subject Instruments, except to the extent specifically set forth therein.

 

[Signature Page Follows.]

 

27



 

IN WITNESS WHEREOF, this Agreement has been duly executed by the parties, and is effective as of the day and year first above written.

 

 

 

LIBERTY INTERACTIVE CORPORATION

 

 

 

 

 

By:

/s/ Richard N. Baer

 

 

Name: Richard N. Baer

 

 

Title:   Chief Legal Officer

 

 

 

 

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

 

By:

/s/ Richard N. Baer

 

 

Name: Richard N. Baer

 

 

Title:   Chief Legal Officer

 

 

 

 

 

 

 

/s/ Barry Diller

 

 

Barry Diller

 

 

 

 

/s/ John C. Malone

 

 

John C. Malone

 

 

 

 

/s/ Leslie Malone

 

 

Leslie Malone

 

 

[ Signature Page to Amended and Restated Transaction Agreement ]

 


 



Exhibit 10.14

 

AGREED FORM

 

PROXY AND VOTING AGREEMENT

 

This Proxy and Voting Agreement, dated as of [    ] (this “ Agreement ”), is by and among Barry Diller, an individual (“ Diller ”), John C. Malone, an individual (“ Malone ”), and Leslie Malone, an individual (“ Mrs. Malone ” and together with Malone, the “ Malone Group ”).

 

WHEREAS, Liberty Interactive Corporation, a Delaware corporation (“ Liberty ”), has determined to engage in the Split-Off (as defined in the Transaction Agreement) and has received the approval of the holders of LVNTA and LVNTB to redeem a portion of such shares in order to effect the Split-Off;

 

WHEREAS, pursuant to Section 3.3 of that certain Amended and Restated Stockholders Agreement, dated as of December 20, 2011 (the “ Stockholders Agreement ”), Liberty granted Diller the Liberty Proxy (as defined in the Stockholders Agreement) (as assigned to Splitco pursuant to the Stockholders Agreement Assignment, the “ Splitco Proxy ”);

 

WHEREAS, Liberty, Splitco, Diller, and the Malone Group have entered into a transaction agreement, dated as of March 24, 2016, as amended and restated as of September 22, 2016, and as may be further amended in accordance with the terms thereof (the “ Transaction Agreement ”), pursuant to which the parties thereto set forth certain agreements in connection with the Split-Off and the other Transaction Instruments;

 

WHEREAS, as provided in and in accordance with the terms of the Transaction Agreement, subject to the completion of the Split-Off, prior to or concurrently with the execution of this Agreement, (i) Diller, Splitco and Liberty will enter into an Assignment and Assumption of Governance Agreement with Expedia (the “ Governance Agreement Assignment ”), pursuant to which, in accordance with Section 5.01 of the Amended and Restated Governance Agreement, dated as of December 20, 2011 (the “ Governance Agreement ”), among other things, all rights and obligations of Liberty under the Governance Agreement will be assigned to Splitco and Splitco will assume such rights and obligations and Expedia will consent to such assignment, (ii) Liberty, Diller and Splitco will enter into an Assignment and Assumption of Stockholders Agreement (the “ Stockholders Agreement Assignment ”), pursuant to which, in accordance with Section 5.1 of the Stockholders Agreement, all rights and obligations of Liberty under the Stockholders Agreement will be assigned to Splitco, Splitco will assume such rights and obligations and Diller will consent to such assignment, (iii) Splitco and Diller will enter into Amendment No. 1 to Stockholders Agreement (the “ Stockholders Agreement Amendment ”) to provide for certain waivers under the Stockholders Agreement and agreements relating to the voting of Common Shares (as defined in the Stockholders Agreement) Beneficially Owned by such parties or with respect to which such parties have the power to vote, and (iv) Diller and Splitco will enter into an Assignment Agreement (the “ Diller Assignment ”), pursuant to which Diller will irrevocably assign, on the terms and conditions set forth therein, the Splitco Proxy to Splitco until the Proxy Swap Termination Date;

 

WHEREAS, in connection with the Diller Assignment, the Malone Group will grant an irrevocable proxy to Diller to vote, subject to certain limitations, all shares of Splitco Series A Stock and Splitco Series B Stock (together with the Splitco Series A Stock, the “ Splitco Common Stock ”), Beneficially Owned at the Effective Time or thereafter by one or both

 

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members of the Malone Group or with respect to which one or both members of the Malone Group have the power to vote (the “ Covered Shares ”); and

 

WHEREAS, Diller and the Malone Group are entering into this Agreement in order to set forth the terms and conditions of the Proxy and the other matters as provided herein.

 

NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.                                       CERTAIN DEFINITIONS .

 

As used in this Agreement, the following terms have the respective meanings set forth below.

 

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 affiliated to the specified Person. For purposes of this definition, (i) natural persons shall not be deemed to be Affiliates of each other, (ii) no member of the Malone Group shall be deemed to be an Affiliate of Liberty, Splitco, Expedia or Diller, (iii) none of Liberty, Splitco, Expedia or Diller shall be deemed to be an Affiliate of any of such other persons, (iv) none of Liberty Media Corporation, Liberty Broadband Corporation, Liberty TripAdvisor Holdings, Inc., Discovery Communications Inc., Starz, CommerceHub, Inc. or Liberty Global plc and, following the Split-Off, Liberty, shall be deemed to be an Affiliate of Splitco or any member of the Malone Group and (v) IAC/InterActiveCorp (“ IAC ”) shall not be deemed to be an Affiliate of Expedia or Diller.

 

Agreement ” has the meaning set forth in the Preamble.

 

Beneficial Owner ” and “ Beneficial Ownership ” has the meaning given such term in Rule 13d-3 under the Exchange Act and a Person’s beneficial ownership of Capital Stock which is then entitled to vote generally in the election of directors 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 sixty (60) days or thereafter, upon the conversion, exchange or exercise of any warrants, options, rights or other securities issued by a Person, (ii) no Person shall be deemed to beneficially own any Equity solely as a result of such Person’s execution of any Transaction Instrument (including by virtue of holding a proxy with respect to any shares) or such Person’s filing of any reports, forms or schedules with the Securities and Exchange Commission in connection with any of the matters contemplated hereby or thereby and (iii) no member of the Malone Group will be deemed to beneficially own any Equity held by The Tracy M. Amonette Trust A (also known as the Tracy L. Neal Trust A) or The Evan D. Malone Trust A, unless and until a member of the Malone Group exercises its right of substitution and acquires such Equity from The Tracy M. Amonette Trust A (also known as the Tracy L. Neal Trust A) or The Evan D. Malone Trust A, respectively.

 

Board ” means the board of directors of Splitco.

 

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Business Day means 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.

 

Certificate ” means the Amended and Restated Certificate of Incorporation of Splitco, as in effect at the Effective Time (as the same may be amended from time to time).

 

Common Stock Directors ” shall have the meaning assigned to it in the Certificate.

 

Contract ” means any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license.

 

Convertible Securities ” means (x) any securities of a Person that are convertible into or exercisable or exchangeable for any shares of any class or series of common stock of such Person or any other Person, whether upon conversion, exercise, or exchange, pursuant to antidilution provisions of such securities or otherwise (other than, for purposes of this Agreement, the Class B common stock of Expedia or the Splitco Series B Stock), and (y) any subscriptions, options, rights, warrants or calls (or any similar securities) or agreements or arrangements of any character, in each case to acquire common stock, preferred stock or other Capital Stock.

 

Covered Series A Shares ” has the meaning set forth in Section 4(b).

 

Covered Series B Shares ” has the meaning set forth in Section 4(b).

 

Covered Shares ” has the meaning set forth in the Recitals.

 

Diller ” has the meaning set forth in the Preamble.

 

Diller Assignment ” has the meaning set forth in the Recitals.

 

Effective Time ” has the meaning set forth in the Transaction Agreement.

 

Equity ” means any and all shares of Capital Stock of the applicable Person and Convertible Securities of such Person.

 

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

 

Excluded Matter ” means any matter submitted to a vote of the stockholders of Splitco or by which the stockholders of Splitco may act by written consent to (x) approve any agreement or transaction (i) between Splitco or any of its Affiliates, on the one hand, and Diller, IAC or any of their respective Affiliates, on the other hand, or (ii) between Splitco or any of its

 

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Affiliates, on the one hand, and Expedia or its Subsidiaries, on the other hand or (y) remove any Series B Director in accordance with Article V, Section D of the Certificate.

 

Expedia ” means Expedia, Inc., a Delaware corporation and any successor by merger, consolidation or other business combination.

 

Expedia Board ” means the board of directors of Expedia.

 

Expedia Board Voting Determination ” has the meaning set forth in the Certificate.

 

Expedia Reimbursement Agreement ” has the meaning set forth in the Transaction Agreement.

 

Governance Agreement ” has the meaning set forth in the Recitals.

 

Governance Agreement Assignment ” has the meaning set forth in the Recitals.

 

Group ” shall have the meaning assigned to it in Section 13(d)(3) of the Exchange Act.

 

IAC ” has the meaning set forth in this Section 1 in the definition of “Affiliate.”

 

Letter Agreement ” means that certain letter agreement from Diller to Liberty, to be delivered in connection with the Split-Off pursuant to the last sentence of Section 5.1 of the Stockholders Agreement.

 

Liberty ” has the meaning set forth in the Recitals.

 

LVNTA ” means the Series A Liberty Ventures common stock, par value $0.01 per share, of Liberty.

 

LVNTB ” means the Series B Liberty Ventures common stock, par value $0.01 per share, of Liberty.

 

Malone ” has the meaning set forth in the Preamble.

 

Malone Group ” has the meaning set forth in the Preamble.

 

Mrs. Malone ” has the meaning set forth in the Preamble.

 

NASDAQ ” means The Nasdaq Global Select Market.

 

Permitted Assigns ” has the meaning set forth in the Transaction Agreement.

 

Permitted Transferee ” has the meaning set forth in Section 3.

 

Person ” means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated

 

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organization, government or any agency or political subdivisions thereof or any Group comprised of two or more of the foregoing.

 

Proxy ” has the meaning set forth in Section 2(a)(i).

 

Proxy Swap Termination Date ” has the meaning assigned to it in the Transaction Agreement.

 

Removal Consent ” has the meaning set forth in the Transaction Agreement.

 

Series B Director ” shall have the meaning assigned to it in the Certificate.

 

Splitco ” means Liberty Expedia Holdings, Inc., a Delaware corporation and any successor by merger, consolidation or other business combination.

 

Splitco Bylaws ” means the amended and restated bylaws of Splitco as in effect at the Effective Time, as the same may be amended from time to time in compliance with the Certificate and such bylaws.

 

Splitco Common Stock ” has the meaning set forth in the Recitals.

 

Splitco Director Determination ” has the meaning set forth in the Certificate.

 

Splitco Proxy ” has the meaning set forth in the Recitals.

 

Splitco Series A Stock ” means Series A common stock, par value $0.01 per share, of Splitco and any securities of Splitco issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification, recapitalization, exchange or other similar reorganization.

 

Splitco Series B Stock ” means Series B common stock, par value $0.01 per share, of Splitco and any securities of Splitco issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification, recapitalization, exchange or other similar reorganization (other than Splitco Series A Stock issued upon conversion of Splitco Series B Stock).

 

Split-Off ” has the meaning set forth in the Recitals.

 

Stockholders Agreement ” has the meaning set forth in the Recitals.

 

Stockholders Agreement Amendment ” has the meaning set forth in the Recitals.

 

Stockholders Agreement Assignment ” has the meaning set forth in the Recitals.

 

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.

 

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Temporary Disability ” means a temporary mental or physical disability (as determined by either of Mrs. Malone or a physician selected by Diller and reasonably satisfactory to Malone, Mrs. Malone or a personal representative designated by Malone) preventing Malone from (i) voting Covered Shares or taking action by written consent with respect to Covered Shares on any Excluded Matter (including, for the avoidance of doubt, executing and delivering a Removal Consent or otherwise voting the Covered Shares in respect of any proposed removal of any Series B Directors), or (ii) engaging reasonably with Diller in discussions regarding the composition of the Expedia Board, in any case where such mental or physical disability occurs during the period of 30 days prior to any meeting of stockholders of Expedia or, with respect to any meeting of stockholders of Expedia at which the election of directors is to take place, between the date the Splitco Board has made an Expedia Board Voting Determination or Splitco Director Determination and the date of the upcoming meeting of the Expedia stockholders to which such Expedia Board Voting Determination or Splitco Board Determination relates.

 

Transaction Agreement ” has the meaning set forth in the Recitals.

 

Transaction Instrument ” means any of this Agreement, the Certificate, the Splitco Bylaws, the Diller Assignment, the Stockholders Agreement, the Stockholders Agreement Assignment, the Stockholders Agreement Amendment, the Letter Agreement, the Governance Agreement, the Governance Agreement Assignment, the Transaction Agreement, and the other agreements contemplated by the matters contemplated hereby and thereby.

 

2.                                       PROXY AND OTHER GOVERNANCE MATTERS .

 

(a)                                  Irrevocable Proxy Granted to Diller .

 

(i)                                      Effective immediately following the Effective Time until the Proxy Swap Termination Date, but subject to the terms and conditions of this Agreement, including this Section 2, and the other Transaction Instruments, Diller is hereby irrevocably appointed and constituted as proxy with respect to the Covered Shares and is granted the sole and exclusive power to vote or act by consent with respect to the Covered Shares, on all matters submitted to a vote of Splitco’s stockholders or by which Splitco’s stockholders may act by written consent that are not Excluded Matters, pursuant to this conditional proxy (which proxy is irrevocable and coupled with an interest for purposes of Section 212 of the General Corporation Law of the State of Delaware) (the “ Proxy ”).  For the avoidance of doubt, Diller’s right to vote or act by written consent with respect to Covered Shares referred to herein will be deemed the right to vote or act by written consent with respect to one or both series of Covered Shares entitled to vote or consent in writing with respect to any particular matter as provided in the Certificate.

 

(ii)                                   Notwithstanding anything to the contrary set forth herein, the Proxy shall not be applicable in connection with any vote or action by written consent on any matter that is an Excluded Matter and Diller will have no right to vote or act by written consent with respect to the Covered Shares, with the voting of or right to act by written consent with respect to such Covered Shares on such matters to remain with (A) the Malone Group with respect to any of the matters referred to in clause (x) of the definition of

 

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Excluded Matter and (B) Malone, or in the event of Malone’s Temporary Disability, with Mrs. Malone, with respect to any of the matters referred to in clause (y) of the definition of Excluded Matters, and the Malone Group shall take and/or refrain from taking all action necessary to ensure that no Person other than Malone or Mrs. Malone shall vote or have the power to vote the Covered Shares with respect to any matter referred to in clause (y) of the definition of Excluded Matters.  Any attempt by Diller to vote the Covered Shares on any Excluded Matter shall be void ab initio.

 

(iii)                                Prior to its termination on the Proxy Swap Termination Date, the Proxy will be binding upon each member of the Malone Group and such member’s respective Permitted Assigns.  The Malone Group represents that any and all other proxies heretofore given in respect of the Covered Shares are revocable, and that such other proxies either have been revoked or are hereby revoked.

 

(iv)                               Notwithstanding anything to the contrary set forth herein, the Proxy is personal to Diller and may not be assigned by Diller by operation of law or otherwise and may not be used by Diller’s successors.

 

(v)                                  Notwithstanding anything to the contrary set forth herein, and without affecting the termination of the Proxy on the Proxy Swap Termination Date, the 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 Covered Shares or engaging reasonably with Malone, or receiving or following instruction from Malone, as to the matters contemplated by this Section 2 (as determined by a physician selected by Malone (on behalf of the Malone Group) and reasonably acceptable to Diller, his spouse or a personal representative designated by Diller), and during such period of disability, Malone (on behalf of the Malone Group) will be entitled to vote or consent in writing with respect to all Covered Shares, regardless of any restriction specified herein with respect to such Covered Shares. The Proxy will be reinstated (unless sooner terminated on the Proxy Swap Termination Date) upon Diller ceasing to be so disabled (as determined by a physician selected by Diller and reasonably acceptable to Malone (on behalf of the Malone Group)).

 

(vi)                               Notwithstanding anything to the contrary set forth in this Agreement, the Proxy shall remain in full force and effect and be enforceable (A) against any member of the Malone Group’s estate, executor or personal representative to the fullest extent and in the manner set forth in this Agreement and (B) irrespective of the death of one or both of Malone and/or Mrs. Malone.

 

(b)                                  Voting on Certain Matters .  Subject to Sections 2(a)(ii) and 2(d), in the event that any of the matters specified in clauses (i) through (iv) below is presented to the stockholders of Splitco for approval or the stockholders of Splitco propose to act by written consent on any such matter, Malone (on behalf of the Malone Group) and Diller will seek to agree upon how the Covered Shares will be voted on such matter.  If Malone and Diller reach an agreement as to how the Covered Shares are to be voted on such matter, Diller will vote the Covered Shares entitled to vote thereon as so agreed.  In the event Malone and Diller do not agree on how the Covered Shares are to be voted on such matter, Diller will be required to vote and will vote all

 

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Covered Shares entitled to vote thereon against such proposal.  The foregoing provisions will be applicable to the following matters:

 

(i)                                      any recapitalization, reclassification or other change in the capital structure of Splitco or the voluntary commencement of any liquidation, dissolution or winding up of Splitco;

 

(ii)                                   any merger or other business combination involving Splitco or its Subsidiaries or any sale of all or substantially all of Splitco’s assets;

 

(iii)                                the creation of any new class or series of Splitco Capital Stock or the issuance (other than pursuant to options, warrants or other rights to acquire shares of Splitco Series A Stock or Splitco Series B Stock outstanding immediately following the Effective Time) of Splitco Common Stock (including to the extent required for NASDAQ purposes); and

 

(iv)                               any amendment of the Certificate or Splitco’s bylaws.

 

(c)                                   Election of Splitco Directors; Vacancies .  With respect to the election of or the filling of any vacancy with respect to Series B Directors, Diller will vote all Covered Series B Shares as he determines in his sole discretion.  With respect to the election of Common Stock Directors, Diller will vote all Covered Shares entitled to vote thereon in favor of the Recommended Slate (as defined in the Transaction Agreement) of nominees for election as Common Stock Directors at each meeting of Splitco’s stockholders at which Common Stock Directors are to be elected.

 

(d)                                  Class Vote .  In the event that there is a proposal for any action which requires the approval of the holders of shares of Splitco Series B Stock, voting as a separate class, other than the election of, removal of or the filling of a vacancy with respect to Series B Directors, Diller will, with respect to such class vote, vote all Covered Series B Shares entitled to vote thereon as instructed by Malone (on behalf of the Malone Group) or, to the extent such matter is also an Excluded Matter (1) referred to in clause (x) of the definition thereof, voting of the Covered Series B Shares on such Excluded Matter will remain with the Malone Group and (2) referred to in clause (y) of the definition thereof, voting of the Covered Series B Shares on such Excluded Matter will remain with Malone or in the event of his Temporary Disability, Mrs. Malone; provided , that to the extent such proposed action (i) would result in the decrease in the voting power of a share of Splitco Series B Stock as compared to a share of Splitco Series A Stock (including, for example, as a result of (x) a decrease in the number of votes per share attributable to the Splitco Series B Stock or (y) any required conversion of Splitco Series B Stock into Splitco Series A Stock) or (ii) would change the process, or any other term, related to the election of, removal of, filling of a vacancy with respect to or voting power of Series B Directors, Diller will, with respect to such class vote, vote all such Covered Series B Shares entitled to vote thereon against such proposal.

 

(e)                                   Removal of Common Stock Directors .  In the event that there is a proposal to remove any Common Stock Director from the Board, Diller will vote all Covered Shares entitled to vote thereon as instructed by Malone (on behalf of the Malone Group) or, in the event of any

 

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Temporary Disability of Malone, as instructed by Mrs. Malone.

 

(f)                                    Cooperation .  Diller will (i) vote (or act or not act by written consent with respect to) all Covered Shares subject to the Proxy, (ii) attend all meetings of Splitco stockholders in person or by proxy for purposes of obtaining a quorum, and (iii) execute or not execute all written consents in lieu of meetings, as applicable, in each case in accordance with the terms of the Proxy and this Agreement.  The parties acknowledge and agree that all Covered Shares will be voted in accordance with the provisions of this Agreement.

 

3.                                       TRANSFER RESTRICTIONS .

 

(a)                                  Transfer Restrictions .  Until the Proxy Swap Termination Date, the Malone Group will not sell, transfer or otherwise dispose of any Covered Shares, or any of the voting rights with respect thereto (including by way of a pledge, by tendering Covered Shares into a tender or exchange offer or by conversion of Covered Series B Shares into Covered Series A Shares at the option of the holder), or any interest in such Covered Shares or voting rights and, in the case of any Covered Shares not owned of record by the Malone Group, will cause the applicable record owner or owners not to do any of the foregoing; provided , that, the Malone Group may sell, transfer or otherwise dispose of any Covered Shares pursuant to any sale, transfer, Contract or other disposition (which, for the avoidance of doubt, excludes any pledge or conversion) to an acquiror that agrees to take such Covered Shares subject to this Agreement and that is acceptable to Diller in his sole discretion (a “ Permitted Transferee ”); provided , further , that the death of any member of the Malone Group shall itself not be a sale, transfer or disposition of any Covered Shares as long as a member of the Malone Group or a Permitted Assign continues to own all the Covered Shares.

 

(b)                                  Permitted Pledge .  Notwithstanding the foregoing Section 3(a) , the Malone Group will be permitted to pledge Covered Series A Shares to a bona fide financial institution (so long as such pledge does not prevent or otherwise restrict Diller from voting such shares pursuant to the Proxy and this Agreement prior to any foreclosure of such pledge, but shall not be permitted to pledge any other Covered Shares.  Malone (on behalf of the Malone Group) will take such actions as are reasonably necessary to enable Diller to vote the Covered Series A Shares subject to any such pledge prior to any foreclosure (including, for the avoidance of doubt, delivering instructions to the pledgee or other custodian with respect to Diller’s right to vote such shares).

 

4.                                       REPRESENTATIONS AND WARRANTIES OF THE MALONE GROUP .

 

Each member of the Malone Group hereby represents and warrants to Diller that:

 

(a)                                  Authority for this Agreement .  (i) Each such member of the Malone Group has the power and authority to enter into this Agreement and to carry out his or her obligations hereunder, (ii) the execution and delivery of this Agreement by such member of the Malone Group has been duly authorized by all necessary action on the part of such member of the Malone Group and no other proceedings on the part of such member of the Malone Group are necessary to authorize this Agreement, (iii) this Agreement has been duly executed and delivered by such member of the Malone Group and constitutes a valid and binding obligation of such member of the Malone Group, and, assuming this Agreement constitutes a valid and binding

 

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obligation of Diller, is enforceable against such member of the Malone Group in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity), (iv) neither the execution, delivery or performance of this Agreement by such member of the Malone Group constitutes a breach or violation of or conflicts with any material agreement to which such member of the Malone Group is a party and (v) none of such material agreements would impair in any material respect the ability of such member of the Malone Group to perform his or her obligations hereunder.

 

(b)                                  Ownership of Shares .  As of the date hereof, the Malone Group is the Beneficial Owner of [ · ] shares of LVNTA with respect to which [ · ] number of shares of Splitco Series A Stock will be issued as of the Effective Time (such shares of Splitco Series A Stock so issued, together with any other shares of Splitco Series A Stock that constitute Covered Shares, the “ Covered Series A Shares ”) and the Beneficial Owner of [ · ] shares of LVNTB with respect to which [ · ] number of shares of Splitco Series B Stock will be issued as of the Effective Time (such shares of Splitco Series B Stock so issued, together with any other shares of Splitco Series B Stock that constitute Covered Shares, the “ Covered Series B Shares ”), in each case, pursuant to the Split-Off.  The Covered Shares, as of the Effective Time, will be free and clear of all pledges, liens, proxies, claims, charges, security interests, preemptive rights, voting trusts, voting agreements, options, rights of first offer or refusal and any other encumbrances whatsoever, other than encumbrances created by this Agreement or any other Transaction Instrument, any restrictions on transfer under applicable federal and state securities laws and, with respect to any Covered Series A Shares, any encumbrances, as described on Schedule 4(b)  hereto.  As of the Effective Time, the Malone Group will have the sole authority to direct the voting of the Covered Shares and grant the Proxy in accordance with the provisions of this Agreement and the sole power of disposition with respect to the Covered Shares (subject to the restrictions created by this Agreement or any other Transaction Instrument and any restrictions on transfer under applicable federal and state securities laws).  Except for the Covered Shares and Convertible Securities of Splitco convertible solely into Covered Shares, in each case, received pursuant to the Split-Off, the Malone Group will not Beneficially Own any other Equity of Splitco or any securities of any other Person convertible into or exchangeable for Equity of Splitco, in each case as of the Effective Time.

 

5.                                       REPRESENTATIONS AND WARRANTIES OF DILLER . Diller hereby represents and warrants to the Malone Group that (a) Diller has the power and authority to enter into this Agreement and the Diller Assignment and to carry out his obligations hereunder and thereunder, (b) the execution and delivery of this Agreement and the Diller Assignment by Diller has been duly authorized by all necessary action on the part of Diller and no other proceedings on the part of Diller are necessary to authorize this Agreement or the Diller Assignment, (c) this Agreement has been duly executed and delivered by Diller and constitutes a valid and binding obligation of Diller, and, assuming this Agreement constitutes a valid and binding obligation of the Malone Group, is enforceable against Diller in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity), (d) the Diller Assignment has been duly executed and delivered by Diller and constitutes a valid and binding obligation of Diller, and, assuming the Diller Assignment constitutes a valid and binding obligation of Splitco, is enforceable against Diller in accordance with its terms (subject to applicable bankruptcy,

 

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insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity), (e) neither the execution, delivery or performance of this Agreement or the Diller Assignment by Diller constitutes a breach or violation of, or conflicts with any provision of any material agreement to which Diller is a party, and (f) none of such material agreements would impair in any material respect the ability of Diller to perform his obligations hereunder or thereunder.

 

6.                                       TERM; TERMINATION .  This Agreement will terminate upon the Proxy Swap Termination Date, without any requirement to give notice, whereupon the Proxy will be immediately revoked (unless notice of termination is required pursuant to the Transaction Agreement, in which case this Agreement will terminate on the Proxy Swap Termination Date as determined thereby) and the right to vote the Covered Shares subject to the Proxy will revert to and be vested solely in the Malone Group or any Permitted Assign; provided , however , that , nothing in this Section 6 shall relieve any party of any liability for a breach of this Agreement prior to such termination.

 

7.                                       MISCELLANEOUS .

 

(a)                                  Remedies .  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.  All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.  In the event that a party institutes any suit or action under this Agreement, including for specific performance or injunctive relief pursuant to this Section 7, the prevailing party in such proceeding shall be entitled to receive the costs incurred thereby in conducting the suit or action, including reasonable fees and expenses of counsel, accountants, consultants and other experts.

 

(b)                                  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 actions as the other party may reasonably request in order to evidence or effectuate the matters contemplated hereby and to otherwise carry out the intent of the parties hereunder.

 

(c)                                   Expenses .  Except as otherwise provided in any Transaction Instrument, all costs and expenses incurred in connection with the matters contemplated by this Agreement shall be paid by the party incurring such costs and expenses.

 

(d)                                  Governing Law; Jurisdiction and Venue .  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. The parties hereto hereby irrevocably submit to the jurisdiction of the Delaware Court of Chancery or, in the event (but only in the event) that such court does not

 

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have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the matters contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in the Delaware Court of Chancery, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware, or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined exclusively in the Delaware Court of Chancery, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware. The parties hereto hereby consent to and grant the Delaware Court of Chancery, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, the United States District Court for the District of Delaware, jurisdiction over the person of such parties and, to the extent permitted by Law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided herein or in such other manner as may be permitted by Law shall be valid and sufficient service thereof. 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 PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

 

(e)                                   Assignment; Successors .  Except as otherwise provided herein, neither this Agreement nor any of the rights or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise (except, in the case of a member of the Malone Group, to a Permitted Assign or Permitted Transferee) by a 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 permitted assigns.  All authority conferred herein shall survive the death of any member of the Malone Group and in the event of any member of the Malone Group’s death, any rights or obligation of the Malone Group or such member thereof under this Agreement shall be for the benefit of and binding upon the estate, executor(s) and personal representative(s) of such member of the Malone Group.

 

(f)                                    Entire Agreement; No Third-Party Beneficiaries .  Except as otherwise expressly set forth herein or therein, this Agreement, the other Transaction Instruments and the Expedia Reimbursement Agreement, including any exhibits and schedules hereto or thereto, (i) 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 and (ii) are not intended to confer any rights, benefits, remedies, obligations or liabilities upon any Person other than the parties hereto and their respective successors and permitted assigns; provided , that, Splitco is deemed to be a third-party beneficiary of the rights and obligations of the parties set forth in Section 2 of this Agreement

 

12



 

and will be entitled to enforce the rights and obligations of the parties under such Section 2 as if it were a party hereto.

 

(g)                                   Notices .  Any notices or other communications required or permitted under, or otherwise in connection with this Agreement, shall be in writing and shall be deemed to have been duly given (A) when delivered in person, (B) upon transmission by electronic mail or facsimile transmission as evidenced by confirmation of transmission to the sender (but only if followed by transmittal of a copy thereof by (x) national overnight courier or (y) hand delivery with receipt, in each case, for delivery by the second (2 nd ) Business Day following such electronic mail or facsimile transmission), (C) on receipt after dispatch by registered or certified mail, postage prepaid and addressed, or (D) on the next Business Day if transmitted by national overnight courier, in each case as set forth to the parties as set forth below:

 

If to the Malone Group, to:

 

John C. Malone

c/o Liberty Media Corporation

12300 Liberty Boulevard

Englewood, CO 80112

Facsimile:

E-Mail:

 

with a copy (which shall not constitute notice) to:

 

Sherman & Howard L.L.C.

633 Seventeenth Street

Suite 3000

Denver, CO 80202

Attention:                                          Steven D. Miller

Facsimile:                                          (303) 298-0940

E-Mail:                                                        smiller@shermanhoward.com

 

If to Diller, to:

 

c/o Arrow Investments, Inc.

555 West 18th Street

New York, NY 10011

Attention:                                          Barry Diller

Facsimile:

E-Mail:

 

with a copy (which shall not constitute notice) to:

 

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, NY 10019

Attention:                                          Andrew J. Nussbaum, Esq.

 

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Facsimile:                                          (212) 403-2000

E-mail:                                                         AJNussbaum@wlrk.com

 

or such other address, email address or facsimile number as such party may hereafter specify by like notice to the other parties hereto.

 

(h)                                  Severability .  Whenever possible, each provision (or portion thereof) of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision (or portion thereof) of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, then (subject to Section 6 hereof) 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.

 

(i)                                      Amendments and Waivers .  This Agreement may not be amended, modified, or waived except in a written instrument executed by the parties; provided , that no amendment or modification of the provisions of Section 2 hereof, or any waiver of any right or obligation thereunder, will be effective unless consented to in writing by Splitco. 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.

 

(j)                                     No Implied Waivers .  No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein or made pursuant hereto.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by any party to exercise any right or privilege hereunder shall be deemed a waiver of such party’s rights or privileges hereunder or shall be deemed a waiver of such party’s rights to exercise the same at any subsequent time or times hereunder.

 

(k)                                  Interpretation .  To the extent any consent of, or action or instruction by, the Malone Group is required by this Agreement, the consent, action or instruction by Malone, or, in the event (x) Malone should become Disabled (as defined in the Transaction Agreement) or suffer from a Temporary Disability, Mrs. Malone, or (y) of Malone’s death, the executor of Malone’s estate or personal representative following Malone’s death, or any Permitted Assign or Permitted Transferee of Malone, shall be deemed to be the consent, action or instruction by the Malone Group.  When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated.  The headings contained in this Agreement are for reference purposes 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”.  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.  When this Agreement contemplates a certain number of securities, whether Splitco Common Stock or otherwise, as of a particular date, such number of securities shall be deemed

 

14



 

to be appropriately adjusted to account for stock splits, dividends, recapitalizations, combinations of shares or other change affecting the such securities. In the event of any ambiguity or claimed ambiguity in any provision of a Subject Instrument (as defined in the Transaction Agreement), such provision shall be construed in light of the purpose acknowledged and agreed by the parties that Diller’s rights and interests, including without limitation with respect to the control of Expedia by virtue of the Splitco Proxy, subject to the terms thereof, shall not be affected or changed by any of the Subject Instruments, except to the extent specifically set forth therein.

 

(l)                                      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.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each of the undersigned has executed this agreement as of the date first above written.

 

 

 

 

 

 

John C. Malone

 

 

 

 

 

Leslie Malone

 

 

 

 

 

Barry Diller

 

 

[Signature Page to Malone Proxy]

 


 



Exhibit 10.15

 

AGREED FORM

 

ASSIGNMENT AGREEMENT

 

This Assignment Agreement, dated as of [    ] , (this “ Agreement ”), is by and between Barry Diller, an individual (“ Diller ”), and Liberty Expedia Holdings, Inc., a Delaware corporation (“ Splitco ”).

 

WHEREAS, Liberty Interactive Corporation, a Delaware corporation (“ Liberty ”), has determined to engage in the Split-Off (as defined in the Transaction Agreement) and has received the approval of the holders of Liberty Ventures Series A common stock, par value $0.01 per share, and Liberty Ventures Series B common stock, par value $0.01 per share, to redeem a portion of such shares in order to effect the Split-Off;

 

WHEREAS, pursuant to Section 3.3 of that certain Amended and Restated Stockholders Agreement, dated as of December 20, 2011 (the “ Stockholders Agreement ”), Liberty granted Diller the Liberty Proxy (as defined in the Stockholders Agreement) (as assigned to Splitco pursuant to the Stockholders Agreement Assignment, the “ Splitco Proxy ”);

 

WHEREAS, Liberty, Splitco, Diller, and the Malone Group have entered into a transaction agreement, dated as of March 24, 2016, as amended and restated as of September 22, 2016, and as may be further amended in accordance with the terms thereof (the “ Transaction Agreement ”), pursuant to which the parties thereto set forth certain agreements in connection with the Split-Off and the other Transaction Instruments;

 

WHEREAS, as provided in and in accordance with the terms of the Transaction Agreement, subject to the completion of the Split-Off, prior to or concurrently with the execution of this Agreement, (i) Diller, Splitco and Liberty will enter into an Assignment and Assumption of Governance Agreement with Expedia (the “ Governance Agreement Assignment ”), pursuant to which, in accordance with Section 5.01 of the Amended and Restated Governance Agreement, dated as of December 20, 2011 (the “ Governance Agreement ”), among other things, all rights and obligations of Liberty under the Governance Agreement will be assigned to Splitco and Splitco will assume such rights and obligations and Expedia will consent to such assignment, (ii) Liberty, Diller and Splitco will enter into an Assignment and Assumption of Stockholders Agreement (the “ Stockholders Agreement Assignment ”), pursuant to which, in accordance with Section 5.1 of the Stockholders Agreement, all rights and obligations of Liberty under the Stockholders Agreement will be assigned to Splitco, Splitco will assume such rights and obligations and Diller will consent to such assignment, (iii) Splitco and Diller will enter into Amendment No. 1 to Stockholders Agreement (the “ Stockholders Agreement Amendment ”) to provide for certain waivers under the Stockholders Agreement, as assigned pursuant to the Stockholders Agreement Assignment, and agreements relating to the voting of Common Shares Beneficially Owned by such parties or with respect to which such parties have the power to vote, and (iv) Diller, John C. Malone (“ Malone ”) and Leslie Malone (“ Mrs. Malone ” and together with Malone, the “ Malone Group ”) will enter into a Proxy and Voting Agreement (the “ Malone Proxy ”), pursuant to which the Malone Group will until the Proxy Swap Termination Date grant an irrevocable proxy to Diller to vote, subject to certain limitations, the Covered Shares; and

 

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WHEREAS, in connection with the Malone Proxy, Diller and Splitco are entering into this Agreement in order to assign the Splitco Proxy from Diller to Splitco, subject to certain limitations, and to provide for the other matters as set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.                                       CERTAIN DEFINITIONS .

 

As used in this Agreement, the following terms have the respective meanings set forth below.

 

Agreement ” has the meaning set forth in the Preamble.

 

Amended Stockholders Agreement ” means the Stockholders Agreement, as amended by the Stockholders Agreement Assignment and the Stockholders Agreement Amendment.

 

Assignment ” has the meaning set forth in Section 2(a)(i).

 

Beneficial Owner ” and “ Beneficial Ownership ” has the meaning given such term in Rule 13d-3 under the Exchange Act and a Person’s beneficial ownership of Common Shares or any shares of Capital Stock of Expedia which are then entitled to vote generally in the election of directors 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 sixty (60) days or thereafter, upon the conversion, exchange or exercise of any warrants, options, rights or other securities issued by Expedia and (ii) no Person shall be deemed to beneficially own any Equity solely as a result of such Person’s execution of any Transaction Instrument (including by virtue of holding a proxy with respect to any shares) or such Person’s filing of any reports, forms or schedules with the Securities and Exchange Commission in connection with any of the matters contemplated hereby or thereby, it being understood that for purposes of this definition Diller does not Beneficially Own the Common Shares subject to the Splitco Proxy.

 

Business Day means 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.

 

Certificate ” means the Amended and Restated Certificate of Incorporation of Splitco, as in effect at the Effective Time (as the same may be amended from time to time).

 

Common Shares ” has the meaning set forth in the Stockholders Agreement.

 

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Covered Shares ” has the meaning ascribed to such term in the Malone Proxy.

 

Diller ” has the meaning set forth in the Preamble.

 

Effective Time ” has the meaning set forth in the Transaction Agreement.

 

Equity ” has the meaning given such term in the Amended Stockholders Agreement.

 

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

 

Expedia ” means Expedia, Inc., a Delaware corporation, and any successor by merger, consolidation or other business combination.

 

Expedia Reimbursement Agreement ” has the meaning set forth in the Transaction Agreement.

 

Governance Agreement ” has the meaning set forth in the Recitals.

 

Governance Agreement Assignment ” has the meaning set forth in the Recitals.

 

Group ” shall have the meaning assigned to it in Section 13(d)(3) of the Exchange Act.

 

Letter Agreement ” means that certain letter agreement from Diller to Liberty, to be delivered in connection with the Split-Off pursuant to the last sentence of Section 5.1 of the Stockholders Agreement.

 

Liberty ” has the meaning set forth in the Recitals.

 

Malone ” has the meaning set forth in the Recitals.

 

Malone Group ” has the meaning set forth in the Recitals.

 

Malone Proxy ” has the meaning set forth in the Recitals.

 

Mrs. Malone ” has the meaning set forth in the Recitals.

 

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.

 

Proxy Swap Termination Date ” has the meaning assigned to it in the Transaction Agreement.

 

Splitco ” has the meaning set forth in the Preamble.

 

3



 

Splitco Bylaws ” means the amended and restated bylaws of Splitco as in effect at the Effective Time, as the same may be amended from time to time in compliance with the Certificate and such bylaws.

 

Splitco Proxy ” has the meaning set forth in the Recitals.

 

Split-Off ” has the meaning set forth in the Recitals.

 

Splitco Stockholder Group ” means Splitco and those Subsidiaries (as defined in the Amended Stockholders Agreement) of Splitco that, from time to time, hold Equity subject to the Amended Stockholders Agreement.

 

Stockholders Agreement ” has the meaning set forth in the Recitals.

 

Stockholders Agreement Amendment ” has the meaning set forth in the Recitals.

 

Stockholders Agreement Assignment ” has the meaning set forth in the Recitals.

 

Transaction Agreement ” has the meaning set forth in the Recitals.

 

Transaction Instrument ” means any of this Agreement, the Certificate, the Splitco Bylaws, the Malone Proxy, the Stockholders Agreement, the Stockholders Agreement Assignment, the Stockholders Agreement Amendment, the Letter Agreement, the Governance Agreement, the Governance Agreement Assignment, the Transaction Agreement and the other agreements contemplated by the matters contemplated hereby and thereby.

 

2.                                       ASSIGNMENT OF SPLITCO PROXY .

 

(a)           Assignment .

 

(i)            Effective immediately following the Effective Time until the Proxy Swap Termination Date, subject to the terms and conditions of this Agreement and the other Transaction Instruments, Diller irrevocably assigns all of his rights to vote Common Shares under Section 3.3 of the Stockholders Agreement, as amended by the Stockholders Agreement Assignment, to Splitco, and Splitco accepts such assignment on the terms and conditions set forth herein (the “ Assignment ”).

 

(ii)           Notwithstanding anything to the contrary set forth herein, the Assignment is personal to Splitco and may not be transferred or further assigned by Splitco without the prior written consent of Diller (except by operation of law pursuant to a merger whose purpose is not to avoid the provisions of this Agreement).

 

(b)           Voting Agreement .  Splitco will (i) vote or not vote (or act or not act by written consent with respect to) all Common Shares Beneficially Owned by Splitco or any member of the Splitco Stockholder Group (or with respect to which Splitco has the power to vote) subject to the terms of the Assignment and this Agreement, the Transaction Agreement, the Certificate and the Amended Stockholders Agreement, (ii) cause a representative to attend all meetings of Expedia stockholders in person or be present by proxy for purposes of obtaining a quorum

 

4



 

(except as otherwise required pursuant to the terms of Section 3(d) of the Transaction Agreement and Article V, Section C of the Certificate), and (iii) execute all written consents in lieu of meetings of Expedia stockholders, as applicable, in each case in accordance with and subject to the terms of the Assignment and this Agreement, the Transaction Agreement, the Certificate and the Amended Stockholders Agreement.

 

3.             REPRESENTATIONS AND WARRANTIES OF SPLITCO .  Splitco hereby represents and warrants to Diller that (a) it is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and it has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunder, (b) the execution and delivery of this Agreement by Splitco has been duly authorized by all necessary action on the part of Splitco and no other proceedings on the part of Splitco are necessary to authorize this Agreement, (c) this Agreement has been duly executed and delivered by Splitco and constitutes a valid and binding obligation of Splitco, and, assuming this Agreement constitutes a valid and binding obligation of Diller, is enforceable against Splitco in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity), (d) neither the execution, delivery or performance of this Agreement by Splitco constitutes a breach or violation of or conflicts with its certificate of incorporation or by-laws (or similar governing documents) or any material agreement to which it is a party and (e) none of such material agreements would impair in any material respect the ability of Splitco to perform its obligations hereunder.

 

4.             REPRESENTATIONS AND WARRANTIES OF DILLER . Diller hereby represents and warrants to Splitco that (a) Diller has the power and authority to enter into this Agreement and to carry out his obligations hereunder, (b) the execution and delivery of this Agreement by Diller has been duly authorized by all necessary action on the part of Diller and no other proceedings on the part of Diller are necessary to authorize this Agreement, (c) this Agreement has been duly executed and delivered by Diller and constitutes a valid and binding obligation of Diller, and, assuming this Agreement constitutes a valid and binding obligation of Splitco, is enforceable against Diller in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity), (d) neither the execution, delivery or performance of this Agreement by Diller constitutes a breach or violation of or conflicts with any provision of any material agreement to which Diller is a party and (e) none of such material agreements would impair in any material respect the ability of Diller to perform his obligations hereunder.

 

5.             TERM; TERMINATION .  This Agreement will terminate upon the Proxy Swap Termination Date, without any requirement to give notice, whereupon the Assignment will be immediately revoked (unless notice of termination is required pursuant to the Transaction Agreement, in which case this Agreement will terminate on the Proxy Swap Termination Date as determined thereby), and the right to vote the Expedia shares subject to the Assignment will revert to and be vested solely in Diller in accordance with and subject to the terms and conditions of the Amended Stockholders Agreement; provided , however , that , nothing in this Section 5 shall relieve any party of any liability for a breach of this Agreement prior to such termination.

 

6.             SPLITCO COVENANT TO COMPLY .  Splitco hereby covenants to Diller that it will

 

5



 

comply with the Proxy Swap Certificate and Bylaw Provisions (as defined in the Transaction Agreement).

 

7.                                       MISCELLANEOUS .

 

(a)           Remedies .  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.  All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.  In the event that a party institutes any suit or action under this Agreement, including for specific performance or injunctive relief pursuant to this Section 7, the prevailing party in such proceeding shall be entitled to receive the costs incurred thereby in conducting the suit or action, including reasonable fees and expenses of counsel, accountants, consultants and other experts.

 

(b)           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 actions as the other party may reasonably request in order to evidence or effectuate the matters contemplated hereby and to otherwise carry out the intent of the parties hereunder.

 

(c)           Expenses .  Except as otherwise provided in any Transaction Instrument, all costs and expenses incurred in connection with the matters contemplated by this Agreement shall be paid by the party incurring such costs and expenses.

 

(d)           Governing Law; Jurisdiction and Venue .  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. The parties hereto hereby irrevocably submit to the jurisdiction of the Delaware Court of Chancery or, in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the matters contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in the Delaware Court of Chancery, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware, or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined exclusively in the Delaware Court of Chancery, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District

 

6



 

Court for the District of Delaware. The parties hereto hereby consent to and grant the Delaware Court of Chancery, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, the United States District Court for the District of Delaware, jurisdiction over the person of such parties and, to the extent permitted by Law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided herein or in such other manner as may be permitted by Law shall be valid and sufficient service thereof. 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 PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

 

(e)           Assignment; Successors .  Except as otherwise provided herein, 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 a party without the prior written consent of the other party hereto. Any assignment in violation of the foregoing shall be void ab initio.  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 permitted assigns.

 

(f)            Entire Agreement; No Third-Party Beneficiaries .  Except as otherwise expressly set forth herein or therein, (i) this Agreement and (ii) the other Transaction Instruments and the Expedia Reimbursement Agreement, including any exhibits and schedules thereto, (x) 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 and (y) are not intended to confer any rights, benefits, remedies, obligations or liabilities upon any Person other than the parties hereto and their respective successors and permitted assigns.

 

(g)           Notices .  Any notices or other communications required or permitted under, or otherwise in connection with this Agreement, shall be in writing and shall be deemed to have been duly given (i) when delivered in person, (ii) upon transmission by electronic mail or facsimile transmission as evidenced by confirmation of transmission to the sender (but only if followed by transmittal of a copy thereof by (x) national overnight courier or (y) hand delivery with receipt, in each case, for delivery by the second (2 nd ) Business Day following such electronic mail or facsimile transmission), (iii) on receipt after dispatch by registered or certified mail, postage prepaid and addressed, or (iv) on the next Business Day if transmitted by national overnight courier, in each case as set forth to the parties as set forth below:

 

If to Splitco, to:

 

Liberty Expedia Holdings, Inc.

12300 Liberty Boulevard

Englewood, CO 80112

Facsimile:

 

7



 

Attention:              Richard N. Baer

E-Mail:

 

with a copy (which shall not constitute notice) to:

 

Baker Botts L.L.P.

30 Rockefeller Plaza

New York, New York 10112

Facsimile: (212) 259-2500

Attention:                                          Frederick H. McGrath

Renee L. Wilm

E-Mail:                                                        frederick.mcgrath@bakerbotts.com

renee.wilm@bakerbotts.com

 

If to Diller, to:

 

c/o Arrow Investments, Inc.

555 West 18th Street

New York, NY 10011

Attention:                                          Barry Diller

Facsimile:

E-mail:

 

with a copy (which shall not constitute notice) to:

 

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, NY 10019

Attention:                                          Andrew J. Nussbaum, Esq.

Facsimile:                                          (212) 403-2000

E-mail:                             AJNussbaum@wlrk.com

 

or such other address, email address or facsimile number as such party may hereafter specify by like notice to the other parties hereto.

 

(h)           Severability .  Whenever possible, each provision (or portion thereof) of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision (or portion thereof) of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, then (subject to Section 5 hereof) 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.

 

(i)            Amendments and Waivers .  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

 

8



 

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.

 

(j)            No Implied Waivers .  No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein or made pursuant hereto.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by any party to exercise any right or privilege hereunder shall be deemed a waiver of such party’s rights or privileges hereunder or shall be deemed a waiver of such party’s rights to exercise the same at any subsequent time or times hereunder.

 

(k)           Interpretation .  When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated.  The headings contained in this Agreement are for reference purposes 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”.  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.  In the event of any ambiguity or claimed ambiguity in any provision of a Subject Instrument (as defined in the Transaction Agreement), such provision shall be construed in light of the purpose acknowledged and agreed by the parties that Diller’s rights and interests, including without limitation with respect to the control of Expedia by virtue of the Splitco Proxy, shall not be affected or changed by any of the Subject Instruments, except to the extent specifically set forth therein.

 

(l)            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.

 

[Signature Page Follows]

 

9



 

IN WITNESS WHEREOF, each of the undersigned has executed this agreement as of the date first above written.

 

 

LIBERTY EXPEDIA HOLDINGS, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

Barry Diller

 

 

[Signature Page to Diller Assignment]

 


 



Exhibit 21.1

 

List of Subsidiaries

 

A table of subsidiaries of Liberty Expedia Holdings, Inc. following the Split-Off is set forth below, indicating as to each the state or jurisdiction of organization and the names under which such subsidiaries do business.

 

Subsidiary

 

Jurisdiction of Formation

Liberty Protein, Inc.

 

Delaware

Bodybuilding.com EU B.V.

 

Netherlands

Bodybuilding.com, LLC

 

Delaware

Bodybuilding.com Sociedad De Responsiabilidad Limitada

 

Costa Rica

Bodybuilding.com (UK) LTD

 

England

Hopkins Real Estate Investments, LLC

 

Idaho

Sphere, LLC

 

Idaho

LEXE Marginco, LLC

 

Delaware

Expedia, Inc.

 

Delaware

Higher Power Nutrition Common Holdings, LLC

 

Delaware

Lift Life Foundation Inc.

 

Idaho

LEXEB, LLC

 

Delaware

 




Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm

 

The Board of Directors
Liberty Interactive Corporation:

 

We consent to the use of our report dated March 24, 2016, with respect to the combined balance sheets of Liberty Expedia Holdings, Inc. as of December 31, 2015 and 2014, and the related combined statements of operations, comprehensive earnings (loss), cash flows, and equity for each of the years in three-year period ended December 31, 2015, included herein and to the reference to our firm under the heading “Experts” in the prospectus.

 

 

/s/ KPMG LLP

 

Denver, Colorado
September 21, 2016

 

 

 




Exhibit 23.2

 

Consent of Independent Registered Public Accounting Firm

 

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated February 10, 2016, with respect to the consolidated financial statements of Expedia, Inc. included in Amendment No. 4 to the Registration Statement (Form S-4 No. 333-210377) and related Prospectus of Liberty Expedia Holdings, Inc. for the registration of Series A Common Stock and Series B Common Stock.

 

/s/ Ernst & Young LLP

 

 

 

Seattle, Washington

 

September 21, 2016

 

 




Exhibit 99.2

MMMMMMMMMMMM . MMMMMMMMMMMMMMM C123456789 000004 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on [ ], 2016. MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Vote by Internet • Go to www.envisionreports.com/LIC • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch-tone telephone • Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proposals — The Board of Directors recommends a vote FOR Proposals 1 and 2. + ForAgainst Abstain 1. A proposal to approve the redemption by Liberty Interactive Corporation of a portion of the outstanding shares of Liberty Ventures common stock for all of the outstanding shares of Liberty Expedia Holdings, Inc., which would hold Liberty Interactive Corporation’s ownership and voting interests in Expedia, Inc., Liberty Interactive Corporation’s wholly owned subsidiary Bodybuilding.com, LLC, anticipated corporate level cash and cash equivalents of $50 million and $350 million in indebtedness. ForAgainst Abstain 2. A proposal to authorize the adjournment of the special meeting by Liberty Interactive Corporation to permit further solicitation of proxies, if necessary or appropriate, if sufficient votes are not represented at the special meeting to approve the other proposal to be presented at the special meeting. Non-Voting Items Change of Address — Please print your new address below. Comments — Please print your comments below. Meeting Attendance Mark the box to the right if you plan to attend the Special Meeting. Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign your name exactly as it appears hereon. When signing as attorney, executor, administrator, trustee or guardian, please add your title as such. When signing as joint tenants, all parties in the joint tenancy must sign. If a signer is a corporation, please sign in full corporate name by duly authorized officer. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. MMMMMMMC 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 1 U P X2 9 2 5 5 0 1 02FQ8B MMMMMMMMM C B A Special Meeting Proxy Card1234 5678 9012 345 X IMPORTANT SPECIAL MEETING INFORMATION

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. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — LIBERTY INTERACTIVE CORPORATION THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS SPECIAL MEETING OF STOCKHOLDERS [ ], 2016 The undersigned hereby appoint(s) Richard N. Baer and Mark D. Carleton, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Series A Liberty Ventures common stock and/or Series B Liberty Ventures common stock held by the undersigned at the Special Meeting of Stockholders to be held at [ ], local time, on [ ], 2016, at [ ] and any adjournment or postponement thereof, with all the powers the undersigned would possess if present in person. All previous proxies given with respect to the meeting are revoked. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED. IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2. IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING, THE PERSONS NAMED IN THIS PROXY WILL VOTE IN THEIR DISCRETION. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE. CONTINUED AND TO BE SIGNED ON REVERSE SIDE

GRAPHIC