EMPLOYEE MATTERS AGREEMENT

Exhibit 10.11

 

EXECUTION COPY

 

EMPLOYEE MATTERS AGREEMENT

 

by and between

 

IAC/INTERACTIVECORP

 

and

 

EXPEDIA, INC.

 

Dated as of August 9, 2005

 

TABLE OF CONTENTS

 

 

-i-

 

-ii-

 

-iii-

EMPLOYEE MATTERS AGREEMENT

 

This Employee Matters Agreement (this “ Agreement ”), dated as of August 9, 2005, with effect as of the Effective Time, is entered into by and between IAC/InterActiveCorp, a Delaware corporation (“ IAC ”), and Expedia, Inc., a Delaware corporation (“ Expedia ”).

 

RECITALS :

 

WHEREAS, IAC and Expedia have entered into a Separation Agreement pursuant to which the Parties (as defined below) have set out the terms on which, and the conditions subject to which, they wish to implement the Separation (as defined in the Separation Agreement) (such agreement, as amended, restated or modified from time to time, the “ Separation Agreement ”).

 

WHEREAS, in connection therewith, IAC and Expedia have agreed to enter into this Agreement to allocate between them assets, liabilities and responsibilities with respect to certain employee compensation, pension and benefit plans, programs and arrangements and certain employment matters.

 

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

 

ARTICLE I

DEFINITIONS

 

Unless otherwise defined in this Agreement, capitalized words and expressions and variations thereof used in this Agreement or in its Appendices have the meanings set forth below. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Separation Agreement.

 

1.1 “ Affiliate ” has the meaning given that term in the Separation Agreement.

 

1.2 “ Agreement ” means this Employee Matters Agreement, including all the Schedules hereto.

 

1.3 “ Ancillary Agreements ” has the meaning given that term in the Separation Agreement.

 

1.4 “ Approved Leave of Absence ” means an absence from active service (i) due to an individual’s inability to perform his or her regular job duties by reason of illness or injury and resulting in eligibility to receive benefits pursuant to the terms of the IAC Short-Term Disability Plan or the IAC Long-Term Disability Plan, or (ii) pursuant to an approved leave policy with a guaranteed right of reinstatement.

 

1.5 “ ASO Contract” has the meaning set forth in Section 4.2(a).

 

1.6 “ Auditing Party ” has the meaning set forth in Section 6.4(a).

1.7 “ Award ” when immediately preceded by “IAC,” means IAC Restricted Stock and IAC Restricted Stock Units and, when immediately preceded by “Expedia,” means Expedia Restricted Stock and Restricted Stock Units.

 

1.8 “ Benefit Plan ” means, with respect to an entity or any of its Subsidiaries, (a) each “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) and all other employee benefits arrangements, policies or payroll practices (including, without limitation, severance pay, sick leave, vacation pay, salary continuation, disability, retirement, deferred compensation, bonus, stock option or other equity-based compensation, hospitalization, medical insurance or life insurance) sponsored or maintained by such entity or by any of its Subsidiaries (or to which such entity or any of its Subsidiaries contributes or is required to contribute) and (b) all “employee pension benefit plans” (as defined in Section 3(2) of ERISA), occupational pension plan or arrangement or other pension arrangements sponsored, maintained or contributed to by such entity or any of its Subsidiaries (or to which such entity or any of its Subsidiaries contributes or is required to contribute). When immediately preceded by “IAC,” Benefit Plan means any Benefit Plan sponsored, maintained or contributed to by IAC or an IAC Entity. When immediately preceded by “Expedia,” Benefit Plan means any Benefit Plan sponsored, maintained or contributed to by Expedia or any Expedia Entity.

 

1.9 “ Close of the Effective Date ” means 11:59:59 P.M., Eastern Standard Time or Eastern Daylight Time (whichever shall then be in effect), on the Effective Date.

 

1.10 “ COBRA ” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code § 4980B and ERISA §§ 601 through 608.

 

1.11 “ Code ” means the Internal Revenue Code of 1986, as amended, or any successor federal income tax law. Reference to a specific Code provision also includes any proposed, temporary or final regulation in force under that provision.

 

1.12 “ Committee ” has the meaning set forth in Section 5.3(a).

 

1.13 “ Covered Employees ” has the meaning set forth in Section 4.3.

 

1.14 “ Current Term ” has the meaning set forth in Section 4.4(b).

 

1.15 “ Effective Date ” has the meaning given that term in the Separation Agreement.

 

1.16 “ Effective Time ” has the meaning given that term in the Separation Agreement.

 

1.17 “ Effective Time Year ” means the calendar year during which the Effective Time occurs.

 

1.18 “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific provision of ERISA also includes any proposed, temporary or final regulation in force under that provision.

 

1.19 “ Expedia ” has the meaning set forth in the preamble to this Agreement.

 

-2-

1.20 “ Expedia Common Stock ” has the meaning given that term in the Separation Agreement.

 

1.21 “ Expedia Employee ” means any individual who, immediately prior to the Effective Time, is either actively employed by, or then on Approved Leave of Absence from, an Expedia Entity.

 

1.22 “ Expedia Entities ” means the Expedia Group as defined in the Separation Agreement and any business or operations (whether current or historical regardless of whether discontinued or sold) included in the Separated Businesses.

 

1.23 “ Expedia Executive Benefit Plans ” means the executive benefit and nonqualified plans, programs, and arrangements established, sponsored, maintained, or agreed upon, by any Expedia Entity for the benefit of employees and former employees of any Expedia Entity before the Close of the Effective Date.

 

1.24 “ Expedia Flexible Benefit Plan ” means the flexible benefit plan to be established by Expedia pursuant to Section 4.3 of this Agreement as in effect as of the time relevant to the applicable provision of this Agreement.

 

1.25 “ Expedia Long-Term Incentive Plan ” means the long-term incentive plan or program to be established by Expedia, effective immediately prior to the Effective Date, in connection with the treatment of Awards as described in Article V.

 

1.26 “ Expedia Ratio ” means 1.12444, the quotient obtained by dividing the IAC Stock Value by the Expedia Stock Value.

 

1.27 “ Expedia Retirement Savings Plan ” means the 401(k) and profit sharing plan to be established by Expedia pursuant to Section 3.1 of this Agreement, as in effect as of the time relevant to the applicable provision of this agreement.

 

1.28 “ Expedia Retirement Savings Plan Trust ” means a trust relating to the Expedia Retirement Savings Plan intended to qualify under Section 401(a) and be exempt under Section 501(a) of the Code.

 

1.29 “ Expedia Stock Value ” means $22.50, the closing per-share price of Expedia Common Stock trading in the “when issued market” on August 8, 2005, as listed on the NASDAQ as of 4:00 P.M., Eastern Daylight Time.

 

1.30 “ Former Expedia Employee ” means any individual who as of the Effective Time is a former employee of the Expedia Group or the IAC Group, and whose last employment with the Expedia Group or IAC Group, was with an Expedia Entity.

 

1.31 “ Former IAC Employee ” means any individual who as of the Effective Time is a former employee of the IAC Group or the Expedia Group, and whose last employment with the IAC Group or Expedia Group, was with an IAC Entity.

 

1.32 “ Group Insurance Policies ” has the meaning set forth in Section 4.2(a).

 

-3-

1.33 “ Health and Welfare Plans ” means any plan, fund or program which was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, medical, dental, surgical or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs or day care centers, scholarship funds, or prepaid legal services, including any such plan, fund or program as defined in Section 3(1) of ERISA. When immediately preceded by “IAC,” Health and Welfare Plans means each Health and Welfare Plan that is an IAC Benefit Plan. When immediately preceded by “Expedia,” Health and Welfare Plans means each Health and Welfare Plan that is an Expedia Benefit Plan.

 

1.34 “ HIPAA ” means the health insurance portability and accountability requirements for “group health plans” under the Health Insurance Portability and Accountability Act of 1996, as amended.

 

1.35 “ HMO ” means a health maintenance organization that provides benefits under the IAC Medical Plans or the Expedia Medical Plans.

 

1.36 “ HMO Agreements ” has the meaning set forth in Section 4.2(a).

 

1.37 “ IAC ” has the meaning set forth in the preamble to this Agreement.

 

1.38 “ IAC Common Stock ” means, with respect to periods prior to the Separation, shares of common stock, $0.01 par value per share, of IAC, and with respect to periods following the Separation, shares of common stock, $0.001 par value per share, of IAC.

 

1.39 “ IAC Compensation/Benefits Committee “ means the Compensation/Benefits Committee of the IAC Board of Directors, or any subcommittee thereof.

 

1.40 “ IAC Employee ” means any individual who, immediately prior to the Close of the Effective Date, is either actively employed by, or then on Approved Leave of Absence from, any IAC Entity.

 

1.41 “ IAC Entities ” means the members of the IAC Group, as defined in the Separation Agreement, and their respective Subsidiaries and Affiliates, excluding any business or operations (whether current or historical, regardless of whether discontinued or sold) that are included in the Separated Businesses.

 

1.42 “ IAC Executive Benefit Plans ” means the executive benefit and nonqualified plans, programs, and arrangements established, sponsored, maintained, or agreed upon, by any IAC Entity for the benefit of employees and former employees of any IAC Entity before the Close of the Effective Date.

 

1.43 “ IAC Executive Deferred Compensation Plan ” means the IAC Executive Deferred Compensation Plan in effect as of the time relevant to the applicable provision of this Agreement.

 

-4-

1.44 “ IAC Flexible Benefit Plans ” means the IAC Healthcare FSA and the IAC Dependent Care FSA, as in effect as of the time relevant to the applicable provision of this Agreement.

 

1.45 “ IAC Incentive Plans ” means any of the annual or short term incentive plans of IAC, all as in effect as of the time relevant to the applicable provisions of this Agreement.

 

1.46 “ IAC Long-Term Incentive Plans ” means any of the Silver King Communications, Inc. 1995 Stock Incentive Plan, HSN, Inc. 1997 Stock and Annual Incentive Plan, USA Interactive Amended and Restated 2000 Annual Stock and Incentive Plan, IAC/InterActiveCorp 2005 Stock and Annual Incentive Plan, Home Shopping Network, Inc. 1996 Stock Option Plan for Employees, Equity and Bonus Compensation Agreement with Barry Diller, Expedia, Inc. 1999 Amended and Restated Stock Option Plan, the Hotels Reservations Network, Inc. 2000 Stock Plan, Ticketmaster Online-Citysearch, Inc. 1996 Stock Option Plan, Ticketmaster Online-Citysearch, Inc. 1998 Stock Option Plan, Ticketmaster 1999 Stock Plan, and Ticketweb, Inc. 2000 Stock Plan, Styleclick, Inc. 1995 Stock Option Plan, Servicemagic, Inc. Amended and Restated 1999 Stock Option Plan and Precision Response Corporation Amended and Restated 1996 Incentive Stock Plan, Expedia, Inc. Amended and Restated 2001 Stock Plan, 1998 Stock Option Plan of LendingTree, Inc., Amended and Restated Stock Incentive Plan of LendingTree, Inc., the Silver King Communications, Inc. Directors Stock Option Plan, Hotwire, Inc. 2000 Equity Incentive Plan and any other stock incentive plan of IAC, all as in effect as of the time relevant to the applicable provisions of this Agreement.

 

1.47 “ IAC Post-Separation Stock Value ” means $28.10, the closing per-share price of IAC Common Stock in the “when issued market” on August 8, 2005, as listed on the NASDAQ as of 4:00 P.M. Eastern Daylight time.

 

1.48 “ IAC Ratio ” means 0.90036, the quotient obtained by dividing the IAC Stock Value by the IAC Post-Separation Stock Value.

 

1.49 “ IAC Retirement Savings Plan ” means the InterActiveCorp Retirement Savings Plan as in effect as of the time relevant to the applicable provision of this Agreement.

 

1.50 “ IAC Severance Pay Program ” means any severance plan, policy, program or other arrangement as in effect as of the time relevant to the applicable provision of this Agreement.

 

1.51 “ IAC Stock Value ” means $25.30, the closing per-share price of the IAC Common Stock trading “regular way with due bills” on August 8, 2005, as listed on the NASDAQ as of 4:00 P.M., Eastern Daylight Time.

 

1.52 “ Immediately after the Effective Date ” means on the first moment of the day after the Effective Date.

 

1.53 “ Liabilities ” has the meaning given that term in the Separation Agreement.

 

1.54 “ Medical Plan ” when immediately preceded by “IAC,” means the Benefit Plan under which medical benefits are provided to IAC Employees established and maintained by

 

-5-

IAC. When immediately preceded by Expedia, Medical Plan means the Benefit Plan under which medical benefits are provided to Expedia Employees to be established by Expedia pursuant to Article IV.

 

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

 

1.56 “ Non-parties ” has the meaning set forth in Section 6.4(b).

 

1.57 “ Option ” when immediately preceded by “Old IAC,” means an option (either nonqualified or incentive) to purchase shares of IAC Common Stock prior to the Effective Time pursuant to an IAC Long-Term Incentive Plan. When immediately preceded by “New IAC,” Option means an option (either nonqualified or incentive) to purchase shares of IAC Common Stock following the Effective Time pursuant to an IAC Long-Term Incentive Plan. When immediately preceded by “Expedia,” Option means an option (either nonqualified or incentive) to purchase shares of Expedia Common Stock following the Effective Time pursuant to the Expedia Long-Term Incentive Plan.

 

1.58 “ Participating Company ” means (a) IAC and (b) any other Person (other than an individual) that participates in a plan sponsored by any IAC Entity.

 

1.59 “ Person ” has the meaning given that term in the Separation Agreement.

 

1.60 “ Restricted Stock ” when immediately preceded by “IAC,” means shares of IAC Common Stock that are subject to restrictions on transferability and a risk of forfeiture and are issued under an IAC Benefit Plan and, when immediately preceded by “Expedia,” means shares of Expedia Common Stock that are subject to restrictions on transferability and a risk of forfeiture and are issued under an Expedia Benefit Plan.

 

1.61 “ Restricted Stock Unit ” when immediately preceded by “IAC,” means units issued under an IAC Benefit Plan representing a general unsecured promise by IAC to pay the value of shares of IAC Common Stock in cash or shares of IAC Common Stock and, when immediately preceded by “Expedia,” means units issued under the Expedia Long-Term Incentive Plan representing a general unsecured promise by Expedia to pay the value of shares of Expedia Common Stock in cash or shares of Expedia Common Stock.

 

1.62 “ Reverse Stock Split ” means the one-for-two reverse stock split of IAC Common Stock that IAC will complete immediately prior to the Effective Time.

 

1.63 “ Separated Businesses ” has the meaning given that term in the Separation Agreement.

 

1.64 “ Separation ” has the meaning given that term in the Separation Agreement.

 

1.65 “ Separation Agreement ” has the meaning set forth in the recitals to this Agreement.

 

1.66 “ Subsidiaries ” has the meaning given that term in the Separation Agreement.

 

-6-

1.67 “ Tax Sharing Agreement ” means the Tax Sharing Agreement entered into as of the date hereof between IAC and Expedia.

 

1.68 “ Transferred Account Balances ” has the meaning set forth in Section 4.3.

 

1.69 “ U.S. ” means the 50 United States of America and the District of Columbia.

 

1.70 “ VEBA ” when immediately preceded by IAC, means the IAC Health and Welfare Benefit Trust. When immediately preceded by Expedia, VEBA means the Expedia Health and Welfare Benefit Trust to be established by Expedia pursuant to Section 4.7 that corresponds to the IAC VEBA.

 

ARTICLE II

GENERAL PRINCIPLES

 

2.1 Employment of Expedia Employees . All Expedia Employees shall continue to be employees of Expedia or another Expedia Entity, as the case may be, immediately after the Effective Time.

 

2.2 Assumption and Retention of Liabilities; Related Assets .

 

(a) As of the Effective Date, except as expressly provided in this Agreement, the IAC Entities shall assume or retain and IAC hereby agrees to pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all IAC Benefit Plans, (ii) all Liabilities with respect to the employment or termination of employment of all IAC Employees, Former IAC Employees and their dependents and beneficiaries, and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or nonpayroll worker of any IAC Entity or in any other employment, non-employment, or retainer arrangement, or relationship with any IAC Entity), in each case to the extent arising in connection with or as a result of employment with or the performance of services to any IAC Entity, and (iii) any other Liabilities expressly assigned to IAC under this Agreement. All assets held in trust to fund the IAC Benefit Plans and all insurance policies funding the IAC Benefit Plans shall be IAC Assets (as defined in the Separation Agreement), except to the extent specifically provided otherwise in this Agreement.

 

(b) From and after the Effective Date, except as expressly provided in this Agreement, Expedia and the Expedia Entities shall assume or retain, as applicable, and Expedia hereby agrees to pay, perform, fulfill and discharge, in due course in full, (i) all Liabilities under all Expedia Benefit Plans, (ii) all Liabilities with respect to the employment or termination of employment of all Expedia Employees, Former Expedia Employees and their dependents and beneficiaries, and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or nonpayroll worker of Expedia or any Expedia Entity or in any other employment, non-employment, or retainer arrangement, or relationship with Expedia or an Expedia Entity), in each case to the extent arising in connection with or as a result of employment with or the performance of services to

 

-7-

any Expedia Entity and (iii) any other Liabilities expressly assigned to Expedia or any Expedia Entity under this Agreement.

 

2.3 Expedia Participation in IAC Benefit Plans . Except as expressly provided in this Agreement, effective as of the Close of the Effective Date, Expedia and each other Expedia Entity shall cease to be a Participating Company in any IAC Benefit Plan, and IAC and Expedia shall take all necessary action before the Effective Date to effectuate such cessation as a Participating Company.

 

2.4 Terms of Participation by Expedia Employees in Expedia Benefit Plans . IAC and Expedia shall agree on methods and procedures, including, without limitation, amending the respective Benefit Plan documents, to prevent Expedia Employees from receiving duplicative benefits from the IAC Benefit Plans and the Expedia Benefit Plans. With respect to Expedia Employees, each Expedia Benefit Plan shall provide that all service, all compensation and all other benefit-affecting determinations that, as of the Close of the Effective Date were recognized under the corresponding IAC Benefit Plan shall, as of Immediately after the Effective Date receive full recognition, credit and validity and be taken into account under such Expedia Benefit Plan to the same extent as if such items occurred under such Expedia Benefit Plan, except to the extent that duplication of benefits would result or for benefit accrual to the extent that Expedia adopts a final average pay defined benefit pension plan.

 

2.5 Commercially Reasonable Efforts . IAC and Expedia shall use commercially reasonable efforts to (a) enter into any necessary agreements to accomplish the assumptions and transfers contemplated by this Agreement; and (b) provide for the maintenance of the necessary participant records, the appointment of the trustees and the engagement of recordkeepers, investment managers, providers, insurers, etc.

 

2.6 Regulatory Compliance . IAC and Expedia shall, in connection with the actions taken pursuant to this Agreement, cooperate in making any and all appropriate filings required under the Code, ERISA and any applicable securities laws, implementing all appropriate communications with participants, transferring appropriate records and taking all such other actions as may be necessary and appropriate to implement the provisions of this Agreement in a timely manner.

 

2.7 Approval by IAC as Sole Stockholder . Prior to the Effective Time, IAC shall cause Expedia to adopt the Expedia 2005 Long-Term Incentive Plan.

 

ARTICLE III

SAVINGS PLANS

 

3.1 Savings Plan . Effective as of the Effective Date, Expedia shall establish the Expedia Retirement Savings Plan and the Expedia Retirement Savings Plan Trust. As soon as practical following the establishment of the Expedia Retirement Savings Plan and the Expedia Retirement Savings Plan Trust, IAC shall cause the accounts of the Expedia Employees to be transferred to the Expedia Retirement Savings Plan and the Expedia Retirement Savings Plan Trust in cash or such other assets as mutually agreed by IAC and Expedia, and Expedia shall cause the Expedia Retirement Savings Plan to assume and be solely responsible for all Liabilities

 

-8-

for plan benefits (but not legal Liabilities, such as penalties for violation of law, if applicable, relating to the administration of plan benefits by IAC prior to the Effective Time and during such time as IAC owned 100% of an Expedia Entity with respect to which IAC administered plan benefits, it being understood that Expedia shall be responsible for such legal Liabilities incurred during such periods prior to the Effective Time during which IAC did not own 100% of such Expedia Entities) under the Expedia Retirement Savings Plan to or relating to Expedia Employees whose accounts are transferred from the IAC Retirement Savings Plan. Notwithstanding the foregoing, IAC Common Stock that is held in the accounts of Expedia Employees and any outstanding participant loans to Expedia Employees whose accounts are transferred under the IAC Retirement Savings Plan shall be transferred to the Expedia Retirement Savings Plan in kind and shall thereafter be treated in the manner set forth in Section 3.2. IAC and Expedia agree to cooperate in making all appropriate filings and taking all reasonable actions required to implement the provisions of this Section 3.1; provided that Expedia acknowledges that it will be responsible for complying with any requirements and applying for any determination letters with respect to the Expedia Retirement Savings Plan.

 

3.2 Stock Considerations . To the extent that IAC Employees and Former IAC Employees receive shares of Expedia Common Stock in connection with the Separation with respect to IAC Common Stock held under the IAC Retirement Savings Plan, such shares will be deposited in an Expedia Common Stock Fund under the IAC Retirement Savings Plan. To the extent that Expedia Employees and Former Expedia Employees hold shares of IAC Common Stock in their IAC Common Stock Fund under the Expedia Reti