Expedia 2005 Annual Report Download - page 91

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Expedia, Inc.
Notes to Consolidated Financial Statements Ì (Continued)
Put and Call Option Agreements
In connection with our acquisitions of TripAdvisor and Egencia, we have call and put option
agreements in place to acquire the remaining shares held by the minority shareholders of each company.
In March 2006, the minority holders of Egencia notified us of their intention to exercise their put right
whereby they would sell their remaining minority ownership interest in exchange for approximately
$6.4 million in cash. We expect the put exercise to be executed in April 2006. We estimate that the call
option value for TripAdvisor is approximately $16.0 million as of December 31, 2005.
NOTE 17 Ì Related Party Transactions
Expenses Allocated from IAC
Prior to Spin-Off, our operating expenses include allocations from IAC for accounting, treasury, legal,
tax, corporate support, human resource functions and internal audit. Expenses allocated from IAC were
$5.0 million for the period from January 1, 2005 to August 8, 2005, and $7.5 million and $2.0 million for
the years ended December 31, 2004 and 2003. We recorded the expense allocation from IAC in general
and administrative expense in our consolidated statements of income.
Additional allocations from IAC prior to the Spin-Off related to stock-based compensation expense
attributable to our employees. Stock-based compensation expense allocated from IAC was $56.5 million
for the period from January 1, 2005 to August 8, 2005, and $171.4 million and $79.6 million for the years
ended December 31, 2004 and 2003.
Interest Income from IAC
The majority of the interest income recorded in our consolidated statements of income arose from
intercompany receivable balances from IAC. The interest income from IAC ceased upon Spin-Off on
August 9, 2005.
Relationship Between IAC and Expedia, Inc. after the Spin-Off
In connection with the Spin-Off, we entered into various agreements with IAC to provide for an
orderly transition and to govern our ongoing relationships with IAC. These agreements include the
following:
‚ a Separation Agreement that sets forth the arrangements between IAC and Expedia with respect to
the principal corporate transactions necessary to complete the Spin-Off, and a number of other
principles governing the relationship between IAC and Expedia following the Spin-Off;
‚ a Tax Sharing Agreement that governs the respective rights, responsibilities and obligations of IAC
and Expedia after the Spin-Off with respect to tax liabilities and benefits, tax attributes, tax
contests and other matters regarding income taxes, other taxes and related tax returns;
‚ an Employee Matters Agreement that governs a wide range of compensation and benefit issues,
including the allocation between IAC and Expedia of responsibility for the employment and benefit
obligations and liabilities of each company's current and former employees (and their dependents
and beneficiaries); and
‚ a Transition Services Agreement that governs the provision of transition services from IAC to
Expedia.
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