8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 19, 2007
Expedia, Inc.
(Exact name of registrant as specified in its charter)
Delaware	000-51447	20-2705720
(State or other jurisdiction of	(Commission	(I.R.S. Employer
incorporation or organization)	File Number)	Identification No.)
3150 139th Avenue S.E., Bellevue, Washington		98005
(Address of principal executive offices)		(Zip Code)
Registrant's telephone number, including area code:		(425) 679-7200
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
[X] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

     In connection with the announcement by Expedia, Inc. (the “Company”) on June 19, 2007, of the Company’s intention to commence an issuer tender offer as described in Item 8.01 below (the “Tender Offer”), the Company, Liberty Media Corporation, a significant stockholder of the Company (“Liberty Media”), and Mr. Barry Diller, the Company’s Chairman and Senior Executive, entered into an amendment (the “First Amendment”) to that certain Governance Agreement (the “Governance Agreement”), dated as of August 9, 2005, among the Company, Liberty Media and Mr. Diller.

     At the Effective Time (as defined below) the First Amendment shall amend the provisions of the Governance Agreement which, as of the date of this Current Report on Form 8-K (this “Report”), provide that so long as certain conditions relating to, among other things, ownership are met (the “Ownership Requirements”), the Company may not take specified actions (including, among other transactions, making material amendments to the certificate of incorporation or bylaws of the Company, adopting any stockholder rights plan that would adversely affect Liberty Media or Mr. Diller, as applicable, and granting additional consent rights to a stockholder of the Company) (the “Specified Actions”) without the prior approval of Liberty Media and/or Mr. Diller, as applicable, if the Company’s “total debt ratio” equals or exceeds 4:1 over a twelve month period. As of the Eff ective Time, the First Amendment provides that, so long as the Ownership Requirements are met, in the event that the Company or any of its subsidiaries incurs any new obligations for borrowed money within the definition of “total debt” set forth in the Governance Agreement (other than in respect of specified refinancings), if the Company’s “total debt ratio” (giving effect to such new obligations) equals or exceeds 8:1, and for so long as the Company’s “total debt ratio” continues to equal or exceed 8:1, the Company may not take the Specified Actions without the prior approval of Liberty Media and/or Mr. Diller. The First Amendment further provides that if the new obligations are incurred by the Company or a subsidiary in connection with the acquisition of a business, the foregoing calculation of the Company’s “total debt ratio” would take into account certain debt and cash of the acquired business and would also take into account twelve months of the EB ITDA (as defined in the Governance Agreement) of the acquired business.

     At the Effective Time, the First Amendment also amends the provisions of the Governance Agreement which, as of the date of this Report, provide Liberty Media the right to nominate up to two directors of the Company so long as Liberty Media beneficially owns at least 33,651,963 equity securities of the Company (and so long as Liberty Media’s ownership percentage is at least equal to 15% of the total equity securities of the Company) (the “Liberty Ownership Requirements”). As of the Effective Time, the First Amendment provides that Liberty Media shall be entitled to nominate up to 20% of the number of directors on the Board of Directors (the “Board”) of the Company (rounded up to the next whole number if the number of directors on the Board is not an even multiple of five) so long as Liberty Media meets the Liberty Ownership Requirements.

     Under the terms of the First Amendment, the amendments to the Governance Agreement described above will become effective (the “Effective Time”) upon the commencement by the Company of the Tender Offer, so long as the Tender Offer is commenced no later than July 16, 2007.

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     The foregoing summary of the First Amendment is qualified in its entirety by reference to the First Amendment, which is filed as Exhibit 10.1 to this Report and incorporated herein by reference.

Item 8.01. Other Events.

     On June 19, 2007, the Company issued a press release announcing its intention to repurchase up to 116,666,665 shares of Common Stock of the Company (“Common Stock”) in a modified “Dutch auction” tender offer at a price per share of not less than $27.50 and not greater than $30.00. The 116,666,665 shares of Common Stock subject to the tender offer represent approximately 42% of the number of shares of Common Stock currently outstanding and 38% of the total number of shares of Common Stock and Class B Common Stock of the Company currently outstanding. The Company expects to commence the tender offer during the week of June 25, 2007 and expects that the tender offer will expire, unless extended, during the week of August 6, 2007. A modified “Dutch auction” will allow holders of Common Stock to indicate how many shares and at what price within the Company’s specified range they wish to tender. Based on the number of shares of Common Stock tendered and the prices specified by the tendering stockholders, the Company will determine the lowest price per share within the range at which the Company can purchase 116,666,665 shares of Common Stock or such lesser number of shares as are properly tendered. The Company will not purchase shares of Common Stock below a price stipulated by a tendering stockholder, and in some cases, may actually purchase shares at prices above a stockholder’s indication under the terms of the modified “Dutch auction.” The tender offer will not be contingent upon any minimum number of shares of Common Stock being tendered. However, it will be subject to certain conditions that will be described in the Offer to Purchase to be filed by the Company with the Securities and Exchange Commission and mailed to holders of Common Stock, including the receipt of financing.

     A copy of the Company’s press release is filed as Exhibit 99.1 to this Report and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

10.1 First Amendment to Governance Agreement, dated as of June 19, 2007, among Expedia, Inc., Liberty Media Corporation and Barry Diller

99.1 Press release issued by the Company on June 19, 2007.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: June 19, 2007

EXPEDIA, INC. 

            /s/ Burke F. Norton 

By: 

            Name: Burke F. Norton 

            Title: Executive Vice President & General 

                    Counsel 

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EXHIBIT INDEX

10.1      First Amendment to Governance Agreement, dated as of June 19, 2007, among Expedia, Inc., Liberty Media Corporation and Barry Diller

99.1      Press release of Expedia, Inc., dated June 19, 2007

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EX-10.1

Exhibit 10.1

Execution Copy

     FIRST AMENDMENT TO GOVERNANCE AGREEMENT

     THIS FIRST AMENDMENT TO GOVERNANCE AGREEMENT, dated as of June 19, 2007 (this “Amendment”), is among Expedia, Inc., a Delaware corporation (“Expedia” or the “Company”), Liberty Media Corporation, for itself and on behalf of the members of its Stockholder Group (“Liberty”), and Mr. Barry Diller (“Mr. Diller”), for himself and on behalf of the members of his Stockholder Group.

     WHEREAS, the parties hereto have entered into that certain Governance Agreement, dated as of August 9, 2005 (the “Governance Agreement”) (capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Governance Agreement); and

     WHEREAS, Section 6.02 of the Governance Agreement permits the parties to amend the Governance Agreement, in the case of the Company, upon the authorization of a majority of the Board of Directors excluding any director who is a Liberty Director as provided for in the Governance Agreement; and

     WHEREAS, the parties desire to amend the Governance Agreement as set forth herein in connection with a proposed “Dutch Auction” issuer tender offer by the Company to purchase up to $3.5 billion of Company Common Shares at a price between $27.50 and $30.00 or such other prices as may be authorized by the Board of Directors (the “Proposed Tender Offer”), such amendments to be effective only upon the commencement of the Proposed Tender Offer; and

     WHEREAS, a majority of the Board of Directors excluding the Liberty Directors has authorized the Company to enter into this Amendment.

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the Company, Liberty and Mr. Diller hereby agree as follows:

     1.  Amendment of Section 2.03(b). Upon the Effective Date (as defined below), Section 2.03(b) of the Governance Agreement is hereby amended by replacing the words:

          “if the Total Debt Ratio continuously equals or exceeds 4:1 over a twelvemonth period, then, for so long as the Total Debt Ratio continues to equal or exceed 4:1:” in the lead-in to such Section 2.03(b) with the words:

          “if the Company or any of its Subsidiaries incurs any obligations (other than in respect of the customary refinancing of an amount not to exceed the principal amount of the existing obligation being refinanced) included within the definition of Total Debt (the “Incurred Debt”) upon which (and after giving effect to such) incurrence the Total Debt Ratio equals or exceeds 8:1 (for this purpose (x) calculating Total Debt as

if the Incurred Debt had been incurred on the last day of the most recently ended fiscal quarter of the Company (the “Balance Sheet Date”) and (y) if the Incurred Debt is being incurred in whole or in part to fund the acquisition by the Company or any of its Subsidiaries of any Person or business (whether by way of a merger, stock purchase, asset purchase or otherwise) (an “Acquisition”) then (A) in addition to the adjustment set forth in clause (x) above, Total Debt shall be calculated to be Total Debt of the Company and its Subsidiaries plus Total Debt of the Person or business acquired in the Acquisition (substituting, for this purpose, such Person or business for the Company and its Subsidiaries in the definition of Total Debt) as of the Balance Sheet Date to the extent applicable to the business(es) or assets being acquired and (B) there shall b e added to the EBITDA otherwise used in calculating the Total Debt Ratio at the Balance Sheet Date an amount equal to the EBITDA of the acquired Person or business (substituting, for this purpose, such Person or business for the Company and its Subsidiaries in the definition of EBITDA) for the four fiscal quarter period ending as of the Balance Sheet Date to the extent applicable to the business(es) or assets being acquired), then, for so long as the Total Debt Ratio continues to equal or exceed 8:1:”.

     2.      Amendment of Section 2.01(a). Upon the Effective Date, the first sentence of Section 2.01(a) of the Governance Agreement is hereby deleted in its entirety and replaced with the following:

              Liberty shall have the right to nominate up to such number of Liberty Directors as is equal to 20% of the total number of directors on the Board of Directors (rounded up to the next whole number if the total number of directors on the Board of Directors is not an even multiple of 5) so long as Liberty Beneficially Owns at least 33,651,963 Equity Securities (so long as the Ownership Percentage of Liberty is at least equal to 15% of the Total Equity Securities).

     3.      Effectiveness of Amendments. The amendments set forth in Sections 1 and 2 hereof shall become effective upon the commencement (the “Effective Date”) by the Company, on or before July 16, 2007, of the Proposed Tender Offer, and shall be null and void in the event the Proposed Tender Offer is not commenced on or before such date

     4.      No Other Amendments. Except as expressly set forth herein, the terms and provisions of the Governance Agreement are hereby ratified and confirmed.

     5.      Governing Law; Consent to Jurisdiction. This Amendment shall be construed in accordance with and governed by the internal laws of the State of Delaware, without giving effect to the principles of conflicts of laws. Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the non-exclusive jurisdiction of the courts of the State of Delaware, for any Litigation arising out of or relating to this Amendment and the transactions contemplated hereby and further agrees that service of any process, summons, notice or document by U.S. mail to its respective address set forth in the Governance Agreement shall be effective service of process for any Litigation brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of this Amendment or the transactions contemplated hereby in the courts of the State of Delaware, and hereby further irrevocably and unconditionally waives

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and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum. Each of the parties irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any and all rights to trial by jury in connection with any Litigation arising out of or relating to this Amendment or the transactions contemplated hereby.

     6.      Counterparts. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

     7.      Interpretation. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “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 such agreement or instrument.

     8.      Headings. The titles of Sections of this Amendment are for convenience only and shall not be interpreted to limit or otherwise affect the provisions of this Amendment.

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and year first written above.

EXPEDIA, INC. 

By:/s/ Burke F. Norton 

     Name: Burke F. Norton 

     Title: Executive Vice President, General Counsel 

             and Secretary 

LIBERTY MEDIA CORPORATION 

By: /s/ Albert Rosenthaler 

      Name: Albert Rosenthaler 

      Title: Senior Vice President 

/s/ Barry Diller 

     BARRY DILLER 

EX-99.1

Exhibit 99.1

Expedia, Inc. Announces Intention to Repurchase Up to $3.5 Billion of its Common Stock in Tender Offer

     Bellevue, Wash. — Expedia, Inc. (NASDAQ: EXPE) announced today that it intends to repurchase up to 116,666,665 shares of its common stock in a tender offer at a price per share not less than $27.50 and not greater than $30.00. The 116,666,665 shares subject to the tender offer represent approximately 42% of the number of shares of common stock currently outstanding and approximately 38% of the total number of shares of common stock and Class B common stock currently outstanding. The tender offer is expected to commence during the week of June 25, 2007 and to expire, unless extended, during the week of August 6, 2007. A modified “Dutch auction” will allow stockholders to indicate how many shares and at what price within the company’s specified range they wish to tender. Based on the number of shares tendered and the prices specified by the tendering stockholders, the company will deter mine the lowest price per share within the range at which the company can purchase 116,666,665 shares of its common stock or such lesser number of shares as are properly tendered. The company will not purchase shares below a price stipulated by a stockholder, and in some cases, may actually purchase shares at prices above a stockholder’s indication under the terms of the modified “Dutch auction.” Expedia, Inc.’s directors and executive officers and Liberty Media Corporation have advised the company that they do not intend to tender any shares in the tender offer.

     Specific instructions and a complete explanation of the terms and conditions of the tender offer will be contained in the Offer to Purchase and related materials that Expedia expects will be mailed to stockholders of record beginning the week of June 25, 2007. MacKenzie Partners, Inc. will serve as information agent and The Bank of New York will serve as the depositary. The tender offer will not be contingent upon any minimum number of shares being tendered. However, it will be subject to certain conditions that will be described in the Offer to Purchase, including the receipt of financing.

     “With this action, we couldn’t be clearer that the management and the Board of this company are confident in the value of Expedia and in its long term future," said Barry Diller, Expedia, Inc.’s Chairman and Senior Executive.

     Expedia, Inc. will announce its second quarter results prior to its purchase of shares pursuant to the offer. The company currently plans to issue its second quarter earnings release on or around August 2, 2007.

     This press release is for informational purposes only and is not an offer to purchase or the solicitation of an offer to sell any shares of the company’s common stock. The solicitation and offer to purchase the company’s common stock will only be made pursuant to the Offer to Purchase and related materials that the company will send to its stockholders. Stockholders should read those materials carefully because they will contain important information, including the various terms and conditions of the tender offer. Stockholders will be able to obtain copies of the Offer to Purchase, related materials filed by the company as part of the statement on Schedule “TO” and other documents filed with the Securities and Exchange Commission (“SEC”) through the SEC’s internet address at http://www.sec.gov without charge when th ese documents become available. Stockholders and investors may also obtain a copy of these documents, as well as any other documents the company has filed with the SEC, without charge, from the company or at the Investor Relations section of the company’s website: www.expediainc.com. Stockholders are urged to carefully read these materials prior to making any decision with respect to the offer. Stockholders and investors who have questions or need assistance may call MacKenzie Partners, Inc. at 1-800-322-2885 in the United States and Canada, and +1-212-929-5500 for all other countries.

About Expedia, Inc.

     Expedia, Inc. is the world’s leading online travel company, empowering business and leisure travelers with the tools and information they need to easily research, plan, book, and experience travel. Expedia, Inc. also provides wholesale travel to offline retail travel agents. Expedia, Inc.’s portfolio of brands includes: Expedia.com®, hotels.com®, Hotwire®, Expedia® Corporate Travel, TripAdvisor™ and Classic Vacations®. Expedia, Inc.'s companies also operate internationally with sites in Australia, Canada, France, Germany, Italy, Japan, the Netherlands, Norway, Spain, Sweden, the United Kingdom and China, through its investment in eLong™. For more information, visit http://www.expediainc.com (NASDAQ: EXPE).

Forward-Looking Statements

     This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, regarding Expedia, Inc.’s intention to repurchase up to 116,666,665 shares of its common stock. These statements are subject to a variety of risks and uncertainties including the company's ability to secure financing and consummate the repurchase. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of Expedia, Inc. are contained in its filings with the SEC, including its most recent Annual Report on Form 10-K. Expedia, Inc. undertakes no obligation to release publicly the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Contacts

     MacKenzie Partners, Inc.
     United States and Canada: 1-800-322-2885 
     All other countries: +1-212-929-5500

June 19, 2007

Expedia and Expedia.com are either registered trademarks of Expedia, Inc. in the U.S. and/or other countries. Other logos or product and company names mentioned herein may be the property of their respective owners.