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Exhibit 10.4
EXECUTION
COPY
EMPLOYEE MATTERS
AGREEMENT
by and between
IAC/INTERACTIVECORP
and
EXPEDIA, INC.
Dated as of August 9,
2005
TABLE OF CONTENTS
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EMPLOYEE MATTERS
AGREEMENT
This Employee Matters Agreement
(this “ Agreement ”), dated as of August 9,
2005, with effect as of the Effective Time, is entered into by and
between IAC/InterActiveCorp, a Delaware corporation (“
IAC ”), and Expedia, Inc., a Delaware corporation
(“ Expedia ”).
RECITALS
:
WHEREAS, IAC and Expedia have
entered into a Separation Agreement pursuant to which the Parties
(as defined below) have set out the terms on which, and the
conditions subject to which, they wish to implement the Separation
(as defined in the Separation Agreement) (such agreement, as
amended, restated or modified from time to time, the “
Separation Agreement ”).
WHEREAS, in connection therewith,
IAC and Expedia have agreed to enter into this Agreement to
allocate between them assets, liabilities and responsibilities with
respect to certain employee compensation, pension and benefit
plans, programs and arrangements and certain employment
matters.
NOW THEREFORE, in consideration of
the mutual agreements, covenants and other provisions set forth in
this Agreement, the Parties hereby agree as follows:
Unless otherwise defined in this
Agreement, capitalized words and expressions and variations thereof
used in this Agreement or in its Appendices have the meanings set
forth below. Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Separation
Agreement.
1.1
“
Affiliate ” has the meaning given that term in the
Separation Agreement.
1.2
“
Agreement ” means this Employee Matters Agreement,
including all the Schedules hereto.
1.3
“
Ancillary Agreements ” has the meaning given that term
in the Separation Agreement.
1.4
“
Approved Leave of Absence ” means an absence from
active service (i) due to an individual’s inability to
perform his or her regular job duties by reason of illness or
injury and resulting in eligibility to receive benefits pursuant to
the terms of the IAC Short-Term Disability Plan or the IAC
Long-Term Disability Plan, or (ii) pursuant to an approved
leave policy with a guaranteed right of reinstatement.
1.5
“ ASO
Contract ” has the meaning set forth in
Section 4.2(a).
1.6
“
Auditing Party ” has the meaning set forth in
Section 6.4(a).
1.7
“
Award ” when immediately preceded by
“IAC,” means IAC Restricted Stock and IAC Restricted
Stock Units and, when immediately preceded by
“Expedia,” means Expedia Restricted Stock and
Restricted Stock Units.
1.8
“
Benefit Plan ” means, with respect to an entity or any
of its Subsidiaries, (a) each “employee welfare benefit
plan” (as defined in Section 3(1) of ERISA) and all
other employee benefits arrangements, policies or payroll practices
(including, without limitation, severance pay, sick leave, vacation
pay, salary continuation, disability, retirement, deferred
compensation, bonus, stock option or other equity-based
compensation, hospitalization, medical insurance or life insurance)
sponsored or maintained by such entity or by any of its
Subsidiaries (or to which such entity or any of its Subsidiaries
contributes or is required to contribute) and (b) all
“employee pension benefit plans” (as defined in
Section 3(2) of ERISA), occupational pension plan or
arrangement or other pension arrangements sponsored, maintained or
contributed to by such entity or any of its Subsidiaries (or to
which such entity or any of its Subsidiaries contributes or is
required to contribute). When immediately preceded by
“IAC,” Benefit Plan means any Benefit Plan sponsored,
maintained or contributed to by IAC or an IAC Entity. When
immediately preceded by “Expedia,” Benefit Plan means
any Benefit Plan sponsored, maintained or contributed to by Expedia
or any Expedia Entity.
1.9
“ Close
of the Effective Date ” means 11:59:59 P.M., Eastern
Standard Time or Eastern Daylight Time (whichever shall then be in
effect), on the Effective Date.
1.10
“
COBRA ” means the continuation coverage requirements
for “group health plans” under Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended,
and as codified in Code § 4980B and ERISA
§§ 601 through 608.
1.11
“
Code ” means the Internal Revenue Code of 1986, as
amended, or any successor federal income tax law. Reference
to a specific Code provision also includes any proposed, temporary
or final regulation in force under that provision.
1.12
“
Committee ” has the meaning set forth in
Section 5.3(a).
1.13
“
Covered Employees ” has the meaning set forth in
Section 4.3.
1.14
“
Current Term ” has the meaning set forth in
Section 4.4(b).
1.15
“
Effective Date ” has the meaning given that term in
the Separation Agreement.
1.16
“
Effective Time ” has the meaning given that term in
the Separation Agreement.
1.17
“
Effective Time Year ” means the calendar year during
which the Effective Time occurs.
1.18
“
ERISA ” means the Employee Retirement Income Security
Act of 1974, as amended. Reference to a specific provision of
ERISA also includes any proposed, temporary or final regulation in
force under that provision.
1.19
“
Expedia ” has the meaning set forth in the preamble to
this Agreement.
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1.20
“
Expedia Common Stock ” has the meaning given that term
in the Separation Agreement.
1.21
“
Expedia Employee ” means any individual who,
immediately prior to the Effective Time, is either actively
employed by, or then on Approved Leave of Absence from, an Expedia
Entity.
1.22
“
Expedia Entities ” means the Expedia Group as defined
in the Separation Agreement and any business or operations (whether
current or historical regardless of whether discontinued or sold)
included in the Separated Businesses.
1.23
“
Expedia Executive Benefit Plans ” means the executive
benefit and nonqualified plans, programs, and arrangements
established, sponsored, maintained, or agreed upon, by any Expedia
Entity for the benefit of employees and former employees of any
Expedia Entity before the Close of the Effective Date.
1.24
“
Expedia Flexible Benefit Plan ” means the flexible
benefit plan to be established by Expedia pursuant to
Section 4.3 of this Agreement as in effect as of the time
relevant to the applicable provision of this Agreement.
1.25
“
Expedia Long-Term Incentive Plan ” means the long-term
incentive plan or program to be established by Expedia, effective
immediately prior to the Effective Date, in connection with the
treatment of Awards as described in Article V.
1.26
“
Expedia Ratio ” means 1.12444, the quotient obtained by
dividing the IAC Stock Value by the Expedia Stock
Value.
1.27
“
Expedia Retirement Savings Plan ” means the 401(k) and
profit sharing plan to be established by Expedia pursuant to
Section 3.1 of this Agreement, as in effect as of the time
relevant to the applicable provision of this agreement.
1.28
“
Expedia Retirement Savings Plan Trust ” means a trust
relating to the Expedia Retirement Savings Plan intended to qualify
under Section 401(a) and be exempt under
Section 501(a) of the Code.
1.29
“
Expedia Stock Value ” means $22.50, the closing
per-share price of Expedia Common Stock trading in the “when
issued market” on August 8, 2005, as listed on the
NASDAQ as of 4:00 P.M., Eastern Daylight Time.
1.30
“ Former
Expedia Employee ” means any individual who as of the
Effective Time is a former employee of the Expedia Group or the IAC
Group, and whose last employment with the Expedia Group or IAC
Group, was with an Expedia Entity.
1.31
“ Former
IAC Employee ” means any individual who as of the
Effective Time is a former employee of the IAC Group or the Expedia
Group, and whose last employment with the IAC Group or Expedia
Group, was with an IAC Entity.
1.32
“ Group
Insurance Policies ” has the meaning set forth in
Section 4.2(a).
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1.33
“ Health
and Welfare Plans ” means any plan, fund or program which
was established or is maintained for the purpose of providing for
its participants or their beneficiaries, through the purchase of
insurance or otherwise, medical, dental, surgical or hospital care
or benefits, or benefits in the event of sickness, accident,
disability, death or unemployment, or vacation benefits,
apprenticeship or other training programs or day care centers,
scholarship funds, or prepaid legal services, including any such
plan, fund or program as defined in Section 3(1) of
ERISA. When immediately preceded by “IAC,” Health
and Welfare Plans means each Health and Welfare Plan that is an IAC
Benefit Plan. When immediately preceded by
“Expedia,” Health and Welfare Plans means each Health
and Welfare Plan that is an Expedia Benefit Plan.
1.34
“
HIPAA ” means the health insurance portability and
accountability requirements for “group health plans”
under the Health Insurance Portability and Accountability Act of
1996, as amended.
1.35
“
HMO ” means a health maintenance organization that
provides benefits under the IAC Medical Plans or the Expedia
Medical Plans.
1.36
“ HMO
Agreements ” has the meaning set forth in
Section 4.2(a).
1.37
“
IAC ” has the meaning set forth in the preamble to
this Agreement.
1.38
“ IAC
Common Stock ” means, with respect to periods prior to
the Separation, shares of common stock, $0.01 par value per share,
of IAC, and with respect to periods following the Separation,
shares of common stock, $0.001 par value per share, of
IAC.
1.39
“ IAC
Compensation/Benefits Committee ” means the
Compensation/Benefits Committee of the IAC Board of Directors, or
any subcommittee thereof.
1.40
“ IAC
Employee ” means any individual who, immediately prior to
the Close of the Effective Date, is either actively employed by, or
then on Approved Leave of Absence from, any IAC Entity.
1.41
“ IAC
Entities ” means the members of the IAC Group, as defined
in the Separation Agreement, and their respective Subsidiaries and
Affiliates, excluding any business or operations (whether current
or historical, regardless of whether discontinued or sold) that are
included in the Separated Businesses.
1.42
“ IAC
Executive Benefit Plans ” means the executive benefit and
nonqualified plans, programs, and arrangements established,
sponsored, maintained, or agreed upon, by any IAC Entity for the
benefit of employees and former employees of any IAC Entity before
the Close of the Effective Date.
1.43
“ IAC
Executive Deferred Compensation Plan ” means the IAC
Executive Deferred Compensation Plan in effect as of the time
relevant to the applicable provision of this Agreement.
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1.44
“ IAC
Flexible Benefit Plans ” means the IAC Healthcare FSA and
the IAC Dependent Care FSA, as in effect as of the time relevant to
the applicable provision of this Agreement.
1.45
“ IAC
Incentive Plans ” means any of the annual or short term
incentive plans of IAC, all as in effect as of the time relevant to
the applicable provisions of this Agreement.
1.46
“ IAC
Long-Term Incentive Plans ” means any of the Silver King
Communications, Inc. 1995 Stock Incentive Plan, HSN, Inc.
1997 Stock and Annual Incentive Plan, USA Interactive Amended and
Restated 2000 Annual Stock and Incentive Plan, IAC/InterActiveCorp
2005 Stock and Annual Incentive Plan, Home Shopping
Network, Inc. 1996 Stock Option Plan for Employees, Equity and
Bonus Compensation Agreement with Barry Diller, Expedia, Inc.
1999 Amended and Restated Stock Option Plan, the Hotels
Reservations Network, Inc. 2000 Stock Plan, Ticketmaster
Online-Citysearch, Inc. 1996 Stock Option Plan, Ticketmaster
Online-Citysearch, Inc. 1998 Stock Option Plan, Ticketmaster
1999 Stock Plan, and Ticketweb, Inc. 2000 Stock Plan,
Styleclick, Inc. 1995 Stock Option Plan,
Servicemagic, Inc. Amended and Restated 1999 Stock Option Plan
and Precision Response Corporation Amended and Restated 1996
Incentive Stock Plan, Expedia, Inc. Amended and Restated 2001
Stock Plan, 1998 Stock Option Plan of LendingTree, Inc.,
Amended and Restated Stock Incentive Plan of
LendingTree, Inc., the Silver King Communications, Inc.
Directors Stock Option Plan, Hotwire, Inc. 2000 Equity
Incentive Plan and any other stock incentive plan of IAC, all as in
effect as of the time relevant to the applicable provisions of this
Agreement.
1.47
“ IAC
Post-Separation Stock Value ” means $28.10, the closing
per-share price of IAC Common Stock in the “when issued
market” on August 8, 2005, as listed on the NASDAQ as of
4:00 P.M. Eastern Daylight time.
1.48
“ IAC
Ratio ” means 0.90036, the quotient obtained by dividing
the IAC Stock Value by the IAC Post-Separation Stock
Value.
1.49
“ IAC
Retirement Savings Plan ” means the InterActiveCorp
Retirement Savings Plan as in effect as of the time relevant to the
applicable provision of this Agreement.
1.50
“ IAC
Severance Pay Program ” means any severance plan, policy,
program or other arrangement as in effect as of the time relevant
to the applicable provision of this Agreement.
1.51
“ IAC
Stock Value ” means $25.30, the closing per-share price
of the IAC Common Stock trading “regular way with due
bills” on August 8, 2005, as listed on the NASDAQ as of
4:00 P.M., Eastern Daylight Time.
1.52
“
Immediately after the Effective Date ” means on the
first moment of the day after the Effective Date.
1.53
“
Liabilities ” has the meaning given that term in the
Separation Agreement.
1.54
“
Medical Plan ” when immediately preceded by
“IAC,” means the Benefit Plan under which medical
benefits are provided to IAC Employees established and maintained
by
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IAC. When immediately
preceded by Expedia, Medical Plan means the Benefit Plan under
which medical benefits are provided to Expedia Employees to be
established by Expedia pursuant to Article IV.
1.55
“
NASDAQ ” means the National Association of Securities
Dealers Inc. Automated Quotation System.
1.56
“
Non-parties ” has the meaning set forth in
Section 6.4(b).
1.57
“
Option ” when immediately preceded by “Old
IAC,” means an option (either nonqualified or incentive) to
purchase shares of IAC Common Stock prior to the Effective Time
pursuant to an IAC Long-Term Incentive Plan. When immediately
preceded by “New IAC,” Option means an option (either
nonqualified or incentive) to purchase shares of IAC Common Stock
following the Effective Time pursuant to an IAC Long-Term Incentive
Plan. When immediately preceded by “Expedia,”
Option means an option (either nonqualified or incentive) to
purchase shares of Expedia Common Stock following the Effective
Time pursuant to the Expedia Long-Term Incentive Plan.
1.58
“
Participating Company ” means (a) IAC and
(b) any other Person (other than an individual) that
participates in a plan sponsored by any IAC Entity.
1.59
“
Person ” has the meaning given that term in the
Separation Agreement.
1.60
“
Restricted Stock ” when immediately preceded by
“IAC,” means shares of IAC Common Stock that are
subject to restrictions on transferability and a risk of forfeiture
and are issued under an IAC Benefit Plan and, when immediately
preceded by “Expedia,” means shares of Expedia Common
Stock that are subject to restrictions on transferability and a
risk of forfeiture and are issued under an Expedia Benefit
Plan.
1.61
“
Restricted Stock Unit ” when immediately preceded by
“IAC,” means units issued under an IAC Benefit Plan
representing a general unsecured promise by IAC to pay the value of
shares of IAC Common Stock in cash or shares of IAC Common Stock
and, when immediately preceded by “Expedia,” means
units issued under the Expedia Long-Term Incentive Plan
representing a general unsecured promise by Expedia to pay the
value of shares of Expedia Common Stock in cash or shares of
Expedia Common Stock.
1.62
“
Reverse Stock Split ” means the one-for-two reverse
stock split of IAC Common Stock that IAC will complete immediately
prior to the Effective Time.
1.63
“
Separated Businesses ” has the meaning given that term
in the Separation Agreement.
1.64
“
Separation ” has the meaning given that term in the
Separation Agreement.
1.65
“
Separation Agreement ” has the meaning set forth in
the recitals to this Agreement.
1.66
“
Subsidiaries ” has the meaning given that term in the
Separation Agreement.
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1.67
“ Tax
Sharing Agreement ” means the Tax Sharing Agreement
entered into as of the date hereof between IAC and
Expedia.
1.68
“
Transferred Account Balances ” has the meaning set
forth in Section 4.3.
1.69
“
U.S. ” means the 50 United States of America and the
District of Columbia.
1.70
“
VEBA ” when immediately preceded by IAC, means the IAC
Health and Welfare Benefit Trust. When immediately preceded
by Expedia, VEBA means the Expedia Health and Welfare Benefit Trust
to be established by Expedia pursuant to Section 4.7 that
corresponds to the IAC VEBA.
2.1
Employment of
Expedia Employees . All Expedia Employees
shall continue to be employees of Expedia or another Expedia
Entity, as the case may be, immediately after the Effective
Time.
2.2
Assumption and
Retention of Liabilities; Related Assets .
(a)
As of the
Effective Date, except as expressly provided in this Agreement, the
IAC Entities shall assume or retain and IAC hereby agrees to pay,
perform, fulfill and discharge, in due course in full (i) all
Liabilities under all IAC Benefit Plans, (ii) all Liabilities
with respect to the employment or termination of employment of all
IAC Employees, Former IAC Employees and their dependents and
beneficiaries, and other service providers (including any
individual who is, or was, an independent contractor, temporary
employee, temporary service worker, consultant, freelancer, agency
employee, leased employee, on-call worker, incidental worker, or
nonpayroll worker of any IAC Entity or in any other employment,
non-employment, or retainer arrangement, or relationship with any
IAC Entity), in each case to the extent arising in connection with
or as a result of employment with or the performance of services to
any IAC Entity, and (iii) any other Liabilities expressly
assigned to IAC under this Agreement. All assets held in
trust to fund the IAC Benefit Plans and all insurance policies
funding the IAC Benefit Plans shall be IAC Assets (as defined in
the Separation Agreement), except to the extent specifically
provided otherwise in this Agreement.
(b)
From and after
the Effective Date, except as expressly provided in this Agreement,
Expedia and the Expedia Entities shall assume or retain, as
applicable, and Expedia hereby agrees to pay, perform, fulfill and
discharge, in due course in full, (i) all Liabilities under
all Expedia Benefit Plans, (ii) all Liabilities with respect
to the employment or termination of employment of all Expedia
Employees, Former Expedia Employees and their dependents and
beneficiaries, and other service providers (including any
individual who is, or was, an independent contractor, temporary
employee, temporary service worker, consultant, freelancer, agency
employee, leased employee, on-call worker, incidental worker, or
nonpayroll worker of Expedia or any Expedia Entity or in any other
employment, non-employment, or retainer arrangement, or
relationship with Expedia or an Expedia Entity), in each case to
the extent arising in connection with or as a result of employment
with or the performance of services to
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any Expedia Entity and
(iii) any other Liabilities expressly assigned to Expedia or
any Expedia Entity under this Agreement.
2.3
Expedia
Participation in IAC Benefit Plans . Except as expressly
provided in this Agreement, effective as of the Close of the
Effective Date, Expedia and each other Expedia Entity shall cease
to be a Participating Company in any IAC Benefit Plan, and IAC and
Expedia shall take all necessary action before the Effective Date
to effectuate such cessation as a Participating
Company.
2.4
Terms of
Participation by Expedia Employees in Expedia Benefit
Plans . IAC and Expedia shall
agree on methods and procedures, including, without limitation,
amending the respective Benefit Plan documents, to prevent Expedia
Employees from receiving duplicative benefits from the IAC Benefit
Plans and the Expedia Benefit Plans. With respect to Expedia
Employees, each Expedia Benefit Plan shall provide that all
service, all compensation and all other benefit-affecting
determinations that, as of the Close of the Effective Date were
recognized under the corresponding IAC Benefit Plan shall, as of
Immediately after the Effective Date receive full recognition,
credit and validity and be taken into account under such Expedia
Benefit Plan to the same extent as if such items occurred under
such Expedia Benefit Plan, except to the extent that duplication of
benefits would result or for benefit accrual to the extent that
Expedia adopts a final average pay defined benefit pension
plan.
2.5
Commercially
Reasonable Efforts . IAC and Expedia shall
use commercially reasonable efforts to (a) enter into any
necessary agreements to accomplish the assumptions and transfers
contemplated by this Agreement; and (b) provide for the
maintenance of the necessary participant records, the appointment
of the trustees and the engagement of recordkeepers, investment
managers, providers, insurers, etc.
2.6
Regulatory
Compliance . IAC and Expedia
shall, in connection with the actions taken pursuant to this
Agreement, cooperate in making any and all appropriate filings
required under the Code, ERISA and any applicable securities laws,
implementing all appropriate communications with participants,
transferring appropriate records and taking all such other actions
as may be necessary and appropriate to implement the provisions of
this Agreement in a timely manner.
2.7
Approval by
IAC as Sole Stockholder . Prior to the
Effective Time, IAC shall cause Expedia to adopt the Expedia 2005
Long-Term Incentive Plan.
3.1
Savings
Plan . Effective as of the
Effective Date, Expedia shall establish the Expedia Retirement
Savings Plan and the Expedia Retirement Savings Plan Trust.
As soon as practical following the establishment of the Expedia
Retirement Savings Plan and the Expedia Retirement Savings Plan
Trust, IAC shall cause the accounts of the Expedia Employees to be
transferred to the Expedia Retirement Savings Plan and the Expedia
Retirement Savings Plan Trust in cash or such other assets as
mutually agreed by IAC and Expedia, and Expedia shall cause the
Expedia Retirement Savings Plan to assume and be solely responsible
for all Liabilities
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for plan benefits (but not
legal Liabilities, such as penalties for violation of law, if
applicable, relating to the administration of plan benefits by IAC
prior to the Effective Time and during such time as IAC owned 100%
of an Expedia Entity with respect to which IAC administered plan
benefits, it being understood that Expedia shall be responsible for
such legal Liabilities incurred during such periods prior to the
Effective Time during which IAC did not own 100% of such Expedia
Entities) under the Expedia Retirement Savings Plan to or relating
to Expedia Employees whose accounts are transferred from the IAC
Retirement Savings Plan. Notwithstanding the foregoing, IAC
Common Stock that is held in the accounts of Expedia Employees and
any outstanding participant loans to Expedia Employees whose
accounts are transferred under the IAC Retirement Savings Plan
shall be transferred to the Expedia Retirement Savings Plan in kind
and shall thereafter be treated in the manner set forth in
Section 3.2. IAC and Expedia agree to cooperate in
making all appropriate filings and taking all reasonable actions
required to implement the provisions of this Section 3.1;
provided that Expedia acknowledges that it will be
responsible for complying with any requirements and applying for
any determination letters with respect to the Expedia Retirement
Savings Plan.
3.2
Stock
Considerations . To the extent that
IAC Employees and Former IAC Employees receive shares of Expedia
Common Stock in connection with the Separation with respect to IAC
Common Stock held under the IAC Retirement Savings Plan, such
shares will be deposited in an Expedia Common Stock Fund under the
IAC Retirement Savings Plan. To the extent that Expedia
Employees and Former Expedia Employees hold shares of IAC Common
Stock in their IAC Common Stock Fund under the Expedia Retirement
Savings Plan following the transfer from the IAC Retirement Savings
Plan to the Expedia Retirement Savings Plan set forth in
Section 3.1, the Expedia Retirement Savings Plan shall permit
such employees to continue to hold such shares in an IAC Common
Stock Fund under the Expedia Retirement Savings Plan following such
transfer. Following the Effective Date, Expedia Employees and
Former Expedia Employees shall not be permitted to acquire shares
of IAC Common Stock in the IAC Common Stock Fund under the Expedia
Retirement Savi
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