EXPEDIA INC, S-1/A, 1999-11-08

EXPEDIA INC
S-1/A, 1999-11-08
TRANSPORTATION SERVICES

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<PAGE>

As filed with the Securities and Exchange Commission on November 8, 1999
SEC File No. 333-87623

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

Amendment No. 2
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
EXPEDIA, INC.
(Exact name of Registrant as specified in its charter)
---------------
Washington 4700 91-1996083
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)

4200 150th Ave. NE
Redmond, Washington 98052
(425) 705-5161
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
---------------
Richard N. Barton
President and Chief Executive Officer
Expedia, Inc.
4200 150th Ave. NE
Redmond, Washington 98052
(425) 705-5161
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies of all communications to:

Richard B. Dodd Frank H. Golay, Jr.
Mark S. Britton Sullivan & Cromwell
Maja D. Chaffe 1888 Century Park East
Preston Gates & Ellis LLP Los Angeles, California 90067
701 Fifth Avenue, Suite 5000 (310) 712-6600
Seattle, Washington 98104-7078
(206) 623-7580
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement as the
underwriters shall determine.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the Securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) 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. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
Amount Maximum Maximum Amount of
Title of each class of to be offering price aggregate registration
securities to be registered registered per share(1) offering price(1) fee(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares par value $0.01............. 5,980,000 shares $12.00 $71,760,000 $19,950(1)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933 solely
for purposes of calculating amount of registration fee. $20,850 was
previously paid with original filing.

---------------
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 the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to Completion. Dated November 8, 1999.

5,200,000 Shares

[EXPEDIA, INC. LOGO]

Common Stock

------------

This is an initial public offering of shares of common stock of Expedia,
Inc. This prospectus relates to an offering of 4,160,000 shares in the United
States. In addition, 1,040,000 shares are being offered outside the United
States in an international offering. All of the 5,200,000 shares of common
stock are being sold by Expedia.

Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $10.00 and $12.00. Application has been made for
quotation of the common stock on the Nasdaq National Market under the symbol
"EXPE."

See "Risk Factors" beginning on page 8 to read about factors you should
consider before buying shares of the common stock.

------------

Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.

------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price................................... $ $
Underwriting discount........................................... $ $
Proceeds, before expenses, to Expedia........................... $ $
</TABLE>

To the extent that the underwriters sell more than 5,200,000 shares of
common stock, the underwriters have the option to purchase up to an additional
780,000 shares from Expedia at the initial public offering price less the
underwriting discount.

------------

The underwriters expect to deliver the shares in New York, New York on
, 1999.

------------

Joint Book-Running Managers

Goldman, Sachs & Co. Morgan Stanley Dean Witter

------------

Prospectus dated , 1999.
<PAGE>

INSIDE FRONT COVER

[ARTWORK]

The Expedia Travel Marketplace

Consumers
Leisure Travelers
Small Business Travelers
Corporate Travelers

[Expedia, Inc. Logo]

Suppliers
Airlines
Hotels
Car Rental Companies
Vacation Packagers
Cruise Lines
Destination Services Merchants

[horizontal rule]

Global Reach and Presence
United States
Launched in October 1996
[Expedia.com logo]
[Image of USA flag]
Canada
Launched in April 1997
[Expedia.ca logo]
[Image of Canada flag]
United Kingdom
Launched in November 1998
[Expedia.co.uk logo]
[Image of Union Jack flag]
Germany
Launched in August 1999
[Expedia.de logo]
[Image of German flag]
<PAGE>

INSIDE GATEFOLD
[ARTWORK in background is version of Expedia, Inc. logo]

Commerce
Expedia.com offers one-stop travel shopping and reservation services, providing
access to schedule, pricing and availability information [screenshot of home
page of Expedia.com]

Community
Expedia.com community features enable consumers to make choices on their travel
purchases. Our Fare Compare feature allows consumers to review fares that other
Expedia.com customers have found on similar flights.

[screenshot of Fare Compare, with heading that says Deals found by other
Expedia.com customers]

Customer Service
Expedia.com offers customers 24-hour access to toll-free telephone and email
customer service.

[screenshot of Customer Service area on Expedia.com, with a photograph of
customer service agent]

Content
Expedia.com consumers use our editorial content to research destinations, read
travel tips provided by other Expedia travelers, and gain more insight before
leaving on a trip.

[screenshot of places to go page with a photograph and caption titled The Grand
Canal]

[Expedia, Inc. Logo]

Expedia.com and Expedia are either registered trademarks or trademarks of
Expedia, Inc. in the United States and/or other countries.

<PAGE>

SUMMARY

This summary may not contain all the information that may be important to
you. You should read this entire prospectus before making an investment
decision.

In this prospectus, the terms "Expedia" and "we" refer to Expedia, Inc. and
our subsidiaries and our predecessor, the travel business unit of Microsoft
Corporation, except where it is clear that such terms mean only Expedia, Inc.

Expedia, Inc.

The Internet is dramatically changing the way that consumers and businesses
communicate, share information and buy and sell goods and services. The
Internet reduces inefficiencies in markets characterized by the presence of
large numbers of geographically dispersed buyers and sellers and purchase
decisions involving large amounts of information from multiple sources. We
believe that the worldwide travel industry, which exemplifies these
characteristics, is especially well-suited to benefit from increased Internet
and electronic commerce adoption. As a result, travel has already become the
largest online retail category with estimated online transactions of $7.8
billion in 1999, growing to $32 billion in 2004, according to Forrester
Research.

To address this market opportunity, we attract a large global base of
consumers and travel suppliers to our Internet-based travel marketplace and
enable them to research, buy and sell travel-related services online. Our
global travel marketplace offers consumers a convenient, comprehensive and
personalized source of travel information and services. At the same time, our
marketplace enables travel suppliers to reach a large, global audience of
consumers who are actively engaged in planning and purchasing travel services.
In our marketplace, suppliers can pursue a range of innovative, targeted
merchandising and advertising strategies designed to increase revenues, while
reducing overall transaction and customer service costs.

We have built an underlying technology infrastructure that enables both
buyers and sellers to transact through our websites in a reliable, scalable and
secure environment. In addition to generating revenues from transactions and
advertising on our websites, we also license key components of our technology
and editorial content to selected airlines as a platform for their electronic
commerce websites.

Since launching our online travel service in October 1996, we have
experienced significant growth in our traffic and the amount of travel
purchased through our websites. As of September 30, 1999, over $790 million in
airline ticket purchases and hotel and car rental reservations had been made
through our websites by over 930,000 consumers and 7.5 million users had
registered on our websites. In addition, as of September 30, 1999, over $500
million in airline ticket purchases and hotel and car rental reservations had
been made through the websites of our licensees by over 470,000 customers and
5.5 million users had registered on the websites of our licensees. According to
Media Metrix, Expedia.com was the #1 most visited website for travel services
for each of the six months ended September 30, 1999.

We are located at 4200 150th Avenue NE, Redmond, Washington 98052, and our
phone number is (425) 705-5161.

3
<PAGE>

Our Strategy

Our objective is to enhance our position as a leading online travel
marketplace. The key elements of our strategy are as follows:

Increase brand awareness. We plan to pursue an aggressive brand development
strategy that will include a substantial advertising presence in both online
media and traditional media, such as print, radio and television. We will also
continue to offer co-branded promotions with selected suppliers.

Enhance supplier relationships. Investing in and building on strong
supplier relationships are crucial to the success of our business. We will
continue to work with suppliers to develop new advertising and travel services
for our websites and new tools to facilitate suppliers' entry of pricing,
availability and description information directly into our marketplace.

Enhance technology platform and product functionality. We plan to continue
to enhance the underlying infrastructure and functionality of our websites. The
operation of our own websites and those of our licensees has given us extensive
experience at handling rapid increases in transaction volumes. In addition to
continuously updating software features and editorial content, we believe that
increasing the level of personalization in our marketplace is critical to
providing a rich consumer experience.

Expand internationally. We operate localized websites in the United
Kingdom, Germany and Canada. We selected these countries due to their large
travel markets and the rapid growth of online commerce in these markets. We
plan to expand our international presence by entering other important travel
markets, after evaluating both the size of the local travel market and the
popularity of online commerce. In developing customized websites in these and
other international markets, we will continue to draw on our experience in the
United States with technology, user interface and supplier relationships while
tailoring our international websites to specific characteristics of each local
marketplace.

Broaden our marketplace into new travel services categories. We plan to
expand our travel service offerings to include more complex travel products and
destination service offerings. Currently, the majority of our commerce revenues
are derived from sales of airline tickets, with a smaller percentage
represented by hotel reservations and car rentals. We plan to extend our
offerings in each of these core segments and expand the range of offerings into
other segments, such as cruises and vacation packages.

4
<PAGE>

Our Relationship with Microsoft Corporation

In October 1996, Microsoft launched its online travel services through
Expedia. On October 1, 1999, Microsoft separated the Expedia assets and
contributed them to us in exchange for 33,000,000 shares of common stock or
100% of our outstanding common stock at that date. After giving effect to this
offering, Microsoft will own approximately 86.4% of our outstanding common
stock, or approximately 84.7% if the underwriters' over-allotment options are
exercised in full. Microsoft will continue to include us in its consolidated
federal tax returns as long as it owns at least 80% of our outstanding stock
and will continue to include our financial data in its consolidated financial
reports as long as it maintains control of our outstanding common stock.

Microsoft will cancel all of the unvested options of Microsoft employees
who choose to join Expedia prior to this offering and we will replace the
canceled options with Expedia options, that will have equivalent vesting
schedules and in-the-money values and comparable other terms as the canceled
Microsoft options.

We have also entered into a number of other agreements which were necessary
to separate the Expedia assets from Microsoft and to facilitate the operation
of the Expedia assets after such separation. One of these agreements provides
that for a three-year period Microsoft will not compete directly or indirectly
in the business of offering an online service for reserving or purchasing
travel services. These agreements were not negotiated on an arm's length basis.

Risk Factors

An investment in our common stock involves a high degree of risk. We have
incurred substantial net losses and negative cash flows on both an annual and
interim basis, including a net loss of $5.0 million for the three months ended
September 30, 1999 and, in the same period, negative cash flow from operating
and investing activities of $6.3 million. As of September 30, 1999, we had an
accumulated deficit of $91.7 million. We expect our operating losses and
negative cash flow to continue for the foreseeable future. We also expect to
incur a non-cash charge in the range of $100 million to $150 million related to
the issuance of stock options to our employees to replace their unvested
Microsoft options. Before deciding whether to invest in shares of our common
stock, you should carefully consider the risks and uncertainties described in
"Risk Factors" beginning on page 8 of this prospectus.

5
<PAGE>

The Offering

<TABLE>
<S> <C>
Common stock offered by Expedia
U.S. offering................ 4,160,000 shares
International offering....... 1,040,000 shares
Total...................... 5,200,000 shares
Common stock to be outstanding
after this offering........... 38,200,000 shares
Use of proceeds................ Working capital and general corporate
purposes
Nasdaq National Market symbol.. "EXPE"
</TABLE>

In addition to the shares of common stock to be outstanding after this
offering, we may issue additional shares of common stock under the following
plans and arrangements:

. shares issuable upon exercise of outstanding options at a
weighted average exercise price of $ per share as of , 1999.
The number of options and their price will be determined only at the
pricing date of this offering and will be reflected in the final
prospectus. We estimate that, at the pricing date, there will be
approximately 18.5 million shares issuable upon the exercise of
outstanding options at a weighted average exercise price of
approximately $4.50 per share.

. 4,435,000 shares available for future issuance upon exercise of options
not yet granted or for future issuance under our various stock plans.

6
<PAGE>

Summary Financial Data

<TABLE>
<CAPTION>
Three
months ended
Years ended June 30, September 30,
-------------------------------------------- ----------------
1995 1996 1997 1998 1999 1998 1999
----- ------- -------- -------- -------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues............ $ -- $ -- $ 2,742 $ 13,827 $ 38,699 $ 6,057 $15,268
Cost of revenues........ -- -- 3,279 9,692 15,950 3,177 5,364
----- ------- -------- -------- -------- ------- -------
Gross profit (loss)..... -- -- (537) 4,135 22,749 2,880 9,904
Operating expenses:
Product development... 818 6,263 16,211 18,506 21,180 4,977 5,393
Sales and marketing... -- 17 8,820 10,823 14,888 2,060 6,732
General and
administrative....... 145 1,520 3,353 4,284 6,283 1,050 2,729
----- ------- -------- -------- -------- ------- -------
Total operating
expenses........... 963 7,800 28,384 33,613 42,351 8,087 14,854
----- ------- -------- -------- -------- ------- -------
Loss from operations and
net loss............... $(963) $(7,800) $(28,921) $(29,478) $(19,602) $(5,207) $(4,950)
===== ======= ======== ======== ======== ======= =======
Pro forma basic and
diluted net loss per
share.................. $ (.59) $ (.15)
======== =======
Shares used in computing
pro forma net loss per
share.................. 33,000 33,000
======== =======
</TABLE>

<TABLE>
<CAPTION>
As of
September 30, 1999
---------------------
As
Actual adjusted
--------- ----------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Working capital........................................... $ 2,608 $ 54,004
Total assets.............................................. 7,018 58,414
Accumulated deficit....................................... (91,714) (91,714)
Total owner's net deficit/stockholders' equity............ (373) 51,023
</TABLE>

The as adjusted amounts reflect the receipt by Expedia of the estimated net
proceeds of $51.4 million from the sale of the 5,200,000 shares of common stock
offered by Expedia in this offering after deducting the estimated offering
expenses and underwriting discounts and commissions, based upon an assumed
public offering price of $11.00 per share.

Unless we note otherwise, all of the information that we have included in
this prospectus assumes that the underwriters have not exercised their over-
allotment options. See "Underwriting" for a discussion of the over-allotment
options.

7
<PAGE>

RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should consider the following factors carefully before deciding to purchase
shares of common stock. Additional risks not presently known to us or that we
currently deem immaterial may also impair our business operations.

Our operating results are volatile and difficult to predict. If we fail to
meet the expectations of securities analysts or investors, the market price of
our common stock may decline significantly.

Our annual and quarterly operating results have fluctuated in the past and
may fluctuate significantly in the future due to a variety of factors, many of
which are outside of our control. Because our operating results are volatile
and difficult to predict, we believe that quarter-to-quarter comparisons of
our operating results are not a good indication of our future performance. It
is likely that in some future quarter our operating results will fall below
the expectations of securities analysts or investors. In this event, the
trading price of our common stock may decline significantly.

Factors that may cause us to fail to meet the expectations of securities
analysts or investors include the following:

. our inability to obtain new customers at reasonable cost, retain
existing customers or encourage repeat purchases

. decreases in the number of visitors to our websites or our inability
to convert visitors to our websites into customers

. our inability to adequately maintain, upgrade and develop our
websites, the systems that we use to process customers' orders and
payments or our computer network

. our inability to retain existing airlines, hotels, rental car
companies and other suppliers of travel services ("travel suppliers")
or to obtain new travel suppliers

. our inability to obtain travel products on satisfactory terms from our
travel suppliers

. the ability of our competitors to offer new or enhanced websites,
services or products

. fluctuating gross margins due to a changing mix of revenues

. the termination of existing relationships with key service providers
or failure to develop new ones

. the amount and timing of operating costs relating to expansion of our
operations

. economic conditions specific to the Internet, online commerce and the
travel industry

Because we have a limited operating history, it is difficult to evaluate our
business and prospects.

Our business began operations in July 1994 and we launched our online
travel service in October 1996. As a result, we have only a limited operating
history from which you can evaluate our historical business. It is also
difficult to evaluate our prospective business because we face the risks
frequently encountered by early stage companies using new and unproven
business models and entering new and rapidly evolving markets, such as online
commerce. These risks include our potential failure to:

. attract additional travel suppliers and consumers to our service

. maintain and enhance our brand

8
<PAGE>

. expand our service offerings

. operate, expand and develop our operations and systems efficiently

. maintain adequate control of our expenses

. raise additional capital

. attract and retain qualified personnel

. respond to technological changes

. respond to competitive market conditions

We depend on our relationships with travel suppliers, licensees and computer
reservation systems; adverse changes in these relationships could affect our
inventory of travel offerings and license revenues.

Our business model relies on relationships with travel suppliers, and it
would be negatively affected by adverse changes in these relationships. We
depend on travel suppliers to enable us to offer our customers comprehensive
access to travel services and products. Consistent with industry practices, we
currently have few agreements with our travel suppliers obligating them to
sell services or products through our websites. It is possible that travel
suppliers may choose not to make their inventory of services and products
available through online distribution. Travel suppliers could elect to sell
exclusively through other sales and distribution channels or to restrict our
access to their inventory, either of which could significantly decrease the
amount or breadth of our inventory of available travel offerings. We also
depend on travel suppliers for advertising revenues. Adverse changes in any of
these relationships could reduce the amount of inventory which we are able to
offer through our websites.

In addition to our relationships with travel suppliers, our business model
relies on our relationships with licensees and computer reservations systems.
Our license revenues are generated through a small number of licensees and our
computer reservation systems, particularly Worldspan, L.P. and Pegasus
Systems, Inc., provide us access to travel suppliers. Adverse changes in any
of these relationships could have a material adverse effect on the revenue
which we generate from these licenses.

A decline in commission rates or the elimination of commissions could reduce
our revenues.

A substantial majority of our online revenues depends on the commissions
paid by travel suppliers for bookings made through our online travel service.
Generally, we do not have written commission agreements with our suppliers. As
is standard practice in the travel industry, we rely on informal arrangements
for the payment of commissions. Travel suppliers are not obligated to pay any
specified commission rate for bookings made through our websites. We cannot
assure you that airlines, hotel chains or other travel suppliers will not
reduce current industry commission rates or eliminate commissions entirely,
either of which could reduce our revenues.

For example, in 1995, most of the major airlines placed a cap on per-
ticket commissions payable to all travel agencies for domestic airline travel.
In September 1997, the major United States airlines reduced the commission
rate payable to traditional travel agencies from 10% to 5%. In 1997, the major
United States airlines reduced the commission rate payable for online
reservations from 8% to 5%. In addition, since 1998, many airlines have
implemented a fixed-rate commission of $10.00 for domestic online roundtrip
ticket sales. Because a high percentage of our business relates to airline
ticket sales, a further reduction in airline ticket commissions could reduce
our revenues.

9
<PAGE>

Consumers, travel suppliers and advertisers may not accept our websites as
valuable commercial tools, which would harm the growth of our business.

For us to achieve significant growth, consumers, travel suppliers and
advertisers must accept our websites as valuable commercial tools. Consumers
who have historically purchased travel products using traditional commercial
channels, such as local travel agents and calling airlines directly, must
instead purchase these products through our websites. Consumers frequently use
our websites for route pricing and other travel information and then choose to
purchase airline tickets or make other reservations directly from travel
suppliers or other travel agencies. If this practice increases, it could limit
our growth.

Similarly, travel suppliers and advertisers will also need to accept or
expand their use of our websites. Travel suppliers will need to view our
websites as efficient and profitable channels of distribution for their travel
products. Advertisers will need to view our websites as effective ways to
reach their potential customers.

In order to achieve the acceptance of consumers, travel suppliers and
advertisers contemplated by our business plan, we will need to continue to
make substantial investments in our technology and brand. However, we cannot
assure you that these investments will be successful. Our failure to make
progress in these areas will harm the growth of our business.

We expect our losses and negative cash flows to continue.

We have incurred substantial net losses and negative cash flows on both an
annual and interim basis. For the fiscal year ended June 30, 1999, we had a
net loss of $19.6 million and negative cash flow from operating and investing
activities of $18.0 million. For the quarter ended September 30, 1999, we had
a net loss of $5.0 million and negative cash flow from operating and investing
activities of $6.3 million. As of September 30, 1999, we also had an
accumulated deficit of $91.7 million. In addition, we expect to incur a non-
cash charge in the range of $100 million to $150 million related to the
issuance of stock options to our employees to replace their unvested Microsoft
options. This charge will be amortized over the vesting period of the new
options. We expect to continue to incur net losses and negative cash flows for
the foreseeable future and we cannot assure you that we will ever achieve
profitability or generate positive cash flows.

We expect to grow our operating expenses significantly, especially in the
areas of sales and marketing and operations. These increased expenses will
result primarily from our launch of a significant advertising campaign in
fiscal 2000, extension of the coverage of our advertising sales force and
expansion of our domestic and international operations. In addition, we may
experience an increase in general and administrative expenses as we develop
and purchase resources in areas where we currently rely on Microsoft to
provide services and in other areas required to operate as a stand-alone
entity. As a result, we will need to increase our revenues to become
profitable. If our revenues do not grow as expected, or if increases in our
expenses are not in line with our plans, there could be a material adverse
effect on our business, operating results and financial condition.

Intense competition could reduce our market share and harm our financial
performance.

The markets for the products and services offered by us are intensely
competitive. We compete with other online travel reservation services,
traditional travel agencies, travel suppliers offering their services directly
and international travel service providers competing in critical national or
regional markets, such as the United Kingdom, Germany and Canada. We also
compete with many of the same parties and others in the licensing of
technology to airlines and corporate travel agencies.

10
<PAGE>

We compete with a variety of companies with respect to each product or
service we offer. These competitors include:

. Internet travel agents such as Travelocity, which is operated by The
Sabre Group Holdings, Inc., a majority-owned subsidiary of American
Airlines, and Preview Travel, Inc.; Travelocity has recently announced
its intention to acquire Preview Travel

. local, regional, national and international traditional travel
agencies

. consolidators and wholesalers of airline tickets and other travel
products, including online consolidators such as Cheaptickets.com and
Priceline.com

. individual airlines, hotels, rental car companies, cruise operators
and other travel service providers, some of which are suppliers to our
websites

. operators of travel industry reservation databases

In addition to the traditional travel agency channel, many travel
suppliers also offer their travel services as well as third-party travel
services directly through their own websites. These travel suppliers include
many suppliers with which we do business. Suppliers also sell their own
services directly to consumers, predominantly by telephone. As the market for
online travel services grows, we believe that travel suppliers, traditional
travel agencies, travel industry information providers and other companies
will increase their efforts to develop services that compete with our services
by selling inventory from a wide variety of suppliers. We cannot assure you
that our online operations will compete successfully with any current or
future competitors.

Many of our competitors have longer operating histories, larger customer
bases, greater brand recognition and significantly greater financial,
marketing and other resources than we have and may enter into strategic or
commercial relationships with larger, more established and better-financed
companies. Some of our competitors may be able to secure services and products
from travel suppliers on more favorable terms, devote greater resources to
marketing and promotional campaigns and commit more resources to website and
systems development than we are able to devote. In addition, the introduction
of new technologies and the expansion of existing technologies may increase
competitive pressures. Increased competition may result in reduced operating
margins, as well as loss of market share and brand recognition. We cannot
assure you that we will be able to compete successfully against current and
future competitors. Competitive pressures faced by us could have a material
adverse effect on our business, operating results and financial condition.

If we fail to increase our brand recognition among consumers, we may not be
able to attract and expand our online traffic.

We believe that establishing, maintaining and enhancing the Expedia brand
is a critical aspect of our efforts to attract and expand our online traffic.
The number of Internet sites that offer competing services increases the
importance of establishing and maintaining brand recognition. Many of these
Internet sites already have well-established brands in online services or the
travel industry generally. Promotion of the Expedia brand will depend largely
on our success in providing a high-quality online experience supported by a
high level of customer service. In addition, we intend to increase our
spending substantially on marketing and advertising with the intention of
expanding our brand recognition to attract and retain online users and to
respond to competitive pressures. However, we cannot assure you that these
expenditures will be effective to promote our brand or that our marketing
efforts generally will achieve our goals.

11
<PAGE>

If we are unable to introduce and sell new products and services, our brand
could be damaged.

We need to broaden the range of travel products and services and increase
the availability of products and services that we offer in order to enhance
our service. We will incur substantial expenses and use significant resources
trying to expand the range of products and services that we offer. However, we
may not be able to attract sufficient travel suppliers and other participants
to provide desired products and services to our consumers. In addition,
consumers may find that delivery through our service is less attractive than
other alternatives. If we launch new products and services and they are not
favorably received by consumers, our reputation and the value of the Expedia
brand could be damaged.

Our relationships with consumers and travel suppliers are mutually
dependent since consumers will not use a service that does not offer a broad
range of travel services. Similarly, travel suppliers will not use a service
unless consumers actively make travel purchases through it. We cannot predict
whether we will be successful in expanding the range of products and services
that we offer. If we are unable to expand successfully, this could also damage
our brand.

We may be unable to plan and manage our operations and growth effectively
after our separation from Microsoft.

Our growth to date has placed, and our anticipated future operations will
continue to place, a significant strain on our management, systems and
resources. We continue to increase the scope of our operations and the size of
our workforce. In addition to needing to train and manage our workforce, we
will need to continue to improve and develop our financial and managerial
controls and our reporting systems and procedures. A failure to plan,
implement and integrate these systems successfully could adversely affect our
business.

In the past, we have used Microsoft's resources in technology, systems,
administration and other areas. Following this offering we will have a
services agreement with Microsoft, but we will need to develop our own
resources in these areas over time.

Our growth may increase our expense levels and the difficulties we face in
managing our operations and our separation from Microsoft.

Declines or disruptions in the travel industry generally could reduce our
revenues.

We rely on the health and growth of the travel industry. Travel is highly
sensitive to business and personal discretionary spending levels, and thus
tends to decline during general economic downturns. In addition, other adverse
trends or events that tend to reduce travel are likely to reduce our revenues.
These may include:

. price escalation in the airline industry or other travel-related
industries

. increased occurrence of travel-related accidents

. airline or other travel-related strikes

. political instability

. regional hostilities and terrorism

. bad weather

12
<PAGE>

Interruptions in service from third parties could impair the quality of our
service.

We rely on third-party computer systems and third-party service providers,
including the computerized central reservation systems of the airline, hotel
and car rental industries to make airline ticket, hotel room and car rental
reservations and credit card verifications and confirmations. Currently, a
majority of our transactions are processed through the Worldspan and Pegasus
systems. We rely on Online Fulfillment Services, a subsidiary of World Travel
Partners, L.P., to provide telephone and email customer support, as well as to
print and deliver airline tickets as necessary. Microsoft will also service
substantially all of our information systems as part of a services agreement.
Any interruption in these third-party services or a deterioration in their
performance could impair the quality of our service. If our arrangement with
any of these third parties is terminated, we may not find an alternate source
of systems support on a timely basis or on commercially reasonable terms. In
particular, any migration from the Worldspan system could require a
substantial commitment of time and resources and hurt our business.

Our success depends on maintaining the integrity of our systems and
infrastructure.

In order to be successful, we must provide reliable, real-time access to
our systems for our customers and suppliers. As our operations grow in both
size and scope, domestically and internationally, we will need to improve and
upgrade our systems and infrastructure to offer an increasing number of
customers and travel suppliers enhanced products, services, features and
functionality. The expansion of our systems and infrastructure will require us
to commit substantial financial, operational and technical resources before
the volume of business increases, with no assurance that the volume of
business will increase. Consumers and suppliers will not tolerate a service
hampered by slow delivery times, unreliable service levels or insufficient
capacity, any of which could have a material adverse effect on our business,
operating results and financial condition.

In this regard, our operations face the risk of systems failures. Our
product development and information management systems, as well as computer
and communications hardware, are hosted by Microsoft in facilities in and
around the Seattle, Washington area. Our systems and operations are vulnerable
to damage or interruption from fire, flood, power loss, telecommunications
failure, break-ins, earthquake and similar events. Our business interruption
insurance may not adequately compensate us for losses that may occur. The
occurrence of a natural disaster or unanticipated problems at our leased
facilities in Seattle, Washington could cause interruptions or delays in our
business, loss of data or render us unable to process reservations. In
addition, the failure of our computer and communications systems to provide
the data communications capacity required by us, as a result of human error,
natural disaster or other operational disruptions, could result in
interruptions in our service. The occurrence of any or all of these events
could adversely affect our reputation, brand and business.

Rapid technological changes may render our technology obsolete or decrease the
competitiveness of our services.

To remain competitive in the online travel industry, we must continue to
enhance and improve the functionality and features of our websites. The
Internet and the online commerce industry are rapidly changing. In particular,
the online travel industry is characterized by increasingly complex systems
and infrastructures. If competitors introduce new services embodying new
technologies, or if new industry standards and practices emerge, our existing
websites and proprietary technology and systems may become obsolete. Our
future success will depend on our ability to do the following:

. enhance our existing services

13
<PAGE>

. develop and license new services and technologies that address the
increasingly sophisticated and varied needs of our prospective
customers and suppliers

. respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis

Developing our websites and other proprietary technology entails
significant technical and business risks. We may use new technologies
ineffectively or we may fail to adapt our websites, transaction-processing
systems and network infrastructure to customer requirements or emerging
industry standards. If we face material delays in introducing new services,
products and enhancements, our customers and suppliers may forego the use of
our services and use those of our competitors.

The success of our business will depend on continued growth of online commerce
and the Internet.

Because we do not intend to provide our service through any commercial
medium other than the Internet, our future revenues and profits depend upon
the widespread acceptance and use of the Internet and online services as a
medium for commerce. Rapid growth in the use of the Internet and online
services is a recent phenomenon. This growth may not continue. A sufficiently
broad base of consumers may not accept, or continue to use, the Internet as a
medium of commerce. Demand for and market acceptance of recently introduced
products and services over the Internet involve a high level of uncertainty.

The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and amount of traffic. Our success
will depend upon the development and maintenance of the Internet's
infrastructure to cope with this increased traffic. This will require a
reliable network backbone with the necessary speed, data capacity and security
and the timely development of complementary products for providing reliable
Internet access and services. Major online service providers and the Internet
itself have experienced outages and other delays as a result of software and
hardware failures and could face such outages and delays in the future.
Outages and delays are likely to affect the level of Internet usage and the
processing of transactions on our websites. In addition, the Internet could
lose its viability because of delays in the development or adoption of new
standards to handle increased levels of activity or of increased government
regulation. The adoption of new standards or government regulation may require
us to incur substantial compliance costs.

We are substantially controlled by Microsoft, which may impede our business
development and may prevent a takeover of Expedia, irrespective of whether it
is beneficial to our shareholders.

Microsoft beneficially owns 33,000,000 shares of common stock, which after
giving effect to this offering will represent approximately 86.4% of the
outstanding shares of common stock. As long as Microsoft controls a
significant percentage of the common stock, it will be able to control all
matters requiring approval by our common shareholders, including the election
of directors and the ability to cause or prevent a change of control of
Expedia. In addition, there are no limits on the ability of Microsoft to
purchase shares of common stock in the open market.

As part of our separation from Microsoft, we have entered into various
agreements with Microsoft relating to the provision of services to us by
Microsoft, our licensing of intellectual property from Microsoft and the
sharing of taxes and purchasing of services. In one of these agreements,
Microsoft has agreed not to compete with us for a period of three years, and
we may face competition from Microsoft after this period. These agreements
were not negotiated on an arm's length basis and potentially give Microsoft a
further ability to influence our operations.

14
<PAGE>

Because we are a Microsoft-affiliated entity, some potential strategic
customers and vendors may not wish to enter, or may even be contractually
prohibited from entering, into strategic relationships with us. If too many
potential strategic partners were to decline strategic relationships with us,
it could have an adverse impact on our strategy and business development.

Microsoft's voting control and provisions of Washington law affecting
acquisitions and business combinations applicable to us may discourage
transactions involving an actual or potential change of control of Expedia,
including transactions in which our shareholders might receive a premium for
their shares over the then-prevailing market price. This voting control and
these provisions of Washington law may also have a negative effect on the
market price of the common stock.

Our business is exposed to risks associated with online commerce security and
credit card fraud.

Consumer concerns over the security of transactions conducted on the
Internet or the privacy of users may inhibit the growth of the Internet and
online commerce. To transmit confidential information such as customer credit
card numbers securely, we rely on encryption and authentication technology.
Unanticipated events or developments could result in a compromise or breach of
the systems we use to protect customer transaction data. Furthermore, our
servers may also be vulnerable to viruses transmitted via the Internet. While
we proactively check for intrusions into our infrastructure, a new and
undetected virus could cause a service disruption.

To date, our results have been impacted due to reservations placed with
fraudulent credit card data. Under current credit card practices, we may be
held liable for fraudulent credit card transactions and other payment disputes
with customers. A failure to control fraudulent credit card transactions
adequately would adversely affect our business.

Our international operations involve risks relating to travel patterns and
practices and Internet-based commerce.

We operate in the United Kingdom, Germany and Canada and may expand our
operations to other countries. In order to achieve wide-spread acceptance in
each country we enter, we believe that we must tailor our services to the
unique customs and cultures of that country. Learning the customs and cultures
of various countries, particularly with respect to travel patterns and
practices, is a difficult task and our failure to do so could slow our growth
in those countries.

We also face risks specific to Internet-based commerce in foreign markets.
Our international risks include:

. delays in the development of the Internet as a broadcast, advertising
and commerce medium in international markets

. difficulties in managing operations due to distance, language and
cultural differences, including issues associated with establishing
management systems infrastructures in individual foreign markets

. unexpected changes in regulatory requirements

. tariffs and trade barriers and limitations on fund transfers

. difficulties in staffing and managing foreign operations

15
<PAGE>

. potential adverse tax consequences

. exchange rate fluctuations

. increased risk of piracy and limits on our ability to enforce our
intellectual property rights

Any of these factors could harm our business. We do not currently hedge our
foreign currency exposures.

We may be found to have infringed on intellectual property rights of others
which could expose us to substantial damages and restrict our operations.

We could face claims that we have infringed the patents, copyrights or
other intellectual property rights of others. In addition, we may be required
to indemnify travel suppliers for claims made against them. Any claims against
us could require us to spend significant time and money in litigation, delay
the release of new products or services, pay damages, develop new intellectual
property or acquire licenses to intellectual property that is the subject of
the infringement claims. These licenses, if required, may not be available on
acceptable terms or at all. As a result, intellectual property claims against
us could have a material adverse effect on our business, operating results and
financial condition.

We are a defendant, along with Microsoft, in a lawsuit filed by
Priceline.com that alleges that our Hotel Price Matcher service infringes on a
patent held by them. See "Business--Legal Proceedings."

Because our market is seasonal, our quarterly results will fluctuate.

Our limited operating history and rapid growth make it difficult for us to
assess the impact of seasonal factors on our business. Nevertheless, we expect
our business to experience seasonal fluctuations, reflecting seasonal trends
for the products and services offered by our websites. For example, demand for
travel bookings may increase in anticipation of summer vacations and holiday
periods, but online travel bookings may decline with reduced Internet usage
during the summer months. These factors could cause our revenues to fluctuate
from quarter to quarter. Our results may also be affected by seasonal
fluctuations in the inventory made available to our service by travel
suppliers. Airlines, for example, typically enjoy high demand for tickets
through traditional distribution channels for travel during holiday periods.
As a result, during these periods, airlines may either have less inventory to
offer through our service or available tickets may be less competitively
priced. These same factors are expected to affect rental cars, hotels and
other travel products and services.

Our success depends in large part on the continuing efforts of a few
individuals and our ability to continue to attract, retain and motivate highly
skilled employees.

We depend substantially on the continued services and performance of our
senior management, particularly Richard N. Barton, our Chief Executive Officer
and President. These individuals may not be able to fulfill their
responsibilities adequately and may not remain with us. The loss of the
services of any executive officers or other key employees could hurt our
business.

As of September 30, 1999, we employed a total of 149 full-time Microsoft
employees. As of October 25, 1999, 138 previous Microsoft employees have
accepted offers of employment with us. Pursuant to our services agreement with
Microsoft, we have contracted the services of seven employees who remain
employed by Microsoft, until the earlier of May 20, 2000 or our notice that we
no longer require the service of the employees. We intend to hire new
personnel to replace these contracted employees during this period; however,
competition for personnel throughout the Internet industry is intense. If we
do not succeed in attracting new employees and retaining and motivating our
current personnel, our business will be adversely affected.

16
<PAGE>

Our websites rely on intellectual property, and we cannot be sure that this
intellectual property is protected from copy or use by others, including
potential competitors.

We regard much of our content and technology as proprietary and try to
protect our proprietary technology by relying on trademarks, copyrights, trade
secret laws and confidentiality agreements with consultants. In connection
with our license agreements with third parties, we seek to control access to
and distribution of our technology, documentation and other proprietary
information. Even with all of these precautions, it is possible for someone
else to copy or otherwise obtain and use our proprietary technology without
our authorization or to develop similar technology independently. Effective
trademark, copyright and trade secret protection may not be available in every
country in which our services are made available through the Internet, and
policing unauthorized use of our proprietary information is difficult and
expensive. We cannot be sure that the steps we have taken will prevent
misappropriation of our proprietary information. This misappropriation could
have a material adverse effect on our business. In the future, we may need to
go to court to enforce our intellectual property rights, to protect our trade
secrets or to determine the validity and scope of the proprietary rights of
others. This litigation might result in substantial costs and diversion of
resources and management attention.

We currently license from third parties, including Microsoft, some of the
technologies incorporated into our websites. As we continue to introduce new
services that incorporate new technologies, we may be required to license
additional technology from Microsoft and others. We cannot be sure that these
third-party technology licenses will continue to be available on commercially
reasonable terms, if at all.

Regulatory and legal changes may impose taxes or other burdens on our
business.

The laws and regulations applicable to the travel industry affect us and
our travel suppliers. We must comply with laws and regulations relating to the
sale of travel services, including those prohibiting unfair and deceptive
practices and those requiring us to register as a seller of travel, comply
with disclosure requirements and participate in state restitution funds. In
addition, many of our travel suppliers and computer reservation systems
providers are heavily regulated by the United States and other governments.
Our services are indirectly affected by regulatory and legal uncertainties
affecting the businesses of our travel suppliers and computer reservation
systems providers.

We must also comply with laws and regulations applicable to businesses
generally and online commerce. Currently, few laws and regulations directly
apply to the Internet and commercial online services. Moreover, there is
currently great uncertainty about whether or how existing laws governing
issues such as property ownership, sales and other taxes, libel and personal
privacy apply to the Internet and commercial online services. It is possible
that laws and regulations may be adopted to address these and other issues.
Further, the growth and development of the market for online commerce may
prompt calls for more stringent consumer protection laws. New laws or
different applications of existing laws would likely impose additional burdens
on companies conducting business online and may decrease the growth of the
Internet or commercial online services. In turn, this could decrease the
demand for our products and services or increase our cost of operations.

Federal legislation imposing limitations on the ability of states to tax
Internet-based sales was enacted in 1998. The Internet Tax Freedom Act, as
this legislation is known, exempts specific types of sales transactions
conducted over the Internet from multiple or discriminatory state and local
taxation through October 21, 2001. It is possible that this legislation will
not be renewed when it terminates in October 2001. Failure to renew this
legislation could allow state and local governments to impose taxes on
Internet-based sales, and these taxes could decrease the demand for our
products and services or increase our costs of operations.

17
<PAGE>

Our common stock price may be volatile.

The market price for our common stock is likely to be highly volatile and
is likely to experience wide fluctuations in response to factors including the
following:

. actual or anticipated variations in our quarterly operating results

. announcements of technological innovations or new services by us or
our competitors

. changes in financial estimates by securities analysts

. conditions or trends in the Internet or online commerce industries

. changes in the economic performance or market valuations of other
Internet, online commerce or travel companies

. announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments

. additions or departures of key personnel

. release of lock-up or other transfer restrictions on our outstanding
shares of common stock or sales of additional shares of common stock

. potential litigation

The market prices of the securities of Internet-related and online
commerce companies have been especially volatile. Broad market and industry
factors may adversely affect the market price of our common stock, regardless
of our actual operating performance. In the past, following periods of
volatility in the market price of their stock, many companies have been the
subject of securities class action litigation. If we were sued in a securities
class action, it could result in substantial costs and a diversion of
management's attention and resources and would adversely affect our stock
price.

At various times after this offering, there will be a significant amount of
common stock eligible for sale, which could cause our stock price to fall.

Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices. As described below, no shares
currently outstanding will be available for sale immediately after this
offering because of contractual restrictions on resale. Sales of substantial
amounts of our common stock in the public market after the restrictions lapse
could adversely affect the prevailing market price and impair our ability to
raise equity capital in the future.

Upon completion of this offering, we will have outstanding 38,200,000
shares of common stock. Of these shares, the 5,200,000 shares sold in this
offering, plus any shares issued upon exercise of the underwriters' over-
allotment options, will be freely tradable without restriction under the
Securities Act, unless purchased by our "affiliates," as that term is defined
in Rule 144 under the Securities Act. In general, affiliates include officers,
directors or 10% stockholders.

The remaining 33,000,000 shares outstanding are "restricted securities"
within the meaning of Rule 144. These restricted securities may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 under the Securities Act. These
rules are summarized under "Shares Eligible for Future Sale." Sales of the
restricted securities in the public market, or the availability of these
shares for sale, could adversely affect the market price of the common stock.

18
<PAGE>

As discussed in "Certain Relationships and Related Transactions--Our
Relationship with Microsoft; Shareholder Agreement," Microsoft has entered
into an agreement with Expedia that it will not offer, sell, contract to sell
or grant any option to purchase or otherwise dispose of our common stock, or
any securities exercisable for or convertible into our common stock, owned by
it for a period of one year after the date of this offering without the prior
approval of Expedia. After this time Microsoft will have the ability to sell
some or all of its common stock. We have agreed to file registration
statements under the Securities Act to register the common stock held by
Microsoft.

In addition, we intend to file immediately after the effectiveness of this
offering a registration statement on Form S-8 under the Securities Act
covering all shares of common stock reserved for issuance under our stock
plans. Shares registered under this registration statement would be available
for sale in the open market unless these shares are subject to vesting
restrictions with Expedia or the contractual restrictions described above.
Within 180 days of the date of this prospectus, we estimate that approximately
2.3 million shares of common stock will become exercisable under outstanding
options held by employees who are not subject to lock-up agreements.

In the future we may need to raise additional capital in order to remain
competitive in the online travel services industry. This capital may not be
available on acceptable terms, if at all.

We will not be able to fund our growth if we lack adequate resources.
Based on our current operating plan, we anticipate that the net proceeds of
this offering will be sufficient to satisfy our anticipated needs for working
capital, capital expenditures and business expansion for the next twelve
months. After that time, we may need additional capital. If we raise
additional funds by issuing equity or convertible debt securities, the
percentage ownership of our stockholders will be diluted. Any securities could
have rights, preferences and privileges senior to those of the common stock.

We currently do not have any commitments for additional financing. We
cannot be certain that additional financing will be available in the future on
acceptable terms or at all. In this regard, it is important to note that even
though Microsoft will own a controlling interest in our common stock after
this offering, Microsoft has made no commitment to us for additional
financing.

You will experience immediate and substantial dilution.

The initial public offering price is expected to be substantially higher
than book value per share of the common stock. Investors purchasing shares of
common stock will incur immediate substantial dilution that we estimate will
amount to $9.66 per share. In addition, investors purchasing shares in this
offering will incur additional dilution when outstanding options are
exercised.

Our management has broad discretion in the application of proceeds, which may
increase the risk that the proceeds will not be applied effectively.

Our management will have broad discretion in determining how to spend the
proceeds of this offering. Accordingly, we could spend the proceeds from this
offering in ways which may be ineffective or with which the stockholders may
not agree.

19
<PAGE>

We would lose revenues and incur significant costs if our systems or those
operated by third parties with which we do business are not year 2000
compliant.

In the year 2000, we could encounter system and processing failures of
date-related data because our computer-controlled systems may use two digits
rather than four to define the applicable year. This could result in system
failure or miscalculations. If this were to happen, we would experience
disruptions of our operations including a temporary inability for us to
process reservations on our websites or to engage in similar normal business
activities.

Our operations could also be harmed if the information technology systems
or other systems that we operate or that are operated by third parties are not
year 2000 compliant. We rely on information technology supplied by third
parties, and our travel suppliers are also heavily dependent on information
technology systems and on their own third party vendors' systems. Year 2000
problems experienced by us or any such third parties could hurt our business
in various ways, including:

. lost sales

. increased operating costs

. loss of customers or persons accessing our websites

. business interruptions of a material nature

. claims of mismanagement, misrepresentation or breach of contract

Finally, our operations in the short term could be affected by any public
reaction to the upcoming turn of the century and the reluctance to travel
anytime on or near January 1, 2000. This reluctance could have a short-term
effect on our results of operations.

This prospectus includes forward-looking statements relating to our industry
and our operations, which are inherently uncertain.

Some statements under the captions "Prospectus Summary," "Risk Factors,"
"Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere in this
prospectus are forward-looking statements. These forward-looking statements
include, but are not limited to, statements about our industry, plans,
objectives, expectations, intentions, assumptions and other statements
contained in this prospectus that are not historical facts. When used in this
prospectus, the words "expect," "anticipate," "intend," "plan," "believe,"
"seek," "estimate" and similar expressions are generally intended to identify
forward-looking statements. Because these forward-looking statements involve
risks and uncertainties relating to our industry and our operations including
those described in this "Risk Factors" section, actual results may differ
materially from those expressed or implied by these forward-looking
statements. This is particularly true for a company with a limited operating
history such as Expedia and for a young and rapidly evolving industry such as
the online travel industry.

Market data and forecasts relating to our operations which are used in
this prospectus have been obtained from independent industry sources. We have
not independently verified these data and results may be materially different
from these forecasts.

20
<PAGE>

USE OF PROCEEDS

Our net proceeds, after deducting estimated underwriting discounts and
offering expenses, from the sale of the 5,200,000 shares of common stock we
are offering at the assumed public offering price of $11.00 per share are
estimated to be $51.4 million, or $59.4 million if the underwriters' over-
allotment options are exercised in full. We intend to use the net proceeds
from this offering for our working capital and general corporate purposes,
including approximately $5 million for the expansion of our facilities and
other infrastructure and approximately $45 million for operating expenses.
Included in this intended allocation for operating expenses are approximately
$10 million for product development, approximately $30 million for sales and
marketing and approximately $5 million for general and administrative
expenses. Pending application of the net proceeds, we will invest the cash in
investment grade debt securities, commercial paper, certificates of deposit
and other short-term investments.

While the principal reason for this offering is to raise capital, we
anticipate receiving additional benefits from this offering which include:

Greater strategic focus and flexibility. As a result of having a separate
board of directors and management team from Microsoft, we expect to have
sharper focus on our business and strategic opportunities and greater
flexibility to address the needs of our customers and suppliers.

More directly aligned incentives for employees. We expect that the
motivation of our employees and the focus of our management will be
strengthened by incentive compensation programs tied to the market performance
of our common stock.

Direct access to capital markets. We will have direct access to the
capital markets and an increased ability to grow through acquisitions and
strategic relationships.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock or
other securities. We currently anticipate that we will retain all of our
future earnings for use in the expansion and operation of our business and do
not anticipate paying cash dividends in the foreseeable future.

21
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 1999
on an actual basis, on a pro forma basis to give effect to the capitalization
of Expedia, Inc. and on a pro forma as adjusted basis to give effect to the
sale of 5,200,000 shares of common stock at an assumed offering price of
$11.00 per share after deducting the estimated expenses and underwriting
discounts and commissions payable by Expedia. This table should be read
together with our financial statements and notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus.

<TABLE>
<CAPTION>
As of September 30, 1999
--------------------------------
Pro forma
Actual Pro forma as adjusted
-------- --------- -----------
(in thousands except share and
per share data)
<S> <C> <C> <C>
Owner's net deficit/stockholders' equity
(deficit):
Preferred stock, $.01 par value, 10,000,000
shares authorized; no shares issued or
outstanding pro forma and pro forma as
adjusted.................................... $ -- $ -- $ --
Common stock, $.01 par value, 120,000,000
shares authorized; no shares issued or
outstanding; 33,000,000 shares issued and
outstanding, pro forma; 38,200,000 shares
issued and outstanding, pro forma as
adjusted.................................... -- 330 382
Net contribution from owner/additional paid-
in capital.................................. 91,341 91,011 142,355
Accumulated deficit.......................... (91,714) (91,714) (91,714)
-------- -------- --------
Total owner's net deficit/stockholders'
equity (deficit).......................... (373) (373) 51,023
-------- -------- --------
Total capitalization....................... $ (373) $ (373) $ 51,023
======== ======== ========
</TABLE>

In addition to the shares of common stock to be outstanding after this
offering, we may issue additional shares of common stock under the following
plans and arrangements:

. shares issuable upon exercise of outstanding options at a
weighted average exercise price of $ per share as of , 1999. The
number of options and their price will be determined only at the
pricing date of this offering and will be reflected in the final
prospectus. We estimate that, at the pricing date, there will be
approximately 18.5 million shares issuable upon the exercise of
outstanding options at a weighted average exercise price of
approximately $4.50 per share.

. 4,435,000 shares available for future issuance upon exercise of options
not yet granted or for future issuance under our various stock plans.

22
<PAGE>

DILUTION

As of September 30, 1999, our historical net tangible book value was a
deficit of approximately $0.4 million or $.01 per share of common stock. Net
tangible book value per share represents total tangible assets less total
liabilities divided by 33,000,000 shares of common stock. After giving effect
to our receipt of the net proceeds from our sale of the 5,200,000 shares of
common stock offered hereby at the assumed offering price of $11.00 per share,
the pro forma net tangible book value at September 30, 1999 would have been
approximately $51.0 million or $1.34 per share. This represents an immediate
increase in net tangible book value of $1.35 per share to our sole existing
shareholder and an immediate dilution of $9.66 per share to new investors
purchasing shares of common stock in this offering. The following table
illustrates this per share dilution:

<TABLE>
<S> <C>
Assumed public price per share....................................... $11.00
Net tangible book value per share after this offering................ 1.34
------
Dilution per share to new investors.................................. $ 9.66
======
</TABLE>

The following table summarizes, as of September 30, 1999, the differences
between the number and percentage of shares of common stock issued to
Microsoft, our sole existing shareholder, and new investors purchasing shares
of common stock in this offering, at the assumed initial public offering price
of $11.00 per share, as well as the aggregate consideration and the average
price per share paid by them:

<TABLE>
<CAPTION>
Shares Total
purchased consideration Average
------------------ -------------------- price per
Number Percent Amount Percent share
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholder.......... 33,000,000 86.4% $ 91,341,000 61.5% $ 2.77
New investors................. 5,200,000 13.6 57,200,000 38.5 11.00
---------- ----- ------------ -----
Total......................... 38,200,000 100.0% $148,541,000 100.0%
========== ===== ============ =====
</TABLE>

In addition to the shares of common stock to be outstanding after this
offering, we may issue additional shares of common stock under the following
plans and arrangements:

. 4,435,000 shares available for future issuance upon exercise of options
not yet granted or for future issuance under our various stock plans.

The following table summarizes, as of September 30, 1999 and on a pro
forma basis to give effect to the exercise of the 18.5 million options
estimated to be issuable on the date of this offering, the differences between
the number and percentage of shares of common stock issued to pro forma
existing shareholders and to new investors purchasing shares of common stock
in this offering, at the assumed initial public offering price of $11.00 per
share, as well as the aggregate consideration and the average price per share
paid by them:

<TABLE>
<CAPTION>
Shares Total
purchased consideration Average
------------------ -------------------- price per
Number Percent Amount Percent share
---------- ------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C>
Pro forma existing
shareholders............ 51,500,000 90.8% $173,906,500 75.2% $ 3.38
New investors............ 5,200,000 9.2% 57,200,000 24.8% $11.00
---------- ------------
56,700,000 $231,106,500
========== ============
</TABLE>

23
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data should be read together with our
financial statements and notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus. The statement of operations data for the years ended June 30,
1997, 1998 and 1999 and the balance sheet data as of June 30, 1998 and 1999
are derived from our audited financial statements included elsewhere in this
prospectus which have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon is also included elsewhere in this prospectus.

The statement of operations data for the years ended June 30, 1995 and
1996 and the balance sheet data as of June 30, 1995, 1996 and 1997 are derived
from unaudited financial statements not included herein. The statement of
operations data for the three months ended September 30, 1998 and 1999 and the
balance sheet data as of September 30, 1999 are derived from our unaudited
financial statements included elsewhere in this prospectus. In the opinion of
management, these statements have been prepared on the same basis as the
audited financial statements and include all adjustments, consisting only of
normal recurring adjustments, necessary for the fair statement of the results
for these periods.

<TABLE>
<CAPTION>
Three months
ended
Years ended June 30, September 30,
-------------------------------------------- ----------------
1995 1996 1997 1998 1999 1998 1999
----- ------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(in thousands, except per share data)
Statement of Operations
Data:
Net revenues............ $ -- $ -- $ 2,742 $ 13,827 $ 38,699 $ 6,057 $15,268
Cost of revenues........ -- -- 3,279 9,692 15,950 3,177 5,364
----- ------- -------- -------- -------- ------- -------
Gross profit (loss)..... -- -- (537) 4,135 22,749 2,880 9,904
----- ------- -------- -------- -------- ------- -------
Operating expenses:
Product development... 818 6,263 16,211 18,506 21,180 4,977 5,393
Sales and marketing... -- 17 8,820 10,823 14,888 2,060 6,732
General and
administrative....... 145 1,520 3,353 4,284 6,283 1,050 2,729
----- ------- -------- -------- -------- ------- -------
Total operating
expenses........... 963 7,800 28,384 33,613 42,351 8,087 14,854
----- ------- -------- -------- -------- ------- -------
Loss from operations.... (963) (7,800) (28,921) (29,478) (19,602) (5,207) (4,950)
Provision for income
taxes.................. -- -- -- -- -- -- --
----- ------- -------- -------- -------- ------- -------
Net loss................ $(963) $(7,800) $(28,921) $(29,478) $(19,602) $(5,207) $(4,950)
===== ======= ======== ======== ======== ======= =======
Pro forma basic and
diluted net loss per
share.................. $ (.59) $ (.15)
======== =======
Shares used in computing
pro forma net loss per
share.................. 33,000 33,000
======== =======
</TABLE>

<TABLE>
<CAPTION>
As of June 30, As of
------------------------------------------- Sept. 30,
1995 1996 1997 1998 1999 1999
----- ------ -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
(in thousands)
Balance Sheet Data:
Working capital......... $ -- $ -- $ 658 $ 4,814 $ 1,390 $ 2,608
Total assets............ 28 601 1,645 8,333 5,756 7,018
Unearned revenue, net of
current................ -- -- -- 5,820 3,851 4,102
Accumulated deficit..... (963) (8,763) (37,684) (67,162) (86,764) (91,714)
Total owner's investment
(deficit).............. 991 601 (721) (92) (1,675) (373)
</TABLE>

24
<PAGE>

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

The information contained in this section has been derived from our
financial statements and should be read together with our financial statements
and related notes included elsewhere in this prospectus. The discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those expressed or implied in these
forward-looking statements as a result of various factors, including those set
forth under "Risk Factors" and elsewhere in this prospectus.

Overview

We are a leading provider of branded online travel services for leisure
and small business travelers. We operate our own websites, including
Expedia.com and international versions of Expedia.com, and we license
components of our technology to provide the platform for travel websites with
Continental Airlines, Northwest Airlines and American Express Travel Related
Services. We derive our revenues from commissions from transactions on our
websites, sales of advertisements on our websites and licensing fees.

In the past, we conducted business as an operating unit of Microsoft. Our
statements of operations and balance sheets are derived from the historic
books and records of Microsoft and include cost allocations from Microsoft.
Although these allocations are not necessarily indicative of the costs that
would have been incurred by us on a stand-alone basis, we believe that the
allocated amounts are reasonable. Prior to the closing of this offering,
assets, liabilities and operations that comprise our business will be
contributed by Microsoft to us.

Commission revenues are derived from airline ticket transactions and hotel
and car rental reservations. Our commissions and related revenues accounted
for 80% of our total net revenues in fiscal 1997, 71% of our total net
revenues in fiscal 1998, 69% of our total net revenues in fiscal 1999 and 66%
of our total net revenues for the three months ended September 30, 1999. A
substantial majority of these revenues are derived from airline ticket
transactions. Airline ticket commissions are determined by individual airlines
and billed and collected through the Airline Reporting Corporation, an
industry-administered clearinghouse. As is customary in the travel industry,
travel suppliers are not obligated to pay any specified commission rate for
bookings made through our websites. We recognize commission revenues on air
transactions when the reservation is made and secured by a credit card, net of
an allowance for cancellations. We recognize commission revenues on hotel and
car rental reservations either on the receipt of our commission payment or on
notification of entitlement by a third party.

In addition to commissions, we derive revenues from the sales of
advertisements on our websites and fees from the licensing of software to our
airline and corporate customers such as Continental Airlines, Northwest
Airlines and American Express. We recognize advertising revenues either on
display of each individual advertisement or ratably over the advertising
period, depending on the terms of the advertising contract. Revenues from
software license agreements are recognized ratably over the license term.
Advertising revenues accounted for 17% of our total net revenues in fiscal
1997, 15% of our total net revenues in fiscal 1998, 18% of our total net
revenues in fiscal 1999 and 19% of our total net revenues for the three months
ended September 30, 1999. License revenues accounted for 3% of our total net
revenues in fiscal 1997, 14% of our total net revenues in fiscal 1998, 13% of
our total net revenues in fiscal 1999 and 15% of our total net revenues for
the three months ended September 30, 1999.

We launched our websites in Canada in fiscal 1997, in the United Kingdom
in fiscal 1999 and in Germany in fiscal 2000. Revenues from our international
websites amounted to less than 2% of our total net revenues in fiscal 1999 and
increased to 4% of our total net revenues for the three months ended

25
<PAGE>

September 30, 1999. As a result of increased activity from these websites and
future websites in other markets we may enter, we expect international
revenues to continue to increase.

Cost of revenues consists primarily of fees paid to our fulfillment
vendors for the costs associated with issuing airline tickets and related
customer services, fees paid to Worldspan for use of their computer
reservation and information services system, allocated and direct costs for
the operation of our data center and costs related to insertion of banner and
other advertisements.

Our direct product development expenses consist primarily of compensation
for personnel. Our direct sales and marketing expenses consist primarily of
personnel-related costs as well as advertising, distribution and public
relations expenses. In addition to these direct expenses, we have historically
been allocated an amount of product development, sales and marketing and
general and administrative costs from Microsoft. These costs include
allocations for real estate, legal, treasury, human resources, information
technology and other general services. These allocations were not materially
different from the costs that we would have incurred as a stand-alone entity.

In conjunction with this offering, we will enter into a services agreement
with Microsoft. Accordingly, we will no longer be allocated costs from
Microsoft. Under the services agreement, Microsoft will continue to provide us
with the types of services described above. In return, we will pay Microsoft
fees based on the total cost of the services. The services agreement is for an
initial period ending December 31, 2000 with one-year renewals if the parties
agree on fees. The agreement is cancelable by us upon 30 days written notice
and by Microsoft upon 180 days written notice. Following this offering we
intend to develop our own resources in these areas over time.

All permanent Microsoft employees who transfer to Expedia prior to this
offering will cancel their unvested options to purchase Microsoft common stock
and concurrently receive new options to acquire Expedia's common stock. The
number of Expedia options which will replace each Microsoft option will depend
on the offering price of the Expedia common stock and the market price of the
Microsoft common stock on the date of the offering, which will also be the
date on which Expedia issues the options. The Expedia options will have
equivalent vesting schedules, in-the-money value and comparable other terms as
the canceled Microsoft options. For example, if an employee has 1,000 unvested
Microsoft options which have an exercise price of $40 per share, and if the
Microsoft stock price is $100 per share and the Expedia offering price is $10
per share, then the employee's Microsoft options would convert to 10,000
Expedia options ((100/10) x 1000) with an exercise price of $4 per share
(40/(100/10)). This issuance of Expedia options will be treated as a new grant
of stock options. As a result we will incur a non-cash charge because the
exercise price of the new options will be significantly less than the initial
public offering price of our common stock. The amount of the charge will
depend on the market price of Microsoft common stock as referred to above. We
estimate that the charge will be in the range of $100 million to $150 million.
This non-cash charge will be amortized over the vesting period of the Expedia
options, generally between one and 54 months.

We have incurred and expect to continue to incur substantial losses and
negative cash flows on both an annual and interim basis. In particular, we
intend to increase our focus and spending on brand development, sales and
marketing, product development, website content and strategic relationships.
Additionally, our revenues are impacted by the seasonality of the travel
industry, particularly leisure travel. These factors could adversely affect
our future financial condition and operating results.

Our fiscal years end on June 30 of each year. References to a fiscal year,
such as fiscal 1999, are to the twelve months ended June 30 of that year.

26
<PAGE>

Results of Operations

The following table sets forth our results of operations as a percentage
of net revenues.

<TABLE>
<CAPTION>
As a Percentage of Net Revenues
-----------------------------------------
Years ended Three months
June 30, ended Sept. 30,
-------------------- ------------------
1997 1998 1999 1998 1999
------ ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Net revenues....................... 100% 100% 100% 100% 100%
------ ---- --- ------- -------
Cost of revenues................... 120 70 41 52 35
------ ---- --- ------- -------
Gross profit (loss)................ (20) 30 59 48 65
Operating expenses:
Product development.............. 591 134 55 82 35
Sales and marketing.............. 322 78 38 34 44
General and administrative....... 122 31 16 18 18
------ ---- --- ------- -------
Total operating expenses....... 1,035 243 109 134 97
Loss from operations............... (1,055) (213) (51) (86) (32)
Provision for income taxes......... -- -- -- -- --
------ ---- --- ------- -------
Net loss........................... (1,055)% (213)% (51)% (86)% (32)%
====== ==== === ======= =======
</TABLE>

Three months ended September 30, 1998 and 1999

Net Revenues. Our net revenues increased 152% from $6.1 million in the
three months ended September 30, 1998 to $15.3 million in the three months
ended September 30, 1999. Approximately $5.9 million of the increase in net
revenues was due to increases in commissions and related revenues. This
increase was primarily attributable to an increase in the number of airline-
related transactions partially offset by a decrease in some air ticket
commission rates. Increased advertising revenues accounted for approximately
$2.1 million of the increase in net revenues. The increase in advertising
revenues was due to new advertising contracts entered into in fiscal 1999.

Cost of Revenues. Cost of revenues increased 69% from $3.2 million the
three months ended September 30, 1998 to $5.4 million in the three months
ended September 30, 1999. As a percentage of net revenues, our cost of
revenues decreased from 52% in the three months ended September 30, 1998 to
35% in the three months ended September 30, 1999. This decrease was due to
efficiencies associated with an increased transaction volume, the allocation
of fixed costs, such as operation of our data center, over a larger revenue
base and the growth in higher margin advertising revenues.

Product Development. Product development costs increased 8% from $5.0
million in the three months ended September 30, 1998 to $5.4 million in the
three months ended September 30, 1999. This increase resulted from an increase
in personnel related costs as compared to the year-earlier quarter. Product
development costs as a percentage of net revenues decreased from 82% in the
three months ended September 30, 1998 to 35% in the three months ended
September 30, 1999, primarily due to an increase in our revenue base.

Sales and Marketing. Sales and marketing costs increased 227% from $2.1
million in the three months ended September 30, 1998 to $6.7 million in the
three months ended September 30, 1999. Sales and marketing costs as a
percentage of net revenues increased from 34% in the three months ended

27
<PAGE>

September 30, 1998 to 44% in the three months ended September 30, 1999. This
increase was primarily attributable to increased promotional activities
intended to drive traffic to our websites, such as radio and paper media
advertising.

General and Administrative. General and administrative costs increased
160% from $1.1 million in the three months ended September 30, 1998 to $2.7
million in the three months ended September 30, 1999. The increase was
primarily due to an increase of $1.1 million of allocated costs from
Microsoft. General and administrative costs as a percentage of net revenues
were 18% in the three months ended September 30, 1998 and the three months
ended September 30, 1999.

Income Taxes. We are included in Microsoft's consolidated returns for
federal income tax purposes. In some states we will file unitary or combined
tax returns with Microsoft and its subsidiaries. No tax benefits for our net
operating losses have been recognized as we will not be allowed to utilize
such losses generated by us as an operating unit of Microsoft. We have entered
into a tax allocation agreement with Microsoft.

Fiscal 1997, 1998 and 1999

Net Revenues. Our net revenues increased 404% from $2.7 million in fiscal
1997 to $13.8 million in fiscal 1998 and increased a further 180% to $38.7
million in fiscal 1999. Approximately $7.6 million of the increase in net
revenues from fiscal 1997 to fiscal 1998 and $16.7 million of the increase in
net revenues from fiscal 1998 to fiscal 1999 were due to increases in
commissions and related revenues. These increases were primarily attributable
to increases in the number of airline-related transactions. Increases in
advertising revenues accounted for approximately $1.6 million of the increase
in net revenues from fiscal 1997 to fiscal 1998 and $4.8 million of the
increase in net revenues from fiscal 1998 to fiscal 1999.

Cost of Revenues. Cost of revenues increased 196% from $3.3 million in
fiscal 1997 to $9.7 million in fiscal 1998 and increased a further 65% to
$16.0 million in fiscal 1999. As a percentage of net revenues, our cost of
revenues decreased from 120% in fiscal 1997 to 70% in fiscal 1998 and to 41%
in fiscal 1999. These decreases are due to efficiencies associated with
increased transaction volume, the allocation of fixed costs, such as operation
of our data center, over a larger revenue base and growth in higher margin
advertising revenues.

In September 1999, we introduced the Hotel Price Matcher reservation
service. As the merchant of record for transactions through our Hotel Price
Matcher service, we will record the entire value of these transactions as
revenues rather than only the commission amount. Likewise, we will record as
cost of revenues the entire cost of the transaction. As such, the gross margin
percentage that we derive from Hotel Price Matcher transactions will be lower
than our recent historical gross margin percentage.

Product Development. Product development costs increased 14% from $16.2
million in fiscal 1997 to $18.5 million in fiscal 1998 and increased a further
14% to $21.2 million in fiscal 1999. The increase in product development costs
from fiscal 1997 to fiscal 1998 resulted primarily from an increase in
personnel and consultant costs of $6.2 million offset by a decrease in product
development allocations from Microsoft of $4.1 million. The increase in
product development costs from fiscal 1998 to fiscal 1999 resulted primarily
from an increase in product development allocations from Microsoft of $2.5
million. Product development costs as a percentage of net revenues decreased
from 591% in fiscal 1997 to 134% in fiscal 1998 and to 55% in fiscal 1999,
primarily due to increases in our revenue base in the

28
<PAGE>

applicable periods. We believe our product development efforts are critical to
the success of our strategic objectives, and accordingly, we expect to
increase the absolute dollar amount of product development expenditures in
future periods.

Sales and Marketing. Sales and marketing costs increased 23% from $8.8
million in fiscal 1997 to $10.8 million in fiscal 1998 and increased a further
38% to $14.9 million in fiscal 1999. The increase in sales and marketing costs
from fiscal 1997 to fiscal 1998 resulted primarily from an increase in
personnel and consultant costs of $1.4 million. The increase from fiscal 1998
to fiscal 1999 was attributable to a $4.8 million increase in the cost of
direct promotional activities intended to drive traffic to Expedia.com, and to
establish, enhance and maintain the Expedia brand, partially offset by a
decrease in marketing and advertising allocations from Microsoft of $0.6
million. Sales and marketing costs as a percentage of net revenues decreased
from 322% in fiscal 1997 to 78% in fiscal 1998 and to 38% in fiscal 1999,
primarily due to increases in our revenue base in the applicable periods. We
believe that establishing, maintaining and enhancing the Expedia brand is a
critical aspect of our efforts to attract and expand online traffic.
Accordingly, we expect to launch a significant advertising campaign in fiscal
2000 and to extend the national coverage of our advertising sales force, both
of which will increase substantially the amount we spend on sales and
marketing in future periods.

General and Administrative. General and administrative costs increased 28%
from $3.4 million in fiscal 1997 to $4.3 million in fiscal 1998 and increased
a further 47% to $6.3 million in fiscal 1999. These increases primarily relate
to increases in general and administrative cost allocations from Microsoft as
we expanded our operations. As a percentage of net revenues, general and
administrative costs decreased from 122% in fiscal 1997 to 31% in fiscal 1998
and to 16% in fiscal 1999 as a result of increases in our revenue base. We may
incur additional general and administrative expenses in future periods as we
transition from being an operating unit of Microsoft to a stand-alone public
company.

29
<PAGE>

Quarterly Unaudited Results of Operations

The following table sets forth our unaudited quarterly results of
operations, in dollars and as a percentage of net revenues, for the periods
presented.

We have prepared this unaudited information on the same basis as the
audited financial statements. This information includes all adjustments,
consisting only of normal recurring adjustments, that we consider necessary
for a fair presentation of our financial position and operating results for
the quarters presented. The operating results in any quarter are not
necessarily indicative of the results that may be expected for any future
period and you should not rely on them as such.

<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------
Sep. 30, Dec. 31, Mar. 31, Jun. 30, Sep. 30
1998 1998 1999 1999 1999
-------- -------- -------- -------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues............... $ 6,057 $ 7,851 $11,219 $13,572 $15,268
Cost of revenues........... 3,177 4,132 3,983 4,658 5,364
------- ------- ------- ------- -------
Gross profit............... 2,880 3,719 7,236 8,914 9,904
Operating expenses:
Product development...... 4,977 5,083 5,254 5,866 5,393
Sales and marketing...... 2,060 2,516 3,119 7,193 6,732
General administrative... 1,050 1,568 1,571 2,094 2,729
------- ------- ------- ------- -------
Total operating
expenses............... 8,087 9,167 9,944 15,153 14,854
------- ------- ------- ------- -------
Loss before income taxes... (5,207) (5,448) (2,708) (6,239) (4,950)
Provision for income
taxes..................... -- -- -- -- --
------- ------- ------- ------- -------
Net loss................... $(5,207) $(5,448) $(2,708) $(6,239) $(4,950)
======= ======= ======= ======= =======
<CAPTION>
As a Percentage of Net Revenues
---------------------------------------------------
Sep. 30, Dec. 31, Mar. 31, Jun. 30, Sep. 30,
1998 1998 1999 1999 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenues............... 100% 100% 100% 100% 100%
Cost of revenues........... 52 52 35 34 35
------- ------- ------- ------- -------
Gross profit............... 48 48 65 66 65
Operating expenses:
Product development...... 82 65 47 43 35
Sales and marketing...... 34 32 28 53 44
General administrative... 18 20 14 16 18
------- ------- ------- ------- -------
Total operating
expenses............... 134 117 89 112 97
------- ------- ------- ------- -------
Loss before income taxes... (86) (69) (24) (46) (32)
Provision for income
taxes..................... -- -- -- -- --
------- ------- ------- ------- -------
Net loss................... (86)% (69)% (24)% (46)% (32)%
======= ======= ======= ======= =======
</TABLE>

Net Revenues. Our net revenues increased sequentially in each quarter
during fiscal 1999 and the first quarter of fiscal 2000, primarily due to
increases in airline transaction and advertising revenues. Advertising
revenues increased as a percentage of total net revenues from 14% in the first
quarter to 19% in the first quarter of fiscal 2000.

30
<PAGE>

Cost of Revenues. Cost of revenues generally increased in absolute dollars
and decreased as a percentage of net revenues in each quarter of fiscal 1999
and in the first quarter of fiscal 2000, as a result of efficiencies
associated with increased transaction volume, the allocation of fixed costs
over a larger revenue base and growth in higher margin advertising revenues.
The decrease in cost of revenues from December 31, 1998 to March 31, 1999 and
the corresponding increase in gross profit as a percentage of net revenues are
due primarily to a decreases in data center costs allocated from Microsoft and
in per unit airline ticket fulfillment costs.

Operating Expenses. Operating expenses increased in absolute dollars in
each quarter of fiscal 1999 as we continued to increase our product
development and sales and marketing activities. Operating expenses as a
percentage of net revenues decreased in the first three quarters of fiscal
1999, primarily due to our increasing revenue base over prior quarters. The
increase in operating expenses during the fourth quarter of fiscal 1999 and
the first quarter of fiscal 2000 resulted from increased sales and marketing
expenses primarily attributable to product marketing promotions.

Liquidity and Capital Resources

Historically, we have financed our activities exclusively through
contributions from Microsoft. Although we have been an operating unit of
Microsoft in the past, and Microsoft has made a net contribution to our
operations of $91.3 million through September 30, 1999, Microsoft will not
continue to be a source of liquidity for us following this offering. We had an
accumulated deficit of $91.7 million at September 30, 1999. We anticipate that
our liquidity needs over the next twelve months will be met with proceeds
generated from this offering. We do not have a credit facility and are not
currently negotiating with any party to obtain a credit facility.

Net cash used in operations of $27.1 million in fiscal 1997, $29.5 million
in fiscal 1998, $17.4 million in fiscal 1999 and $5.7 million in the three
months ended September 30, 1999 resulted primarily from net losses of $28.9
million, $29.5 million, $19.6 million and $5.0 million, respectively. Net cash
used in investing activities of $519,000 in fiscal 1997, $631,000 in fiscal
1998, $650,000 in fiscal 1999 and $599,000 in the three months ended September
30, 1999 resulted from capital expenditures on personal computers and servers
that support our online travel operations. At September 30, 1999, we had no
material commitments for capital expenditures, but we expect our capital
expenditures for fiscal 2000 to be approximately $5.0 million.

We have multi-year agreements with specific travel service providers that
make available the services accessed through our websites. Under these
agreements, we pay monthly service fees to the service providers based on the
volume of activity. Additionally, we are party to a cooperative advertising
agreement with one of our airline licensees that requires us to set aside a
portion of the proceeds from transactions to be used for joint advertising
initiatives. These commitments amounted to $87,000 in fiscal 1998 and $245,000
in fiscal 1999.

We are a party to a carriage and cross-promotion agreement with Microsoft
for premium placement of Expedia.com on the Microsoft Network internet site
("MSN"). We are required to make payments of $167,000 per month under this
agreement. We are also party to a services agreement with Microsoft which
requires us to make minimum payments of approximately $365,000 per month. In
addition, we will be obligated to pay additional amounts based on our
headcount and usage of services under the services agreement. These additional
amounts would approximate $450,000 per month based on our headcount of
approximately 150 employees at September 30, 1999. These additional payments
may increase if our headcount increases. Net payments to Microsoft for
operating and allocated expenses have historically been recorded as a
contribution from owner. Following the consummation of this offering, we will
be

31
<PAGE>

required to pay Microsoft for the services received under the services
agreement and begin managing our own working capital. As a result, the levels
of recorded accounts payable and accrued expenses will be higher than those in
the historical financial statements. See "Certain Relationships and Related
Transactions--Our Relationship with Microsoft."

We have never held derivative financial instruments nor had debt
outstanding at any time. Accordingly, we have not been exposed to near-term
adverse changes in interest rates, foreign currency exchange rates or other
market prices. We may however experience such adverse changes if we incur debt
or hold derivative financial instruments in the future. Additionally, we do
not expect inflation to have a material effect on our results of operations.

Year 2000 Issues

Our operations could also be harmed if the information technology systems
or other systems that we operate or that are operated by third parties are not
year 2000 compliant. We have completed an assessment of our internal and
external information technology and other systems. This assessment included
joint large scale tests with our key service providers, Worldspan and Online
Fulfillment Services. We have also already processed travel reservations for
travel in the year 2000 across many hundreds of different travel suppliers.
Based on the results of our assessment, we are not aware of any year 2000
problems relating to our systems or third parties' systems that would have a
material effect on our business, results of operations or financial condition.
We are aware of one issue that could have a material effect on our corporate
travel booking product, which is scheduled to be corrected by the end of
November 1999.

We anticipate that costs associated with fixing any information technology
or other systems will not exceed $100,000. To date, our costs for assessing,
remediating and developing a remediation plan relating to year 2000 issues
have not been significant. We do not currently expect that our financial
condition or results of operations will be adversely affected by the year 2000
issue. However, our financial condition or results of operations could be
adversely affected if:

. our systems are not converted in a timely manner

. the systems of other companies on which our systems rely are not
converted in a timely manner

. other companies do not convert their systems at all or in a manner
compatible with our systems

If our assessment is finalized and there are no additional material
systems we operate or that are operated by third parties that are found to be
non-compliant, the worst case year 2000 scenario is a systemic failure beyond
our control. This failure could include a prolonged telecommunications,
Internet or electrical failure. Such a failure could affect our business by:

. preventing us from operating our business

. preventing users from accessing our websites

. changing the behavior of advertising customers or persons accessing
our websites

32
<PAGE>

If such a failure were to happen, we believe that the primary business
risks would include any or all of the following:

. lost sales

. increased operating costs

. loss of customers or persons accessing our websites

. business interruptions of a material nature

. claims of mismanagement, misrepresentation or breach of contract

Any of the above business risks could have a material adverse effect on
our business, results of operations and financial condition. We do not intend
to create a contingency plan to address such risks.

Recent Accounting Pronouncements

In March 1998, the AICPA issued Statement of Position ("SOP") 98-1,
"Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 will be effective for fiscal 2000. SOP 98-1 provides
guidance on accounting for computer software developed or obtained for
internal use including the requirement to capitalize specified costs and
amortization of such costs. We will begin capitalizing these costs in fiscal
2000 although we do not expect them to be material.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 is effective for fiscal 2000. This SOP provides
guidance on the financial reporting of start-up costs and organization costs.
It requires the costs of start-up activities and organization costs to be
expensed as incurred. We were incorporated in fiscal 2000 and our organization
costs were expensed as incurred.

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BUSINESS

Business Overview

We are a leading provider of branded online travel services for leisure
and small business travelers. We operate our own website, located at
Expedia.com, with localized versions in the United Kingdom, Germany and
Canada. We offer one-stop travel shopping and reservation services, providing
reliable, real-time access to schedule, pricing and availability information
for over 450 airlines, 40,000 hotels and all major car rental companies. Our
websites' consumer-oriented interfaces enable consumers to make informed
choices about their travel purchases by providing quick and easy access to
travel information and content, 24 hours a day, 7 days a week.

Our global travel marketplace enables travel service suppliers to extend
their marketing reach online. Through our websites, suppliers can reach a
large, global audience of consumers who are actively engaged in planning and
purchasing travel. Suppliers can pursue a range of innovative, targeted
merchandising and advertising strategies designed to increase revenues, while
at the same time reducing transaction and customer service costs. We also
license components of our technology and editorial content to selected
airlines and American Express as a platform for their websites.

Since launching our online travel service in October 1996, we have
experienced significant growth in our traffic and the amount of travel
purchased through our websites. As of September 30, 1999, over $790 million in
airline ticket purchases and hotel and car rental reservations had been made
through our websites by over 930,000 customers and 7.5 million users had
registered on our websites. In addition, as of September 30, 1999, over $500
million in airline ticket purchases and hotel and car rental reservations had
been made through the websites of our licensees by over 470,000 customers and
5.5 million users had registered on the websites of our licensees.

Industry Background

Growth of the Internet and Online Commerce

The Internet is dramatically changing the way that consumers and
businesses communicate, share information and buy and sell goods and services.
The Internet's broadly distributed and easily accessible environment creates
the ideal foundation for new online marketplaces, which provide increased
search efficiency, comprehensive information and competitive pricing. In an
online environment, consumers have access to information and software tools
that enable them to evaluate and compare product and service offerings,
community forums within which to discuss relevant experiences and preferences
and tools to complete e-commerce transactions. In addition, suppliers can
extend their online marketing reach to a larger base of potential customers
and can efficiently target those customers who are most likely to buy their
products and services. The Internet brings efficiencies to markets
characterized by the presence of large numbers of geographically dispersed
buyers and sellers and purchase decisions involving large amounts of
information from multiple sources. We believe that the worldwide travel
industry, which exemplifies these characteristics, is especially well-suited
to benefit from increased Internet and e-commerce adoption.

The Worldwide Travel Industry

The travel industry is very large in terms of both dollars spent and
number of participants. According to the United States Department of
Transportation, there will be over 700 million air passengers worldwide in
1999, rising to one billion air passengers in 2010. The World Travel and
Tourism Council estimates that spending on travel and tourism worldwide will
reach $3.7 trillion in 1999, growing to $7.5 trillion in 2010. According to
the World Travel and Tourism Council, approximately 72% of the revenues in
this market are attributable to personal travel and tourism.

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Consumers planning and purchasing a trip generally engage in a predictable
process that begins with consideration of destinations, dates and budgets and
progresses to a series of purchase decisions involving transportation,
accommodations and destination activities. This planning and purchasing
process is inefficient due in large part to the limitations of the
infrastructure of the traditional worldwide travel industry, which causes
consumers to spend a significant amount of time piecing together the
information they need to plan and purchase a trip. One critical reason for
this inefficiency is the absence of a central source of comprehensive travel
information that addresses all stages of the planning process and incorporates
a reliable and secure purchasing process. As a result, consumers, especially
to the extent they are price sensitive, frequently consult multiple sources,
such as guidebooks, magazines, travel agents, friends, co-workers and
disparate travel suppliers, to shop for each element of their trip.

Travel suppliers located around the world compete for business from travel
consumers. This supplier community includes hundreds of airlines, thousands of
hotels, dozens of car rental companies, numerous vacation packagers and cruise
lines and hundreds of thousands of destination services merchants such as
restaurants, attractions, and local transportation and tour providers. These
suppliers spend substantial amounts of money to reach and attract potential
purchasers. For example, according to the Air Transport Association, the
combined revenue of United States airlines in 1997 was $109 billion, and the
airlines spent an average of 13% of total revenues on promotions and sales
expenses. The fragmented nature of the global consumer travel market makes it
difficult and inefficient for suppliers to target those consumers with the
greatest propensity to purchase travel services. Traditional advertising
channels, such as print, television and radio, do not eliminate inefficiency
because only a limited portion of any traditional advertising audience is
planning a trip at the time the advertisement is run.

Consumers and suppliers have traditionally relied on travel agents as
intermediaries. However, traditional travel agents are often unable to reduce
the inefficiencies of the travel market. We believe that many traditional
travel agents cannot provide consumers with a reliable, personalized source
for comprehensive travel information. Although traditional travel agents
generally have access to comprehensive information on the availability and
pricing of airline seats through computer reservations systems such as
Worldspan, Sabre and Apollo, time and resource constraints frequently make it
difficult for travel agents to provide consumers with the full set of options
available in a given computerized reservation system. Furthermore, due to
budgetary or time constraints, traditional travel agents often have limited
access to other sources of travel information such as consumer ratings,
editorial content or information about destination services. In addition,
productivity demands often restrict the amount of time traditional travel
agents can spend with any single customer to learn about preferences and
tailor recommendations. As a result, many consumers hesitate to rely solely on
traditional travel agents and consult multiple sources to plan and purchase
trips.

The traditional travel agency channel also does not provide suppliers with
an efficient distribution network. Computerized reservation systems are
effective in maintaining information about travel inventory, such as airline
seats or rental cars, that does not require extensive description. However,
these databases are not well-suited to maintaining detailed information about
travel inventory such as resorts, cruises and vacation packages that is
difficult to understand and sell in the absence of more descriptive editorial
or visual material. In addition, it is difficult and inefficient for suppliers
to use traditional travel agents as a distribution channel because the travel
agency market is fragmented and the cost of training and servicing travel
agents is high.

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Our Opportunity

The emergence of the Internet provides new opportunities for travelers and
suppliers to find one another. Travel has already become the largest online
retail category with users making an estimated $7.8 billion in airline ticket
purchases and hotel and car rental reservations through travel websites in
1999, growing to $32 billion in 2004, according to Forrester Research. Travel
suppliers are beginning to sell their inventory directly from their websites,
and third-party providers of travel services have emerged online. Some of
these third parties attempt to replicate the traditional travel agency
experience on the Internet, some focus on providing travel-related content and
others offer a less comprehensive travel service as a part of a larger e-
commerce effort. Each of these solutions is incomplete because it does not
address fundamental consumer requirements for comprehensive information and
reliable service integrated with a secure and efficient means to complete a
purchase.

A significant opportunity exists for a new online global travel
marketplace that brings consumers and travel suppliers together, enables
consumers to find and act more easily upon a diverse selection of travel
information and enables suppliers to market and distribute their products and
services more efficiently. To be successful, this new travel marketplace must
offer consumers a blend of content, community, commerce and customer service,
delivered in a highly reliable and personalized manner. It must scale to
accommodate growth in users and it must be international in scope and
localized by region, creating a new and efficient channel for local and global
travel suppliers to reach consumers who are actively engaged in travel
planning and purchasing.

Our Solution

We have created a leading online marketplace for researching, buying and
selling travel-related services. Our Internet-based travel marketplace offers
consumers a convenient, comprehensive and personalized source of travel
information and services and satisfies the needs of a broad range of travel
suppliers to market and sell their services cost-effectively to a large,
global audience that is actively engaged in planning and purchasing travel
services. We have built an underlying technology infrastructure that enables
buyers and sellers to transact in a reliable, scalable and secure environment.

Leading Travel Services Marketplace

Expedia.com, our travel website aimed at the United States consumer
market, brings together a large base of consumers and travel suppliers.
According to Media Metrix, Expedia.com was the #1 most visited Internet travel
site in each month from April 1999 through September 1999, and in September
attracted approximately 4.1 million unique visitors. We offer consumers access
to dozens of vacation and cruise suppliers and to an increasing number of
local destination services providers. In the fiscal quarter ended September
30, 1999, approximately $193 million in airline ticket purchases and hotel and
car rental reservations were made through our websites. In addition, for the
fiscal quarter ended September 30, 1999, approximately $129 million in airline
ticket purchases and hotel and car rental reservations were made through the
websites of our licensees.

Compelling Value for Consumers

We believe that consumers value Expedia services because we provide the
control, flexibility and access to information necessary for them to identify
competitive prices for a wide range of travel options, to evaluate and
purchase travel-related services at any time of day or night and to enhance
the travel planning experience with high-quality editorial content. Our travel
marketplace is also designed to be

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more convenient, comprehensive and personalized and delivers a higher quality
of service than alternative travel planning and purchase methods. Expedia.com
and our localized international websites offer a unique blend of content,
community, commerce and customer service, enabling consumers to easily
identify, evaluate and purchase travel services in a single location and a
secure, reliable transactional environment.

Compelling Value for Travel Suppliers

Recognizing the limitations of traditional travel solutions for suppliers,
we have worked with our suppliers to design our websites to address their
specific needs on both a local and multinational basis. Through our websites,
suppliers worldwide can reach a large audience of consumers who are actively
engaged in planning and purchasing travel. Suppliers can pursue a range of
innovative, targeted merchandising and advertising strategies designed to
increase revenues while at the same time reducing transaction and customer
service costs. Suppliers can also use remote inventory management tools
located on our ExpediaPartners.com website, to introduce new products,
services and promotions quickly and easily. In addition, we are creating an
aggregated, secure database of customer purchase and shopping patterns that
will allow suppliers to offer more tailored services through our marketplace
while preserving consumer privacy.

Global Reach and Presence

We designed our travel marketplace to be global. Localized versions of our
websites accommodate not only differences in language and culture, but also
differences in travel purchase behavior and supplier inventory preferences.
These localized websites, such as Expedia.co.uk in the United Kingdom and
Expedia.de in Germany, are designed to replicate Expedia.com's success in
addressing the needs of both consumers and suppliers in the United States
market. For example, because negotiated fares are important to consumers in
the United Kingdom, we developed a custom airfare pricing engine that allows
us to offer unique integration of negotiated fares with published fares in a
single display.

Reliable, Secure and Scalable Technology Platform

We have designed our platform to provide a high level of reliability,
security and scalability. Our multi-layered platform design allows us to
deliver a high-performance website capable of managing high transaction
volumes and ensuring reliable access for our customers and suppliers. We also
offer advanced security features, maintain excess capacity to handle peak
traffic loads in the rapidly expanding online travel market and have built
dedicated distributed storage for critical data such as customer profile
information. Our technology leadership and the scalability of our platform
have enabled us to generate revenue by licensing core parts of our platform to
Continental Airlines, Northwest Airlines and American Express.

Superior Business Model

We have created a multi-dimensional business model, which we believe has
several advantages relative to traditional and other online travel vendors.
Because our marketplace is Internet-based, we are able to support substantial
growth in transactions with a smaller staff than required by a traditional
travel agency experiencing similar growth and without a large network of
physical retail outlets. We also have a more diversified stream of revenues
than our principle online competitors. Our revenues come from transactions,
advertising and licensing, creating multiple growth opportunities.

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Strategy

Our objective is to enhance our position as a leading online global travel
marketplace. The key elements of our strategy are as follows:

Increase Brand Awareness

We plan to increase brand awareness among consumers by pursuing an
aggressive brand development strategy. We have not yet pursued a substantial
brand-building campaign and less than 10 percent of our traffic reaches our
websites through our advertisements. To build on this success, we intend to
launch a brand-building campaign that will include a substantial advertising
presence in both online media and traditional media, such as print, radio and
television. We will also continue to offer co-branded promotions with selected
suppliers and to pursue targeted press coverage.

Enhance Supplier Relationships

Investing in and building on strong supplier relationships are crucial to
the success of our business. We will continue to work with suppliers to
develop new advertising and promotional inventory for our websites and new
tools, such as our Vacation and Cruise Wizards, to facilitate suppliers' entry
of pricing, availability and description information directly into our
marketplace. We will also work with suppliers to develop new distribution
channels that address their needs. For example, in September 1999, we launched
our new Hotel Price Matcher service. This service allows hotels in major
markets to fill unsold rooms in a way that minimizes the impact on their
existing rate structures. We have also addressed supplier needs specific to
our international websites, such as specific supplier offers on our Holiday
Shop section of our United Kingdom website. In addition, to extend our share
of the emerging online advertising market, we are establishing a dedicated
media advertising sales force to service the United States and international
markets to raise our worldwide profile in the advertising and travel
industries.

Enhance Technology Platform and Product Functionality

We plan to continue to enhance the underlying infrastructure and
functionality of our websites.

. Scalability, Security and Reliability. We have invested heavily in
core infrastructure with the objective of eliminating downtime on our
websites. The operation of our own websites and those of our licensees
has given us extensive experience at handling rapid increases in
transaction volumes. We are also planning to move mission-critical
processing activity from the mainframes of computerized reservation
systems to more flexible and cost-effective servers based on the
Windows NT platform.

. Feature Differentiation. We will continuously update new software
features and editorial content to our websites. We believe increasing
the level of personalization in our marketplace is critical to
providing a rich consumer experience and more efficient and targeted
merchandising and advertising opportunities for suppliers. We will
also continue to develop features that meet the needs of specific
market segments, such as small business travelers. We are improving
the accessibility of our websites through various Internet access
channels, such as wireless hand-held devices, and are providing
multimedia applications.

Expand Internationally

We operate localized websites in the United Kingdom, Germany and Canada.
We selected these countries due to their large travel markets and the rapid
growth of online commerce in these markets. According to the World Travel and
Tourism Council, spending on travel and tourism is expected to be $209 billion
in the United Kingdom, $301 billion in Germany and $111 billion in Canada in
1999, rising

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to $380 billion in the United Kingdom, $557 billion in Germany and $212
billion in Canada in 2010. We plan to extend our international presence by
entering other important travel markets, after evaluating both the size of the
local travel market and the popularity of online commerce. Potential markets
for expansion include other major European markets, Japan and other Far
Eastern markets. In developing customized websites in these and other
international markets, we will continue to draw on our experience in the
United States with technology, user interface and supplier relationships while
tailoring our international websites to specific characteristics of each local
marketplace.

Broaden our Marketplace Into New Travel Services Categories

We plan to expand our travel service offerings to include more complex
travel products and destination service offerings. Currently, the majority of
our transaction revenues are derived from sales of airline tickets, with a
smaller percentage represented by hotel reservations and car rentals. We plan
to extend our offerings in each of these core segments and expand the range of
offerings into other segments. For example, we intend to enable online booking
for cruises and vacation packages, including proprietary vacation packages.
Other new travel services categories may include offering additional price
matching features, retailing travel-related goods such as luggage and
accessories, selling travel insurance and entering into strategic
relationships with third-party providers of ground transportation, tours and
similar services.

Our Websites

Expedia.com

Through our Expedia.com website, customers can easily access the wide
selection of our online travel services to shop for and book airline tickets,
car rentals and hotel reservations, and to search and book the offerings of
selected vacation packagers, cruise lines, specialty lodging providers and
travel-related retailers.

For consumers engaging in travel planning, we feature extensive editorial
content covering over 350 popular destinations, travel advice and
recommendations from acknowledged industry experts, feature articles on
specific destinations and specialty travel sections geared to the needs of
specific groups such as families and business travelers. Consumers looking for
advice from fellow travelers can take advantage of extensive community
interaction, including bulletin boards and chat rooms. To accommodate the
needs of consumers who are searching for price and availability information,
we complement our core flight, hotel and car rental shopping and purchase
functionality with a number of powerful comparison shopping tools. After
building a specific itinerary, customers can complete the purchase of airline
tickets, hotel rooms or car rentals by entering credit card and address
information. Customers instantly receive email confirmation of the purchase
and are directed via links on our website to explore relevant destination
information and take advantage of our proprietary Expedia Maps. We also
provide a twenty-four hour toll-free customer service center that customers
can call for assistance.

Using our websites, consumers and suppliers engage in a heavy volume of
transactions across multiple systems and networks. We rely on third-party
computer systems and third-party service providers, including the computerized
central reservation systems of the airline, hotel and car rental industries.
The nature and size of the reservation process require frequent expansion of
our operations, and upgrades of our systems and infrastructure in order to
deal with the increasing number of customers and travel suppliers. Upgrades
are also required to enable the enhanced features and functionality which we
need to compete in our industry. The complexity of these processes and the
multiple parties involved result inevitably in our customers and suppliers
occasionally encountering problems in accessing or distributing information
through our marketplace or in completing transactions.

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Commerce

The core Expedia.com feature set provides consumers with access to
purchase information such as reliable price comparisons, availability and
itinerary details, an integrated purchase path and post-purchase confirmation.

. Flight, Hotel and Car Wizards. Consumers can search for and
compare airline, rental car and hotel room pricing and
availability information and can also purchase tickets, make
reservations and obtain additional information on hotels in our
hotel directory.

. Vacation and Cruise Wizards. These tools search a proprietary
database of vacation and cruise packages. The content of this
database is regularly updated by suppliers using the inventory
management tools offered on ExpediaPartners.com.

. Hotel Price Matcher. This shopping tool offers consumers the
ability to request specific prices for hotel rooms in popular
cities, such as New York, San Francisco and Las Vegas. We search
our proprietary database of negotiated hotel rates for available
rooms that can fulfill consumer requests.

. Fare Tracker. This service enables subscribers to specify three
routes and receive updates on special fares and offers via weekly
email as well as via a personalized summary on our website. As of
September 30, 1999, we had over 3.9 million Fare Tracker
subscribers.

. My Travel. This personalization feature enables consumers to
define a personal travel page which provides easy access to
existing travel itineraries and personal profiles. My Travel
encourages consumers to return to Expedia.com and build an ongoing
customer relationship.

. Mileage Miner. Working with a third-party partner, Expedia.com
helps consumers manage their frequent flyer programs online.

Content

Consumers can use our editorial content extensively at the beginning of
the travel planning and purchase process for researching destinations and
travel tips. Consumers can also use content more extensively after they have
purchased travel as a way to gain more insight before their trip begins. Some
examples of content include:

. World Guide. Expedia.com offers consumers a library of destination
information on over 350 popular destinations around the world,
based on content purchased from the publishers of the Fieldings
and Moon guidebook series and updated by the Expedia.com editorial
staff.

. Expedia Maps. We maintain a proprietary database of street maps of
the United States and highway maps for the rest of the world that
we offer as stand-alone applications and that we integrate with
other features such as the Hotel Wizard.

. Specialty Travel Sections. Expedia.com has recently launched two
new editorial sections that target families and business
travelers. We intend to launch new editorial sections that target
other consumer groups in response to perceived consumer and
advertiser demand.

. Travel Features. We provide travel content that uses multimedia
technologies such as 360-degree photography and video clips. We
also offer editorial features on travel destinations and other
special interest travel topics.

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. Travel News. We provide regularly updated information on fare
sales, changing travel conditions and specific weather and
security advisories.

. Flight Information. Consumers can use this feature to check the
expected arrival times of flights in progress.

. Directory of Web Links. To extend our own travel research tools,
we offer consumers a selection of links to useful travel-related
and destination-related websites.

. Expedia Radio. We work with a licensee that produces a travel-
related radio show, Expedia Radio, that is broadcast in 40 markets
in the United States. Expedia.com visitors can play Expedia Radio
audio content from our website.

. Search. Our proprietary search engine allows consumers to generate
a quick list of information relating to a particular destination
or travel theme, such as Hawaii or scuba diving.

Community

Because one of the best resources for travel recommendations is other
travelers, we have developed features to encourage a sense of community among
the four million consumers who visit Expedia.com in a typical month. Some
examples of our community services are as follows:

. Fare Compare. This benchmarking feature allows consumers to review
airfares that other Expedia.com consumers have found on particular
routes.

. Chat Rooms. Expedia.com visitors can communicate directly with one
another in chat rooms maintained by Microsoft through MSN.com.

. Bulletin Boards. Travelers can post their questions and answers on
bulletin boards maintained by Microsoft through MSN.com and
moderated by travel experts on contract to Expedia.com.

. From Experience. This section of our website contains feedback
from travelers organized according to destination.

Customer Service

We strive to provide superior service to our customers to enhance their
experience and to assist them with travel plans.

. Telephone and Email Service Center. Expedia contracts with Online
Fulfillment Services to provide toll-free 24-hour telephone and
email customer service. Over 200 trained travel agents and service
personnel staff the customer service center.

Supplier Functionality

We offer an array of functionality to address the specific needs of our
travel suppliers.

. Promotional and Advertising Inventory. We provide advertising
banners and other placements throughout the website. Suppliers
participating in the Expedia Travel Network have access to a wide
variety of promotional opportunities, including front-page
placement, travel category targeting, inclusion in our Special
Deals database and access to our Vacation and Cruise Wizard
database.

. Inventory Management Tools. We enable selected suppliers to upload
information related to vacation and cruise packages into a
proprietary database maintained at ExpediaPartners.com. This
inventory is then available on our website.

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. Email Promotions. We work with suppliers to tailor email-based
promotions for selected segments of our customer base.

International Websites

We offer localized websites in the United Kingdom, Germany and Canada.

Expedia.co.uk

In the United Kingdom, we operate a leading online travel service at
Expedia.co.uk. This marketplace offers a number of features customized to the
needs of consumers and suppliers in the United Kingdom, such as:

. Negotiated Fares. We offer fares negotiated with airlines by MTG
Limited UK (Thomas Cook) and integrate both negotiated and
published fares in a single display.

. Holiday Shop. This service allows customers in the United Kingdom
to browse vacation package offerings leaving from the United
Kingdom.

. Localized Customer Service. Expedia.co.uk customer service is
provided by MTG Limited UK (Thomas Cook) in the United Kingdom and
is tailored to the needs of United Kingdom travelers.

. Localized Editorial Content. The editorial advice and feature
articles offered on the United Kingdom website are developed with
a British point of view. Though we use content developed for the
United States market where appropriate, our goal is to offer a
local product to the United Kingdom travel market.

. United Kingdom Strategic Relationships. We have developed
strategic relationships in the United Kingdom with British
Airways, MTG Limited UK (Thomas Cook) and the local service of
AOL, among others. These relationships enable us to expand our
localization features such as negotiated fares, provide local
editorial content and extend our regional distribution channels.

. Travel Insurance. We offer travelers the ability to purchase
travel insurance in the United Kingdom through our website.

Expedia.de

In Germany, we recently launched a new website at Expedia.de. In addition
to relevant language and currency changes, other features on our website
include:

. Package Tours Database. Because package tours are a popular
vacation purchase in Germany, we provide customers with an
interface to a third-party database of packaged tour inventory.

. Negotiated Fares. We offer fares negotiated with airlines by
Deutsches Reiseburo and integrate negotiated and published fares
in a single display on our website.

. Localized Customer Service. Expedia.de customer service is
provided by Deutsches Reiseburo in Germany and is tailored to the
needs of German travelers.

. Localized Editorial Content. The editorial advice and feature
articles offered on Expedia.de are developed with a German point
of view. Therefore, most of our feature articles and editorials
are not translations of articles that run on Expedia.com but
instead are original German articles.

. German Strategic Relationships. We have developed strategic
relationships in Germany with Lufthansa, Touristik Union
International and Deutsches Reiseburo, among others.

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. Travel Insurance. We offer travelers the ability to purchase
travel insurance in Germany through our website.

Expedia.ca

In Canada, we operate Expedia.ca, which is similar to Expedia.com, with
localized currency and date formats. This website offers a number of features
to address the needs of the Canadian marketplace, including localized customer
service.

Licensing of Expedia Products

We license components of our technology and editorial content to selected
airlines and American Express as a platform for their websites. We may in the
future offer licenses to additional airlines, other travel suppliers and other
corporate travel agencies. Licensing selected components of our technology
allows us to participate in online bookings whether they are placed through
airline websites and corporate travel agencies or on our websites.

Licensing of Travel Website Technology to Airlines

Our current airline licensees include Continental Airlines and Northwest
Airlines. Airlines license technology from us in order to take advantage of
our reliable, scalable infrastructure, to leverage our large development
investment and to avoid the cost of building and maintaining dedicated
internal development and testing teams. We deliver a subset of the features
included on our websites and develop some features specifically to address the
needs of suppliers distributing inventory directly from their own websites.
Some examples of functionality provided to licensees include:

. Core Shopping and Purchasing Technology. Licensees use our technology
to enable shopping and purchasing of airline tickets and making of car
rental and hotel reservations.

. Broad Customization. Licensees are able to control the setting of over
200 parameters to customize their websites.

. Electronic Coupon Redemption. Selected airline licensees have the
ability to redeem coupons electronically.

. Selected Editorial Information. Licensees have access to our World
Guide library of destination information, but not to our daily news
features and other editorial content that is closely identified with
the Expedia brand.

Licensing of Travel Website Technology to Corporate Travel Agencies

Our initial corporate travel agency licensee is American Express.
Corporate travel agencies can use our technology to increase efficiency by
providing automated travel policy enforcement and negotiated rate management
tools. In addition to a substantial subset of the features included on our
websites, we also deliver features designed to address the needs of corporate
travel agencies. Some examples of functionality provided to licensees include:

. Core Shopping and Purchasing Technology. Licensees use our technology
to enable shopping and purchasing of airline tickets and making of car
rental and hotel reservations.

. Negotiated Rate Management. Corporate travel managers can upload
negotiated rate agreements with airline, hotel and rental car
suppliers in order to have those rates available to employees.

. Policy Enforcement Tools. Corporate travel managers can incorporate
travel policies into the displays used by employees to book business-
related travel. Employees attempting to book travel that conflicts
with corporate policy can be notified online, asked for explanations
and offered alternatives.

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. Shared Itinerary Management. Employees can designate travel arrangers,
typically administrative assistants, and can make selected itineraries
available for intracompany use in order to facilitate group and small
meeting travel.

Strategic Relationships

We pursue strategic relationships to increase our access to online
customers, to build brand recognition and to expand our online presence. To
date, we have established the following alliances, among others, for
distribution and product enhancement:

Strategic Customers

. Continental and Northwest. We license components of the technology
underlying our websites to these airlines to run transaction engines
on their websites.

. American Express. American Express licenses components of the
technology underlying our websites on a non-exclusive basis to over
140 of its large corporate customers as "AXI--American Express
Interactive."

Strategic Vendors

. Worldspan. Worldspan, our primary computer reservation service
provider, processes a substantial majority of airline ticket and car
rental reservations for Expedia.com, a portion of airline ticket and
car rental reservations for our websites in the United Kingdom,
Germany and Canada, and a portion of the hotel reservations for our
websites.

. World Travel Partners. World Travel Partners' subsidiary, Online
Fulfillment Services, provides telephone and email customer support
and provides mailing and other fulfillment services for Expedia.com.
World Travel Partners was the fourth largest travel agency in the
United States in 1998, according to Travel Weekly, focusing on
corporate travel services.

. Pegasus. Pegasus is our primary provider of connectivity to hotel
reservation systems for both our Hotel Wizard reservations channel and
our Hotel Price Matcher service.

. MTG Limited UK (Thomas Cook). Thomas Cook, a leading travel agency in
the United Kingdom, is our primary customer service and negotiated
rates provider in the United Kingdom.

. Deutsches Reiseburo. Deutsches Reiseburo, a leading travel agency and
tour operator in Germany, is our primary customer service and
negotiated rates provider in the German market.

. Microsoft. Microsoft supplies us with premium placement on the MSN.com
website, the Hotmail email service and the WebTV platform. Microsoft
also supplies us with technology and systems infrastructure under
license agreements. MSN.com is the third most visited site on the
Internet, attracting over 28 million unique visitors in August 1999
according to Media Metrix. Hotmail, with over 30 million active
monthly users in August 1999, is one of the largest email systems in
the world, and WebTV is one of the largest providers of television-
based Internet access.

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<PAGE>

Technology

We believe that the quality of our technology differentiates our websites
from those of our competitors. Our goal has been to build a reliable, scalable
and secure environment for consumers to plan and purchase travel. Since
inception, we have supported substantial growth in traffic, commerce and
advertising inventory with our present architecture.

A single software code base supports our United States and international
websites, including those of our licensees. This approach allows us to
efficiently distribute central code base improvements to benefit multiple
services where appropriate. Our core booking engine connects to each of the
four major computer reservations systems: Worldspan, Sabre, Apollo and
Amadeus, giving our websites and our licensees the ability to choose which
computerized reservation system to support.

We have built a multi-layered system using powerful and expandable
Internet hardware and software. From inception, we have distributed
functionality across multiple layers of our platform. One layer handles the
demands of serving webpages. Another layer manages the demands of high-volume
message traffic between our servers and those of our suppliers and
intermediaries. A third layer manages storage of critical data such as
customer profiles, marketing database information and editorial content. Our
hardware consists of multiple Compaq Proliant servers. Our data center is
connected to the Internet through the equivalent of eight T3 connections.
Microsoft Back Office technology, including Windows NT, SQL Server and
Internet Information Server, is the foundation for our operating service
software. Multiple redundant servers support each key layer of the
architecture to help manage heavy user traffic. Microsoft hosts substantially
all of our systems, software and hardware.

Consumer Marketing

We believe that important drivers of our business are our ability to
attract visitors to our websites, our ability to convert those visitors into
purchasing customers and our ability to convert first-time purchasers into
repeat customers. We plan to continue to attract new visitors to our websites
by increasing our brand enhancement efforts and promotional advertising, both
online and in traditional television, radio and print media, and by continuing
to work with influential press and industry analysts. Our strategy to convert
visitors into purchasers includes a combination of broad purchase-related
promotions, increased emphasis on merchandising of available offers and
increased efforts to work with our travel suppliers to offer superior
selection and quality of travel inventory. We plan to convert first-time
purchasers to repeat customers by focusing on enhanced customer satisfaction
and new personalization features and launching a loyalty program.

Sales and Supplier Relations

Our sales efforts are directed toward building long-term relationships
with the travel supplier community and key advertising partners, including
advertising agencies. We are expanding our sales force to extend our national
sales coverage and to build a dedicated advertising sales force. Our
salespeople make frequent sales calls at advertiser and supplier offices and
attend trade shows, conferences and other industry events. Our sales efforts
are complemented by public relations and other channel marketing efforts,
including advertisement placements in industry trade publications.

Competition

The online travel services market is new, rapidly evolving and intensely
competitive, and we expect competition to increase. We compete on the basis of
service, merchandising, reliability, amount and

45
<PAGE>

accessibility of information and breadth of products and services offered. We
make available to our customers a wide range of products and prices offered by
our travel suppliers.

In the United States, we compete primarily with online travel services and
with traditional travel agent distribution channels. In the online travel
services market, we compete with other entities that maintain commercial
websites providing online travel services, such as Travelocity (operated by
Sabre), Preview Travel, CheapTickets.com, Cendant Corporation, TravelWeb
(operated by Pegasus), GetThere.com, Biztravel.com (operated by Rosenbluth
Travel) and Trip.com. Travelocity has recently announced its intention to
acquire Preview Travel. We also compete with companies that offer travel as
part of a larger electronic commerce portfolio, such as Priceline.com and
Yahoo. Several traditional travel agencies, including larger travel agencies
such as Uniglobe Travel and Carlson Wagonlit Travel, have established, or may
establish in the future, commercial websites offering online travel services.
We also compete with many of these same parties and others in the licensing of
technology to airlines and corporate travel agencies.

Internationally we compete with a different set of participants in each
market, ranging from traditional travel agents, market-specific websites and
global competitors, including Travelocity, GetThere.com and Leisure Planet,
which have expanded beyond the United States market. In the United Kingdom,
local online competitors include Deckchair.com, e-bookers and A2Btravel. In
Germany, local online competitors include Travelchannel.de and iFAO.

As the market for online travel services grows, we believe that the range
of companies involved in the online travel services industry, including travel
suppliers, traditional travel agencies, travel industry information providers,
online portals and e-commerce providers, will increase their efforts to
develop services that compete with our websites. Many airlines and other
travel suppliers offer travel services directly through their own websites,
including services from other travel suppliers. We are unable to anticipate
which companies will offer competitive services in the future. As the market
for online travel service grows, we believe that companies involved in the
travel services industry will increase their efforts to develop services that
compete with our services. We cannot assure you that our online operations
will compete successfully with any current or future competitors.

Proprietary Rights

Our intellectual property rights relate to trademarks and domain names
associated with the name "Expedia" and copyrights and other rights associated
with our websites, our software and other aspects of our business and
technology. We rely on trademark and trade secret protection law, copyright
law and confidentiality and/or license agreements with our employees,
customers, partners and others to protect our proprietary rights. We pursue
the regulation of our key trademarks and service marks in the United States
and internationally.

We license the right to use some of Microsoft's retail products and other
technology pursuant to our license agreements with Microsoft. In addition, we
license, on a perpetual and royalty-free basis, patent rights from Microsoft
that relate to our business. See "Certain Relationships and Related
Transactions-- Our Relationship with Microsoft; License Agreements."

We license components of our travel website technology and editorial
content to selected airlines and American Express. In addition, we license
trademark rights to the Expedia brand to a third party who operates Expedia
Radio and to Microsoft for use with some of its software products. We may
license other intellectual property rights to third parties in the future.

46
<PAGE>

Government Regulation

The laws and regulations applicable to the travel industry affect us and
our travel suppliers. We must comply with laws and regulations relating to the
sale of travel services, including those prohibiting unfair and deceptive
practices and requiring us to register as a seller of travel, to comply with
disclosure requirements and to participate in state restitution funds. In
addition, many of our travel suppliers and computer reservation systems
providers are heavily regulated by the United States and other governments.
Our services are indirectly affected by regulatory and legal uncertainties
affecting the businesses of our travel suppliers and computer reservation
systems providers.

We must also comply with laws and regulations applicable to businesses
generally and online commerce specifically. Currently, few laws and
regulations apply directly to the Internet and commercial online services.
Moreover, there is currently great uncertainty whether or how existing laws
governing issues such as property ownership, sales and other taxes, libel and
personal privacy apply to the Internet and commercial online services. It is
possible that laws and regulations may be adopted to address these and other
issues. Further, the growth and development of the market for online commerce
may prompt calls for more stringent consumer protection laws. New laws or
different applications of existing laws would likely impose additional burdens
on companies conducting business online and may decrease the growth of the
Internet or commercial online services. In turn, this could decrease the
demand for our products and services or increase our cost of doing business.

Federal legislation imposing limitations on the ability of states to
impose taxes on Internet-based sales was enacted in 1998. The Internet Tax
Freedom Act, as this legislation is known, exempts certain types of sales
transactions conducted over the Internet from multiple or discriminatory state
and local taxation through October 21, 2001. It is possible this legislation
will not be renewed when it terminates in October 2001. Failure to renew this
legislation could allow state and local governments to impose taxes on
Internet-based sales, and these taxes could decrease the demand for our
products and services or increase our cost of operations.

Employees

As of September 30, 1999, we employed a total of 149 full-time Microsoft
employees. As of October 25, 1999, 138 previous Microsoft employees have
accepted offers of employment from us. Pursuant to our services agreement with
Microsoft, we have contracted the services of seven employees who remain
employed by Microsoft, until the earlier of May 20, 2000 or our notice that we
no longer require the service of the employees. We intend to hire new
personnel to replace these contracted employees during this period. In
addition, we contract for the services of 45 employees of temporary staffing
firms.

Our ability to attract and retain highly qualified employees will be
important to our success in maintaining online leadership. We have a policy of
using equity-based compensation programs to reward and motivate significant
contributors among our employees. Competition for qualified personnel in our
industry is intense. Our employees are not presently represented by a labor
union. We have not experienced any work stoppages and consider our relations
with our employees to be good.

Our employees will continue to participate in Microsoft's various benefit
plans. We plan to adopt our own benefit plans for our employees, some of which
we will adopt prior to this offering and some of which will be adopted
effective January 1, 2000. Our employees who were previously employees of
Microsoft will transition into our employee benefit plans over time. Prior to
the effective date of these plans, these employees will continue to be
eligible for Microsoft's plans.

47
<PAGE>

Properties

We are headquartered in Redmond, Washington, in space leased from
Microsoft. We expect to move in December 1999 to leased space in Bellevue,
Washington. This new leased space will consist of approximately 67,000 square
feet, housing our principal administrative, sales and marketing, customer
service and computer and communications systems facilities. Our lease for this
space expires in five years with an option to renew for an additional five-
year term.

Legal Proceedings

On October 13, 1999, Priceline.com Incorporated filed a patent
infringement lawsuit against Microsoft and Expedia in the United States
District Court for the District of Connecticut. The lawsuit alleges that our
Hotel Price Matcher service infringes on a patent held by Priceline.com. The
suit also alleges that Microsoft and Expedia engaged in unfair and deceptive
acts or practices in violation of the Connecticut Unfair Trade Practices Act.
The suit seeks:

. unspecified damages, including treble and punitive damages

. an injunction against further alleged infringement

. an injunction from continuing to operate our Hotel Price Matcher or
any similar service

. interest and costs, attorneys' fees and an accounting of the revenue
received by Microsoft and Expedia relating to Internet travel services

We do not believe that the claims made by Priceline.com have merit.
Accordingly, we intend to vigorously defend ourselves in this lawsuit. Since
the lawsuit was recently filed and discovery has not yet commenced, we are not
presently able to estimate the likelihood of an adverse result or the range of
possible loss relating to this matter. In the event of an adverse result, we
could be required to do one or more of the following:

. pay substantial damages, including treble and punitive damages

. permanently cease use of our Hotel Price Matcher service and any
similar service

. obtain a license for the technology or spend significant resources to
develop noninfringing technology

Any limitation on our ability to market our Hotel Price Matcher service or
the costs and potential delays associated with redesigning this service would
seriously harm our business, financial condition, results of operation and
cash flows.

On October 7, 1999, Reed Elsevier Inc. filed a complaint in the United
States District Court for the District of New Jersey against Microsoft and
Expedia. The suit alleges that Microsoft and Expedia materially breached an
agreement between Microsoft and Reed Elsevier relating to the development by
Microsoft of a hotel directory for the Internet and the sale of Internet
advertising in that directory. The suit also alleges conversion and
misappropriation of Reed Elsevier's proprietary database, unfair competition,
breach of implied covenant of good faith and fair dealing and interference
with a business relationship. The suit seeks:

. unspecified damages, including punitive damages

. a permanent injunction requiring us to comply with the agreement

48
<PAGE>

. a permanent injunction prohibiting us from offering or selling
Internet advertising in the hotel directory or competing with Reed
Elsevier in connection with the sale of advertising in the hotel
directory and from utilizing a joint database developed pursuant to
the parties' agreement.

. rescission of the agreement, return of all payments made by and all
information given by Reed Elsevier under the agreement

. costs and attorneys' fees

Since this lawsuit was recently filed and discovery has not yet commenced,
we are not presently able to estimate the likelihood of an adverse result or
the range of possible loss relating to this matter. We intend to vigorously
defend ourselves in this lawsuit and do not expect the outcome of this lawsuit
to have a material adverse effect on our business.

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<PAGE>

MANAGEMENT

Executive Officers and Directors

The names, ages and positions of our executive officers and directors as
of November 3, 1999 are listed below along with their business experience
during the past five years. The business address of all of our executive
officers is 4200 150th Ave. NE, Redmond, Washington 98052. Directors will be
elected to serve until they resign or are removed, or are otherwise
disqualified to serve, or until their successors are elected and qualified.
Executive officers of Expedia are appointed by the Board of Directors. No
family relationships exist among any of the directors or executive officers of
Expedia.

<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
Richard N. Barton.......... 32 President, Chief Executive Officer and Director
Byron D. Bishop............ 35 Vice President, Product Development
Erik C. Blachford.......... 32 Vice President, Marketing
Simon J. Breakwell......... 34 Vice President, Sales
Mark S. Britton............ 32 Vice President, General Counsel and Secretary
Kathleen K. Dellplain...... 40 Vice President, Human Resources
Seth E. Eisner............. 40 Vice President, Operations
Gregory S. Stanger......... 35 Vice President and Chief Financial Officer
Gregory B. Maffei.......... 39 Chairman of the Board
Brad Chase................. 39 Director
Gerald Grinstein........... 67 Director
Laurie McDonald Jonsson.... 50 Director
Richard D. Nanula.......... 39 Director
</TABLE>

Richard N. Barton founded Expedia in 1994. He has served as a Director of
Expedia since September 1999. Prior to this, he worked for Microsoft from 1991
to 1994 in various product management roles involving Windows and MS-DOS.
Prior to joining Microsoft in 1991, he worked as a strategy consultant for
Alliance Consulting Group. Mr. Barton received a B.S. in industrial
engineering from Stanford University. Mr. Barton also serves as a director of
VacationSpot.com, Inc.

Byron D. Bishop joined Expedia in 1994 as a founding member, with the
principal focus of building and managing Expedia's product development team.
Mr. Bishop has been a Microsoft employee since 1986. During this time, he
created and managed three other development groups within Microsoft, including
the "Windows for Pen Computing" operating system and Microsoft's first
handheld operating system. Mr. Bishop received a B.S. in computer science and
mathematics from the University of Washington.

Erik C. Blachford joined Expedia in 1995. Previously, he served as General
Manager at Kroll Travel Watch, a travel information services division of Kroll
Associates Inc. from 1994 to 1995. Prior to this, he held various marketing
and new product development positions at Butterfield & Robinson Travel Inc.
from 1989 to 1992. Mr. Blachford received a B.A. from Princeton University and
an M.B.A. from Columbia Business School.

Simon J. Breakwell joined Expedia in 1997. Previously, Mr. Breakwell held
various sales positions at British Airways from 1987 to 1993 and various
senior sales management positions from 1993 to 1997. During this period, Mr.
Breakwell managed sales strategy, distribution, sales technology and
commercial agreements with British Airways corporate customers in the United
Kingdom. Mr. Breakwell received an Honors Politics Degree from Portsmouth
Polytechnic and an M.B.A. from Lancaster University.

50
<PAGE>

Mark S. Britton joined Expedia in November 1999. Prior to this, he was an
attorney with the Seattle office of Preston Gates & Ellis LLP from 1997 to
1999, being elected to this firm's partnership in 1999. Mr. Britton served as
Senior Counsel to the Division of Corporation Finance of the SEC from 1994 to
1997. Mr. Britton received a juris doctorate degree from the National Law
Center, George Washington University, and a B.B.A. from Gonzaga University.

Kathleen K. Dellplain joined Expedia in September 1999. Previously, Ms.
Dellplain served as Vice President, Human Resources, for IDX Systems
Corporation, a healthcare information technology company, from 1997 to 1999.
Prior to this, Ms. Dellplain was the Senior Director, Human Resources, for
PHAMIS, Inc., from 1990 until its merger with IDX Systems Corporation in 1997.
She has over 15 years experience in various human resources management
positions in health care information systems, health care and manufacturing
industries. Ms. Dellplain received a B.B.A. from the University of Hawaii,
Honolulu and an M.B.A. from the University of Washington.

Seth E. Eisner joined Expedia in 1998. Before joining Expedia, Mr. Eisner
spent two and a half years within Microsoft's Information Technology Group,
serving as Director of Development, and later as Corporate Data Manager. Mr.
Eisner also managed all technical and business operations for Sidewalk,
Microsoft's Local City Guide from 1997 to 1998. Mr. Eisner joined Microsoft in
1994. Mr. Eisner's work history includes 18 years of experience with IT
systems and, in particular, construction and deployment of high performance,
real-time transactional systems. Mr. Eisner received a B.S. in mathematics
from Washington University, St Louis.

Gregory S. Stanger joined Expedia in September 1999. Prior to joining
Expedia, he served as Senior Director, Corporate Development at Microsoft from
1998 to 1999. Prior to this, he held various positions in Microsoft's
Corporate Development department from 1993 to 1998, and elsewhere within
Microsoft's Finance Organization from 1991 to 1993. Prior to joining
Microsoft, Mr. Stanger worked as an investment banker with PaineWebber from
1987 to 1989. Mr. Stanger received a B.A. from Williams College and an M.B.A.
from the University of California at Berkeley. Mr. Stanger serves on the board
of directors of E-Stamp Corporation.

Gregory B. Maffei has served as Chairman of the Board of Directors and a
Director of Expedia since September 1999. Since 1997 he has been Senior Vice
President, Finance & Administration and Chief Financial Officer of Microsoft
Corporation. Previously, Mr. Maffei has held a number of positions at
Microsoft, including Vice President of Corporate Development, Treasurer, and
Director, Business Development & Investments. Prior to joining Microsoft in
1993, he was with Citicorp Venture Capital, Pay N Pak Stores and Dillon Read.
Mr. Maffei received an A.B. degree from Dartmouth College and an M.B.A. from
Harvard Business School, where he was a Baker Scholar. Mr. Maffei serves on
the board of directors of Ragen MacKenzie and Starbucks.

Brad Chase has served as a Director of Expedia since October 1999. Since
April 1999 he has been Senior Vice President of the Consumer and Commerce
Group of Microsoft Corporation. Prior to his current position, since July 1987
Mr. Chase held a number of positions at Microsoft, most recently managing the
Windows Marketing and Developer Relations Group. Previously, he managed the
marketing and development teams for Microsoft Plus!, served as General Manager
for MS-DOS and served in a variety of other management roles at Microsoft in
the applications division. Mr. Chase received a B.S. from the University of
California at Berkeley and an M.B.A. from Northwestern's Kellogg Graduate
School of Management.

Gerald Grinstein has served as a Director of Expedia since October 1999.
Mr. Grinstein has been non-Executive Chairman of Agilent Technologies since
1999 and non-Executive Chairman of the Board of Delta Air Lines, Inc. since
1997. He is also a principal of Madrona Investment Group, L.L.C., a

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<PAGE>

Seattle-based investment company. From 1985 to 1991, Mr. Grinstein held a
number of positions at Burlington Northern, Inc. and served as Chairman and
Chief Executive Officer from 1991 until his retirement in 1995. He is also a
director of PACCAR Inc., Vans, Inc., The Pittston Company and Imperial Sugar
Corporation. He previously served as a director of Browning-Ferris Industries,
Inc. and Sundstrand Corporation.

Laurie McDonald Jonsson has served as a Director of Expedia since October
1999. Since 1987 she has served as Chairperson and CEO of Stellar Travel, a
Seattle-based travel agency specializing in family, business and cruise
vacation travel, and President and CEO of Stellar International, an
international investment company. She also co-founded both Sundance Cruises
and Admiral Cruises. Ms. McDonald Jonsson serves on the board of directors of
the Commerce Bank, the Harvard University, John F. Kennedy School of
Government, Women's Leadership Board, and is also chair of Governor Locke's
Executive Women's Council, which sponsored the first all-women's trade and
study mission to Central Europe. She received a B.A. from the University of
Washington, an M.S.W. from the University of Michigan and completed Stanford
University's Executive Business Program.

Richard D. Nanula has served as a Director of Expedia since October 1999.
He was the President and Chief Operating Officer of Starwood Hotels & Resorts,
Inc. from 1998 to 1999. Previously, Mr. Nanula held a variety of positions at
The Walt Disney Company from 1986 to 1998, serving most recently as Senior
Executive Vice President and Chief Financial Officer from 1996 to 1998, as
President of The Disney Stores from 1994 to 1996 and as Executive Vice
President and Chief Financial Officer from 1991 to 1994. Mr. Nanula received a
B.S. from the University of California, Santa Barbara and an M.B.A. from
Harvard Business School.

Board Composition

Our Bylaws currently provide for a Board of Directors consisting of at
least 3 and no more than 11 members. All directors hold office until the next
annual meeting of our stockholders and until their successors have been
elected and qualified. Our officers are appointed annually and serve at the
discretion of the Board of Directors. We anticipate appointing one additional
independent director to the board.

Board of Directors Committees

Expedia has an Audit Committee and a Compensation Committee. Our Audit
Committee, which will consist of Messrs. Grinstein, Maffei and Nanula, reviews
the results and scope of the audits and other services provided by our
independent accountants.

Our Compensation Committee, which will consist of Messrs. Chase and
Grinstein and Ms. McDonald Jonsson, reviews and approves the compensation and
benefits for our executive officers, administers our stock purchase and stock
option plans and makes recommendations to the Board of Directors regarding
such matters.

Historically, we have had no Compensation Committee and decisions
regarding compensation have been made by Microsoft. Following the completion
of this offering, compensation decisions will be made by the Compensation
Committee.

Board Compensation

Except for reimbursement for reasonable travel expenses relating to
attendance at Board meetings and the grant of stock options, directors are not
compensated for their services as directors. Directors who are also our
employees are eligible to participate in our 1999 Stock Option Plan and will
be eligible to participate in our Purchase Plan. Directors who are not
employees are eligible to participate in our 1999 Stock Option Plan for Non-
Employee Directors. See "--Stock Plans."

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<PAGE>

Executive Compensation

Summary Compensation Table

The following table sets forth compensation awarded to, earned by, or paid
to our Chief Executive Officer and our four other most highly compensated
executive officers whose total cash compensation exceeded $100,000 for the
fiscal year ended June 30, 1999 (collectively, the "Named Executive
Officers"). While this compensation is indicative of the historical
compensation paid by Microsoft to the Named Executive Officers, it is not
necessarily indicative of the compensation which Expedia will pay to such
individuals going forward.

<TABLE>
<CAPTION>
Annual Compensation
----------------------------
Securities
Name and Fiscal Underlying All Other
Principal Position(1) Year Salary($)(2) Bonus($) Options(#)(3) Compensation($)
--------------------- ------ ------------ -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Richard N. Barton.......... 1999 119,072 50,000 -- --
President, Chief
Executive Officer
and Director
Byron D. Bishop............ 1999 128,231 49,000 -- --
Vice President, Product
Development
Simon J. Breakwell......... 1999 105,157 6,500 10,000 8,194(4)
Vice President, Sales
Seth E. Eisner............. 1999 108,584 23,700 10,000 --
Vice President, Operations
Gregory S. Stanger......... 1999 101,427 35,591 40,000 --
Vice President and
Chief Financial Officer
</TABLE>
- -------
(1) Prior to October 1, 1999, each of these officers was employed by
Microsoft.
(2) Includes amounts deferred at the election of the Named Executive Officers
pursuant to Microsoft's 401(k) plan.
(3) While this number includes all options which Microsoft granted to the
Named Executive Officers in fiscal 1999, only those options which are
unvested will be assumed by Expedia. See "Certain Relationships and
Related Transactions--Our Relationship with Microsoft."
(4) Reflects a one-time reimbursement for moving expenses.

Option Grants During Fiscal 1999

Vested and Unvested Microsoft Options

The following table provides information regarding stock options granted by
Microsoft to the Named Executive Officers during fiscal 1999. Microsoft has
not granted any stock appreciation rights.

<TABLE>
<CAPTION>
Potential Realizable Value at
% of Total Assumed Annual
Options Rates of Stock Appreciation
Granted to Exercise or for Option Term(3)
Options Employees in Base Price Expiration -----------------------------
Name Granted(#)(1) Fiscal Year ($/share)(2) Date 5%($) 10%($)
---- ------------- ------------ ------------ ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard N. Barton....... -- -- % $ -- -- $ -- $ --
Byron D. Bishop......... -- -- -- -- -- --
Simon J. Breakwell...... 10,000 0.01 53.625 7/2/05 218,308 508,750
Seth E. Eisner.......... 10,000 0.01 53.625 7/2/05 218,308 508,750
Gregory S. Stanger...... 40,000 0.05 53.625 7/2/05 873,230 2,034,998
</TABLE>
- -------
(1) While this number includes all options which Microsoft granted to the
Named Executive Officers in fiscal 1999, only those options which are
unvested will be assumed by Expedia. See the table below, as well as the
sections entitled "Certain Relationships and Related Transactions--Our
Relationship with Microsoft" and "--Stock Plans; Stock Option Plan."
(2) The exercise price was the lowest price of Microsoft common stock during
July 1998.
(3) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compounded
rates of appreciation on the Microsoft common stock underlying the options
over the term of the options. These numbers do not take into account
provisions for termination of the option following termination of
employment, nontransferability or vesting over periods of up to 54 months.

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<PAGE>

Unvested Microsoft Options to be Replaced with Expedia Options

The following table provides information regarding stock options granted
by Microsoft to the Named Executive Officers during fiscal 1999 which have not
yet vested. Expedia will issue replacement options only for these unvested
options. See "--Stock Plans; Stock Option Plan" for a discussion of the
formula relating to such replacement. This table assumes that the closing
price of the Microsoft common stock on the date of the offering will be
$92.44, which was the closing price of the Microsoft common stock on October
25, 1999.

<TABLE>
<CAPTION>
Potential Realizable
% of Total Value at Low and
Options High End of Offering
Granted to Exercise or Range(3)
Options Employees in Base Price Expiration --------------------
Name Granted(#)(1) Fiscal Year ($/share)(2) Date $10.00 $12.00
---- ------------- ------------ ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard N. Barton....... -- -- % $ -- -- $ -- $ --
Byron D. Bishop......... -- -- -- -- -- --
Simon J. Breakwell...... 8,750 0.01 53.625 7/2/05 339,631 339,631
Seth E. Eisner.......... 8,750 0.01 53.625 7/2/05 339,631 339,631
Gregory S. Stanger...... 35,000 0.05 53.625 7/2/05 1,358,525 1,358,525
</TABLE>
- --------
(1) Messrs. Breakwell's and Eisner's options will be replaced by 80,885
Expedia options if the Expedia offering price equals $10.00 and 67,404
Expedia options if the Expedia offering price equals $12.00. Mr. Stanger's
options will be replaced by 323,540 Expedia options if the Expedia
offering price equals $10.00 and 269,617 Expedia options if the Expedia
offering price equals $12.00.
(2) The exercise price was the lowest price of Microsoft common stock during
July 1998. Once these options are replaced with Expedia options, their
exercise price will be $5.801 if the Expedia offering price equals $10.00
and $6.961 if the Expedia offering price equals $12.00.
(3) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the low and high end of
the offering range for Expedia's common stock. These numbers do not take
into account provisions for termination of the option following
termination of employment, nontransferability or vesting over periods of
up to 54 months.

Option Exercises During Fiscal 1999 and Fiscal Year-End Option Values

The following table sets forth information concerning options granted by
Microsoft to purchase Microsoft common stock exercised by the Named Executive
Officers during fiscal 1999. The table also sets forth the number and value of
unexercised in-the-money options at June 30, 1999. Microsoft has no
outstanding stock appreciation rights.

<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised in-the-Money
Options at Fiscal Options at Fiscal
Year-End (#) Year-End ($)(1)
Shares Acquired ------------------------- -------------------------
Name on Exercise (#) Value Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard N. Barton....... 15,682 $1,074,736 41,870 158,128 $3,348,757 $ 9,679,384
Byron D. Bishop......... 20,000 1,246,311 64,402 168,238 5,122,706 10,460,412
Simon J. Breakwell...... 250 17,000 4,550 22,000 302,291 1,162,875
Seth E. Eisner.......... 4,000 203,499 66,240 40,480 5,292,520 2,532,698
Gregory S. Stanger...... 27,000 2,204,125 87,900 77,300 7,067,186 4,105,283
</TABLE>
- --------
(1) Value is calculated on the basis of the difference between the option
exercise price and the market price of Microsoft common stock of $90.19 at
June 30, 1999. While this number includes all options which Microsoft
granted to the Named Executive Officers in fiscal 1999, only those options
which are unvested will be replaced by Expedia. See "Certain Relationships
and Related Transactions--Our Relationship with Microsoft."

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<PAGE>

Stock Plans

Stock Option Plan

Our 1999 Stock Option Plan (the "Stock Option Plan") was adopted by the
Board of Directors and approved by our sole stockholder in October 1999. In
addition to the approximately 18.5 million options that will be determined at
the pricing date of this offering, a total of 4,000,000 shares of common stock
has been reserved for issuance under the Stock Option Plan. The Stock Option
Plan provides for the grant to our employees, officers and employee directors
of nonstatutory stock options. Non-employee directors are not eligible for
option grants under the Stock Option Plan. Messrs. Chase and Maffei are
considered to be employee directors and will be eligible to participate in the
Stock Option Plan.

The Stock Option Plan is administered by the Board of Directors or a
committee of the Board of Directors (the "Administrator"). The Administrator
determines the terms of options granted under the Stock Option Plan, including
the number of shares to be issued upon exercise of the option, exercise price,
term and exercisability. The exercise price of any stock option granted to an
optionee who owns stock representing more than 10% of the voting power of our
outstanding capital stock (a "10%+ Stockholder") must equal at least 110% of
the fair market value of the common stock on the date of grant. The exercise
price of all stock options other than to 10%+ Stockholders may be less than,
equal to or greater than the fair market value of our common stock on the date
of grant. Payment of the exercise price may be made in cash, check, delivery
of shares of our common stock, if the Optionee is an officer of Expedia, or
other consideration determined by the Administrator. The Administrator
determines the term of options. The term of any stock option granted under the
Stock Option Plan may not exceed 10 years; provided, however, that
the term of an option qualifying under Section 422 of the Code may not exceed
five years for 10%+ Stockholders. Options may not be transferred by the
optionee other than by will or the laws of descent or distribution or for
estate planning purposes. Options granted are exercisable at such times and
under such conditions as determined by the Board at the time of the grant or
as permissible under the terms of the Stock Option Plan.

In the event of a change in control as defined in the plan, the Stock
Option Plan requires that each outstanding option be assumed or an equivalent
option substituted by the successor corporation. In the event that a successor
corporation refuses to assume each option or substitute an equivalent option,
the Administrator shall provide for the optionee to have the right to exercise
the option as to all of the shares covered by the option, including shares as
to which the option would not otherwise be exercisable, in which case each
option will be exercisable for 15 days from the date of such determination.
The Board of Directors has the authority to amend or terminate the Stock
Option Plan as long as such action does not affect any outstanding option and
provided that stockholder approval shall be required for an amendment to
increase the number of shares reserved for the Stock Option Plan. If not
terminated earlier, the Stock Option Plan will terminate in ten years.

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Expedia options ((100/10) x 1000) with an exercise price of $4 per share
(40/(100/10)). This issuance of Expedia options will be treated as a new grant
of stock options.

Employee Stock Purchase Plan

Our 1999 Employee Stock Purchase Plan (the "Purchase Plan") was adopted by
the Board of Directors and approved by our sole stockholder in October 1999. A
total of 300,000 shares of common stock has been reserved for issuance under
the Purchase Plan. The Purchase Plan, which is intended to qualify under
Section 423 of the Code, generally will be implemented in a series of twelve
separate consecutive six-month offering periods commencing on January 1 and
July 1 of each year. The first such offering period will commence on January
1, 2000. The Purchase Plan will be administered by the Board of Directors or
by a committee appointed by the Board of Directors. Our employees, officers
and employee directors, or employees of any majority owned subsidiary
designated by the Board of Directors, are eligible to participate if they are
employed by us or any such subsidiary for at least 20 hours per week and more
than 5 months per year. The Purchase Plan permits eligible employees to
purchase common stock through payroll deductions, which may not exceed 10% of
an employee's compensation, at a price equal to the lower of (a) 85% of the
fair market value of our common stock at the beginning of the offering period
or (b) 85% of the fair market value of our common stock on the last business
day of the offering. Employees may end their participation in the offering at
any time during the offering period, and participation ends automatically on
termination of employment with us.

The Purchase Plan provides that in the event of a merger of us with or
into another corporation or a sale of substantially all of our assets, the
Board of Directors may make such adjustments as it may deem appropriate in the
number, kind and price of shares available under the Purchase Plan and in the
number of shares employees are entitled to purchase. The Board of Directors
has the power to amend or terminate the Purchase Plan as long as such action
does not adversely affect any outstanding rights to purchase stock thereunder
and provided that stockholders approval shall be required for an amendment to
increase the number of shares subject to the Purchase Plan. If not terminated
earlier, the Purchase Plan will automatically terminate December 31, 2005.

Stock Option Plan for Non-Employee Directors

The 1999 Stock Option Plan for Non-Employee Directors (the "Directors'
Plan") was adopted by the Board of Directors and approved by our sole
stockholder in October 1999. A total of 135,000 shares of common stock has
been reserved for issuance under the Directors' Plan. The Directors' Plan
provides for discretionary grants of nonstatutory stock options to our
nonemployee directors. The Directors' Plan will be administered by the Board
of Directors or by a committee appointed by the Board of Directors.

The Directors' Plan provides that the Board of Directors may grant in its
discretion an option to any person who is a nonemployee director.

The Directors' Plan sets a maximum of 10,000 shares for which options may
be granted to any one nonemployee director in any year, or, in the case of a
newly elected director, a maximum of 15,000 shares in the year in which the
director is first elected. Without Board consent, no option granted under the
Directors' Plan is transferable by the optionee other than by will or the laws
of descent or distribution and each option is exercisable, during the lifetime
of the optionee, only by such optionee. The Directors'

Plan provides that options shall become exercisable as set by the Board of
Directors in its discretion. The exercise price of all stock options granted
under the Directors' Plan shall be set by the Board of Directors in its
discretion. Options granted under the Directors' Plan have a maximum term of
10 years unless they are terminated early upon death of the holder or his
departure from the Board.

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<PAGE>

In the event of a change in control, the Board of Directors may amend or
terminate the Directors' Plan; provided, however, that stockholder approval is
required for any amendment that will increase the total number of shares as to
which options may be granted under the Directors' Plan, modify the class of
persons eligible to receive options or otherwise as required by law. The Board
may not amend the Directors' Plan more than once every six months, other than
to comport with changes in the Internal Revenue Code, the Employee Retirement
Income Security Act or the rules thereunder. If not terminated earlier, the
Directors' Plan will have a term of 10 years.

Employment Agreement

We have entered into an employment agreement with Richard N. Barton which
provides that, if he is terminated by Expedia during his first two years of
employment for reasons set forth in the agreement, he will receive the salary
and stock option vesting which he would have otherwise received as an Expedia
employee.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Our Relationship with Microsoft

Along with contributions of ownership of intellectual property described
below, Microsoft contributed to Expedia other assets such as computers and
securities of Expedia Canada Corp. and of a private company in the travel
industry.

Microsoft assigned to us a number of contracts having to do with the
Expedia business. Many of these have intellectual property components.
Generally, where the contract only impacts the Expedia business and no other
units of Microsoft, it is being assigned to Expedia. Microsoft has agreed to
obtain consents to these assignments where applicable.

We have also entered into a number of other agreements which were
necessary to separate the Expedia assets from Microsoft and to facilitate the
operation of the Expedia assets after such separation. Each of these
agreements are summarized below. Although these agreements were not negotiated
on an arm's length basis, we believe that the terms of these agreements, when
taken as a whole, are at least as favorable to Expedia as those which would
have resulted from arm's length negotiations with parties other than
Microsoft. We intend to negotiate any future agreements with Microsoft on the
same basis.

Services Agreement

We entered into a services agreement with Microsoft whereby Microsoft will
provide us with employee and other administrative and operational services.

Microsoft will provide us with the full-time services of the Microsoft
employees who worked in the travel business unit of Microsoft prior to the
formation of Expedia but chose not to leave Microsoft to join Expedia. These
employees will continue to work in the same positions they had prior to the
separation of the Expedia assets from Microsoft. These services will be
provided until the earlier of May 20, 2000 or our notice that we no longer
require the services of these employees.

Microsoft will also provide us with administrative and operational
services in the following general areas: legal, tax, real estate and
facilities, information technology, online advertising, product localization,
corporate accounting, treasury, human resources and product localization.

These services will be provided until December 31, 2000 but the parties
may agree to extend this date for some or all of the administrative and
operational service.

We will pay Microsoft for the services under this agreement on either an
estimated or actual cost reimbursement and will also pay any sales and
occupancy taxes associated with these services.

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<PAGE>

License Agreements

In a set of license agreements, Microsoft provides us with rights to
intellectual property to be used in our business.

Microsoft assigned to us the trademarks and domain names associated with
the name "Expedia." In addition, Microsoft assigned to us copyrights for
software relating to online travel services.

We license the right to use some of Microsoft's retail products and other
technology pursuant to our license agreements with Microsoft. We also license
the server technology related to the Expedia Maps service. In addition, we
have a license to all of Microsoft's patents relating to the operation of our
websites. All of the licenses relating to Expedia specific software content
and data and patents are royalty-free and perpetual.

Microsoft holds licenses to various third-party software programs, content
and data that are useful in our business. Where the license to Microsoft
permits, Microsoft sublicensed these rights to us. We must reimburse Microsoft
for any fees due to the licensor for these sublicenses. As part of the
licenses granted by Microsoft to us for technology and data related to our
Expedia Maps service, we have agreed to provide Microsoft websites with
mapping services to the extent the services are requested by Microsoft.

Tax Allocation Agreement

We entered into a tax allocation agreement with Microsoft Corporation that
generally adopts the "percentage of tax liability" method of Regulations
section 1.1552-1(a)(2) as its "basic method" and the "percentage" method of
Regulations section 1.1502-33(d)(3) as its complementary method.

Under the "percentage of tax liability" method, a member's allocable share
of consolidated tax liability is equal to the tax liability of the group
multiplied by a fraction, the numerator of which is the separate return tax
liability of such member and the denominator of which is the sum of the
separate return tax liability of all the members.

This basic allocation method is modified by the complementary "percentage"
method. Under the percentage method, in the event a loss or credit is
generated by a member, such member is compensated at the time the loss or
credit is absorbed by the other members of the Microsoft group. In our case,
however, 7.5% of the benefit we generate and is absorbed by the other members
of the Microsoft group will be retained by Microsoft as a "fee" because we are
being paid for tax attributes prior to the time we could have used them to
reduce our tax liability.

Under the terms of this agreement, each party must compute its tax
liability as if it were a separate corporation. In making this computation,
Microsoft will be entitled to deduct on its separate tax return a portion of
the cost attributable to the Microsoft stock options that we assume. The
parties will take this deduction into account under the normal tax accounting
rules, so the deduction will generally occur on the exercise of the options.
The portion of this cost that Microsoft will deduct is equal to the excess of
the fair market value of the shares to be acquired on exercise of the option
on the date we employ the optionee over the exercise price of the assumed
option. We will determine this amount on the date that we employ an optionee.

Carriage and Cross Promotion Agreement

We entered into a five-year carriage and cross promotion agreement with
Microsoft under which we receive premium placement on the MSN.com website. The
travel channel on MSN.com will be a

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customized version of Expedia.com that includes both our logo and MSN's logo.
This website will be the exclusive travel transaction service offered on
Microsoft's websites, except in international markets where we may not have a
presence. We will develop, maintain and host this website. We will also
receive premium placement on the Hotmail email service and the WebTV platform.

The MSN advertising sales team will sell and keep all revenues from the
sale of up to 52.0 million banner advertisements during the first year of this
agreement and up to 57.2 million banner advertisements during the second year
of the agreement. Revenues resulting from these sales will be received and
retained by Microsoft, in addition to the annual fees which we will pay to
Microsoft under this agreement. We believe that MSN will sell all banner
advertisements at a price responsive to market conditions.

Under the agreement, the parties agreed to restrictions regarding the sale
of banner advertising on MSN.com and the co-branded travel channel on MSN.com.

We will pay Microsoft a flat annual fee of $2.0 million in fiscal 2000 and
$2.2 million in fiscal 2001. In addition, we will pay incentive fees to the
extent that the number of completed airline transactions from the MSN.com
website exceeds our forecasts. The fees and terms of sale of banner
advertisements will depend on agreement between the parties for the remaining
three years under this agreement.

Shareholder Agreement

We entered into a shareholder agreement with Microsoft relating to the
transfer and registration of the common stock owned by Microsoft.

Microsoft has agreed not to dispose of the common stock which it owns for
12 months following this offering. Microsoft may, however, submit a written
request to us to be relieved from this lock-up period prior to its expiration.
Only a majority of our outside directors may grant this request.

Microsoft and Expedia have agreed that, for a period of one year from the
date of this offering, no employee of either company will solicit for the
purpose of hiring any employee of the other company. Microsoft has also agreed
that, for a period of three years following this offering, it will not engage
in our business, including acquiring more than 5% of a competing business. The
shareholder agreement generally defines our business as any online service for
reserving or purchasing travel services, such as airline tickets, hotel rooms,
rental cars, cruises and resort vacation packages, accessed with an
interactive electronic device enabling the user to view information and
respond with additional information.

Microsoft has the right to require us to use our best efforts to register
under the Securities Act all shares of common stock owned by Microsoft. These
demand registration rights include the condition that we would not be required
to effect more than one demand registration in any 12-month period. Microsoft
also has the right to participate, or "piggy-back," in equity offerings
initiated by us, subject to reduction of the size of the offering on the
advice of the managing underwriter. Microsoft will pay all expenses relating
to the demand registration requests under the shareholder agreement, and we
will pay all expenses relating to the performance of, or compliance with,
"piggy-back" registrations under the shareholder agreement. In either case,
however, Microsoft will be responsible for underwriters' discounts and selling
commissions with respect to the registrable shares being sold and the fees and
expenses of its counsel in connection with this registration.

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Conflict of Interest Policies

Following this offering, we will continue to conduct business with
Microsoft, which may give rise to conflicts of interest and our Articles of
Incorporation contain policies relating to the resolution of these conflicts
of interest. These policies regulate and guide our business relationships
generally with the following parties:

. Microsoft

. Microsoft's customers or suppliers

. other corporations, partnerships or other business entities in which
one or more of our directors have a financial interest (a "related
entity")

. the directors and officers of a related entity

. one or more of our officers and directors

If we enter into a contract or transaction with the above parties, the
contract or transaction is not void or voidable solely because:

. the party with which we entered into the contract or transaction was
one of the above parties

. any of our directors or officers who could be considered a related
party were present at or participated in the meeting or their votes
were counted at the meeting of our board of directors which authorized
the contract or transaction

Further, if we enter into a contract or transaction with any of the above
parties, our Articles of Incorporation generally provide that any related
party and any of our directors and officers who could be considered a related
party shall have fully satisfied their fiduciary duties to us and our
stockholders and have been deemed to have acted in good faith and not for an
improper personal benefit as long as any of the following conditions are met:

. the material facts about the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the contract
or transaction is authorized by the affirmative vote of a majority of
the directors who are considered disinterested

. the material facts about the transaction are disclosed or are known to
our stockholders entitled to vote on the transaction, and the
transaction is approved in good faith by vote of the shareholders of a
majority of the then outstanding common stock not owned by Microsoft
or a related entity

. the transaction is completed according to standards which are approved
by the affirmative vote of a majority of the disinterested directors
or by vote of the stockholders of a majority of our then outstanding
common stock not owned by Microsoft or a related entity

. the transaction is fair to us when it is authorized by our board of
directors or our stockholders

Equity Investment in Related Party

In an agreement dated March 1998, between Expedia and VacationSpot.com
Inc., a Seattle-based non-public company, we agreed to provide advertising
services in the form of a link on our Expedia.com website to the
VacationSpot.com website in exchange for an equity interest in
VacationSpot.com. The VacationSpot.com website enables customers to book
leisure lodging such as private vacation condominiums. This agreement is
scheduled to expire in March 2000, but we will be prepared to consider a
renewal of this agreement. Richard N. Barton, the President and Chief
Executive Officer and a Director of Expedia, is a member of the board of
directors of VacationSpot.com. We estimate the fair value of the advertising
services provided to VacationSpot.com to be $400,000.

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PRINCIPAL STOCKHOLDER

As of November 3, 1999, 33,000,000 shares of our common stock were
outstanding, all of which were owned by Microsoft. Upon completion of this
offering, Microsoft will own 86.4% of our outstanding common stock and
approximately 84.7% of our outstanding common stock if the underwriters' over-
allotment options are exercised in full.

Microsoft's address is: Microsoft Corporation, One Microsoft Way, Redmond,
WA 98052-6399. For a description of transactions and arrangements between us
and Microsoft, see "Certain Relationships and Related Transactions--Our
Relationship with Microsoft."

As of November 3, 1999, none of our directors or officers beneficially
owned any shares of our common stock. We intend to make option grants with
respect to approximately 3,700,000 shares of our common stock to our Named
Executive Officers and approximately 1,900,000 shares to our other executive
officers and directors, in each case effective upon completion of this
offering.

In addition, none of our directors or officers beneficially own more than
1% of Microsoft's outstanding common stock.

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DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 120,000,000 shares of common
stock, $0.01 par value and 10,000,000 shares of preferred stock, $0.01 par
value.

Common Stock

Holders of our common stock have no cumulative voting rights and no
preemptive or conversion rights. There are no redemption or sinking fund
provisions available to the common stock. All outstanding shares of common
stock are fully-paid and non-assessable. Taking into consideration preferences
that may be applicable to any then-outstanding preferred stock, holders of
common stock will be entitled to receive ratably any dividends that may be
declared by our Board of Directors out of funds legally available for these
dividends. In the event of a liquidation, dissolution or winding up of
Expedia, holders of common stock will be entitled to share ratably in all
assets remaining after payment of liabilities and any liquidation preference
to any then-outstanding holders of preferred stock.

As a result of this offering, there will be 38,200,000 shares of common
stock outstanding assuming no exercise of the underwriters' over-allotment
options. As of October 25, 1999, there were 33,000,000 shares of common stock
outstanding, all of which were held of record by Microsoft. The number of
outstanding shares of common stock held by Microsoft will not change as a
result of this offering.

Preferred Stock

Our Articles of Incorporation authorize us to issue preferred stock in one
or more classes or series or upon authorization by our Board of Directors. Our
Board of Directors, without further approval of the shareholders, is
authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences and any other
rights, preferences, privileges and restrictions applicable to each class or
series of preferred stock. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could adversely affect the voting power of the holders of our common
stock and could make it more difficult for a third party to gain control of
us, discourage bids for our common stock at a premium, or otherwise adversely
affect the market price of our common stock.

We currently have no plans to issue any preferred stock.

Business Combination Statute

The Washington Business Act, Section 23B.19 of the Revised Code of
Washington, prohibits a "target corporation," with some exceptions, from
engaging in "significant business transactions," such as a merger or sale of
assets with an "acquiring person" who acquires more than 10% of the voting
securities of the target corporation for a period of five years after the
acquisition of the voting securities, unless the transaction is approved by
the majority of the members of the target corporation's board of directors
prior to the date of the transaction, or unless the aggregate amount of the
cash and the market value of non-cash consideration received by holders of
outstanding shares of any class or series of stock of the target corporation
is equal to specified minimum amounts.

Warrants and Other Rights

As of the date of this prospectus, there are no warrants or similar rights
to purchase common stock, other than the options for employees, officers and
directors described earlier in this prospectus.

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Transfer Agent and Registrar

The Transfer Agent and Registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C.

Listing

Our common stock will be traded on the Nasdaq National Market under the
trading symbol "EXPE."

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SHARES ELIGIBLE FOR FUTURE SALE

The remaining 33,000,000 shares outstanding are "restricted securities"
within the meaning of Rule 144. These restricted securities may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act, which are summarized below. Sales of the restricted securities in the
public market, or the availability of these shares for sale, could adversely
affect the market price of the common stock.

Microsoft, Expedia and our directors and officers have entered into lock-
up agreements in connection with this offering generally providing that they
will not offer, sell, contract to sell or grant any option to purchase or
otherwise dispose of our common stock or any securities exercisable for or
convertible into our common stock owned by them for a period of 180 days after
the date of this prospectus without the prior written consent of Goldman,
Sachs & Co. and Morgan Stanley & Co. Incorporated. Additionally, as discussed
in "Certain Relationships and Related Transactions--Our Relationship with
Microsoft; Shareholder Agreement," Microsoft has entered into an agreement
with Expedia that it will not offer, sell, contract to sell or grant any
option to purchase or otherwise dispose of our common stock or any securities
exercisable for or convertible into our common stock owned by it for a period
of one year after the date of this offering without the prior approval of
Expedia's outside directors. After this time Microsoft will have the ability
to sell some or all of its common stock. We have agreed to file registration
statements under the Securities Act to register the common stock held by
Microsoft.

Taking into account these lock-up agreements, and assuming Goldman, Sachs
& Co. and Morgan Stanley & Co. Incorporated do not release stockholders from
their agreements or Expedia does not release Microsoft from its additional
agreement, the following shares will be eligible for sale in the public market
at the following times:

. beginning on the effective date of this prospectus, only the shares of
common stock sold in the offering will be immediately available for
sale in the public market

. on various dates prior to 180 days after the date of this prospectus,
approximately 2.5 million shares of common stock underlying
exercisable options of Expedia employees not required to sign lock-up
agreements will become eligible for sale under Rule 701 or as a result
of the Form S-8 registration statement described below

. beginning 180 days after the date of this prospectus, approximately
3.9 million additional shares of common stock underlying exercisable
options of Expedia employees will be eligible for sale under Rule 701
or as a result of the Form S-8 registration statement described below

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. beginning 365 days after the date of this prospectus, essentially all
shares of our common stock will be available for sale, provided there
is compliance with the vesting requirements in the case of shares
underlying exercisable options of Expedia employees. Microsoft will
have registration rights with respect to its common stock. In
addition, Microsoft, any of its affiliates and any holders of shares
of common stock that are restricted securities, may sell shares under
Rule 144.

In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any three-
month period a number of shares that does not exceed the greater of:

. one percent of the number of shares of common stock then outstanding,
which will equal approximately 382,000 shares immediately after this
offering

. the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale

Sales under Rule 144, including sales by affiliates, must comply with the
requirements with respect to manner of sale, notice, and the availability of
current public information about us. Under Rule 144(k), a person who is not
deemed to have been our affiliate at any time during the three months
preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least two years, is entitled to sell these shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.

Rule 701, as currently in effect, permits our employees, officers,
directors or consultants who purchased shares under a written compensatory
plan or contract to resell these shares in reliance upon Rule 144 but without
compliance with specific restrictions. Commencing 90 days after the date of
this offering, Rule 701 permits affiliates to sell their Rule 701 shares under
Rule 144 without complying with the holding period requirement and permits
non-affiliates to sell these shares in reliance on Rule 144 without complying
with the holding period, public information, volume limitation or notice
provisions of Rule 144.

In addition, we intend to file, immediately after the effectiveness of
this offering, a registration statement on Form S-8 under the Securities Act
covering all shares of common stock reserved for issuance under our stock
plans. See "Management--Stock Plans." Shares registered under this
registration statement would be available for sale in the open market in the
future, provided there is compliance with the vesting restrictions with
Expedia, Rule 144 restrictions in the case of affiliates, and the contractual
restrictions described above.

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UNDERWRITING

Expedia and the underwriters for the U.S. offering (the "U.S.
underwriters") named below have entered into an underwriting agreement with
respect to the shares being offered in the United States. With specific
conditions, each U.S. underwriter has severally agreed to purchase the number
of shares indicated in the following table. Goldman, Sachs & Co. and Morgan
Stanley & Co. Incorporated are the representatives of the U.S. underwriters.

<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co. ....................................
Morgan Stanley & Co. Incorporated........................
---------
Total.................................................. 4,160,000
=========
</TABLE>

----------------

If the U.S. underwriters sell more shares than the total number set forth
in the table above, the U.S. underwriters have an option to buy up to an
additional 624,000 shares from Expedia to cover such sales. They may exercise
that option for 30 days. If any shares are purchased pursuant to this option,
the U.S. underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.

The following table shows the per share and total underwriting discounts
and commissions to be paid to the U.S. underwriters by Expedia. Such amounts
are shown assuming both no exercise and full exercise of the U.S.
underwriters' option to purchase 624,000 additional shares.

<TABLE>
<CAPTION>
Paid by Expedia
---------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share....................................... $ $
Total........................................... $ $
</TABLE>

Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per share from
the initial public offering price. If all the shares are not sold at the
initial public offering price, the representatives may change the offering
price and the other selling terms.

Expedia has entered into an underwriting agreement with the international
underwriters for the sale of 1,040,000 shares outside of the United States in
addition to the 4,160,000 shares offered in the United States. The terms and
conditions of both offerings are the same and the sale of shares in both
offerings are conditioned on each other. Goldman Sachs International and
Morgan Stanley & Co. International Limited are representatives of the
underwriters for the international offering outside of the United States.
Expedia has granted the international underwriters a similar option to
purchase up to an aggregate of an additional 156,000 shares.

The underwriters for both of the offerings have entered into an agreement
in which they agree to restrictions on where and to whom they and any dealer
purchasing from them may offer shares as a part

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of the distribution of the shares. The underwriters also have agreed that they
may sell shares among each of the underwriting groups.

Microsoft, Expedia and its directors and officers have agreed with the
underwriters not to dispose of or hedge any of their common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 180
days after the date of this prospectus, except with the prior written consent
of the representatives. See "Shares Eligible for Future Sale" for a discussion
of transfer restrictions.

Prior to this offering, there has been no public market for the shares.
The initial public offering price will be negotiated among Expedia and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be Expedia's historical performance, estimates of the
business potential and earnings prospects of Expedia, an assessment of
Expedia's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.

Application has been made for quotation of the common stock on the Nasdaq
National Market under the symbol "EXPE."

In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include
short sales, stabilizing transactions and purchases to cover positions created
by short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in this offering.
Stabilizing transactions consist of bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock
while this offering is in progress.

The representatives may impose a penalty bid on underwriters. This means
that to the extent the representatives purchase in the open market shares of
the common stock sold in this offering to reduce the underwriters' short
position or to stabilize the price of the common stock, they have the option
to reduce the aggregate selling concession paid or payable to each syndicate
member by the amount of the selling concession attributable to the portion of
the repurchased shares sold in the offering by the syndicate member while such
short covering or stabilizing activities are ongoing. To reduce the likelihood
of the imposition of a penalty bid, underwriters, in determining how to
allocate shares in the offering, may take into consideration the history of
investors who have quickly sold their shares in prior offerings. The
imposition of a penalty bid may discourage the immediate resale of shares sold
in this offering.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by
the underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.

The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.

The underwriters have reserved for sale, at the initial public offering
price, approximately 325,000 shares of the common stock offered hereby for
individuals designated by Expedia who have expressed an interest in purchasing
such shares of common stock in this offering. The number of shares available
for sale to the general public will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same basis as other
shares offered hereby.

68
<PAGE>

Expedia estimates that its share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately
$1,800,000.

Expedia has agreed to indemnify the underwriters against specific
liabilities, including liabilities under the Securities Act.

This prospectus may be used by the underwriters and other dealers in
connection with offers and sales of the shares, including sales of shares
initially sold by the international underwriters in the offering being made
outside of the United States, to persons located in the United States.

VALIDITY OF THE COMMON STOCK

The validity of the common stock offered hereby will be passed upon for us
by our counsel, Preston Gates & Ellis LLP, Seattle, Washington and for the
underwriters by Sullivan & Cromwell, Los Angeles, California.

EXPERTS

The financial statements as of June 30, 1999 and 1998 and for the three-
year period ended June 30, 1999 included in this prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and have been so included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common
stock offered in this offering. This prospectus does not contain all of the
information set forth in the registration statement. For further information
with respect to Expedia and the common stock offered in this offering, we
refer you to the registration statement and to the attached exhibits and
schedules. Statements made in this prospectus concerning the content of any
document referred to in this prospectus are not necessarily complete. With
respect to each such document filed as an exhibit to the registration
statement, we refer you to the exhibit for a more complete description of the
matter involved.

You may inspect our registration statement and the attached exhibits and
schedules without charge at the public reference facilities maintained by the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, NY 10048, and the Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, IL 60661. You may obtain copies of
all or any part of our registration statement from the Securities and Exchange
Commission upon payment of prescribed fees. You may also inspect reports,
proxy and information statements and other information regarding registrants
that file electronically with the Securities and Exchange Commission without
charge at a website maintained by the Securities and Exchange Commission at
www.sec.gov.

69
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Report................................................ F-2
Statements of Operations.................................................... F-3
Balance Sheets.............................................................. F-4
Statements of Changes in Owner's Net Investment (Deficit)................... F-5
Statements of Cash Flows.................................................... F-6
Notes to Financial Statements............................................... F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Microsoft Corporation
Redmond, Washington

We have audited the accompanying balance sheets of Expedia, an operating
unit of Microsoft Corporation, as of June 30, 1999 and 1998, and the related
statements of operations, changes in owner's net investment (deficit), and
cash flows for the three-year period ended June 30, 1999. These financial
statements are the responsibility of Expedia's management. Our responsibility
is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, such financial statements present fairly, in all material
respects, the financial position of Expedia as of June 30, 1999 and 1998, and
the results of its operations and its cash flows for the three-year period
ended June 30, 1999, in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared from the records
maintained by Microsoft Corporation and may not necessarily be indicative of
the conditions that would have existed or the results of operations if Expedia
had been operated as an unaffiliated entity. Portions of certain expenses
represent allocations made from and applicable to Microsoft Corporation as a
whole.

/s/ DELOITTE & TOUCHE LLP

Seattle, Washington
October 26, 1999

F-2
<PAGE>

EXPEDIA

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Three months
ended
Years ended June 30, September 30,
---------------------------- ----------------
1997 1998 1999 1998 1999
-------- -------- -------- ------- -------
(in thousands, except per share amounts)
(unaudited)
<S> <C> <C> <C> <C> <C>
Net revenues................... $ 2,742 $ 13,827 $ 38,699 $ 6,057 $15,268
Cost of revenues............... 3,279 9,692 15,950 3,177 5,364
-------- -------- -------- ------- -------
Gross profit (loss)........ (537) 4,135 22,749 2,880 9,904
Operating expenses:
Product development.......... 16,211 18,506 21,180 4,977 5,393
Sales and marketing.......... 8,820 10,823 14,888 2,060 6,732
General and administrative... 3,353 4,284 6,283 1,050 2,729
-------- -------- -------- ------- -------
Total operating expenses... 28,384 33,613 42,351 8,087 14,854
-------- -------- -------- ------- -------
Loss from operations........... (28,921) (29,478) (19,602) (5,207) (4,950)
Provision for income taxes..... -- -- -- -- --
-------- -------- -------- ------- -------
Net loss....................... $(28,921) $(29,478) $(19,602) $(5,207) $(4,950)
======== ======== ======== ======= =======
Pro forma basic and dilutive
net loss per common share..... $ (0.59) $ (0.15)
======== =======
Weighted average shares used to
compute pro forma basic and
dilutive net loss per common
share......................... 33,000 33,000
</TABLE>

F-3
<PAGE>

EXPEDIA

BALANCE SHEETS

<TABLE>
<CAPTION>
June 30,
------------------ September 30,
1998 1999 1999
-------- -------- -------------
(in thousands)
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ -- $ -- $ --
Accounts receivable........................ 7,059 4,970 5,897
Prepaid expenses and other current assets.. 360 -- --
-------- -------- --------
Total current assets..................... 7,419 4,970 5,897
Property and equipment, net.................. 514 386 721
Investment................................... 400 400 400
-------- -------- --------
Total........................................ $ 8,333 $ 5,756 $ 7,018
======== ======== ========
LIABILITIES AND OWNER'S NET DEFICIT
Current liabilities:
Accounts payable........................... $ 462 $ 1,216 $ 1,062
Accrued expenses........................... -- -- 287
Current portion of unearned revenue........ 2,143 2,364 1,940
-------- -------- --------
Total current liabilities................ 2,605 3,580 3,289
Unearned revenue, net of current portion..... 5,820 3,851 4,102
Commitments and contingencies (Note 6)
Owner's net deficit:
Net contribution from owner................ 67,070 85,089 91,341
Accumulated deficit........................ (67,162) (86,764) (91,714)
-------- -------- --------
Total owner's net deficit................ (92) (1,675) (373)
-------- -------- --------
Total........................................ $ 8,333 $ 5,756 $ 7,018
======== ======== ========
</TABLE>

F-4
<PAGE>

EXPEDIA

STATEMENTS OF CHANGES IN OWNER'S NET INVESTMENT (DEFICIT)

<TABLE>
<CAPTION>
Net Owner's net
contribution Accumulated investment
from owner deficit (deficit)
------------ ----------- -----------
(in thousands)
<S> <C> <C> <C>
Balance, July 1, 1996.................... $ 9,364 $ (8,763) $ 601
Net loss............................... -- (28,921) (28,921)
Net contribution from owner............ 27,599 -- 27,599
------- -------- --------
Balance, June 30, 1997................... 36,963 (37,684) (721)
Net loss............................... -- (29,478) (29,478)
Net contribution from owner............ 30,107 -- 30,107
------- -------- --------
Balance, June 30, 1998................... 67,070 (67,162) (92)
Net loss............................... -- (19,602) (19,602)
Net contribution from owner............ 18,019 -- 18,019
------- -------- --------
Balance, June 30, 1999................... $85,089 $(86,764) $ (1,675)
Net loss (unaudited)................... -- (4,950) (4,950)
Net contribution from owner
(unaudited)........................... 6,252 -- 6,252
------- -------- --------
Balance at September 30, 1999
(unaudited)............................. $91,341 $(91,714) $ (373)
======= ======== ========
</TABLE>

F-5
<PAGE>

EXPEDIA

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Three months
ended September
Years ended June 30, 30,
---------------------------- ----------------
1997 1998 1999 1998 1999
-------- -------- -------- ------- -------
(in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net loss.................... $(28,921) $(29,478) $(19,602) $(5,207) $(4,950)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation............... 487 750 778 206 264
Amortization of noncash
item...................... -- (50) (200) (50) (50)
Cash provided (used) by
changes in operating
assets and liabilities:
Accounts receivable....... (1,012) (6,047) 2,089 4,423 (927)
Prepaid expenses and other
current assets........... -- (360) 360 360 --
Accounts payable and
accrued expenses......... 17 445 754 229 133
Unearned revenue.......... 2,349 5,556 395 -- 526
Recognition of unearned
revenue from prior
periods.................. -- (292) (1,943) (514) (649)
-------- -------- -------- ------- -------
Net cash used by operating
activities............... (27,080) (29,476) (17,369) (553) (5,653)
Investing activities:
Additions to property and
equipment.................. (519) (631) (650) (139) (599)
Financing activities:
Net contribution from
owner...................... 27,599 30,107 18,019 692 6,252
-------- -------- -------- ------- -------
Net increase and beginning and
end of year--cash and cash
equivalents:................. $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======= =======
Supplemental disclosure of
noncash item:
Equity investment received
for advertising services... $ -- $ 400 $ -- $ -- $ --
</TABLE>

F-6
<PAGE>

EXPEDIA

NOTES TO FINANCIAL STATEMENTS

Note 1: Description of Business and Summary of Significant Accounting Policies

Description of business: Expedia (the Company), an operating unit of
Microsoft Corporation (Microsoft), provides Internet-based travel-related
services to retail consumers and corporate clients. The Company is a provider
of branded online travel services for leisure and small business travelers.
The Company operates websites, including Expedia.com and international
versions of Expedia.com, and licenses components of its technology to provide
the platform for travel websites operated by others. The Company derives its
revenues from commissions from transactions on its websites, sales of
advertisements on its websites and licensing fees. Services provided include
the reservation and purchase of airline tickets, hotel rooms, and car rentals
as well as vacation planning and destination information. In addition, the
Company receives fees for website advertising and for the licensing of
components of its technology and editorial content to selected airlines and
corporate travel agencies as a platform for their websites. In October 1999,
Microsoft contributed the assets, liabilities and operations of the Company to
Expedia, Inc.

On August 23, 1999, the Company was incorporated in the state of
Washington. The authorized share capital of the Company is 120,000,000 shares
of common stock and 10,000,000 shares of preferred stock.

Basis of presentation: The financial statements present the results of
operations, balance sheets, changes in owner's net deficit, and cash flows
applicable to the operations of the Company. The financial statements of the
Company are derived from the historic books and records of Microsoft.

The Company does not maintain corporate treasury, legal, tax, purchasing,
and other similar corporate support functions. For purposes of preparing the
accompanying financial statements, certain Microsoft corporate costs were
allocated to the Company using the allocation method described in Note 3.

Estimates and assumptions: Preparing financial statements requires
management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues, and expenses. Actual results could differ
from those estimates.

Cash and cash equivalents: The Company considers all highly liquid
instruments purchased with original maturities of 90 days or less to be cash
equivalents.

Property and equipment: Property and equipment consists primarily of
computer equipment, which is stated at cost. Property and equipment is
depreciated using the straight-line method over the estimated useful life of
the assets, ranging from one to three years.

Investment: The Company owns an interest of under 20% of the outstanding
equity in a related party and accounts for this investment under the cost
method.

Certain risks and concentrations: The Company is potentially subject to a
concentration of credit risk from its accounts receivable. The Company
maintains allowances for potential credit losses. Historically, such losses
have not been significant.

Commissions and related revenues accounted for 80%, 71%, and 69% of total
net revenues for fiscal 1997, 1998, and 1999, respectively. The Company relies
on unrelated service entities to accumulate, process, and remit these
revenues. Discontinuance of these services could result in disruption to the
Company's business and accordingly may have a material adverse effect on the
Company's results of operations, financial position, and cash flows.

F-7
<PAGE>

EXPEDIA

NOTES TO FINANCIAL STATEMENTS--(Continued)

The Company's business is subject to other risks and uncertainties common
to growing technology-based companies, including rapid technology change,
growth and commercial acceptance of the Internet, dependence on third-party
technology, new service introductions and other activities of competitors,
dependence on key personnel, international expansion, and limited operating
history.

Revenue recognition: Transaction revenues consist of commissions and
related revenues for air travel, hotel rooms, and car rentals, net of
allowances for cancellations. Revenues from air travel are recognized when the
reservation is made and secured by a credit card. Commission revenues from
hotel and car rental reservations are recognized either on receipt of the
commission payment or on notification of entitlement by a third party. The
allowance for cancellations were $3,000 and $10,000 as of June 30, 1998 and
1999, respectively, and $22,000 (unaudited) as of September 30, 1999.
Cancellations approximated $15,000, $57,000, and $132,000 for fiscal 1997,
fiscal 1998, and fiscal 1999, respectively, and $50,000 (unaudited) for the
three-month period ended September 30, 1999.

Additional revenues are derived from sales of advertising on the Company's
websites. Revenues from sales under per-transaction agreements are recognized
upon display of each individual advertisement. Revenues from sales under flat
fee agreements are recognized ratably over the period in which the advertising
is displayed, provided that no significant obligations for the Company remain,
collection of the resulting receivable is probable and evidence of an
arrangement exists.

Software license revenue recognition policies are in compliance with
American Institute of Certified Public Accountants (AICPA) Statement of
Position (SOP) 97-2, Software Revenue Recognition, and SOP 98-9, Modification
of SOP 97-2, With Respect to Certain Transactions. Revenues for significant
contracts have been recognized ratably over the license term.

Product development: Product development costs consist primarily of
payroll and related expenses for website and software development and are
expensed as incurred.

Capitalized software costs: Financial accounting standards require the
capitalization of certain software product costs after technological
feasibility of the software is established. To date, the period between
achieving technological feasibility and the general availability of such
software has been short and software development costs qualifying for
capitalization have been insignificant. Accordingly, the Company has not
capitalized any software development costs.

Advertising costs: The Company expenses advertising costs as incurred.

Income taxes: As of June 30, 1999, the Company was not a separate taxable
entity for federal, state, or local income tax purposes and its operations are
included in the consolidated Microsoft returns. The Company's tax provision
has been prepared in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes on a separate return
basis. Accordingly, no tax benefit for the Company's net operating losses has
been recognized.

Deferred taxes result from differences between the financial and tax bases
of the Company's assets and liabilities and are adjusted for changes in tax
rates and tax laws when changes are enacted. Valuation allowances are recorded
to reduce deferred tax assets when it is more likely than not that a tax
benefit will not be realized by the Company.

F-8
<PAGE>

EXPEDIA

NOTES TO FINANCIAL STATEMENTS--(Continued)

Stock-based compensation: The Company accounts for stock-based compensation
arrangements in accordance with provisions of Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, and complies
with the disclosure provisions of SFAS No. 123, Accounting for Stock-Based
Compensation.

Earnings per share: The Company is not a separate legal entity and has no
historical capital structure. Therefore, historical earnings per share have
not been presented in the financial statements.

Pro-forma net loss per share (unaudited): In October 1999, the net
contribution from owner was converted into an aggregate of 33 million shares
of $.01 par value common stock.

Pro forma net loss per share has been computed in accordance with SFAS No.
128, Earnings per Share, and SEC Staff Accounting Bulletin (SAB) No. 98 to
reflect the pro forma effect of the Company's capitalization. Under the
provisions of SFAS No. 128 and SAB No. 98, basic pro forma net loss per share
is computed by dividing the net loss for the period by the weighted average
number of common shares outstanding, using the pro forma effect of the
conversion of the net contribution from owner as if the shares issued to
capitalize the Company were outstanding over the entire period for which the
pro forma net loss per share has been computed. Common equivalent shares
related to stock options are excluded from the calculation as their effect is
antidilutive. Accordingly, basic and diluted loss per share are equivalent.

Pro forma basic and dilutive net loss per share is as follows (in
thousands, except per share amount):

<TABLE>
<CAPTION>
Year Ended
June 30, Three months ended
1999 September 30, 1999
---------- ------------------
<S> <C> <C>
Net loss......................................... $(19,602) $(4,950)

Weighted average shares used to compute pro forma
basic and dilutive net loss per common share.... 33,000 33,000
--------- --------
Pro forma basic and dilutive net loss per
common share.................................. $ (0.59) $ (0.15)
========= ========
</TABLE>

Segment information: The Company has organized and managed its operations
in a single operating segment providing travel-related services, advertising,
and licenses for related software products. Revenues from customers outside of
the United States were less than 10% of net revenues for all periods presented
in the accompanying statements of operations.

Unaudited Interim Financial Statements: The interim financial information
contained herein is unaudited but, in the opinion of management, reflects all
adjustments which are necessary for a fair presentation of the financial
position, results of operations and cash flows for the periods presented. All
such adjustments are of a normal, recurring nature. Results of operations for
interim periods presented herein are not necessarily indicative of results of
operations for the entire year.

Recent accounting pronouncements: In March 1998, the American Institute of
Certified Public Accountants (AICPA) issued Statement of Position (SOP) 98-1,
Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use. SOP 98-1 will be effective for the Company's fiscal year ending
June 30, 2000. SOP 98-1 provides guidance on accounting for computer software
developed or obtained for internal use including the requirement to capitalize
specified costs and amortization of such costs. The Company will begin
capitalizing these costs in the fiscal year ending June 30, 2000.

F-9
<PAGE>

EXPEDIA

NOTES TO FINANCIAL STATEMENTS--(Continued)

In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of Start-
Up Activities. SOP 98-5 will be effective for the Company's fiscal year ending
June 30, 2000. SOP 98-5 provides guidance on the financial reporting of start-
up costs and organization costs. It requires the costs of start-up activities
and organization costs to be expensed as incurred. Subsequent to June 30,
1999, the Company was incorporated and related organization costs will be
expensed as incurred.

Note 2: Property and Equipment, net

A summary of property and equipment is as follows (in thousands):

<TABLE>
<CAPTION>
June 30,
---------------- September 30,
1998 1999 1999
------- ------- -------------
(unaudited)
<S> <C> <C> <C>
Computer equipment.............................. $ 1,771 $ 3,045 $ 3,644
Accumulated depreciation........................ (1,257) (2,659) (2,923)
------- ------- -------
Property and equipment, net................... $ 514 $ 386 $ 721
======= ======= =======
</TABLE>

Fully depreciated computer equipment of $624,000 was transferred into the
Company from Microsoft in the year ended June 30, 1999.

Note 3: Related Party Transactions

Equity investment in related party: In March 1998, the Company received an
equity interest in VacationSpot.com Inc. in exchange for a link on the
Company's website to the VacationSpot.com's website to be provided over a two-
year period. An executive officer of the Company is a member of the Board of
Directors of VacationSpot.com Inc. The fair value of the advertising services
provided to the investee was estimated at $400,000.

F-10
<PAGE>

EXPEDIA

NOTES TO FINANCIAL STATEMENTS--(Continued)

Allocated costs: As discussed in Note 1, the financial statements of the
Company reflect certain allocated corporate support costs from Microsoft. Such
allocations and charges are based on a percentage of total corporate costs for
the services provided, based on factors such as headcount, revenue, gross
asset value, or the specific level of activity directly related to such costs.

Management believes that the allocation methods used are reasonable and
reflective of the Company's proportionate share of such expenses and are not
materially different from those that would have been incurred on a stand alone
basis.

The following summarizes the corporate costs allocated to the Company (in
thousands):

<TABLE>
<CAPTION>
Years ended June 30,
----------------------- Three months ended
1997 1998 1999 September 30, 1999
------- ------- ------- ------------------
(unaudited)
<S> <C> <C> <C> <C>
Cost of revenues..................... $ 1,754 $ 2,912 $ 2,147 $ 924
Product development.................. 8,367 4,250 6,727 557
Sales and marketing.................. 1,591 1,622 998 1,497
General and administrative........... 2,921 3,633 5,754 2,086
------- ------- ------- ------
$14,633 $12,417 $15,626 $5,064
======= ======= ======= ======
</TABLE>

Subsequent to June 30, 1999, the Company entered into a services agreement
with Microsoft under which it will pay Microsoft directly for many of the
services that Microsoft formerly provided on an allocated basis. See Note 6.

Note 4: Income Taxes

No provision for income taxes has been recorded because the Company has
incurred net losses since inception and the Company has received no benefit
for such losses from the consolidated Microsoft group. The Company has gross
deferred tax assets related primarily to unearned revenue that is currently
income for tax purposes. Management believes that, based on a number of
factors, the available objective evidence creates sufficient uncertainty
regarding the realizability of the deferred tax assets such that a full
valuation allowance has been recorded.

Deferred tax assets at June 30 are comprised of the following (in
thousands):

<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Unearned revenue........................................... $ 2,752 $ 2,105
Other...................................................... 7 35
------- -------
Gross deferred tax assets.................................. 2,759 2,140
------- -------
Deferred tax asset valuation allowance..................... (2,759) (2,140)
------- -------
$ -- $ --
======= =======
</TABLE>

The Company has entered into a tax allocation agreement with Microsoft.
The agreement would not allow Expedia, Inc. to utilize tax net operating
losses previously generated by Expedia as an operating

F-11
<PAGE>

EXPEDIA

NOTES TO FINANCIAL STATEMENTS--(Continued)

unit of Microsoft. Under the agreement, the Company will calculate its own tax
liability as if it had filed a separate tax return. Generally, if the Company
contributes a tax benefit which reduces Microsoft's consolidated tax
liability, Microsoft will compensate the Company in an amount equal to 92.5%
of the benefit. Microsoft will be entitled to deduct on its separate tax
return a portion of the cost attributable to the Microsoft stock options that
the Company assumes. The parties will take this deduction into account under
the normal tax accounting rules, so the deduction will generally occur on the
exercise of the options. The portion of this cost that Microsoft will deduct
is equal to the excess of the fair market value of the shares to be acquired
on exercise of the option on the date the Company employs the optionee over
the exercise price of the assumed option. The Company will determine this
amount on the date that an optionee is employed.

Note 5: Employee Benefit Plans

Employees of the Company participate in stock-based compensation and
savings plans that are administered through Microsoft and involve options to
acquire Microsoft stock. Accordingly, option and expense information presented
herein represents the Company's portion of the overall plans.

Employee stock purchase plan: Microsoft has an employee stock purchase
plan for all eligible employees. Under the plan, shares of Microsoft's common
stock may be purchased at six-month intervals at 85% of the lower of the fair
market value on the first or the last day of each six-month period. Employees
may purchase shares having a value not exceeding 10% of their gross
compensation during an offering period. During 1997, 1998, and 1999, employees
of the Company purchased 43,600, 29,700, and 18,900 shares, respectively, at
average prices of $14.91, $27.21, and $52.59 per share.

401(k) savings plan: Microsoft has a savings plan which qualifies under
401(k) of the Internal Revenue Code. Participating employees may defer up to
15% of pretax salary, but not more than statutory limits. Microsoft
contributes 50 cents for each dollar a participant contributes, with a maximum
contribution of 3% of a participant's earnings. Matching contributions for
employees of the Company were $126,000, $279,000, and $351,000 in 1997, 1998,
and 1999, respectively.

Stock option plans: Microsoft stock option plans for directors, officers,
and employees provide for nonqualified and incentive stock options. Options
granted prior to 1995 generally vest over four and one-half years and expire
ten years from the date of the grant. Options granted during and after 1995
generally vest over four and one-half years and expire seven years from the
date of the grant, while certain options vest over seven and one-half years
and expire after ten years.

The Company and Microsoft will require all permanent employees who
transfer to the Company, subject to specific tax and legal requirements, to
participate in a program involving the cancellation of all of their unvested
options to purchase Microsoft common stock and the issuance by the Company of
new options to acquire the Company's common stock. The new options will have
comparable terms, vesting schedules and in-the-money value as the canceled
options. This issuance will be treated as a new grant of stock options. As a
result, the Company will incur a non-cash charge of approximately $100 to $150
million as the exercise price of the new options will be significantly less
than the initial public offering price of the Company's common stock. This
non-cash charge will be amortized over the vesting period of the new options,
ranging from one month to 54 months.

Expedia stock plans: In October 1999, the Board of Directors of the
Company adopted the following stock plans:

F-12
<PAGE>

EXPEDIA

NOTES TO FINANCIAL STATEMENTS--(Continued)

1999 Employee Stock Purchase Plan (the "Purchase Plan"). A total of
300,000 shares of common stock have been reserved for issuance under the
Purchase Plan, which is intended to qualify under Section 423 of the Internal
Revenue Code. The first offering period will commence on January 1, 2000.

1999 Stock Option Plan (the "Stock Option Plan"). In addition to the
options issued to replace the cancelled unvested Microsoft options, a total of
4,000,000 shares of common stock has been reserved for issuance under the
Stock Option Plan for grants to employees, officers and employee directors of
nonstatutory stock options.

1999 Stock Option Plan for Non-Employee Directors (the "Directors' Plan").
A total of 135,000 shares of common stock has been reserved for issuance under
the Directors' Plan, which sets a maximum of 10,000 shares for which options
may be granted to any one non-employee director in any year, 15,000 shares in
the year in which the director is first elected.

The following information represents data reflecting outstanding Microsoft
employee stock options for Company employees for the three-year period ended
June 30, 1999. Upon the initial public offering, Company employees will be
able to retain their vested Microsoft stock options. Unvested Microsoft
options will be converted to Expedia, Inc. options. The transfer of Microsoft
employees into and out of Expedia are presented below as transfers in and out.

<TABLE>
<CAPTION>
Options outstanding
-----------------------------
Number Weighted average
outstanding exercise price
----------- ----------------
<S> <C> <C>
Balance, June 30, 1996............................ 3,342,027 $ 4.47
Granted......................................... 1,130,720 14.24
Transfers in.................................... 1,611,600 4.68
Exercised....................................... (1,131,704) 3.73
Cancelled and transfers out..................... (1,428,116) 5.25
----------
Balance, June 30, 1997............................ 3,524,527 7.62
Granted......................................... 1,007,096 31.74
Transfers in.................................... 3,661,380 7.30
Exercised....................................... (1,611,934) 4.50
Cancelled and transfers out..................... (1,374,234) 10.68
----------
Balance, June 30, 1998............................ 5,206,835 12.22
Granted......................................... 434,554 54.21
Transfers in.................................... 639,800 12.76
Exercised....................................... (791,887) 6.27
Cancelled and transfers out..................... (795,180) 16.26
----------
Balance, June 30, 1999............................ 4,694,122 16.50
----------
Granted (unaudited)............................. 283,552 86.14
Transfers in (unaudited)........................ 597,405 20.16
Exercised (unaudited)........................... (279,179) 18.07
Cancelled and transfers out (unaudited)......... (14,955) 23.84
----------
Balance, September 30, 1999 (unaudited)........... 5,280,945 $20.55
==========

</TABLE>

F-13
<PAGE>

EXPEDIA

NOTES TO FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
Options exercisable
Options outstanding at June 30, 1999 at June 30, 1999
-------------------------------------- --------------------------
Weighted
average
Weighted remaining Weighted
Range of Number average contractual Number average
exercise prices outstanding exercise price life outstanding exercise price
- ----------------- ----------- -------------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 1.85 $ 5.34 1,335,772 $ 3.82 3.0 years 1,335,772 $ 3.82
5.35 12.64 997,840 9.53 3.7 years 810,331 9.12
12.65 29.73 1,186,421 14.50 4.8 years 572,144 14.32
29.74 47.97 826,495 32.24 6.1 years 118,050 31.77
47.98 83.28 347,594 54.66 6.1 years --
--------- ---------
4,694,122 2,836,297
========= =========
</TABLE>

Fair value disclosures: Under SFAS No. 123, employee stock options are
valued at the grant date using the Black-Scholes valuation model and the
related compensation cost is recognized ratably over the vesting period. Had
compensation cost for the Microsoft's stock option and employee stock purchase
plans been determined based on the Black-Scholes value at the grant dates for
awards as prescribed by SFAS No. 123, the pro forma net loss for fiscal 1997,
fiscal 1998 and fiscal 1999 would have been $30,100,000, $32,800,000, and
$26,900,000, respectively.

The Company calculated the minimum fair value of each option grant at the
date of grant using the Black-Scholes pricing model with the following
assumptions for the years ended June 30:

<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Expected life (years)...................................... 5 5 5
Risk-free interest rate.................................... 6.5% 5.7% 4.9%
Expected volatility........................................ 30% 32% 32%
Dividend rate.............................................. 0% 0% 0%
</TABLE>

Note 6: Commitments and Contingencies

The Company has multi-year agreements with certain travel service
providers that make available the services accessed through the Company's
website. Under these agreements, the Company pays monthly service fees to the
service providers based on the volume of activity. In addition, certain
communication and capacity fees are paid. The Company expenses these amounts
as the services are provided.

The Company is party to a cooperative advertising agreement with a
corporate airline customer that requires the Company to set aside monies
received from transactions to be used for joint advertising initiatives. Such
commitments amounted to $87,000 and $245,000 in 1998 and 1999, respectively.

The Company has entered into a services agreement with Microsoft whereby
Microsoft will provide the Company with employee, administrative and
operational services. Employee services will be provided until the earlier of
May 20, 2000 or upon notice by the Company that employee services are no
longer required. Administrative and operational services will be provided
until December 31, 2000 but the parties may agree to extend the expiration
date. Fees will be paid to Microsoft for the services under

F-14
<PAGE>

this agreement on either an estimated or actual cost reimbursement, including
any sales and occupancy taxes. Minimum payments are approximately $365,000 per
month. In addition, the Company will be obligated to pay additional amounts
based on its headcount and usage of services, which would approximate $450,000
per month based on current head count of 150 employees.

The Company has entered into a five-year carriage and cross promotion
agreement with Microsoft under which the Company will receive premium
placement on Microsoft's MSN.com website, the Hotmail email service and the
WebTV platform. Under the terms of the agreement, Microsoft is able to
generate revenues by selling up to 52.0 million banner advertisements on the
Company's website during the first year of this agreement and up to 57.2
million banner advertisements during the second year of the agreement. The
Company will pay Microsoft a flat annual fee of $2.0 million in fiscal 2000
and $2.2 million in fiscal 2001 as well as incentive fees to the extent that
the number of completed airline transactions from the MSN.com website exceeds
the Company's forecasts. The fees and terms of sale of banner advertisements
will depend on agreement between the parties for the remaining three years
under this agreement.

On October 13, 1999, Priceline.com Incorporated filed a lawsuit against
Microsoft and the Company alleging patent infringement and use of unfair and
deceptive acts. The lawsuit seeks unspecified damages, including treble and
punitive damages, an injunction against further alleged infringement and from
continuing to operate the Company's Hotel Price Matcher or any similar
service, among other items. Since the lawsuit was recently filed and discovery
has not yet commenced, the Company is unable to estimate the likelihood of an
adverse result or range of possible loss relating to this matter. However, the
Company does not believe this claim has merit and intends to vigorously defend
against this lawsuit.

On October 7, 1999, Reed Elsevier Inc. filed a lawsuit against Microsoft
and the Company alleging a material breach of an agreement between Microsoft
and Reed Elsevier, Inc. The suit alleges conversion and misappropriation of
Reed Elsevier Inc.'s proprietary database, unfair competition, breach of
implied covenant of good faith and fair dealing and interference with a
business relationship. The suit seeks unspecified damages, including punitive
and permanent injunction requiring compliance with the agreement, among other
items. Since the lawsuit was recently filed and discovery has not yet
commenced, the Company is unable to estimate the likelihood of an adverse
result or the range of possible loss relating to this matter. The Company
intends to vigorously defend against this lawsuit and does not expect the
outcome of this lawsuit to have a material adverse effect on the Company's
business.

The Company is also subject to various legal proceedings and claims that
arise in the ordinary course of business.

F-15
<PAGE>

INSIDE BACK COVER

[ARTWORK]

A Global Marketplace, A Local Presence

[screenshot of the front page of Expedia.de, our localized website in Germany]

Customized to Local Needs
Localized versions of Expedia's websites accommodate not only differences in
language and culture, but also differences in travel purchase behavior and
supplier inventory preferences.

Vacation Package Database
Expedia provides European customers with an interface to a third-party database
of packaged tour inventory.

Negotiated Fares
We offer fares negotiated with airlines by our local travel partners and
integrate negotiated and published fares in a single display on our website.

Localized Editorial Content
The editorial advice and feature articles offered on our international sites are
developed with a local point of view.

International Strategic Partners
Expedia has developed strategic relationships in Germany, the United Kingdom and
Canada to provide complete localized services.

Localized Customer Service
Our customer service is provided by our locally-based partners and is tailored
to the needs of travelers in particular regions of the world.
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.

---------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 3
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 21
Dividend Policy.......................................................... 21
Capitalization........................................................... 22
Dilution................................................................. 23
Selected Financial Data.................................................. 24
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 25
Business................................................................. 34
Management............................................................... 50
Certain Relationships and Related Transactions........................... 58
Principal Stockholder.................................................... 62
Description of Capital Stock............................................. 63
Shares Eligible for Future Sale.......................................... 65
Underwriting............................................................. 67
Validity of the Common Stock............................................. 69
Experts.................................................................. 69
Where You Can Find More Information...................................... 69
Index to Financial Statements............................................ F-1
</TABLE>

---------------

Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether
or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a
prospectus when acting as an underwriter and with respect to an unsold
allotment or subscription.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

5,200,000 Shares

Expedia, Inc.

Common Stock

---------------

[EXPEDIA, INC. LOGO]

---------------

Joint Book-Running Managers

Goldman, Sachs & Co.
Morgan Stanley Dean Witter

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Expedia in connection with
the sale of common stock being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fee.

<TABLE>
<CAPTION>
Amount
To Be
Paid
----------
<S> <C>
SEC Registration Fee.......................................... $ 20,850
NASD Filing Fee............................................... 8,000
Nasdaq National Market Listing Fee............................ 96,000
Printing Fees and Expenses.................................... 300,000
Legal Fees and Expenses....................................... 400,000
Accounting Fees and Expenses.................................. 900,000
Blue Sky Fees and Expenses.................................... 15,000
Transfer Agent and Registrar Fees............................. 15,000
Miscellaneous................................................. 45,150
----------
Total....................................................... $1,800,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article VII of our Articles of Incorporation authorizes us to indemnify any
present or former director or officer to the fullest extent not prohibited by
the Washington Business Corporation Act ("WBCA") or other applicable law now
or hereafter in force. Chapter 23B.08.510 and .570 of the WBCA authorizes a
corporation to indemnify its directors, officers, employees, or agents in
terms sufficiently broad to permit such indemnification under specific
circumstances for liabilities, including provisions permitting advances for
expenses incurred, arising under the Securities Act.

In addition, we intend to either maintain our own or receive coverage under
Microsoft's directors' and officers' liability insurance under which our
directors and officers are insured against loss, as defined in the policy, as
a result of claims brought against them for their wrongful acts in such
capacities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

(a) (i) On October 1, 1999, Expedia issued to Microsoft 33,000,000
shares of common stock in exchange for assets relating to Expedia's
operations.

(ii) As of the date of this offering, Expedia will grant options under
its 1999 Stock Option Plan for new Expedia employees who were not
previously employed by Microsoft and will grant new options and to replace
the unvested Microsoft options of Expedia employees who were previously
employed by Microsoft.

(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).

II-1
<PAGE>

The issuance described in Item 15(a)(i) was deemed to be exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof as
a transaction by an issuer not involving any public offering. The issuances
described in Item 15(a)(ii) was deemed to be exempt from registration under
the Securities Act in reliance upon Rule 701 promulgated thereunder in that
they were offered and sold either pursuant to written compensatory benefit
plans or pursuant to a written contract relating to compensation, as provided
by Rule 701. In addition, such issuances were deemed to be exempt from
registration under Section 4(2) of the Securities Act as transactions by an
issuer not involving any public offering. The recipients of securities in each
such transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends where affixed to the securities
issued in such transactions. All recipients had adequate access, through their
relationships with Expedia, to information about Expedia.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement+

1.2 Form of International Underwriting Agreement+

3.1 Articles of Incorporation of the Registrant+

3.2 Articles of Amendment to Articles of Incorporation dated September 22,
1999+

3.2.1 Articles of Amendment to Articles of Incorporation dated October 25,
1999+

3.3 Bylaws of the Registrant+

4.1 Form of the Registrant's Common Stock Certificate

5.1 Opinion of Preston Gates & Ellis LLP+

10.1 Contribution Agreement between Expedia, Inc. and Microsoft
Corporation, effective October 1, 1999+

10.2 Services Agreement between Expedia, Inc. and Microsoft Corporation,
effective October 1, 1999+

10.3 License Agreement between Expedia, Inc. and Microsoft Corporation,
effective October 1, 1999+

10.4 Map Server License Agreement between Expedia, Inc. and Microsoft
Corporation, effective October 1, 1999+

10.5 Carriage and Cross Promotion Agreement between Expedia, Inc. and
Microsoft Corporation, effective October 1, 1999

10.6 Tax Allocation Agreement between Expedia, Inc. and Microsoft
Corporation, effective October 1, 1999+

10.7 Shareholder Agreement between Expedia, Inc. and Microsoft Corporation,
effective October 1, 1999+

10.8 CRS Marketing, Services and Development Agreement between Microsoft
Corporation and Worldspan, L.P., dated December 15, 1995 and last
amended on April 1, 1999*

10.9 Service Agreement between Microsoft Corporation and World Travel
Partners, L.P., dated October 9, 1996 and amended on April 1, 1999*+

10.10 1999 Stock Option Plan

10.11 1999 Employee Stock Purchase Plan+
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------

<C> <S>
10.12 1999 Directors' Stock Option Plan+

10.13 Employment Agreement between Expedia, Inc. and Richard N. Barton

23.1 Consent of Deloitte & Touche LLP, Independent Auditors

23.2 Consent of Counsel (included in Exhibit 5.1)+

27.1 Financial Data Schedule+

99.1 Consent of Person About to Become Director for Brad Chase+

99.2 Consent of Person About to Become Director for Gerald Grinstein+

99.3 Consent of Person About to Become Director for Richard N. Nanula+

99.4 Consent of Person About to Become a Director for Laurie McDonald
Jonsson+
</TABLE>
- --------
+ Previously filed
* Confidential treatment requested for portions of this agreement pursuant to
Rule 406 of the Securities Act

(b) Financial Statement Schedules

Not applicable.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities
Act 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 Act and will be governed by
the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1), or
(4), or 497(h) under the Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus 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.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this its Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Redmond, State of
Washington, on the 8th day of November 1999.

Expedia, Inc.

/s/ Richard N. Barton
By: _________________________________
Richard N. Barton
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Richard N. Barton President, Chief Executive November 8, 1999
______________________________________ Officer and Director
Richard N. Barton (Principal Executive
Officer)

* Vice President and Chief November 8, 1999
______________________________________ Financial Officer
Gregory S. Stanger (Principal Financial and
Accounting Officer)

* Chairman of the Board November 8, 1999
______________________________________
Gregory B. Maffei

/s/ Richard N. Barton
*By: _________________________________
Richard N. Barton
Attorney-in-fact
</TABLE>

II-4
<PAGE>

EXHIBIT INDEX

<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement+

1.2 Form of International Underwriting Agreement+

3.1 Articles of Incorporation of the Registrant+

3.2 Articles of Amendment to Articles of Incorporation dated September 22,
1999+

3.2.1 Articles of Amendment to Articles of Incorporation dated October 25,
1999+

3.3 Bylaws of the Registrant+

4.1 Form of the Registrant's Common Stock Certificate

5.1 Opinion of Preston Gates & Ellis LLP+

10.1 Contribution Agreement between Expedia, Inc. and Microsoft Corporation,
effective October 1, 1999+

10.2 Services Agreement between Expedia, Inc. and Microsoft Corporation,
effective October 1, 1999+

10.3 License Agreement between Expedia, Inc. and Microsoft Corporation,
effective October 1, 1999+

10.4 Map Server License Agreement between Expedia, Inc. and Microsoft
Corporation, effective October 1, 1999+
10.5 Carriage and Cross Promotion Agreement between Expedia, Inc. and
Microsoft Corporation, effective October 1, 1999

10.6 Tax Allocation Agreement between Expedia, Inc. and Microsoft
Corporation, effective October 1, 1999+

10.7 Shareholder Agreement between Expedia, Inc. and Microsoft Corporation,
effective October 1, 1999+

10.8 CRS Marketing, Services and Development Agreement between Microsoft
Corporation and Worldspan, L.P., dated December 15, 1995 and last
amended on April 1, 1999*

10.9 Service Agreement between Microsoft Corporation and World Travel
Partners, L.P., dated October 9, 1996 and amended on April 1, 1999*+

10.10 1999 Stock Option Plan

10.11 1999 Employee Stock Purchase Plan+

10.12 1999 Directors' Stock Option Plan+

10.13 Employment Agreement between Expedia, Inc. and Richard N. Barton

23.1 Consent of Deloitte & Touche LLP, Independent Auditors

23.2 Consent of Counsel (included in Exhibit 5.1)+

27.1 Financial Data Schedule+

99.1 Consent of Person About to Become Director for Brad Chase+

99.2 Consent of Person About to Become Director for Gerald Grinstein+

99.3 Consent of Person About to Become Director for Richard N. Nanula+

<PAGE>

Form of the Registrant's Common Stock Certificate 4.1

================================================================================

Expedia, Inc.

NUMBER SHARES
EXP

INCORPORATED UNDER SEE REVERSE FOR
THE LAWS OF THE STATE CERTAIN DEFINITIONS
OF WASHINGTON CUSIP 302125 10 9

This Certifies that

is the record holder of

FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE, OF
=================================EXPEDIA, INC.==================================

transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.

Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

Dated:

EXPEDIA, INC.
CORPORATE
SEAL
August 23, 1999
WASHINGTON

SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER

COUNTERSIGNED AND REGISTERED
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR

AUTHORIZED SIGNATURE
================================================================================

<PAGE>

EXPEDIA, INC.

The Corporation will furnish to any stockholder, upon request and without
charge, a statement of the powers, designations, preferences, and relative
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights, insofar as the same shall have been fixed, and of the authority
of the Board of Directors to designate any preferences, rights and limitations
of any wholly unissued series. Any such request should be directed to the
Secretary of the Corporation at the principal office of the Corporation.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

<TABLE>
<CAPTION>
<S> <C>
TEN COM --as tenants in common UNIF GIFT MIN ACT--...........Custodian...........
TEN ENT --as tenants by the entireties (Cust) (Minor)
JT TEN --as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act.................
in common (State)

Additional abbreviations may also be used though not in the above list.

For Value Received, ____________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
| |
- --------------------------------------

____________________________________________________________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

____________________________________________________________________________________________________________________________________

____________________________________________________________________________________________________________________________________
Shares of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint

____________________________________________________________________________________________________________________________________
Attorney to transfer the said shares on the books of the within named Corporation with full power of substitution in the premises.

Dated ________________________________

______________________________________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAMES AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

Signature(s) Guaranteed:

THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE GUARANTEE PROGRAM) PURSUANT
TO S.E.C. RULE 17Ad-15.
</TABLE>

<PAGE>

EXHIBIT 10.5

MSN / Expedia.com Carriage and Cross Promotion Agreement

This MSN / Expedia.com Carriage and Cross Promotion Agreement
("Agreement"), by and between Microsoft Corporation ("Microsoft"), a Washington
corporation, and Expedia, Inc. ("EI"), a Washington corporation, is effective as
of October 1, 1999 (the "Effective Date").

RECITALS

WHEREAS, EI owns and operates an online travel service on the World
Wide Web; the home page for said network is currently located at
http://www.expedia.com;

WHEREAS, Microsoft owns and operates, among other things, a network of
Web sites currently known as "MSN," with a home page currently located at
http://www.msn.com, which network includes a variety of topic-specific
offerings;

WHEREAS, the parties desire that EI develop a special, customized
co-branded version of Expedia.com for inclusion as part of MSN's "Travel"
channel; and

WHEREAS, the parties further desire to provide various links among
pages located in Microsoft Online Properties, and among pages located in
Expedia.com and the co-branded version of Expedia.com (as defined below) Web
sites, and to engage in certain activities intended to promote the parties'
respective products and services.

NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the parties hereby agree as follows:

1. Definitions
-----------

1.1 "Channel" shall mean a group of content-related secondary Web Pages
within a Web Site, the top level page of which group is accessed directly from a
Home Page.

1.2 "Expedia.com" shall mean the software code, informational
databases, products, and other components that make up a service which is
operated by or for EI and is marketed for use by individual end users and
enables such end users to shop for, reserve, book and pay for certain travel
services via a personal computer (or other interactive device) connected to the
Internet. EI currently offers such services on the Web under the name
"Expedia.com", but such name may change from time to time. For the purposes of
this Agreement "Expedia.com" shall not include versions of Expedia.com that are
co-branded with third parties in connection with EI's Associate Program (or its
successor or replacement) and shall not include EI's licensing program (or its
successor or replacement) under which EI licenses its travel technologies
platform to third parties.

1.3 "Expedia.com/MSN" shall mean the special, customized co-branded
version of Expedia.com to be developed, hosted and maintained by EI in
accordance with this Agreement.

1.4 "Travel Channel" shall mean a Channel designed, programmed (except
as to Section 3.1) and operated by or for EI (except to the extent set forth in
Section 2.1) for inclusion in MSN relating to travel information, travel booking
and related travel information and having placement and prominence equivalent to
other Channels within MSN.

1.5 "Home Page" shall mean the initial Web Page of a Web Site seen by a
user once the user has directed Web Browsing Technology to access the Web Site's
URL.

1.6 "Travel Channel Home Page" shall mean the top level page of the
Travel Channel on MSN in MSN template, and developed and hosted by EI.

1
<PAGE>

1.7 "Link" shall mean an embedded icon, object, graphic or text within
a Web Page that consists of a hypertext pointer to the URL address of a Web
Page.

1.8 "MSN" shall mean the aggregation of Web-based properties (as such
properties may change from time to time in Microsoft's sole discretion) which is
currently marketed by Microsoft as "The Microsoft Network" and/or "MSN", and
accessed through the domain http://www.msn.com, and includes international
versions of such Web-based properties.

1.9 "MSN User Air Transaction" shall mean a purchase via
Expedia.com/MSN of an airline ticket for one trip (round-trip, or one way if no
round-trip is purchased) by one person.

1.10 "Specifications" shall mean the content and technical
specifications for Expedia.com/MSN attached hereto as Exhibit A and any
modifications thereto that are made in accordance with Section 2.1 below.

1.11 "User Information" shall mean both Aggregate Information and
Personal Information pertaining to an end user. "Aggregate Information" shall
mean information that describes the habits, usage patterns and/or demographics
of users as a group but does not indicate the identity of any particular end
user, and information about an individual end user presented in a form
distinguishable from information relating to other end users but not in a form
that enables the recipient to personally identify any end user. "Personal
Information" shall mean information about an end user permitting such end user
to be specifically identified and may include, but not be limited to (i) end
user name, (ii) end user address, and (iii) the end user's personally
identifying transaction data.

1.12 "Web Page" shall mean content in the World Wide Web portion of the
Internet accessed via a single URL, and excluding content on other Web Pages
accessed via Links in said content.

1.13 "Web Site" shall mean a collection of Web Pages related in some
manner and interconnected via Links.

1.14 "WebTV" shall mean the television-based Internet access services
provided to consumers by WebTV Networks, Inc.

1.15 Successor Versions of Web Sites. Whenever this Agreement refers to
a Web Site or aggregation of Web Pages, including without limitation MSN, the
Travel Channel, Microsoft Online Properties, and Expedia.com, such reference
will also include successor versions thereof that may evolve throughout the term
of this Agreement, regardless of whether or not marketed or promoted under the
same name.

1.16 "Microsoft Online Properties" shall include MSN portal (U.S. and
International), Hotmail, WebTV, Web Courier, Mobile, and other consumer commerce
online products or services Microsoft may develop or acquire during the term of
the Agreement (e.g., other portals and online products or services) where travel
(small business or leisure) would be a key component. For the purpose of this
Agreement, "Microsoft Online Properties" shall not include third-party Web sites
or services that are either branded or co-branded by Microsoft, or is licensed
by Microsoft to incorporate private-labeled version of all or portions of MSN or
other Microsoft Online Properties.

2. Description of Expedia.com/MSN
------------------------------

2.1 Development and Maintenance. EI shall develop, operate, maintain,
and host Expedia.com/MSN in accordance with this Section 2 and the
Specifications attached as Exhibit A (as may be amended by the parties from time
to time during the term of the Agreement). Expedia.com/MSN will be a customized
version of Expedia.com; to the extent reasonably possible, but subject to
specific requirements for Expedia.com/MSN set forth herein, Expedia.com/MSN will
use substantially the same format and templates used by Expedia.com as described
in the Specifications. In particular:

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(a) EI agrees to provide Microsoft with a development and
implementation plan for Expedia.com/MSN within thirty (30) days after the
Effective Date. Expedia.com/MSN shall enable end user to purchase airline
tickets, reserve hotels and car rental and access other travel-related
information and services.

(b) If MS decides to enhance the Travel Channel by adding
additional content areas, then EI shall have the first right to develop and
provide such content as a part of Expedia.com/MSN. If EI informs MS that EI does
not desire to develop and provide such content, then MS may either develop or
engage a third party to develop the content subject to the terms of this
Agreement, provided, however MS shall be responsible for hosting or managing
such content.

(c) EI agrees to use its best efforts to be in compliance with
the Specifications set forth in Exhibit A by December 1, 1999 ("Start Date").

(d) The parties intend that this Agreement be global in scope
and agree that the UK, Canada and German versions of Expedia.com shall be
customized and co-branded as international versions of Expedia.com/MSN for the
UK, Canada and German versions, respectively, of MSN on the terms set forth in
this Agreement, including the exclusivity provision set forth in Section 3.6.
The parties also agree that to the extent both Expedia.com and MSN develop an
additional international version of their respective sites for a particular
country or region, such international version of Expedia.com (to the extent the
international version of Expedia.com includes comparable technology or services
as offered by other online travel service providers in the particular country or
region) shall be customized and co-branded as the international version of
Expedia.com/MSN for such country or region on the terms set forth in this
Agreement, including the exclusivity provision set forth in Section 3.6.
Provided, however, the Specifications for such international versions of
Expedia.com/MSN may be "localized" as necessary, and Microsoft shall have the
sole discretion of determining not to include a Travel Channel in an MSN
international market. For countries or regions in which EI does not offer or
does not plan to offer in the near reasonable term a version of Expedia.com,
Microsoft may enter into agreements with other online travel sites for the
purposes of creating an MSN Travel Channel for such country or region for such
period only. The parties acknowledge that the terms of Section 3.6 and Section 5
shall not apply in an international country or region in which Expedia.com and
MSN both have not developed an international version of their respective sites
for the particular country or region, or the international version of
Expedia.com is not the MSN Travel Channel in such international version of the
MSN for the reasons permitted in this Section 2.1(d). EI acknowledges that
certain international versions of MSN may be controlled by joint ventures in
which Microsoft participates, and in such instances, Microsoft agrees to use
best efforts to include the applicable international version of Expedia.com as
the Travel Channel in the appropriate international version of MSN operated by
such joint venture.

2.2 Co-Branding. Expedia.com/MSN shall be co-branded by EI and
Microsoft as described in Exhibits A and B hereto, which shall be subject to
periodic changes with the prior approval of both parties. EI agrees to use the
standard MSN co-branded header and footer template that is used by all MSN
network premier partners (as set forth in Exhibits A and B) for Expedia.com/MSN.

2.3 Responsibility for Expedia.com/MSN. As between Microsoft and
EI, except as expressly provided otherwise in this Agreement, or in any related
or support services agreement, EI shall be and remain solely responsible for all
development, operation, maintenance and hosting of Expedia.com/MSN and all
content contained in Expedia.com/MSN, provided however Microsoft shall be
responsible for all reasonable costs relating to the original travel content
developed by EI for Expedia.com/MSN in accordance with Section 3.1.

2.4 User Information

(a) Microsoft and EI may use User Information collected by
Microsoft in connection with the Expedia service prior to the Effective Date of
this Agreement in accordance with the terms of the MSN privacy statement in
effect at the time of collection of such User Information. Microsoft and EI may
use any and all User Information collected by EI from end users of
Expedia.com/MSN during the term of this Agreement, and EI shall provide all
applicable User Information to Microsoft on a monthly basis, provided however
such collection and use shall be in compliance with the applicable
Expedia.com/MSN privacy statement agreed to by the parties (which shall be
approved by TRUSTe or other comparable independent privacy organization and all
applicable laws).

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Furthermore, EI may not use or store any Expedia.com/MSN Personal Information
except to the same extent it uses and stores Personal Information gathered from
Expedia.com. Microsoft agrees not to use or store any Expedia.com/MSN Personal
Information except to the same extent it uses and stores Personal Information
gathered from MSN.com. The parties agree that any promotional emails to end
users of Expedia.com/MSN or Expedia.com shall be sent by EI, provided however,
Microsoft may send up to two (2) promotional emails to end users of
Expedia.com/MSN each year during the term of the Agreement. The parties will
work together on joint promotions, and neither party shall send marketing email
or communications to the registered Expedia.com/MSN end users (unless these same
offers are also sent to all of Expedia.com's registered end users) without first
discussing with the other party.

(b) All uses by EI of Personal Information collected by EI
from end users of Expedia.com during the term of this Agreement shall comply
with the applicable Expedia.com privacy statement (which shall be approved by
TRUSTe or other comparable independent privacy organization and all applicable
laws). Microsoft may use certain User Information collected by EI from
Expedia.com to the extent such use is in compliance with the applicable
Expedia.com privacy statement (e.g., to support Microsoft's ad targeting and
profiling efforts). Except as expressly set forth in this Section 2.4 EI shall
not be obligated to share any customer data with Microsoft.

3. Distribution and Cross Promotion Requirements
---------------------------------------------

3.1 Expedia.com/MSN; Travel Channel Home Page. EI shall develop,
maintain and host the Travel Channel Home Page and the Expedia.com/MSN site in
accordance with the Specifications set forth in Exhibit A. The Travel Channel
Home Page shall include a content module, dedicated and linking to
Expedia.com/MSN as described in the Specifications. Additionally, such content
module will be branded by the applicable Expedia.com brand and will occupy at
least eighty percent (80%) of the programmable screen space on the Travel
Channel Home Page. MS shall provide at most twenty (20%) of the content included
in the programmable space on the Travel Channel Home Page. The above-the-fold
programmable screen space on the Travel Channel Home Page shall be divided at
least eighty percent (80%) to EI content and at most twenty percent (20%) to
Microsoft-supplied content. For the purposes of this Section, "content" means
non-revenue generating material except as expressly agreed to in Section 5 of
this Agreement. Microsoft shall have full discretion in determining what content
to include in its portion of the Travel Channel Home Page, provided however, the
content may not be competitive with any travel related materials or services
offered by EI on Expedia.com/MSN and must be consistent with the restrictions
described in Section 5. EI and Microsoft will cooperate to develop original
travel-related content (not distributed or offered by EI online anywhere else)
for Expedia.com/MSN.

3.2 Links from MSN to Expedia.com/MSN. In addition to the Links
included pursuant to Section 3.1, Microsoft agrees to provide Links to
Expedia.com/MSN, as follows:

(a) The Travel Channel Home Page shall be will be one click
from the MSN default Home Page.

(b) at least two "quick link" text Links above the fold (e.g.,
"air tickets" and "maps") or a comparable driving Links from the MSN.com (U.S.
version) default Home Page (and wherever else "quick links" (or their
equivalent) otherwise appear within MSN.com (U.S. version)) to the appropriate
Web Page in Expedia.com/MSN or Expediamaps (as applicable). In MSN International
markets (where Travel is applicable as set forth in Section 2.1(d)), Microsoft
will use best efforts to include similar or comparable links to Expedia.com/MSN
and Expediamaps. Both parties agree that Expediamaps will be carried only if
Expediamaps' offerings are comparable in features and functions to commercially
available Web based mapping tools and technologies in the local markets.

Microsoft will provide additional Links to Expedia.com/MSN from MSN or Microsoft
Web Sites other than those specified in clauses (a) and (b) (e.g., HomeAdvisor)
as determined by Microsoft, with the placement, type and position of such Links
being within Microsoft's reasonable discretion. The parties acknowledge that the
format and/or appearance of MSN may change from time to time; however, Microsoft
agrees that the positioning of such quick links shall at all times remain
comparable to other quick links, provided that if quick links are removed from
the default MSN Home Page or other key places, both parties will work in good
faith to provide EI with placement

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of Links that will provide substantially equivalent traffic to the Travel
Channel Home Page and Expedia.com/MSN, as the case may be.

3.3 MSN Promotions. Microsoft agrees to include Expedia.com/MSN in
general MSN network promotions (such as banner advertising, key initiatives, MSN
network promotion inventory, MSN network info pane, and special editorial
references) and make commercially reasonable efforts to promote Expedia.com/MSN
in offline promotions in a similar manner as it promotes other MSN properties
(e.g., HomeAdvisor). Microsoft agrees that the Expedia.com/MSN online promotions
shall constitute a minimum of four percent (4%) of the total number of
impressions resulting from all MSN network in-house promotions during each of
the first two Years of this Agreement so long as EI is in compliance with the
Specifications set forth in Exhibit A.

3.4 Links from WebTV. Microsoft agrees to cause one or more Links to
Expedia.com/MSN to appear in the appropriate section of WebTV user interface
pages. The location of such link or links will be at Microsoft's sole
discretion.

3.5 Links from Expedia.com or Expedia.com/MSN. EI agrees to provide a
navigation link below the header and above-the-fold on the Expedia.com Home Page
to Microsoft-designated Web Page in MSN. Additionally, EI agrees to include
links or providing access on Expedia.com/MSN to MSN Messenger Service, Search,
Communities/Chat (where appropriate), Hotmail and Yellow Pages to the extent
commercially available and technically viable.

3.6 Exclusivity. The parties agree that Expedia.com/MSN shall be the
exclusive travel transaction service on or promoted by Microsoft Online
Properties, except as expressly agreed to otherwise in Section 2.1(d) and
Section 5 and subject to the terms of certain agreements entered into by
Microsoft, if any, prior to the Effective Date (the terms of such agreements
have been disclosed to EI). Microsoft will use commercially reasonable efforts
to include Expedia.com/MSN in co-branded or private-labeled sites where travel
content and transaction are relevant. In the event a material co-branded or
private-labeled partner elects to use a different travel partner, MS will use
reasonable efforts to notify EI.

3.7 Other Microsoft Internet Technologies. EI agrees it shall
implement Microsoft Passport wallet technology and Microsoft Passport
authentication technology on Expedia.com/MSN and Expedia.com as soon as
commercially available and technically viable (timing to be discussed by the
parties) so that existing registered Passport users may use the services
available on Expedia.com/MSN without having to reenter their username and
password or other relevant personal information; the usage terms and conditions
shall be agreed upon by the parties, provided however, that EI shall be entitled
to "most-favored nations" pricing on the licensing of such Passport
technologies. Upon notice from Microsoft that other technologies are available
for distribution, EI agrees, as soon as commercially available and technically
viable, to make best efforts (when technology is applicable) to include or
implement or adopt on Expedia.com/MSN and/or Expedia.com other Microsoft
Internet services (e.g., ad profiling) or platform (e.g., MSN Mobile) pursuant
to such usage terms and conditions as the parties may agree, provided however,
that EI shall be entitled to "most-favored nations" pricing on the licensing of
such technologies.

3.8 MSNBC. The parties agree that MSNBC shall be the sole third-party
provider of travel news headline that is integrated into Expedia.com/MSN.

3.9 Material Changes. In the event that there are business changes by
EI or MSN that materially impact this Agreement, both parties agree to
re-evaluate and work together in good faith to reach mutually agreeable terms.

4. Fees and Payments
-----------------

4.1 Annual Fees. EI shall pay to Microsoft an annual fee of two
million dollars ($2,000,000.00) for the first year after the Start Date ("Year
1") and two million two hundred thousand dollars ($2,200,000.00) for the second
year after the Start Date ("Year 2"). Year 1 fees and Year 2 fees shall be paid
as follows:

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Amount Date
------ ----
$500,000.00 December 1, 1999
$500,000.00 March 1, 2000
$500,000.00 June 1, 2000
$500,000.00 September 1, 2000
$550,000.00 December 1, 2000
$550,000.00 March 1, 2001
$550,000.00 June 1, 2001
$550,000.00 September 1, 2001

The annual fees for Years after Year 2 shall be reasonably negotiated and
agreed upon by the parties in good faith taking into account the then-prevailing
market value.

4.2 Incentive Fees. In addition to the Annual Fees set forth in
Section 4.1, EI shall pay to Microsoft three dollars and fifty cents ($3.50) per
MSN User Air Transaction completed on the co-branded site above the applicable
forecast for such year. The Year 1 forecast shall be equal to two hundred
seventy thousand three hundred and twenty (270,320) air ticket sales on MSN
Expedia; the Year 2 forecast shall be equal to twelve times the average of June
00, July 00, and August 00 air ticket sales on Expedia.com/MSN. EI shall pay any
incentive fees at the end of each Year and shall provide with such payment a
report in detail sufficient to determine how the incentive fees for such Year
were calculated. Forecasts for Years after Year 2 shall be agreed upon by the
parties.

5. Ad Sales for Expedia.com/MSN and Expedia.com
--------------------------------------------

5.1 Allocation of Banner Inventory for Expedia.com/MSN and
Expedia.com.

(a) The MSN advertising sales team may sell up to fifty-two
million (52,000,000) advertising banners in Year 1 and fifty-seven million two
hundred thousand (57,200,000) advertising banners in Year 2 from the total
banner inventory for Expedia.com/MSN and Expedia.com ("MSN Ad Sales Allocation")
subject to the restrictions set forth in Section 5.2. For the purposes of this
Section 5, "banner inventory" means (i) non-geo-targeted advertising that runs
at the top of the screen in the 468 x 60 pixels throughout the Expedia.com/MSN
and the Expedia.com sites, and (ii) a 120x60 pixels ad box (or similar) on the
Travel Channel Home Page (above the fold 600x800 pixels) and the top level pages
of each section (below the fold 600x800 pixels) on Expedia.com/MSN. "Banner
inventory" does not include geo-targeted advertising or sponsorships.

(b) EI will allocate one-third (1/3) of the ad banners (468x60
pixels as described in 5.1(a)(i) above) available on Expedia.com and
Expedia.com/MSN to MSN ("MSN Ad Sales Cap") in each of Year 1 and Year 2. EI
will own the remaining banner inventory, geo-targeted inventory, sponsorships
and any other revenue generating ad space for Expedia.com/MSN and Expedia.com
("EI Ad Sales Allocation"). The MSN advertising sales team may sell more than
MSN Ad Sales Cap with the prior approval of EI. In addition, The MSN advertising
sales team may sell geo-targeted banners, sponsorships, and other ad placements
on Expedia.com or Expedia.com/MSN only with EI's approval. Both parties will
work together to assign the banner inventory allocations fairly.

(c) MS shall not be entitled to share in any revenue derived
from EI's sale of the EI Ad Sales Allocation. EI shall not be entitled to share
in any revenue derived from Microsoft's sale of the MSN Ad Sales Allocation,
provided however, that Microsoft shall remit to EI eighty percent (80%) of the
total revenue received by Microsoft for sales of banner inventory in excess of
the MSN Ad Sales Allocation and up to the MSN Ad Sales Cap, and other ad
placements that the parties agree on (geo-targeted banners, sponsorships etc.)
during Year 1 and Year 2, respectively. MS shall make any payments that may be
due to EI within thirty (30) days after the end of Year 1 or Year 2 as
applicable, or on any other payment schedule that may be agreed upon by the
parties.

(d) The calculation of the MSN Ad Sales Allocation and EI Ad
Sales Allocation for both Expedia.com/MSN and Expedia.com shall be done on a
monthly basis based upon monthly banner inventory

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forecasts. The MSN Ad Sales Allocation and the EI Ad Sales Allocation for Years
after Year 2 shall be reasonably negotiated and agreed upon by the parties in
good faith.

5.2 Restriction on Ad Sales for Expedia.com/MSN and Expedia.com.

(a) EI agrees that it will not sell or otherwise make available
any banner inventory or otherwise promote on Expedia.com/MSN up to five (5)
competitors of MSN as agreed to by the parties. EI further agrees that it will
not sell or otherwise make available any banner inventory or otherwise promote
on Expedia.com/MSN up to five (5) competitors of each of the MSN vertical sites
(e.g., CarPoint, HomeAdvisor, Money Central) as agreed to by the parties. EI
will promote MSN on Expedia.com in a similar matter as it promotes other major
partners (e.g. other portals).

(b) Microsoft agrees that it may sell banner inventory included in
the MSN Ad Sales Allocation only to non-travel accounts as agreed to by the
parties, provided however, that Microsoft may sell such banner inventory to
travel accounts only if (i) the banners on Expedia.com/MSN and Expedia.com do
not link or promote the travel booking engine of any travel related company
(subject to exceptions in (ii)); or (ii) the banners on Expedia.com/MSN may link
to the travel engine of any travel related company only if (A) such promotion or
sponsorship is also included in Expedia.com/MSN (e.g., Microsoft may promote on
Expedia.com/MSN ABC Airlines' flight special so long as ABC Airlines' special is
also included in Expedia.com/MSN's travel booking service) and (B) the sale is a
part of a larger MSN advertising agreement in which the Expedia.com/MSN banner
inventory does not constitute more than twenty percent (20%) of the total number
of advertising banners sold by MSN under such MSN advertising agreement.
Controversial promotions and sponsorships will be discussed and resolved by the
parties.

(c) Microsoft agrees that it will not sell or otherwise make
available any banner inventory or promote on Expedia.com/MSN or Expedia.com up
to five (5) competitors of EI as agreed to by the parties.

5.3 Restriction on Ad Sales for MSN. Microsoft shall be solely
responsible for advertising sales on MSN, and EI shall not be entitled to share
any revenue derived from such sales. Microsoft agrees, however, that it shall
not sell or otherwise make available any advertisements, sponsorships or
promotions on MSN or the MSN vertical sites (e.g., CarPoint, HomeAdvisor, Money
Central) to any of the five (5) competitors of EI as agreed to by the parties.
Nothing in this Section 5.3 shall be interpreted as limiting Microsoft's ability
to sell advertising or promotions to any travel service other than the five (5)
EI competitors agreed to by the parties.

5.4 Ad Sales Services. EI agrees that if it desires to engage a third
party for general ad sales services, it shall first negotiate with Microsoft
exclusively for a period of one (1) month with respect to engaging the MSN
advertising sales team to provide such services.

6. Proprietary Rights
------------------

The parties agree that except as expressly licensed to EI in this
Agreement or a separate license agreement, Microsoft shall retain all right,
title, and interest in all data, content, technologies and other property
furnished by Microsoft to EI hereunder. The parties further agree that except as
expressly licensed to Microsoft in this Agreement or a separate license
agreement, EI shall retain all right, title and interest in and to
Expedia.com/MSN (except for the MSN brand) all data, content, technologies and
other property furnished by EI to Microsoft hereunder.

7. Confidentiality
---------------

7.1 The parties acknowledge and agree that all of the terms of this
Agreement (including but not limited to its existence) are confidential. Each
party may disclose the terms and conditions of this Agreement to its employees,
affiliates and its immediate legal and financial consultants on a need to know
basis as required in the ordinary course of that party's business, provided that
such employees, affiliates and/or legal and/or financial consultants agree in
advance of disclosure to be bound by this Section 7, and may disclose
Confidential Information

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as required by government or judicial order, provided each party gives the other
party prompt notice of such order and complies with any protective order (or
equivalent) imposed on such disclosure.

7.2 Each party acknowledges that monetary damages may not be a
sufficient remedy for unauthorized disclosure or use of Confidential Information
and that each party may seek, without waiving any other rights or remedies, such
injunctive or equitable relief as may be deemed proper by a court of competent
jurisdiction.

8. Branding Guidelines
-------------------

8.1 By Microsoft. To the extent that this Agreement requires EI to
use any logo, trademark, tradename or service mark owned and/or provided by
Microsoft (collectively "Microsoft Marks"), Microsoft shall provide EI with such
elements and renderings for the agreed upon use of such Microsoft Mark in a form
necessary to permit EI's use as contemplated by this Agreement. Microsoft shall
also provide the applicable usage guidelines for the use of Microsoft Marks, and
EI agrees to comply with such guidelines.

8.2 By EI. To the extent that this Agreement requires Microsoft to
use any logo, trademark, tradename or service mark owned and/or provided by EI
(collectively "EI Marks"), EI shall provide Microsoft with such elements and
renderings for the agreed upon use of such EI Marks in a form necessary to
permit Microsoft's use as contemplated by this Agreement. EI shall also provide
the applicable usage guidelines for the use of EI Marks, and Microsoft agrees to
comply with such guidelines.

9. Term; Termination
-----------------

9.1 Term. Subject to the other provisions hereof, this Agreement shall
commence on the Effective Date and continue for a period of five (5) years
following the Start Date (the "Term").

9.2 Termination for Cause. In addition to any other rights and/or
remedies that either party may have under the circumstances, all of which are
expressly reserved, either party may terminate this Agreement at any time,
effective immediately upon written notice, if the other party is in material
breach of any warranty, representation, term, condition or covenant of this
Agreement, and fails to cure that breach within thirty (30) days after written
notice thereof.

9.3 Effect of Termination. In the event of termination or expiration
of this Agreement for any reason each and every clause which by its nature is
intended to survive the termination of this Agreement including, without
limitation, Sections 6, 7, 9.3, 10, 11, 13 and 14 shall survive termination.

10. Warranties and Indemnification.
------------------------------

10.1 EI Warranties. EI warrants and represents that: (i) it has
sufficient authority to enter into this Agreement; (ii) all materials delivered
by EI to Microsoft and/or included in Expedia.com/MSN pursuant to this Agreement
(other than those provided by Microsoft) are and will be owned and controlled by
EI and do not and will not infringe the copyrights, trademarks, service marks or
any other personal or proprietary right of any third party; (iii)
Expedia.com/MSN and all actions thereon are and will be in compliance with all
applicable laws.

10.2 Microsoft Warranties. Microsoft warrants and represents that: (i)
it has sufficient authority to enter into this Agreement, (ii) all materials
delivered by Microsoft to EI pursuant to this Agreement (excluding any
trademarks and logos) do not and will not infringe the copyrights, trademarks,
service marks or any other personal or proprietary right of any third party.

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<PAGE>

10.3 Indemnification. Each party (the "Indemnifying Party") will hold
harmless and indemnify the other party (the "Indemnified Party") from and
against any loss, claim, liability, damage, action or cause of action
(including, without limitation, reasonable attorneys' fees) brought against the
Indemnified Party by a third party and arising from or related to any alleged
act or omission which, if the allegation were true, would be a breach by the
Indemnifying Party of this Agreement, provided that the Indemnified Party
cooperates as set forth in Section 10.4. In addition, EI will hold harmless and
indemnify Microsoft from and against any loss, claim, liability, damage, action
or cause of action (including, without limitation, reasonable attorneys' fees)
brought against Microsoft by a third party and arising from or related to
Expedia.com/MSN (unless such claim would be covered by the immediately preceding
sentence), provided that Microsoft cooperates as set forth in Section 10.4.

10.4 Indemnification Process. If any action shall be brought against
either party (the "Indemnified Party") in respect to which indemnity may be
sought from the other party (the "Indemnifying Party") pursuant to the
provisions of Section 10.3, the Indemnified Party shall promptly notify the
Indemnifying Party in writing, specifying the nature of the action and the total
monetary amount sought or other such relief as is sought therein. The
Indemnified Party shall cooperate with the Indemnifying Party at the
Indemnifying Party's expense in all reasonable respects in connection with the
defense of any such action. The Indemnifying Party may upon written notice to
Indemnified Party undertake to control and conduct all proceedings or
negotiations in connection therewith, assume and control the defense thereof,
and if it so undertakes, it shall also undertake all other required steps or
proceedings to settle or defend any such action, including the employment of
counsel which shall be reasonably satisfactory to Indemnified Party, and payment
of all reasonably incurred expenses. Indemnified Party shall have the right to
employ separate counsel and participate in the defense, at Indemnified Party's
sole cost and expense. The Indemnifying Party shall reimburse Indemnified Party
upon demand for any payments made or loss suffered by it at any time after the
date of tender, based upon the judgment of any court of competent jurisdiction
or pursuant to a bona fide compromise or settlement of claims, demands, or
actions, in respect to any damages to which the foregoing relates.

10.5 PRODUCTS OR SERVICES DELIVERED UNDER THE TERMS OF THIS AGREEMENT
SHALL BE SUBJECT TO THE TERMS OF THE LIMITED WARRANTY STATEMENT, IF ANY,
SPECIFIED BY THE DELIVERING PARTY FOR THE SPECIFIC PRODUCT OR SERVICE. CERTAIN
SOFTWARE PRODUCTS MAY BE PROVIDED TO THE OTHER PARTY "AS IS" WITHOUT WARRANTY OR
CONDITION OF ANY KIND, IF SO DESIGNATED BY THE LICENSOR. FOR SUCH PRODUCTS, THE
ENTIRE RISK AS TO THE RESULTS AND PERFORMANCE OF SUCH SOFTWARE IS ASSUMED BY THE
RECEIVING PARTY AND ITS CUSTOMERS AND SUBLICENSEES, IF ANY. THE WARRANTIES SET
FORTH IN SECTIONS 10.1, 10.2, AND THIS SECTION 10.5 ARE THE ONLY WARRANTIES MADE
BY THE PARTIES. EACH PARTY DISCLAIMS ANY AND ALL OTHER WARRANTIES OR
REPRESENTATION EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY, TITLE, NON-INFRINGEMENT AND FITNESS FOR A
PARTICULAR PURPOSE. NEITHER PARTY WARRANTS THAT ACCESS TO OR USE OF THE SITES OR
CHANNELS WILL BE UNINTERRUPTED OR ERROR-FREE, OR THAT ANY SOFTWARE OR SERVICES
WILL MEET ANY PARTICULAR CRITERIA OF PERFORMANCE OR QUALITY.

11. Limitation Of Liabilities NEITHER PARTY SHALL BE LIABLE TO THE OTHER
-------------------------
FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES,
ARISING OUT OF OR RELATED TO THIS AGREEMENT INCLUDING, WITHOUT LIMITATION,
DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS
INFORMATION, AND THE LIKE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. THIS SECTION SHALL NOT APPLY TO EITHER PARTY'S (A)
ABILITY TO OBTAIN INJUNCTIVE OR OTHER EQUITABLE RELIEF; (B) CONFIDENTIALITY
OBLIGATIONS UNDER SECTION 7; AND (C) INDEMNIFICATION OBLIGATIONS AS TO THIRD
PARTY DAMAGES ASSESSED AGAINST THE INDEMNIFIED PARTY IN CONNECTION WITH
INDEMNIFIED CLAIMS UNDER SECTION 10.

12. Press Releases
--------------

9
<PAGE>

Neither Microsoft nor EI will issue any press release or make any
public announcement(s) relating in any way whatsoever to this Agreement or the
relationship established by this Agreement without the express prior written
consent of the other party, which consent shall not be unreasonably withheld.
However, the parties acknowledge that this Agreement, or portions thereof, may
be required under applicable law to be disclosed, as part of or an exhibit to a
party's required public disclosure documents.

13. Taxes
-----

13.1 Liability for Taxes. The amounts to be paid by Expedia to
Microsoft herein do not include any foreign, U.S. federal, state, local,
municipal or other governmental taxes, duties, levies, fees, excises or tariffs,
arising as a result of or in connection with the transactions contemplated under
this Agreement including, without limitation, any state or local sales or use
taxes or any value added tax or business transfer tax now or hereafter imposed
on or with respect to the provision of goods and services to Expedia by
Microsoft under this Agreement, regardless of whether the same are separately
stated by Microsoft. Except as provided in section 13.4 below, all such taxes
(and any penalties, interest, or other additions to any such taxes), with the
exception of taxes imposed on Microsoft's net income or with respect to
Microsoft's property ownership, shall be the financial responsibility of
Expedia. Expedia agrees to indemnify, defend and hold Microsoft harmless from
any such taxes or claims, causes of action, costs (including, without
limitation, reasonable attorneys' fees) and any other liabilities of any nature
whatsoever related to such taxes.

13.2 Collected Taxes. Expedia will pay all applicable value added,
sales and use taxes and other taxes levied on it by a duly constituted and
authorized taxing authority on the software, services, hardware, equipment or
other product provided under this Agreement or any transaction related thereto
in each country in which the services and/or property are being provided or in
which the transactions contemplated hereunder are otherwise subject to tax,
regardless of the method of delivery. Any taxes that are owed by Expedia, (i) as
a result of entering into this Agreement and the payment of the fees hereunder,
(ii) are required or permitted to be collected from Expedia by Microsoft under
applicable law, and (iii) are based upon the amounts payable under this
Agreement (such taxes described in (i), (ii), and (iii) above the "Collected
Taxes"), shall be remitted by Expedia to Microsoft, whereupon, upon request,
Microsoft shall provide to Expedia tax receipts or other evidence indicating
that such Collected Taxes have been collected by Microsoft and remitted to the
appropriate taxing authority. Expedia may provide to Microsoft an exemption
certificate acceptable to Microsoft and to the relevant taxing authority
(including without limitation a resale certificate) in which case, after the
date upon which such certificate is received in proper form, Microsoft shall not
collect the taxes covered by such certificate. Microsoft agrees to take such
steps at Expedia's request and expense to minimize Collected Taxes or other
taxes paid by Expedia in accordance with all relevant laws.

13.3 Tax Withholding. If, after a determination by foreign tax
authorities, any taxes are required to be withheld on payments made by Expedia
to Microsoft, Expedia may deduct such taxes from the amount owed Microsoft and
pay them to the appropriate taxing authority; provided however, that Expedia
shall promptly secure and deliver to Microsoft an official receipt for any such
taxes withheld or other documents necessary to enable Microsoft to claim a U.S.
Foreign Tax Credit. Expedia will make certain that any taxes withheld are
minimized to the extent possible under applicable law.

13.4 Taxes Resulting from Microsoft Ad Sales. Notwithstanding section
13.1 and 13.2 hereof, all taxes (and any penalties, interest, or other additions
to any such taxes), arising as a result of or in connection with the sale by
Microsoft for its own account of its MSN Ad Sales Allocation as set forth in
Section 5.1 of this Agreement, shall be the financial responsibility of
Microsoft. Microsoft agrees to indemnify, defend and hold Expedia harmless from
any such taxes or claims, causes of action, costs (including, without
limitation, reasonable attorneys' fees) and any other liabilities of any nature
whatsoever related to such taxes.

10
<PAGE>

13.5 Tax Provision Governs. This tax section shall govern the treatment
of all taxes arising as a result of or in connection with this Agreement
notwithstanding any other section of this Agreement.

14. General Provisions
------------------

14.1 Independent Contractors. The parties are independent contractors
with respect to each other, and nothing in this Agreement shall be construed as
creating an employer-employee relationship, a partnership, agency relationship
or a joint venture between the parties.

14.2 Governing Law. This Agreement shall be governed by the laws of the
State of Washington as though entered into by Washington residents and to be
performed entirely within the State of Washington. The parties agree to
exclusive jurisdiction and venue in the state and federal courts sitting in King
County, Washington. In any action or suit to enforce any right or remedy under
this Agreement or to interpret any provision of this Agreement, the prevailing
party shall be entitled to recover its costs, including reasonable attorneys'
fees.

14.3 Assignment. Neither party may assign this Agreement or any rights
and/or obligations hereunder without the other party's prior written approval.

14.4 Construction. In the event that any provision of this Agreement
conflicts with governing law or if any provision is held to be null, void or
otherwise ineffective or invalid by a court of competent jurisdiction, (i) such
provision shall be deemed to be restated to reflect as nearly as possible the
original intentions of the parties in accordance with applicable law, and (ii)
the remaining terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect. This Agreement has been negotiated by the
parties and their respective counsel and will be interpreted fairly in
accordance with its terms and without any strict construction in favor of or
against either party. The section headings used in this Agreement are intended
for convenience only and shall not be deemed to affect in any manner the meaning
or intent of this Agreement or any provision hereof.

14.5 Notices. All notices and requests in connection with this
Agreement shall be given in writing and shall be deemed given as of the day they
are received either by messenger, delivery service, or in the United States of
America mail, postage prepaid, certified or registered, return receipt
requested, and addressed as follows:

<TABLE>
<CAPTION>
To Expedia, Inc.: To Microsoft:
<S> <C>
Expedia, Inc. Microsoft Corporation
4200 150th Ave. NE One Microsoft Way
Redmond, WA 98052 Redmond, WA 98052-6399
Attention: President Attention: MSN Business Development

Phone: 425.705.5161 Phone: 425.703.6466
Fax: 425.936.7329 Fax: 425.936.7329

Copy to: Copy to:
General Counsel (same address and fax) Law & Corporate Affairs, US Legal
Fax: 425.936.7409
</TABLE>

or to such other address as the applicable party may designate pursuant to this
notice provision.

14.6 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior and contemporaneous agreements or communications. This Agreement shall not
be modified except by a written agreement dated subsequent to the date of this
Agreement and signed on behalf of EI and Microsoft by their respective duly
authorized representatives. No waiver of any breach of any provision of this
Agreement shall constitute a waiver of any prior, concurrent or subsequent
breach of the same or any other provisions hereof, and no waiver shall be
effective unless made in writing and signed by an authorized representative of
the waiving party.

11
<PAGE>

The parties have caused this Agreement to be executed by their duly
authorized representatives as of the Effective Date.

MICROSOFT CORPORATION EXPEDIA, INC.

By /s/ Gregory B. Maffei By /s/ Richard N. Barton
---------------------------------- ----------------------------------

Name (Print) Gregory B. Maffei Name (Print) Richard N. Barton
------------------------- -------------------------

Title Chief Financial Officer Title President and Chief
-------------------------------- --------------------------------
Executive Officer
--------------------------------

12
<PAGE>

Exhibit A
---------

Specifications
--------------

I. EI will develop, maintain and host the Expedia.com/MSN and the version of
ExpediaMaps to which the MSN "Maps quick link" links ("ExpediaMaps"), in
accordance with the requirements specifications below: (For the purpose of this
Specification, Expedia.com/MSN and ExpediaMaps may be collectively referred to
as "EI/MSN Sites").

. The Network Template includes the following components:

. The Network headers and footers. It will be included on each
-------------------------------
non-transaction page within Expedia.com/MSN and ExpediaMaps in the
manner provided by Microsoft. A lighter MSN branding header will be
included above the fold on all transaction pages within the
Exepdia.com/MSN site.

. The Network Promotion Inventory. It will be included on the
-------------------------------
Travel Channel Home Page and on the top page of each section within
Expedia.com/MSN and on the top two levels of the ExpediaMaps pages
in the manner provided by Microsoft. The Network Promotion
Inventory is currently defined as the right hand, white column
space on an 800x600 screen resolution of pixels.

. Any layout or technical changes to the Network Template must be
preceded by a detailed specification and sample code, and an
implementation period of approximately a month following delivery of
said specs and sample code. EI will use best efforts to implementation
the behavior and look-and-feel of the Network Template. If EI may not
replicate the exact code and functionality of the Network Template due
to the technical architecture of the EI/MSN Sites, EI will implement
comparable and mutually agreed MSN co-branding and promotion inventory
on the EI/MSN Sites.

. Microsoft will not promote in The Network Promotion Inventory the five
(5) competitors of EI to be agreed upon by the parties. Both parties
will work together to minimize conflicts with EI's premier sponsors.
EI will notify MSN if any serious ad conflicts occur, and MSN will
make best efforts to eliminate such conflict within 10 business days.

. EI will supply content to scheduled network wide promotions and
campaigns.

. Microsoft will make best efforts to promote Expedia.com/MSN, EI's ETN
and Premier partners (e.g. Disney) via the Network Promotion
Inventory.

EI will make available all materials and content in the Expedia.com web site to
be included in the Expedia.com/MSN Site.

. Microsoft requires that EI maintain certain minimum standards for
connectivity and availability which shall be not more restrictive than
the standards required by MSN with respect to any other MSN premier
partner; these requirements may be updated by Microsoft with
reasonable input from EI from time to time by written notice from
Microsoft to EI, and EI will implement any required modifications to
the service on a timely basis.

. All pages of the EI/MSN Sites must have the same performance standard
as the regular Expedia.com and ExpediaMaps.com including but not
limited to up time, availability, rendering speed, and page loading.
Both EI and Microsoft will attempt a standard of performance to match
any leading web site.

. The parties will provide each other with mutually agreed maintenance
reports, system alerts, and other communications related to site
performance. In addition, each party will provide the other with any
reasonable reporting that may be requested by the other party, and the
parties shall work together to develop reasonable reporting
requirements. The parties shall also share their respective
international product development plans on an annual basis.

. EI agrees that the EI/MSN Sites, as served by EI servers, will be
easily viewable on all popular browsers, including but not limited to
Internet Explorer, Netscape Navigator and WebTV. Also, users of
Windows, Macintosh, Linux and Unix systems should all be able to view
pages served by EI. In no event will EI make any technology decision
that renders the content viewing experience of Internet Explorer users
on the EI/MSN Sites to be inferior to the viewing experience of users
elsewhere on the Microsoft Online Properties.

1
<PAGE>

. The parties shall work together to implement the procedures as
reasonably necessary to ensure that Microsoft is notified of all site
failure(s) or significant decline(s) in performance.

. EI agrees to support the following activities as soon as the MSN
profiling technology is commercially available and technically viable:
EI will store user information in MSN User Profile Store. EI will
implement EI's web pages to provide real time events logging to the
MSN User Profile Store. EI will also provide click stream information
to MSN IDSS nightly. EI will tag content pages using MSN's taxonomy.
MSN agrees to provide EI reasonable consulting support to assist in
the implementation process. MSN agrees to deliver targeted advertising
in a similar manner as it treats other premium partners on MSN who
participate in the profiling initiative.

II. EI will make updates, modifications or changes to the EI/MSN Sites, in
accordance with the requirements specifications below:

. Changes to Network Template (i.e. header or footer text) or graphic
content changes shall be implemented by EI within 10 business days
upon receipt of final MS elements (i.e. copy, graphics, code).

. Changes to daily tree content shall be made within 10 business days
upon receipt of final elements.

. Changes to World Guide upon receipt of final MS elements - content
changes will be implemented within 10 days, code changes will be
implemented within 30 days.

. Changes to Promotional modules upon receipt of final MS elements -
content changes will be implemented within 10 days, code changes will
be implemented within 30 days.

Changes involving substantial interpreted code modification (e.g. javascript,
VBScript, whether client-side or ASP) can add unpredictability to customization
and modification time. Such requests will require at least an additional week or
more above the heretofore mentioned turnaround schedules, time which Expedia
will in good faith try to minimize. As for changes that require Expedia to
recompile transactional-path.dlls or hotfix qscript or HTX files, these will
need to be synchronized with MTT development and testing schedules, whose timing
will dictate implementation dates.

2
<PAGE>

Exhibit B
---------

Co-Branding
-----------

Initially, the Travel Channel Home Page shall be branded MSN Travel Channel
"with Expedia.com" (which shall include the EI logo). The Expedia.com/MSN Site
(except for the Travel Channel Home Page) shall be branded MSN Travel Channel
"by Expedia.com" (which shall include the EI logo). The EI branded logo ("with
Expedia.com" and "by Expedia.com") will be 125x22 pixels, located on the right
side of the MSN network header.

A sample co-branded header for MSN premium partners is included below:

[GRAPHIC]

<PAGE>

EXHIBIT 10.8

Note: Portions of this exhibit indicated by "[*]" are subject to a confidential
treatment request, and have been omitted from this exhibit. Complete, unredacted
copies of this exhibit have been filed with the Securities and Exchange
Commission as part of this company's confidential treatment request.

CRS MARKETING, SERVICES AND DEVELOPMENT AGREEMENT

This CRS MARKETING, SERVICES AND DEVELOPMENT AGREEMENT, dated and effective
as of December 15, 1995 (the "Agreement"), by and between MICROSOFT CORPORATION,
a Washington corporation, with its principal office at One MICROSOFT Way,
Redmond, Washington 98052 ("MICROSOFT"), and WORLDSPAN, L.P., a Delaware limited
partnership, with its principal office at 300 Galleria Parkway NW, Atlanta,
Georgia 30339 ("WORLDSPAN")

RECITALS

WORLDSPAN operates a computerized reservations system and provides
information and other transaction processing to airlines, travel agents and
others in the travel industry.

MICROSOFT develops software and operates an Online System in the United
States and throughout the world.

MICROSOFT desires to retain WORLDSPAN to provide travel related transaction
and data processing and other services, and WORLDSPAN desires to provide same,
all according to this Agreement;

Now, Therefore, in consideration of the above recitals, the mutual
undertakings of the parties as contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:

1. Definitions
-----------

Except as otherwise defined in this Agreement, terms used herein in
capitalized form shall have the meanings set forth in Schedule 1.

2. WORLDSPAN's Obligations
-----------------------

2.1.1 WORLDSPAN shall provide MICROSOFT access to the WORLDSPAN
System through Super Transaction, Standard Message Interface, and such other
communication protocols as WORLDSPAN may develop from time to time. WORLDSPAN
shall through proprietary and leased communications facilities allow access to
the WORLDSPAN System to MICROSOFT's communications node in Bellevue, Washington.

2.1.2 The parties acknowledge that neither can accurately forecast
the volume of transactions that will be generated by MICROSOFT System users with
the WORLDSPAN System. To ensure reasonable capacity is available, WORLDSPAN
shall make available to MICROSOFT not later than August 14, 1996, processing
capacity from the WORLDSPAN System according to the specifications set forth on
Schedule 2.1.2 attached hereto and as otherwise provided in this Agreement.
Thereafter, the parties shall confer periodically for the purpose of modifying
these minimum standards. Notwithstanding the foregoing, WORLDSPAN acknowledges
that the standards set forth herein and to be agreed upon are the minimum
standards necessary to service MICROSOFT System users and that adequate
WORLDSPAN System
<PAGE>

resources are critical to the use of the MICROSOFT System travel related
services for their intended purposes.

2.2 WORLDSPAN shall be responsible for acquiring any hardware and
developing, at its expense, all of the software and systems necessary and
appropriate for delivery of the CRS Services to the MICROSOFT node according to
this Agreement. Improvements, changes and enhancements to the WORLDSPAN System
to be developed by WORLDSPAN to implement MICROSOFT's access to the WORLDSPAN
System and the schedule for such development are included on Schedule 2.2
attached hereto and incorporated herein by this reference.

2.3 Upon MICROSOFT's request, WORLDSPAN shall provide, at its own
expense, engineering, communications and technical support on-site at
MICROSOFT's facilities in Redmond, Washington until the Rollout Date to a
maximum of two (2) Person Months in any twelve (12) month period. This on-site
support will be provided by WORLDSPAN to: (a) assist MICROSOFT in installing and
utilizing the communication's link between the MICROSOFT System and the
WORLDSPAN System; (b) provide support for translation of MICROSOFT System users'
entries into the appropriate set of Super Transactions and input values; and (c)
trouble-shoot and repair problems with any of the foregoing.

2.4 WORLDSPAN shall provide to MICROSOFT telephone access to
WORLDSPAN's production and technical personnel or contractors to respond to
MICROSOFT personnel with questions and problems arising out of access to the
WORLDSPAN System by MICROSOFT System users. WORLDSPAN shall use reasonable
business efforts to make the necessary personnel available twenty four (24)
hours each day.

2.5 WORLDSPAN shall not disclose any information created by a
MICROSOFT System user or use such information except as necessary for the
performance of this Agreement (including as reasonably needed by WORLDSPAN to
complete and facilitate travel transactions generated by Microsoft System users,
and/or to adequately service WORLDSPAN's Travel Suppliers), except that
WORLDSPAN may disclose information from a reservation as required by law.
WORLDSPAN acknowledges and agrees that MICROSOFT will have data privacy
obligations to its customers which MICROSOFT will need to be respected by
WORLDSPAN. WORLDSPAN agrees to comply with all MICROSOFT data privacy
requirements communicated in writing by MICROSOFT to WORLDSPAN except where to
do so would be commercially unreasonable due to the costs of implementation
(where costs may not include foregone revenue from the sale or use of such
data).

3. Services
--------

3.1 During the Term, WORLDSPAN shall make available to MICROSOFT the
CRS Services in accordance with the performance standards set forth in Schedule
2.1.2. Such performance standards in general are intended to reflect the service
levels provided to any Travel Agent customer of WORLDSPAN. WORLDSPAN shall not
be responsible for WORLDSPAN System unavailability or any Response Time in
excess of agreed limits due to: (a) scheduled maintenance or scheduled downtime,
(b) actions or inactions of MICROSOFT or MICROSOFT System users, (c) failure of
any part of the WORLDSPAN Network operated by a third party supplier, or (d)
outages caused by the failure of public network components.

2
<PAGE>

3.2 Nothing herein shall prohibit MICROSOFT from obtaining any travel
information or CRS Services from any entity other than WORLDSPAN for use with
the MICROSOFT System and nothing shall prohibit WORLDSPAN from providing any
travel information or CRS Services to any Online System provider or other
person.

3.3 MICROSOFT shall provide to WORLDSPAN the information, data and
necessary technical and human resources to permit WORLDSPAN to complete
WORLDSPAN's development of improvements, changes and enhancements to the
WORLDSPAN System and to provide access to the WORLDSPAN System and the CRS
Services.

4. Access To CRS Services And Rights
---------------------------------

4.1 Subject to Section 4.3 and during the Term, WORLDSPAN hereby
grants to MICROSOFT a nonexclusive right and license in and to all of the
functions, services, information and data available through the WORLDSPAN System
to all of WORLDSPAN's Travel Agent customers including, but not limited to, the
CRS Services.

4.2 WORLDSPAN also grants to MICROSOFT a worldwide, non-exclusive,
right and license during the Term of this Agreement in WORLDSPAN Training
Materials for the sole purpose of permitting MICROSOFT to create, publish, and
distribute training books, manuals, software programs and other materials for
the use of MICROSOFT employees, contractors and MICROSOFT System users. Within a
reasonable period following termination of this Agreement not to exceed sixty
(60) days, MICROSOFT shall, at its option, return to WORLDSPAN or destroy all of
the WORLDSPAN Training Materials and all copies of books, manuals, software or
other materials containing WORLDSPAN Training Materials, then in the possession
of MICROSOFT.

4.3 The license and the rights granted in Section 4.1 herein shall be
limited to the Territory and shall permit MICROSOFT to utilize information,
data, functions and services from the WORLDSPAN System, including the CRS
Services, to provide such information, data, functions and services through an
Online System to permit, among other things, users to review travel related
information, make reservations, and request tickets and other documents for
travel. Notwithstanding anything to the contrary herein, such restriction of
MICROSOFT's license rights to the Territory shall mean only that MICROSOFT shall
not actively market or advertise the availability of the travel services and
information provided through the WORLDSPAN System as part of the MICROSOFT
System outside of the Territory, and such restriction shall place no limitation
on MICROSOFT's right which is permitted by this Agreement to operate the
MICROSOFT System and to provide travel services and information via the
WORLDSPAN System over the Internet, the World Wide Web, The Microsoft Network,
or any other Online System. As used in this Section 4.3, to "actively market or
advertise" outside the Territory shall mean to undertake actual marketing or
advertising activities in local markets outside the Territory, but shall not
include marketing or advertising activities done generally over the Internet,
the World Wide Web, The Microsoft Network, or any other Online System regardless
of the fact that such activities may be accessible to persons outside the
Territory. With respect to information and data regarding hotels and other
lodging services, WORLDSPAN also grants to MICROSOFT a perpetual, worldwide
license and right to: (a) develop, market, sell, make, use, reproduce, modify,
adapt, create derivative works based on, translate, distribute, (directly and
indirectly), transmit, display and perform publicly, license, rent, lease, and
sell such information and data on printed, electronic or other fixed media, and
to sublicense any or all of the foregoing rights, including the right to
sublicense such rights to third parties; and (b) create, develop, market,
distribute, transmit, license, sub-license and sell such information and data
through broadcast, cable or satellite television distribution, interactive and
otherwise. Such license to information and data regarding hotels and other
lodging services shall be subject to such future restrictions as may be imposed
on WORLDSPAN by its suppliers of such information, but only to the extent that
such restrictions are communicated in advance and in writing to MICROSOFT.

3
<PAGE>

4.4 Subject to the provisions of Section 7.5 herein, WORLDSPAN
retains the right to modify and enhance the WORLDSPAN System in its sole
discretion at any time during the Term, including but not limited to, the right
to migrate MICROSOFT and MICROSOFT System users to new computer reservation
systems created or used by WORLDSPAN, provided that any such modifications,
enhancements and/or migration shall not materially adversely alter any of the
CRS Services, including specifically the functionality associated with the
development items set forth on Schedule 2.2 attached hereto. MICROSOFT agrees
that it will take reasonable steps to administer the use of the WORLDSPAN System
by MICROSOFT System Users, including but not limited to using all commercially
reasonable efforts to terminate the access of such users who MICROSOFT or
WORLDSPAN determines use the WORLDSPAN System improperly. Improper use of the
WORLDSPAN System shall include: transmitting personal messages; making
speculative or improper bookings; training anyone other than MICROSOFT
employees, contractors or MICROSOFT System users; entering passive booking codes
(e.g., GK, HK, MK or BK codes) when no corresponding space has been reserved
with the transporting carrier's internal reservation system; or failing to
remove such passive bookings from the WORLDSPAN System if the corresponding
space is canceled via telephone or by other means.

5. MICROSOFT's Obligations
-----------------------

MICROSOFT will develop, at its own expense, the capability for
MICROSOFT System users to make reservations on airlines, cars, hotels, tours,
cruises and other products and services distributed through the WORLDSPAN
System. For a five (5) month period following implementation of the WORLDSPAN
System through the MICROSOFT System, MICROSOFT will use reasonable business
efforts to construct its travel reservations facilities available through the
MICROSOFT System in a way to promote the making of reservations and bookings to
generate a stream of chargeable transactions through the WORLDSPAN System.
Thereafter, MICROSOFT and WORLDSPAN shall agree upon the appropriate level of
promotion of the WORLDSPAN System given the then-existing business
circumstances. MICROSOFT makes no representation or warranty about the volume of
chargeable transactions that will be generated by MICROSOFT System users or the
ratio of chargeable transactions to total transactions.

6. Attribution
-----------

At WORLDSPAN's request, MICROSOFT shall include in a screen or page
provided as a part of any fixed media product utilizing data or information
provided from the WORLDSPAN System that WORLDSPAN has supplied such data or
information.

4
<PAGE>

7. Term
----

7.1 Unless earlier terminated as provided herein, the term of this
Agreement (the "Term") shall commence as of the date first written above on page
one, and shall continue thereafter for a period of ten (10) years.

7.2 This Agreement may be terminated as follows:

7.2.1 Either WORLDSPAN or MICROSOFT may terminate this Agreement
(a) following six (6) months prior notice if the parties have failed to reach an
agreement according to either Section 2.1.2 or Section 11.2 or Schedule 2.1.2 of
this Agreement, or (b) upon the occurrence of an Event of Default by the other
party.

7.2.2 An Event of Default with respect to MICROSOFT shall mean
that:

(a) MICROSOFT defaults in making any payment hereunder
when the same becomes due and payable, and such default continues for a
period of thirty (30) days after notice thereof in writing from WORLDSPAN;
or

(b) MICROSOFT fails to comply with any of its other
material covenants or agreements in this Agreement and such default
continues for a period of thirty (30) days after notice thereof in writing
from WORLDSPAN.

7.2.3 An Event of Default with respect to WORLDSPAN shall mean
that:

(a) WORLDSPAN fails to provide the CRS Services, which
failure is not cured by WORLDSPAN not more than sixty (60) days after
notice thereof in writing from MICROSOFT; or

(b) WORLDSPAN fails to comply with any of its other
material covenants or obligations in this Agreement and such default
continues for a period of thirty (30) days after notice thereof in writing.

7.3 If MICROSOFT makes any assignment for the benefit of creditors or
becomes insolvent, or if WORLDSPAN has reason to believe MICROSOFT is not
generally paying its bills when due, or if federal, state or common law
bankruptcy or insolvency proceedings are commenced with respect to MICROSOFT, or
if a receiver of MICROSOFT assets is appointed, or if MICROSOFT shall take any
step leading to its cessation as a going concern, or if MICROSOFT shall cease
operations for reasons other than a strike, then in any of the foregoing events
WORLDSPAN may immediately cancel this Agreement on notice to MICROSOFT, or, at
WORLDSPAN's option require MICROSOFT to give adequate assurance of future
performance of this Agreement by immediately curing any default hereunder and
establishing any irrevocable letter of credit issued by a bank and on terms and
conditions acceptable to WORLDSPAN in an amount sufficient to cover all amounts
potentially due from MICROSOFT under this Agreement and which may be drawn upon
WORLDSPAN upon the sole condition that MICROSOFT does not fulfill its
obligations under this Agreement in a timely manner.

5
<PAGE>

7.4 If WORLDSPAN makes any assignment for the benefit of creditors or
becomes insolvent, or if MICROSOFT has reason to believe WORLDSPAN is not
generally paying its bills when due, or if federal, state or common law
bankruptcy or insolvency proceedings are commenced with respect to WORLDSPAN, or
if a receiver of WORLDSPAN's assets is appointed, or if WORLDSPAN shall take any
step leading to its cessation as a going concern, or if WORLDSPAN shall cease
operations for reasons other than a strike, then in any of the foregoing events
MICROSOFT may immediately cancel this Agreement on notice to WORLDSPAN, or, at
MICROSOFT's option require WORLDSPAN to give adequate assurance of future
performance of this Agreement by immediately curing any default hereunder and
establishing any irrevocable letter of credit issued by a bank and on terms and
conditions acceptable to MICROSOFT in an amount sufficient to cover all amounts
potentially due from WORLDSPAN under this Agreement and which may be drawn upon
MICROSOFT upon the sole condition that WORLDSPAN does not fulfill its
obligations under this Agreement in a timely manner.

7.5 MICROSOFT shall have the option to terminate this Agreement upon
written notice to WORLDSPAN in the event that WORLDSPAN migrates MICROSOFT and
MICROSOFT System users to a computer reservation system not operated by
WORLDSPAN. In addition, either party may terminate this Agreement upon written
notice to the other in the event of an assignment of this Agreement by the other
party to a third party. For purposes of this Section 7.5, an assignment shall
include (i) any transfer of an ownership interest in WORLDSPAN or MS to a
person, group, or entity that would result in that person, group or entity
acquiring control of such party, or (ii) any transfer by either party of all or
substantially all of its assets.

8. Additional Development Services
-------------------------------

In addition to development otherwise required to be done by WORLDSPAN
pursuant to this Agreement, MICROSOFT may request that WORLDSPAN develop
additional enhancements, improvements or changes to the WORLDSPAN System for the
benefit of MICROSOFT System users. Subject to the availability of programming
resources and provided the enhancements, improvements, or changes do not
adversely impact the existing performance standards of the WORLDSPAN System,
WORLDSPAN shall provide Additional Development Services to complete such
requested development.

9. Charges/Payment
---------------

9.1 MICROSOFT shall pay WORLDSPAN'S standard hourly rate for
Additional Development Services provided pursuant to this Agreement.

9.2 MICROSOFT shall pay all amounts hereunder calculated pursuant to
the formulas and otherwise in the manner set forth in this Agreement. Payment
shall be made within thirty (30) days of each monthly invoice.

6
<PAGE>

10. Ownership, No Other License
---------------------------

10.1 The WORLDSPAN System, including all Intellectual Property
Rights therein, shall be owned or retained, to the fullest extent legally
permitted under all applicable laws, by WORLDSPAN. MICROSOFT shall execute such
instruments, agreements and acknowledgments as WORLDSPAN shall require to
transfer and assign any and all of MICROSOFT's rights in and to such
Intellectual Property Rights therein to WORLDSPAN. In addition to any other
rights WORLDSPAN may have, WORLDSPAN shall be permitted to license or market to
any third party all or portions of the WORLDSPAN System or the WORLDSPAN
Software.

10.2 The MICROSOFT System, including all Intellectual Property
Rights therein, shall be owned or retained, to the fullest extent legally
permitted under all applicable laws, by MICROSOFT. WORLDSPAN shall execute such
instruments, agreements and acknowledgments as MICROSOFT shall require to
transfer and assign any and all of WORLDSPAN's rights in and to such
Intellectual Property Rights therein to MICROSOFT. In addition to any other
rights MICROSOFT may have, MICROSOFT shall be permitted to license or market to
any third party all or portions of the MICROSOFT System or the MICROSOFT
Software.

10.3 Nothing herein shall be construed as granting or conferring
upon a party a license or right to use the name or any Trademark, logo, or mark
of the other party.

11. Financial Arrangements
----------------------

11.1 WORLDSPAN acknowledges that the MICROSOFT System is a new
service and, accordingly, neither MICROSOFT nor WORLDSPAN can anticipate the
number of transactions through the WORLDSPAN System that will be generated by
MICROSOFT System users nor all of the revenues or expenses that will accrue to
either party or the number of transactions that will be generated by MICROSOFT
System users. As additional consideration for the promises made by WORLDSPAN in
this Agreement, MICROSOFT agrees that if revenues payable by Travel Suppliers to
WORLDSPAN for transactions generated by MICROSOFT System users are less than One
Hundred Thousand Dollars ($100,000.00) during the five (5) month period
following implementation of the WORLDSPAN System through the MICROSOFT System
(including the development items set forth on Schedule 2.2), then MICROSOFT
shall pay to WORLDSPAN:

(i) the amount by which the actual amount of revenues payable is less than
$100,000.00; and

(ii) the amount equal to WORLDSPAN's out of pocket costs paid to third
party telecommunications suppliers for the leased communications lines from
the WORLDSPAN System to the Microsoft System in Bellevue, Washington.

WORLDSPAN shall make available to MICROSOFT upon request any of its books,
records and regularly generated reports as are reasonably necessary to confirm
the average amounts charged for air bookings in 1995 and 1996.

7
<PAGE>

11.2 Other than payments made by MICROSOFT for Additional
Development Services and the amount to be paid by MICROSOFT, if any, pursuant to
section 11.1 above, MICROSOFT and WORLDSPAN agree that each shall bear any and
all expenses incurred in the performance of this Agreement and each shall be
entitled to retain any and all revenues arising out of this Agreement for the
period ending January 31, 1997. Not later than August 1, 1996, the parties shall
begin to confer for the purposes of determining the need for making any change
to the financial aspects of this Agreement for the period after January 31,
1997, principally the sharing of revenues received by WORLDSPAN from Travel
Suppliers for bookings and reservations made by MICROSOFT System users and
expenses incurred by WORLDSPAN in excess of the anticipated expenses. In the
event the parties are unable to agree to the financial aspects by November 30,
1996, either party may terminate this Agreement pursuant to Section 7.2.

12. Confidentiality
---------------

12.1 The Non Disclosure Agreement shall be in effect throughout the
Term and shall continue according to its terms.

12.2 Notwithstanding the foregoing, if either party receives a
subpoena, civil investigative demand, or any other order, demand or request for
the Confidential Information of the other party (the "Owning Party"); or if
there is any change in law, statute or regulation that requires the disclosure
or delivery of such information to any third party, then the party that would
respond or otherwise be required to make the delivery, disclosure or response
shall give written notice to the Owning Party. The Owning Party shall have ten
(10) business days following such notice to make any motion to quash, file any
objection or protest, or otherwise take any action deemed necessary and
appropriate to prevent such disclosure and, during such ten (10) day period, the
other party will make no delivery, disclosure or response with respect to the
Confidential Information of the Owning Party.

13. Force Majeure
-------------

13.1 WORLDSPAN shall have no liability to MICROSOFT or any other
person for malfunctions, errors or interruptions in the operation of the
WORLDSPAN System or non-performance or delays in performance hereunder caused by
acts of God, strikes, labor disputes, fires, delays of suppliers of goods or
services, acts or omissions of sovereign states or airline industry associations
(including but not limited to ATA, ACH, ARC and IATA) or for any other cause
beyond the control of WORLDSPAN, and no such malfunction, interruption, non-
performance or delay shall constitute an Event of Default with respect to
WORLDSPAN or MICROSOFT hereunder.

13.2 MICROSOFT shall have no liability to WORLDSPAN or any other
person for malfunctions or interruptions in the operation of the MICROSOFT
System or non-performance or delays in performance hereunder caused by acts of
God, strikes, labor disputes, fires, delays of suppliers of goods or services,
acts or omissions of sovereign states or airline industry associations
(including but not limited to ATA, ACH, ARC and IATA) or for any other cause
beyond the control of MICROSOFT, and no such malfunction, interruption, non-
performance or delay shall constitute an Event of Default with respect to
MICROSOFT or WORLDSPAN hereunder.

8
<PAGE>

14. Indemnification
---------------

14.1 WORLDSPAN and MICROSOFT each agree to indemnify, defend and
hold harmless the other and the other's directors, officers, partners,
affiliates, and employees from any and all Loss arising out of: (a) the death or
bodily injury of any agent, employee, contractor, customer, business invitee or
business visitor of the indemnitor; and (b) the damage, loss or destruction of
any real or tangible personal property of the indemnitor, including but limited
to the loss of use thereof.

14.2 WORLDSPAN and MICROSOFT each agree to indemnify, defend and
hold harmless the other and the other's directors, officers, partners,
affiliates, and employees from any and all Loss arising out of any claims or
infringement of any Intellectual Property Right conferred by contract or by
common law or by any law of the United States or any state alleged to have
occurred because of any service, data, or Confidential Information provided or
work performed by the indemnitor; provided, however, that this indemnity shall
not apply unless the party claiming indemnification notifies the other promptly
of any matters in respect of which the foregoing indemnity may apply and of
which the notifying party has knowledge and gives the other full opportunity to
control the response thereto and defense thereof, including, without limitation
any agreement relating to the settlement thereof.

14.3 MICROSOFT agrees to indemnify, defend, and hold harmless
WORLDSPAN and its directors, officers, partners, affiliates, and employees from
any and all Loss incurred by WORLDSPAN arising out any claim by a MICROSOFT
System user using the WORLDSPAN System, except for or to the extent that any
such Loss is due to the negligence of WORLDSPAN.

14.4 WORLDSPAN agrees to indemnify, defend, and hold harmless
MICROSOFT and its directors, officers, partners, affiliates, and employees from
any and all Loss incurred by MICROSOFT arising out any claim by a MICROSOFT
System user using the WORLDSPAN System to the extent that any such Loss is due
to the negligence of WORLDSPAN.

14.5 Each of the indemnities set forth in this Section shall apply
to each applicable Loss described above that results from any cause (including
the negligence of the indemnified party) but shall not apply to the extent such
applicable loss results solely from the gross negligence or willful misconduct
of the indemnified party or such indemnity is otherwise prohibited by applicable
law.

15. Insurance
---------

15.1 WORLDSPAN shall maintain a Comprehensive General Liability
insurance policy, including worldwide coverage, in the amount of no less than
U.S. One Million and no/100 Dollars ($1,000,000.00) per occurrence with a U.S.
Two Million and no/100 Dollars ($2,000,000.00) aggregate. Such coverage shall
include contractual liability coverage for the indemnification obligations
contained herein, products hazard coverage and broad form property coverage. In
addition, WORLDSPAN shall maintain an umbrella liability insurance policy or
policies in an amount no less than U.S. Five Million and no/100 Dollars
($5,000,000.00).

9
<PAGE>

15.2 WORLDSPAN shall maintain the insurance or policies as required
in subsection 15.1 above as follows:

15.2.1 WORLDSPAN hereto shall provide to MICROSOFT a
Certificate of Insurance, in a form reasonably acceptable to MICROSOFT, for each
of the policies of insurance required by this Section. Each Certificate of
Insurance with respect to the policies of insurance required by this Section
must name MICROSOFT as an additional insured.

15.2.2 Each insurance policy including renewal insurance, or
Certificates of Insurance shall contain an agreement by the insurer that it
shall give no less than thirty (30) days written notice of cancellation, intent
not to renew, or reduction of material change in coverage. WORLDSPAN shall
provide MICROSOFT no less than ten (10) days prior written notice of any such
notice set forth in this Section.

15.2.3 Each Certificate of Insurance required hereby shall be
delivered to MICROSOFT within ten (10) business days after the effective date or
renewal of the respective policy, as applicable.

16. Regulatory Compliance
---------------------

WORLDSPAN and MICROSOFT shall comply with all ATA, ACH, ARC, IATA and other
travel industry and other governmental and regulatory rules and regulations, and
all laws, statutes, ordinances and regulations in each case, applicable to this
Agreement, to the parties, and to the services provided hereunder. WORLDSPAN
reserves the right to modify or eliminate any CRS Service if the provision of
such service might constitute a violation of any applicable statute, law,
ordinance, industry rule or regulation or order of a court or judicial or
administrative body.

17. Successors
----------

Neither party shall assign its interest in this Agreement; provided,
however, that (subject to Section 7.5) either party may assign this Agreement
upon thirty (30) days prior written notice to a wholly-owned subsidiary or to an
entity to which substantially all of the assets of the assigning party are being
transferred if such assignee assumes and agrees to perform all of the
obligations of the assignor. This Agreement shall be binding upon the parties
hereto and their successors and assigns and all persons claiming under or
through them or any such successor or assign.

18. Entire Agreement
----------------

This Agreement and the Non Disclosure Agreement, together with any
appendices, schedules and exhibits to either this Agreement and the Non
Disclosure Agreement, constitute the entire agreement and understanding of the
parties and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
This Agreement and the Non Disclosure Agreement may be amended only by a further
writing duly executed by authorized representative of the parties.

10
<PAGE>

19. Governing Law
-------------

19.1 Governing Law. This agreement shall be governed by, and shall
-------------
be performed, enforced and construed in accordance with, the laws of the United
States and the State of Washington (other than its rules on conflicts of laws).

19.2 Jurisdiction, Forum. Each Party irrevocably submits to the
-------------------
non-exclusive jurisdiction of the Courts of the State of Georgia and Washington
and the United States Federal Courts sitting in Georgia and Washington. Each
party shall appoint an agent for services of process in the States of Georgia
and Washington (and notify the other party of the name and address of such
agent) and shall maintain such agent at all times unless it shall designate and
notify the other of a reasonably satisfactory successor agent or agents.

19.3 Negotiation of Provisions. The parties agree that the choice
-------------------------
of law and forum provisions of this Section 19 have been negotiated in good
faith and agreed upon by the parties hereto and are reasonable. The parties, by
their due execution of this Agreement, expressly agree, to the fullest extent
permitted by law, not to challenge the choice of law or forum provisions
contained in this Section 19.

20. No Third Party Beneficiaries
----------------------------

None of the provisions of this Agreement shall be for the benefit of or
enforceable by or against any person other than a party, including without
limitation, any creditor of WORLDSPAN or of MICROSOFT.

21. Cooperation and Further Assurances
----------------------------------

Each party hereto agrees to execute, acknowledge, deliver, file and record
such further certificates, instruments and documents, and to do such other acts
and things as may be required by law, or as may, in the reasonable opinion of
the counsel of either party, be necessary or advisable to carry out the full
intent and purposes of this Agreement. In addition, each party agrees to provide
to the other party, as soon as practicable after receipt of a request and
subject to applicable laws and regulations, such financial data or other
information as may be necessary for compliance with the requirements of any
federal, state or local law or regulations or any governmental agency or
authority applicable to a party or its affiliates; provided, however, that the
requesting person shall bear any outside reasonable accounting, legal, and
third-party costs and expenses incurred in fulfilling any such request. Each
party agrees to keep confidential and not use in any matter, other than as
contemplated in this Section 21, financial data or other information or
documents furnished pursuant to this Agreement unless ascertainable from public
or published information or trade sources, or already known to our subsequently
developed by such party independently, or received from a third party not under
an obligation to keep confidential such financial data, other information or
documents. Both parties also agree to confer on mutually beneficial projects,
such as, but not limited to, Net Fares support with possible incentives for the
Net Fares program, during the term of this Agreement.

11
<PAGE>

22. Expenses
--------

Each party hereto shall assume and pay its own expenses incident to the
negotiation, execution and performance of this Agreement.

23. Waivers
-------

The terms of this Agreement may be waived only by a written instrument
signed by the party which would have been able to require compliance. No delay
on the part of either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof. No waiver on the part of either
party of any such right, power or privilege, shall preclude any further exercise
thereof or the exercise of any other such right, power or privilege.

24. Notices
-------

24.1 All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed given: (a) when received
if delivered personally; (b) on the next business day if sent by overnight
service prepaid with instructions for next business day delivery; or (c) on the
day of transmission if telecopied or telegraphed (transmission confirmed), to
the parties at the following addresses and numbers (or to such other persons,
addresses and numbers as a party may have specified by notice given to the other
party pursuant to this provision):

If to WORLDSPAN:

WORLDSPAN, L.P.
300 Galleria Parkway, NW., Suite 2100
Atlanta, Georgia 30339
Attention: Chief Executive Officer
Telecopier No.: (770) 563-7878

with a copy to:

WORLDSPAN, L.P.
300 Galleria Parkway, NW., Suite 2100
Atlanta, Georgia 30339
Attention: Vice President, General Counsel and Secretary
Telecopier No.: (770) 563-7878

If to MICROSOFT:

MICROSOFT CORPORATION
One MICROSOFT Way
Redmond, Washington 98052-6399
Attention: Product Unit Manager - Travel Products Group
Telecopier No.: (206) 936-7329

12
<PAGE>

with a copy to:

MICROSOFT CORPORATION
One MICROSOFT Way
Redmond, Washington 98052-6399
Attention: Legal Department
Telecopier No.: (206) 936-7329

24.2 If either party gives a notice regarding any alleged breach or
default of any term of this Agreement, then such party shall include prominently
on such notice the legend "Notice of Claim of Breach of Contract" or words to
the same effect.

25. Headings
--------

The headings of this Agreement are for reference purposes only and are to
be given no effect in the construction or interpretation of this Agreement.

26. 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 or affecting the validity or enforceability of such provision
in any other jurisdiction.

27. Counterparts
------------

This Agreement may be executed in counterparts, each of which shall be an
original and all of which shall together constitute one and the same instrument.

28. WARRANTY DISCLAIMER
-------------------

28.1 MICROSOFT, ON BEHALF OF ITSELF, ITS SUBSIDIARIES, AFFILIATES, AND
SUBSCRIBERS, ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE PROVIDED HEREIN,
NEITHER WORLDSPAN, ITS PARTNERS, AFFILIATES, NOR ANY SERVICE PROVIDER OR OTHER
SUPPLIER OF DATA PROVIDED THROUGH THE WORLDSPAN SYSTEM WARRANTS THE ACCURACY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY SOFTWARE, DATA OR
EQUIPMENT. MICROSOFT FURTHER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE
PROVIDED HEREIN, WORLDSPAN, ITS PARTNERS, AND AFFILIATES DO NOT MAKE ANY
REPRESENTATIONS OR WARRANTIES CONCERNING THE PARTICIPATION OR IDENTITIES OF
TRAVEL SUPPLIERS OR VENDORS IN THE WORLDSPAN SYSTEM. EXCEPT AS OTHERWISE
PROVIDED HEREIN, NO WARRANTIES, GUARANTEES OR REPRESENTATIONS OF ANY KIND,
EXPRESSED OR IMPLIED, ARE MADE BY WORLDSPAN WITH RESPECT TO THE WORLDSPAN SYSTEM
OR ANY WORLDSPAN SOFTWARE, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

13
<PAGE>

28.2 WORLDSPAN, ON BEHALF OF ITSELF, ITS SUBSIDIARIES, AFFILIATES, AND
SUBSCRIBERS, ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE PROVIDED HEREIN,
NEITHER MICROSOFT, ITS AFFILIATES, NOR ITS AGENTS WARRANTS THE ACCURACY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY SOFTWARE, DATA OR
EQUIPMENT. WORLDSPAN FURTHER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE
PROVIDED HEREIN, MICROSOFT, ITS PARTNERS, AND AFFILIATES DO NOT MAKE ANY
REPRESENTATIONS OR WARRANTIES CONCERNING THE PARTICIPATION LEVEL OF USERS THE
MICROSOFT SYSTEM OR THE REVENUES THAT MIGHT BE GENERATED THEREBY. EXCEPT AS
OTHERWISE PROVIDED HEREIN, NO WARRANTIES, GUARANTEES OR REPRESENTATIONS OF ANY
KIND, EXPRESSED OR IMPLIED, ARE MADE BY MICROSOFT WITH RESPECT TO THE MICROSOFT
SYSTEM, ITS SUBSCRIBERS, OR ANY MICROSOFT SOFTWARE, INCLUDING WITHOUT
LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.

IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed by its respective officer thereunto duly authorized as of the day
and year first above written.

MICROSOFT CORPORATION WORLDSPAN, L.P.

/s/ Patty Stonesifer /s/ Mike Buckman
- --------------------------------- --------------------------------
By (sign) By (sign)

Patty Stonesifer Mike Buckman
- --------------------------------- --------------------------------
Senior Vice President - Consumer Chief Executive Officer, pursuant to
Division a delegation of authority by the
General partners of WORLDSPAN, L.P.

12/22/95
- --------------------------------- ________________________________
Date Date

14
<PAGE>

SCHEDULE 1

DEFINITIONS RELATING TO THE
CRS MARKETING, SERVICES AND DEVELOPMENT AGREEMENT

"ACH" means the Airlines Clearing House

"ARC" means the Airlines Reporting Corporation

"ATA" means the Airline Transport Association

"Additional Development Services" means programming services provided by
WORLDSPAN pursuant to Section 8 of the Agreement to create improvements and
enhancements to the WORLDSPAN System for the benefit of MICROSOFT.

"Computer Reservation System" or "CRS" means an automated system used by travel
agents and other non-airline personnel under contractual agreement, containing
information about the availability of travel related services and goods.

"Confidential Information" shall have the meaning set forth in the Non
Disclosure Agreement. This Agreement shall also be considered Confidential
Information of each party with respect to the other party.

"Contracts" means contracts, leases, sales orders, licenses, agreements,
permits, plans, purchase orders, commitments, collective bargaining agreements,
and other binding arrangements (including, without limitation, capital
commitments and arrangements with respect to construction in progress), whether
oral or written, express or implied.

"CRS Services" means all of the information, data, services, features and
functions of the WORLDSPAN System made available to all Travel Agent customers
of WORLDSPAN from time to time.

"Event of Default" has the meaning assigned in Section 7 of the Agreement.

"Fares/Pricing Services" means the services provided to MICROSOFT through the
WORLDSPAN System with respect to information on fares and the automatic
calculation of prices for air travel itineraries for MICROSOFT System users.

"IATA" means the International Air Transport Association.

"Intellectual Property Right" means each (a) Patent, (b) Trademark, (c) trade
name, (d) knowhow, (e) shop right, (f) copyright, (g) service mark, (h) trade
secret, (i) invention and (j) any Intellectual Property Right.

"Loss" means loss, liability (whether accrued, absolute, contingent, or
otherwise), damages, deficiencies, expenses (including without limitation, fees
and disbursements of counsel and expenses of investigation), claims, liens or
other obligations whatsoever.

15
<PAGE>

"MICROSOFT Network" means the telecommunications network operated and/or managed
by MICROSOFT.

"MICROSOFT Software" means the computer programs and associated documentation,
including source code, used by MICROSOFT in the MICROSOFT Network or otherwise
developed by or licensed to MICROSOFT.

"MICROSOFT System" means the computer hardware, software and related devices and
systems used by, or operated for the benefit of, MICROSOFT to provide an Online
System to customers and MICROSOFT internal users including, without limitation,
the MICROSOFT Software and the MICROSOFT Network. The MICROSOFT System does not
include the WORLDSPAN System.

"MICROSOFT System user" means any person or entity who is entitled to use the
MICROSOFT System.

"Network Services" means data communication services provided through a network.

"Non Disclosure Agreement" means that Microsoft Corporation Non-Disclosure
Agreement between MICROSOFT and WORLDSPAN dated February 10, 1995.

"Online System" means any system or combination of systems for distributing
electronic content or an electronic product or service, digital or otherwise,
via transmission, directly or indirectly, to users, whether over telephone
lines, cable television systems, optical fiber connections, cellular telephones,
satellites, wireless broadcast, or other mode of transmission now known or
subsequently developed.

"Operational Emergency" means (i) any disruption in or impairment of the
operation of the WORLDSPAN System that causes a material interruption in the
normal business operations of any WORLDSPAN Hosted Carrier, or (ii) any problem
or defect in the WORLDSPAN System which, in the reasonable opinion of WORLDSPAN,
either (x) impairs the ability of aircraft of any such carrier to operate safely
pursuant to the laws, rules or regulations of any jurisdiction governing the
flight of such aircraft or (y) poses any imminent risk that the airline
operations conducted by any such carrier will suffer any event, occurrence or
delay that poses a material threat to the safe operation of any aircraft.

"Patents" means patents (including all reissues, divisions, continuation and
extensions thereof), patent applications, patent disclosures docketed and all
other patent rights.

"Person Month" means the equivalent of one person working on average one hundred
seventy (170) hours for a period of thirty (30) consecutive days.

"Power Shopper" means the functionality provided through the WORLDSPAN System to
permit a user to automatically retrieve the lowest priced travel option as more
fully defined in the document entitled "WORLDSPAN Super Transaction
Implementation Guide" as modified on November 13, 1995.

16
<PAGE>

"Response Time" means the time elapsed between delivery of a message to the
WORLDSPAN System, until the response to that message leaves the WORLDSPAN System
(exclusive of the WORLDSPAN Network).

"Rollout Date" means the date that Power Shopper has been through alpha testing,
that changes and/or fixes arising out of alpha testing have been implemented by
WORLDSPAN, and Power Shopper is then released to MICROSOFT for beta testing.

"Term" shall have the meaning assigned in Section 7 of the Agreement.

"Territory" means the geographic territory defined by IATA as Traffic
Conferences 1 and 2, which includes all of the North and South American
continents and adjacent islands, Greenland, Bermuda, the West Indies and Islands
of the Caribbean, the Hawaiian Islands (including Midway and Palmyra), all of
Europe and adjacent islands, Iceland, the Azores, all of Africa and adjacent
islands, Ascension Island and that part of Asia lying west of and including
Iran.

"Trademark" means a trademark, service mark or an application for either.

"Training Materials" means books, instructions, charts, information or programs
used or useful in training or educating a Travel Agent in operating the
WORLDSPAN System, regardless of whether such materials are made available in
print, electronic media, online or otherwise.

"Travel Agent" means each wholesaler, agent or other person who makes travel
arrangements for others for airlines, trains, buses, cruise ships, hotels, car
rentals and the like as well as any corporate travel department, but shall not
include any Travel Supplier.

"Travel Supplier" means each airline, hotel, car rental company, cruise line or
other entity providing travel related goods or services.

"WORLDSPAN Hosted Carrier" means any WORLDSPAN Partner which receives its
internal reservation and/or flight operations functions from the WORLDSPAN
System.

"WORLDSPAN Network" means the telecommunications network operated and/or managed
by WORLDSPAN.

"WORLDSPAN Partner" means any airline that owns, directly or indirectly, an
equity interest in WORLDSPAN, L.P.

"WORLDSPAN Software" means the computer programs and associated documentation,
including source code, used by WORLDSPAN in connection with the operation of the
WORLDSPAN System, including all Improvements.

17
<PAGE>

"WORLDSPAN System" means the computer hardware, software and related devices and
systems used by WORLDSPAN to provide services to MICROSOFT pursuant to the
Agreement including, without limitation, the WORLDSPAN Software and the
WORLDSPAN Network.

"WORLDSPAN Training Materials" means training manuals, books, software and other
materials used or useful in connection with training for WORLDSPAN's Travel
Agent customers.

18
<PAGE>

SCHEDULE 2.1.2

WORLDSPAN INITIAL MINIMUM CAPACITY REQUIREMENTS

WORLDSPAN will provide initial capability to process up to [*] concurrent TPF
transactions during peak hours (7am-7pm EST) and up to [*] concurrent TPF
transactions during off peak hours (7pm-7am EST) submitted from MICROSOFT. This
capacity is expected to be sufficient to process [*] Super Transactions per
second during peak hours and up to [*] super Transactions per second during off-
peak hours. This will be implemented in the form of [*] of terminal addresses
which MICROSOFT can access through the WORLDSPAN Auxiliary Processor. WORLDSPAN
will provide one half the number of terminal addresses guaranteed for the
beginning phase of production by February 15, 1996. During the period February
15, 1996 to August 14, 1996, for agreed upon scheduled periods of at least ten
(10) days every two (2) months, full initial capacity as described above will be
made available for the purpose of stress testing.

WORLDSPAN SYSTEM AVAILABILITY OBJECTIVE

The CRS Services will be available to MICROSOFT on average during any [*]
consecutive month period at least [*] of the time.

Regarding Power Shopper: given that MICROSOFT does not submit at a higher rate
than [*] Power Shopper request per [*] seconds during peak hours (7am-7pm EST)
and [*] Power Shopper per second during off peak hours (7pm-7am EST)WORLDSPAN
will provide a substantive, accurate response [*] of the time.

Prior to Rollout Date

MICROSOFT and WORLDSPAN agree to:

1. Identify all unique Super Transactions which will be generated by MICROSOFT
for processing by the WORLDSPAN System and identify the average TPF
Transaction rate per Super Transaction.

2. Identify profile of Super Transactions activity to include estimates of rates
for entire 24-hour daily periods.

3. Measure current Response Time levels provided to Travel Agent and other
customers of WORLDSPAN System using identical or similar Super Transactions.

4. Identify and implement any necessary changes to the WORLDSPAN System to make
Response Times to MICROSOFT comparable to measurements from point 3 above.

5. MICROSOFT will make changes to its message structure as suggested by
WORLDSPAN to improve Response Times providing the changes do not materially
impact the functionality provided to MICROSOFT System users.

[*] The redacted portion, indicated by this symbol, is the subject of a
confidential treatment request.
19
<PAGE>

Prior to end of Beta Test
- -------------------------

WORLDSPAN and MICROSOFT will mutually agree to the documentation and acceptance
of Response Time objectives above.

The Response Time objectives above shall be available no later than August 14,
1996. In the event the parties are unable to agree to the Response Times to be
imposed during the term of this Agreement, either party may terminate this
Agreement pursuant to Section 7.2.

<PAGE>

SCHEDULE 2.2

WORLDSPAN DEVELOPMENT ITEMS AND DELIVERY DATES

This schedule defines additional functionality in addition to the CRS Services
that WORLDSPAN will provide to MICROSOFT pursuant to the Agreement. Also defined
is the nature and responsibility for the communication link between WORLDSPAN
and MICROSOFT and standards for WORLDSPAN System availability to MICROSOFT
during development.

General Nature of Work
MICROSOFT requires a set of changes to the WORLDSPAN System in order to build
the initial version of the product to be included with the Microsoft System.
Other changes may be necessary to support future versions. The changes described
in this subsection are general only, and more detailed descriptions follow
below. Although all requests in this Schedule 2.2 refer to Super Transaction,
other functionally similar structured message interfaces may be substituted
following MICROSOFT's consent. The changes fall into four categories:

1. Provide functionality through the Super Transaction API that exists on the
native host systems but is not currently available through Super Transaction.
Where practical, MICROSOFT will in its discretion attempt to leverage the
existing capability of the host systems and not require new functionality at the
host level. However, new host system capability may be needed in some areas.
2. Provide enhanced shopping capabilities.
3. Provide support for automating processes that an experienced travel agent
could perform using the existing WORLDSPAN System. For example, interpreting
fares rules and applying applicable discounts.
4. Support MICROSOFT's ability to provide travel agency operations (ticketing,
queue management, etc.) and telephone support, either directly or through
agreement with third parties.

Existing Functionality
MICROSOFT will have the ability to use all functionality described in "WORLDSPAN
Super Transaction Specifications" dated December 1, 1995. All functionality
described in the Specifications will work as documented. Any functionality
described in the Specifications but not yet implemented will be accessible by
MICROSOFT by December 15, 1995.

All transactions will return complete, accurate and reliable information. [*] of
all software defects reported by MICROSOFT will be resolved in 30 days or less
unless by mutual agreement the time limit is extended. Resolution will either
mean the defect is fixed or a suitable work around is identified. A "software
defect" means any documented occurrence of an instance where the software does
not perform according to its published specifications.

Summary of the Requirements for New Work
The following enhancements will be required:

[*]

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

21
<PAGE>

Air Transactions
- ----------------

[*]

Hotels
- ------

[*]

Other
- -----

[*]

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

22
<PAGE>

Communication Links
- -------------------
WORLDSPAN will provide the following communication links with MICROSOFT:

The existing dial-in X.25 link to Atlanta provided for test purposes shall
continue through the Term of the Agreement. MICROSOFT pays for the phone costs
and WORLDSPAN maintains the internal connections and hardware to WORLDSPAN's
systems.

By November 30, 1995, WORLDSPAN will provide a leased line X.25 connection to
the point-of-presence at the local telephone provider in Bellevue Washington.
This will operate at speeds no less than 56KB/sec. WORLDSPAN will pay for all
traffic generated and the cost of installation to the point-of-presence. This
line will be used for continued test and development of the products. This will
be maintained for the Term of the Agreement.

By January 1, 1996, WORLDSPAN will provide one leased line X.25 connection to a
point of presence identified above to WORLDSPAN production facilities. This will
operate at speeds no less than 56KB/sec. WORLDSPAN will pay for all traffic
generated and the cost of installation to the point-of-presence. This line will
be used for final beta testing. This will be maintained for the Term of the
Agreement.

By February 15, 1995, WORLDSPAN will provide two more leased lines X.25
connection to a point of presence identified above to WORLDSPAN production
facilities. These will operate at speeds no less than 56KB/sec. WORLDSPAN will
pay for all traffic generated and the cost of installation to the point-of-
presence. This line will be used for production uses. This will be maintained
for the Term of the Agreement.

For each communications facility described above, WORLDSPAN will provide the
same level availability as provided to its highest volume travel agencies using
similar facilities.

The technology used to support any of the above links can be modified to provide
higher bandwidth, lower cost or better security so long as such modifications do
not materially adversely affect WORLDSPAN's performance standards hereunder.

23
<PAGE>

AMENDMENT NO. 1
TO CRS MARKETING, SERVICES AND DEVELOPMENT AGREEMENT

THIS AMENDMENT NO. 1 TO CRS MARKETING, SERVICES AND DEVELOPMENT AGREEMENT, dated
and effective as of January 1, 1997 ("Amendment"), by and between Microsoft
Corporation, a Washington corporation ("MICROSOFT") with its principal office at
One Microsoft Way, Redmond, Washington 98052, and WORLDSPAN, L.P., a Delaware
limited partnership ("WORLDSPAN"), with its principal office at 300 Galleria
Parkway, NW, Atlanta, Georgia 30339.

MICROSOFT and WORLDSPAN are parties to that certain CRS Marketing, Services and
Development Agreement dated December 15, 1995 (the "Agreement").

WORLDSPAN and MICROSOFT now desire to modify the Agreement.

Now, Therefore, in consideration of the above recitals, the mutual undertakings
of the parties as contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties to
this Amendment hereby agree as follows:

1. Definitions
-----------

Terms in capitalized form used in this Amendment shall have the meanings
set forth in Schedules 1 and 2.1.2. Terms in capitalized form not defined in
this Amendment shall have the meanings set forth in the Agreement.

2. Travel Supplier Billings
------------------------

A new Section 29 is hereby added to the Agreement to provide as follows:

29. Travel Supplier Billings
------------------------

29.1 Notwithstanding anything in this Agreement to the contrary,
commencing with Car and Hotel Bookings as of January 1, 1997,
WORLDSPAN agrees to prepare and deliver to MICROSOFT and/or its
designated service provider reasonably approved by WORLDSPAN, a report
showing the Car and Hotel Bookings made through MICROSOFT System
during the preceding calendar month (the "Booking Report"). The
Booking Reports shall be delivered not more than ten (10) days
following the end of the month in which the Car and Hotel Bookings
occurred. Each Booking Report shall be provided in printed form and on
electronic media according to the following specifications: delimited
text file and print file, both available for download via modem by
MICROSOFT and/or its designated service provider. Each Booking Report
shall include, for each Car and Hotel Booking, the date made, name of
the traveler, and such other information normally provided by
WORLDSPAN to the Participating Car or Participating Hotel in
connection with WORLDSPAN's invoice for the Bookings. WORLDSPAN shall
use reasonable business efforts to obligate, where applicable,
Participating Cars and Participating Hotels to pay Car and Hotel Fees
to MICROSOFT instead of WORLDSPAN. MICROSOFT understands and
<PAGE>

agrees that WORLDSPAN may directly bill certain Participating Cars and
Participating Hotels for Bookings made by MICROSOFT System users.
MICROSOFT shall be responsible at its expense for contracting with
Travel Suppliers with regard to payment of MICROSOFT's charges and
other matters related to Bookings from the MICROSOFT System.

29.2 With respect to Bookings made through the MICROSOFT System, the
parties acknowledge that Participating Cars and Participating Hotels
may agree to provide MICROSOFT with a negotiated rate agreed upon by
MICROSOFT and the applicable Travel Supplier ("Negotiated Car and
Hotel Rates") in lieu of the customary industry commissions. MICROSOFT
shall provide to WORLDSPAN a list indicating whether a Participating
Car or Hotel has elected to pay a Negotiated Car and Hotel Rate on a
monthly basis. Exhibit A sets forth the Participating Cars and
Participating Hotels that have agreed to pay the Negotiated Car and
Hotel Rates as of the effective date of this Amendment. WORLDSPAN
shall prepare a monthly invoice based upon the list described above
and the monthly Booking Report, and MICROSOFT shall pay WORLDSPAN [*]
per Net Booking made by MICROSOFT System users with respect to
Participating Cars and Participating Hotels that have elected to pay
the Negotiated Car and Hotel Rates. (The amount to be paid with
respect to other Travel Suppliers (i.e., cruises and tours), if any,
shall be determined by mutual written agreement of the parties.) Such
invoiced amount shall be paid by MICROSOFT within sixty (60) days of
receipt of WORLDSPAN's invoice. In the event a Participating Car or
Participating Hotel fails to pay MICROSOFT the Negotiated Car and
Hotel Rates for three (3) consecutive months, and MICROSOFT, despite
using reasonable business efforts, is unable to collect any such fees,
MICROSOFT will notify WORLDSPAN in writing of such uncollected amounts
and the parties will discuss the appropriate next steps. If such
Participating Car or Participating Hotel continues to fail to pay
MICROSOFT the Negotiated Car and Hotel Rates for an additional thirty
(30) days after the date of the notice, then MICROSOFT may elect
either (i) to continue to pay to WORLDSPAN the [*] per Net Booking
incurred despite its inability to collect or (ii) to agree to remove
the defaulting Participating Car or Participating Hotel from this
Section 29.2 and to permit WORLDSPAN to directly invoice such
defaulting Participating Car or Participating Hotel the standard
WORLDSPAN Car or Hotel Fee in which case WORLDSPAN will refund (or
otherwise offset from amounts owed by MICROSOFT to WORLDSPAN
hereunder) the amounts paid to WORLDSPAN by MICROSOFT for such
uncollected Bookings (provided, however, WORLDSPAN will not be
required to refund any amounts where MICROSOFT fails to collect due to
a marketing or other arrangement with a Participating Car or
Participating Hotel).

29.3 If WORLDSPAN elects to terminate the availability of a Travel
Supplier participating in the WORLDSPAN System, WORLDSPAN shall notify
MICROSOFT as soon as reasonably practicable and shall use commercially
reasonable efforts to make arrangements appropriate for handling the
existing Bookings of such Travel Supplier made by MICROSOFT users
through the WORLDSPAN System.

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

2
<PAGE>

29.4 WORLDSPAN and MICROSOFT reserve the right to charge Travel
Suppliers for other services and products, and to modify their
respective fees and charges with Travel Suppliers. In the event that
WORLDSPAN changes its Car and Hotel Fee, such change shall not affect
the distribution of the fees collected by MICROSOFT from such
Participating Cars or Participating Hotels as set forth in this
Amendment above unless otherwise agreed to by the parties in writing.

29.5 MICROSOFT shall make available to WORLDSPAN upon request any of
its books, records and reports as are reasonably necessary to confirm
the reports or statement provided by MICROSOFT hereunder.

3. Payment
-------

Section 9.2 of the Agreement is hereby deleted and replaced by the
following new Section 9.2:

9.2 Each party shall pay all amounts due hereunder calculated pursuant to
the formulas and otherwise in the manner set forth in this Agreement.
Except as otherwise specified, payment shall be made within thirty (30)
days of an invoice or, where the amount owed is determined by the paying
party, within sixty (60) days of the end of the month, quarter or other
period to which the obligation applies. All payments to be made to
MICROSOFT shall be sent to the following address (or to such other address
as MICROSOFT so designates in writing to WORLDSPAN):

Microsoft North American Collections
Attn: Dept. 551 - Special Agreements
P.O. Box 844505
Dallas, TX 75284-4505

4. System Capacity
---------------

Section 2.1.2 of the Agreement is hereby deleted and replaced by the
following new Section 2.1.2:

2.1.2 To ensure reasonable capacity is available and subject to
Section 3.1, WORLDSPAN shall make available to MICROSOFT processing
capacity from the WORLDSPAN System according to the specifications set
forth on Schedule 2.1.2 attached hereto and as otherwise provided in
this Agreement. MICROSOFT shall not have any proprietary rights in any
equipment or software acquired by WORLDSPAN to provide capacity
hereunder. Once each calendar month during the term of this Agreement,
MICROSOFT and WORLDSPAN agree to discuss the WORLDSPAN System capacity
available to MICROSOFT and MICROSOFT's projections with respect to its
total capacity requirements. Based upon such meetings and projections,
the parties shall implement in good faith any necessary changes
mutually agreed upon, including but not limited to the WORLDSPAN
System capacity and other technical issues and shall document such
changes in a revised Schedule 2.1.2. MICROSOFT and WORLDSPAN

3
<PAGE>

shall bear the costs and expenses associated with any expansion of
capacity of the WORLDSPAN System only to the extent expressly agreed
to herein by the parties in writing.

5. Revenue Share; Capacity Fees.
----------------------------

(a) Effective as of January 1, 1997, Section 11.1 of the Agreement
is hereby deleted and replaced by the following new Section 11.1:

11.1. A. As additional consideration for the promises made by
WORLDSPAN in this Agreement including, but not limited to the promises
regarding WORLDSPAN System capacity, MICROSOFT shall pay WORLDSPAN [*]
within thirty (30) days of the signing date of this Amendment.
Additionally, MICROSOFT shall pay WORLDSPAN [*] within thirty (30)
days of the signing of this Amendment.

B. (i) The parties agree that WORLDSPAN shall pay to
MICROSOFT the base revenue share amount indicated in the attached
Appendix 1 ("Base Revenue Share") and the incentive revenue share
amount indicated in the attached Appendix 1 (`Incentive Revenue
Share") with respect to all Airline Fees generated by MICROSOFT System
users through the MICROSOFT System. Within sixty (60) days after the
end of each calendar month, WORLDSPAN shall furnish MICROSOFT with a
statement together with payment for all amounts shown thereby to be
due to MICROSOFT. The statement shall be based upon the Base Revenue
Share and the Incentive Revenue Share (together, the "Revenue Share")
for the month preceding the month then ended, and shall contain
information sufficient to discern how the Revenue Share was computed.

(ii) At the end of each calendar year, WORLDSPAN shall
reconcile the amounts billed to and paid by Participating Airlines for
Bookings made by MICROSOFT System users. In the event a Participating
Airline fails to pay and WORLDSPAN, despite using reasonable business
efforts, is unable to collect Airline Fees from such Participating
Airline, WORLDSPAN shall notify MICROSOFT in writing of such
uncollected amounts. Within thirty (30) days of receipt of WORLDSPAN's
notice, MICROSOFT will refund (or WORLDSPAN may set off from amounts
owed by WORLDSPAN to MICROSOFT hereunder) the amounts paid to
MICROSOFT by WORLDSPAN for such Bookings. MICROSOFT shall not be
required to refund any amounts where WORLDSPAN's fails to collect due
to a marketing or other arrangement with a Participating Airline.

(iii) Notwithstanding the foregoing, MICROSOFT and WORLDSPAN
agree to discuss in good faith the revenue share that would apply in
the event a significant or major airline becomes a Participating
Airline.

C. MICROSOFT agrees to pay to WORLDSPAN the Base Capacity Fee
(as defined in Schedule 2.1.2) each month during the term of this
Agreement. The Base Capacity Fee shall be the full amount due to
WORLDSPAN from

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

4
<PAGE>

MICROSOFT with respect to the provision of Base Capacity (as defined
in Schedule 2.1.2). The Base Capacity Fee may be adjusted in
accordance with the provisions set forth in Schedule 2.1.2.
Additionally, MICROSOFT agrees to reimburse WORLDSPAN for the charges
incurred by WORLDSPAN with respect to direct communication lines and
frame relay access devices (each party is responsible for its own
installation and ongoing costs of circuits and equipment necessary to
connect such party's facilities to the local exchange carrier's
termination of the frame relay circuits) that are requested by
MICROSOFT through its Product Unit Manager for the Travel Group
("Direct Communication Fees") and to pay the direct costs related to
terminal addresses used in connection with the MICROSOFT System by
MICROSOFT's fulfillment partner ("Fulfillment Partner Fees").
WORLDSPAN shall invoice MICROSOFT for the Base Capacity Fee, the
Direct Communication Fees, and the Fulfillment Partner Fees on a
monthly basis and shall also include a written report of the PS Rate
for the applicable month and a summary of number of sessions used by
MICROSOFT in connection with the MICROSOFT System. MICROSOFT shall pay
the invoiced amount within thirty (30) days after receipt of the
invoice.

D. WORLDSPAN shall make available to MICROSOFT upon request
any of its books, records and reports as are reasonably necessary to
confirm the reports or statements provided by WORLDSPAN hereunder.

(b) Section 11.2 of the Agreement is hereby deleted and
replaced with the following new Section 11.2:

11.2 Other than payments made by MICROSOFT for Additional
Development Services and the amounts to be paid by MICROSOFT and
WORLDSPAN, if any, pursuant to new Sections 11.1 and 29, MICROSOFT and
WORLDSPAN agree that each shall bear its own expenses incurred in the
performance of this Agreement. Not later than June 1, 1999, the
parties shall begin to confer for the purpose of determining the need
for making any change to the financial aspects of this Agreement for
the period after September 30, 1999, principally the sharing of
revenues received by WORLDSPAN from Travel Suppliers for Bookings
generated by MICROSOFT System users and expenses incurred by WORLDSPAN
in excess of the anticipated expenses. If the parties are unable to
agree to an arrangement for the period after September 30, 1999, the
Agreement shall continue according to the terms in effect on September
30, 1999, subject to each party's rights in Section 7.2 of this
Agreement.

6. Confidentiality
---------------

The terms and conditions contained in this Amendment shall be
considered Confidential Information in accordance with Section 12 of the
Agreement.

7. Other Products and Services.
---------------------------

With respect to other products and services through which MICROSOFT
may desire to use WORLDSPAN System, including but not limited to, certain
private label products, the parties will discuss in good faith how such
products and services may be

5
<PAGE>

included under the terms of this Agreement.

8. Other Agreements
----------------

(a) Use of WORLDSPAN Logo. MICROSOFT agrees that it will include the
---------------------
WORLDSPAN Wired logo on the bottom of the MICROSOFT Expedia home page.
Placement and size of the logo will be determined by MICROSOFT, however
MICROSOFT will use its best efforts to feature the WORLDSPAN logo in a
manner similar to the presentation of any other third party logo featured
on the MICROSOFT Expedia home page.

(b) Updated Hotel Data. WORLDSPAN agrees, on at least a monthly basis
------------------
until September 30, 1999, to continue to provide and license to MICROSOFT,
subject to Section 4.3 of the Agreement, updated pricing information and
data regarding hotel and other lodging services. WORLDSPAN shall not be
obligated to provide any such pricing information and data supplied by
third parties where WORLDSPAN's agreement with such third party prohibits
providing such data to MICROSOFT or for which WORLDSPAN is required to pay
a fee and the provision of such pricing information and data is subject to
the disclaimer of warranty set forth in Section 28 of the Agreement.
Additionally, pursuant to the Section 4.3 of the Agreement, MICROSOFT has
updated certain information and data regarding hotel and other lodging
services received from WORLDSPAN as of the Effective Date of this Amendment
("Updated Hotel Data"). MICROSOFT hereby grants to WORLDSPAN a perpetual,
nonexclusive, royalty-free worldwide license and right to: (i) develop,
market, sell, make, use, reproduce, modify, adapt, create derivative works
based on, translate, distribute (directly and indirectly), transmit,
display and perform publicly, license, rent, lease, and sell such Updated
Hotel Data on printed, electronic or other fixed media, and to sublicense
any or all of the foregoing rights, including the right to sublicense such
rights to third parties; and (ii) create, develop, market, distribute,
transmit, license, sub-license and sell such Updated Hotel Data. WORLDSPAN,
ON BEHALF OF ITSELF, ITS SUBSIDIARIES, AFFILIATES AND SUBSCRIBERS,
ACKNOWLEDGES AND AGREES THAT NEITHER MICROSOFT, ITS AFFILIATES, NOR ITS
AGENTS WARRANTS THE ACCURACY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OF THE UPDATED HOTEL DATA. WORLDSPAN FURTHER ACKNOWLEDGES AND
AGREES THAT MICROSOFT, ITS AFFILIATES, AND AGENTS DO NOT MAKE ANY
REPRESENTATIONS OR WARRANTIES CONCERNING THE UPDATED HOTEL DATA. To the
extent that MICROSOFT, in its sole discretion, updates or modifies the
Updated Hotel Data from the Effective Date until September 30, 1999,
MICROSOFT agrees to provide such updates or modifications to the Updated
Hotel Data to WORLDSPAN without cost. MICROSOFT shall not be obligated to
provide any Updated Hotel Data supplied by third parties where MICROSOFT's
agreement with such third party prohibits providing such data to WORLDSPAN
or for which MICROSOFT is required to pay a fee.

(c) Minimum Performance Functionality. From the Effective Date of
---------------------------------
this Amendment through September 30, 1999, WORLDSPAN agrees to provide the
same or comparable significant functionality tools and features (such as a
ticketless functionality) as other computer reservation systems. So long as
WORLDSPAN complies with the foregoing, MICROSOFT agrees that it will
maintain from the Effective Date of this

[*] The redacted portion, indicated by this symbol, is the subject of a
confidential treatment request.

6
<PAGE>

Amendment through September 30, 1999; on a calendar quarterly basis, at
least [*] CRS booking share from Expedia North America on the WORLDSPAN
System. At any time after MICROSOFT enters into an agreement with another
computer reservation system for [*], MICROSOFT shall provide WORLDSPAN with
a quarterly report that details bookings made by Expedia North American
users. In the event MICROSOFT does not maintain at least a [*] CRS booking
share from Expedia North America on the WORLDSPAN System, the amounts
otherwise payable to MICROSOFT pursuant to Section 5 of this Amendment and
Appendix 1 shall be reduced by [*].

9. Effective Date
--------------

Except as provided in this Amendment or the schedules, the provisions
of this Amendment shall be effective as of the date specified in the
preamble to this Amendment.

10. Continuation of Agreement
-------------------------

Except as provided in this Amendment, the Agreement shall continue in
full force and effect.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their duly authorized undersigned representatives as of the date first above
written.

MICROSOFT CORPORATION WORLDSPAN, L.P.

By: /s/ John Neilson By: /s/ Mike Buckman
--------------------------- ------------------------------
Print Name: John Neilson Print Name: Mike Buckman
------------------- ----------------------
Title: Vice President Title: Chief Executive Officer
------------------------ ---------------------------
Date : 6-16-97

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

7
<PAGE>

SCHEDULE I
DEFINITIONS RELATING TO THE AMENDMENT TO THE
CRS MARKETING, SERVICES AND DEVELOPMENT AGREEMENT

"Airline Fee" means the fee charged by WORLDSPAN to a Participating Airline for
Bookings and other transactions made through the WORLDSPAN System by MICROSOFT
System users.

"Base Capacity" has the meaning set forth in Schedule 2.1.2.

"Base Capacity Fee" has the meaning set forth in Schedule 2.1.2.

"Base Revenue Share" has the meaning set forth in Section 5 of the Amendment.

"Booking" means a reservation, electronic message or other transaction made
through the WORLDSPAN System with respect to a Travel Supplier for which
WORLDSPAN charges a fee.

"Booking Report" has the meaning set forth in Section 2 of the Amendment.

"Car and Hotel Booking" means a reservation or other transaction made through
the WORLDSPAN System with respect to a Participating Car or Participating Hotel
for which WORLDSPAN charges a fee.

"Car and Hotel Fee" means the fee charged by WORLDSPAN to Participating Cars and
Participating Hotels for Bookings and other transactions made through the
WORLDSPAN System by MICROSOFT users.

"Direct Communication Fees" has the meaning set forth in Section 5 of the
Amendment.

"Fulfillment Partner Fees" has the meaning set forth in Section 5 of the
Amendment.

"Incentive Revenue Share" has the meaning set forth in Section 5 of the
Amendment.

"Negotiated Car and Hotel Rates" has the meaning set forth in Section 2 of the
Amendment.

"Net Booking" means the total number of Bookings generated for a Travel Supplier
by a MICROSOFT System user during a calendar month, minus the cancellations
accepted by WORLDSPAN for such Travel Supplier.

"Off-Peak Time" has the meaning set forth in Schedule 2.1.2.

"Off-Peak Power Shopper Factor" or "Off-Peak PS Factor" has the meaning set
forth in Schedule 2.1.2.

"Participating Airline" means an airline that is a party to an agreement with
WORLDSPAN for participation in the WORLDSPAN System and which pays WORLDSPAN
Airline Fees.
<PAGE>

"Participating Car" means a single company or facility that rents or leases cars
or other vehicles, a chain of such companies, or an entity representing a group
of car or other vehicle rental facilities that is a party to an agreement with
WORLDSPAN for participation in the WORLDSPAN System and which pays WORLDSPAN a
fee.

"Participating Hotel" means a single hotel or other lodging facility, chain of
hotels or lodging facility, or entity representing a group of hotels or lodging
facilities, that is a party to an agreement with WORLDSPAN for participation in
the WORLDSPAN System and which pays WORLDSPAN a fee.

"Peak Time" has the meaning set forth in Schedule 2.1.2

"Peak Power Shopper Factor" or "Peak PS Factor" has the meaning set forth in
Schedule 2.1.2.

"Power Shopper Rate" or "PS Rate" has the meaning set forth in Schedule 2.1.2.

"Revenue Share" has the meaning set forth in Section 5 of the Amendment.

"Segment" means each passenger leg created in a passenger name record booked in
the WORLDSPAN System by a MICROSOFT System user less cancellations.

"Updated Hotel Data" has the meaning set forth in Section 8 of the Amendment.

"WORLDSPAN Sessions" has the meaning set forth in Schedule 2.1.2.
<PAGE>

SCHEDULE 2.1.2
CAPACITY REQUIREMENTS

1. Base Capacity; Base Capacity Fees.
---------------------------------

The table below sets forth the initial base capacity that WORLDSPAN will provide
to MICROSOFT as measured by a Power Shopper Rate (during both Peak and Off-Peak
Times) for each identified usage by the MICROSOFT System. MICROSOFT may change
the initial base capacity pursuant to Section 2 of this Schedule 2.1.2, and the
base capacity at any time during the term is defined herein as "Base Capacity".

In consideration for the Base Capacity, MICROSOFT will pay the total Base
Capacity Fees indicated in the table below on a monthly basis in accordance with
Section 5(a) of the Amendment. MICROSOFT will receive a [*] discount from the
Base Capacity Fee in any month if (and subject to Section 3.1 of the Agreement)
i) WORLDSPAN provides a substantive, accurate response to MICROSOFT's processor
[*] of the time during the month, or (ii) WORLDSPAN fails to provide the Base
Capacity in any period during the month.
(excluding any downtime)

If MICROSOFT decides to change the level of Base Capacity (in accordance with
the procedure outlined in Section 2 below), the Base Capacity Fees will be
increased or decreased, as applicable, by [*] per WORLDSPAN Session (SMI/ST/DIR)
per month as a result of the requested change in Base Capacity. The table below
indicates the additional fee that will be incurred by MICROSOFT for one
additional Power Shopper message per second that may be requested by MICROSOFT.
Any changes to Base Capacity will be billed effective as of the first day of the
month such change is implemented by WORLDSPAN.

If MICROSOFT exceeds the indicated Base Capacity by [*] or less for any given
minute during the month, then MICROSOFT will pay to WORLDSPAN the applicable
Base Capacity Fee. If MICROSOFT exceeds the indicated Base Capacity by [*] or
less but more than [*] for any given minute during the month, then MICROSOFT
will pay to WORLDSPAN the applicable Base Capacity Fee and the pro-rated portion
of the Base Capacity Fee for the amount of capacity used in excess of Base
Capacity. If MICROSOFT exceeds the indicated Base Capacity by more than [*] for
any given minute during the month, then MICROSOFT will pay to WORLDSPAN the
applicable Base Capacity Fee, the pro-rated portion of the Base Capacity Fee for
the amount of capacity used in excess of Base Capacity, and the penalty fee
indicated in the "Penalty" column of the Table.

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

<PAGE>

Microsoft Base Capacity Table

[*]

2. Procedure for Changing Base Capacity.
------------------------------------

MICROSOFT may from time to time during the term of this Agreement request
changes to Base Capacity. Changes to Base Capacity may be requested only by the
MICROSOFT Product Unit Manager for the Travel Group to the WORLDSPAN Product
Specialist - Expedia. Requests must be made by email, fax or letter. MICROSOFT
will pay for expanded capacity only to the extent requested by MICROSOFT.

WORLDSPAN shall provide the requested changes to the Base Capacity on the
following schedule, provided however that MICROSOFT may not request a change of
more than [*] Power Shopper messages per second at any one time:

. within two (2) weeks after receiving notice for a less than [*]
increase or decrease (based upon the total Power Shopper messages per
second or sessions for the MICROSOFT System) for existing SMI/ST/DIR
sessions.

. within sixty (60) days after receiving notice for a more than [*]
increase or decrease (based upon the total Power Shopper messages per
second or sessions for the MICROSOFT System) for an existing
SMI/ST/DIR sessions.

. within sixty (60) days after receiving notice for a new SID.

Notwithstanding the above schedule, WORLDSPAN will only be required to provide a
change in Base Capacity that equals [*] per second (or more) within sixty (60)
days after receiving notice of the request. Additionally, WORLDSPAN shall not be
required to provide to MICROSOFT more than [*] Power Shopper messages per second
in connection with the uses by the MICROSOFT System as set forth in the above
Table (or subsequent versions of the Table). The parties agree to discuss in
good faith applicable capacity issues in the event MICROSOFT desires to obtain
more than [*] Power Shopper messages per second in connection with the uses of
the MICROSOFT System as set forth in the above Table (or subsequent versions of
the Table). WORLDSPAN may reject messages from the MICROSOFT System to the
extent that capacity for any given minute during the month exceeds the indicated
Base Capacity by more than [*] if it causes a denigration of the WORLDSPAN
System.

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

<PAGE>

3. Other Requirements
------------------

In connection with providing Base Capacity, WORLDSPAN agrees to configure its
Power Shopper capacity to accept a Power Shopper message for each SMI session.
MICROSOFT will be responsible for appropriately "throttling" the Power Shopper
messages per second rate to its associated Base Capacity. Additionally,
WORLDSPAN will provide [*] two test labs on the WORLDSPAN test systems for
customer test as a cost of doing business and will not be used in billing
calculations.

Current WORLDSPAN capacity configuration may be adjusted at MICROSOFT's request
per Section 2 above (i.e. - [*] sessions can be changed to [*] sessions).

[*]

4. Capacity Meetings and Reports.
-----------------------------

WORLDSPAN will provide the following information and reports to MICROSOFT on a
monthly basis prior to the capacity meetings described in Section 4 of the
Amendment:

[*]

5. Changes to Schedule 2.1.2. The parties may revise and amend this Schedule
-------------------------
2.1.2 from time to time during the term of the Agreement. Any amended Schedule
2.1.2 must be signed by both parties and attached to the Agreement.

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

<PAGE>

6. Definitions.
-----------

Subject to Section 1 of the Amendment, the following are the defined terms for
the purposes of this Schedule 2.1.2:

"Base Capacity" means the PS Rate supported by WORLDSPAN for the MICROSOFT
System.

"Base Capacity Fees" means the fees set forth in the Microsoft Base Capacity
Table in Section 1 of this Schedule 2.1.2.

"Off-Peak Time" means 19:00 Eastern Time - 7:00 Eastern Time.

"Power Shopper" or "PS" means the functionality provided through the WORLDSPAN
System to permit a user to automatically retrieve the lowest priced travel
option as more fully defined in the document entitled "WORLDSPAN Super
Transaction Implementation Guide" as modified on November 13, 1995.

"Peak Time" means 07:00 Eastern Time - 19:00 Eastern Time.

"Power Shopper Rate" or "PS Rate" means the number of PS requests received by
WORLDSPAN from the MICROSOFT System per second averaged over a fixed one minute
period.

"WORDSPAN Sessions" means the total of SMI sessions, ST sessions and DIR
sessions requested by MICROSOFT that are connected to the production WORLDSPAN
TPF system.

"Peak Power Shopper Factor" or "Peak PS Factor" = [*]

"Off-Peak Power Shopper Factor" or "Off-Peak PS Factor" = [*]

(Note - Peak and Off Peak Power Shopper Factor are determined from the current
MICROSOFT configuration of PS enabled sessions for the MICROSOFT US Expedia
product.)

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

<PAGE>

APPENDIX I
REVENUE SHARE MATRIX

The Revenue Share payable by WORLDSPAN to MICROSOFT shall consist of a Base
Revenue Share and an Incentive Revenue Share.

The Base Revenue Share of Airline Fees shall be based on the number of Power
Shopper messages per net Segment per month. The "Base Revenue Share" column
indicates that percentage amount of Airline Fees that will be paid by WORLDSPAN
to MICROSOFT in accordance with Section 5 of the Amendment from dollar one.

Power Shopper Message Base Revenue
----- ------- ------- ------------
Per Net Segment Per Month Share
------- ------- --------- -----
35.01 And Above Renegotiate
30.01 35.00
29.01 30.00
28.01 29.00
27.01 28.00
26.01 27.00
25.01 26.00
23.01 25.00
21.01 23.00
19.01 21.00
17.01 19.00
15.01 17.00
13.01 15.00
11.01 13.00
9.01 11.00
7.01 9.00
5.01 7.00
Below 5.01

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

<PAGE>

The Incentive Revenue Share shall be based on the number of net Segments
generated by MICROSOFT System users each month. The Incentive Revenue Share
column indicates the percentage of Airline Fees that will be paid by WORLDSPAN
to MICROSOFT on an incremental basis.

[*]

For example, and subject to the limitation in the next paragraph, if the net
Segments for a particular month total [*], WORDSPAN will pay Microsoft an
incentive Revenue Share equal to [*] for net Segments that exceed [*] but are
less than [*] plus [*] for net Segments that exceed [*] but are less than [*].

The maximum Revenue Share of Airline Fees to be paid by WORLDSPAN to
MICROSOFT on a monthly basis shall not exceed [*]

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

<PAGE>

EXHIBIT A

List of Participating Hotels and Participating Cars Paying Negotiated Car and
Hotel Rates

Participating Hotels:

[*]

Participating Cars;

[*]

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

<PAGE>

Amendment No. 2
to CRS Marketing, Services and Development Agreement

This Amendment No. 2 to the CRS Marketing, Services and Development Agreement
(the "Amendment") is entered into as of July 27, 1998 (the "Amendment Effective
--
Date") by and between Microsoft Corporation, a Washington corporation
("Microsoft") with its principal office at One Microsoft Way, Redmond,
Washington 98052, and WORLDSPAN, L.P., a Delaware limited partnership
("WORLDSPAN"), with its principal office at 300 Galleria Parkway, NW, Atlanta,
Georgia 30339.

Recitals

Microsoft and WORLDSPAN are parties to that certain CRS Marketing, Services
and Development Agreement dated December 15, 1995, as amended by the parties
pursuant to that certain Amendment No. 1 dated January 1, 1997 (collectively,
the "Agreement").

Microsoft and WORLDSPAN seek to modify the Agreement as set forth herein
to provide an additional avenue for mutual cooperation wherein WORLDSPAN will
encourage certain travel suppliers to join the Microsoft Expedia Associates
Program, and WORLDSPAN and Microsoft will share WORLDSPAN revenues created from
travel bookings deriving from customers who access Expedia (and WORLDSPAN) via
the web sites of such new Associates.

Now, therefore, in consideration of the above recitals, the mutual
undertakings of the parties as contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Amendment hereby agree as follows:

Agreement

1. Definitions

Terms in capitalized form used in this Amendment shall have the meanings
set forth in Schedule I of this Amendment or in the text of this Amendment.
Terms in capitalized form not defined in Schedule I or in the text of the
Amendment shall have the meanings set forth in the Agreement.

2. Revenue Share; Capacity and SID Fees

A new Section 11.3 is hereby added to the Agreement to provide as follows:

11.3. WORLDSPAN Expedia Associates Program
------------------------------------

A. Notwithstanding anything to the contrary in this Section
11, effective as of the Amendment Effective Date, the parties agree that
all Airline Fees generated with respect to WORLDSPAN/EAP Bookings shall be
shared [*] by the parties. The revenue share matrix set forth in Appendix 1
of Amendment No. 1 shall not apply to WORLDSPAN/EAP Bookings. In addition,
the additional fees charged by WORLDSPAN as referred to in Section 30.6
herein shall be reported to Microsoft, but this revenue will not be shared.

B. Within sixty (60) days after the end of each calendar
month, WORLDSPAN shall furnish Microsoft with a statement regarding, and
full payment for, all

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

1
<PAGE>

amounts due to Microsoft pursuant to subsection A above. WORLDSPAN shall be
responsible for tracking the source of all its Bookings to enable the
parties to determine which Bookings qualify as WORLDSPAN/EAP Bookings
subject to Section 1l.3. A above. At the end of each calendar year,
WORLDSPAN shall reconcile the amounts billed to and paid by WORLDSPAN
Expedia Associates. In the event a WORLDSPAN Expedia Associate fails to pay
and WORLDSPAN, despite using reasonable business efforts, is unable to
collect Airline Fees from such WORLDSPAN Expedia Associate, WORLDSPAN will
deduct [*] of the amount not collected from such WORLDSPAN Expedia
Associate from amounts otherwise owed by WORLDSPAN to Microsoft.

C. The parties further acknowledge and agree that, with respect
to all WORLDSPAN/EAP Bookings, there shall be no Incentive Revenue Share
payable to either party.

D. Capacity for WORLDSPAN/EAP Bookings shall be provided by
WORLDSPAN and paid by Microsoft in accordance with Schedule 2.1.2 of
Amendment No. 1.

E. In the event WORLDSPAN EAP Air Bookings exceed [*] per month
in any month during the first year following the Amendment Effective Date,
Microsoft shall arrange and pay for up to [*]. WORLDSPAN shall use such
tickets as incentives to be provided to WORLDSPAN employees (and their
guests) who market Expedia to Eligible Customers.

F. Microsoft agrees to process any and all WORLDSPAN Expedia
Associates' car and hotel bookings, reservations and other transactions via
the WORLDSPAN System, regardless of whether Microsoft uses any other CRS to
process such car and hotel bookings reservations or other transactions for
other providers.

3. WORLDSPAN Marketing of Expedia Associate Program

A new Section 30 shall be added to the Agreement to provide as follows:

30. Marketing of Expedia Associate Programs; WORLDSPAN Contacts
-----------------------------------------------------------

30.1 During the term of this Agreement, WORLDSPAN may initiate
Marketing Contacts with any Eligible Customers for purposes of encouraging
such Eligible Customers to sign the EAP Agreement. WORLDSPAN shall not
entertain any discussions with the Excluded Carriers regarding the Expedia
Associate Program without first receiving written permission from
Microsoft, even in the event such an Excluded Carrier contacts WORLDSPAN
for information regarding the EAP Program; in such case, WORLDSPAN shall
promptly refer such entities to Microsoft.

30.2 Microsoft agrees that for six (6) months starting with the
Amendment Effective Date, Microsoft shall not itself make contacts with
airlines who are Eligible Customers, nor authorize any third party other
than WORLDSPAN to make such contacts, for the purposes of having such
Eligible Customers sign EAP Agreements for U.S. and Canada points of sale.
Microsoft may decide, in its sole discretion, to extend the foregoing
period longer than six (6) months.

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

2
<PAGE>

30.3 WORLDSPAN may disclose the terms of the EAP Agreement in
Marketing Contacts to potential WORLDSPAN Expedia Associates, and may show
such Agreement to the potential WORLDSPAN Expedia Associate and allow a
duplicate to remain in the possession of such potential Associate.
WORLDSPAN shall present interested parties with all information necessary
to contact a designated Microsoft representative to pursue signing the EAP
Agreement. If the WORLDSPAN candidate signs an EAP Agreement, then if the
candidate so agrees. Microsoft shall provide WORLDSPAN a copy of the signed
EAP Agreement, subject to nondisclosure obligations.

30.4 In the event a WORLDSPAN Marketing Contact results in the
delivery of a WORLDSPAN MTT Customer to Microsoft or the conversion of an
Expedia Associate to an MTT Customer. Microsoft shall pay WORLDSPAN [*] of
the initial, one-time license fee (first year only) Microsoft may receive
from such WORLDSPAN MTT Customer. To the extent a WORLDSPAN Marketing
Contact results in the WORLDSPAN candidate becoming a WORLDSPAN Expedia
Associate prior to becoming a WORLDSPAN MTT Customer, the compensation
provisions regarding WORLDSPAN Expedia Associates shall apply. WORLDSPAN
shall not have the right to receive a copy of signed Microsoft Travel
Technology agreements.

30.5 In no event shall either party be considered, or represent
itself, as an agent of the other. Both parties agree that WORLDSPAN is an
independent contractor providing sales services to Microsoft and that
WORLDSPAN has no authority to enter into any obligations, make any
representations or warranties or negotiate any agreements on Microsoft's
behalf. Similarly, Microsoft has no authority to enter into any
obligations, make any representations or warranties or negotiate any
agreements on WORLDSPAN's behalf.

30.6 Initially, the parties agree that WORLDSPAN may charge (or
discount or waive) WORLDSPAN fees to Eligible Customers to complete a
Marketing Contact, in addition to any other compensation owed by the
WORLDSPAN Expedia Associate to Microsoft or WORLDSPAN under the EAP
Agreement or under the WORLDSPAN Expedia Associate's billing arrangements
with WORLDSPAN. The parties shall reexamine such additional WORLDSPAN fees
within six (6) months of the Amendment Effective Date, and WORLDSPAN shall
be permitted to continue such fees after six (6) months only if the parties
so agree in writing. Notwithstanding the foregoing, WORLDSPAN retains
exclusive control over the identity of and the terms of its agreements with
Travel Suppliers.

30.7 The parties agree that the WORLDSPAN "wired" logo shall appear on
WORLDSPAN Expedia Associates' web sites in substantially the same form as
set forth in Exhibit B.

30.8 In the event that traffic generated by WORLDSPAN Expedia
Associates makes Microsoft exceed the capacity provided under Schedule
2.1.2 of Amendment 1, Microsoft may restrict the ability of users referred
by WORLDSPAN Expedia Associates to make searches and bookings on Expedia,
unless WORLDSPAN agrees in writing to provide additional capacity to
accommodate the WORLDSPAN Expedia Associates users.

4. WORLDSPAN Account.

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

3
<PAGE>

A new Section 31 shall be added to the Agreement to provide as follows:

31. Changing the CRS of a WORLDSPAN Expedia Associate.
-------------------------------------------------

Microsoft agrees not to switch the processing of WORLDSPAN bookings,
reservations or other transactions for any WORLDSPAN Expedia Associate to
any other CRS during the initial term of the WORLDSPAN Expedia Associate's
EAP Agreement, and for twelve (12) months after such initial term.
Notwithstanding the foregoing, twenty-four (24) months after the effective
date of the EAP Agreement for any WORLDSPAN Expedia Associate, Microsoft
may switch the WORLDSPAN Expedia Associate's WORLDSPAN EAP Bookings to
another CRS.

5. Territory.

The term "Territory" as defined in Schedule 1 of the Agreement is hereby
revised to provide as follows:

"Territory" means the entire world.

The parties agree that, along with this change of the definition of "Territory,"
the second and third sentences of Section 4.3 of the Agreement are deleted, and
Microsoft may market and advertise the availability of travel services via
Expedia in the applicable countries within TC3 as it does in the rest of the
Territory.

6. Fare Guarantee

A new Section 32 shall be added to the Agreement to provide as follows:

32. Fare Guarantee.
--------------

A. Beginning August 1, 1998, WORLDSPAN guarantees that the prices
available to Expedia for any itinerary for a scheduled airline flight or
flights will be correctly calculated according to applicable fare rules. In
the event that any carrier issues to Microsoft or its authorized
representative a debit memo or other charge for any fare that is not
correct, WORLDSPAN shall promptly either pay the amount of such memo or
charge directly to the carrier, or reimburse Microsoft.

B. This guarantee by WORLDSPAN shall be subject to the following
terms:

1. The price must be based upon published fares in the WORLDSPAN
System.

2. The guarantee applies only to reservations made on the scheduled
flights of WORLDSPAN Participating Carriers and through one of the
predetermined SIDs, for Microsoft Expedia in Great Britain, Germany, France and
Australia. Other countries may be added upon the mutual written consent of both
parties.

3. The price must be autopriced by Power Shopper or other standard
WORLDSPAN System facility such as, but not limited to, entries 4P or 4PLFB. The
guarantee does not apply to

4
<PAGE>

other pricing methods such as agent assist price or rate desk price,
unless the fare has been approved before booking by a WORLDSPAN
representative.

C. Any fare quoted by the WORLDSPAN System will remain valid
for ticketing until midnight the day following the day the
reservation is made. For purposes of determining when a reservation
is made, the time zone of the SID for a particular country shall
apply rather than the time zone for the Point of Sale. WORLDSPAN
will establish SID location per Microsoft direction.

D. If Microsoft receives a debit memo or otherwise is advised
that a price subject to this guarantee is not correct, Microsoft
shall promptly forward such memo or item to WORLDSPAN. WORLDSPAN
shall promptly investigate and, where the price is guaranteed
according to this Agreement, pay the airline the amount of the
charge or, reimburse Microsoft. WORLDSPAN will use commercially
reasonable efforts to provide Microsoft a written report by the
fifteenth day of each calendar month with respect to the handling of
charges referred by Microsoft during the previous month.

E. WORLDSPAN may terminate this Section 32 in its sole
discretion without penalty or reimbursement with ninety (90) days
written notice to Microsoft.

All other terms not expressly amended herein shall remain in full force and
effect as set forth in the Agreement.

MICROSOFT CORPORATION WORLDSPAN, L.P.

/s/ Simon Breakwell /s/ Jeff Hoffman
- -------------------------------- -------------------------------
By By

Simon Breakwell JEFF HOFFMAN
- -------------------------------- -------------------------------
Name (Print) Name (Print)

Group Manager VICE PRESIDENT
- -------------------------------- -------------------------------
Title Title

7/30/98 7/27/98
- -------------------------------- -------------------------------
Date Date

5
<PAGE>

Schedule 1

Definitions

"Co-Branded Pages" means the Web pages to be developed and maintained within
Expedia by MS pursuant to the terms of the EAP Agreement and incorporating the
branding of both MS and the WORLDSPAN Expedia Associate.

"EAP" means the Microsoft Expedia Associate Program, the terms and conditions of
which are set forth in the EAP Agreement.

"EAP Agreement" means an agreement executed between Microsoft and a Eligible
Customer that is substantially in the form attached hereto as Exhibit A.

"Eligible Customers" means any airline (not on the Excluded Carrier list--
Schedule 2) offering U.S. or Canadian Point of Sale, which are customers of
WORLDSPAN at WORLDSPAN's "direct access," "direct sell," or "airline source"
level (referring to the level of access into their reservation database for
purposes of online booking via WORLDSPAN). Microsoft may add additional
categories of companies to the definition of Eligible Customers by providing
written notice to WORLDSPAN.

"Excluded Carriers" means those airline carriers listed in Schedule 2 hereto.

"Expedia" means the software code, informational databases, products, and other
components that make up Microsoft's service to enable such end users to shop
for, reserve, book (including, at a minimum, air travel, hotel accommodations,
and car rentals) and pay for certain travel services via a personal computer (or
other interactive device) connected to the Internet or other network. Microsoft
currently offers such service on the Web under the name "Expedia," but such name
may change from time to time and the term "Expedia" as used herein shall be
deemed to refer to all future versions of the above-described online service,
regardless of the name under which it is offered from time to time, and
includes without limitation any and all additional, follow-on, successor or
replacement versions of such service.

"Marketing Contact" means any sales call or other contact initiated by
WORLDSPAN with a Eligible Customer in which WORLDSPAN explains and markets
Microsoft's EAP program or MTT program, and persuades such potential EAP
Associate or MTT Customer to contact a designated Microsoft liaison with the
intention of entering into the EAP Agreement or MTT license agreement.

"Microsoft Travel Technology" means the computer software and other technology
that provides the travel booking functionality for Expedia.

"Point of Sale" means the location of an Expedia user making a Booking on
Expedia, determined by the billing address of the credit card the end user uses
to make the booking.

"SID" shall mean a WORLDSPAN Subscriber Identification code that allows
Microsoft and WORLDSPAN to identify end user traffic on Expedia as originating
with a WORLDSPAN Expedia Associate.

"Web Link Page(s)" means any page(s) within the web site of a WORLDSPAN Expedia
Associate that provides a hyperlink directly to a Co-Branded Page in Expedia.

6
<PAGE>

"WORLDSPAN/EAP Air Booking" means a WORLDSPAN/EAP Booking for air travel
tickets.

"WORLDSPAN/EAP Booking" means any reservation, electronic message or other
transaction made through the WORLDSPAN System (a) for which WORLDSPAN charges a
fee and (b) that is completed by a user of Expedia who has linked directly to
Expedia from Web Link Page of a WORLDSPAN Expedia Associate.

"WORLDSPAN Expedia Associate" means any Eligible Customer that actually enters
into an EAP Agreement with Microsoft as a direct result of a Marketing Contact.

"WORLDSPAN MTT Customer" means an Eligible Customer who, as a direct result of
a Marketing Contact, enters into a license agreement with Microsoft for
Microsoft Travel Technology in order to allow customers to reserve and purchase
travel services via such Eligible Customer's Web site.

7
<PAGE>

Schedule 2

Excluded Carriers

[*]

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

8
<PAGE>

Exhibit A

Sample EAP Agreement

MICROSOFT CORPORATION
ASSOCIATE PROGRAM AGREEMENT

THIS AGREEMENT ("Agreement") contains the complete terms and conditions
for participation in Microsoft Expedia Associate Program ("Program"), and is
made and entered into as of the later of the two signature dates below (the
"Effective Date") by and between MICROSOFT CORPORATION ("MS"), a Washington,
U.S.A. corporation, and("Company"), a ____________ corporation.

1. DEFINITIONS

1.1 "Co-Branded Pages" means (a) the Welcome Page, and(b) the Expedia
Travel Agent web pages co-branded with the COMPANY logo in accordance with the
specifications set forth in Exhibit 1. Such Expedia Travel Agent web pages will
be made available to users of COMPANY's Web Site who link directly to Expedia
from the COMPANY Web Link Pages.

1.4 "COMPANY Web Link Pages" means the pages within COMPANY Web Site
as identified in Exhibit 2 that provide a hyperlink directly to a Co-Branded
Page in Expedia.

1.5 "COMPANY Web Site" means COMPANY's site located at [insert URL of
COMPANY'S site] and any successor web site.

1.6 "Expedia" means the software code, informational databases,
products, and other components that make up MS' service which is marketed for
use by individual end users in the United States and/or Canada to enable such
end users to shop for, reserve, book (including, at a minimum, air travel, hotel
accommodations, and car rentals) and pay for certain travel services via a
personal computer (or other interactive device) connected to the Internet or
other network. MS currently offers such service on the Web under the name
"Expedia," but such name may change from time to time and the term "Expedia" as
used herein shall be deemed to refer to all future versions of the above-
described online service, regardless of the name under which it is offered from
time to time, and includes without limitation any and all additional, follow-on,
successor or replacement versions of such service.

1.7 "Expedia Logo" means the MS' Expedia logo as set forth in
Exhibit 2.

1.8 "Expedia Travel Agent" means the area within Expedia where Users
may search for and book airline tickets, automobile rentals, and hotel rooms.

1.9 "User" means any person accessing the COMPANY Web Site, Expedia,
or the Co-Branded Pages.

<PAGE>

1.10 "Welcome Page" means the first Co-branded Page (as more
particularly described in Exhibit 1) that a User sees when the User links to
Expedia from Company Web Link Pages.

2. MS OBLIGATIONS

2.1 MS shall create and maintain the Co-Branded Pages of Expedia as set
forth in Exhibit 1 for use by Users linking directly to Expedia from COMPANY Web
Link Pages. MS may use COMPANY's logo and/or logo link described in Exhibit 1 in
accordance with any COMPANY logo guidelines that may be set forth in Exhibit 1
or any other replacement guidelines that COMPANY may provide to MS in writing
from time-to-time during the term of this Agreement. COMPANY's logo link on the
Co-Branded Pages shall link directly back to COMPANY Web Link Pages.

2.2 MS shall provide COMPANY with a Uniform Resource Locator (URL) to
link from COMPANY Web Link Pages to the Welcome Co-Branded Page or similar page
specified in Exhibit 1.

2.3 MS shall provide services to users linking directly to Expedia from
COMPANY Web Link Pages in accordance with MS' then-current standard terms and
conditions and standard customer service policies and procedures applying
generally to users of Expedia.

2.4 MS shall provide COMPANY, reports that set forth the activity by
users linking directly to Expedia from COMPANY Web Link Pages during the
applicable month.

2.5 MS shall be responsible for the development, operation, and
maintenance of Expedia and the Co-Branded Pages and, except as expressly set
forth herein, MS will remit Fare and Tax revenue through normal agency channels.
MS shall retain all other revenues (including all advertising revenues) that are
generated from Expedia, the Co-Branded Pages or related services.

2.6 In the event traffic on Expedia exceeds or threatens to exceed MS'
back end booking capacity, MS shall retain the right to redirect or temporarily
block User searches.

3. COMPANY OBLIGATIONS

3.1 No later than thirty(30) days after the Effective Date, COMPANY
shall prominently display and maintain a persistent hyperlink (in the form
indicated in Exhibit 2 or a substitute that MS may provide to COMPANY from
time-to-time during the term of this Agreement) on the COMPANY Web Link Pages
which shall link directly to the Welcome Page (or other Co-Branded Page) on
Expedia. If Exhibit 2 indicates that such persistent hyperlink shall be in the
form of an MS logo, then the COMPANY agrees to comply with the MS logo link
guidelines as set forth in Exhibit 3or any other replacement guidelines that MS
may provide to COMPANY in writing from time-to-time during the term of this
Agreement.

3.2 COMPANY shall provide MS with all the information identified in the
checklist set forth in Exhibit 1 at least seven (7) days prior to the Effective
Date.

3.3 During the term of the Agreement, COMPANY shall use commercially
reasonable efforts to actively market and promote Expedia and the services
available on Expedia in order to generate the maximum number of bookings on
Expedia by users of COMPANY Web Site. During the term of this Agreement, COMPANY
agrees that it will not with respect to the COMPANY Web Site, co-brand, grant a
sponsorship to or promote any third-party online travel service provider other
than Expedia.

<PAGE>

3.4 COMPANY shall be responsible for the development, operation, and
maintenance of COMPANY Web Site and for all materials that appear on COMPANY Web
Site, including without limitation, as follows:

(a) all technical operation of COMPANY Web Site and all related
equipment;
(b) all maintenance of the hyperlink(s) to Expedia as described in
Exhibit 1 ; and
(c) compliance with all MS trademark requirements or guidelines as
defined in Exhibit 3 and Section 4 below.

3.5 COMPANY agrees that it shall submit the COMPANY Web Link Pages as
described in Exhibit 2 (and any modifications thereof) to MS for its review and
written approval prior to publishing such COMPANY Web Link Pages. Company shall
submit such materials to the MS Expedia Associate Program Product Manager for
review. In no event shall COMPANY or its agents make or extend any
representation or warranty on behalf of MS with respect to Expedia or the
services available therein.

4. MS TRADEMARKS IN PROMOTION MATERIALS

COMPANY agrees that if it desires to use MS trademarks, logos or branding in any
COMPANY promotional material then COMPANY shall first submit all marketing
pieces, documentation, and other materials which contain an MS trademark, logo
or branding to MS for its prior review and written approval. Company shall
submit such materials to the MS Expedia Associate Program Product Manager for
review.

5. OWNERSHIP OF EXPEDIA

5.1 MS shall own all intellectual property rights (including without
limitation all copyrights, patents, trademarks and trade secrets) in connection
with and in all versions of Expedia.

5.2 End users who use Expedia, including users who have linked to
Expedia from COMPANY Web Link Pages, shall be deemed to be customers of
Microsoft Expedia for all purposes with respect to such users' actions on
Expedia. Accordingly, all Expedia terms and conditions, rules, policies and
operating procedures including but not limited to policies relating to the use
of customer personally identifying information, customer orders, customer
service, and ticket fulfillment will apply to those customers. MS reserves the
right to change such terms and conditions, rules, policies and operating
procedures at any time.

6. PAYMENTS

6.1 Fees.
----

Microsoft Expedia is an accredited IATA approved agency. COMPANY agrees
to pay Microsoft Expedia normal commissions that it pays to standard
agencies.

7. TERM AND TERMINATION

7.1 The term of this Agreement shall commence on the Effective Date
and, unless terminated earlier as provided herein, shall continue for one (1)
year after the Effective Date.

<PAGE>

7.2 In the event that MS exits the online travel service business and
no longer offers Expedia, MS may terminate this Agreement with written notice to
COMPANY. Additionally, in the event either party materially fails to perform or
comply with this Agreement or any provision thereof, and fails to remedy the
default within seven (7) days after the receipt of notice to that effect, then
the other party shall have the right, at its sole option and upon written notice
to the defaulting party, to terminate this Agreement upon written notice. Any
notice of default hereunder shall be prominently labeled "NOTICE OF DEFAULT,"
and if to MS, shall be copied to MS' Law & Corporate Affairs Department, attn.
U.S. Legal Group. The rights and remedies provided in this section shall not be
exclusive and are in addition to any other rights and remedies provided by law
or this Agreement.

7.3 Upon termination or expiration of this Agreement for any reason,
COMPANY shall immediately remove any MS logo link from COMPANY Web Site Pages.

7.4 The following provisions shall survive termination of this
Agreement: 7.3, 7.4 and 8-12.

8. REPRESENTATIONS AND WARRANTIES

Each party hereby represents and warrants as follows:

8.1 Corporate Power. Such party is duly organized and validly
---------------
existing under the laws of the state of its incorporation and has full corporate
power and authority to enter into this Agreement and to carry out the provisions
hereof.

8.2 Due Authorization. Such party is duly authorized to execute and
-----------------
deliver this Agreement and to perform its obligations hereunder.

8.3 Binding Agreement. This Agreement is a legal and valid obligation
-----------------
binding upon it and enforceable with its terms. The execution, delivery and
performance of this Agreement by such party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a party
or by which it may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over it.

8.4 Logos and Marks. Such party has the full and exclusive right to
---------------
grant or otherwise permit the other party to use the trademarks, logos and trade
names as set forth in this Agreement, and that it is aware of no claims by any
third parties adverse to any of such trademarks, logos and trade names.

The representations and warranties and covenants in this Section 8 are
continuous in nature and shall be deemed to have been given by each party at
execution of this Agreement and at each stage of performance hereunder. These
representations, warranties and covenants shall survive termination or
expiration of this Agreement.

9. LIMITATION OF WARRANTY

EXCEPT AS EXPRESSLY WARRANTED IN SECTION 8 ABOVE, EACH PARTY EXPRESSLY DISCLAIMS
ANY FURTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO,
THE IMPLIED WARRANTIES OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.

<PAGE>

10. INDEMNIFICATION AND LIMITATION OF LIABILITY

10.1 Indemnification by COMPANY. COMPANY shall, at its expense and MS'
--------------------------
request, defend any third-party claim or action brought against MS, and MS'
affiliates, directors, officers, employees, licensees, agents and independent
contractors, (i) relating to COMPANY Web Site or the marketing thereof, and (ii)
to the extent it is based upon a claim that, if true, would constitute a breach
of a COMPANY warranty, representation or covenant set forth in this Agreement
(collectively, "COMPANY Claims"), and COMPANY shall indemnify and hold MS
harmless from and against any costs, damages and fees reasonably incurred by MS,
including but not limited to fees of attorneys and other professionals, that are
attributable to such COMPANY Claims. MS shall provide COMPANY reasonably prompt
notice in writing of any such COMPANY Claims and provide COMPANY with reasonable
information and assistance, at COMPANY's expense, to help Company to defend such
COMPANY Claims.

10.2 Indemnification by MS. MS shall, at its expense and COMPANY's
---------------------
request, defend any third-party claim or action brought against COMPANY, and its
affiliates, directors, officers, employees, licensees, agents and independent
contractors, (i) relating to Expedia, the Co-Branded Pages or the marketing
thereof, and (ii) to the extent it is based upon a claim that, if true, would
constitute a breach of a MS warranty, representation or covenant set forth in
this Agreement (collectively, "MS Claims"), and MS shall indemnify and hold
COMPANY harmless from and against any costs, damages and fees reasonably
incurred by COMPANY, including but not limited to fees of attorneys and other
professionals, that are attributable to such MS Claims. COMPANY shall provide MS
reasonably prompt notice in writing of any such MS Claims and provide MS with
reasonable information and assistance, at MS' expense, to help MS to defend such
MS Claims.

10.3 Limitation of Liability. BOTH PARTIES AGREE THAT NEITHER PARTY
-----------------------
WILL BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
(INCLUDING BUT NOT LIMITED TO SUCH DAMAGES ARISING FROM BREACH OF CONTRACT OR
WARRANTY OR FROM NEGLIGENCE OR STRICT LIABILITY), OR FOR INTERRUPTED
COMMUNICATIONS, LOST BUSINESS, LOST DATA OR LOST PROFITS, ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF (OR KNOWS
OR SHOULD KNOW OF) THE ONLY POSSIBILITY OF SUCH DAMAGES. UNDER NO CIRCUMSTANCES
SHALL MS BE LIABLE TO COMPANY OR ANY THIRD PARTY FOR AN AMOUNT GREATER THAN THE
AGGREGATE AMOUNTS PAID BY MS HEREUNDER.

11. CONFIDENTIALITY; MEDIA COMMUNICATIONS

11.1 If MS and COMPANY have entered into a Microsoft Non-Disclosure
Agreement, MS and COMPANY agree that the terms of such agreement shall be deemed
incorporated herein, and further, that all terms and conditions of this
Agreement shall be deemed Confidential Information as defined therein. If MS and
COMPANY have not entered into a Microsoft Non-Disclosure Agreement, then each
party expressly undertakes to retain in confidence and to require its agents and
contractors to retain in confidence all information and know-how transmitted to
such party that the disclosing party has identified as being proprietary and/or
confidential or which, by the nature of the circumstances surrounding the
disclosure, ought in good faith to be treated as proprietary and/or
confidential. Without limiting the foregoing, all terms and conditions of this
Agreement shall be considered confidential and shall not be disclosed (except to
either party's attorneys and accountants on a need-to-know basis) without the
prior written consent of the other party.

<PAGE>

11.2 MS and COMPANY agree that the initial press release or
communication to the press and/or public regarding this Agreement and the
parties' relationship shall be made only after prior consultation with the other
party. Subsequent accurate press releases and other communications to the press
and/or public regarding the parties' relationship may be made by either party
subject to the confidentiality obligations set forth in Section 11.1.

12. GENERAL

12.1 Governing Law; Venue; Attorneys Fees. This Agreement shall be
------------------------------------
construed and controlled by the laws of the State of Washington, and each party
further consents to jurisdiction by the state or federal courts sitting in the
State of Washington. Process may be served on either party by U.S. Mail, postage
prepaid, certified or registered, return receipt requested, or by such other
method as is authorized by law. If either MS or COMPANY employs attorneys to
enforce any rights arising out of or relating to this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys' fees and costs,
including expert witness fees.

12.2 Force Majeure. If the performance of this Agreement or any
-------------
obligation hereunder is prevented, restricted or interfered with by any act or
condition whatsoever beyond the reasonable control of the affected party, the
party so affected, upon giving prompt notice to the other party, shall be
excused from such performance, except for the making of payments hereunder, to
the extent of such prevention, restriction or interference.

12.3 Notices; Requests. All notices and requests in connection with
-----------------
this Agreement shall be deemed given as of the day they are (i) deposited in the
U.S. mails, postage prepaid, certified or registered, return receipt requested;
or (ii) sent by overnight courier, charges prepaid, with a confirming fax; and
addressed as follows:

COMPANY:

courier address:
-----------------------
-----------------------
-----------------------

mailing address:
-----------------------
-----------------------
-----------------------

Attention:
-----------------------
Fax:
-----------------------
Phone:
-----------------------

with a cc to: Corporate Legal Department

<PAGE>

MS: MICROSOFT CORPORATION
One Microsoft Way
Redmond, WA 98052-6399

Attention: Product Manager, Expedia Travel

with a cc to: MICROSOFT CORPORATION
One Microsoft Way
Redmond, WA 98052-6399

Attention: Law & Corporate Affairs Department
Fax: U.S. Legal Group
(425) 936-7329

or to such other address as the party to receive the notice or request so
designates by written notice to the other.

12.4 Assignment. COMPANY may not assign this Agreement, or any portion
----------
thereof, to any third party unless MS expressly consents to such assignment in
writing. For the purposes of this Agreement, a merger, consolidation, or other
corporate reorganization, or a transfer or sale of a controlling interest in
COMPANY's stock, or of all or substantially all of its assets shall be deemed to
be an assignment.

12.5 Severability. In the event that any provision of this Agreement
------------
is found invalid or unenforceable pursuant to judicial decree or decision, the
remainder of this Agreement shall remain valid and enforceable according to its
terms. The parties intend that the provisions of this Agreement be enforced to
the fullest extent permitted by applicable law. Accordingly, the parties agree
that if any provisions are deemed not enforceable, they shall be deemed modified
to the extent necessary to make them enforceable.

12.6 Entire Agreement; Modification; No Offer. The parties hereto
----------------------------------------
agree that this Agreement (and the Microsoft Non-Disclosure Agreement to the
extent incorporated herein) constitutes the entire agreement between the parties
with respect to the subject matter hereof and merges all prior and
contemporaneous communications. It shall not be modified except by a written
agreement dated subsequent hereto signed on behalf of COMPANY and MS by their
duly authorized representatives. Neither this Agreement nor any written or oral
statements related hereto constitute an offer, and this Agreement shall not be
legally binding until executed by both parties hereto.

12.7 Binding Effect. Subject to the limitations herein before
--------------
expressed, this Agreement will inure to the benefit of and be binding upon the
parties, their successors, administrators, heirs, and permitted assigns.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the dates indicated below.

MICROSOFT CORPORATION COMPANY

- ----------------------------- ------------------------------------
By (sign) By (sign)

- ----------------------------- ------------------------------------
Name (Print) Name (Print)

- ----------------------------- ------------------------------------
Title Title

- ----------------------------- ------------------------------------
Date Date

Federal Employer ID No.:
------------

<PAGE>

Exhibit 1

Co-Branded Pages Specifications

Expedia.com Associates Program
Partner Set-Up Information Form

Getting set up with the Expedia Associates Program is easy! The 5 simple steps
below provide you with the necessary information to help you get set up.

[ARROW] Step 1: Provide us with some basic information

[ARROW] Step 2: Send us your logo and a return link to your site

[ARROW] Step 3: Fill in the Friendship Table

[ARROW] Step 4: Linking to Expedia.com

[ARROW] Step 5: Send completed form and signed contract to Microsoft

[ARROW] Step 6: Microsoft sends you your Expedia Associates Program
Identification Number and URLs for linking to Expedia

[ARROW] Step 7: How to get a free Hot Mail account to receive your monthly
reports and Expedia Updates!

Please complete this document filling in blanks and checking appropriate boxes
where indicated and return to Joel Ruzich at your earliest convenience. Once
this form has been completed and returned to Expedia, you will be sent back a
copy of this form and an email confirmation with specific URL information.

If you have any questions or comments, please do not hesitate to contact Erin
Cullen, Marketing Coordinator at [425] 703-6625 or via email
[email protected] for assistance.

[ARROW]

<PAGE>

Step 1: Provide us with Basic Information

Please fill in the blanks below:

<TABLE>

<C> <S>
Your Company Name _____________________________________________

This is the name consumers will see on the Intro
page (see Step 2, for sample screen shots of this
page). Please limit this name to a maximum of 40
characters.
Example: Blue Yonder Airways

Business Contact Name & email Name:_____________________________________________
Email Address:_____________________________________________

The name & email address to receive information
and notification with regards to EAP promotions,
reports, member information, etc.
Example: [email protected]

Monthly Report Email Address _____________________________________________

The email address to receive your monthly
performance report.
Example: [email protected]

Technical Contact Name & email Name:_____________________________________________
Email Address:_____________________________________________

The name & email address to receive information
and notification with regards to set-up and review
of EAP links and pages and any technical questions.
Example: [email protected]

Your Company "Short Name": _____________________________________________

A shortened version (up to 8 characters) of Partner Name.
Example: bluydair

(Note: If you represent multiple
sites or multiple links, and each
site is linking to Expedia, you must
assign a unique number to each site.
For example, suppose you are Alpine
Ski Center and there are individual
store sites you represent; you would
list the following multiple short
names and numbers:
bluydair 01 -Alpine Ski Center
bluydair 02 -Alpine Sports Ski Haus
bluydair 03 -Alpine Sports Ski House

In order to track each of these,
please complete a separate EAP
Partner Set Up Information Required
form for each sub-site.)
</TABLE>

<PAGE>

<TABLE>

<C> <S> <C>
Business Type Select one:

Air Car
Directory Hotel
Search Engine Travel Content
Other (please specify):
</TABLE>

<PAGE>

[ARROW] Step 2: Send us your logo and a return link your site

Please provide your logo as a Gif in an electronic file format. Total Gif
dimensions should be 180 width and 38 height. The logo must be centered on a
white background with no border within the specified area. An additional fade
element image (15w x 38h) will be added to the left of the logo (see example
below).

Coloring should be within the 216 color palette that is Netscape and Internet
Explorer Compatible. This will ensure a clean solid appearance with no dithering
pattern. (If your logo contains gradient, metallic, or gives a 3D rendered
appearance please provide a high quality jpeg file instead of a Gif.)

Example:

[GRAPHIC]

Please fill in the blank below:

Your Return Page URL
--------------------------------------------

The URL where you'd like users to return to
if they click on your logo (as shown in the
banner samples above). Typically this return
URL is either to your homepage or the page
on your site the visitor was last at.
Example: Error! Bookmark not defined.

[ARROW]

<PAGE>

[ARROW] Step 3: Friendship Table

If applicable, select whether a consumer sees and chooses from a complete list
of companies (see Figure 3) or a singular company.

<TABLE>
<CAPTION>
Airline Flight Wizard (select one)
<C> <S>
Show complete list of airlines to choose from
-----
Show only one airline. Please specify:
-----

---------------------------------------------
Example:Show only one airline: Blue Yonder Airways

<CAPTION>
Car Wizard (select one)
<C> <S>
Show complete list of car rental companies to choose from
-----

Show only one car rental company. Please specify:
-----

---------------------------------------------

<CAPTION>
Hotel Wizard (select one)
<C> <S>
Show complete list of hotels to choose from
-----
Show only one hotel company. Please specify:
-----

---------------------------------------------
</TABLE>

Figure 3

If you'd like to rent from a specific company, select a name
from the drop-down list below.

-----------------------------------
Company All
All
Advantage Rent A Car
Alamo Rent A Car
Avis
Budget
Dollar Rent A Car
Hertz
National Car Rental Interrent
Sears Car and Truck Rental
Thrifty Car Rental
Value Rent A Car
-----------------------------------

<PAGE>

[ARROW] Step 4: Linking to Expedia.com

Linking to Expedia is simple! We will work with you to design a welcome page
that you can link to from your site. This page will reside on Expedia's web site
and explain how Expedia works to your customers. We recommend this method of
linking to Expedia because it:

[X] Provides your customer with an individual welcome from both
your company and Expedia (co-branding)

[X] Includes necessary information to help your customer with all
of their travel needs

[X] Clearly explains how to use Microsoft Expedia

Please review our recommended linking method below - option 1 (as well as the
additional option detailed on the next page). Once you have decided which method
of linking you prefer, please indicate which choice you prefer by selecting one
of the options (on this page and the following page).

Y/N OPTION 1 Expedia works with you to create a welcome page (Figure 1
- ------
illustrated below.)
- --------------------------------------------------------------------------------

-----------------------------------
- ----------- Key
Figure 1 . Circled areas represent a link
- --------------------------------------------- . Arrows point to where the
link will take the customer
-----------------------------------

--------------------------------------------------
1.) You add a link to your main site to Expedia.
(image - left).
--------------------------------------------------

-----------------------------------------------------
2.) Your customer clicks on the Microsoft Expedia
link and goes to the Welcome page on Expedia.com
-----------------------------------------------------
-------------------------------------------------------------------------

<PAGE>

Linking to Expedia...continued
Below is option 2 for linking to Expedia. This method of linking to Expedia
requires creation of an additional page hosted on your web site explaining
Expedia and providing a link to the Travel Agent main page (and/or additional
linking options as illustrated below). If you select this option, the page you
develop should include the following:

[X] Clear direction to your customer they will be leaving your web
site and going to Expedia

[X] Thorough explanation of Expedia: what the service is and what
it provides

If you select this option, we will work with you on implementing your page and
also need to approve the final design.

Y/N OPTION 2 Your company creates your welcome page (Figure 2 illustrated
- ------
below.)
- --------------------------------------------------------------------------------

-----------------------------------
- ----------- Key
Figure 2 ---------------------------------- . Circled areas represent a link
- ----------- . Arrows point to where the
--------------------------------------- link will take the customer
1.) You add a link to your main web -----------------------------------
site to an additional page on your
company web site (image - below)
---------------------------------------

---------------------------------------------------
2.) Create an additional site which your company
[GRAPHIC] will build and host that introduces & explains
Expedia and then directs your customers to the
---------------------------------------------------

----------------------------------------------------
The Travel Agent main page site sits behind
our registration wall. Therefore, your visitors
in this instance will go to our registration page
if they are not currently an Expedia member.
If the visitor is an existing member, they will
go directly into the area you link to.
----------------------------------------------------

- --------------------------------------------------------------------------------
3.) Link to Expedia via one or more of the following urls: (this example uses
Blue Yonder Airways EAPid which is 101)
Travel Agent Main Page: http://expedia.msn.com/oub/eap.asp?EAPID=101-1
Flight Wizard: http://expedia.msn.com/oub/eap.asp?Intro=http:%2F%2Fexpedia.
msn.com%2Fpub%2Fela dll%3Fcscr%3Dfexp%25illy%30new&EAPID=101-1
Car Wizard: http://expedia.msn.com/pub/eap/asp?INTRO=http%2F%2Fexpedia msn
com%2Fpub%2Feta
dll%3Fascr%3Dspec%26illy%3Dnew%26flag%3DF&aapid=101.1
Hotel Wizard: http://expedia.msn com/pub/eap aso?INTRO=http%2F%2Fexpedia
msn.com%2Fpub%2Fela dll%3Fcscr%3Dhtwx%26illy%3Dnew&EAPID=101-1
- --------------------------------------------------------------------------------

<PAGE>

[ARROW] Step 6: Return this form and the signed contract to Microsoft

Please send this form and your signed contract to:

Attn: Joel Ruzich
Microsoft Travel Business Unit
Microsoft Corporation
One Microsoft Way
Remond, Washington 98052-6399

[ARROW] Step 6: Microsoft will send your Expedia Identification Number and URLs

We will provide you with an EAPid number to be used when setting up
URLs. You will receive a copy of this completed form with your unique
EAPid once the contracts are signed. In addition, we will send you
linking information for linking to Expedia.com (this will be filled out
below and returned to you).

(This section is to be filled in by Microsoft)

<TABLE>

<S> <C>
1.) Your Identification Number -EAPid1 We will send you this information with
completed form --------------------------------------
--------------

2.) URLs We will send you this information with completed form
-----------------------------------------------------

These URLs will be used for linking
to Expedia from your web site.
</TABLE>

[ARROW] Step 7: Sign up for your free Hot Mail account to receive your monthly
reports and

- ---------------------------------
1 EAPid = Expedia Associates Programs Identification

<PAGE>

Expedia Updates

We send out monthly reports and Expedia.com updates each month via your EAP
Hot Mail account. The report is in HTML format and provides you with your
company monthly activity as well as new promotions on Expedia you can
participate in and other Expedia.com content and event updates.

If you are running Microsoft Outlook 98 you will
be able to receive HTML based email. Check
here if you are running Outlook 98 and include
your email address:

--------------------------

[GRAPHIC]

To sign up for your Hot Mail account here is what you need to do:

1.) Go to http://hotmail.com/
2.) Register and Sign up for your account!
3.) Send Expedia your Hot Mail address we will add to our account list for
monthly reporting distribution i.e., [email protected] (or the name
-------------------------
of the person who will receive the reports)
HOTMAIL EMAIL ADDRESS - INPUT HERE BEFORE RETURNING FORM:

- --------------------------------------------------------------------------------
The names of companies, products, people, characters, and/or data mentioned
herein are fictitious and are in no way intended to represent any real
individual, company, product, or event, unless otherwise noted.

<PAGE>

Appendix A

Figure 1 - Option 1: Co-Branded Introduction Page

If you choose this option, your url to link to Expedia would be as follows:
http://expedia.msn.com/pub/eap.asp?EAPID=X-1 X in this instance is a PLACEHOLDER
for your EAPid. With your returned contract and set up form, your assigned url
will be found within Step 5 under EAPid.

<PAGE>

Appendix B

Figure 2 - Option 2: Customized Introduction Page

If you choose this option, your url to link to Expedia would one or more of the
following URLS:

[GRAPHIC]

- --------------------------------------------------------------------------------

X in this instance is a PLACEHOLDER for your EAPid. With your returned contract
and set up form, your assigned url will be found within Step 5 under EAPid.

[GRAPHIC]

- --------------------------------------------------------------------------------

---------
tagging [GRAPHIC]
---------

----------------------------------------------------------
Expedia Page Link
Travel Agent Main Page or one of the other options: Hotel,
Car or Flight wizard.
----------------------------------------------------------

- --------------------------------------------------------------------------------
Tagging occurs when the user from Blue Yonder Airways clicks through to the
Expedia web site.
- --------------------------------------------------------------------------------

<PAGE>

Exhibit 2

Expedia Logo

[LOGO OF MICROSOFT EXPEDIA.COM APPEARS HERE]
Start your travel here

28
<PAGE>

Exhibit B

Sample Appearance of WORLDSPAN Wired Logo
on WORLDSPAN Expedia Associate Web Sites

[LOGO OF WORLDSPAN WIRED APPEARS HERE]

30
<PAGE>

Exhibit 3

Expedia Logo Link and
Guidelines for Using the Expedia Logo Link
On COMPANY Web Link Pages

The following guidelines apply to COMPANY'S use of the Expedia Logo for use on
COMPANY Web Link Pages

1. Except as Microsoft may authorize elsewhere, COMPANY may use only the
Expedia Logo in accordance with the Agreement and guidelines set forth
below.

2. COMPANY may only use the Expedia Logo on COMPANY Web Link Pages identified
in Exhibit 1, and not in any other manner. It must always be an active link
to Microsoft's Expedia web site at http://expedia.com/. HTML code for the
link is shown below.

3. The Expedia Logo gif includes certain words describing the significance of
the Expedia Logo on COMPANY Web Site Pages (i.e. the Expedia Logo is a link
to Microsoft, not an endorsement of COMPANY Web Site). COMPANY may not
remove or alter this or any other element of the Expedia Logo.

4. The Expedia Logo may be used only on COMPANY Web Link Pages that make
accurate references to Microsoft Expedia's products or services. COMPANY
Web Link Page title and other trademarks and logos must appear at least as
prominent as the Expedia Logo. COMPANY may not display the Expedia Logo in
any manner that implies sponsorship, endorsement, or license by Microsoft.

5. The Expedia Logo must appear by itself, with a minimum spacing (the height
of the Expedia Logo) between each side of the Expedia Logo and other
graphic or textual elements on COMPANY Web Link Page. The Expedia Logo may
not be used as a feature or design element of any other logo.

6. COMPANY may not alter the Expedia Logo in any manner, including size,
proportions, colors, elements, etc., or animate, morph or otherwise distort
its perspective or two-dimensional appearance.

7. COMPANY may not use the Expedia Logo on any site that disparages Microsoft
or its products or services, infringes any Microsoft intellectual property
or other rights, or violates any state, federal or international law.

These guidelines do not grant a license or any other right in Microsoft's logos
or trademarks. Microsoft reserves the right in its sole discretion to terminate
or modify permission to use the Expedia Logo at any time. Microsoft reserves the
right to take action against any use that does not conform to these Policies,
infringes any Microsoft intellectual property or other right, or violates other
applicable law.

29
<PAGE>

Amendment No. 3
to CRS Marketing, Services and Development Agreement

This Amendment No. 3 to the CRS Marketing, Services and Development Agreement
(the "Amendment No. 3") is entered into as of April 1, 1999 (the "Amendment
Effective Date") by and between Microsoft Corporation, a Washington corporation
("Microsoft") with its principal office at One Microsoft Way, Redmond,
Washington 98052, and WORLDSPAN, L.P., a Delaware limited partnership
("WORLDSPAN"), with its principal office at 300 Galleria Parkway, NW, Atlanta,
Georgia 30339.

Recitals

i. Microsoft and WORLDSPAN are parties to that certain CRS Marketing,
Services and Development Agreement dated December 15, 1995, as amended by the
parties pursuant to that certain Amendment No. 1 dated January 1, 1997 and
Amendment No. 2 dated July 1, 1998 (collectively, the "Agreement").

ii. Microsoft and WORLDSPAN seek to modify the Agreement as set forth
herein to change the revenue sharing arrangements, capacity provisions, and
other terms under the Agreement.

Agreement

1. Definitions

Terms in capitalized form not defined in the text of this Amendment No. 3
shall have the meanings set forth in the Agreement.

2. Revenue Share.

(a) The revenue share matrix set forth in Appendix 1 of Amendment No. 1
shall be deleted and replaced in its entirety with the matrix attached as
Appendix 1 of this Amendment No. 3. Furthermore, Section 11.3 A. through D. of
the Agreement, as set forth in Amendment No. 2, shall be deleted, and the
revenue share described in Appendix 1 of this Amendment No. 3 shall apply to
WORLDSPAN/EAP Bookings as well as all other air bookings under the Agreement.
However, in the event (i) WORLDSPAN breaches the Development Agreement between
the parties dated as of July 1, 1999 (the "BFS Agreement") and Microsoft elects
to terminate the BFS Agreement pursuant to Section 5.2(a) of the BFS Agreement
or (ii) WORLDSPAN elects to terminate the BFS Agreement pursuant to Section
5.2(b) of the BFS Agreement, then the revenue share and WORLDSPAN's capacity
commitment will revert to the Revenue Share, volume tables and WORLDSPAN
capacity commitment set forth in Schedule 2.1.2 and Appendix 1 of Amendment No.
1 to the Agreement.

(b) Microsoft recognizes that [*] and WORLDSPAN are in the process of
negotiating an agreement whereby WORLDSPAN will provide [*] with hosting and
other airline services. As a part of these negotiations, WORLDSPAN has agreed
to charge hosting and other airline services. As a part of these negotiations,
WORLDSPAN has agreed to charge [*] at cost (as determined in accordance with
WORLDSPAN's normal cost collection and allocation methodology, as used by
WORLDSPAN with respect to its owner airlines) for messages generated through the
[*]. Microsoft agrees that these at-cost fees charged by WORLDSPAN to [*] will
not be included within the definition of Airline Fees under this Agreement and
will not be subject to the revenue share specified in Appendix 1. In the event
WORLDSPAN and [*] do not execute an agreement for hosting and other airline
services within three (3) years after the Effective Date, WORLDSPAN will charge
[*] for all transactions generated on the [*]in accordance with the
Participating Carrier Agreement between [*] and WORLDSPAN and all revenue
received from [*] from its Internet booking site as an [*] (including all
amounts paid retroactively by [*]) will be included as Airline Fees and shared
with Microsoft in accordance with Appendix 1.

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

1
<PAGE>

[*]

Section 11.2. Other than payments made by MICROSOFT for Additional
Development Services and the amounts to be paid by MICROSOFT and
WORLDSPAN, if any, pursuant to new Sections 11.1 and 29, MICROSOFT
and WORLDSPAN agree that each shall bear its own expenses incurred in
the performance of this Agreement.

3. Capacity

Schedule 2.1.2 is deleted from the Agreement in its entirety. Section
2.1.2 of the Agreement, as set forth in Amendment No. 1, is hereby deleted
and replaced in its entirety with the following:

Section 2.1.2. WORLDSPAN and Microsoft will work together in good
faith to ensure the WORLDSPAN System has sufficient capacity to
process Microsoft's estimated demand in accordance with this Section.
The failure of either (i) WORLDSPAN to deliver sufficient capacity
to meet Microsoft's demand, or (ii) Microsoft to deliver the
anticipated air ticket sales, will result in a financial penalty
mutually agreed upon by the parties as set forth herein.

(a) Each month during the Term, Microsoft shall provide to
WORLDSPAN a good faith estimate of the projected Expedia air ticket
sales for each of the following twelve (12) months. WORLDSPAN will
estimate segments to be generated by the projected level of Expedia
air ticket sales and the number of Power Shopper messages that are
expected to be generated by the estimated segments. Microsoft shall
provide such assistance and information for WORLDSPAN's estimation of
segments and Power Shopper messages as WORLDSPAN may reasonably
request. Upon conclusion of this forecasting process, WORLDSPAN
shall make all necessary preparations to provide sufficient capacity
on the WORLDSPAN System to support the projected Expedia demand
during the next six (6) months, as projected pursuant to subsection
(b) below.

(b) If a given estimate of Expedia demand will cause
WORLDSPAN to make material equipment purchases (e.g. purchase of new
CPUs or other equipment) specifically for additional Expedia demand,
WORLDSPAN shall notify Microsoft thereof in writing, and Microsoft
shall either reconfirm or adjust its estimate of Expedia air ticket
sales within ten (10) days after such notice (such reconfirmed or
adjusted estimate, a "Microsoft Binding Estimate"). WORLDSPAN may
also adjust the related estimates of segments and Power Shopper
messages. WORLDSPAN

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

2 MICROSOFT/WORLDSPAN
CONFIDENTIAL
<PAGE>

shall deliver the required capacity no later than ninety (90) days
after the date of a Microsoft Binding Estimate.

(i) The financial remedy to compensate WORLDSPAN for
excess capacity or Microsoft for insufficient capacity shall be
determined by the parties after the following occur:

.A forecasting model that calculates air ticket sales will
be developed by Microsoft within thirty (30) days of
Microsoft's execution of this Amendment and approved by
WORLDSPAN within thirty (30) days after receipt from Microsoft.

.A capacity planning and tracking model to forecast
capacity and calculate rejected demand will be built by
WORLDSPAN within thirty (30) days of WORLDSPAN's execution of
this Amendment and approved by Microsoft within thirty (30)
days after receipt from WORLDSPAN.

.The agreed-upon models will be used for six (6) months
from approval of the above models before instituting any
financial penalties and, during such testing, may be "tweaked"
or otherwise adjusted by mutual agreement of the parties in
order to better achieve their intended purposes. At the end of
such six (6) month period (the "Test Period"), if the models,
as so adjusted, would not have resulted in payments to either
party, then the financial payment aspects of these procedures
will become operative for the remainder of the term of this
Agreement. If, however, the models, as so adjusted, would, have
resulted in payments to either party during the Test Period,
then the financial aspects of these procedures will not become
operative and the parties will negotiate in good faith to
develop alternative models or procedures as a replacement for
those described. If the parties fail to reach an agreement
regarding such replacement models or procedures within two (2)
months after the end of the Test Period, then the financial
payment aspects of the models, as so adjusted, shall continue in
effect with a cap of [*] per month payable by either party,
until the parties mutually agree on alternative financial
arrangements.

The financial penalties will be determined based on the
parameters set forth in Section 2.1.2(b)(ii) and (iii) below.

(ii) If actual Expedia air ticket sales in a given month
are less than [*] of the Microsoft Binding Estimate, then
Microsoft will pay WORLDSPAN an amount based on WORLDSPAN's
anticipated portion of lost Airline Fees. Such Airline Fees
shall be calculated at the revenue share level for such month,
as set forth in Appendix 1 of this Amendment No. 3. If actual
ticket sales in a given month are greater than [*] of the
Microsoft Binding Estimate, then Microsoft will owe nothing
additional to WORLDSPAN.

(iii) If actual Expedia air ticket sales in a given month
are less than [*] of the Microsoft Binding Estimate due to a
failure of the WORLDSPAN System to support the forecast segments
and Power Shopper messages necessary to process the Microsoft
Binding Estimate, WORLDSPAN will pay Microsoft an amount based
on Microsoft's anticipated portion of Airline Fees for ticket
sales that do not get

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

3 MICROSOFT/WORLDSPAN
CONFIDENTIAL
<PAGE>

processed due to such interruptions in capacity. Such Airline
Fees shall be calculated at the revenue share level for such
month, as set forth in Appendix 1 of this Amendment No. 3. If
the WORLDSPAN System processes [*] or more of the Microsoft
Binding Estimate, then WORLDSPAN will owe nothing additional to
Microsoft.

(c) On an annual basis, Microsoft will provide WORLDSPAN with a
long-term demand forecast covering at least three (3) years beyond
the current year. WORLDSPAN, within thirty (30) days after
Microsoft's delivery of such demand forecast, will provide Microsoft
a nonbinding projection of the capacity WORLDSPAN will provide in
the same three (3) year period to support the forecast Microsoft
demand. If after reviewing the demand forecast from Microsoft
pursuant to this Section 2.1.2(C), WORLDSPAN can demonstrate that it
can not meet the capacity requirements during the forecast period by
the time required without having to build a new computer data center
or without materially altering the architecture of the WORLDSPAN
System, WORLDSPAN will provide Microsoft with eleven (11) months
prior written notice (provided Microsoft has given WORLDSPAN at least
twelve (12) months written notice of such increased capacity
requirement) that it will not be able to meet the capacity demand in
the forecasted time. In such event, Microsoft will be released from
its minimum commitment in Section 8(c) of this Amendment and
WORLDSPAN shall not be obligated to provide such additional capacity
to Microsoft but will continue to provide the maximum capacity set
forth in the previously agreed-upon capacity forecast. WORLDSPAN
agrees that Microsoft has provided the projection of Expedia air
ticket sales set forth below, and WORLDSPAN expects to be able to
meet capacity requirements therefor without having to build a new
computer data center and without materially altering the architecture
of the WORLDSPAN System.

<TABLE>
<CAPTION>
Fiscal Year Ticket Sales Projected
- -------------------------------------------------------------------
<S> <C>
July 1999-June 2000 2.5 million
- -------------------------------------------------------------------
July 2000-June 2001 3.7 million
- -------------------------------------------------------------------
July 2001-June 2002 4.5 million
- -------------------------------------------------------------------
</TABLE>

4. Revenue Share Payments; Capacity Fees.

Sections 11.1 B and C of the Agreement, as set forth in Amendment
No. 1, are hereby deleted and replaced in their entirety with the
following:

Section 11.1 B (i) The parties agree that WORLDSPAN shall pay to
Microsoft the revenue share amount indicated in the attached
Appendix 1 (the "Revenue Share") with respect to Airline Fees
generated by Microsoft System users through the Microsoft System.
Within thirty (30) days from the end of each calendar month,
WORLDSPAN shall furnish Microsoft with a statement together with
payment for all amounts shown thereby to be due to Microsoft. That
statement shall be based upon the Revenue Share for the month
preceding the month then ended, and shall contain information
sufficient to discern how the Revenue Share was computed.

(ii) At the end of each calendar year, WORLDSPAN shall reconcile the
amounts billed to and paid by Participating Airlines for Bookings
made by Microsoft System users. In the event a Participating Airline
fails to pay and WORLDSPAN, despite using reasonable business
efforts, is unable to collect Airline Fees from such Participating
Airline, WORLDSPAN shall notify Microsoft in writing of such
uncollected amounts. Within thirty (30) days of receipt of
WORLDSPAN's notice, Microsoft will refund (or WORLDSPAN may set off
from amounts owed

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

4 MICROSOFT/WORLDSPAN
CONFIDENTIAL

<PAGE>

by WORLDSPAN to Microsoft hereunder) the amounts paid to Microsoft by
WORLDSPAN for such Bookings. Microsoft shall not be required to
refund any amounts where WORLDSPAN fails to collect due to a
marketing or other arrangement with a Participating Airline.

Section 11.1 C. Microsoft shall reimburse WORLDSPAN for the charges
incurred by WORLDSPAN with respect to direct communication lines and
frame relay access devices (each party is responsible for its own
installation and ongoing costs of circuits and equipment necessary to
connect such party's facilities to the local exchange carrier's
termination of the frame relay circuits) that are requested by
Microsoft through its Product Unit Manager for the Travel Group
("Direct Communication Fees") and to pay the direct costs related to
terminal addresses used in connection with the Microsoft System by
Microsoft's fulfillment partner ("Fulfillment Partner Fees").
Microsoft shall also pay for any equipment requested by Microsoft and
provided by WORLDSPAN to be used by Microsoft's fulfillment partner.
WORLDSPAN shall either offset these fees from the Revenue Share due
Microsoft or invoice Microsoft for the Direct Communication Fees and
the Fulfillment Partner Fees on a monthly basis and shall also
include a written report of the PS Rate for the applicable month.
Microsoft shall pay the invoiced amount within thirty (30) days after
receipt of the invoice. Except as provided herein and Section 2.1.2,
Microsoft shall not owe WORLDSPAN any fees for capacity under this
Agreement.

5. Assignment.

Section 17 of the Agreement is hereby deleted and replaced in its
entirety with the following:

Section 17. Neither party may assign its interest in this Agreement;
provided, however, that either party may assign this Agreement upon
thirty (30) days prior written notice to a wholly-owned subsidiary or
to an entity to which substantially all the assets of the assigning
party (or, with respect to MICROSOFT, substantially all the assets of
the Expedia online consumer travel agent business) are being
transferred if such assignee assumes and agrees to perform all the
obligations of the assignor. This Agreement shall be binding upon the
parties hereto and their successors and permitted assigns and all
persons claiming under or through them or any such successor or
permitted assign.

6. Equal Treatment.

A new Section 33 shall be added to the Agreement to provide as
follows:

33. Equal Treatment.
---------------

[*] If (i) WORLDSPAN differentiates between Expedia and offline
travel agencies for reasons other than regulatory requirements
and (ii) at the time WORLDSPAN first differentiates, any two of
Sabre, Galileo or Amadeus are not similarly differentiating
between online and offline travel agencies, then the parties
shall at that time discuss adjustment to the business
relationship between the parties in good faith. If the parties
fail to reach an agreement regarding an adjustment to the
business relationship within two (2) months after WORLDSPAN
implements such differentiation, Microsoft may terminate this
Agreement upon six (6) months' written notice. Such termination
right expires eight (8) months from the date of such
differentiation.

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

5 MICROSOFT/WORLDSPAN
CONFIDENTIAL
<PAGE>

7. Change in Expedia Search Functionality.

A new Section 34 shall be added to the Agreement to provide as
follows:

34. Change in Expedia Search Functionality.
---------------------------------------

Microsoft shall consult with WORLDSPAN on a regular basis regarding
proposed changes to the search functionality, or changes to the
utilization of existing functionality, available to end users of
Expedia that are reasonably expected to have a materially adverse
impact on message weight in the WORLDSPAN CRS. If the proposed
change has a materially adverse impact on the financial benefits of
the parties hereunder, the parties shall discuss in good faith a
corresponding adjustment to pricing or revenue share. If the parties
are unable to reach agreement within two (2) months after Microsoft
implements such change, then WORLDSPAN may terminate this Agreement
upon a further six (6) months' written notice. Such termination
right expires eight (8) months from the date of Microsoft's
implementation of such changes.

8. Changes to Expedia CRS Usage Commitment.

Section 8(c) of Amendment No. 1 to the Agreement is hereby deleted
and replaced in its entirety with the following:

(c) Minimum Performance Functionality. During the Term of the
---------------------------------
Agreement, WORLDSPAN agrees to provide the same or comparable significant
functionality tools and features (such as a ticketless functionality) as
other computer reservation systems. So long as WORLDSPAN complies with
the foregoing, Microsoft agrees that it will maintain during the Term of
the Agreement, on a calendar quarterly basis, at least the same or
greater (but in no event [*] CRS booking share from Expedia on the
WORLDSPAN System than it maintains on any other CRS ("Minimum
Commitment"). At any time after Microsoft enters into an agreement with
another CRS for Expedia, Microsoft shall provide WORLDSPAN with a
quarterly report that details bookings made by Expedia users. In the
event Microsoft does not maintain at least the Minimum Commitment CRS
booking share from Expedia on the WORLDSPAN System, the amounts otherwise
payable to Microsoft pursuant to Appendix 1 shall be reduced by [*] For
purposes of this Section only, the term "CRS" shall mean the following
entities and their successors: Sabre, Galileo, Abacus, Amadeus, and
Infini.

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

6 MICROSOFT/WORLDSPAN
CONFIDENTIAL

<PAGE>

All other terms not expressly amended herein shall remain in full force and
effect as set forth in the Agreement. The Agreement, as amended hereby, shall
remain in effect for the remainder of the term set forth in Section 7.

Microsoft Corporation WORLDSPAN, L.P.

/s/ Richard Barton /s/ Douglas L. Abramson
- ------------------------ ---------------------------
By By

Richard Barton Douglas L. Abramson
- ------------------------ ---------------------------
Name (Print) Name (Print)

Gen. Mgr. Travel Group Co-Chief Executive Officer
- ------------------------ ---------------------------
Title Title

7/20/99 July 16, 1999
- ------------------------ ---------------------------
Date Date

7 MICROSOFT/WORLDSPAN
CONFIDENTIAL

<PAGE>

Appendix 1
Revenue Share Matrix

The Revenue Share payable by WORLDSPAN to Microsoft shall consist of the
Base Revenue Share set forth below. The Incentive Revenue Share appearing in
Appendix 1 of Amendment No. 1 is eliminated.

The Revenue Share of Airline Fees shall be based on the number of Power
Shopper messages per net Segment per month. The "Revenue Share" column indicates
the percentage amount of Airline Fees that will be paid by WORLDSPAN to
Microsoft in accordance with Section 5 of Amendment No. 1, from dollar one.

----------------------------------------------------------------
Power Shopper Messages per Revenue Share to
Net Segment per Month Microsoft
----------------------------------------------------------------
30.01 and greater *
----------------------------------------------------------------
29.01-30.00 *
----------------------------------------------------------------
28.01-29.00 *
----------------------------------------------------------------
27.01-28.00 *
----------------------------------------------------------------
26.01-27.00 *
----------------------------------------------------------------
25.01-26.00 *
----------------------------------------------------------------
24.01-25.00 *
----------------------------------------------------------------
23.01-24.00 *
----------------------------------------------------------------
22.01-23.00 *
----------------------------------------------------------------
21.01-22.00 *
----------------------------------------------------------------
20.01-21.00 *
----------------------------------------------------------------
19.01-20.00 *
----------------------------------------------------------------
18.01-19.00 *
----------------------------------------------------------------
17.01-18.00 *
----------------------------------------------------------------
16.01-17.00 *
----------------------------------------------------------------
15.01-16.00 *
----------------------------------------------------------------
14.01-15.00 *
----------------------------------------------------------------
13.01-14.00 *
----------------------------------------------------------------
12.01-13.00 *
----------------------------------------------------------------
11.01-12.00 *
----------------------------------------------------------------
11.00 and less *
----------------------------------------------------------------

If the number of Power Shopper messages per net Segment exceeds 30.00, or
falls below 11.00, in an given month, then the parties shall renegotiate revenue
share percentages in good faith. If the parties are unable to reach agreement
within three (3) months, then at any time in the following three (3) months
either party may terminate this Agreement upon a further six (6) months' written
notice. In the meantime, the percentages set forth above shall apply.

[*] The redacted portion, indicated by this symbol is the subject of a
confidential treatment request.

8 MICROSOFT/WORLDSPAN
CONFIDENTIAL

<PAGE>

EXHIBIT 10.10

EXPEDIA, INC.

1999 STOCK OPTION PLAN

1. Purpose of the Plan. The purposes of this Stock Option Plan are
-------------------
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to such individuals, and to
promote the success of the Company's business by aligning employee financial
interests with long-term shareholder value.

Options granted hereunder are Nonqualified Stock Options.

2. Definitions. As used herein, the following definitions shall
-----------
apply:

(a) "Board" shall mean the Committee, if such Committee has been
-----
appointed, or the Board of Directors of the Company, if such Committee has not
been appointed.

(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----

(c) "Committee" shall mean the Committee appointed by the Board of
---------
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed; provided, however, if the Board of Directors appoints more than one
Committee pursuant to Section 4, then "Committee" shall refer to the appropriate
Committee, as indicated by the context of the reference.

(d) "Common Shares" shall mean the common shares of Expedia, Inc.
-------------

(e) "Company" shall mean Expedia, Inc., a Washington corporation and
-------
any successor thereto.

(f) "Continuous Status as an Employee" shall mean the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of sick leave,
maternity leave, infant care leave, medical emergency leave, military leave, or
any other leave of absence authorized in writing by a Vice President of the
Company prior to its commencement.

(g) "Employee" shall mean any person, including officers, employed by
--------
the Company or any Subsidiary of the Company.

(h) "Immediate Family" shall mean the Optionee and the Optionee's
----------------
spouse, parents, children or grandchildren (including adopted children,
stepchildren and stepgrandchildren).
<PAGE>

(i) "Maximum Annual Employee Grant" shall have the meaning set forth
-----------------------------
in Section 5(e).

(j) "Non-Employee Director" shall have the same meaning as defined or
---------------------
interpreted for purposes of Rule 16b-3 (including amendments and successor
provisions) as promulgated by the Securities and Exchange Commission pursuant to
its authority under the Exchange Act (Rule "16-3").

(k) "Nonqualified Stock Option" shall mean an Option that does not
-------------------------
meet the requirements of Section 422 of the Code.

(l) "Option" shall mean a stock option granted pursuant to the
------
Plan.

(m) "Optioned Shares" shall mean the Common Shares subject to an
---------------
Option.

(n) "Optionee" shall mean an Employee who receives an Option.
--------

(o) "Outside Director" shall have the same meaning as defined or
----------------
interpreted for purposes of Section 162(m) of the Code.

(p) "Plan" shall mean this 1999 Stock Option Plan, including any
----
amendments thereto.

(q) "Share" shall mean one Common Share, as adjusted in accordance
-----
with Section 11 of the Plan.

(r) "Subsidiary" shall mean a "subsidiary corporation" whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code, and, in addition
to, a limited liability company, partnership or other entity in which the
Company controls 50 percent or more of the voting power or equity interests.

3. Shares Subject to the Plan. Subject to the provisions of Section
--------------------------
11 of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 4,000,000 Common Shares. The Shares may be authorized,
but unissued, or reacquired Common Shares.

2
<PAGE>

If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.

4. Administration of the Plan.
--------------------------

(a) Procedure. The Plan shall be administered by the Board of
---------
Directors of the Company.

(1) The Board of Directors may appoint one or more Committees
each consisting of not less than two members of the Board of Directors to
administer the Plan on behalf of the Board of Directors, subject to such terms
and conditions as the Board of Directors may prescribe. Once appointed, such
Committees shall continue to serve until otherwise directed by the Board of
Directors.

(2) Any grants of Options to officers who are subject to Section
16 of the Securities Exchange Act of 1934 (the "Exchange Act") shall be made by
(i) a Committee of two or more directors, each of whom is a Non-Employee
Director and an Outside Director or (ii) as otherwise permitted by both Rule
16b-3, Section 162(m) of the Code and other applicable regulations.

(3) Subject to the foregoing subparagraphs (1) and (2), from
time to time the Board of Directors may increase the size of the Committee(s)
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, or fill vacancies however
caused.

(b) Powers of the Board. Subject to the provisions of the Plan, the
-------------------
Board shall have the authority, in its discretion: (i) to grant Nonqualified
Stock Options; (ii) to determine, in accordance with Section 8(b) of the Plan,
the fair market value of the Shares; (iii) to determine, in accordance with
Section 8(a) of the Plan, the exercise price per share of Options to be granted;
(iv) to determine the Employees to whom, and the time or times at which, Options
shall be granted and the number of Shares to be represented by each Option; (v)
to interpret the Plan; (vi) to prescribe, amend, and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and provisions of
each Option granted (which need not be identical) and, with the consent of the
holder thereof, modify or amend each Option; (viii) to reduce the exercise price
per share of outstanding and unexercised Options; (ix) to accelerate or defer
(with the consent of the Optionee) the exercise date of any Option; (x) to
authorize any person to execute on behalf of the Company any instrument required
to effectuate the grant of an Option previously granted by the Board; and (xi)
to make all other determinations deemed necessary or advisable for the
administration of the Plan.

3
<PAGE>

(c) Effect of Board's Decision. All decisions, determinations, and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.

5. Eligibility.
-----------

(a) Options may be granted only to Employees. For avoidance of
doubt, directors are not eligible to participate in the Plan unless they are
full-time Employees.

(b) Each Option shall be designated in the written option agreement
as a Nonqualified Stock Option.

(c) For purposes of Section 5(b), Options shall be taken into account
in the order in which they were granted, and the fair market value of the Shares
shall be determined as of the time the Option with respect to such Shares is
granted.

(d) Nothing in the Plan or any Option granted hereunder shall confer
upon any Optionee any right with respect to continuation of employment with the
Company, nor shall it interfere in any way with the Optionee's right or the
Company's right to terminate the employment relationship at any time, with or
without cause.

6. Term of Plan. The Plan shall become effective upon its adoption
------------
by the Board. It shall continue in effect until the date 10 years after such
adoption with respect to the granting of options under the Plan, unless sooner
terminated under Section 14 of the Plan, but shall continue thereafter until all
then outstanding options have been exercised, terminated or expired.

7. Term of Option. The term of each Option shall be no more than ten
--------------
(10) years from the date of grant.

8. Exercise Price and Consideration.
--------------------------------

4
<PAGE>

(a) The per Share exercise price under each Option shall be such
price as is determined by the Board, except the per Share exercise price may be
less than, equal to, or greater than the fair market value per Share on the date
of grant.

(b) The fair market value per Share shall be the closing price per
share of the Common Share on the Nasdaq Stock Market ("Nasdaq") on the date of
grant. If the Shares cease to be listed on Nasdaq, the Board shall designate an
alternative method of determining the fair market value of the Shares.

(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Board at the time of grant and may consist of cash and/or check. Payment may
also be made by delivering a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale proceeds necessary to pay the exercise price. If the Optionee is
an officer of the Company within the meaning of Section 16 of the Exchange Act,
he may in addition be allowed to pay all or part of the purchase price with
Shares. Shares used by officers to pay the exercise price shall be valued at
their fair market value on the exercise date.

(d) Prior to issuance of the Shares upon exercise of an Option, the
Optionee shall pay any federal, state, and local withholding obligations of the
Company, if applicable. If an Optionee is an officer of the Company within the
meaning of Section 16 of the Exchange Act, he may elect to pay such withholding
tax obligations by having the Company withhold Shares having a value equal to
the amount required to be withheld. The value of the Shares to be withheld shall
equal the fair market value of the Shares on the day the Option is exercised.
The right of an officer to dispose of Shares to the Company in satisfaction of
withholding tax obligations shall be deemed to be approved as part of the
initial grant of an option, unless thereafter rescinded, and shall otherwise be
made in compliance with Rule 16b-3 and other applicable regulations.

5
<PAGE>

9. Exercise of Option.
------------------

(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board at the time of grant, and as shall be permissible
under the terms of the Plan.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the share
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such share certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the share certificate is issued, except as provided in
Section 11 of the Plan.

Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

(b) Termination of Status as Employee. In the event of termination
---------------------------------
of an Optionee's Continuous Status as an Employee, such Optionee may exercise
stock options to the extent exercisable on the date of termination. Such
exercise must occur within three (3) months (or such shorter time as may be
specified in the grant), after the date of such termination (but in no event
later than the date of expiration of the term of such Option as set forth in the
Option Agreement). To the extent that the Optionee was not entitled to exercise
the Option at the date of such termination, or does not exercise such Option
within the time specified herein, the Option shall terminate.

(c) Disability of Optionee. Notwithstanding the provisions of
----------------------
Section 9(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee as a result of total

6
<PAGE>

and permanent disability (i.e., 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 twelve (12) months), the Optionee
may exercise the Option, but only to the extent of the right to exercise that
would have accrued had the Optionee remained in Continuous Status as an Employee
for a period of twelve (12) months after the date on which the Employee ceased
working as a result of the total and permanent disability. Such exercise must
occur within eighteen (18) months (or such shorter time as is specified in the
grant) from the date on which the Employee ceased working as a result of the
total and permanent disability (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement). To
the extent that the Optionee was not entitled to exercise such Option within the
time specified herein, the Option shall terminate.

(d) Death of Optionee. Notwithstanding the provisions of Section
-----------------
9(b) above, in the event of the death of an Optionee:

(i) who is at the time of death an Employee of the
Company, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Status as an Employee twelve (12) months after the date of death; or

(ii) whose Option has not yet expired but whose Continuous
Status as an Employee terminated prior to the date of death, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of termination.

(e) Notwithstanding subsections (b), (c), and (d) above, the Board
shall have the authority to extend the expiration date of any outstanding option
in circumstances in which it deems such action to be appropriate (provided that
no such extension shall extend the term of an option beyond the date on which
the option would have expired if no termination of the Employee's Continuous
Status as an Employee had occurred).

10. Transferability of Options. Except as otherwise provided herein, the
--------------------------
Option may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee; provided that the Board may permit further transferability, on a
general or specific basis, and may impose conditions and limitations on any
permitted transferability. The Option is transferable, in whole or in part, by
gift or, with the consent of the compensation committee of the Board, for value,
to immediate family members of the Holder, partnerships of which the only
partners are members of the Optionee's Immediate Family, and trusts established
solely for the benefit of Optionee's Immediate Family, provided that such
transferability shall be limited to vested Options. Transfers to Optionee's
Immediate Family shall be subject to the terms and conditions of this Plan and
the applicable stock option grant agreement and shall not be permitted to effect
a cashless exercise. Optionee's Immediate Family members shall not have any
right to further transfer the Option other than by will or by the laws of
descent and distribution.
7
<PAGE>

11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
----------------------------------------------------
required action by the shareholders of the Company, the number of Shares covered
by each outstanding Option, the Maximum Annual Employee Grant and the number of
Shares which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per Share covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination, or reclassification of
the Shares, or any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding, and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of Shares subject to an Option.

In the event of the proposed dissolution or liquidation of the
Company, the Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise an Option as to all or any part of the Optioned Stock, including Shares
as to which the Option would not otherwise be exercisable. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless such
successor corporation does not agree to assume the Option or to substitute an
equivalent option, in which case the Board shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the Option
as to all of the Optioned Stock, including Shares as to which the Option would
not otherwise be exercisable. If the Board makes an Option fully exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify the Optionee that the Option shall be fully exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
will terminate upon the expiration of such period.

12. Time of Granting Options. The date of grant of an Option shall,
------------------------
for all purposes, be the date on which the Company completes the corporate
action relating to the grant of an option and all conditions to the grant have
been satisfied, provided that conditions to the exercise of an option shall not
defer the date of grant. Notice of a grant shall be given to each Employee to
whom an Option is so granted within a reasonable time after the determination
has been made.

8
<PAGE>

13. Substitutions and Assumptions. The Board shall have the right to
-----------------------------
substitute or assume Options in connection with mergers, reorganizations,
separations, or other transactions to which Section 424(a) of the Code applies,
provided such substitutions and assumptions are permitted by Section 424 of the
Code and the regulations promulgated thereunder. The number of Shares reserved
pursuant to Section 3 may be increased by the corresponding number of Options
assumed and, in the case of a substitution, by the net increase in the number of
Shares subject to Options before and after the substitution.

14. Amendment and Termination of the Plan.
-------------------------------------

(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable
(including, but not limited to amendments which the Board deems appropriate to
enhance the Company's ability to claim deductions related to stock option
exercises); provided that any increase in the number of Shares subject to the
Plan, other than in connection with an adjustment under Section 11 of the Plan,
shall require approval of or ratification by the shareholders of the Company.

(b) Employees in Foreign Countries. The Board shall have the
------------------------------
authority to adopt such modifications, procedures, and subplans as may be
necessary or desirable to comply with provisions of the laws of foreign
countries in which the Company or its Subsidiaries may operate to assure the
viability of the benefits from Options granted to Employees employed in such
countries and to meet the objectives of the Plan.

(c) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

15. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

16. Reservation of Shares. The Company, during the term of this
---------------------
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

9
<PAGE>

17. Shareholder Approval. The Plan was approved by the sole shareholder
--------------------
of the Company on November 4, 1999.

<PAGE>

[LOGO OF EXPEDIA INC.] EXHIBIT 10.13

October 25, 1999

Richard Barton
3522 46th Avenue NE
Seattle, WA 98105

Dear Rich:

Expedia, Inc. is excited to offer you the opportunity to join our new company in
the position of Chief Executive Officer. This offer is conditioned upon and
subject to the execution by Expedia, Inc. of an initial public offering (IPO).
The date of the anticipated IPO is tentatively set for November 1999, but could
occur later. As a condition of this offer, your start date with Expedia, Inc.
must be no later than the IPO date. As a further condition of employment with
Expedia, Inc., you will be required to sign an Expedia, Inc. Employee Agreement,
a copy of which is enclosed with this letter.

In the event that an Expedia, Inc. public offering does not take place for any
reason by June 30, 2000, this conditional offer of employment is void.
Microsoft informs us that, in that event, in lieu of becoming employed by
Expedia, Inc. you will have the opportunity to continue your employment with
Microsoft Corporation.

Subject to the above contingencies and the terms and conditions stated below,
your exact start date with Expedia, Inc. is still to be determined but is at
present estimated to occur just prior to the anticipated IPO in the November
1999 timeframe. For purposes of Expedia, Inc. vacation accrual and 401(k)
vesting only, your service date with Expedia, Inc. would be 5/28/91,
recognizing your employment period with Microsoft. We trust you will treat the
details of this offer with utmost confidentiality.

As an Expedia, Inc. employee, your compensation and benefits package would be as
follows:

Your annual base salary would be $165,000, equivalent to approximately
$13,750 per month. The performance review schedule for Expedia, Inc. has
not yet been established and is subject to change, but we anticipate you
would first be eligible for a salary merit increase opportunity during the
summer of 2000. Concurrently with your salary review, you would also be
considered for a 0-15% bonus opportunity. Any subsequent salary and/or
bonus review would occur according to the performance review timetable and
eligibility practices in place for Expedia, Inc. employees at that time.
Any salary increase and bonus would be based on your performance and
subject to your satisfaction of eligibility criteria.

Expedia, Inc would provide a company benefits program that would include
the opportunity to participate in an Expedia, Inc. 401(k) savings plan and
an Expedia, Inc. Employee Stock Purchase Plan. Further details of the
Expedia, Inc. benefits program
<PAGE>

will be provided to you once the program is finalized and in place. Please
note that some portions of the Expedia, Inc. benefit program may not be in
place as of your start date and/or may be subject to change. If you are
currently participating as a Microsoft employee in Microsoft Corporation's
401(k) Plan and/or Employee Stock Purchase Plan, Microsoft has informed us
that you would be permitted to continue your participation in those Plans
through the period ending December 31, 1999, provided of course that you
continue to meet the eligibility criteria for those Microsoft Plans.

Upon becoming an employee of Expedia, Inc., any outstanding Microsoft
Corporation stock options granted to you as a Microsoft employee would be
handled as follows. Any and all Microsoft options previously granted to
you that are vested and exerciseable as of your start date with Expedia,
Inc. would remain vested and exerciseable as Microsoft options through the
life, and subject to all the terms and conditions, of the applicable
Microsoft grant agreement, Microsoft Stock Option Plan(s), and the
administrative policies adopted pursuant to the Microsoft Stock Option
Plan(s). Any and all Microsoft options previously granted to you that are
unvested as of your start date with Expedia, Inc. would be irrevocably
exchanged for and replaced by Expedia, Inc. options dated as of the IPO
date, at which time the actual price and number of Expedia, Inc. shares
would be determined. At the time of this exchange, all your unvested
Microsoft options would be canceled, and you would be issued Expedia, Inc.
options having an aggregate "in-the-money value" (the difference between
the exercise price and the market price of the underlying stock) equivalent
to the aggregate in-the-money value of your unvested Microsoft stock
options as of the IPO date. The number and exercise price of these new
Expedia, Inc. stock options would be established using an exchange ratio
based upon the IPO price of Expedia, Inc. shares and the closing price of
Microsoft stock on the day before the IPO date. Further, these exchange
options from Expedia, Inc. would be non-qualified options granted under and
subject to the terms and conditions of the Expedia, Inc. 1999 Stock Option
Plan, the Expedia, Inc. Stock Option Agreement issued under that Plan, and
any administrative policies adopted pursuant to that Plan. The Expedia,
Inc. exchange options will vest according to the same vesting schedule that
would have applied to the exchanged unvested Microsoft stock options had
those Microsoft options not canceled; however, the Expedia, Inc. exchange
options will be subject to a restriction preventing exercise of any vested
portion of the options for a period of 180 days after the IPO date.
Additional information regarding the Expedia, Inc. stock option, including
the Stock Option Agreement you would be required to sign as a condition of
receiving the option, would be provided to you approximately 60 days after
your grant price has been determined. In addition, as a condition of
commencing employment with Expedia, Inc. and receiving the Expedia, Inc.
exchange options described above, you will be required to sign an agreement
regarding the cancellation of your unvested Microsoft options.

Please recognize that this offer letter is not a contract of employment for any
minimum or specific period and that the employment Expedia, Inc. offers you is
terminable at will. This means that our employment relationship is voluntary
and based on mutual consent and that either you or Expedia, Inc. can decide to
end the relationship at any time, for any reason, with or without cause.
However, if your employment with Expedia, Inc. terminates during the first two
(2) years after your hire date for either of the following two reasons, you will
nonetheless receive as severance benefits upon your termination from Expedia,
Inc. the salary and stock option vesting you would have received from
<PAGE>

Expedia, Inc. had you remained employed with us for a period of two years from
your Expedia, Inc. hire date:

. If your salary or job ladder level are reduced without your consent and you
terminate as a result during the first two years, you will receive the above
referenced severance benefits;

. If there is a material, non-consensual diminution of your authority, title or
scope of responsibility during the first two years, you will receive the
above referenced severance benefits.

As a condition of and in consideration for your receipt of the above referenced
severance benefits, you will be required to sign a full and final release of any
and all claims arising from or related in any way to your employment with or
separation from Expedia, Inc. No severance benefits shall be paid if you are
terminated for misconduct, as defined below, or if you voluntarily resign for
any reason other than the two reasons set forth above. As used in this letter,
the term "misconduct" shall mean your commission of a crime or any other
intentional misconduct on your part that has a material adverse effect upon the
business or reputation of Expedia, Inc.

Please note that the terms stated in this letter constitute a one-time offer to
transition your employment from Microsoft to Expedia, Inc. Should you decline
this offer and subsequently receive and accept an offer to join Expedia, Inc. at
a later time, any such future offer would be governed by separate terms as may
be offered at that time, and the terms stated in this letter will not apply.

This offer is contingent on your providing Expedia, Inc. with proof of U.S.
citizenship or alien work permission as required under federal regulations.

In order to accept all the terms and conditions of this offer as stated above,
please sign the enclosed copy of this letter and return it to me in the enclosed
envelope. You may keep the original of this letter for your records.

We look forward to your contribution to the success of Expedia, Inc. and hope
you will join us. Should you have any questions, please give me a call.

Sincerely, ACCEPTANCE:

/s/ Richard Barton
-----------------------------
NAME
/s/ Greg Maffei
October 27, 1999
Greg Maffei -----------------------------
President DATE
Expedia, Inc.

Enclosure: Expedia, Inc. Employee Agreement

<PAGE>

Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 2 to Registration Statement
No. 333-87623 of Expedia, Inc. on Form S-1 of our report dated October 26,
1999, appearing in the Prospectus, which is a part of such Registration
Statement, and to the references to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.

/s/ Deloitte & Touche LLP

Seattle, Washington
November 5, 1999