LENDINGTREE INC, 424B1, 2000-02-16

LENDINGTREE INC
424B1, 2000-02-16
BUSINESS SERVICES, NEC

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<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 333-91839

PROSPECTUS

3,650,000 SHARES

[LENDINGTREE, INC. LOGO]

COMMON STOCK
----------------------
This is LendingTree, Inc.'s initial public offering. LendingTree, Inc. is
selling all of the shares.

Currently, no public market exists for the shares. The shares have been
approved for quotation on the Nasdaq National Market under the symbol "TREE."

INVESTING IN THE COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 5 OF THIS PROSPECTUS.

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

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price..................................... $12.00 $43,800,000
Underwriting discount..................................... $.84 $3,066,000
Proceeds, before expenses, to LendingTree, Inc. .......... $11.16 $40,734,000
</TABLE>

The underwriters may also purchase up to an additional 547,500 shares from
LendingTree, Inc. at the public offering price, less the underwriting discount,
within 30 days from the date of this prospectus to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The shares will be ready for delivery on or about February 22, 2000.

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

MERRILL LYNCH & CO.
LEHMAN BROTHERS
PRUDENTIAL VOLPE TECHNOLOGY
A UNIT OF PRUDENTIAL SECURITIES
----------------------
The date of this prospectus is February 15, 2000.
<PAGE> 2

APPENDIX -- DESCRIPTION OF GRAPHICS

PROSPECTUS COVER

INSIDE FRONT COVER

The LendingTree logo is positioned in the center of the page with the caption
"Internet Loan Marketplace" placed below it. The LendingTree logo is
encapsulated by a cylinder with the caption "[i]close Marketplace Technology"
placed above and below the cylinder. On either side and above the cylinder are
two captions, "Consumer Demand" and "Lender Supply." Below these headings are
five elongated cubes containing the names of the principal types of loans
offered on the network and the methods by which consumers can access the
network.

The cubes below "Consumer Demand" read:
+ LendingTree.com(SM)
+ Co-Branded Loan Centers
+ Lender Websites
+ Affiliate Network
+ Other Links

The cubes below "Lender Supply" read:
+ Mortgages
+ Home Equity Loans
+ Automobile Loans
+ Credit Cards
+ Personal Loans

Attached to the end of each cube is an arrow which points in the direction of
the cylinder. Below the cylinder there are three boxes placed in a triangular
formation. Each box contains a brief description of one of the following;
"[i]close(SM) Technology," "Lender Supply," or "Consumer Demand."

The text of the [i]close(SM) Technology box: LendingTree's proprietary
[i]close(SM) technology powers the marketplace.

The text of the Lender Supply box: LendingTree's network of more than 90 lenders
provides product coverage and fosters competition.

The text of the Consumer Demand box: LendingTree collects consumer demand across
the Internet from multiple points of distribution.

INSIDE GATEFOLD (two pages)

The gatefold has the five steps a consumer will go through to use LendingTree's
services.

+ Step one illustrates consumer access.
+ Step two illustrates a loan request being completed on a credit request
form.
+ Step three demonstrates how the filtering process matches consumer's credit
requests with the lender's criteria.
+ Step four illustrates the lender evaluation process.
+ Step five illustrates the communication of the lender's offer and the
consumer's acceptance.

Steps one, two, four and five provide a graphical picture of an illustrative
webpage. Step three provides a graphical illustration of the filtering process.

The text associated with step one states: Consumers access the LendingTree
marketplace through LendingTree.com or other points of distribution and select
one of five loan categories.

The text associated with step two states: Consumers complete a single loan
request form.

The text associated with step three states: Through our proprietary filtering
process the consumer's credit request is matched to the preset underwriting
criteria of our lenders and transmitted to up to four lenders.

The text associated with step four states: Lenders evaluate and respond to
loan requests within one business day via a secure website.

The text associated with step five states: The LendingTree system automatically
notifies the consumer to return to the LendingTree website to view and compare
the terms of each offer and choose the loan that is best for them.
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 1
Risk Factors................................................ 5
Forward-Looking Statements.................................. 14
Use of Proceeds............................................. 15
Dividend Policy............................................. 15
Capitalization.............................................. 16
Dilution.................................................... 17
Selected Financial and Operating Data....................... 18
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 19
Business.................................................... 26
Management.................................................. 39
Certain Relationships and Related Transactions.............. 54
Principal Stockholders...................................... 57
Description of Capital Stock................................ 59
Shares Eligible for Future Sale............................. 63
Important United States Federal Tax Considerations for
Non-U.S. Holders of Our Common Stock...................... 65
Underwriting................................................ 67
Legal Matters............................................... 71
Experts..................................................... 71
Where You Can Find More Information......................... 71
Index to Financial Statements............................... F-1
</TABLE>

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

This prospectus contains estimates of market growth and other information
related to the Internet. These estimates have been included in studies published
by Forrester Research and International Data Corporation, which are market
research firms, and by the United States Federal Reserve and the U.S. Census
Bureau. These estimates assume that certain events, trends and activities will
occur. None of these entities guarantees the accuracy or completeness of its
information and estimates. We have not independently verified the information
and assumptions on which these market growth estimates are based. If any of
these entities is wrong about any of its assumptions, then its market estimates
may also be wrong.

You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations, and prospects may have changed since that date.

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

LendingTree(R) is a registered service mark of LendingTree, Inc.
[i]close(SM) is a service mark of LendingTree, Inc. Other service marks or
trademarks appearing in this prospectus are the property of their respective
holders.
<PAGE> 4

SUMMARY

This summary is not complete and does not contain all of the information
that you should consider before investing in our common stock. You should read
the entire prospectus carefully, including the more detailed information
regarding LendingTree, the risks of purchasing our common stock discussed under
"Risk Factors," and our financial statements and the accompanying notes.

We are an Internet-based loan marketplace for consumers and lenders. Using
a simple and powerful consumer proposition, "Lenders compete for your business,"
we collect consumer credit requests and compare these requests and related
credit information to the underwriting criteria of more than 90 participating
lenders in our network. Consumers can receive multiple offers in response to a
single credit request and then compare, review, and accept the loan offer that
best suits their needs. Lenders can generate new business that meets their
specific underwriting criteria at a cost that is lower than the cost associated
with offline loan originations. Our marketplace encompasses most consumer credit
categories, including mortgages, home equity loans, automobile loans, credit
cards, and personal loans. We power our website with our proprietary loan
marketplace technology platform, which we call [i]close(SM).

We are a marketplace that facilitates the lending process. Because we are
not a lender, we have reduced exposure to interest rate and market risks
generally associated with traditional lending activities. Our revenue model
depends on revenue generated from lenders participating in our network who pay
us fees based upon their receipt of credit requests, which we refer to as
transmission fees, and fees based upon loan closings, which we refer to as
closed-loan fees. We also license our [i]close technology to other companies who
create single and multi-lender online marketplaces. Credit requests not meeting
lenders' criteria on those marketplaces are routed to our lender network,
increasing our overall volume.

Our marketplace provides important benefits to consumers, including:

- Price. We foster a competitive bidding environment, encouraging lenders
to price loan offers aggressively as they compete for consumers'
business.

- Consumer Advocacy. Consumers view us as their advocate. Through the
range of online information and tools presented on our website, combined
with our support and service, we aim to reduce the confusion often
experienced by consumers during the borrowing process and the time that
it takes to obtain loans.

- Choice. We provide qualified consumers with up to four loan offers from
our network lenders.

- Convenience. We save consumers valuable time by enabling them to go
online, complete one credit request form, which we refer to as a
Qualification Form, and receive up to four loan offers.

- Content. We provide consumers with educational materials about the
borrowing process, answers to frequently asked questions, informative
articles, and interactive loan calculators.

- No Fees. Our service is free to consumers.

Our marketplace provides important benefits to lenders, including:

- New Business. Leveraging the reach of the Internet, we provide lenders
with access to a significantly larger audience of qualified consumers.

- Lower Acquisition Costs. Our fees are designed to be less than the cost
of acquiring customers through traditional and other online channels. Our
[i]close technology enables lenders to process credit requests more
efficiently and at significantly reduced costs.

- Market Information. We collect and distribute to our lenders valuable
information about the online lending marketplace. This information
enables our lenders to refine and improve their Internet lending
strategies and quickly respond to changing market conditions.

1
<PAGE> 5

Our goal is to be the predominant loan marketplace on the Internet. The key
elements of our strategy are to:

- strengthen our position as an online marketplace offering multiple loan
products from a wide variety of lenders;

- increase brand awareness and transaction volume;

- attract lenders offering an array of products across a wide range of
consumer credit profiles and geographic locations;

- expand transaction volume through online relationships;

- establish [i]close as the dominant loan marketplace technology; and

- assist our network lenders to increase their loan closing rates.

LendingTree commenced nationwide operations on July 1, 1998. Since that
time the LendingTree network has expanded to include more than 90 lenders. Non
Internet-based lenders that generated the highest number of closed loans on our
website during the fourth quarter of 1999 were Bank One, PNC Bank FSB, Provident
Bank and Sovereign Bank. Online lending companies that generated the highest
number of closed loans on our website during that same period were
AppOnline.com, giggo.com, MortgageSelect.com and Smart-Finance.com.

For the quarter ended December 31, 1999, we transmitted 68,200
Qualification Forms, representing $5.0 billion in loan demand, and our lenders
closed loans totaling $440 million. These numbers reflect significant growth
when compared to the quarter ended December 31, 1998, with 9,500 Qualification
Forms transmitted, representing $902 million in loan demand, which resulted in
$11 million in closed loans.

For the quarter ended December 31, 1999, total revenue was $2.9 million, an
increase of more than 22 times revenue of $0.1 million for the quarter ended
December 31, 1998. Our net loss was $8.8 million for the quarter ended December
31, 1999, nearly three times the $3.0 million net loss for the quarter ended
December 31, 1998. For more information, see the sections entitled "Summary
Financial and Operating Data" and "Selected Financial and Operating Data," as
well as our audited financial statements included elsewhere in this prospectus.

We intend to expend significant funds on building the LendingTree brand
identity through increased advertising and related promotional activity, hiring
additional personnel, and further developing our website, [i]close technology,
and network infrastructure.

You should read the section of this prospectus entitled "Risk Factors."
That section indicates among other things that:

- we have a history of significant losses;

- from our inception through December 31, 1999 our accumulated losses were
$32.1 million;

- we anticipate incurring significant losses in the foreseeable future; and

- we operate in a highly competitive online market with low barriers to
entry.

2
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Common stock offered by us................... 3,650,000 shares
Common stock to be outstanding
after the offering......................... 17,215,234 shares
Use of proceeds.............................. We estimate that the net proceeds from this
offering will be approximately $38.7 million.
We expect to use these net proceeds
principally for advertising and marketing, as
well as for general corporate purposes.
Risk factors................................. See "Risk Factors" beginning on page 5 for a
discussion of risks that you should consider
carefully before deciding to invest in shares
of our common stock.
Nasdaq National Market symbol................ "TREE"
</TABLE>

Throughout this prospectus, except where otherwise indicated, the number of
shares of common stock that will be outstanding after this offering is based on
the number of shares outstanding as of January 31, 2000. The number of
outstanding shares excludes:

- 857,885 shares issuable upon the exercise of outstanding warrants;

- 100,000 shares issued upon the exercise of an option at an exercise price
of $12.00 per share granted to our Chief Executive Officer prior to the
commencement of trading of our common stock on the Nasdaq National
Market;

- 444,500 shares reserved for issuance under our employee stock purchase
plan;

- 695,034 shares reserved for future grants under our 1999 stock option
plan; and

- 3,740,222 shares issuable at a weighted average exercise price of $5.27
per share upon exercise of stock options outstanding as of January 31,
2000.

All information in this prospectus:

- assumes that a 1.27-for-1 common stock split is effected before
completion of this offering;

- reflects the automatic conversion of all outstanding shares of our
convertible preferred stock into 10,150,673 shares of our common stock
upon the closing of this offering;

- except as otherwise indicated, includes accumulated dividends on our
convertible preferred stock which were convertible into 292,877 shares of
common stock as of January 31, 2000; and

- except as otherwise indicated, assumes that the underwriters do not
exercise their over-allotment option to purchase additional shares in
this offering.

LendingTree was incorporated in Delaware on June 7, 1996. Our principal
executive offices are located at 6701 Carmel Road, Suite 205, Charlotte, North
Carolina, 28226. Our telephone number is (704) 541-5351, and our website is
located at www.lendingtree.com. Information on our website is not a part of this
prospectus.

3
<PAGE> 7

SUMMARY FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

The following table sets forth summary financial and operating data for our
business. You should read this information together with our financial
statements and the accompanying notes included in this prospectus and the
information under "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The "pro forma as adjusted" balance sheet data gives
effect to the automatic conversion of all outstanding shares of convertible
preferred stock and accumulated dividends through December 31, 1999 into common
stock and reflects our sale of shares of common stock offered by this
prospectus. The calculation of pro forma basic and diluted net loss per common
share excludes shares issuable upon the payment of accumulated dividends on our
convertible preferred stock.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
------ ---------- -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUE:
LendingTree network............................ $ 2 $ 273 $ 6,112
[i]close and other technology.................. -- 136 852
------ ---------- -----------
Total revenue.......................... 2 409 6,964
------ ---------- -----------
COST OF REVENUE:
LendingTree network............................ -- 235 2,231
[i]close and other technology.................. -- 149 312
------ ---------- -----------
Total cost of revenue.................. -- 384 2,543
------ ---------- -----------
Gross profit..................................... 2 25 4,421
------ ---------- -----------
OPERATING EXPENSES:
Product development............................ 293 1,051 1,109
Marketing and advertising...................... 54 2,494 18,611
Sales, general and administrative.............. 621 2,955 9,951
------ ---------- -----------
Total operating expenses............... 968 6,500 29,671
------ ---------- -----------
LOSS FROM OPERATIONS............................. (966) (6,475) (25,250)
Interest income, net........................... 3 41 505
------ ---------- -----------
Net loss....................................... $ (963) $ (6,434) $ (24,745)
====== ========== ===========
Basic and diluted net loss per common share.... $(1.20) $ (1.88) $ (7.74)
====== ========== ===========
Weighted average shares used in computing basic
and diluted net loss per common share....... 803,370 3,434,736 3,560,197
------- ---------- -----------
------- ---------- -----------
PRO FORMA PER COMMON SHARE DATA:
Pro forma basic and diluted net loss per common
share.......................................... $ (3.23)
===========
Pro forma weighted average basic and diluted
shares outstanding............................. 7,650,229
===========
OPERATING DATA:
Qualification Forms transmitted:
Number......................................... -- 18,247 185,792
Dollar volume (in thousands)................... $ -- $1,596,662 $16,209,918
Loans closed:
Number......................................... -- 712 27,155
Dollar volume (in thousands)................... $ -- $ 25,516 $ 940,707
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
------------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................. $ 2,419 $41,148
Short-term investments..................................... 27,053 27,053
Working capital............................................ 26,474 65,208
Total assets............................................... 33,767 72,501
Convertible preferred stock................................ 59,118 --
Total stockholders' equity................................. 27,737 66,471
</TABLE>

4
<PAGE> 8

RISK FACTORS

Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide to
buy our common stock. If any of the following risks actually occur, our
business, financial condition, or results of operations would likely suffer. In
any such case, the market price of our common stock could decline, and you could
lose all or part of the money you paid to buy our common stock.

RISKS RELATED TO OUR FINANCIAL CONDITION

OUR LIMITED OPERATING HISTORY MAKES OUR BUSINESS AND PROSPECTS DIFFICULT TO
EVALUATE.

We have a limited operating history on which to base your evaluation of our
business and prospects. We were formed in 1996 and began serving consumers
across the United States in July 1998. There is no significant historical basis
to assess how we will respond to competitive, economic or technological
challenges. Our business and prospects must be considered in light of the risks
and uncertainties frequently encountered by companies in the early stages of
development, particularly companies like us who operate in new and rapidly
developing online marketplaces. Our failure to address these risks and
uncertainties could cause our operating results to suffer and result in the loss
of all or part of your investment.

WE HAVE A HISTORY OF LOSSES AND EXPECT LOSSES IN THE FUTURE.

We have never been profitable. We incurred losses from operations of
approximately $6.5 million in 1998 and $25.3 million in 1999. As of December 31,
1999, we had accumulated net losses of approximately $32.1 million. We currently
estimate that we will spend approximately $50.0 million during 2000 on marketing
and advertising, more than double what we spent in 1999.

We also intend to use the offering proceeds for general corporate purposes,
such as:

- enhancing our technology, including our filtering system, network
infrastructure, and the functionality of our website;

- hiring additional personnel; and

- establishing and developing online relationships.

As a result of these expenditures, we anticipate further losses for the
foreseeable future.

We forecast our future expense levels based on our operating plans and our
estimates of future revenue. We may find it necessary to accelerate expenditures
relating to our sales and marketing efforts or otherwise increase our financial
commitment to creating and maintaining brand awareness among consumers and
lenders. If our revenue grows at a slower rate than we anticipate, or if our
spending levels exceed our expectations or cannot be adjusted to reflect slower
revenue growth, we may not achieve or sustain profitability. If we fail to
become or remain profitable, the value of your investment could be significantly
reduced.

OUR BUSINESS MODEL IS UNPROVEN AND COULD FAIL.

Our revenue model and profit potential are unproven and we cannot assure
you that we will be able to become profitable. Our revenue model depends heavily
on revenue generated from lenders participating in our network who pay us fees
based upon their receipt of credit requests, which we refer to as transmission
fees, and fees based upon loan closings, which we refer to as closed-loan fees.
We also license our [i]close technology to other companies who create single and
multi-lender online marketplaces. To generate revenue we must rapidly achieve
broad market acceptance of our service by both lenders and consumers who have
traditionally used other means to lend and borrow money. In addition, we must
attract a sufficient number of consumers with credit profiles targeted by our
lenders. It is possible that our online loan marketplace model will not gain the
widespread acceptance necessary to support our business, in which case we may
find it necessary to alter our business model. We cannot accurately predict
what, if
5
<PAGE> 9

any, changes we would make to our business model in response to the
uncertainties in the online lending market. These changes might include shifting
all or a portion of our fees to customers or reducing fees currently charged to
lenders to expand volume more quickly. Shifting fees to consumers may not be
feasible, as other companies may be able to offer comparable services with no
fees. If we are not able to anticipate and adapt to changes in the industry or
if our business model is not successful, we may be unable to expand our business
and the value of your investment could be significantly reduced.

OUR OPERATING RESULTS MAY BE NEGATIVELY IMPACTED BY FLUCTUATIONS IN INTEREST
RATES.

Our business is cyclical. During 1999, more than 80% of our revenue was
derived from fees paid by lenders participating in our online marketplace. In
addition, during the quarter ended December 31, 1999, revenue earned from
refinanced mortgages, traditionally a market segment that is greatly impacted by
changes in interest rates, represented approximately 17% of our total revenue.
While interest rates during this period were rising, we were unable to assess
the extent of the impact on our business because of our limited operating
history. During future periods of rising interest rates we may experience a
decline in consumer traffic to our website and during periods of robust credit
demand, typically associated with falling interest rates, lenders may have less
incentive to use our marketplace. Either of these events could reduce our
revenue and we cannot assess the effects of interest rates on our business over
a broad range of interest rate environments.

YOU SHOULD NOT RELY ON OUR QUARTERLY OPERATING RESULTS AS AN INDICATION OF OUR
FUTURE RESULTS BECAUSE THEY ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND THESE
RESULTS MAY NEGATIVELY IMPACT THE PRICE OF OUR COMMON STOCK.

Our quarterly operating results may fluctuate significantly in the future
due to a variety of factors that affect our revenue or expenses in any
particular quarter. This could cause the market price of our common stock to
decline. Our quarterly results will fluctuate in part based on the demand for
and supply of consumer loans which are a function of seasonal and other
fluctuations in interest rates and related economic factors, all of which are
outside of our control. These temporary fluctuations could adversely affect our
business. As a result, it is possible that in some future periods our results of
operations may be below the expectations of public market analysts and
investors. In addition, we plan to increase our operating expenses significantly
to expand our sales and marketing, administration, maintenance and technical
support, and product management groups. If revenue falls below our expectations
in any quarter and we are unable to quickly reduce our spending in response, our
operating results would be lower than expected.

In addition, we expect that as our business matures we will experience
seasonal fluctuations in our operating results due to fluctuations in consumer
credit markets during the year. For example, home buying behavior is seasonal.
Typically the second and third quarters of a year have a greater number of
mortgage closings as compared to the first and fourth quarters. Because of our
limited operating history, it has not yet been possible for us to assess the
impact of seasonal effects on our business.

OUR FAILURE TO OBTAIN SUFFICIENT FUNDS FROM SUBSEQUENT FINANCINGS MAY
SIGNIFICANTLY IMPEDE OUR GROWTH.

We must achieve and sustain rapid growth for our business model to succeed.
To accomplish this, we will need to raise additional funds in the future, from
equity or debt sources. Our future cash requirements may be substantial. If
additional financing is not available when required or is not available on
acceptable terms, we may be unable to successfully promote our brand name,
develop or enhance our service, take advantage of business opportunities or
respond to competitive pressures, any of which could have a material adverse
effect on our business and significantly reduce the value of your investment.

6
<PAGE> 10

RISKS RELATED TO OUR MARKETS AND STRATEGY

OUR FUTURE SUCCESS IS DEPENDENT UPON INCREASED ACCEPTANCE OF THE INTERNET BY
CONSUMERS AND LENDERS AS A MEDIUM FOR LENDING.

If consumer and lender acceptance of our online marketplace does not
increase, our business will not succeed and the value of your investment may be
adversely affected. The online lending market is new and rapidly developing. The
adoption of online lending in general, and our marketplace in particular,
requires the acceptance of a new way of conducting business, exchanging
information, and applying for credit by consumers as well as acceptance by
lenders that have historically relied upon traditional lending methods. As a
result, we cannot be sure that we will be able to compete effectively with
traditional borrowing and lending methods.

IF POTENTIAL CONSUMERS PERCEIVE THERE ARE SECURITY OR PRIVACY RISKS ASSOCIATED
WITH OUR BUSINESS, DEMAND FOR OUR SERVICE WILL BE REDUCED.

The secure transmission of confidential personal and financial information,
such as personal address, social security number, and bank account information,
over public networks with consumer authorization is critical to consumer
acceptance of our business. Unauthorized access to or use of this information
could result in potential liability under federal and state privacy laws and
damages for which we would be liable. Usage of our service could decline if any
well-publicized compromise of security of information on our website or the
Internet in general were to occur. We and other Internet-based companies may not
be able to respond adequately to privacy concerns of potential users as advances
in computer capabilities and other technological developments occur.

IF WE ARE UNABLE TO EXPAND OUR BRAND RECOGNITION, CONSUMER AND LENDER DEMAND FOR
OUR SERVICE WILL BE LIMITED.

If we fail to promote and maintain our brand successfully or incur
significant expenses in promoting our brand and fail to generate a corresponding
increase in revenue as a result of our branding efforts, our business and the
value of your investment could be materially adversely affected. As of January
15, 2000, we had commitments to pay a minimum of approximately $15.0 million for
advertising and promotion through the end of 2001, and we project that our
actual spending over that period will be significantly higher. We believe that
continuing to build brand awareness of the LendingTree marketplace is critical
to achieving increased demand for our service. Brand recognition is a key
differentiating factor among providers of online lending services, and we
believe it will be increasingly important as competition intensifies. In order
to increase our brand awareness, we must succeed in our marketing efforts,
provide high-quality service, and increase the number of consumers using our
marketplace. If visitors to our website do not perceive our existing service to
be of high quality or if we alter or modify our existing service, introduce new
services, or enter into new business ventures that are not favorably received,
the value of our brand could be diluted, which could decrease the attractiveness
of our service to consumers and lenders.

IF OUR PARTICIPATING LENDERS DO NOT PROVIDE COMPETITIVE LEVELS OF SERVICE TO
CONSUMERS, OUR BRAND WILL BE HARMED AND OUR ABILITY TO ATTRACT CONSUMERS TO OUR
WEBSITE WILL BE LIMITED.

Our ability to provide a high-quality borrowing experience depends in part
on consumers receiving competitive levels of convenience, customer service,
pricing terms, and responsiveness from our participating lenders. If our
participating lenders do not provide consumers with competitive levels of
convenience, customer service, price, and responsiveness, the value of our brand
may be harmed and the number of consumers using our service may decline.

WE MAY HAVE DIFFICULTY INTEGRATING LENDERS INTO OUR ONLINE MARKETPLACE, WHICH
COULD IMPEDE OUR ABILITY TO OFFER A COMPETITIVE SERVICE TO CONSUMERS.

The failure to integrate lenders into our online marketplace could limit
the variety of products that we can offer to our customers. Integration of a
lender into our online marketplace requires a significant commitment of time and
resources on our part and on the part of the lender. This integration process
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<PAGE> 11

typically takes up to three months to complete. Potential lenders may not be
willing to invest the time and resources necessary to achieve this integration,
and we may not have sufficient personnel to devote the time necessary to
successfully integrate lenders into our online marketplace.

WE MAY HAVE DIFFICULTY ATTRACTING A COMPREHENSIVE GROUP OF LENDERS WHICH
COMPLEMENT OUR CURRENT CONSUMER CREDIT PRODUCT COVERAGE.

If we are unable to broaden the offering of consumer credit products on our
network for a wide array of credit profiles and locations, we may be unable to
attract additional consumers or may lose our existing consumers to other online
competitors. The success of our online marketplace depends on our ability to
attract and retain a comprehensive group of lenders to service consumer needs
across a wide array of product lines, consumer credit profiles, and geographic
locations. Lenders may limit the types of credit they offer due to licensing and
regulations, the types of products they offer, and consumer credit profiles. To
this end, some of the lenders in our network do not extend credit in some
states, others are unable to offer particular loan products, and still others do
not lend to consumers with particular credit profiles.

LENDERS IN OUR NETWORK ARE NOT PRECLUDED FROM OFFERING CONSUMER CREDIT PRODUCTS
OUTSIDE OUR MARKETPLACE.

If a significant number of our potential consumers are able to obtain loans
from our participating lenders without utilizing our service, our ability to
generate revenue may be limited. Because we do not have exclusive relationships
with the lenders whose loan products are offered on our online marketplace,
consumers may obtain offers and loans from these lenders without using our
service. Our lenders can offer their products directly to consumers through
brokers, mass marketing campaigns, or through other traditional methods of
credit distribution. These lenders can also offer their products over the
Internet, either directly to prospective borrowers, through one or more of our
online competitors, or both.

IF WE ARE UNABLE TO DEVELOP AND RETAIN OUR ONLINE RELATIONSHIPS, OUR BUSINESS
WILL BE HARMED.

If we are unable to establish or maintain online relationships that
increase consumer traffic to our website, our business and the value of your
investment could be materially adversely affected. We depend on establishing and
maintaining relationships with a large number of high-traffic websites for a
significant portion of our consumers. For example, in December 1999,
Autobytel.com generated approximately 40% of our automobile loan requests. The
loss of this contractual relationship would materially reduce our revenue in
this product area. There is intense competition for relationships with companies
maintaining these websites, and we may have to pay significant fees to establish
additional relationships or maintain existing relationships in the future. Even
if we enter into these relationships, they may not attract significant numbers
of consumers. As a result, we may be unable to enter into relationships with
these firms or websites on commercially reasonable terms or at all.

WE MAY NOT BE ABLE TO MANAGE OUR EXPANDING OPERATIONS EFFECTIVELY.

We have recently experienced a period of rapid expansion. In order to
execute our business plan, we must continue to expand significantly. Our
inability to expand our operations in an efficient manner could cause our
expenses to grow disproportionately to our revenue, our revenue to decline or
grow more slowly than expected, or could otherwise have a material adverse
effect on our business and the value of your investment. We had seven employees
in July 1998. As of December 31, 1999, that number had increased to 125. We
expect that the number of our employees will continue to increase for the
foreseeable future. Our anticipated future growth, combined with the
requirements we will face as a public company, will continue to place a
significant strain on our management, systems, and resources. We will need to
continue to expand and maintain close coordination among our technical,
accounting, finance, and sales and marketing departments. We may not succeed in
these efforts.

COMPETITION MAY REDUCE OUR MARKET SHARE AND HARM OUR PERFORMANCE.

Increased competition could result in reduced margins or loss of market
share, either of which could materially adversely affect our business, results
of operations, and financial condition. We operate in a new

8
<PAGE> 12

industry that, like the broader electronic commerce market, is rapidly evolving,
highly competitive and has low barriers to entry. We expect this competition
will increase. Our current competitors include:

- online and offline lenders, brokers, and credit card issuers, many of
whom operate websites from which consumers can obtain online interest
rate quotes, such as E-LOAN, giggo.com, and iOwn.com; and

- online and offline referral agents that display rates and products for
multiple lenders and refer consumers to individual lenders, such as
Quicken.com, MSN HomeAdvisor, and getsmart.com.

In addition, current and potential new competitors could establish online
loan marketplaces that are competitive with ours.

Our ability to compete depends on many factors, including:

- pricing and breadth of product offering;

- time of market entry;

- brand awareness;

- variety, quantity, and quality of partners and online relationships;

- proprietary and scalable technology infrastructure;

- ease of use and convenience; and

- strength of relationships and depth of technology integration with
customers.

In addition, changes in the methods by which loans are made through traditional
channels of distribution may make electronic commerce a less attractive means
for obtaining loans and could reduce our ability to generate revenue.

Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases, and significantly greater financial, technical, and marketing
resources than we do. These competitors may engage in more extensive product
development, undertake more far-reaching marketing campaigns, adopt more
aggressive pricing policies than our participating lenders, and make more
attractive offers to existing and potential employees and companies with which
we have relationships.

OUR BUSINESS COULD SUFFER IF WE LOSE THE SERVICES OF KEY EXECUTIVES.

If we lose the services of Douglas Lebda, our founder, Chief Executive
Officer, and a director, or any of our other executive officers or key
employees, our ability to expand our business would be seriously compromised and
the value of your investment may be adversely affected. Mr. Lebda has been
instrumental in determining our strategic direction and focus and in promoting
the concept of an Internet-based loan marketplace for consumers and lenders. We
do not maintain key person insurance on any of our key executives.

RISKS RELATED TO THE INTERNET AND OUR TECHNOLOGY INFRASTRUCTURE

WE MAY EXPERIENCE REDUCED VISITOR TRAFFIC, REDUCED REVENUE, AND HARM TO OUR
REPUTATION IN THE EVENT OF UNEXPECTED NETWORK INTERRUPTIONS CAUSED BY SYSTEM
FAILURES.

Any significant failure to maintain the satisfactory performance,
reliability, security, and availability of our website, filtering systems, or
network infrastructure may cause significant harm to our reputation, our ability
to attract and maintain a high volume of visitors to our website, and to attract
and retain participating consumers and lenders. Our revenue depends in large
part on the number of credit requests submitted by consumers. Any system
interruptions that result in the inability of consumers to submit these credit
requests, or more generally the unavailability of our service offerings, could
have an adverse impact on our revenue. In addition, we believe that consumers
who have a negative experience with our website may be reluctant to return or
recommend LendingTree to other potential consumers.

In the past, our website has experienced outages and decreased performance.
In the worst such instance to date, we experienced a service outage for a period
of approximately six hours due to a database

9
<PAGE> 13

software failure. If similar outages occur in the future, they may severely harm
our reputation and our ability to offer our service.

Our computer hardware is located in leased facilities in Beltsville,
Maryland. A full backup system is located in Cupertino, California. If both of
these locations experienced a system failure, the performance of our website
would be harmed. These systems are also vulnerable to damage from fire, floods,
power loss, telecommunications failures, break-ins, and similar events. Our
insurance policies may not compensate us for any losses that may occur due to
any failures or interruptions in our systems. Any extended period of disruptions
could materially adversely affect our business, results of operations, and
financial condition.

BREACHES OF OUR NETWORK SECURITY COULD SUBJECT US TO INCREASED OPERATING COSTS
AS WELL AS LITIGATION AND OTHER LIABILITIES.

Any penetration of our network security or other misappropriation of our
users' personal information could cause interruptions in our operations and
subject us to liability. Claims against us could also be based on other misuses
of personal information, such as for unauthorized marketing purposes. These
claims could result in litigation and financial liability. Security breaches
could also damage our reputation. We rely on licensed encryption and
authentication technology to effect secure transmission of confidential
information. It is possible that advances in computer capabilities, new
discoveries, or other developments could result in a compromise or breach of the
technology that we use to protect consumer transaction data. We cannot guarantee
that our security measures will prevent security breaches. We may be required to
expend significant capital and other resources to protect against and remedy any
potential or existing security breaches and their consequences.

RISKS RELATED TO LEGAL UNCERTAINTY

FAILURE TO COMPLY WITH LAWS GOVERNING OUR SERVICE OR MATERIAL CHANGES IN THE
REGULATORY ENVIRONMENT RELATING TO THE INTERNET COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS.

The loan products available through our website are subject to extensive
regulation by various federal and state governmental authorities. Because of
uncertainties as to the applicability of these laws and regulations to the
Internet and, more specifically, to our business, and considering our business
has evolved and expanded in a relatively short period of time, we may not always
have been, and may not always be, in compliance with applicable federal and
state laws and regulations. Failure to comply with the laws and regulatory
requirements of federal and state regulatory authorities may result in, among
other things, revocation of required licenses or registrations, loss of approved
status, loss of exempt status, indemnification liability to lenders and others
doing business with us, administrative enforcement actions and fines, class
action lawsuits, cease and desist orders, and civil and criminal liability. The
occurrence of one or more of these events could materially affect our business,
results of operations and financial condition. We recently paid a settlement
relating to allegations that we conducted business in a state without the
appropriate registration.

As a computer loan origination system conducting business through the
Internet, we face an additional level of regulatory risk given that most of the
laws governing lending transactions have not been substantially revised or
updated to fully accommodate electronic commerce. Until these laws, rules, and
regulations are revised to clarify their applicability to transactions conducted
through electronic commerce, any company providing loan-related services through
the Internet or other means of electronic commerce

10
<PAGE> 14

will face compliance uncertainty. Federal law, for example, generally prohibits
the payment or receipt of referral fees in connection with residential mortgage
loan transactions. The applicability of referral fee prohibitions to the
compensation provisions of fee arrangements used by online companies like us may
have the effect of reducing the types and amount of fees that we may charge in
connection with real estate-secured products.

Regulations promulgated by some states may impose compliance obligations on
any person who acquires 10% or more of our common stock, including requiring
that person to periodically file financial and other personal and business
information. Because we will be a public company following this offering, we
will be unable to control who purchases our common stock in the open market. If
any person acquires 10% or more of our common stock and refuses or fails to
comply with these requirements, we may not be able to obtain a license and
existing licensing arrangements in particular states may be jeopardized. The
inability to obtain, or the loss of, required licenses could have a material
adverse effect on our operations or financial condition.

The parties conducting business with us, such as lenders and affiliated
websites, similarly may be subject to federal and state regulation. These
parties act as independent contractors and not as our agents in their
solicitations and transactions with consumers. Consequently, we cannot ensure
that these entities will comply with applicable laws and regulations at all
times. Failure on the part of a lender or an affiliated website to comply with
these laws or regulations could result in, among other things, claims of
vicarious liability or negatively impact our reputation. The occurrence of one
or more of these events could materially adversely affect our business, results
of operations, and financial condition.

REGULATION OF THE INTERNET IS UNSETTLED, AND FUTURE REGULATIONS COULD INHIBIT
THE GROWTH OF THE INTERNET, DECREASE VISITORS TO OUR WEBSITE, AND OTHERWISE
MATERIALLY ADVERSELY AFFECT OUR BUSINESS.

Existing laws and regulations specifically regulate communications and
commerce on the Internet. Further laws and regulations that address issues such
as user privacy, pricing, online content regulation, taxation, and the
characteristics and quality of online products and services are under
consideration by federal, state, local, and foreign governments and agencies.
Several telecommunications companies have petitioned the Federal Communications
Commission to regulate Internet service providers and online services providers
in a manner similar to the regulation of long distance telephone carriers and to
impose access fees on such companies. This regulation, if imposed, could
increase the cost of transmitting data over the Internet. Moreover, it may take
years to determine the extent to which existing laws relating to issues such as
intellectual property ownership and infringement and personal privacy are
applicable to the Internet. Many of these laws were adopted prior to the advent
of the Internet and related technologies and, as a result, do not contemplate or
address the unique issues of the Internet and related technologies. The Federal
Trade Commission and government agencies in certain states have been
investigating Internet companies regarding their use of personal information. We
could incur additional expenses if any new regulations regarding the use of
personal information are introduced or if these agencies choose to investigate
our privacy practices. Any new laws or regulations relating to the Internet, or
new application or interpretation of existing laws, could inhibit the growth of
the Internet as a medium for commerce or credit procurement which could, in
turn, decrease the demand for our service or otherwise materially adversely
affect our business, results of operations, and financial condition.

WE MAY BE LIMITED OR RESTRICTED IN THE WAY WE ESTABLISH AND MAINTAIN OUR ONLINE
RELATIONSHIPS BY LAWS GENERALLY APPLICABLE TO OUR BUSINESS.

The Real Estate Settlement Procedures Act and related regulations generally
prohibit the payment or receipt of fees or any other item of value for the
referral of a real estate-secured loan to a loan broker or lender. The act and
the related regulations also prohibit fee shares or splits or unearned fees in
connection with the provision of residential real estate settlement services,
including mortgage brokerage or lending services. Notwithstanding these
prohibitions, RESPA permits payments for goods or facilities furnished or for
services actually performed, so long as those payments bear a reasonable
relationship to the market value of the goods, facilities, or services provided.
Failure to comply with RESPA may result in, among

11
<PAGE> 15

other things, administrative enforcement actions, class action lawsuits, cease
and desist orders and civil and criminal liability.

The mortgage and home equity products offered through our marketplace are
residential real estate secured loans subject to these provisions of RESPA.
Consequently, our online relationships with lenders and other Internet companies
and websites that offer these products are subject to RESPA's prohibitions on
payment or receipt of fees for referrals and for unearned fees. We believe that
we have structured these relationships to comply with these regulations. The
applicability of RESPA's compensation provisions to these types of
Internet-based relationships, however, is unclear and the appropriate regulatory
agency has provided limited guidance to date on the subject.

AS AN ONLINE LOAN MARKETPLACE WE MAY BE LIABLE AS A RESULT OF INFORMATION
RETRIEVED FROM OUR WEBSITE OR THE WEBSITES OF COMPANIES WITH WHICH WE MAINTAIN
RELATIONSHIPS.

We may be subject to legal claims relating to information that is published
or made available on our website and the other websites linked to it. Our
service may subject us to potential liabilities or claims resulting from:

- lost or misdirected messages from our network lenders, consumers or
vendors;

- illegal or fraudulent use of e-mail; or

- interruptions or delays in transmission of Qualification Forms or
lenders' offers.

In addition, we could incur significant costs in investigating and
defending such claims, even if we ultimately are not found liable. If any of
these events occur, our business and the value of your investment could be
materially adversely affected.

FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD HARM OUR
BRAND-BUILDING EFFORTS AND ABILITY TO COMPETE EFFECTIVELY.

Failure to protect our intellectual property could harm our brand and our
reputation, devalue our content in the eyes of our customers, and adversely
affect our ability to compete effectively. Further, enforcing or defending our
intellectual property rights, including our service marks, patent application,
copyrights and trade secrets, could result in the expenditure of significant
financial and managerial resources. We regard our intellectual property as
critical to our success. To protect the rights to our intellectual property, we
rely on a combination of patent, trademark and copyright law, trade secret
protection, confidentiality agreements, and other contractual arrangements with
our employees, affiliates, clients, and others. The protective steps we have
taken may be inadequate to deter misappropriation of our proprietary
information. We may be unable to detect the unauthorized use of, or take
appropriate steps to enforce, our intellectual property rights. We have applied
for a U.S. patent and filed a Patent Cooperation Treaty international patent
application on our [i]close technology and our online loan market process. While
the number of software and business method patents issued by the U.S. Patent and
Trademark Office has been growing substantially in recent years, there is still
a significant degree of uncertainty associated with these patents. It is
possible that our patent applications will be denied or granted in a very
limited manner such that they offer little or no basis for us to deter
competitors from employing similar technology or processes or allow us to defend
against third party claims of patent infringement.

RISKS RELATED TO THIS OFFERING, OUR STOCK PRICE, AND CORPORATE CONTROL

OUR COMMON STOCK MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS AND
INVESTORS IN OUR STOCK MAY NOT BE ABLE TO RESELL THEIR SHARES AT OR ABOVE THE
OFFERING PRICE.

We cannot predict the extent to which investors' interest in us will lead
to the development of a trading market in our common stock or how liquid the
market might become. If you purchase shares of our common stock in this
offering, you will pay a price that was not established in a competitive market,
but was negotiated between us and the underwriters. The stock market in general
and the market prices of shares in newly public technology companies,
particularly those such as ours that offer Internet-based
12
<PAGE> 16

services, have been extremely volatile and have experienced fluctuations that
have often been unrelated or disproportionate to the operating performance of
such companies. The market price of our common stock could be highly volatile
and subject to wide fluctuations in response to many factors, some of which are
largely beyond our control. These factors include:

- quarterly variations in our results of operations;

- adverse business developments;

- changes in financial estimates by securities analysts;

- investor perception of us and online lending services in general;

- announcements by our competitors of new products and services; and

- general economic conditions, including interest rate fluctuations.

AN AGGREGATE OF APPROXIMATELY 13.6 MILLION SHARES, OR 78.8% OF OUR OUTSTANDING
STOCK, WILL BECOME ELIGIBLE FOR RESALE IN THE PUBLIC MARKET WITHIN ONE YEAR
AFTER THIS OFFERING, AND FUTURE SALES OF SUCH STOCK MAY CAUSE OUR STOCK PRICE TO
DECLINE.

Sales of substantial amounts of our common stock in the public market after
this offering could reduce the prevailing market prices for our common stock. Of
the 17.2 million shares of common stock to be outstanding upon the closing of
this offering, the 3.65 million shares offered by this prospectus will be freely
tradable without restriction or further registration, other than shares
purchased by our officers, directors, or other "affiliates" within the meaning
of Rule 144 under the Securities Act, which will be restricted from sale until
180 days after the date of this prospectus pursuant to agreements between these
affiliates and the underwriters. The 13.6 million remaining shares of our common
stock will become eligible for resale in the public market subject to the lapse
of applicable holding periods pursuant to Rule 144 as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES/
PERCENT OUTSTANDING
AFTER THE OFFERING DATE WHEN SHARES BECOME AVAILABLE FOR RESALE IN THE PUBLIC MARKET
- ------------------- -----------------------------------------------------------------
<S> <C>
5.2 million/30% 180 days after the date of this prospectus, pursuant to
agreements between the stockholders and the underwriters.
Approximately 3.8 million of these shares will also be subject to
sales volume restrictions under Rule 144 under the Securities
Act.
8.4 million/48% Upon expiration of applicable one-year holding periods under Rule
144, which will expire between August 2000 and November 2000,
subject to sales volume restrictions under Rule 144.
</TABLE>

Merrill Lynch may, in its sole discretion, release all or any portion of
the securities subject to the lock-up agreements prior to the expiration of
their 180 day term. Merrill Lynch may waive these restrictions at our request or
upon the request of a stockholder. In evaluating whether to grant such a
request, Merrill Lynch may consider a number of factors with a view toward
maintaining an orderly market for, and minimizing volatility in the market price
of, LendingTree's common stock. These factors include, among others, the number
of shares involved, the then recent trading volume and prices of the stock, the
length of time before the lock-up expires and the reasons for, and the timing
of, the request.

In addition, we intend to file a registration statement on Form S-8 under
the Securities Act approximately 90 days after the date of this offering to
register an aggregate of 5.6 million shares of common stock issued or reserved
for issuance under our various stock option plans. Some holders of our common
stock will also have demand and piggyback registration rights enabling them to
register their shares under the Securities Act for sale.

13
<PAGE> 17

IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE OUR COMPANY, WHICH COULD
DEPRESS OUR STOCK PRICE.

Delaware corporate law and our amended and restated certificate of
incorporation and by-laws which will become effective upon the closing of this
offering, will contain provisions that could have the effect of delaying,
deferring, or preventing a change in control of LendingTree or our management
that stockholders may consider favorable or beneficial. These provisions could
discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. These
provisions could also limit the price that investors might be willing to pay in
the future for shares of our common stock. These provisions include:

- authorization to issue "blank check" preferred stock, which is preferred
stock that can be created and issued by the board of directors without
prior stockholder approval, with rights senior to our common
stockholders;

- a staggered board of directors, so that it would take three successive
annual meetings to replace all directors;

- prohibition of stockholder action by written consent; and

- advance notice requirements for the submission by stockholders of
nominations for election to the board of directors and for proposing
matters that can be acted upon by stockholders at a meeting.

In addition, we will enter into a stockholder rights agreement which will
make it more difficult for a third party to acquire us without the support of
our board of directors and principal stockholders.

OUR EXECUTIVE OFFICERS AND DIRECTORS AND ENTITIES AFFILIATED WITH THEM, WHOSE
INTERESTS MAY DIFFER FROM OTHER STOCKHOLDERS, WILL HAVE THE ABILITY TO EXERCISE
SIGNIFICANT CONTROL OVER US.

Our executive officers, directors and entities affiliated with them will,
as a group, beneficially own approximately 49.1% of our common stock following
this offering. These stockholders will be able to exercise significant influence
over all matters requiring approval by our stockholders, including the election
of directors and the approval of significant corporate transactions, including a
change of control of our company. The interests of these stockholders may differ
from the interests of our other stockholders.

YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION OF THE VALUE OF YOUR
INVESTMENT.

The initial public offering price per share will be substantially higher
than the net tangible book value per share of the common stock outstanding
immediately prior to this offering. As a result, if you purchase shares in this
offering, you will incur immediate dilution of approximately $8.12 per share
from the price you paid per share. In the past, we issued options and warrants
to acquire common stock at prices significantly below the initial public
offering price. To the extent these outstanding options or warrants are
ultimately exercised, your investment will be further diluted.

FORWARD-LOOKING STATEMENTS

Many statements made in this prospectus under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," and elsewhere are
forward-looking statements that are not based on historical facts. The words
"expects," "anticipates," "estimates," "intends," "believes," and similar
expressions are intended to identify forward-looking statements. Because these
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements. The forward-looking
statements made in this prospectus are based on events through the date on which
the statements are made.

14
<PAGE> 18

USE OF PROCEEDS

The net proceeds from the sale of the 3,650,000 shares of common stock
offered by this prospectus, after deducting the underwriting discount and
estimated offering expenses, will be approximately $38.7 million, or $44.8
million if the underwriters' over-allotment option is exercised in full.

We intend to use approximately $29.0 million of the proceeds from this
offering for advertising and marketing to increase brand awareness and to
attract consumers to our marketplace. We intend to use the balance of the
offering proceeds for general corporate purposes.

We currently estimate that we will spend approximately $50.0 million during
2000 on marketing and advertising, more than double what we spent in 1999. Our
marketing expenses will be funded from the proceeds of the offering, our current
cash on hand, and revenue generated from our operations. The amount we actually
spend for this purpose will depend on a number of factors, including the growth
of our consumer base, the types of efforts we make to build our brand and
competitive developments in the home mortgage and consumer credit markets.
Therefore, we cannot specify with certainty the particular uses of the net
proceeds of this offering. Accordingly, management will have significant
flexibility and discretion in applying the net proceeds of this offering.
Pending any use, we will invest the net proceeds of this offering in short-term,
investment grade, interest-bearing securities.

From time to time, in the ordinary course of business, we evaluate possible
acquisitions of, or investments in, businesses, technologies, services, or
products that are complementary to our business. We are currently evaluating the
possible minority equity investment in several companies offering complementary
services. None of these potential investments are currently considered to be
pending or probable. A portion of the net proceeds may be used to fund future
acquisitions or investments.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock and
do not expect to pay any cash dividends for the foreseeable future. We currently
intend to retain future earnings, if any, to finance the expansion of our
business. Any future payment of dividends will be at the discretion of our board
of directors and will depend upon factors such as future earnings, capital
requirements, our financial condition, and general business conditions.

15
<PAGE> 19

CAPITALIZATION

The following table shows our capitalization as of December 31, 1999:

- on an actual basis;

- on a pro forma basis to reflect the conversion of all of our outstanding
shares of convertible preferred stock and accumulated dividends as of
December 31, 1999 into shares of common stock upon the closing of this
offering; and

- on a pro forma as adjusted basis to reflect our sale of the 3,650,000
shares of common stock offered by us at the initial public offering price
of $12.00 per share, less the underwriting discount and estimated
offering expenses.

You should read this information in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," our
financial statements, and the accompanying notes and the other financial
information included in this prospectus.

The table excludes:

- 857,885 shares issuable upon the exercise of outstanding warrants as of
January 31, 2000;

- 695,034 shares reserved for future grants under our 1999 stock option
plan as of January 31, 2000;

- 100,000 shares issued upon the exercise of an option by our Chief
Executive Officer on February 15, 2000 at an exercise price equal to
$12.00 per share;

- 444,500 shares reserved for issuance under our employee stock purchase
plan;

- accumulated dividends from January 1, 2000 to January 31, 2000 which will
convert into 70,481 shares of common stock; and

- 3,740,222 shares issuable at a weighted average exercise price of $5.27
per share upon exercise of stock options outstanding as of January 31,
2000.

<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Stockholders' equity:
Convertible preferred stock, $.01 par value, 8%
cumulative, 10,467,194 shares authorized:
Series A -- 1,754,484 shares issued and outstanding
actual, none issued and outstanding pro forma and pro
forma as adjusted....................................... $ 9,884 $ -- $ --
Series D -- 6,238,172 shares issued and outstanding
actual, none issued and outstanding pro forma and pro
forma as adjusted....................................... 49,234 -- --
-------- -------- --------
Total convertible preferred stock....................... 59,118 -- --
-------- -------- --------
Common stock, $.01 par value, 38,100,000 shares
authorized, 4,070,655 shares issued and outstanding
actual; 14,443,724 shares issued pro forma; and
18,093,724 shares issued pro forma as adjusted.......... 41 144 181
Additional paid-in capital.............................. 9,423 68,438 107,135
Deferred compensation................................... (2,767) (2,767) (2,767)
Treasury stock, cost (948,971 shares)................... (5,978) (5,978) (5,978)
Unrealized gain, available for-sale-securities.......... 46 46 46
Accumulated deficit..................................... (32,146) (32,146) (32,146)
-------- -------- --------
Total stockholders' equity...................... 27,737 27,737 66,471
-------- -------- --------
Total capitalization............................ $ 27,737 $ 27,737 $ 66,471
======== ======== ========
</TABLE>

16
<PAGE> 20

DILUTION

Our pro forma net tangible book value as of December 31, 1999 was
approximately $27,737,000, or approximately $2.06 per share of common stock. Pro
forma net tangible book value per share represents the amount of our total
tangible assets reduced by the amount of our total liabilities and divided by
the total number of shares of common stock outstanding, after giving effect to
the conversion of all outstanding shares of convertible preferred stock and
accumulated dividends through December 31, 1999 into shares of common stock.
After giving effect to the sale by us of the 3,650,000 shares of common stock in
this offering at $12.00 per share and after deducting the underwriting discount
and estimated offering expenses, the pro forma net tangible book value of our
common stock as of December 31, 1999 would have been $66,471,000, or $3.88 per
share. This represents an immediate increase in pro forma net tangible book
value of $1.82 per share to existing stockholders and an immediate and
substantial dilution in pro forma net tangible book value of $8.12 per share to
new public investors. The following table illustrates this per share dilution:

<S> <C> <C>
Initial public offering price per share..................... $12.00
Pro forma net tangible book value per share as of December
31, 1999............................................... $2.06
Increase attributable to this offering.................... 1.82
-----
Adjusted pro forma net tangible book value per share after
this offering............................................. 3.88
------
Net tangible book value dilution per share to new public
investors................................................. $ 8.12
======
</TABLE>

The following table summarizes, on a pro forma basis as of December 31,
1999 described above, the differences between existing stockholders and new
public investors in this offering with respect to the number of shares of common
stock purchased from us, the total consideration paid for those shares and the
average price paid per share:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -----------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 13,494,753 78.7% $ 61,222,000 58.3% $ 4.54
New public investors........... 3,650,000 21.3 43,800,000 41.7 12.00
---------- ----- ------------ ----- ------
Total................ 17,144,753 100.0% $105,022,000 100.0% $ 6.13
========== ===== ============ ===== ======
</TABLE>

The foregoing tables and calculations assume no exercise of outstanding
options or warrants and excludes treasury shares. As of December 31, 1999, there
were 2,970,996 shares of common stock issuable upon exercise of outstanding
options at a weighted average exercise price of $4.25 per share and 1,564,259
shares of common stock reserved for future grants under our stock option plan.
As of December 31, 1999, there were warrants outstanding to purchase 667,385
shares of common stock with a weighted average exercise price of $5.66 per
share. After December 31, 1999, we issued 769,225 options to purchase our common
stock at a weighted average exercise price of $9.28 per share. We also recently
granted an option to purchase 100,000 shares of our common stock to our Chief
Executive Officer. This option was exercised on February 15, 2000 at an exercise
price of $12.00 per share. As a result, options to purchase up to an additional
695,034 shares of common stock may be issued under our stock option plan. The
tables also exclude additional preferred stock dividends accumulated from
January 1, 2000 through January 31, 2000 which will convert into 70,481 shares
of common stock upon consummation of this offering. We also issued two warrants
to CNBC.com, each of which grants CNBC.com the right to purchase 95,250 shares
of our common stock at an exercise price of approximately $7.87 per share. One
warrant is immediately exerciseable upon issuance and one becomes exerciseable
on January 14, 2001, subject to certain conditions. In addition, we may agree to
issue additional warrants to acquire common stock to companies with which we
maintain relationships. To the extent that these options or warrants are
exercised, there will be further dilution to new public investors.

17
<PAGE> 21

SELECTED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

The following table sets forth selected financial and operating data for
our business. You should read the information together with our financial
statements and the accompanying notes included in this prospectus and the
information under "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The statement of operations data for the years ended
December 31, 1997, 1998 and 1999, and the balance sheet data as of December 31,
1998 and 1999, are derived from, and are qualified by reference to, our
financial statements which have been audited by PricewaterhouseCoopers LLP and
are included elsewhere in this prospectus. The balance sheet data as of December
31, 1997 are derived from our financial statements which have been audited by
PricewaterhouseCoopers LLP and are not included in this prospectus. The
statement of operations data for the period from inception through December 31,
1996 and the balance sheet data as of December 31, 1996 are unaudited.
Historical results are not necessarily indicative of the results to be expected
in the future, and results of interim periods are not necessarily indicative of
results for the entire year. The calculation of pro forma basic and diluted net
loss per common share excludes shares issuable upon the payment of accumulated
dividends on our convertible preferred stock.

<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED DECEMBER 31,
INCEPTION THROUGH ----------------------------------
DECEMBER 31, 1996 1997 1998 1999
------------------ ------- ---------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUE:
LendingTree network....................................... $ -- $ 2 $ 273 $ 6,112
[i]close and other technology............................. -- -- 136 852
-------- ------- ---------- -----------
Total revenue...................................... -- 2 409 6,964
-------- ------- ---------- -----------
COST OF REVENUE:
LendingTree network....................................... -- -- 235 2,231
[i]close and other technology............................. -- -- 149 312
-------- ------- ---------- -----------
Total cost of revenue.............................. -- -- 384 2,543
-------- ------- ---------- -----------
Gross profit................................................ -- 2 25 4,421
-------- ------- ---------- -----------
OPERATING EXPENSES:
Product development....................................... -- 293 1,051 1,109
Marketing and advertising................................. -- 54 2,494 18,611
Sales, general and administrative......................... 4 621 2,955 9,951
-------- ------- ---------- -----------
Total operating expenses........................... 4 968 6,500 29,671
-------- ------- ---------- -----------
LOSS FROM OPERATIONS........................................ (4) (966) (6,475) (25,250)
Interest income, net...................................... -- 3 41 505
-------- ------- ---------- -----------
Net loss.................................................. $ (4) $ (963) $ (6,434) $ (24,745)
======== ======= ========== ===========
Basic and diluted net loss per common share............... $ (0.02) $ (1.20) $ (1.88) $ (7.74)
======== ======= ========== ===========
Weighted average shares used in computing basic and diluted
net loss per common share................................. 259,080 803,370 3,434,736 3,560,197
======== ======= ========== ===========
PRO FORMA PER COMMON SHARE DATA:
Pro forma basic and diluted net loss per common share..... $ (3.23)
===========
Pro forma weighted average basic and diluted shares
outstanding............................................. 7,650,229
===========
OPERATING DATA:
Qualification Forms transmitted:
Number.................................................... -- -- 18,247 185,792
Dollar volume (in thousands).............................. -- -- $1,596,662 $16,209,918
Loans closed:
Number.................................................... -- -- 712 27,155
Dollar volume (in thousands).............................. -- -- $ 25,516 $ 940,707
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1996 1997 1998 1999
---- ---- ------- -------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $-- $402 $ 3,085 $ 2,419
Short-term investments...................................... -- -- -- 27,053
Working capital............................................. (1) 333 2,666 26,474
Total assets................................................ -- 424 3,687 33,767
Mandatorily redeemable preferred securities................. -- -- 4,631 --
Convertible preferred stock................................. -- -- -- 59,118
Total stockholders' equity (deficit)........................ (1) 353 (1,695) 27,737
</TABLE>

18
<PAGE> 22

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

The following discussion and analysis should be read in conjunction with
the financial statements and the notes to those statements that appear elsewhere
in this prospectus. The following discussion and analysis contains
forward-looking statements that reflect our plans, estimates, and beliefs. Our
actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and elsewhere
in this prospectus, particularly in "Risk Factors."

OVERVIEW

LendingTree was founded on June 7, 1996. From June 1996 until July 1998, we
conducted research, developed core technology, and conducted initial lender
marketing efforts. Our website, www.lendingtree.com, commenced operations
nationally on July 1, 1998. Since that time, the LendingTree network has
expanded to include over 90 regional and national lenders. For the quarter ended
December 31, 1999, we transmitted 68,200 Qualification Forms representing $5.0
billion in loan demand and our lenders closed loans totaling $440 million. These
numbers reflect significant growth when compared to the quarter ended December
31, 1998, with 9,500 Qualification Forms transmitted, representing $902 million
in loan demand, which resulted in $11 million in closed loans.

We derive our revenue from two primary sources: fees from the LendingTree
network, and fees from licensing our [i]close technology. All of our revenue
from the network is derived from lenders. Our service is free to consumers.

Network revenue consists principally of transmission revenue and closing
revenue. Transmission revenue is earned and recognized when consumers complete
Qualification Forms that are transmitted to lenders. Fees are payable regardless
of whether Qualification Forms result in closed loans. Closing revenue is earned
and recognized when a loan is closed by a lender. Closing revenue generally lags
the transmission of Qualification Forms from several days to up to four months,
depending upon the loan type. In 1999, network revenue included: transmission
revenue, which equalled 32% of total revenue, closing revenue, which equalled
51% of total revenue, set-up fees, which equalled 4% of total revenue and
monthly maintenance fees, which equalled less than 1% of total revenue.

19
<PAGE> 23

We also generate revenue by licensing [i]close to third parties to create
single and multi-lender loan marketplaces. [i]close revenue is recognized on the
percentage-of-completion basis. In 1999, revenue from [i]close licenses
generated approximately 11% of our total revenue. In addition, our network
revenue includes transmission fees and closed-loan fees which originated from
customers of our [i]close licenses representing 15% of total revenue during this
period, bringing the total revenue derived directly or indirectly from [i]close
to approximately 26% of total revenue.

Other technology revenue consists of revenue generated from providing third
parties various software integration and hardware hosting services. Revenue
generated from other technology represented less than 1% of total revenue in
1999. Other technology revenue is recognized either on a
percentage-of-completion basis or on a fixed monthly rate, depending on the type
of service offered.

Currently, mortgages and home equity loans represent the largest portion of
our network revenue, contributing approximately $4.7 million of our total
revenue generated in 1999. During the same period, credit card revenue was
approximately $0.8 million. In addition, automobile loan and personal loan
revenue were approximately $0.3 million and less than $0.1 million,
respectively. No single lender currently represents more than 10% of our total
revenue. Revenue from credit cards, automobile loans and personal loans is
expected to increase as we increase our marketing focus on these products.
Revenue from some of our products may experience seasonal fluctuations. For
example, home buying is typically strongest in the second and third quarters of
each year, which may result in higher mortgage loan closing rates during those
periods. However, we do not have a sufficient operating history to forecast the
seasonality of our revenues with respect to any particular product offering.

Our network cost of revenue includes salary and benefit costs of the
borrower relations and lender implementation groups, credit scoring expenses,
revenue-sharing costs, consumer promotion costs, and the cost of hardware for
the LendingTree network. Our [i]close and other technology cost of revenue
includes direct costs of modifying our proprietary software for license to
[i]close users, as well as the related cost of hardware for these customers. All
of these expenses are recognized in the month that they are incurred.

Product development expenses primarily include costs incurred by us to
develop our proprietary software and filtering technologies and enhance, manage,
monitor, and operate our website. These expenses consist primarily of salaries
and benefits for our technology department, third-party software upgrades and,
from time to time, outside technology consultants and/or contractors. We intend
to continue to expand our online marketplace by adding other product offerings
and new lenders and, consequently, we expect these activities may require
additional personnel. Accordingly, we expect that our product development
expenses will continue to increase for the foreseeable future.

Marketing and advertising expenses consist primarily of costs of
advertising, trade shows, affiliate service fees, and indirect costs. Marketing
and advertising expenses also include costs, including salaries and benefits, of
all personnel involved in the marketing and advertising department as well as
outside advertising agency fees. All advertising costs are expensed as incurred.

Sales, general and administrative expenses consist primarily of salary,
benefits, and related expenses for our management, sales, administrative, legal,
and accounting personnel, expenses relating to our facilities, professional
fees, and other general corporate expenses. We expect that, in support of the
continued growth of our business and our operations as a public company, sales,
general and administrative expenses will continue to increase for the
foreseeable future.

Since our inception on June 7, 1996, we have incurred significant losses
and, as of December 31, 1999, we had accumulated net losses of $32.1 million.
These losses have resulted from the significant costs incurred for advertising,
employment expenses primarily for the development of our [i]close technology
platform, establishment of lender relationships, and integration of lenders
within our website. We intend to continue to invest heavily in advertising and
marketing. As a result, we believe that we will continue to incur substantial
operating losses for the foreseeable future.

20
<PAGE> 24

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1999 AND 1998

REVENUE

Total revenue amounted to $7.0 million in 1999, an increase of $6.6 million
from $0.4 million in 1998.

LendingTree Network. LendingTree network revenue accounted for $6.1
million, or 88% of total revenue for the year ended December 31, 1999, compared
with 67% for the year ended December 31, 1998. Network revenue in 1999 increased
by $5.8 million from $0.3 million in 1998 primarily due to higher Qualification
Form and closed loan volume. Transmitted Qualification Form volume increased
over nine times from approximately 18,000 to approximately 186,000 during this
period while the number of loans closed increased nearly forty times from about
700 to over 27,000.

[i]close and Other Technology. [i]close and other technology revenue
accounted for $0.9 million, or 12% of total revenue for the year ended December
31, 1999, compared with $0.1 million for the year ended December 31, 1998. The
increase in [i]close and other technology revenue resulted primarily from the
issuance of [i]close licenses.

COST OF REVENUE

LendingTree Network. Cost of network revenue increased to $2.2 million for
the year ended December 31, 1999 up from $0.2 million for the year ended
December 31, 1998. This increase in cost was due to $1.2 million in
volume-related expenses such as credit scoring and network hardware expense,
$0.3 million from an increase in employment in the borrower relations
department, and $0.5 million from the introduction of revenue-share agreements
with other consumer websites such as priceline.com. Our network gross margin
increased to 64% from 14% for the years ended December 31, 1999 and 1998,
respectively.

[i]close and Other Technology. Cost of [i]close and other technology
revenue increased to $0.3 million for the year ended December 31, 1999 from $0.1
million for the year ended December 31, 1998. This increase is primarily due to
greater direct hours incurred for [i]close projects.

OPERATING EXPENSES

Product Development. Product development expense was $1.1 million for each
of the years ended December 31, 1999 and 1998.

Marketing and Advertising. Marketing and advertising expense increased to
$18.6 million for the year ended December 31, 1999 from $2.5 million for the
year ended December 31, 1998, an increase of $16.1 million. The increase is
primarily due to higher advertising expenses in order to build brand awareness
and increase volume to our marketplace.

Sales, General and Administrative. Sales, general and administrative
expense increased to $10.0 million for the year ended December 31, 1999, an
increase of $7.0 million from the year ended December 31, 1998. The increase is
primarily due to higher employee-related costs such as compensation, recruiting
and relocation expenses, rent for a larger facility, and professional fees.

YEARS ENDED DECEMBER 31, 1998 AND 1997

REVENUE

Total revenue amounted to $0.4 million in 1998, an increase of $0.4 million
from 1997, which resulted from the national launch of our website, on July 1,
1998.

LendingTree Network. LendingTree network revenue accounted for $0.3
million in 1998, compared with $2,000 in 1997.

21
<PAGE> 25

[i]close and Other Technology. [i]close and other technology revenue
accounted for $0.1 million in 1998, the first year [i]close was licensed.

COST OF REVENUE

LendingTree Network. Cost of LendingTree network revenue was $0.2 million
in 1998.

[i]close and Other Technology. Cost of [i]close and other technology
revenue was $0.1 million in 1998.

OPERATING EXPENSES

Product Development. Product development expense amounted to $1.1 million
in 1998 compared with $0.3 million in 1997. The increase is primarily due to
employment costs and technology consulting fees.

Marketing and Advertising. Marketing and advertising expense increased to
$2.5 million in 1998 from $0.1 million in 1997. The increase is primarily due to
higher advertising expenses.

Sales, General and Administrative. Sales, general and administrative
expense increased to $3.0 million in 1998, an increase of $2.3 million from
1997. The increase is primarily due to higher employee-related costs such as
compensation, recruiting and relocation expenses, rent, and professional fees.

22
<PAGE> 26

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth a summary of our unaudited quarterly results
of operations for each of the eight quarters in the two-year period ended
December 31, 1999, as well as selected data expressed as a percentage of total
revenue for each quarter. This information has been derived from unaudited
interim financial statements. In management's opinion, this unaudited
information has been prepared on a basis consistent with financial statements
contained elsewhere in this prospectus and includes all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
information for the quarters presented. You should read this information in
conjunction with our financial statements and the accompanying notes included
elsewhere in this prospectus. Historical results for any quarter are not
necessarily indicative of the results to be expected for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------------------
MAR. 31, JUN. 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUE:
LendingTree network..... $ 15 $ 42 $ 100 $ 116 $ 475 $ 1,049 $ 1,874 $ 2,714
[i]close and other
technology............ -- -- 125 11 162 24 444 222
------- -------- -------- -------- ---------- ---------- ---------- ----------
Total revenue..... 15 42 225 127 637 1,073 2,318 2,936
------- -------- -------- -------- ---------- ---------- ---------- ----------
COST OF REVENUE:
LendingTree network..... 39 42 65 89 217 448 665 901
[i]close and other
technology............ -- -- 133 16 175 16 55 66
------- -------- -------- -------- ---------- ---------- ---------- ----------
Total cost of
revenue......... 39 42 198 105 392 464 720 967
------- -------- -------- -------- ---------- ---------- ---------- ----------
Gross profit.............. (24) -- 27 22 245 609 1,598 1,969
OPERATING EXPENSES:
Product development..... 223 420 69 339 142 394 272 301
Marketing and
advertising........... 105 274 649 1,466 2,883 2,956 6,230 6,542
Sales, general and
administrative........ 539 577 654 1,185 1,344 1,763 2,529 4,315
------- -------- -------- -------- ---------- ---------- ---------- ----------
Total operating
expenses........ 867 1,271 1,372 2,990 4,369 5,113 9,031 11,158
------- -------- -------- -------- ---------- ---------- ---------- ----------
LOSS FROM OPERATIONS...... (891) (1,271) (1,345) (2,968) (4,124) (4,504) (7,433) (9,189)
Interest income, net...... -- 25 16 -- 22 3 55 425
------- -------- -------- -------- ---------- ---------- ---------- ----------
Net loss.................. $ (891) $ (1,246) $ (1,329) $ (2,968) $ (4,102) $ (4,501) $ (7,378) $ (8,764)
======= ======== ======== ======== ========== ========== ========== ==========
AS A PERCENTAGE OF TOTAL REVENUE:
Revenue:
LendingTree network..... 100% 100% 44% 91% 75% 98% 81% 92%
[i]close and other
technology............ -- -- 56 9 25 2 19 8
------- -------- -------- -------- ---------- ---------- ---------- ----------
Total revenue..... 100 100 100 100 100 100 100 100
------- -------- -------- -------- ---------- ---------- ---------- ----------
Total cost of revenue..... 260 100 88 83 62 43 31 33
------- -------- -------- -------- ---------- ---------- ---------- ----------
Gross margin.............. (160) -- 12 17 38 57 69 67
Total operating
expenses................ 5,780 3,026 610 2,354 686 477 390 380
------- -------- -------- -------- ---------- ---------- ---------- ----------
Loss from operations...... (5,940)% (3,026)% (598)% (2,337)% (648)% (420)% (321)% (313)%
======= ======== ======== ======== ========== ========== ========== ==========
OPERATING DATA:
Qualification Forms
transmitted:
Number.................. 1,276 2,544 4,900 9,527 22,253 33,762 61,563 68,214
Dollar volume
(in thousands)........ $80,172 $190,747 $423,883 $901,859 $3,144,612 $3,289,217 $4,801,832 $4,974,257
Loans closed:
Number.................. 21 125 215 351 731 4,472 9,540 12,412
Dollar volume
(in thousands)........ $ 134 $ 4,308 $ 9,933 $ 11,142 $ 47,733 $ 187,163 $ 266,176 $ 439,635
</TABLE>

23
<PAGE> 27

Our total revenue has increased steadily over the last eight quarters,
primarily as a result of consistent growth in network revenue. [i]close and
other technology revenue has fluctuated based on the percentage of work
completed on the projects during a quarter. The growth in the cost of revenue
reflects the higher level of revenue.

Quarterly increases in operating expenses reflect the continued expansion
of our operations during the two-year period. The increase in marketing and
advertising is primarily due to higher advertising expenses in order to attract
more consumers to our website, and higher employee-related costs such as
compensation, recruiting and relocation expenses, rent for facilities, and
professional fees.

We expect to experience significant fluctuations in future quarterly
operating results due to a variety of factors, many of which are outside of our
control. Our limited operating history and the emerging nature of the markets in
which we compete makes it difficult for us to accurately forecast our operating
results. Our operating results in one or more future quarters may fall below the
expectations of securities analysts and investors, which could cause the price
of our common stock to decline.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations primarily through private placements of
securities. Through December 31, 1999, proceeds from the sale of our securities
totaled approximately $64.0 million, net of financing fees. On September 20,
1999, we received approximately $50.0 million in gross proceeds from the sale of
Series D convertible preferred stock to a group of corporate and institutional
investors including Capital Z Partners, GE Capital, Goldman Sachs, priceline.com
and Marsh & McLennan Risk Capital. The investors who purchased the Series D
convertible preferred stock were allowed to designate three representatives to
serve on our board of directors. At that time, our stockholder's considered it
undesirable to increase the size of our board to accommodate these designees.
Five incumbent board members resigned, three of whom requested that we
repurchase some of their shares since they would no longer be able to oversee
their investments. Approximately $6.0 million of the proceeds from the sale of
Series D convertible preferred stock was used to repurchase 948,971 shares of
outstanding common stock owned by those resigning directors.

Net cash used in operating activities was $21.2 million, $5.7 million and
$0.6 million in 1999, 1998 and 1997, respectively. In each year the use of cash
primarily consisted of our net operating losses before non-cash items. Non-cash
items in each year included the issuance of common stock, stock options and
warrants, and increases in accounts receivable, partially offset by increases in
trade payables and accrued expenses.

Net cash used in investing activities was $28.1 million in 1999 and $0.2
million and less than $0.1 million in 1998 and 1997, respectively. Net cash used
in investing activities in these periods primarily consisted of capital
expenditures for the purchase of computer equipment and furniture.

Net cash provided by financing activities was $48.7 million in 1999 and
$8.6 million and $1.0 million in 1998 and 1997, respectively. Net cash provided
by financing activities for the year ended December 31, 1999 consisted primarily
of proceeds from the sale of preferred stock and convertible notes, offset by
the repurchase of common stock.

As of December 31, 1999, we had approximately $29.5 million in cash, cash
equivalents and short-term investments. We currently estimate that we will spend
approximately $50.0 million during 2000 on marketing and advertising, more than
double what we spent in 1999. As of January 15, 2000 we had commitments to pay a
minimum of approximately $10.1 million and $4.9 million during the years ending
December 31, 2000 and 2001, respectively, for advertising and promotion. We
believe that the net proceeds from this offering, together with our existing
cash, cash equivalents, and short-term investments, will be sufficient to meet
our working capital and capital expenditure requirements for at least the next
12 months, whereas the commitments for 2001 may be funded from remaining cash
from this offering, cash from short term investments, cash inflows from
stock-option or warrant exercises, our sales of stock under our employee stock
purchase plan, and/or additional financing sources. Without the proceeds of this

24
<PAGE> 28

offering, management would have to reduce the extent of our plans for marketing
and advertising during 2000. We have no current plans to make additional equity
offerings in 2000. After 2000, we may be required to raise additional funds.
Additional financing may not be available when needed or, if available, such
financing may not be on terms favorable to us. Consequently, management may have
to reduce advertising to conserve cash. If additional funds are raised through
the issuance of equity securities, our existing stockholders may experience
significant dilution.

MARKET-RELATED RISKS

We currently have no floating rate indebtedness, hold no derivative
instruments, and do not earn foreign-sourced income. Accordingly, changes in
interest rates or currency exchange rates do not have a direct effect on our
financial position. However, increases in interest rates generally reduce
consumer demand for real estate and other significant purchases and, therefore,
could affect the volume of business transacted in our marketplace.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes a new model
for accounting for derivatives and hedging activities and supercedes several
existing standards. SFAS No. 133, as amended by SFAS No. 137, is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. We do not
expect that the adoption of SFAS No. 133 will have a material impact on the
financial statements.

YEAR 2000 READINESS

Year 2000 computer problems may arise after the date of this prospectus.
Our business could be interrupted by any material year 2000-related failure of
our internal systems, the systems that carry Internet traffic to our online loan
marketplace, the systems of our lenders or online partners, or the systems used
by consumers to access our marketplace.

During 1998 and 1999 we conducted a review of the year 2000 readiness of
our information technology systems. These systems include software that we have
internally developed and software and hardware that we have obtained from
third-party vendors and licensors. Our review identified a limited number of
remediation steps that we completed prior to January 1, 2000. In 1999, we
performed full end-to-end testing of all key business functions in a simulated
operating environment to assure that our systems previously verified to be year
2000 compliant remained compliant as changes were made to them.

The aggregate costs associated with our year 2000 review and remediation
were approximately $500 in 1998 and $11,500 in 1999. We estimate that any costs
related to year 2000 issues in 2000 will also be immaterial. As of the date of
this prospectus, we have not experienced any year 2000-related systems failures
and, subsequent to January 1, 2000, we have received verbal assurances from all
of our largest lenders and [i]close licensees that they are year 2000 compliant
and that they have not experienced any year 2000-related systems failures in
connection with the January 1, 2000 date change. We intend to continue to
monitor our own systems for ongoing year 2000 compliance and conduct testing to
confirm the compliance of our system, as well as to confer with our lenders and
online partners and vendors about their ongoing year 2000 compliance.

Based on our efforts to date, we believe that we will not experience any
material year 2000 problems. There are, however, possible scenarios under which
year 2000 problems, if they occur, could materially affect us. The most
reasonably likely worst cases among these scenarios, include: the temporary
inability of one or more of our key lenders to receive consumer Qualification
Forms from us or to reply to consumers with loan offers; the temporary inability
of our online partners to direct consumer traffic to our marketplace; and a
failure of, or a degradation in, the Internet infrastructure that reduces
traffic to, or the performance of, our website. We do not intend to develop
contingency plans to address these or other potential worst-case scenarios.
25
<PAGE> 29

BUSINESS

OVERVIEW

We are a marketplace that facilitates the lending process. Because we are
not a lender, we have reduced exposure to interest rate and market risks
generally associated with traditional lending activities. Our revenue model
depends on revenue generated from lenders participating in our network who pay
us fees based upon their receipt of credit requests, which we refer to as
transmission fees, and fees based upon loan closings, which we refer to as
closed-loan fees. We earn revenues primarily through transaction fees paid by
lenders when Qualification Forms are transmitted to lenders and when loans are
closed. We also license our [i]close technology to other companies who create
single and multi-lender online marketplaces. Credit requests not meeting
lenders' criteria on those marketplaces are routed to our lender network,
increasing our overall volume.

We commenced nationwide operations on July 1, 1998. Since that time our
network has expanded to include more than 90 regional and national lenders. For
the quarter ended December 31, 1999, we transmitted 68,200 Qualification Forms,
representing $5.0 billion in loan demand, and our lenders closed loans totaling
$440 million. These numbers reflect significant growth when compared to the
quarter ended December 31, 1998, with 9,500 Qualification Forms transmitted,
representing $902 million in loan demand, which resulted in $11 million in
closed loans.

Non Internet-based lenders generating the highest number of closed loans on
our website during the fourth quarter of 1999 were Bank One, PNC Bank FSB,
Provident Bank and Sovereign Bank. Online lending companies generating the
highest number of closed loans on our website during the same period were
AppOnline.com, giggo.com, MortgageSelect.com and Smart-Finance.com. Our [i]close
technology powers the loan centers of Wachovia Bank, Fleet Bank, priceline.com,
CNBC.com, Autobytel.com, Bloomberg.com and PNC's Banking Center on iVillage.com,
and supplies the loan content and tools for a network of over 11,000 websites.

We believe our unique business model, growing consumer acceptance of our
website, our first mover advantage, the strength of the LendingTree brand, the
breadth of our lender network, our online relationships, and our [i]close
technology platform provide us with significant competitive advantages.

INDUSTRY BACKGROUND

GROWTH OF INTERNET USAGE AND ELECTRONIC COMMERCE

The Internet has emerged as a global medium for communication, information,
and commerce. International Data Corporation estimates that there were 63
million Internet users in the United States at the end of 1998 and anticipates
that this number will grow to approximately 177 million by the end of 2003,
representing a compound annual growth rate of 23%. As a result of the Internet's
increasing acceptance as a commercial medium, businesses have a growing
opportunity to conduct electronic commerce. International Data Corporation
estimates that in the United States, Internet commerce will increase from
approximately $37 billion in 1998 to approximately $708 billion by 2003,
representing a compound annual growth rate of 80%.

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<PAGE> 30

CONSUMER LENDING MARKETS

Consumer lending markets are both large and highly fragmented. The United
States Federal Reserve estimates that as of year-end 1998 total outstanding debt
by households amounted to approximately $5.4 trillion and the U.S. Census Bureau
estimates that there were over 21,000 financial institutions providing consumer
credit in the United States. Forrester Research, a market research organization,
projected approximately $1.9 trillion in loan originations in the United States
during 1999. Forrester also projected that 1.3% of consumer loan originations
would be conducted online in 1999, growing to 9.5% by 2003, and that total
online credit originations will grow from $25.7 billion in 1999 to $167.6
billion in 2003, representing a compound annual growth rate of 60%.

The following table summarizes by consumer product category for the periods
presented, the dollar volume and number of online loan originations, as well as
the dollar volume of online originations as a percentage of total originations
in the United States, as projected by Forrester Research.

<TABLE>
<CAPTION>
PROJECTED
ONLINE
ORIGINATIONS
PROJECTED ONLINE PROJECTED ONLINE AS % OF
ORIGINATIONS ORIGINATIONS TOTAL $
(DOLLARS IN BILLIONS) (IN THOUSANDS) ORIGINATIONS
--------------------- ---------------- ------------
1999 2003 1999 2003 1999 2003
-------- --------- ------ ------ ---- -----
<S> <C> <C> <C> <C> <C> <C>
Mortgage...................................... $18.7 $ 91.2 116 599 1.5% 9.6%
Credit Card................................... 5.2 21.5 990 3,674 4.3 16.3
Automobile.................................... 0.8 21.4 36 952 0.2 4.7
Home Equity................................... 1.0 20.2 25 422 0.6 11.4
Student....................................... -- 13.3 12 3,261 0.1 25.3
----- ------ ----- -----
Total......................................... $25.7 $167.6 1,179 8,908
===== ====== ===== =====
</TABLE>

LIMITATIONS OF TRADITIONAL LOAN PROCESS AND OTHER ONLINE LENDING MODELS

For lenders, the traditional lending process is paper-intensive and
time-consuming, usually accompanied by high fixed costs and labor expense. It
generally involves defining loan product guidelines for specific segments of
consumers and establishing a pre-determined price for which the consumer
applies. This inefficient process results in significant marketing and
processing costs. In addition, the traditional lending process increases the
time it takes to implement a given lending strategy, thereby reducing
flexibility and the ability to respond to competition.

For consumers, the traditional loan process is time-consuming, requires
completion of multiple forms and can often be frustrating and confusing.
Consumers typically search through a variety of loan products from many
different lenders, apply to one lender at a time for that lender's offered
price, and then wait for that lender to approve or reject the application.
Online lending sites of our competitors generally mirror the traditional lending
process. Consumers visit a website, view a list of loan products, apply for one
product from one lender, and are either approved or rejected. While the consumer
proposition presented by online lending websites is the same as the traditional
offline process, the business models for online lending websites fall into two
categories:

- Lender/Broker Model. The operators of these websites generate revenue in
the same way as traditional lenders -- from a mark-up over their cost of
capital, whether the source of capital is a lender, secondary market
purchaser, or warehouse line of credit. In exchange for these mark-ups,
the lender/broker undertakes all of the underwriting, processing,
verification, and customer interaction. In addition, to the extent the
lenders/brokers fund originated loans with their own capital, they are
directly exposed to interest rate fluctuations.

- Referral Agent Model. The operators of these websites typically generate
revenue by providing referrals to lenders. Because referral agents
typically do not generate any revenue upon loan closings, there is little
incentive for these companies to ensure that lenders and consumers
consummate the loan transaction.

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We believe that the inefficiencies of the traditional lending process and
the shortcomings of other online business models, combined with the large and
recurring nature of consumer loan demand, offer a substantial opportunity for
our marketplace business model.

THE LENDINGTREE MARKETPLACE SOLUTION

The LendingTree marketplace enables consumers to receive up to four loan
offers in response to a single credit request while providing lenders with the
opportunity to generate new business that meets their specific underwriting
criteria at reduced acquisition costs.

THE LENDINGTREE PROCESS

The LendingTree process consists of the following steps:

- Credit Request. Consumers access our website at www.lendingtree.com and
select a loan product from our current offering of five loan categories,
which include mortgage, home equity, automobile, credit card, and
personal loans. Consumers complete a single Qualification Form for the
selected loan product with information such as income, net worth, loan
term preferences, and other personal data. Consumers also consent to our
use of their credit history.

- Qualification Form Filtering and Transmission. Our proprietary filtering
process matches the consumers' Qualification Forms, credit profile, and
geographic location to the preset underwriting criteria provided by the
lenders in our network. Lenders are able to immediately modify their
underwriting criteria directly through our website. Once Qualification
Forms pass the filters, they are transmitted to up to four lenders. In
the event that after being filtered, the Qualification Form meets the
lending criteria of more than four lenders, the four Lenders to whom the
Qualification Form is sent are randomly selected.

- Lender Evaluation and Response. Lenders evaluate and respond to the
Qualification Forms that pass through their filters. Currently, lenders
respond to approximately 85% of the Qualification Forms they receive
within one business day. In most cases, lenders approve the Qualification
Form.

- Communication of Offer. Once a lender evaluates a Qualification Form,
renders a decision and responds with an offer, the LendingTree system
automatically notifies the consumer via e-mail and displays the offers on
our website. The e-mail contains instructions to return to our website
and provides instructions directing them to our Check Status page where
consumers can view and compare the terms of each offer online, including:
interest rate, closing costs, monthly payment amount, and lenders' fees.

- Consumer Acceptance. The consumer has the ability to accept, reject, or
request more information about a loan offer. When the consumer selects
one of these options, the LendingTree system automatically notifies the
chosen lender and the remainder of the process is conducted offline. If
the consumer does not like any of the offers he or she can fill out a new
Qualification Form. However, consumers are prohibited from completing a
Qualification Form for the same loan type for 72 hours after they receive
responses from lenders.

- Ongoing Process Support. We provide active telephone follow-up and
support to both lenders and consumers during the loan transaction
process. This follow-up and support is designed to increase overall
satisfaction of the participants in our marketplace.

CONSUMER BENEFITS

Our marketplace provides important benefits to consumers, including:

- Price. Our growing network of more than 90 lenders fosters a competitive
bidding environment, encouraging lenders to price loan offers
aggressively as they compete for consumers' business.

- Consumer Service. Through the range of online information and tools
presented on our website, combined with our support and service, we aim
to reduce the confusion often experienced by consumers during the
borrowing process and the time that it takes to obtain loans.

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- Choice. We provide qualified consumers with up to four loan offers from
a national base of lenders.

- Convenience. In contrast to the traditional process of separately
applying to multiple local lenders for credit, our marketplace saves
consumers valuable time by enabling them to go online, complete one
Qualification Form, and receive multiple loan offers. In addition,
consumers can save a partially or fully completed Qualification Form and
return at a later time to complete the process or apply for another loan.

- Content. We provide consumers with educational materials about the
borrowing process, answers to frequently asked questions, informative
articles, and interactive loan calculators. Consumers can also purchase
related services, including credit reports and insurance.

- No Fees. Our service is free to consumers.

LENDER BENEFITS

Our marketplace provides important benefits to lenders, including:

- New Business. Leveraging the reach of the Internet, we provide lenders
with access to a significantly larger audience of qualified consumers.

- Lower Acquisition Costs. The fees we charge lenders are designed to be
less than the cost of acquiring customers through traditional and other
online channels. Additionally, our [i]close technology and integration
with our lenders' systems enables lenders to process credit requests more
efficiently and at significantly reduced costs.

- Market Information. Our involvement with lenders and consumers across
multiple credit categories provides us with valuable data about the
online lending marketplace. Within the guidelines of our privacy policy,
our account managers combine surveys, consumer feedback, and quarterly
reviews to provide valuable and timely information to lenders. We believe
that this enables our lenders to refine and improve their Internet
lending strategies and quickly respond to changing market conditions in
order to compete more effectively.

THE LENDINGTREE [i]CLOSE SOLUTION

We license our [i]close technology to other companies who create single and
multi-lender loan marketplaces. [i]close consists primarily of four integrated
technologies which we call our technology platform:

- Credit Request Forms. [i]close provides the lender with the
Qualification Form on a website where a consumer can complete the form.

- Proprietary Filtering Process. Once the consumer completes the
Qualification Form, [i]close technology processes the consumer's
information and directs it to a lender whose lending criteria matches the
borrower's loan profile.

- Lender Evaluation and Response. After receiving the consumer's credit
request, [i]close technology enables lenders to evaluate the consumer's
information and respond with loan offers.

- Viewing of Offers. [i]close allows consumers to return to a website and
view one or multiple offers online.

Our current [i]close customers are Wachovia Bank, Fleet Bank,
priceline.com, CNBC.com, Autobytel.com, Bloomberg.com and PNC's Banking Center
on iVillage.com. The benefits to our [i]close customers include:

- Minimal Upfront Cost. We believe that our proprietary technology results
in minimal upfront cost to lenders compared with internally developing a
web-based distribution channel. We believe that as lenders seek to
develop proprietary Internet capabilities, [i]close can meet their needs
in a faster, more cost-effective, and scalable manner.

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- Reduced Technology Obsolescence. We continually update [i]close as new
technologies develop. Lenders who use [i]close can take advantage of
these improvements and maintain the latest technology.

- Multi-lender Capability. We believe that over time, even single-lender
entities such as banks will consider offering other lenders' products on
their websites. Our [i]close solution is well-suited for this purpose.
For example, [i]close is utilized by PNC's Banking Center on the iVillage
community website where, in addition to access to PNC Bank, consumers
have access to our entire network of lenders. This multi-lender approach
not only increases consumer choice, but also provides additional
transaction revenue to the [i]close partner.

LENDINGTREE STRATEGY

Our mission is to be the predominant loan marketplace on the Internet. The
key elements of our strategy are to:

- STRENGTHEN LENDINGTREE'S POSITION AS A MULTI-PRODUCT LOAN
MARKETPLACE. We believe that no other loan marketplace or multi-lender
website offers the breadth of loan categories available on our website.
This multi-category strategy enables us to become consumers' primary
resource for all of their lifetime borrowing needs. We will continually
evaluate adding new loan products to our marketplace such as student
loans and small business loans. By becoming a consumer's primary lending
destination and fostering repeat usage we can increase revenue per
customer and decrease acquisition costs for each new loan.

- EXPAND LENDER COVERAGE AND PRODUCT OFFERINGS. We seek to provide
consumers throughout the United States with a competitive marketplace for
consumer credit products across a wide range of credit risk profiles. The
availability of multiple lenders for each type of loan product generally
provides qualified consumers with a choice of competitive offers. We
intend to expand our lender coverage by actively marketing our
marketplace solution to new lenders. We are also seeking to expand the
product offerings of lenders who are already participants in our network.

- EXPAND TRANSACTION VOLUME THROUGH ONLINE RELATIONSHIPS. We intend to
increase the number of transactions processed in our marketplace by
continuing to enter into agreements with online businesses that have a
high affinity to consumer lending. Currently we have contractual
relationships with well-known consumer Internet brands including
priceline.com, Autobytel.com and Bloomberg.com.

- INCREASE BRAND AWARENESS AND TRANSACTION VOLUME. We intend to
significantly expand our online and offline advertising to create
consumer awareness of LendingTree as the predominant online loan
marketplace and thereby build transaction volume. We are planning a major
advertising campaign in 2000 with the aim of making our marketplace "top
of mind" with consumers.

- ESTABLISH [I]CLOSE AS THE DOMINANT LOAN MARKETPLACE TECHNOLOGY. We
intend to increase our revenue by licensing [i]close to individual
lenders and other companies who create single and multi-lender websites.
We will do this through expansion of our sales force and industry-focused
marketing activities.

- INCREASE LOAN CLOSING RATES. We intend to increase loan closing rates
by:

- adding lenders to our network;

- increasing the level of automation of our lenders to shorten the loan
approval process; and

- continually improving our customer service and encouraging our
lenders to improve their customer service.

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LENDER RELATIONS

OUR LENDERS

During December 1999 we had more than 90 lenders participating in the
LendingTree marketplace across five principal products: mortgages, home equity,
automobile, credit card and personal loans. Below are the top lenders by the
number of closed loans in each category for the quarter ended December 31, 1999.
Collectively, these lenders, which are comprised of both non Internet-based
lenders and online lenders, contributed 54% of our revenue for that quarter.

MORTGAGE
- AppOnline (CMP Mortgage)
- iOwn.com
- mortgage.com
- MortgageSelect.com
- New Century Mortgage

HOME EQUITY
- Bank One
- Mellon Bank
- PNC Bank, FSB
- Provident Bank
- Sovereign Bank
AUTOMOBILE
- Auto Refinance Source, Inc.
- giggo.com
- SmartFinance.com
- Sovereign Bank
- Synergy Federal Savings Bank

CREDIT CARD
- Aspire Card Services
- First USA
- Merrick Bank

PERSONAL LOANS
- Chase
- The Dime Savings Bank
- Sovereign Bank
- Synergy Federal Savings Bank

LENDER SALES AND MARKETING

Our sales force consists of three lender development teams that cover the
following consumer loan categories: mortgage and home equity; automobile; and
credit cards and personal loans. Each team targets and establishes relationships
with lenders to ensure an adequate array of credit products to meet consumer
demand.

Our lender marketing objective is to support our lender sales efforts by
increasing awareness of LendingTree within the lending community through trade
advertising, public relations, and attendance at trade shows and industry
conferences.

LENDER ACCOUNT MANAGEMENT

We strive to provide a high level of support and service to lenders who are
on the LendingTree network and those that license our [i]close technology. We
provide each lender with comprehensive training on our marketplace technology as
well as a dedicated support team after the lender has joined our network. We
regularly review our lenders' online lending processes and make recommendations
to improve their performance.

We have developed a "best practices" program that helps lenders achieve
high levels of customer service and make competitive loan offers. We believe
that the most successful lenders in our network adhere to the following best
practices including:

- use of dedicated in-house teams to monitor their online loan activities;

- rapid response to consumer credit requests;

- proactive solicitation of customer feedback; and

- personalized service through outbound call centers.

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PRODUCT LINES

Our marketplace offers consumers the opportunity to obtain the following
loan products:

- Home Mortgage. As of November 1, 1999, we had 68 lenders providing home
mortgage loans.

- Home Equity. As of November 1, 1999, we had 37 lenders providing home
equity loans.

- Automobile Loans. As of November 1, 1999, we had 12 lenders providing
automobile loans. Until recently, our marketing efforts have focused
primarily on real estate borrowers and lenders. We have only recently
begun to actively pursue additional automobile lenders. As we increase
our marketing focus on automobile lenders and consumers, we expect this
product category to represent a greater portion of our revenue.

- Credit Cards. As of November 1, 1999, we had three credit card issuers.
We are in the process of adding more credit card issuers that will
complement our strategy of target marketing specific demographic
segments, such as college students and other affinity groups.

- Personal Loans. As of November 1, 1999, we had five lenders providing
personal loans. While personal loans are not currently a significant
revenue source for us, this product may contribute a greater portion of
our revenue as we increase our marketing efforts on lenders and
consumers.

CUSTOMER SERVICE

We employ a staff of customer relations managers whose responsibilities
include:

- responding to consumers' questions about the status of their credit
request, how to use our website, and other frequently-asked questions;
and

- acting as a liaison between consumers and lenders, to ensure consumers
receive prompt service from lenders.

We actively evaluate the effectiveness of our customer service efforts. For
example, for incoming telephone calls, we monitor the average speed of answering
such calls, the average length of the call, and the average amount of time spent
performing work in response to the call. We also respond to e-mail from
consumers and respond generally within 36 hours. Many of the e-mails and
telephone calls from consumers provide feedback on the performance of our
lenders. As part of our best practices program, this information is shared
directly with our lenders, within the guidelines of our privacy policy, to
improve their services and performance on our network.

RELATIONSHIPS

We have established contractual relationships with a number of high-traffic
consumer websites that utilize our online loan marketplace technology. These
relationships include:

- priceline.com. We have formed a relationship with priceline.com to
provide a "name your price" service for mortgage and home equity loans.
Priceline.com has made an equity investment in LendingTree. See "Certain
Relationships and Related Transactions."

- Autobytel.com. We provide the technology platform for the automobile
financing center on the Autobytel.com website.

- Bloomberg.com. Consumers can access our marketplace directly through
Bloomberg's website.

- CNBC.com. We have agreed with CNBC.com that we will be the exclusive
loan marketplace for residential mortgage, home equity and automobile
loans through the CNBC.com website and we will advertise on the CNBC
cable network channel. CNBC.com received warrants to purchase 190,500
shares of our common stock in connection with this transaction at an
exercise price of approximately $7.87 per share. See "Certain
Relationships and Related Transactions."

- PNC Banking Center on iVillage.com. We are the exclusive loan
marketplace provider on the PNC Banking Center on iVillage.com.

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CONSUMER MARKETING

Our principal marketing objectives are to build positive brand awareness
and increase volume on our marketplace. These efforts include offline
advertising, online advertising, and direct marketing. We also collect and
analyze consumer data to enhance our consumer marketing programs, subject to
compliance with our privacy policy.

CONSUMER OFFLINE ADVERTISING

- Radio Advertising. Our radio advertising directly increases transaction
volume on our website as well as consumer awareness of the LendingTree
brand. Radio advertising also allows us to test new geographic markets
for their receptiveness to our consumer proposition. We select radio
markets based on a variety of factors, including population density,
housing starts, Internet-enabled users, and mortgage activity. To date,
we have used radio advertising in over 30 U.S. markets.

- Print Advertising. We promote the LendingTree brand through strategic
placements in daily news publications, as well as weekly, bi-weekly, and
monthly periodicals. We have advertised in publications such as The Wall
Street Journal, USA Today, The New York Times, and The Washington Post.

- Outdoor Advertising. We also employ outdoor advertising as part of our
overall advertising strategy. Our strategy includes the use of several
media including billboards, bus and train advertising, and airport
terminals.

CONSUMER ONLINE ADVERTISING

- Online Advertising and Sponsorships. We purchase online advertising and
sponsorships on selected websites with high affinity to consumer credit
such as websites relating to real estate and personal finance. We also
sponsor keywords on major search engines. For example, when a search is
made for the keywords "loan" or "mortgage," a LendingTree banner
advertisement may appear.

- The LendingTree Affiliate Network. A core part of our marketing strategy
is to utilize the thousands of websites that provide content about
products and services that are complementary to those that we offer. Our
objective is to make these websites sources of low-cost Qualification
Forms for LendingTree. The LendingTree affiliate network is one of our
strategies to expand the distribution of our service across the Internet.
We pay a marketing fee to these affiliates in exchange for delivering
consumer Qualification Forms. More than 11,000 websites have joined the
LendingTree affiliate network.

DIRECT MARKETING

We believe that direct marketing is especially effective to increase loan
closure rates and develop lifetime relationships with consumers. Our direct
marketing is conducted through a variety of channels, within the guidelines of
our privacy policy, including:

- Direct E-mail. We use e-mail to prompt consumers to visit our website,
communicate with consumers throughout the lending process, and promote
loan closing.

- Cross Selling. Through our cross-sell efforts, consumers have the
opportunity to purchase related products and services at various points
in the loan process. Current cross-sell offerings include credit cards,
homeowners' insurance, and life insurance. We intend to increase the
breadth of our cross-sell efforts.

COMPETITION

The market for online loan shopping and related services is new and rapidly
developing. We believe that we have an important first mover advantage, but
current and potential new competitors could establish online loan marketplaces
that are competitive with ours. We expect competition from:

- online lenders/brokers such as E-LOAN, mortgage.com, QuickenMortgage,
iOwn.com, and NextCard;

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- traditional lenders and brokers, such as Washington Mutual and
Countrywide; and

- existing online referral agents such as GetSmart, Microsoft's
HomeAdvisor, Creditland, and MortgageAuction.com.

Some of these competitors are also participants in our marketplace.

We believe that the primary competitive factors in the online financial
services market are:

- pricing and breadth of product offering;

- time of market entry;

- brand awareness;

- variety, quantity, and quality of partners and online relationships;

- proprietary and scalable technology infrastructure;

- ease of use and convenience; and

- strength of relationships and depth of technology integration with
customers.

Our success depends upon capturing and maintaining a significant share of
consumers who obtain loans through the Internet. In order to do this, we must
continue to build on our first mover advantage, continue to increase brand
awareness among consumers and lenders, expand our network of lenders, establish
additional relationships, and continually upgrade our technology. As described
elsewhere in this prospectus, we are planning to significantly increase our
advertising program during 2000. Many of our current competitors, however, have
longer operating histories, greater name recognition, larger customer bases, and
significantly greater financial, technical, and marketing resources than we do.
In addition, participants in other areas of the financial services industry may
enter the consumer loan marketplace.

TECHNOLOGY

Our marketplace is supported by a proprietary technology platform that was
designed with an emphasis on scalability, performance, reliability, and
security. We use standard Microsoft languages and development tools such as
Visual Basic and Active Server Pages; we also use C++ and Perl. We use
Microsoft's SQL Server as our database engine and our website and database
servers run on the Windows NT operating system. Communications to our website
are protected with Secure Sockets Layer, an industry-standard protocol that
provides data encryption, server authentication, and message integrity. Our
website servers and database servers are protected by firewalls that separate
them from the Internet. For the years ended December 31, 1997, 1998 and 1999, we
spent approximately $0.3 million, $1.1 million and $1.1 million, respectively,
on company-sponsored research and development activities.

As an Internet company, our operations may be subject to system failures or
other service interruptions, which could materially harm our reputation and
impair our ability to offer services. We have established procedures to minimize
the likelihood of service interruptions, including periodic equipment and
software testing, data monitoring, and maintaining error records. We have also
instituted and tested a contingency plan to limit the duration of any database
or other software-related system failure.

Our website is hosted by Digex at its facilities in Beltsville, Maryland
and Cupertino, California. Digex operates with redundant communication lines,
emergency power backup, and 24-hour monitoring and engineering support. Physical
access to all of our servers at Digex is strictly controlled by a state-of-
the-art physical security architecture utilizing multi-redundant mechanics,
utilities, and environmental controls.

We believe that issues relating to privacy and use of personal information
relating to Internet users are becoming increasingly important as the Internet
and its commercial use grow. We have adopted a detailed privacy policy that
outlines how we use information concerning our consumers and the extent to which
lenders and other third parties may have access to this information. This policy
is prominently noted on our website. We do not sell or rent any personally
identifiable information about our customers to any

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third party. We use the information about our customers for internal purposes
only in order to improve our marketing and promotional efforts, to statistically
analyze site usage, and to improve content, product offering and site layout.

The privacy provisions of the recently-enacted Gramm-Leach-Bliley Act,
which are effective in November 2000:

- bar financial institutions from disclosing to unaffiliated third parties
nonpublic personal information collected from consumers, subject to
several exemptions;

- require financial institutions to develop and disclose consumer privacy
policies;

- empower federal regulators with the authority to regulate information
sharing and enforce the provisions of the law; and

- expressly allow states to pass stricter financial privacy laws.

Federal regulations implementing the statute are being developed. Since we
are likely to be deemed a financial institution under the Gramm-Leach-Bliley
Act, we may be required to amend our privacy policy and consumer authorizations
and disclosures to comply with the Gramm-Leach-Bliley Act and its implementing
regulations.

GOVERNMENT REGULATION

Many of the loan products available through our website are subject to
extensive regulation by various federal and state governmental authorities.
These rules impose restrictions on our marketing activities and compensation
arrangements with our participating lenders, many of whose activities are
similarly highly regulated. Federal and state rules regarding lending may, for
example:

- regulate the content of advertisements;

- limit the amount of fees we may receive from lenders and other websites;

- require additional disclosure to consumers;

- mandate protection of consumer privacy;

- regulate sales practices generally, including prohibiting discrimination;
and

- impose various qualification and licensing obligations on us.

Failure to comply with these requirements may result in, among other
things, revocation of required licenses or registrations, loss of approved
status, loss of exempt status, indemnification liability to lenders,
administrative enforcement actions, class action lawsuits, cease and desist
orders, and civil and criminal liability.

We believe we are in substantial compliance with these rules and
regulations, subject to the regulatory uncertainties discussed in the paragraphs
that follow. Our determination is based upon knowledge of our policies,
practices and procedures designed to achieve compliance with applicable laws and
regulations, including the employment of full-time in-house attorneys and
retention of external regulatory counsel, who advise us with respect to the
federal and state consumer protection laws and regulations applicable to our
operations.

As a computer loan origination system conducting business through the
Internet, we face an additional level of regulatory risk given the fact that
most statutes and regulations governing solicitation of lending transactions
have not been substantially revised or updated to fully accommodate electronic
commerce. Most of the federal and state laws, rules, and regulations governing
lending, for example, contemplate or assume paper-based transactions and do not
currently address the delivery of required disclosures and other documents
through electronic means. In addition, many of the federal and state rules
regarding licensing requirements and fees paid in connection with lending did
not originally contemplate that loan products would be made available through
non-lender third parties over the Internet. Until these laws, rules, and
regulations are revised to clarify their applicability to transactions conducted
through e-commerce, any company providing loan-related services through the
Internet or other means of e-commerce will face compliance uncertainty. In
addition, there is no assurance that revisions to the laws,

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rules, and regulations will be adopted and, if adopted, will be timely or
adequate to eliminate this uncertainty. Management believes it has taken prudent
steps to mitigate these risks, as discussed in the preceding paragraph.

Many, but not all, states require licenses to solicit or broker to
residents of those states, loans secured by residential mortgages, and/or other
consumer loans, including credit card, automobile and personal loans.
LendingTree has obtained licenses to broker residential mortgage loans, or is
not required to be licensed, in the District of Columbia and all 50 states, with
the exceptions of Delaware where an application is currently pending. Similarly,
LendingTree has obtained licenses to broker consumer loans, or is not required
to be licensed, in all 50 states, with the exceptions of California, New Jersey
and Ohio, where applications for consumer loan licenses are pending, and
Tennessee, where LendingTree cannot obtain a license to broker consumer or home
equity loans because of residency requirements of that state. We are not
currently accepting credit requests for loan products from residents of states
in which we are not licensed to provide those products. In many of the states in
which we are licensed, we are subject to examination by regulators. We were
recently notified by a state banking regulatory agency that in its view, prior
to our being registered as a mortgage broker, we engaged in the business of
soliciting mortgage loans on properties located in the state. While we disagree
with the agency's interpretation, we determined that it was more advantageous to
resolve the dispute rather than enter into expensive, protracted litigation. In
resolving this matter, we paid a settlement in the amount of $175,000, and we
received a registration with the state agency as a mortgage broker.

In addition, any person who acquires 10% or more of our common stock may be
required to comply with applicable regulations promulgated by certain states
that may include requiring the person to periodically file financial information
and other personal and business information. If any person holding 10% or more
of our common stock refuses or fails to comply with these licensing
requirements, we may be unable to obtain a license or existing licensing
arrangements in particular states could be jeopardized. The inability to obtain,
or loss of, required licenses could have a material adverse effect on our
operations and financial condition.

In addition to licensing requirements, federal and state laws regulate
residential lending activities of brokers and lenders. At the federal level, our
services are regulated by the Truth in Lending Act and Regulation Z, the Equal
Credit Opportunity Act and Regulation B, the Fair Housing Act, the Fair Credit
Reporting Act, federal privacy laws, and the Real Estate Settlement Procedures
Act and Regulation X. These laws generally regulate the manner in which loan
services are made available, including advertising and other consumer
disclosures, payments for services, and the privacy and reporting of consumer
data. State and federal laws also prohibit unfair and deceptive trade practices
and require companies to adopt appropriate policies and practices to protect
consumer privacy.

Under the Truth in Lending Act, creditors are required to provide consumers
with uniform, understandable information concerning some of the terms and
conditions of loan and credit transactions being offered, which may include
disclosures in advertising. This particular federal law is generally applicable
to lenders and applies to us primarily in the context of advertising.

The Equal Credit Opportunity Act prohibits discrimination against
applicants on the basis of race, color, sex, age, religion, national origin, or
marital status, and the Fair Housing Act similarly prohibits discrimination in
residential lending. The regulations under the Equal Credit Opportunity Act also
restrict creditors from requesting various types of information from loan
applicants and require lenders to supply applicants with a notice, referred to
as an "adverse action notice," when the lender denies its applicants credit. Our
lenders are generally obligated to provide the required disclosures.

The Real Estate Settlement Procedures Act requires certain disclosures,
including a good faith estimate of closing costs and fees, as well as mortgage
servicing transfer practices. LendingTree believes that these requirements are
not applicable to its business as presently conducted. RESPA also prohibits the
payment or receipt of kickbacks or referral fees, fee shares or splits, or
unearned fees in connection with the provision of real estate settlement
services. It is a common practice for online financial service companies to
enter into advertising, marketing and distribution arrangements with other
Internet companies and websites whereby the financial service companies pay the
Internet companies fees for

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<PAGE> 40

advertising, marketing and distribution services and other goods and facilities
based on a number of factors, including the number of impressions,
click-throughs, completed loan applications or closed loans derived from these
arrangements. The applicability of RESPA's referral fee prohibitions to the
compensation provisions of these arrangements is unclear and the Department of
Housing and Urban Development has provided limited guidance to date on the
subject. Although LendingTree believes that it has structured its relationships
with Internet advertisers, marketers and distributors to comply with RESPA, some
level of risk is inherent absent amendments to the law or regulations, or
clarification from regulators. In addition, the applicability of referral fee
prohibitions to the compensation provisions on arrangements used by online
companies like us may have the effect of reducing the types and amount of fees
that we may charge or pay in connection with real-estate secured products.

The Fair Credit Reporting Act is a consumer privacy statute that generally
governs the assemblage, evaluation, maintenance, and dissemination of
information on consumers that has been collected for the purpose of evaluating
their qualifications for credit. The Fair Credit Reporting Act also requires
that users of consumer credit reports notify consumers when their loan
applications are denied on the basis of those consumer credit reports. In
addition, recent consumer privacy legislation enacted as part of the Gramm-
Leach-Bliley Act will restrict the dissemination of nonpublic consumer
information to nonaffiliated third parties absent consumer consent and will
require regulated institutions to maintain privacy policies when it becomes
effective during 2000.

At the state level, consumer protection laws applicable to LendingTree vary
by state, but typically regulate disclosures in advertising, require disclosures
and notices, prohibit unfair and deceptive trade practices and restrict
dissemination of non-public consumer information. The laws, rules and
regulations applicable to us undergo periodic modification and change.
Periodically, various laws, rules, and regulations are proposed, which, if
adopted, could impact us. These proposed laws, rules, and regulations, or other
applicable laws, rules, or regulations, if adopted, could make compliance more
difficult or expensive, restrict our ability to provide lending services,
further limit or restrict the amount of fees charged by us, or otherwise
adversely affect our business or prospects.

INTELLECTUAL PROPERTY

We regard our intellectual property as critical to our success. We rely on
a combination of patent, trademark and copyright law, and trade secret
protection to protect our proprietary rights. We pursue the protection of our
intellectual property in part through trademark and copyright registration. We
have registered "LendingTree" as a trademark in the United States and have
applied for trademark registration in the United States for "[i]close." We
consider the protection of our trademarks to be important for maintenance of our
brand identity and reputation. We cannot assure you that any of these
registrations or applications will not be successfully challenged by others or
invalidated through administrative process or litigation. Further, if our
trademark applications are not approved or granted due to the prior issuance of
trademarks to third parties or for other reasons, there can be no assurance that
we would be able to enter into arrangements with such third parties on
commercially reasonable terms allowing us to continue to use such trademarks. We
have applied for a U.S. patent and filed a Patent Cooperation Treaty
international patent application on our [i]close technology and our online loan
market process. It is possible that our patent applications will be denied or
granted in a very limited manner such that they offer little or no basis for us
to deter competitors from employing similar technology or processes or allow us
to defend LendingTree against third-party claims of patent infringement.
Further, effective patent, trademark, copyright, and trade secret protection may
not be available in every country in which we may offer our services.

A substantial portion of our intellectual property is licensed to third
parties. We license the right to use [i]close to well-known regional and
national lenders, other online companies that create single and multi-lender
online marketplaces, and consumer websites providing lending services. In
addition, a portion of the intellectual property used in our business is based
on licenses granted to us by third parties. We depend on the third party owners
from whom we license intellectual property and technology to protect those
rights, and therefore, cannot guarantee that the measures taken by these third
parties to protect their proprietary rights will be sufficient. In these
agreements, the licensors have generally agreed to defend,

37
<PAGE> 41

indemnify and hold us harmless with respect to any claim by a third party that
the licensed property infringes any patent or other proprietary right. We cannot
assure you that these provisions will be adequate to protect us from
infringement claims.

In addition, we seek to protect our proprietary rights through the use of
confidentiality agreements and other contractual arrangements with our
employees, affiliates, clients, [i]close licensees, and others. We cannot assure
you that these agreements will provide adequate protection for our proprietary
rights in the event of any unauthorized use or disclosure, that employees of our
affiliates, clients, [i]close licensees, or others will maintain the
confidentiality of such proprietary information, or that such proprietary
information will not otherwise become known, or be independently developed, by
competitors. Occasionally, we have been, and expect to continue to be, subject
to claims in the ordinary course of our business, including claims alleging that
we have violated a patent or infringed a copyright, trademark or other
proprietary right belonging to a third party. We cannot assure you that the
steps we have taken to protect our proprietary rights will be adequate or that
third parties will not infringe or misappropriate our proprietary rights. Any
infringement claims, even if not meritorious, could result in the expenditure of
significant financial and managerial resources on our part, which could
materially adversely affect our business, results of operations, and financial
condition.

EMPLOYEES

As of December 31, 1999, we had 125 full-time employees. Of these, 31 were
in lender and borrower relations, 33 were in sales, marketing, and business
development, 33 were in technology and project management, 19 were in financial
and legal, and the remainder were in human resources and administrative
positions. None of our employees is represented under collective bargaining
agreements. We consider our relations with our employees to be good.

FACILITIES

Our principal executive offices are currently located in approximately
16,000 square feet of office space in Charlotte, North Carolina under a lease
that expires in 2004. We recently entered into a lease for approximately 38,000
square feet of office space in Charlotte for a 10-year term. We have also
entered into a contract to sublease our current office space.

LEGAL PROCEEDINGS

There are currently no material legal proceedings pending or, to our
knowledge, threatened against us.

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<PAGE> 42

MANAGEMENT

The following table sets forth, as of December 31, 1999, the name, age and
position within LendingTree of each of our directors, executive officers and key
employees.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Douglas Lebda................................... 29 Chief Executive Officer and Director
Keith Hall...................................... 46 Senior Vice President, Chief Financial Officer
and Treasurer
David Anderson.................................. 34 Senior Vice President of Operations
James Bennett, Jr. ............................. 31 Senior Vice President of Strategy and Corporate
Development
Richard Stiegler................................ 43 Chief Technology Officer
Steve Campbell.................................. 35 Chief Information Officer
Robert Flemma, Jr............................... 39 General Counsel
Thomas Reddin................................... 39 Chief Marketing Officer
Virginia Rebata................................. 46 Senior Vice President of Human Resources
James Carthaus.................................. 59 Director
Richard Field................................... 59 Director
Robert Kennedy.................................. 64 Director
Daniel Lieber................................... 37 Director
Adam Mizel...................................... 30 Director
W. James Tozer, Jr. ............................ 58 Director
Robert Wilson................................... 65 Chairman Emeritus
</TABLE>

DOUGLAS LEBDA founded LendingTree in June 1996. He has served as Chief
Executive Officer and a Director since September 1998. Prior to that time, Mr.
Lebda served as Chairman of the Board and President. Prior to founding
LendingTree, Mr. Lebda was with Price Waterhouse in various capacities since
1992.

KEITH HALL is Senior Vice President, Chief Financial Officer and Treasurer.
From 1997 until 1999, Mr. Hall was the chief financial officer of Broadway &
Seymour, Inc., a software product and services firm. Beginning in 1995, Mr. Hall
was the chief financial officer of Legent Corporation, a software company.
Between 1983 and 1995 Mr. Hall worked in various financial positions at United
Technologies Corporation, including chief financial officer at Carrier North
America. Mr. Hall has been with LendingTree since June 1999.

DAVID ANDERSON is Senior Vice President of Operations. From June 1988 until
March 1999, Mr. Anderson worked in various capacities at American Management
Systems Inc., an international business and information technology consulting
company, most recently as a senior principal. Mr. Anderson has been with
LendingTree since March 1999.

JAMES BENNETT, JR. is Senior Vice President of Strategy and Corporate
Development. From November 1996 until May 1998, Mr. Bennett was the vice
president for electronic development in the entertainment, communications, and
media group of Cahners Publishing. In June 1994, Mr. Bennett founded BookWire, a
business-to-business news and information website for the book publishing trade
and acted as publisher until November 1996. Mr. Bennett is a co-founder of
LendingTree and joined LendingTree full-time in May 1998. Mr. Bennett served as
a Director of LendingTree from June 1996 until September 1999.

RICHARD STIEGLER is Chief Technology Officer. From 1993 until 1997, Mr.
Stiegler served as vice president of Advanced Technology at Greenwich Capital
Markets. From 1987 until 1993, Mr. Stiegler was a vice president at Morgan
Stanley. Mr. Stiegler has been with LendingTree since November 1997.

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<PAGE> 43

STEVE CAMPBELL is Chief Information Officer. From 1987 until November 1999,
Mr. Campbell worked in various capacities with American Management Systems Inc.,
an international business and information technology consulting company, most
recently as the director of Software Development for the Consumer Financial
Services Group. Mr. Campbell has been with LendingTree since November 1999.

ROBERT FLEMMA, JR. is General Counsel. From 1998 to 1999, Mr. Flemma was a
private investor. From 1986 to 1997, Mr. Flemma was an attorney at Whyte
Hirschboeck Dudek S.C., where he was a partner and the administrative head of
the firm's consumer finance law team. Mr. Flemma joined LendingTree in October
1999.

THOMAS REDDIN is Chief Marketing Officer. From 1995 to 1999, he was vice
president, consumer marketing for Coca-Cola USA. Mr. Reddin was responsible for
leading the strategy and all marketing activities for Coca-Cola. Prior to
joining the Coca-Cola Company, Mr. Reddin spent 13 years with Kraft General
Foods in various brand management capacities. Mr. Reddin joined LendingTree in
December 1999.

VIRGINIA REBATA is Senior Vice President of Human Resources. Ms. Rebata has
over twenty years of human resources management experience. From 1998 to 1999,
Ms. Rebata was senior vice president of human resources for Planet Hollywood
International, Inc., an international restaurant chain. From 1997 to 1998, she
served as senior vice president of human resources of Fortis, Inc., a financial
services company. Prior to 1997, Ms. Rebata spent 13 years as vice president of
human resources for the Marriott Management Services Division of Marriott
International, an international hotel chain. Ms. Rebata joined LendingTree in
December 1999.

JAMES CARTHAUS has been a Director since December 1998 and is Chairman of
LendingTree's compensation committee. Since 1989, Mr. Carthaus has been the
chairman of a New York investment bank, Scott-Macon, Ltd. He is a former officer
of Citibank, a vice president and senior lending officer of a predecessor of
FleetBoston Financial and an executive vice president and director of Shearson
Lehman Brothers where he headed its financial services division. Mr. Carthaus is
currently a director and chairman of the investment committee of The Franciscan
Sisters of The Poor Foundation, Inc.

RICHARD FIELD has been a Director since August 1997. From 1978 until 1997,
Mr. Field worked at The Bank of New York in various capacities, most recently as
senior executive vice president of retail banking and a member of its policy
committee. Prior to 1978, Mr. Field served in various marketing capacities at
Chase Manhattan Corporation and Citicorp. Mr. Field is also a former member of
the executive committee for MasterCard International's board of directors and
the former chairman of MasterCard's U.S. board of directors.

ROBERT KENNEDY has been a Director since December 1998. Mr. Kennedy has
been the director of special projects of ULLICO, Inc. since 1994. Mr. Kennedy is
currently a director of SuperShuttle International, Inc. and is a member of the
advisory board of Euclid Funds.

DANIEL LIEBER has been a Director since September 1999. Mr. Lieber is a
partner at Equifin Capital Management, an investment firm, where he has worked
since October 1998. Prior to joining Equifin, Mr. Lieber was a senior vice
president at AT&T Capital. From 1995 to 1997, Mr. Lieber was a senior vice
president with GE Capital Services, RFS Ventures Group. Between 1993 and 1995,
he was employed as a vice president in the Management Consulting Group at
Bankers Trust.

ADAM MIZEL has been a Director since September 1999. Mr. Mizel co-founded
Capital Z Partners, an investment firm, in 1998 where he is currently a partner.
From 1994 to 1998, Mr. Mizel was a Managing Director of Zurich Centre
Investments, Inc.

W. JAMES TOZER, JR. has been a Director since August 1997. Since 1990, Mr.
Tozer has been the managing director of Vectra Management Group, a real estate
firm. He is a former senior vice president of Citibank, senior executive vice
president of Shearson Hayden Stone, senior executive vice president of Marine
Midland Bank, and president of Prudential-Bache Securities. He is chairman of
the executive committee of Draper Bank and Trust and was co-founder of Vectra
Bank of Colorado.

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<PAGE> 44

ROBERT WILSON is Chairman Emeritus. Mr. Wilson joined LendingTree shortly
after its founding. Between April 1997 and September 1999 he served in various
capacities, including chief executive officer, chairman of the board, and chief
financial officer. Following an active role in business development and capital
raising, Mr. Wilson retired from LendingTree in September 1999 and continues to
serve as a consultant. Mr. Wilson was a general partner at Goldman Sachs for 17
years, including three years as a president and managing director of Goldman,
Sachs International. He is currently a director of the Phoenix Home Life Mutual
Insurance Co., WorkPlus.com, inc. and co-founder and chairman of QuoteShip.com,
Inc. Mr. Wilson also serves on the International Advisory Board of BlueStone
Capital Partners, LP.

Several of our directors were elected to the board as designees of specific
stockholders pursuant to a stockholders' agreement that terminates as of the
closing of this offering. Adam Mizel and Dan Lieber were designated by Capital Z
Partners, Robert Kennedy was designated by The Union Labor Life Insurance
Company, and W. James Tozer, Jr. was designated by Richard Field and himself.

CLASSES OF DIRECTORS

We will adopt a provision in our certificate of incorporation which will
divide our board of directors into three classes, denominated as Class I, Class
II and Class III. Members of each class hold office for staggered three-year
terms. At each annual meeting of the stockholders of LendingTree commencing in
2001, the successors to the directors whose term expires at that meeting will be
elected to serve until the third annual meeting after their election or until
their successor has been elected and qualified. Messrs. Field and Tozer will
serve as Class I directors whose terms expire at the 2001 annual meeting of
stockholders. Messrs. Carthaus, Lieber, and Kennedy will serve as Class II
directors whose terms expire at the 2002 annual meeting of stockholders. Messrs.
Lebda and Mizel will serve as Class III directors whose terms expire at the 2003
annual meeting of stockholders. With respect to each class, a director's term
will be subject to the election and qualification of their successors, or their
earlier death, resignation or removal. These provisions, when taken in
conjunction with other provisions of our amended and restated certificate of
incorporation authorizing the board of directors to fill vacant directorships,
may delay a stockholder from removing incumbent directors and simultaneously
gaining control of the board of directors by filling the vacancies with its own
nominees.

BOARD COMMITTEES

The board of directors has a compensation committee that reviews and
recommends to the board the compensation arrangements provided to the management
of LendingTree and administers the stock option plan. The members of the
compensation committee are James Carthaus and Adam Mizel.

The board of directors has an audit committee that reviews LendingTree's
annual audit and meets with LendingTree's independent auditors to review
LendingTree's internal controls and financial management practices. The members
of the audit committee are Richard Field, Daniel Lieber, and Robert Kennedy.

DIRECTOR COMPENSATION

We do not currently pay cash fees to our directors for attending board or
committee meetings, but we reimburse directors for their reasonable expenses
incurred in connection with attending these meetings. Each non-employee director
who holds less than one percent of the common stock as of the closing of this
offering will be granted an option under the Amended and Restated 1999 Stock
Incentive Plan to purchase 15,000 shares of common stock. Following this
offering, a new non-employee director will be granted an option to purchase
15,000 shares of common stock upon his or her first election or appointment to
the board of directors, if he or she holds less than five percent of the common
stock at the time of his or her first election or appointment. In addition,
immediately following each annual stockholders' meeting following this offering,
each non-employee director who holds less than five percent of the common stock
at that time will be granted an option to purchase 5,000 shares of common stock.
These grants are

41
<PAGE> 45

described more fully below, at "Executive Compensation -- Amended and Restated
1999 Stock Incentive Plan -- Outside Director Options."

Our directors are eligible to participate in a deferred compensation
program whereby a director may defer the income from director's fees, should we
begin to pay director's fees, and from the exercise of his or her stock options.
Under that plan, in the event of a change in control, we will be required to
fund a so-called "rabbi trust" sufficiently to pay the deferred compensation.

EXECUTIVE COMPENSATION

The following summary compensation table sets forth information concerning
compensation earned in 1999 by our Chief Executive Officer and the remaining
four most highly compensated executive officers as of the end of 1999 whose
salary and bonus for that year exceeded $100,000. Also included is information
with respect to two additional individuals who would have been named in the
Summary Compensation Table for 1999 except that they were not executive officers
as of the end of 1999.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
NUMBER OF
SECURITIES
ANNUAL COMPENSATION UNDERLYING
-------------------- OPTION/ ALL OTHER
SALARY BONUS SARS COMPENSATION
NAME AND PRINCIPAL POSITION ($) ($) (#) ($)
- --------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Douglas Lebda(1)........................... $154,000 $100,000 190,500 --
Chief Executive Officer
Keith Hall(2).............................. 79,000 75,000 114,300 --
Senior Vice President, Chief Financial
Officer and Treasurer
David Anderson(3).......................... 96,000 78,000 114,300 20,000
Senior Vice President of Operations
James Bennett, Jr.......................... 117,000 58,000 114,300 1,000
Senior Vice President of Strategy and
Corporate Development
Richard Stiegler(4)........................ 120,000 122,000(7) -- --
Chief Technology Officer
Mitchell York(5)........................... 101,000 25,000 -- 33,750(8)
Robert Wilson(6)........................... 88,000 -- -- 31,000(9)
</TABLE>

- ---------------
(1) On January 6, 2000, the compensation committee of the board of directors
approved an increase of Mr. Lebda's annual salary from $200,000 to $250,000.

(2) Mr. Hall joined LendingTree in June 1999.

(3) Mr. Anderson joined LendingTree in March 1999.

(4) On January 6, 2000, the compensation committee of the board of directors
approved an increase of Mr. Stiegler's annual salary from $120,000 to
$185,000.

(5) Mr. York terminated his employment with LendingTree effective as of October
1, 1999.

(6) Mr. Wilson resigned his positions with LendingTree effective as of September
20, 1999. He is currently providing consulting services to LendingTree for
annual compensation of $100,000 and reimbursable expenses.

(7) At our election up to one-half of Mr. Stiegler's bonus may be paid in common
stock equal in value to that portion of the bonus. $58,000 of Mr. Stiegler's
1999 bonus was paid in common stock.

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<PAGE> 46

(8) Amounts consist of amounts earned in 1999 pursuant to his agreement with us
described under "Employment/Consulting Arrangements -- Agreement with Mr.
York."

(9) Amounts consist of consulting fees earned in 1999 and reimbursable expenses
for 1999 pursuant to his agreement with us described under
"Employment/Consulting Arrangements -- Consulting Agreement with Mr.
Wilson."

The following table sets forth information concerning individual grants of
stock options made in 1999 to each of the officers and former officers named in
the Summary Compensation Table.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
--------------------------------------------------------- RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTION/SARS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- -------------- ---------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Douglas Lebda........ 190,500(2) 18.5% $6.06 09/02/09 $2,506,176 $4,580,335
Keith Hall........... 76,200(3) 11.1 4.72 06/14/09 1,089,653 1,888,786
38,100(4) 5.51 09/01/09 522,190 932,022
David Anderson....... 19,050(5) 11.1 4.72 03/15/09 268,020 458,961
95,250(6) 5.51 09/01/09 1,305,475 2,342,555
James Bennett, Jr.... 114,300(7) 11.1 5.51 09/01/09 1,566,570 2,811,066
Richard Stiegler..... --(8) -- -- -- -- --
Mitchell York........ 101,600(9) 11.1 4.72 (9) 787,344 950,173
12,700(10) 4.72 10/01/03 122,964 157,724
Robert Wilson........ 76,200(11) 7.4 5.20 08/10/07 927,989 1,488,740
</TABLE>

- ---------------
(1) All options, other than the grant to Mr. York relating to 12,700 shares of
common stock, were granted under LendingTree's 1998 Stock Option Plan,
which is described below, under "Stock Plans -- 1998 Stock Option Plan."
All options granted to Messrs. Lebda, Hall, Anderson, and Bennett have a
term of ten years and become vested in equal installments on each of the
first four anniversaries of the date of grant, except for the grant to Mr.
Anderson relating to 19,050 shares, which will become vested on each of the
first three anniversaries of the date of grant.

(2) 32,987 of the shares covered by the option will be eligible for incentive
stock option treatment, and the remainder of the shares will be subject to
the rules for non-qualified stock options. On January 6, 2000, LendingTree
granted an option to Mr. Lebda for 158,750 shares of common stock at an
exercise price of approximately $9.25 per share. This option expires
January 6, 2010. 13,753 of the shares covered by this option will be
eligible for incentive stock option treatment, and the remainder of the
shares will be subject to the rules for non-qualified stock options. In
February, LendingTree granted an option to Mr. Lebda for up to 100,000
shares of common stock at an exercise price equal to $12.00 per share. This
option was exercised on February 15, 2000 prior to the commencement of
trading of our common stock on the Nasdaq National Market.

(3) All of the shares covered by the option will be eligible for incentive
stock option treatment.

(4) 7,254 of the shares covered by the option will be eligible for incentive
stock option treatment, and the remainder of the shares will be subject to
the rules for non-qualified stock options. On January 6, 2000, LendingTree
granted an option to Mr. Hall for 38,100 shares of common stock at an
exercise price of approximately $9.25 per share. This option expires
January 6, 2010. 9,525 of the shares covered by this option will be
eligible for incentive stock option treatment, and the remainder of the
shares will be subject to the rules for non-qualified stock options.

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<PAGE> 47

(5) All of the shares covered by the option will be eligible for incentive
stock option treatment.

(6) 56,242 of the shares covered by the option will be eligible for incentive
stock option treatment, and the remainder of the shares will be subject to
the rules for non-qualified stock options. This option expires January 6,
2010.

(7) 56,242 of the shares covered by the option will be eligible for incentive
stock option treatment, and the remainder of the shares will be subject to
the rules for non-qualified stock options.

(8) On January 6, 2000, LendingTree granted an option to Mr. Stiegler for
38,100 shares of common stock at an exercise price of approximately $9.25
per share. This option expires January 6, 2010. 35,059 of the shares
covered by this option will be eligible for incentive stock option
treatment, and the remainder of the shares will be subject to the rules for
non-qualified stock options.

(9) This grant was made as consideration for the cancellation of an incentive
stock option relating to 101,600 shares of common stock. The new option's
exercise price per share is the same as the exercise price per share of the
cancelled option. The vesting schedule and term of this option is the same
as the vesting schedule of the cancelled option, as follows:

- as to the 38,100 shares which vested on September 9, 1999, the
expiration date is September 9, 2001;

- as to the 38,100 shares which vest on September 9, 2000, the expiration
date is September 9, 2002; and

- as to the 25,400 shares which vest on September 9, 2001, the expiration
date is September 9, 2003.

Other terms of this option are described under "Employment/Consulting
Arrangements -- Agreement with Mr. York."

(10) This grant was made as consideration for the cancellation of a previously
granted non-qualified stock option relating to 12,700 shares of common
stock and was not granted under the terms of any of LendingTree's option
plans. The new option's exercise price per share is the same as the
exercise price per share of the cancelled option and the option is fully
exercisable as of the date of grant.

(11) This grant was made as consideration for the cancellation of a previously
granted non-qualified stock option relating to 76,200 shares of common
stock. The new option's exercise price per share is the same as the
exercise price per share of the cancelled option and the option is fully
exercisable as of the date of grant.

The following table sets forth information concerning the exercise of stock
options during 1999 by the officers and former officers named in the Summary
Compensation Table.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES ACQUIRED VALUE FISCAL YEAR-END FISCAL YEAR-END
NAME ON EXERCISE (#) REALIZED ($) EXCERCISABLE/UNEXERCISABLE (#) EXCERCISABLE/UNEXERCISABLE ($)
- ---- --------------- ------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Douglas Lebda........ -- $ -- 123,093/241,300 $1,205,120/1,476,600
Keith Hall........... -- -- 0/114,300 --/801,600
David Anderson....... -- -- 0/114,300 --/756,600
James Bennett, Jr.... -- -- 19,056/133,350 138,600/880,200
Richard Stiegler..... -- -- 46,567/16,933 464,203/123,197
Mitchell York........ 25,400 120,000 50,800/63,500 369,600/462,000
Robert Wilson........ -- -- 80,853/0 567,571/--
</TABLE>

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<PAGE> 48

STOCK PLANS

1997 STOCK OPTION PLAN

On January 15, 1997, we adopted the 1997 Stock Option Plan of LendingTree,
Inc., effective as of the same date. The purpose of the plan is to promote our
long-term growth and profitability by providing key people with incentives to
improve stockholder value and to contribute to our growth and financial success
and enabling us to attract, retain, and reward the best available persons for
positions of substantial responsibility.

GENERAL. A maximum of 1,556,890 shares of common stock is reserved for
issuance under the plan, subject to equitable adjustment upon the occurrence of
any stock dividend or other distribution, stock split, merger, consolidation,
combination, share repurchase or exchange, or other similar corporate
transaction or event. If an option granted under the plan expires or is
terminated for any reason without being exercised, the shares of common stock
underlying the grant will again be available for purposes of the plan. It is
currently anticipated that no further grants will be made under this plan.

ADMINISTRATION. The plan is administered by the compensation committee of
the board of directors. The compensation committee has full authority to
determine the persons to whom options will be granted, the type of options to be
granted, the number of shares to be made subject to options, the exercise price
and other terms and conditions of the options, and to interpret the plan and
prescribe, amend and rescind rules and regulations relating to the plan. Members
of the compensation committee who are either eligible for awards of stock
options or have been given stock options may vote on any matters affecting the
administration of the plan or the grant of options pursuant to the plan, except
that no such member may act upon the granting of an option to himself or
herself.

GRANTS. Options granted under the plan may be either "incentive stock
options," as such term is defined in Section 422 of the Internal Revenue Code,
or non-qualified stock options.

ELIGIBILITY. Options may be granted under the plan to employees,
directors, including directors who are not employees, and consultants, as
selected by the compensation committee.

TERMS AND CONDITIONS OF OPTIONS. The exercise price of a stock option
granted under the plan was determined by the compensation committee at the time
the option was granted, and the exercise price of an incentive stock option is
not less than the fair market value per share of common stock on the date of
grant. Stock options are exercisable at the times and upon the conditions that
the compensation committee has determined, as reflected in the applicable option
agreement. The exercise period may not exceed 10 years from the date of grant.

Unless earlier terminated pursuant to the provisions of the plan or the
grant agreement, options will terminate in their entirety, whether vested in
whole or in part, three years after the date the grantee is no longer employed
by or providing services to us for any reason other than death, disability or
retirement. If a grantee's employment or service terminates for cause, all
options held by the grantee will terminate upon termination. In the event that
the employment or service of a grantee terminates as a result of death,
disability or retirement, all options that are not exercisable at the time of
termination will terminate and all options that are exercisable at the time of
termination may be exercised for a period of three years immediately following
termination, but in no case after the options expire in accordance with their
terms.

In the event of a proposed change in control, the compensation committee
may:

- accelerate or change the exercise dates of any option;

- make arrangements with grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any option;
and

- in any case where equity securities other than our common stock are
proposed to be delivered in exchange for or with respect to our common
stock, make arrangements providing that any option may become one or more
options with respect to such other securities.

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In the event a change in control occurs, the vesting of any option that is
time-based only will be accelerated so that the unvested time-based portion of
the option will become 50% vested and exercisable.

In the event we dissolve or liquidate, other than pursuant to a plan of
merger or reorganization, then notwithstanding any restrictions on exercise set
forth in the plan or any option agreement:

- grantees will have the right to exercise their options at any time up to
10 days prior to the effective date of the liquidation or dissolution,
after which time all options will expire; and

- the compensation committee may make arrangements with the grantees for
the payment to them of appropriate consideration for the cancellation and
surrender of any option that is canceled or surrendered at any time up to
10 days prior to the effective date of the liquidation or dissolution.

1998 STOCK OPTION PLAN

On February 3, 1998, we adopted the 1998 Stock Option Plan of LendingTree,
Inc., effective as of the same date. The purpose of the plan is to promote our
long-term growth and profitability by providing key people with incentives to
improve stockholder value and to contribute to our growth and financial success
and enabling us to attract, retain and reward the best available persons for
positions of substantial responsibility.

GENERAL. A maximum of 1,187,450 shares of common stock is reserved for
issuance under the plan, subject to equitable adjustment upon the occurrence of
any stock dividend or other distribution, stock split, merger, consolidation,
combination, share repurchase or exchange, or other similar corporate
transaction or event. If an option granted under the plan expires or is
terminated for any reason without being exercised, the shares of common stock
underlying such grant will again be available for purposes of the plan. It is
currently anticipated that no further grants will be made under this plan.

ADMINISTRATION. The plan is administered by the compensation committee of
the board of directors. The compensation committee has full authority, subject
to the provisions of the plan, among other things, to determine the persons to
whom options will be granted, the type of options to be granted, the number of
shares to be made subject to options, the exercise price and other terms and
conditions of the options, and to interpret the plan and prescribe, amend and
rescind rules and regulations relating to the plan. Members of the compensation
committee who are either eligible for awards of stock options or have been given
stock options may vote on any matters affecting the administration of the plan
or the grant of options pursuant to the plan, except that no such member may act
upon the granting of an option to himself or herself.

GRANTS. Options granted under the plan may be either "incentive stock
options," as such term is defined in Section 422 of the Internal Revenue Code,
or non-qualified stock options.

ELIGIBILITY. Options may be granted under the plan to employees,
directors, including directors who are not employees, and consultants, as
selected by the compensation committee.

TERMS AND CONDITIONS OF OPTIONS. The exercise price of a stock option
granted under the plan was determined by the compensation committee at the time
the option was granted, and the exercise price of an incentive stock option was
not less than the fair market value per share of common stock on the date of
grant. Stock options are exercisable at the times and upon the conditions that
the compensation committee has determined, as reflected in the applicable option
agreement. The exercise period may not exceed 10 years from the date of grant.

Unless earlier terminated pursuant to the provisions of the plan or the
grant agreement, options will terminate in their entirety, whether vested in
whole or in part, three years after the date the grantee is no longer employed
by or providing services to us for any reason other than death, disability or
retirement. If a grantee's employment or service terminates for cause, all
options held by the grantee will terminate upon termination. In the event that
the employment or service of a grantee terminates as a result of death,
disability or retirement all options that are not exercisable at the time of
termination will terminate and all

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options that are exercisable at the time of termination may be exercised for a
period of three years immediately following termination but in no case after the
options expire in accordance with their terms.

In the event of a proposed change in control, the compensation committee
may:

- accelerate or change the exercise dates of any option;

- make arrangements with grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any option;
and

In the event we dissolve or liquidate, other than pursuant to a plan of
merger or reorganization, then notwithstanding any restrictions on exercise set
forth in the plan or any option agreement:

- grantees will have the right to exercise their options at any time up to
10 days prior to the effective date of such liquidation and dissolution,
after which time all options will expire; and

AMENDED AND RESTATED 1999 STOCK INCENTIVE PLAN

On September 21, 1999 we adopted the 1999 Stock Option Plan of LendingTree,
Inc., effective as of the same date. On January 21, 2000, we amended and
restated that plan, which was renamed the Amended and Restated 1999 Stock
Incentive Plan of LendingTree, Inc., effective as of the same date. The purpose
of the plan is to promote our long-term growth and profitability by providing
key people with incentives to improve stockholder value and to contribute to our
growth and financial success and by enabling us to attract, retain and reward
the best available persons for positions of substantial responsibility.

GENERAL. A maximum of 2,286,000 shares of common stock has been reserved
for issuance under the plan, subject to equitable adjustment upon the occurrence
of any stock dividend or other distribution, stock split, merger, consolidation,
combination, share repurchase or exchange, or other similar corporate
transaction or event. If an award granted under the plan expires or is
terminated for any reason, the shares of common stock underlying the award will
again be available for purposes of the plan.

TYPES OF AWARDS. The following awards may be granted under the plan:

- stock options, including incentive stock options and nonqualified stock
options;

- restricted stock;

- phantom stock;

- stock bonuses; and

- other stock-based awards.

ADMINISTRATION. The plan is administered by the compensation committee of
the board of directors. The compensation committee has full authority, subject
to the provisions of the plan, among other things, to determine the persons to
whom awards will be granted, to determine the type of award to be granted, the
number of shares to be made subject to awards, the exercise price and other
terms and conditions of the awards, and to interpret the plan and prescribe,
amend and rescind rules and regulations relating to the plan. The board of
directors or the compensation committee may delegate to any of our senior
management the authority to make grants of awards to our employees who are not
executive officers or directors of LendingTree.
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ELIGIBILITY. Awards may be granted under the plan to employees, directors,
including directors who are not employees, and consultants of LendingTree or any
of our affiliates, as selected by the committee.

TERMS AND CONDITIONS OF OPTIONS. Stock options may be either "incentive
stock options," as that term is defined in Section 422 of the Internal Revenue
Code, or nonqualified stock options. The exercise price of a stock option
granted under the plan is determined by the compensation committee at the time
the option is granted, but the exercise price of an incentive stock option may
not be less than the fair market value per share of common stock on the date of
grant. Stock options are exercisable at the times and upon the conditions that
the compensation committee may determine, as reflected in the applicable option
agreement. The exercise period will be determined by the compensation committee,
but in the case of an incentive stock option, generally, the exercise period may
not exceed 10 years from the date of grant.

The option exercise price must be paid in full at the time of exercise, and
may be payable by one or more of the following methods:

- in cash or cash equivalents;

- the surrender of previously acquired shares of common stock that have
been held by the participant for at least six months prior to the date of
surrender;

- if so determined by the compensation committee as of the grant date,
authorization for LendingTree to withhold a number of shares otherwise
payable pursuant to the exercise of an option; or

- through a broker cashless exercise procedure approved by LendingTree.

The compensation committee may, in its sole discretion, authorize
LendingTree to make or guarantee loans to a participant to assist the
participant in exercising options.

The compensation committee may provide at the time of grant of an option
that the participant may elect to exercise all or any part of the option before
it becomes vested and exercisable. If the participant elects to exercise all or
part of a non-vested option, the participant will be issued shares of restricted
stock which will become vested in accordance with the vesting schedule set forth
in the original option agreement.

OUTSIDE DIRECTOR OPTIONS. Non-employee directors who, through the day of
the closing of this offering, own less than one percent of the voting power of
LendingTree or who, after the closing of this offering, own less than five
percent of the common stock, or "outside directors," will be eligible for
automatic grants of non-qualified options under the plan. Each outside director
who holds less than five percent of the common stock as of the closing of this
offering will be granted an option to purchase 15,000 shares of common stock.
Following this offering, each outside director will be granted upon his or her
first election or appointment to the board an option to purchase 15,000 shares
of common stock. In addition, immediately following each annual stockholders
meeting following this offering, each outside director will be granted an option
to purchase 5,000 shares of common stock. Each option granted under this program
to an outside director will have an exercise price equal to the fair market
value of the common stock on the date of grant and will become exercisable in
full on the second anniversary of the date of grant of the option, provided that
the director is still serving as a director as of the date of vesting of the
option. Each option granted to an outside director will expire on the tenth
anniversary of the date of grant. The other terms of the options granted to
outside directors will be consistent with the terms of options granted to
employees.

RESTRICTED STOCK. The plan provides for awards of common stock that are
subject to restrictions on transferability and other restrictions imposed by the
compensation committee. Except to the extent restricted under the award
agreement relating to the restricted stock, a participant granted restricted
stock will have all of the rights of a stockholder.

PHANTOM STOCK. The plan provides for awards of phantom stock, which upon
vesting, entitles the participant granted such an award to receive an amount in
cash equal to the fair market value of the number of shares subject to such
award. Vesting of all or a portion of a phantom stock award may be subject to
various conditions established by the compensation committee.

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STOCK BONUSES; OTHER AWARDS. The plan provides that awards of shares of
common stock may be made to employees at the discretion of the compensation
committee. In addition, other awards valued in whole or in part by reference to,
or otherwise based on, common stock may be granted either alone or in addition
to other awards under the plan, in the compensation committee's discretion.

CHANGE IN CONTROL. In the event of a change in control, the time-based
portion of an outstanding award that is not vested and exercisable at the time
of the change in control will become 50% vested and exercisable. In addition to
the automatic acceleration, the compensation committee will have the discretion
to accelerate the vesting or exercisability of the remainder of any award
granted under the plan.

TERMINATION OF EMPLOYMENT. Unless otherwise determined by the compensation
committee, the unvested portion of awards granted under the plan will
immediately be cancelled upon termination of a participant's employment or
service with LendingTree. If a participant's employment or service terminates
other than because of death, disability or retirement, all options that are
exercisable at the time of termination may be exercised by the participant for
no longer than 90 days after the date of termination. If a participant's
employment or service terminates for cause, all options held by the participant
will immediately terminate. If a participant's employment or service terminates
as a result of death, all options that are exercisable at the time of death may
be exercised by the participant's heirs or distributees for one year, provided
that options granted to non-employee directors may provide for a post-death
exercise period of up to three years. If a participant's employment or service
terminates because of disability or retirement, all options that are exercisable
at the time of termination may be exercised for a period of one year immediately
following termination. In no case may an option be exercised after it expires in
accordance with its terms.

AMENDMENT, TERMINATION OF PLAN. The board of directors may modify or
terminate the plan or any portion of the plan at any time, except that an
amendment that requires stockholder approval in order for the plan to continue
to comply with any law, regulation or stock exchange requirement will not be
effective unless approved by our stockholders. No awards may be granted under
the plan after the day immediately preceding the tenth anniversary of its
adoption date.

Since the amount of benefits to be received by any plan participant who is
an employee of Lending Tree or any of its affiliates is determined by the
compensation committee, the amount of future benefits to be allocated to any
employee or group of employees under the plan in any particular year is not
determinable.

Mr. Carthaus is currently the only director eligible to be granted options
under the plan's outside director program for automatic grants of options. It is
anticipated that Mr. Carthaus will be granted options to purchase an aggregate
of 38,100 shares of common stock under this program during our next fiscal year.

EMPLOYEE STOCK PURCHASE PLAN

In January 2000, we adopted, and our stockholders approved, the
LendingTree, Inc. Employee Stock Purchase Plan. The employee stock purchase plan
is designed to encourage our employees to purchase shares of our common stock.

GENERAL. The employee stock purchase plan is intended to comply with the
requirements of Section 423 of the Internal Revenue Code, and to assure the
participants of the tax advantages provided thereby. The employee stock purchase
plan will be administered by a committee established by the board of directors
comprising solely of non-employee directors who are not eligible to participate
in the employee stock purchase plan. The committee may make such rules and
regulations and establish such procedures for the administration of the employee
stock purchase plan as it deems appropriate.

SHARES AVAILABLE. The committee has authorized for issuance under the plan
a total of 444,500 shares of common stock, plus an additional number of shares
to be added on the first day of our fiscal year beginning in 2001 equal to:

- 508,000 shares, or

- a lesser amount determined by the committee.

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In each of the above cases, the number of shares is subject to adjustment
by the committee in the event of a recapitalization, stock split, stock dividend
or similar corporate transaction.

ELIGIBILITY. Subject to procedural requirements, employees of LendingTree
who have at least six months of service and work more than 20 hours per week
will be eligible to participate in the employee stock purchase plan, except that
employees who own five percent or more of the common stock of LendingTree or any
subsidiary of LendingTree will not be eligible to participate. All of our
full-time employees will be eligible to participate in the first offering period
under the plan.

STOCK PURCHASES. Under the employee stock purchase plan, each eligible
employee will be permitted to purchase shares of the common stock through
regular payroll deductions or cash payments in an amount equal to 1% to 20% of
the employee's compensation for each payroll period. The fair market value of
the shares of common stock which may be purchased by any employee under this or
any other LendingTree plan that is intended to comply with Section 423 of the
Internal Revenue Code during any calendar year may not exceed $25,000.

The employee stock purchase plan provides for a series of consecutive,
overlapping offering periods that generally will be 24 months long. Successive
six-month purchase periods will run during each offering period. Offering
periods generally will commence on January 1 and July 1 of each year during the
term of the plan, and purchase periods will run from January 1 to June 30 and
from July 1 to December 31; provided, that the first offering period will begin
on the first day of regular trading and end on the last trading day on or before
December 31, 2001.

During each offering period, participating employees will be able to
purchase shares of common stock at a purchase price equal to 85% of the fair
market value of the common stock at either the beginning of each offering period
or the end of each purchase period within the offering period, whichever price
is lower.

To the extent permitted by applicable laws, regulations, or stock exchange
rules, if the fair market value of the shares at the end of any purchase period
is lower than the fair market value of the shares on the date the related
offering period began, then all participants in that offering period will be
automatically withdrawn from the offering period immediately after the exercise
of their option on the date the purchase period ends. The participants will
automatically be re-enrolled in the immediately following offering period when
that offering period begins.

The options granted to a participant under the employee stock purchase plan
are not transferable other than by will or the laws of descent and distribution,
and are exercisable, during the participant's lifetime, only by the participant.

AMENDMENT, TERMINATION OF PLAN. The employee stock purchase plan and all
offering periods under the plan will automatically terminate on the tenth
anniversary of the first offering period under the plan. The board of directors
may from time to time amend or terminate the employee stock purchase plan;
provided, that no such amendment or termination may adversely affect the rights
of any participant without the consent of such participant and, to the extent
required by Section 423 of the Internal Revenue Code or any other law,
regulation or stock exchange rule, no such amendment will be effective without
the approval of stockholders entitled to vote thereon. Additionally, the
committee may make such amendments as it deems necessary to comply with
applicable laws, rules and regulations.

Since the amount of benefits to be received by each participant in the
employee stock purchase plan is determined by his or her elections, the amount
of future benefits to be allocated to any individual or group of individuals
under the plan in any particular year is not determinable.

MANAGEMENT INCENTIVE PLAN

On January 21, 2000, we adopted the LendingTree, Inc. Management Incentive
Plan. The purposes of the management incentive plan are to reinforce corporate
business goals and to promote the achievement of annual and long-range financial
business and other objectives by providing for the payment of cash bonuses to
our officers and other key employees. The plan will be administered by the
compensation committee of our board of directors. The compensation committee
will have the authority to determine

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who will participate in the plan and to determine the terms and conditions of
incentive awards granted under the plan. The payment of bonuses under the
management incentive plan will be based on the achievement during a performance
period determined by the compensation committee of certain performance goals set
by the compensation committee, which may include any or all or none of the
following:

- income, profits or earnings per share;

- increase in the volume of qualification forms submitted;

- increase in the number of loans closed;

- growth of revenue;

- reductions in expenses; or

- increases in the market price of the common stock or total return to our
stockholders.

Minimum bonuses will be based on achievement of 80% of the performance
goals and maximum bonuses will be based on achievement of 150% of the
performance goals. A bonus will be paid only if the participant is employed by
LendingTree or its affiliates on the day the bonus is to be paid. Under the
plan, no payment may be made to one of our executive officers that exceeds 150%
of the officer's annual base salary. In the event of a change in control, the
performance period in effect at the time of the change in control will be deemed
to have been completed, the maximum targets will be deemed to have been
attained, and a pro rata portion of the award will be paid in cash to the
participant.

EMPLOYMENT/CONSULTING ARRANGEMENTS

EMPLOYMENT AGREEMENT WITH MR. LEBDA. We have an employment agreement with
Douglas Lebda having a term commencing on September 2, 1999 and expiring on
September 2, 2003, unless earlier terminated as provided under the agreement. In
addition to providing for a current annual salary of $250,000 and benefits, Mr.
Lebda's agreement provides for his participation in our bonus programs, with a
maximum bonus opportunity equal to 50% of his salary, and for the grant of an
option to purchase 190,500 shares of common stock; this grant will be referred
to later as the "new option." In the event we terminate Mr. Lebda's employment
either without cause or for bad performance, or if Mr. Lebda terminates his
employment for good reason, Mr. Lebda is entitled to receive continuation of his
base salary until the first anniversary of the effective date of termination,
provided that the severance payments are to be reduced to the extent he receives
any earned compensation from any subsequent employment during the one-year
severance period. In the event Mr. Lebda's employment is terminated as a result
of any merger, acquisition, share exchange or other business combination, Mr.
Lebda is entitled to receive a lump sum payment in an amount equal to 12 months
of his then current base salary.

With respect to his stock options, if we terminate Mr. Lebda's employment
without cause, or Mr. Lebda terminates his employment for good reason or if his
employment is terminated as a result of a merger, acquisition, share exchange or
other business combination, all of Mr. Lebda's stock options will continue to
vest in accordance with their vesting schedules in effect prior to termination
and he will have a right to exercise the options for a period of 30 days
following the final vesting date. In the event we terminate Mr. Lebda's
employment for bad performance, his stock options, excluding the new option,
will vest in accordance with the schedule set forth in the agreement evidencing
the new option and he will have a right to exercise the options for a period of
30 days following the final vesting date. Mr. Lebda will be subject to a
non-compete and non-solicitation covenant for one year following termination of
his employment and will be required to give us a general release in order to
receive his severance payments.

EMPLOYMENT AGREEMENT WITH MR. REDDIN. We have an employment agreement with
Thomas Reddin, our Chief Marketing Officer, whose employment with us began on
December 10, 1999. Under his agreement, Mr. Reddin is entitled to an annual
salary of $200,000, a signing bonus of $65,000, and employee benefits, including
reasonable relocation expenses. During his first year of employment, we are
obligated to pay to Mr. Reddin a bonus equal to $70,000, payable in four
quarterly payments beginning March 31, 2000. During subsequent years, bonuses
will be incentive-based and will range from zero to 50%

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of his salary. Mr. Reddin was granted on December 10, 1999 an option under the
1999 Stock Option Plan, which is now the Amended and Restated 1999 Stock
Incentive Plan, to purchase 285,750 shares of common stock at an exercise price
of approximately $5.51 per share. The option is intended to be an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code and
will vest ratably on each of the first four anniversaries of his date of
employment. If Mr. Reddin's employment is terminated other than for cause, we
will be obligated to continue to pay him his salary and his first year's bonus
for one year or until he takes another full-time job, in which case, if his
subsequent employer is paying him less, we are obligated to pay the difference,
if any, between the salary and bonus paid to Mr. Reddin from the subsequent
employer and the salary he would have received from us. In addition, if his
employment is terminated other than for cause after his first year of
employment, Mr. Reddin will be entitled to additional vesting on a pro rata
portion of stock options previously granted to him based on the number of months
worked in the year of termination before his next anniversary. The stock options
that are or become exercisable at termination will remain exercisable for 90
days following termination. Mr. Reddin is also subject to covenants with respect
to LendingTree's confidential information and trade secrets during his
employment and for five years thereafter. If Mr. Reddin completes one year of
employment with us, he will be subject to non-competition and non-solicitation
covenants during his employment and for one year thereafter.

AGREEMENT WITH MR. YORK. Simultaneously with his resignation from all
positions, directorships and titles relating to LendingTree, we entered into an
agreement with Mitchell York with a one-year term commencing on October 1, 1999.
Under the terms of the agreement, LendingTree agrees to pay Mr. York $11,250 per
month for 12 months. Mr. York has given us a general release in order to receive
these monthly payments, which will be reduced on a dollar-for-dollar basis to
the extent that Mr. York receives compensation from any subsequent employment
before October 1, 2000. In addition, LendingTree agrees to pay Mr. York prorated
bonus amounts. Mr. York has agreed to cooperate with all of our financing
efforts and with any existing or future litigation against us. Further, Mr. York
is subject to a non-compete and non-solicitation covenant until October 1, 2000
and is obligated to refrain from making any disparaging statements with respect
to LendingTree or our officers, directors or employees. In connection with
entering into the agreement, we entered into two new stock option agreements
with Mr. York which cancel two previous stock option agreements, one of which
was a non-qualified stock option relating to 12,700 shares of common stock. The
other agreement was an incentive stock option, within the meaning of Section 422
of the Internal Revenue Code, relating to 101,600 shares of common stock. The
new option agreements are substantially similar to the old agreements, except
that the incentive stock option was replaced with a non-qualified stock option.

In the event that, within three years after the effective date of Mr.
York's agreement, a court finds that Mr. York has materially violated any of the
provisions of his non-compete, non-solicitation, and non-disparagement covenants
or that he has failed to cooperate with our financing efforts or failed to
assist us with any litigation matter, we will be relieved of all of our
obligations under the agreement and Mr. York will be required to repay all
payments and other benefits paid to him under his agreement. In the event that
the non-compete, non-solicitation and non-disparagement provisions of Mr. York's
agreement are found by a court to be unenforceable with respect to Mr. York, the
new option agreement relating to 101,600 shares of common stock will become null
and void, and any of Mr. York's vested and unvested options will be immediately
cancelled. Mr. York will also be required to return all shares of common stock
which he received pursuant to the exercise of the new option relating to 101,600
shares. We will then be required to return to Mr. York all sums paid to us in
connection with the exercise of the option.

CONSULTING AGREEMENT WITH MR. WILSON. In connection with his resignation
from all directorships and positions with us and in settlement of his then
current employment agreement, we entered into a consulting agreement with Robert
Wilson effective September 21, 1999 and expiring on October 12, 2002. Under the
terms of the agreement, LendingTree has agreed to pay Mr. Wilson a quarterly fee
in the amount of $25,000, prorated for a shorter period, as consideration for
his services as a consultant, which will not exceed the equivalent of 10 days'
full-time employment per year. Mr. Wilson also receives an annual allowance for
reimbursement of medical expenses and a reimbursement for any legal expenses

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relating to LendingTree. Concurrently with entering into the agreement, we
purchased 539,750 shares of common stock from Mr. Wilson at approximately $6.30
per share and entered into a new option agreement with Mr. Wilson. The new
option agreement cancels Mr. Wilson's old option and grants Mr. Wilson a
non-qualified stock option to purchase 76,200 shares of common stock. The new
stock option is immediately exercisable in full at the same exercise price per
share, as the exercise price per share of the old stock option. Mr. Wilson has
agreed to cooperate with all of our financing efforts and with any existing or
future litigation against us. Further, Mr. Wilson is subject to a non-compete
and non-solicitation covenant until September 21, 2000 and is obligated to
refrain from filing or participating or assisting in any lawsuit, arbitration or
other legal action asserting any claims on his behalf against us, our directors,
officers or employees other than a claim for breach of his consulting agreement.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation committee of the board of directors consists of James
Carthaus and Adam Mizel. No interlocking relationship exists between any member
of our board of directors or our compensation committee and any members of the
board of directors or compensation committee of any other company, and no such
interlocking relationship has existed in the past, except that Mr. Mizel is a
partner at Capital Z Partners and participates in compensation decisions for
Capital Z Partners.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PRIVATE EQUITY FINANCINGS

PHOENIX STRATEGIC CAPITAL. In March 1998, we sold 564,444 shares of our
common stock at a price per share of approximately $3.54 to Phoenix Strategic
Capital for $2.0 million. Phoenix also provided us with a $1,000,000 line of
credit, $500,000 of which was utilized in November 1998 and repaid in December
1998. The line of credit provided by Phoenix expired on December 30, 1998. As
part of the line of credit transaction, Phoenix received a warrant to purchase
9,525 shares of our common stock with an exercise price of approximately $4.72
per share. The value of the warrant as determined by the difference between the
offering price and the exercise price is approximately $69,000. In September
1999, we repurchased 282,222 shares of our common stock at a price per share of
approximately $6.30 from Phoenix Strategic Capital for $1,777,776. Upon the
closing of this offering, Phoenix Strategic Capital will own approximately 1.7%
of our issued and outstanding common stock.

THE UNION LABOR LIFE INSURANCE COMPANY. In December 1998, we sold
convertible preferred stock and a warrant to purchase 260,000 additional shares
of Series A convertible preferred stock at an exercise price of $6.00 per share
to The Union Labor Life Insurance Company, on behalf of its Separate Account P
(ULSAP) for $5.0 million. In March 1999, we sold an additional 500,000 shares of
Series A convertible preferred stock and warrants to purchase 40,000 shares of
Series B convertible preferred stock at an exercise price of $9.00 per share to
ULSAP for $3.0 million. In September 1999, all of the warrants held by ULSAP
were exchanged for a warrant to purchase 381,000 shares of our common stock.
This warrant has an exercise price of $4.72 per share and expires in September
2005. The value of this warrant as determined by the difference between the
offering price and the exercise price is approximately $2,774,000. Upon the
closing of this offering and assuming the exercise of the warrant to purchase
381,000 shares of our common stock, ULSAP will own approximately 12.6% of our
issued and outstanding common stock.

CAPITAL Z, GE CAPITAL, GOLDMAN SACHS AND PRICELINE.COM. In September 1999,
we sold 6,024,096 shares of our Series D convertible preferred stock at a price
per share of $8.30 to an affiliate of Capital Z, The Goldman Sachs Group, Inc.,
General Electric Capital Assurance Company, GE Capital Residential Connections
Corporation, priceline.com Incorporated and Marsh & McLennan Risk Capital Corp.
for aggregate consideration in the amount of $50 million. Capital Z, GE Capital,
The Goldman Sachs Group, Inc. and priceline.com, either directly or through an
affiliate, received 3,012,048, 1,204,819, 1,084,337 and 240,964 shares of Series
D convertible preferred stock, respectively. Upon the closing of this offering,
Capital Z, GE Capital, Goldman Sachs and priceline.com will own approximately
22.9%, 9.1%, 8.2% and 1.8%, respectively, of our issued and outstanding common
stock. In addition, we have a commercial relationship with priceline.com which
is summarized below.

INVESTMENTS BY DIRECTORS

In July 1998, we sold 42,333 shares of our common stock at a price of
approximately $4.72 per share to H. Eugene Lockhart for $200,000. Mr. Lockhart
served as a member of our board of directors until September 1999.

In November 1998, we sold 12,700 shares of our common stock at a price of
approximately $4.72 per share to James Carthaus for $60,000. Mr. Carthaus is a
member of our board of directors.

In May 1999, we sold 333,334 shares of Series A convertible preferred stock
at a price of $6.00 per share and warrants to purchase 33,020 shares of our
common stock for $2.0 million to W. James Tozer, Jr. and Richard Field, each of
whom serves as a member of our board of directors. These warrants have an
exercise price of approximately $7.87 per share and expire in May 2004. The
value of the warrants as determined by the difference between the offering price
and the exercise price is approximately $136,000.

In July 1999, we issued an 8% $500,000 principal amount convertible
promissory note and a warrant to purchase 15,240 shares of our common stock at
an exercise price of approximately $7.87 per share to Garrity Investment LLC,
which is controlled by a family member of Douglas Lebda, our Chief Executive
Officer. This financing was part of our issuance of 8% convertible promissory
notes in an aggregate

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principal amount of $1,750,000 and warrants to purchase 53,340 shares of our
common stock to five investors. In September 1999, all of the promissory notes
along with accrued interest were exchanged for 214,076 shares of our Series D
convertible preferred stock, of which Garrity Investments received 61,165
shares. The value of the warrant held by Garrity Investment LLC as determined by
the difference between the offering price and the exercise price is
approximately $63,000.

In September 1999, Robert G. Wilson, who served as our Chairman until
September 1999, received $3,400,000 upon our repurchase of 539,750 shares of our
common stock at a price per share of approximately $6.30. Donald Colby, who
served as a member of our board of directors until September 1999, received
$800,000 upon our repurchase of 127,000 shares of our common stock at a price
per share of approximately $6.30. Also in September 1999, we repurchased 282,222
shares of our common stock at a price per share of approximately $6.30 from
Phoenix Strategic Capital for $1,777,776. Richard Shaw was designated as a
member of our board of directors by Phoenix in March 1998 and served until
September 1999.

In January 2000, we granted options to Douglas Lebda to purchase up to
158,750 shares of our common stock at an exercise price of $9.25 per share which
vest over a four year period. In addition, we also granted Mr. Lebda an option
to purchase up to 100,000 shares of our common stock at an exercise price equal
to the initial public offering price. This option was exercised at $12.00 per
share prior to the commencement of trading of our common stock on the Nasdaq
National Market. In connection with the exercise of this option, Mr. Lebda
issued to us a full recourse promissory note for the full exercise price of the
option. The note is secured by all of the shares purchased pursuant to the
option. In addition, to the extent that Mr. Lebda sells, transfers or encumbers
any shares of our common stock which he presently holds and the then current
value of the pledged shares is insufficient under the terms of the note, the
proceeds from such sale, transfer or encumbrance will be remitted to us and the
principal balance of the note will be reduced by such amount. Mr. Lebda
presently holds 943,852 shares of our common stock. The note will bear interest
at the average monthly "applicable federal rate" as defined in Section 1274(d)
of the Internal Revenue Code compounded annually. The applicable federal rate,
which is revised monthly, is 6.56% for the month of February 2000. Interest on
the unpaid principal balance will be due on January 31 of each year, in arrears,
and the full principal balance will be due in two equal installments on January
31, 2004 and 2005, respectively.

On February 9, 2000 Douglas Lebda, Keith Hall and James Bennett, Jr.
exercised options, which were granted prior to December 31, 1999, to purchase
49,828, 8,700, and 8,700, shares of our common stock, at weighted average
exercise prices of $5.00, $7.00, and $7.00 per share, respectively. The value of
the options exercised by Messrs. Lebda, Hall and Bennet on the exercise date
were approximately $299,000, $35,000 and $35,000, respectively, assuming the
fair value of our stock on February 9, 2000 was equal to $11.00, the mid-point
of the estimated offering price range on that date. In connection with these
option exercises and the payment of related income taxes, we agreed to lend
Messrs. Lebda, Hall and Bennet $500,000, $100,000 and $100,000, respectively, as
permitted under our benefit plans. Each of these loans is evidenced by a full
recourse promissory note which bears interest at the average monthly applicable
federal rate, compounded annually, and is secured by all of the shares purchased
under the respective options. Interest on the unpaid principal balance of each
note is payable on February 9 of each year, in arrears, and the full principal
balance is due in three equal installments on February 9, 2002, 2003 and 2004,
respectively.

RELATIONSHIPS BETWEEN DIRECTORS AND STOCKHOLDERS

Robert Kennedy, a member of our board of directors, is the director of
special projects of ULLICO, Inc.

Daniel Lieber, who serves as a member of our board of directors, is a
partner of Equifin Capital Management, an entity associated with Capital Z.

Adam Mizel, who serves as a member of our board of directors, is a partner
of Capital Z.

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OTHER RELATIONSHIPS

PRICELINE.COM

In August 1998, we entered into an agreement with priceline.com in which
priceline.com granted to us a license to operate an area of the priceline.com
website through which we offered our business services and the non-exclusive
license to utilize priceline.com intellectual property. In return, we granted
priceline.com the non-exclusive license to utilize our intellectual property. We
also agreed to pay priceline.com a marketing fee equal to a percentage of the
monthly net revenue received by us in operating the loan center on their
website. In February 2000, we agreed with priceline.com to extend the term of
this agreement for at least six months and to modify some of the initial terms.
During 1999, we derived net revenue of $0.7 million from this arrangement and we
paid priceline.com $0.5 million. To enhance the variety of products available
through the priceline.com home finance service, we subsequently modified our
service to allow for multiple providers.

CNBC.COM

In January 2000, we entered into an agreement with CNBC.com, an interactive
media company. CNBC.com agreed to cooperate with us exclusively in developing
and operating a series of loan marketplace websites using our [i]close software.
These websites will appear to the consumer to be part of the CNBC.com website,
and will incorporate our loan marketplace content and transaction capability.
The agreement also includes joint marketing and promotional arrangements, and
contains provisions requiring us to conduct television advertising on the CNBC
cable network channel. In return, we granted CNBC.com the non-exclusive license
to our intellectual property and we agreed to pay CNBC.com a variable monthly
fee based on the number of completed Qualification Forms. In connection with
these arrangements, we are committed to pay CNBC.com a minimum of $4.9 million
during each year of the two-year term of the agreement. In addition, on February
2, 2000 we granted CNBC.com warrants to purchase up to 190,500 shares of our
common stock, or approximately 1.1% of our common stock, at an exercise price of
approximately $7.87 per share. Warrants to purchase 95,250 of these shares are
currently exercisable, while the balance will become exercisable on January 14,
2001, assuming the agreement has not been previously terminated. CNBC.com is an
affiliate of GE Capital, which will own approximately 9.1% of our common stock
upon the consummation of this offering.

LOANTRADER.COM

On February 3, 2000, we consummated an equity investment in LoanTrader.com,
a wholesale lending service. In connection with this investment, we received
1,984,127 shares of LoanTrader's series A preferred stock for $2.5 million, or
approximately $0.79 per share. These shares represent approximately 8.5% of
LoanTrader's outstanding equity. We also received customary registration rights
and the right to designate a member of LoanTrader's board of directors.
Affiliates of Capital Z and Goldman Sachs also participated in this transaction
on substantially the same terms as LendingTree, and purchased 9,325,397 shares
and 1,984,127 shares of LoanTrader's series A preferred stock, respectively.
Capital Z and Goldman Sachs will be the beneficial owners of approximately 22.9%
and 8.2%, respectively, or our outstanding common stock upon completion of this
offering. Daniel Lieber and Adam Mizel, each a member of our board of directors,
are affiliated with Capital Z.

PRUDENTIAL SECURITIES INCORPORATED

Prudential Securities Incorporated, an underwriter, acted as placement
agent in connection with a private placement of our Series D convertible
preferred stock in September 1999. Prudential Securities Incorporated received a
warrant to purchase 127,000 shares of common stock at an exercise price of $7.52
per share. On January 25, 2000 Prudential Securities Incorporated agreed to
exchange the warrant for a new warrant to purchase 127,000 shares of common
stock at an exercise price equal to the public offering price of the shares
offered by this prospectus. This warrant is exercisable for a five-year period
ending on September 21, 2004. Other than the shares to be purchased by
Prudential Securities Incorporated as an underwriter in this offering,
Prudential Securities Incorporated has agreed that it will not transfer or
dispose of, directly or indirectly, shares of common stock or any securities
convertible into or exercisable or exchangeable for or repayable with shares of
common stock for one year after the date of this prospectus.

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<PAGE> 60

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership
of our common stock as of January 31, 2000. The percentage of beneficial
ownership is provided for the following:

- each stockholder who is known by us to beneficially own 5% or more of any
class of our capital stock;

- each of our present executive officers who are also named in the Summary
Compensation Table and each of our directors; and

- all of our executive officers and our directors as a group.

Percentage ownership is based on 17,215,234 shares outstanding as of
January 31, 2000, net of treasury stock, as adjusted to reflect the conversion
of all outstanding preferred stock and accumulated dividends into common stock.
Shares of common stock subject to options or warrants currently exercisable or
exercisable within 60 days of January 31, 2000, are deemed outstanding for the
purpose of computing the percentage ownership of the person holding such options
or warrants but are not outstanding for computing the percentage ownership of
another person. Unless otherwise indicated below, the persons and entities named
in the table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where applicable.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
OF COMMON
NUMBER OF SHARES OF STOCK BENEFICIALLY OWNED
COMMON STOCK -------------------------------------------
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE THE OFFERING AFTER THE OFFERING(1)
- ------------------------ ------------------- ------------------- ---------------------
<S> <C> <C> <C>
Capital Z Partners(2)........................... 3,937,562 29.0% 22.9%
ULSAP(3)........................................ 2,222,785 15.9% 12.6%
GE Capital(4)................................... 1,575,024 11.6% 9.1%
The Goldman Sachs Group, Inc.(5)................ 1,417,521 10.4% 8.2%
Douglas Lebda(6)................................ 1,087,285 7.9% 6.2%
Keith Hall...................................... 48,681 * *
David Anderson.................................. 12,700 * *
James Bennett, Jr.(7)........................... 148,590 1.1% *
Richard Stiegler(8)............................. 80,750 * *
James Carthaus(9)............................... 31,750 * *
Richard Field(10)............................... 841,964 6.0% 4.8%
Robert Kennedy(11).............................. 2,222,785 15.9% 12.6%
Daniel Lieber(12)............................... 3,937,562 29.0% 22.9%
Adam Mizel(13).................................. 3,937,562 29.0% 22.9%
W. James Tozer, Jr.(14)......................... 592,848 4.4% 3.4%
All executive officers and directors as a group
(11 persons).................................. 9,004,600 61.3% 49.1%
</TABLE>

- ------------------------
* represents less than 1%

(1) Assumes the underwriters' over-allotment option is not exercised.

(2) Capital Z Partners is located at 54 Thompson Street, New York, New York.
These shares are held by Specialty Finance Partners, an affiliate of
Capital Z Partners. Includes 112,261 shares of common stock to be received
upon the conversion of accumulated dividends on preferred stock.

(3) The Union Labor Life Insurance Company, on behalf of its Separate Account P
(ULSAP), is located at 111 Massachusetts Avenue, N.W., 8th Floor,
Washington, D.C. Includes a warrant to purchase 381,000 shares of common
stock with an exercise price of approximately $4.72 which is currently
exercisable. Includes 48,588 shares of common stock to be received upon the
conversion of accumulated dividends on preferred stock.

(4) GE Capital is located at 6601 Six Forks Road, Raleigh, North Carolina. Upon
the automatic conversion of the preferred stock at the closing of this
transaction, General Electric Capital Assurance Company will be the holder
of 315,004 shares of common stock and GE Capital Residential Connections
Corporation will be the holder of 1,260,020

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shares of common stock. Includes 8,981 and 35,924 shares of common stock to
be received upon the conversion of accumulated, unpaid dividends on
preferred stock held by General Electric Capital Assurance Company and GE
Capital Residential Connections Corporation, respectively.

(5) The Goldman Sachs Group, Inc. is located at 85 Broad Street, New York, New
York. Upon the automatic conversion of the preferred stock at the closing
of this transaction, The Goldman Sachs Group, Inc. will be the holder of
1,417,521 shares of common stock. Includes 40,414 shares of common stock to
be received upon the conversion of accumulated dividends on preferred
stock.

(6) Includes an option to purchase 97,693 shares of common stock with an
exercise price of approximately $1.43 per share, an option to purchase
25,400 shares of common stock with an exercise price of approximately $5.20
per share which are exercisable as of January 31, 2000, or will become
exercisable within 60 days thereafter, options to purchase 6,667 shares of
common stock with an exercise price of approximately $5.20 per share which
are exercisable as of January 31, 2000 or will become exercisable within 60
days thereafter and 857,524 shares of common stock, held directly by or
jointly with family members. Includes options granted subsequent to January
31, 2000 to purchase up to 100,000 shares of common stock with an exercise
price equal to the initial public offering price, which were exercised at
$12.00 per share prior to the commencement of trading in our common stock
on the Nasdaq National Market.

(7) Includes an option to purchase 12,700 shares of common stock with an
exercise price of approximately $4.72 and an option to purchase 6,350
shares of common stock with an exercise price of approximately $4.72 per
share, which are exercisable as of January 31, 2000, or will become
exercisable within 60 days thereafter.

(8) Includes an option to purchase 38,100 shares of common stock with an
exercise price of approximately $1.43 and an option to purchase 8,467
shares of common stock with an exercise price of approximately $4.72 per
share, which are exercisable as of January 31, 2000, or will become
exercisable within 60 days thereafter.

(9) Includes an option to purchase 19,050 shares of common stock with an
exercise price of approximately $4.72 which is exercisable as of January
31, 2000, or will become exercisable within 60 days thereafter.

(10) Includes a warrant to purchase 16,510 shares of common stock with an
exercise price of approximately $7.87 which is currently exercisable and an
option to purchase 392,511 shares of common stock with an exercise price of
approximately $1.43 which is exercisable as of January 31, 2000, or will
become exercisable within 60 days thereafter. Includes 5,893 shares of
common stock to be received upon the conversion of accumulated dividends on
preferred stock.

(11) Includes 2,222,785 shares of common stock beneficially owned by ULSAP as to
which Robert Kennedy disclaims beneficial ownership.

(12) Includes 3,937,562 shares of common stock beneficially owned by Capital Z
Partners, as to which Mr. Lieber disclaims beneficial ownership. Daniel
Lieber is a partner at Equifin Capital Management, an entity affiliated
with Capital Z Partners.

(13) Includes 3,937,562 shares of common stock beneficially owned by Capital Z
Partners of which Adam Mizel is a partner.

(14) Includes a warrant to purchase 16,510 shares of common stock with an
exercise price of approximately $7.87 which is currently exercisable, as to
which Mr. Tozer disclaims beneficial ownership. Includes 5,893 shares of
common stock to be received upon the conversion of accumulated dividends on
preferred stock.

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DESCRIPTION OF CAPITAL STOCK

Our amended and restated certificate of incorporation which will become
effective upon the closing of this offering authorizes us to issue up to 100
million shares of common stock, $0.01 par value per share, and 10 million shares
of preferred stock, par value $0.01 per share. All of the outstanding capital
stock is and, upon completion of this offering, will be, fully paid and
non-assessable.

Upon the closing of this offering, we will have 17,215,234 shares of common
stock issued and outstanding, excluding treasury stock. This includes 10,443,550
shares of common stock to be issued upon the automatic conversion of all
outstanding shares of our convertible preferred stock, together with accumulated
dividends as of January 31, 2000.

COMMON STOCK

Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available for this purpose
at the times and in the amounts as the board of directors may occasionally
determine. Each stockholder is entitled to one vote for each share of common
stock held on all matters submitted to a vote of stockholders. Cumulative voting
for the election of directors is not provided for in our amended and restated
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election. The
common stock is not entitled to preemptive rights and is not subject to
conversion or redemption. Upon the occurrence of a liquidation, dissolution or
winding-up of LendingTree, the holders of shares of common stock would be
entitled to share ratably in the distribution of all of LendingTree's assets
remaining available for distribution after satisfaction of all its liabilities
and the payment of the liquidation preference of any outstanding preferred
stock.

PREFERRED STOCK

The board of directors has the authority to provide by resolution for the
issuance of shares of preferred stock, in one or more classes or series, and to
fix the rights, preferences, privileges and restrictions of this preferred
stock, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series. The issuance of preferred stock could
have the effect of decreasing the market price of the common stock and could
adversely affect the voting and other rights of the holders of common stock.

WARRANTS

As of the date of this prospectus, the following warrants to purchase
shares of common stock are outstanding:

(1) a warrant to purchase up to 381,000 shares at an exercise price of
approximately $4.72 per share that is held by ULSAP;

(2) a warrant to purchase up to a total of 16,510 shares at an
exercise price of approximately $7.87 per share that is held by W. James
Tozer, Jr.;

(3) a warrant to purchase up to a total of 16,510 shares at an
exercise price of approximately $7.87 per share that is held by Richard
Field;

(4) a warrant to purchase up to 15,240 shares at an exercise price of
approximately $7.87 per share that is held by a family member of Douglas R.
Lebda;

(5) seven warrants to purchase an aggregate of 38,100 shares at an
exercise price of approximately $7.87 per share that are held by Hovde
Financial Institution Partners II, L.P., Hovde Investment Corp., L.L.C.,
William N. Schiebler, Barbara A. and Peter A. Georgescu, and John B.
Prince;

(6) a warrant to purchase up to 63,500 shares at an exercise price of
approximately $4.72 per share that is held by Seacris Group, Ltd.;

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(7) a warrant to purchase up to 127,000 shares that is held by
Prudential Securities at an exercise price equal to $7.52 per share which
was amended on January 25, 2000 such that the current exercise price is
equal to the public offering price of the shares offered by this
prospectus; and

(8) a warrant to purchase up to 9,525 shares at an exercise price of
approximately $4.72 per share that is held by Phoenix Strategic Capital.

(9) warrants to purchase up to 190,500 shares at an exercise price of
approximately $7.87 per share that are held by CNBC.com. Of these warrants,
warrants to purchase up to 95,250 shares are immediately exercisable, while
the balance will become exercisable on January 14, 2001.

Except as otherwise indicated, all of the warrants listed above are
currently exercisable and contain standard anti-dilution provisions.

OPTIONS

As of the date of this prospectus:

- options to purchase a total of 3,675,903 shares of common stock are
outstanding of which 1,171,645 have vested with exercise prices
ranging from $1.43 to $5.23 per share;

- up to 659,988 additional shares of common stock may be subject to
options granted in the future.

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND LENDINGTREE'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS

Some provisions of our amended and restated certificate of incorporation
and amended and restated bylaws, each of which will become effective after this
offering, may be deemed to have an anti-takeover effect and may delay or prevent
a tender offer or takeover attempt that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares held by stockholders.

CLASSIFIED BOARD OF DIRECTORS. Our board of directors will be divided into
three classes of directors serving staggered three-year terms. As a result,
approximately one-third of the board of directors will be elected each year.
These provisions, when coupled with the provision of our amended and restated
certificate of incorporation authorizing the board of directors to fill vacant
directorships or increase the size of the board of directors, may deter a
stockholder from removing incumbent directors and simultaneously gaining control
of the board of directors by filling the vacancies created by such removal with
its own nominees.

CUMULATIVE VOTING. Our amended and restated certificate of incorporation
will expressly deny stockholders the right to cumulate votes in the election of
directors.

STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. Our amended and
restated certificate of incorporation will eliminate the ability of stockholders
to act by written consent. It further provides that special meetings of our
stockholders may be called only by the chairman of the board of directors, the
president or a majority of the board of directors.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTORS
NOMINATIONS. Our amended and restated bylaws will provide that stockholders
seeking to bring business before an annual meeting of stockholders, or to
nominate candidates for election as directors at an annual meeting of
stockholders, must provide timely notice in writing. To be timely, a
stockholder's notice must be delivered to or mailed and received at our
principal executive offices not less than 90 days prior to the anniversary date
of the immediately preceding annual meeting of stockholders. However, in the
event that the annual meeting is called for a date that is not within 30 days
before or after such anniversary date, notice by the stockholder in order to be
timely must be received not later than the close of business on the 10th day
following the date on which notice of the date of the annual meeting was mailed
to stockholders or made public, whichever first occurs. In the case of a special
meeting of stockholders called for the purpose of electing directors, notice by
the stockholder in order to be timely must be received not later than the close
of business on the 10th day following the day on which notice of the date of the
special meeting was mailed

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or public disclosure of the date of the special meeting was made, whichever
first occurs. Our amended and restated bylaws will also specify requirements as
to the form and content of a stockholder's notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of stockholders or
from making nominations for directors at an annual meeting of stockholders.

AUTHORIZED BUT UNISSUED SHARES

The authorized but unissued shares of common stock and preferred stock will
be available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of
common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of LendingTree by means of a proxy contest, tender
offer, merger or otherwise.

AMENDMENTS; SUPERMAJORITY VOTE REQUIREMENTS

The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless
either a corporation's certificate of incorporation or bylaws require a greater
percentage. Our amended and restated certificate of incorporation will impose
supermajority vote requirements in connection with business combination
transactions and the amendment of provisions of our amended and restated
certificate of incorporation and amended and restated bylaws, including those
provisions relating to the classified board of directors, action by written
consent and the ability of stockholders to call special meetings.

RIGHTS AGREEMENT

Under Delaware law, every corporation may create and issue rights entitling
the holders of such rights to purchase from the corporation shares of its
capital stock of any class or classes, subject to any provisions in its
certificate of incorporation. The price and terms of such shares must be stated
in the certificate of incorporation or in a resolution adopted by the board of
directors for the creation or issuance of such rights.

We have entered into a stockholder rights agreement. As with most
stockholder rights agreements, the terms of our rights agreement are complex and
not easily summarized, particularly as they relate to the acquisition of our
common stock and to exercisability. This summary may not contain all of the
information that is important to you. Accordingly, you should carefully read our
rights agreement, which has been filed as an exhibit to the registration
statement of which this prospectus forms a part.

Our rights agreement provides that each share of our common stock
outstanding after this offering will have one right to purchase one-hundredth of
a preferred share attached to it. The purchase price per one one-hundredth of a
preferred share under the stockholder rights agreement is four times the average
closing price of our common stock for the first five days of trading after the
consummation of this offering.

Initially, the rights under our rights agreement are attached to
outstanding certificates representing our common stock and no separate
certificates representing the rights will be distributed. The rights will
separate from our common stock and be represented by separate certificates
approximately 10 days after someone acquires or commences a tender offer for 15%
of our outstanding common stock.

After the rights separate from our common stock, certificates representing
the rights will be mailed to record holders of our common stock. Once
distributed, the rights certificates alone will represent the rights.

All shares of our common stock issued prior to the date the rights separate
from the common stock will be issued with the rights attached. The rights are
not exercisable until the date the rights separate from the common stock. The
rights will expire on the tenth anniversary of the date of the completion of
this offering unless earlier redeemed or exchanged by us.

If an acquiror obtains or has the rights to obtain 15% or more of our
common stock, then each right will entitle the holder to purchase a number of
shares of our common stock equal to two times the purchase price of each right.

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Each right will entitle the holder to purchase a number of shares of common
stock of the acquiror having a then current market value of twice the purchase
price if an acquiror obtains 15% or more of our common stock and any of the
following occurs:

- we merge into another entity;

- an acquiring entity merges into us; or

- we sell more than 50% of our assets or earning power.

Under our rights agreement, any rights that are or were owned by an acquiror of
more than 15% of our outstanding common stock will be null and void.

Our rights agreement contains exchange provisions which provide that after
an acquiror obtains 15% or more, but less than 50% of our outstanding common
stock, our board of directors may, at its option, exchange all or part of the
then outstanding and exercisable rights for shares of our common stock. In such
an event, the exchange ratio is one common share per right, adjusted to reflect
any stock split, stock dividend or similar transaction.

Our board of directors may redeem all of the outstanding rights under our
rights agreement prior to the earlier of (1) the time that an acquiror obtains
15% or more of our outstanding common stock or (2) the final expiration date of
the rights agreement. The redemption price under our rights agreement is $0.01
per right, subject to adjustment. The right to exercise the rights will
terminate upon the action of our board ordering the redemption of the rights and
the only right of the holders of the rights will be to receive the redemption
price.

Holders of rights will have no rights as our stockholders including the
right to vote or receive dividends, simply by virtue of holding the rights.

Our rights agreement provides that the provisions of the rights agreement
may be amended by the board of directors prior to 10 days after someone acquires
or commences a tender offer for 15% of our outstanding common stock without the
approval of the holders of the rights. However, after that date, the rights
agreement may not be amended in any manner which would adversely effect the
interests of the holders of the rights, excluding the interests of any acquiror.
In addition, our rights agreement provides that no amendment may be made to
adjust the time period governing redemption at a time when the rights are not
redeemable.

Our rights agreement contains rights that have anti-takeover effects. The
rights may cause substantial dilution to a person or group that attempts to
acquire us without conditioning the offer on a substantial number of rights
being acquired. Accordingly, the existence of the rights may deter acquirors
from making takeover proposals or tender offers. However, the rights are not
intended to prevent a takeover, but rather are designed to enhance the ability
of our board to negotiate with an acquiror on behalf of all the stockholders. In
addition, the rights should not interfere with a proxy contest.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is First Union
National Bank. Its address is 1525 W. WT, Harris Blvd; 3C3, Charlotte, NC
28288-1153.

LISTING

The shares have been approved for quotation on the Nasdaq National Market,
subject to notice of issuance, under the symbol "TREE."

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<PAGE> 66

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices of our common stock. Furthermore,
since no shares will be available for sale shortly after this offering because
of contractual and legal restrictions on resale described below, sales of
substantial amounts of common stock in the public market after these
restrictions lapse could adversely affect the prevailing market price of our
common stock and our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding a total of
17,215,234 shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
all of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless such shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act. The remaining shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rule 144 promulgated under the Securities Act, which rules are summarized below.

As a result of the contractual restrictions described below and the
provisions of Rule 144, the restricted securities will be available for sale in
the public market subject to the volume limitations and other conditions of Rule
144. These shares could be available for resale immediately upon the expiration
of the 180-day lock-up period.

LOCK-UP AGREEMENTS

Stockholders holding approximately 93% of our outstanding common stock,
including all of our officers and directors, have signed lock-up agreements
under which they agreed not to transfer or dispose of any shares of common stock
or any securities convertible into or exchangeable or exercisable for or
repayable with shares of common stock, for a period of 180 days after the date
of this prospectus. Transfers or dispositions can be made sooner with the prior
written consent of Merrill Lynch.

RULE 144

In general, under Rule 144, beginning 90 days after the date of this
prospectus, a person who has beneficially owned shares of our common stock 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:

- 1% of the number of shares of common stock then outstanding, which will
equal approximately 172,000 shares immediately after this offering; or

- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.

Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.

RULE 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.

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<PAGE> 67

The following table indicates approximately when the 13.6 million shares of
our common stock that are not being sold in this offering, but which will be
outstanding at the time this offering is complete, will be eligible for sale
into the public market:

<TABLE>
<CAPTION>
NUMBER OF SHARES/
PERCENT OUTSTANDING
AFTER THE OFFERING DATE WHEN SHARES BECOME AVAILABLE FOR RESALE IN THE PUBLIC MARKET
- ------------------- -----------------------------------------------------------------
<S> <C>
5.2 million/30% 180 days after the date of this prospectus, pursuant to
agreements between the stockholders and the underwriters,
provided that Merrill Lynch can waive this restriction at any
time. Approximately 3.8 million of these shares will also be
subject to sales volume restrictions under Rule 144 under the
Securities Act.
8.4 million/48% Upon expiration of applicable one-year holding periods under Rule
144, which will expire between August 2000 and November 2000,
subject to sales volume restrictions under Rule 144.
</TABLE>

STOCK OPTIONS

Following the completion of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act covering 5.6 million shares of
common stock issued or reserved for issuance under our various stock option
plans. The registration statement will become effective automatically upon
filing. As of January 31, 2000, options to purchase 3,740,222 shares of common
stock were issued and outstanding of which 1,201,265 shares have vested.
Accordingly, shares registered under the registration statement will, subject to
vesting provisions and Rule 144 volume limitations applicable to our affiliates,
be available for sale in the open market immediately after the 180-day lock-up
agreements expire.

REGISTRATION RIGHTS

On September 20, 1999, we entered into a registration rights agreement with
holders of our convertible preferred stock and common stock in which we granted
them registration rights in respect of 12.1 million shares of common stock. On
February 2, 2000, CNBC.com was made a party to the registration rights agreement
with respect to 190,500 shares issuable to CNBC.com upon the exercise of
outstanding warrants. A copy of the registration rights agreement has been filed
as an exhibit to the registration statement of which this prospectus forms a
part. Pursuant to the registration rights agreement, at any time after 180 days
after the consummation of this offering, previous holders of the preferred stock
who hold at least a total of approximately 10.4 million shares may request us to
register their shares under the Securities Act. All holders which are party to
the registration rights agreement may demand registration of their shares,
provided the demand relates to at least $500,000, we are then qualified to use
Form S-3, and the holders of the preferred stock did not exercise their demand
rights within the previous 180 days. We are not obligated to effect a
registration statement on Form S-3 more than once in any 180-day period.

These registration rights are subject to our right to delay the filing of a
registration statement in certain circumstances for up to 90 days.

In addition, the registration rights agreement provides these holders of
restricted stock with "piggyback" registration rights. If we propose to register
any common stock under the Securities Act, other than pursuant to this offering
or in connection with the registration of securities issued under an employee
benefit plan or in consideration for an acquisition, each of these holders may
require us to include all or a portion of their restricted stock in such
registration. However, the managing underwriter, if any, of any such offering
has rights to limit the number of shares of restricted stock proposed to be
included in such registration.

We would bear all registration expenses incurred in connection with these
registrations. Each participating seller of restricted stock would bear their
proportionate share of all underwriting discounts and selling commissions.

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<PAGE> 68

IMPORTANT UNITED STATES FEDERAL TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS OF OUR COMMON STOCK

The following is a general summary of the material United States federal
tax consequences of the purchase, ownership, and sale or other taxable
disposition of the common stock by any person or entity other than:

- a citizen or resident of the United States;

- a partnership, corporation or other entity created or organized in or
under the laws of the United States or of any political subdivision
thereof;

- a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust or the trust has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a U.S. person; or

- an estate, the income of which is includible in gross income for United
States income tax purposes regardless of its source.

This summary does not address all tax considerations that may be relevant
to non-U.S. holders in light of their particular circumstances or to certain
non-U.S. holders that may be subject to special treatment under United States
federal income or estate tax laws. This summary is based upon the Internal
Revenue Code of 1986, existing, temporary and proposed regulations promulgated
thereunder and administrative and judicial decisions, all of which are subject
to change, possibly with retroactive effect. In addition, this summary does not
address the effect of any state, local or foreign tax laws. Each prospective
purchaser of common stock should consult its tax advisor with respect to the tax
consequences of purchasing, owning and disposing of the common stock.

DIVIDENDS

Dividends paid to a non-U.S. holder of common stock generally will be
subject to a withholding of United States federal income tax at a 30 percent
rate or such lower rate as may be specified by an applicable income tax treaty,
unless:

- the dividend is effectively connected with the conduct of a trade or
business of the non-U.S. holder within the United States; or

- if a tax treaty applies, it is attributable to a United States permanent
establishment of the non-U.S. holder.

In these cases, the dividend will be taxed at ordinary federal income tax
rates. If the non-U.S. holder is a corporation, such effectively connected
income may also be subject to an additional branch profits tax. A non-U.S.
holder may be required to satisfy certain certification requirements in order to
claim treaty benefits or otherwise claim a reduction of, or exemption from, the
withholding described above.

SALE OR OTHER DISPOSITION OF COMMON STOCK

A non-U.S. holder generally will not be subject to United States federal
income tax in respect of any gain recognized on the sale or other taxable
disposition of common stock, unless:

- the gain is effectively connected with the conduct of a trade or business
of the non-U.S. holder within the United States or, if a tax treaty
applies, is attributable to a United States permanent establishment of
the non-U.S. holder;

- in the case of a non-U.S. holder who is an individual and holds the
common stock as a capital asset, the holder is present in the United
States for 183 or more days in the taxable year of the disposition and
certain other tests are met;

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<PAGE> 69

- the non-U.S. holder is subject to tax under the provisions of United
States federal income tax law applicable to certain United States
expatriates; or

- we are or have been during certain periods preceding the disposition a
"United States real property holding corporation" for United States
federal income tax purposes and certain other requirements are met. We
currently believe that we are not a United States real property holding
corporation and we do not anticipate that we will become one.

ESTATE TAX

Common stock owned or treated as owned by an individual non-U.S. holder at
the time of death will be includible in the individual's gross estate for United
States federal estate tax purposes, unless an applicable treaty provides
otherwise, and may be subject to United States federal estate tax.

BACKUP WITHHOLDING AND INFORMATION REPORTING

DIVIDENDS. United States backup withholding tax generally will not apply
to dividends paid on the common stock that are subject to the 30 percent or
reduced treaty rate of United States withholding tax previously discussed. We
must report annually to the Internal Revenue Service and to each non-U.S. holder
the amount of dividends paid to, and the tax withheld with respect to, such
holder, regardless of whether any tax was withheld. This information may also be
made available to the tax authorities in the non-U.S. holder's country of
residence.

SALE OR OTHER DISPOSITION OF COMMON STOCK. Upon the sale or other taxable
disposition of common stock by a non-U.S. holder to or through a United States
office of a broker, the broker must backup withhold at a rate of 31 percent and
report the sale to the Internal Revenue Service, unless the holder certifies its
non-U.S. holder status under penalties of perjury or otherwise establishes an
exemption. Upon the sale or other taxable disposition of common stock by a
non-U.S. holder to or through the foreign office of a United States broker, or a
foreign broker with a certain relationship to the United States, the broker must
report the sale to the Internal Revenue Service, but not backup withhold, unless
the broker has documentary evidence in its files that the seller is a non-U.S.
holder and certain other conditions are met or the holder otherwise establishes
an exemption.

Backup withholding is not an additional tax. Amounts withheld under the
backup withholding rules generally are allowable as a refund or credit against a
non-U.S. holder's United States federal income tax liability, if any, provided
that the required information is furnished to the Internal Revenue Service on a
timely basis.

The U.S. Treasury Department has issued regulations generally effective for
payments made after December 31, 2000 that will affect the procedures to be
followed by a non-U.S. holder in establishing such holder's status as a non-U.S.
holder for purposes of the withholding, backup withholding and information
reporting rules described herein. In general, such regulations do not
significantly alter the substantive withholding and information reporting
requirements, but unify current certification procedures and forms and clarify
reliance standards. Prospective investors should consult their tax advisors
concerning the effect of such regulations on an investment in the common stock.

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<PAGE> 70

UNDERWRITING

GENERAL

We intend to offer our common stock through a number of underwriters.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc. and
Prudential Securities Incorporated are acting as representatives of each of the
underwriters named below. Subject to the terms and conditions contained in a
purchase agreement among us and the underwriters, we have agreed to sell to the
underwriters, and the underwriters severally have agreed to purchase from us,
the number of shares listed opposite their names below.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 1,770,000
Lehman Brothers Inc......................................... 590,000
Prudential Securities Incorporated.......................... 590,000
Credit Suisse First Boston Corporation...................... 100,000
First Union Securities, Inc. ............................... 100,000
FleetBoston Robertson Stephens Inc. ........................ 100,000
Legg Mason Wood Walker, Incorporated........................ 100,000
Wachovia Securities, Inc. .................................. 100,000
Brean Murray & Co., Inc. ................................... 50,000
Friedman, Billings, Ramsey & Co., Inc. ..................... 50,000
Raymond James & Associates, Inc. ........................... 50,000
Sutro & Co. Incorporated.................................... 50,000
----------
Total.......................................... 3,650,000
==========
</TABLE>

The underwriters have agreed to purchase all of the shares sold under the
purchase agreement if any of these shares are purchased. If an underwriter
defaults, the purchase agreement provides that the purchase commitments of the
nondefaulting underwriters may be increased or the purchase agreement may be
terminated.

We have agreed to indemnify the underwriters against specified liabilities,
including liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make because of those liabilities.

The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreement, such as receipt by the underwriters of
officer's certificates and legal opinions. The underwriters reserve the right to
withdraw, cancel or modify offers to the public and to reject orders in whole or
in part.

COMMISSIONS AND DISCOUNTS

The representatives have advised us that the underwriters propose initially
to offer the shares to the public at the initial public offering price on the
cover of this prospectus, and to dealers at that price less a concession not in
excess of $.50 per share. The underwriters may allow, and the dealers may
reallow, a discount not in excess of $.10 per share to other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.

We will sell the shares to the underwriters at a per-share price of $11.16,
which represents an $.84 discount from the public offering price of $12.00. This
discount, which equals 7% of the public offering price, is the underwriters'
compensation. The following table shows the public offering price, underwriting
discount and proceeds before expenses to LendingTree. In addition, the table
includes certain other items

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<PAGE> 71

considered by the NASD to be underwriting compensation for purposes of the
NASD's Conduct Rules. This information assumes either no exercise or full
exercise by the underwriters of their over-allotment option.

<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- --------------- -----------
<S> <C> <C> <C>
Public offering price............................ $12.00 $43,800,000 $50,370,000
Underwriting discount............................ $.84 $3,066,000 $3,525,900
Proceeds, before expenses, to LendingTree........ $11.16 $40,734,000 $46,844,100
Other items...................................... $495,300 $495,300
</TABLE>

As described in more detail below, Prudential Securities Incorporated holds
a warrant to purchase 127,000 shares of common stock at an exercise price equal
to the public offering price of the shares offered by this prospectus. The
compensation included in the table above in the line titled "other items"
represents the value of this warrant for NASD purposes computed in accordance
with a formula prescribed by the NASD's Conduct Rules.

The expenses of the offering, not including the underwriting discount, are
estimated at $2,000,000 and are payable by us, as set forth in the following
table.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 13,298
NASD filing fee............................................. 5,537
Nasdaq National Market listing fee.......................... 100,000
Printing and engraving expenses............................. 500,000
Legal fees and expenses..................................... 500,000
Accounting fees and expenses................................ 300,000
Blue sky fees and expenses (including legal fees)........... 10,000
Transfer agent and registrar fees and expenses.............. 20,000
Premiums for director and officer insurance................. 250,000
Miscellaneous............................................... 301,165
----------
Total............................................. $2,000,000
----------
</TABLE>

OVER-ALLOTMENT OPTION

We have granted an option to the underwriters to purchase up to 547,500
additional shares at the public offering price less the underwriting discount.
The underwriters may exercise this option for 30 days from the date of this
prospectus solely to cover any over-allotments. If the underwriters exercise
this option, each will be obligated, subject to customary conditions contained
in the purchase agreement, to purchase a number of additional shares
proportionate to that underwriter's initial amount reflected in the above table.

RESERVED SHARES

At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 438,000 shares offered by this prospectus for sale
to some of our directors, officers, employees and friends and to some of the
officers and employees of the institutions comprising the LendingTree network.
If these persons purchase reserved shares, this will reduce the number of shares
available for sale to the general public. Any reserved shares that are not
orally confirmed for purchase within one day of the pricing of this offering
will be offered by the underwriters to the general public on the same terms as
the other shares offered by this prospectus. Merrill Lynch is administering this
reserved share program.

Purchasers of shares pursuant to the reserved share program generally will
not be subject to lock-up agreements in respect of the shares so purchased
unless required by the Conduct Rules of the NASD. The NASD's conduct rules will
require that some purchasers of shares who are affiliated or associated with
NASD members or who hold senior positions at financial institutions or members
of their immediate families be subject to three-month lock-up agreements.

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<PAGE> 72

NO SALES OF COMMON STOCK OR SIMILAR SECURITIES

We and our officers, directors and persons beneficially owning in the
aggregate approximately 93% of our outstanding common stock have agreed, with
limited exceptions, not to sell or transfer any common stock for 180 days after
the date of this prospectus without first obtaining the written consent of
Merrill Lynch. Specifically, we and these other individuals and entities have
agreed not to directly or indirectly

- offer, pledge, sell or contract to sell any common stock,

- sell any option or contract to purchase any common stock,

- purchase any option or contract to sell any common stock,

- grant any option, right or warrant for the sale of any common stock,

- lend or otherwise dispose of or transfer any common stock,

- request or demand that we file a registration statement related to the
common stock, or

- enter into any swap or other agreement that transfers all or any portion
of the economic consequence of ownership of any common stock, whether any
such swap or transaction is to be settled by delivery of shares or other
securities, in cash or otherwise.

This lockup provision applies to common stock and to securities convertible
into or exchangeable or exercisable for or repayable with common stock. It also
applies to common stock owned now or acquired later by the person executing the
agreement or for which the person executing the agreement later acquires the
power of disposition.

NASDAQ NATIONAL MARKET LISTING

The shares have been approved for quotation on the Nasdaq National Market,
subject to notice of issuance, under the symbol "TREE."

Before this offering, there has been no public market for our common stock.
The initial public offering price has been determined through negotiations
between us and the representatives. In addition to prevailing market conditions,
the primary factors considered in determining the initial public offering price
were:

- the valuation multiples of publicly traded companies that the
representatives believed to be comparable to us,

- our financial information,

- the history of, and the prospects for, our company and the industry in
which we compete,

- an assessment of (1) our management, (2) our past and present operations,
(3) the prospects for, and timing of, future revenue of our company and
(4) the present state of our development, and

- the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours.

An active trading market for the shares may not develop. It is also
possible that after the offering the shares will not trade in the public market
at or above the initial public offering price.

The underwriters do not expect to sell more than 5% of the shares in the
aggregate to accounts over which they exercise discretionary authority.

PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS

Until the distribution of the shares is completed, SEC rules may limit
underwriters and selling group members from bidding for and purchasing our
common stock. However, the representatives may engage in transactions that
stabilize the price of our common stock, such as bids or purchases to peg, fix
or maintain that price.

If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell more shares than are listed on
the cover of this prospectus, the representatives may reduce that short position
by purchasing shares in the open market. The representatives may also elect to
reduce any

69
<PAGE> 73

short position by exercising all or part of the over-allotment option described
above. Purchases of the common stock to stabilize its price or to reduce a short
position may cause the price of the common stock to be higher than it might be
in the absence of such purchases.

The representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares in
the open market to reduce the underwriters' short position or to stabilize the
price of the shares they may reclaim the amount of the selling concession from
the underwriters and selling group members who sold those shares. The imposition
of a penalty bid may also affect the price of the shares in that it discourages
resales of those shares.

Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the representatives
will engage in these transactions or that these transactions, once commenced,
will not be discontinued without notice. These transactions may be effected on
the Nasdaq National Market, in the over-the-counter market or otherwise.

ELECTRONIC PROSPECTUS

Prudential Securities Incorporated facilitates the marketing of new issues
online through its PrudentialSecurities.com division. Clients of Prudential
Advisor(SM), a full service brokerage program, may view offering terms and a
prospectus online and place orders through their financial advisors.

OTHER RELATIONSHIPS

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<PAGE> 74

LEGAL MATTERS

The validity of the shares of common stock offered by this prospectus will
be passed upon for LendingTree by Skadden, Arps, Slate, Meagher & Flom LLP, New
York, New York. Certain legal matters in connection with this offering will be
passed upon for the underwriters by Brown & Wood LLP, New York, New York.

EXPERTS

Our financial statements as of December 31, 1998 and 1999 and for each of
the three years in the period ended December 31, 1999 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the shares of common stock we propose to sell in
this offering. This prospectus, which constitutes part of the registration
statement, does not contain all of the information set forth in the registration
statement. For further information with respect to us and the common stock we
propose to sell in this offering, we refer you to the registration statement and
the exhibits and schedule filed as a part of the registration statement.
Statements contained in this prospectus regarding the contents of any contract
or any other document filed as an exhibit to the registration statement are not
necessarily complete, and, in each instance, we refer you to the copy of that
contract or other document filed as an exhibit to the registration statement. A
copy of the registration statement and the exhibits and schedule filed as a part
of the registration statement may be inspected without charge at the public
reference facilities maintained by the SEC in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at the
Citicorp Center, 5000 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of all or any part of the registration statement may be obtained from
those offices upon the payment of the fees prescribed by the SEC. You can obtain
information on the operation of the public reference facilities maintained by
the SEC by calling 1-800-SEC-0330. The SEC also maintains a World Wide website
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
website is http://www.sec.gov.

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<PAGE> 75

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets as of December 31, 1998 and 1999............. F-3
Statements of Operations for the years ended December 31,
1997, 1998 and 1999....................................... F-4
Statements of Changes in Shareholders' Equity (Deficit) for
the years ended December 31, 1997, 1998 and 1999.......... F-5
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999....................................... F-7
Notes to Financial Statements............................... F-8
</TABLE>

F-1
<PAGE> 76

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
LendingTree, Inc.

In our opinion, the accompanying balance sheets and the related statements of
operations, of changes in shareholders' equity (deficit) and of cash flows
present fairly, in all material respects, the financial position of LendingTree,
Inc. at December 31, 1998 and 1999, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP
Charlotte, North Carolina
January 26, 2000 except for the stock split described in
Note 2 which is as of February 3, 2000

F-2
<PAGE> 77

LENDINGTREE, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,085,000 $ 2,419,000
Short-term investments.................................... -- 27,053,000
Accounts receivable, net of allowance for doubtful
accounts of $8,000 and $118,000 respectively........... 245,000 2,027,000
Prepaid expenses and other current assets................. 87,000 1,005,000
----------- ------------
Total current assets.............................. 3,417,000 32,504,000
Property and equipment, net (Note 3)........................ 210,000 1,086,000
Other assets................................................ 60,000 177,000
----------- ------------
Total assets...................................... $ 3,687,000 $ 33,767,000
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 736,000 $ 3,579,000
Accrued expenses (Note 4)................................. 15,000 2,451,000
----------- ------------
Total current liabilities......................... 751,000 6,030,000
----------- ------------
Commitments and contingencies (Note 7)...................... -- --
Mandatorily redeemable securities (Note 5):
Series A Convertible Preferred stock, $.01 par value, 8%
cumulative, 3,049,031 shares authorized, 833,334 shares
issued and outstanding at December 31, 1998............ 4,379,000 --
Series A Convertible Preferred stock warrants............. 252,000 --
Shareholders' equity (deficit) (Note 5):
Series A Convertible Preferred stock, $.01 par value, 8%
cumulative, 3,049,031 shares authorized, 1,754,484
shares issued and outstanding at December 31, 1999..... -- 9,884,000
Series B Convertible Preferred stock, $.01 par value,
911,450 shares authorized, none issued................. -- --
Series C Convertible Preferred stock, $.01 par value,
268,074 shares authorized, none issued................. -- --
Series D Convertible Preferred stock, $.01 par value, 8%
cumulative, 6,238,639 shares authorized, 6,238,172
shares issued and outstanding at December 31, 1999..... -- 49,234,000
Common stock, $.01 par value, 38,100,000 shares
authorized, 3,750,172, and 4,070,655 shares issued at
December 31, 1998 and 1999, respectively............... 38,000 41,000
Deferred compensation..................................... -- (2,767,000)
Treasury stock (948,971 shares at December 31, 1999)...... -- (5,978,000)
Additional paid-in-capital................................ 5,668,000 9,423,000
Unrealized gain on available-for-sale securities.......... -- 46,000
Accumulated deficit....................................... (7,401,000) (32,146,000)
----------- ------------
Total shareholders' equity (deficit).............. (1,695,000) 27,737,000
----------- ------------
Total liabilities and shareholders' equity
(deficit)....................................... $ 3,687,000 $ 33,767,000
=========== ============
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 78

LENDINGTREE, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------------
1997 1998 1999
--------- ----------- ------------
<S> <C> <C> <C>
Revenue:
LendingTree network...................................... $ 2,000 $ 273,000 $ 6,112,000
[i]close and other technology............................ -- 136,000 852,000
--------- ----------- ------------
Total revenue.................................... 2,000 409,000 6,964,000
--------- ----------- ------------
Cost of revenue:
LendingTree network...................................... -- 235,000 2,231,000
[i]close and other technology............................ -- 149,000 312,000
--------- ----------- ------------
Total cost of revenue............................ -- 384,000 2,543,000
--------- ----------- ------------
Gross profit............................................... 2,000 25,000 4,421,000
--------- ----------- ------------
Operating expenses:
Product development...................................... 293,000 1,051,000 1,109,000
Marketing and advertising................................ 54,000 2,494,000 18,611,000
Sales, general and administrative........................ 621,000 2,955,000 9,951,000
--------- ----------- ------------
Total operating expenses......................... 968,000 6,500,000 29,671,000
--------- ----------- ------------
Loss from operations....................................... (966,000) (6,475,000) (25,250,000)
Interest income, net....................................... 3,000 41,000 505,000
--------- ----------- ------------
Net loss................................................... (963,000) (6,434,000) (24,745,000)
--------- ----------- ------------
Accretion of mandatorily redeemable preferred stock........ -- -- (131,000)
Dividends issued to preferred shareholders on conversion of
preferred stock warrants to common stock warrants........ -- -- (525,000)
Dividends on convertible preferred stock................... -- (24,000) (506,000)
Accumulated, undeclared dividends on convertible preferred
stock.................................................... -- -- (1,654,000)
--------- ----------- ------------
Net loss attributable to common shareholders............... $(963,000) $(6,458,000) (27,561,000)
========= =========== ============
Net loss per common share -- basic and diluted............. $ (1.20) $ (1.88) $ (7.74)
========= =========== ============
Weighted average shares used in basic and diluted net loss
per common share calculation............................. 803,370 3,434,736 3,560,197
========= =========== ============
Pro forma per common share data (unaudited) -- Note 2:
Pro forma basic and diluted net loss per common share.... $ (3.23)
============
Pro forma weighted average basic and diluted shares
outstanding........................................... 7,650,229
============
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 79

LENDINGTREE, INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED
STOCK COMMON STOCK
----------------------- ------------------- ADDITIONAL
NUMBER OF NUMBER OF TREASURY PAID-IN ACCUMULATED UNREALIZED
SHARES AMOUNT SHARES AMOUNT STOCK CAPITAL DEFICIT GAINS
--------- ----------- --------- ------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996...................... -- $ -- 259,080 $ 3,000 $ -- $ -- $ (4,000) $ --
Sale of common stock,
including exercise of
common stock options...... 1,125,928 11,000 1,012,000
Issuance of common stock in
lieu of
compensation/services
offered................... 1,269,365 13,000 30,000
Issuance of stock options... 251,000
Net loss.................... (963,000)
--------- ----------- --------- ------- ----------- ---------- ------------ -------
Balance at December 31,
1997...................... -- -- 2,654,373 27,000 -- 1,293,000 (967,000) --
Sale of common stock........ 1,041,401 10,000 3,918,000
Issuance of warrants in
conjunction with sales of
Series A Convertible
Preferred stock and line
of
credit.................... 56,000
Issuance of common stock in
lieu of
compensation/services
offered................... 54,398 1,000 210,000
Issuance of stock options... 215,000
Dividends on mandatorily
redeemable preferred
stock..................... (24,000)
Net loss.................... (6,434,000)
--------- ----------- --------- ------- ----------- ---------- ------------ -------
Balance at December 31,
1998...................... -- -- 3,750,172 38,000 -- 5,668,000 (7,401,000) --

TOTAL
SHAREHOLDERS'
DEFERRED EQUITY
COMPENSATION (DEFICIT)
------------ -------------
<S> <C> <C>
Balance at December 31,
1996...................... $ -- $ (1,000)
Sale of common stock,
including exercise of
common stock options...... 1,023,000
Issuance of common stock in
lieu of
compensation/services
offered................... 43,000
Issuance of stock options... 251,000
Net loss.................... (963,000)
------------ ------------
Balance at December 31,
1997...................... -- 353,000
Sale of common stock........ 3,928,000
Issuance of warrants in
conjunction with sales of
Series A Convertible
Preferred stock and line
of
credit.................... 56,000
Issuance of common stock in
lieu of
compensation/services
offered................... 211,000
Issuance of stock options... 215,000
Dividends on mandatorily
redeemable preferred
stock..................... (24,000)
Net loss.................... (6,434,000)
------------ ------------
Balance at December 31,
1998...................... -- (1,695,000)
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 80

LENDINGTREE, INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) -- (CONTINUED)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED
STOCK COMMON STOCK
----------------------- ------------------- ADDITIONAL
NUMBER OF NUMBER OF TREASURY PAID-IN ACCUMULATED UNREALIZED
SHARES AMOUNT SHARES AMOUNT STOCK CAPITAL DEFICIT GAINS
--------- ----------- --------- ------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1998....................... -- -- 3,750,172 38,000 -- 5,668,000 (7,401,000) --
Exercise of common stock
options.................... 274,419 3,000 494,000
Issuance of common stock in
lieu of compensation....... 46,064 310,000
Sale of Series D Convertible
Preferred stock, net....... 6,024,096 47,457,000
Issuance of warrants in
conjunction with sale of
Series A Convertible
Preferred stock............ 25,000
Conversion of preferred stock
from mandatorily
redeemable................. 1,666,667 9,378,000
Conversion of preferred stock
warrants to common stock
warrants................... 303,000
Conversion of convertible
notes into Series D
Convertible Preferred
stock...................... 214,076 1,777,000
Repurchase of common stock... (5,978,000)
Issuance of stock options in
conjunction with consulting
and severance agreements... 684,000
Issuance of stock options to
employees at below fair
value...................... 2,576,000
Amortization of deferred
compensation...............
Accretion of mandatorily
redeemable preferred
stock...................... (131,000)
In-kind dividends on Series A
Convertible Preferred
stock...................... 87,817 506,000 (506,000)
Other comprehensive income:
Unrealized gain, available-
for-sale securities...... 46,000
Net loss................... (24,745,000)
Total comprehensive income...
--------- ----------- --------- ------- ----------- ---------- ------------ -------
Balance at December 31,
1999....................... 7,992,656 $59,118,000 4,070,655 $41,000 $(5,978,000) $9,423,000 $(32,146,000) $46,000
========= =========== ========= ======= =========== ========== ============ =======

TOTAL
SHAREHOLDERS'
DEFERRED EQUITY
COMPENSATION (DEFICIT)
------------ -------------
<S> <C> <C>
Balance at December 31,
1998....................... -- (1,695,000)
Exercise of common stock
options.................... 497,000
Issuance of common stock in
lieu of compensation....... 310,000
Sale of Series D Convertible
Preferred stock, net....... 47,457,000
Issuance of warrants in
conjunction with sale of
Series A Convertible
Preferred stock............ 25,000
Conversion of preferred stock
from mandatorily
redeemable................. 9,378,000
Conversion of preferred stock
warrants to common stock
warrants................... 303,000
Conversion of convertible
notes into Series D
Convertible Preferred
stock...................... 1,777,000
Repurchase of common stock... (5,978,000)
Issuance of stock options in
conjunction with consulting
and severance agreements... (335,000) 349,000
Issuance of stock options to
employees at below fair
value...................... (2,576,000) --
Amortization of deferred
compensation............... 144,000 144,000
Accretion of mandatorily
redeemable preferred
stock...................... (131,000)
In-kind dividends on Series A
Convertible Preferred
stock...................... --
Other comprehensive income:
Unrealized gain, available-
for-sale securities......
Net loss...................
Total comprehensive income... (24,699,000)
----------- -----------
Balance at December 31,
1999....................... $(2,767,000) $27,737,000
=========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 81

LENDINGTREE, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
---------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (963,000) $(6,434,000) $(24,745,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... -- 46,000 249,000
Provision for doubtful accounts......................... -- 8,000 129,000
Common stock issued in lieu of compensation/services
rendered.............................................. 43,000 210,000 310,000
Common stock options issued in lieu of
compensation/services rendered........................ -- -- 349,000
Amortization of deferred compensation................... -- -- 144,000
Issuance of stock options and warrants.................. 251,000 223,000 13,000
Issuance of Series D Convertible Preferred stock in lieu
of interest........................................... -- -- 27,000
Changes in assets and liabilities:
Accounts receivable................................... (2,000) (251,000) (1,911,000)
Prepaid expenses and other current assets............. -- (87,000) (918,000)
Other assets.......................................... (2,000) (58,000) (117,000)
Accounts payable...................................... 70,000 665,000 2,843,000
Accrued expenses...................................... -- 15,000 2,436,000
---------- ----------- ------------
Net cash used in operating activities.............. (603,000) (5,663,000) (21,191,000)
---------- ----------- ------------
Cash flows from investing activities:
Purchase of available-for-sale securities................. -- -- (27,007,000)
Purchase of property and equipment........................ (18,000) (231,000) (1,125,000)
---------- ----------- ------------
Net cash used in investing activities.............. (18,000) (231,000) (28,132,000)
---------- ----------- ------------
Cash flows from financing activities:
Proceeds from sales of common stock and warrants and
exercise of stock options............................... 1,023,000 3,921,000 497,000
Repurchase of common stock................................ -- -- (5,978,000)
Proceeds from issuance of convertible notes............... -- -- 1,750,000
Proceeds from sale of mandatorily redeemable Series A
Convertible Preferred stock and warrants, net of
offering costs.......................................... -- 4,656,000 4,931,000
Proceeds from sale of Series D Convertible Preferred
stock, net of offering costs............................ -- -- 47,457,000
---------- ----------- ------------
Net cash provided by financing activities.......... 1,023,000 8,577,000 48,657,000
---------- ----------- ------------
Net increase (decrease) in cash and cash equivalents........ 402,000 2,683,000 (666,000)
Cash and cash equivalents, beginning of period.............. -- 402,000 3,085,000
---------- ----------- ------------
Cash and cash equivalents, end of period.................... $ 402,000 $ 3,085,000 $ 2,419,000
========== =========== ============
Supplemental disclosure of cash flow information:
Interest paid............................................. $ -- $ -- $ --
Income taxes paid......................................... -- -- --
Supplemental schedule of non-cash financing activities (Note
2)
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-7
<PAGE> 82

LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS

1. THE COMPANY

LendingTree, Inc. (the "Company") was incorporated in the State of Delaware
on June 7, 1996.

The Company is an Internet-based loan marketplace for consumers and
lenders. Loan types include mortgage, home equity, automobile, credit cards and
personal loans.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include percentage complete under
long-term contracts and the valuation of the Company's common stock, options and
warrants. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. As of December 31, 1999, cash equivalents
included amounts in an overnight repurchase agreement of $2,419,000.

Short-Term Investments

The aggregate fair values of the Company's short-term investments (all
available-for-sale investments in short-term corporate commercial paper) as of
December 31, 1999 were as follows:

<TABLE>
<CAPTION>
UNREALIZED AMORTIZED
FAIR VALUE HOLDING GAINS COST BASIS MATURITIES
----------- ------------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
$27,053,000 $46,000 $27,033,000 Less than 6 months
=========== ======= =========== ==================
</TABLE>

The specific identification cost basis is used to determine realized gains
on the Company's available-for-sale securities. The unrealized holding gain of
$46,000 is included as a separate component of shareholders' equity for the year
ended December 31, 1999. Investments in available-for-sale securities are
carried at fair value. There have been no realized gains or losses.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, accounts payable and
accounts receivable at December 31, 1998 and 1999 approximated their fair value
due to the short-term nature of these items. The carrying value of the Company's
short-term investments at December 31, 1999 approximated their fair values.

Property and Equipment

Property and equipment is primarily comprised of furniture and computer
equipment which are stated at cost less accumulated depreciation and are being
depreciated using the straight-line method over their estimated useful lives,
which range from one to five years. Leasehold improvements are depreciated over
the shorter of the lease period or the estimated useful life of the improvement.
Ordinary maintenance and repair costs are expensed as incurred.

F-8
<PAGE> 83
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Impairment of Long-Lived Assets

The Company evaluates the recoverability of its property and equipment and
intangible assets in accordance with Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," ("SFAS No. 121"). SFAS No. 121 requires recognition
of impairment of long-lived assets in the event the net book value of such
assets exceeds the future undiscounted cash flows attributable to such assets or
the business to which such assets relate. No impairments were required to be
recognized during the years ended December 31, 1997, 1998 or 1999.

Income Taxes

The Company accounts for income taxes using the liability method whereby
deferred tax assets or liabilities are recognized for the temporary differences
between financial reporting and tax bases of the Company's assets and
liabilities and for tax carryforwards. In estimating future tax consequences,
the Company generally considers all expected future events other than enactment
of changes in tax law or rates. If it is "more likely than not" that some
portion or all of a deferred tax asset will not be realized, a valuation
allowance is recorded.

Revenue Recognition

LendingTree network revenue is generated principally from the transmission
of qualification forms ("Transmission Revenue") and the closing of loans
("Closed Loan Revenue"). LendingTree network revenue also includes lender set-up
fees and monthly maintenance fees. Transmission Revenue is recognized at the
time qualification forms are transmitted, while Closed Loan Revenue is
recognized at the time the lender reports the activity to the Company, which may
be up to four months after the qualification form is transmitted. Revenue from
lender set-up fees is recognized upon completion of the lender's integration
with the LendingTree network. Monthly maintenance fees are recognized as the
service is provided.

[i]close and other technology revenue is related primarily to modifying the
Company's proprietary software for use by certain lenders and other third
parties. Revenue under such contracts is recognized as work is performed under
the percentage of completion method with progress generally measured using costs
incurred to date compared to total estimated costs to be incurred, as this
software requires significant modification and customization. Losses, if any,
are recognized when the liability is identified. Included in accounts
receivable, net, as of December 31, 1998 and 1999 is $105,000, and $10,000,
respectively, of unbilled revenue related to percentage of completion contracts.

Cost of Revenue

LendingTree network cost of revenue includes salary and benefit costs of
the borrower relations and implementation groups, credit agency scoring
expenses, revenue sharing costs, closed loan rebate costs, and the costs of
website hardware.

[i]close cost of revenue includes direct costs of modifying the Company's
proprietary software for licensing to lenders, as well as the cost of servers
related to these licenses. Revenue share expense in 1999 is approximately $0.5
million and is recorded in the period when the related revenue is recognized.
The Company's partner in these revenue share transactions is also a holder of
the Company's preferred stock.

Marketing and Advertising Expenses

Marketing and advertising expenses consist primarily of costs, including
salaries, of all personnel involved in marketing and advertising. Marketing and
advertising expenses also include costs of advertising,

F-9
<PAGE> 84
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

trade shows, affiliate bounty fees, and certain indirect costs. All costs of
advertising the services and products offered by the Company are expensed as
incurred. Advertising expense totaled approximately $50,000, $1,812,000 and
$17,121,000 in the years ended December 31, 1997, 1998 and 1999, respectively.

Product Development Costs

Product development costs primarily include expenses incurred by the
Company to develop our proprietary software and to enhance, manage, monitor, and
operate the Company's website. Prior to January 1, 1999, the software
development costs component of product development costs were accounted for in
accordance with Statement of Financial Accounting Standards No. 86 "Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,"
which requires software development costs to be capitalized beginning when a
product's technological feasibility is established and ending when a product is
available for general release. Through December 31, 1998, completion of a
working model of the Company's product and general release have substantially
coincided. Costs incurred by the Company between the completion of the working
model and the point at which the product is ready for general release have been
insignificant.

In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position No. 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"), which provides guidance regarding when software
developed or obtained for internal use should be capitalized. SOP 98-1 is
effective for financial statements for fiscal years beginning after December 15,
1998. The Company adopted SOP 98-1 effective January 1, 1999. With the adoption
of this standard, the Company began accounting for the software development
component of product development costs associated with internal use software in
accordance with SOP 98-1, which requires that certain costs incurred during the
application development stage be capitalized, while costs incurred during the
preliminary project stage and post-implementation/operation stage should be
expensed as incurred. Capitalized product development costs are amortized over
the estimated life of the related application. The adoption of SOP 98-1 did not
have a material impact on the Company's financial statements.

Stock-Based Compensation

The Company accounts for the effect of its stock-based compensation plans
for employees under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("SFAS No. 123") using the optional
intrinsic value method. The intrinsic value method results in compensation cost
equal to the excess of the fair value of the stock over the exercise or purchase
price at the date of award. The Company also discloses the pro forma income
statement effect of its stock-based compensation plans as if the Company had
adopted the fair value approach. The fair value approach results in compensation
cost using an option-pricing model that takes into account the fair value price
at the grant date, the exercise price, the expected life of the award, the
expected dividends, and the risk-free interest rate expected over the life of
the award.

The Company accounts for the effect of its stock-based compensation for
non-employees under SFAS No. 123, using the fair value approach.

Risks and Uncertainties, Significant Customers and Concentrations

Since inception, the Company has incurred significant losses and had an
accumulated deficit of $32.1 million as of December 31, 1999. The losses and
accumulated deficit have resulted from the significant costs incurred for
advertising and employment expenses related to the development of [i]close and
establishing relationships with lenders. Because the Company plans to continue
to invest in advertising, product development, and marketing, the Company will
continue to incur substantial losses in the foreseeable future. Although the
Company has experienced significant revenue growth, the operating

F-10
<PAGE> 85
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

results for future periods are subject to numerous uncertainties, and there can
be no assurance that revenue growth will continue or that the Company will be
able to achieve or sustain profitability. The Company plans to raise additional
equity capital through its IPO in order to continue to fund its operating needs.
However, if it is unable to successfully raise sufficient funds, management
believes it could reduce discretionary operating expenditures, including
advertising and marketing and certain overhead costs, to permit the Company to
continue as a going concern beyond December 31, 2000.

Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents and accounts
receivable. Cash equivalents are invested in repurchase agreements on an
overnight basis with high credit quality financial institutions. Short term
investments are comprised of commercial paper from a diverse group of high
credit quality issuers.

For the year ended December 31, 1997, two lenders comprised all of the
Company's revenue. For the year ended December 31, 1998, four lenders comprised
27%, 13%, 12%, and 11% of the Company's revenue. For the year ended December 31,
1999, no lender exceeded 10% of the Company's revenue. All of the Company's
revenues are from transactions originating in the United States.

As of December 31, 1998, two lenders comprised 41% and 13% of the Company's
accounts receivable balance. As of December 31, 1999, no lender exceeded 10% of
the Company's accounts receivable balance. Concentrations of credit risk with
respect to accounts receivable are limited due to the large number of lenders
comprising the Company's customer base.

NET LOSS PER COMMON SHARE

Historical

The Company computes net loss per common share in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings Per Share," ("SFAS No.
128") and SEC Staff Accounting Bulletin No. 98 ("SAB No. 98"). Under the
provisions of SFAS No. 128 and SAB No. 98, basic net loss per common share
("Basic EPS") is computed by dividing net loss available to common shareholders
by the weighted average number of common shares outstanding. Diluted net loss
available to common shareholders ("Diluted EPS") is computed by dividing net
loss by the weighted average number of common shares and dilutive potential
common shares then outstanding. Potential common shares consist of shares
issuable upon the exercise of stock options and warrants and shares issuable
upon conversion of convertible preferred stock.

The calculation of net loss per common share for years ended December 31,
1998 and 1999 does not include 786,656 and 5,165,545, respectively, of weighted
average potential common shares as their impact would be antidilutive.

Pro Forma (Unaudited)

Pro forma net loss per common share is calculated assuming the conversion
of all outstanding shares of preferred stock into common stock which converts
automatically upon completion of the Company's IPO into 10,150,673 shares of
common stock at December 31, 1999, therefore, accretion of discounts on
mandatorily redeemable preferred stock of $131,000 and dividends issued to
preferred shareholders on conversion of preferred stock warrants to common stock
warrants of $525,000 for the year ended December 31, 1999 and dividends on
convertible preferred stock for $2,160,000 during the year ended December 31,
1999, are excluded from the calculation of pro forma net loss per common share.
It is assumed that each series of preferred stock was converted as of January 1,
1998 or the date of issuance, if later.

The calculation of pro forma net loss per common share for the year ended
December 31, 1999 does not include 1,159,579, of weighted average potential
common shares, as their impact would be antidilutive.

F-11
<PAGE> 86
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Stock Split

On January 5, 2000, the Board of Directors approved a 1.27-for-1 common
stock split which was effective February 3, 2000. The financial statements for
all periods presented have been restated to reflect the effect of this stock
split. In addition, the Board approved an amendment to the certificate of
incorporation to take effect as of the effective date of the registration
statement, increasing the authorized capital stock to 100,000,000 shares of
common stock and 10,000,000 shares of preferred stock, each with a par value of
$0.01 per share.

Comprehensive Income

Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"). SFAS No. 130 establishes standards for reporting comprehensive
income and its components in financial statements. Comprehensive income, as
defined, includes all changes in equity during a period from non-owner sources.
The Company had no items of other comprehensive income for the years ended
December 31, 1997 or 1998. For the year ended December 31, 1999, the Company had
$46,000 of other comprehensive income related to unrealized gains on
available-for-sale securities.

Segment Reporting

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," ("SFAS No. 131"). This statement
establishes standards for the way companies report information about operating
segments in annual financial statements. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. The disclosures prescribed by SFAS No. 131 are effective for the year
ended December 31, 1998. Management has determined that the Company does not
have any separately reportable operating segments as of December 31, 1998 or
December 31, 1999.

Start-Up Costs

In April 1998, the Accounting Standards Executive Committee of the AICPA
issued Statement of Position No. 98-5, "Reporting on the Costs of Start-Up
Activities," ("SOP No. 98-5") which is effective for fiscal years beginning
after December 15, 1998. SOP No. 98-5 requires companies to expense as incurred
all pre-operating, startup and organizational costs that are not capitalizable
as long-lived assets. The Company adopted SOP No. 98-5 effective January 1,
1999. The adoption of SOP No. 98-5 had no impact on the Company's financial
condition or results of operations.

F-12
<PAGE> 87
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Cash Flow Information

A supplemental schedule of non-cash financing activities follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1998 1999
------- ------- ----------
<S> <C> <C> <C>
Accretion of mandatorily redeemable
preferred stock........................... $ -- $ -- $ 131,000
Dividends issued to preferred shareholders
on conversion of preferred stock warrants to
common stock warrants....................... $ -- $ -- $ 525,000
Dividends on convertible preferred stock.... $ -- $24,000 $ 506,000
Conversion of convertible notes and accrued
interest into Series D Convertible
Preferred stock........................... $ -- $ -- $1,777,000
Issuance of warrants in conjunction with
Series A financing and convertible
promissory notes.......................... $ -- $56,000 $ 63,000
</TABLE>

Reclassifications

Certain reclassifications were made to the December 31, 1997 and 1998
financial statements to conform them to the December 31, 1999 presentation.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," ("SFAS No. 133"). SFAS No. 133 establishes a new model
for accounting for derivatives and hedging activities and supercedes several
existing standards. SFAS No. 133, as amended by SFAS No. 137, is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. The Company
does not expect that the adoption of SFAS No. 133 will have a material impact on
the Company's financial statements.

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
EXPECTED DECEMBER 31,
LIFE --------------------------
(YEARS) 1998 1999
-------- --------- -------------
<S> <C> <C> <C>
Computer hardware......................... 3 $174,000 $ 545,000
Office furniture and equipment............ 5 70,000 381,000
Computer systems software................. 1 5,000 420,000
-------- -------------
249,000 1,346,000
Accumulated depreciation.................. (39,000) (260,000)
-------- -------------
Net....................................... $210,000 $ 1,086,000
======== =============
</TABLE>

Depreciation expense for the years ended December 31, 1997, 1998 and 1999
was $0, $39,000 and $249,000, respectively.

F-13
<PAGE> 88
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. ACCRUED EXPENSES

Accrued expenses are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1999
------- ----------
<S> <C> <C>
Professional services and fees........................ $ -- $ 706,000
Advertising........................................... -- 460,000
Loss on sub-lease..................................... 454,000
Incentive and other compensation...................... 15,000 385,000
Deferred revenues..................................... -- 209,000
Other................................................. -- 237,000
------- ----------
Total accrued expenses...................... $15,000 $2,451,000
======= ==========
</TABLE>

5. SHAREHOLDERS' EQUITY

Common Stock

On March 24, 1998, the Company effected a 2-for-1 stock split in the form
of a stock dividend. All share and per share amounts have been restated to
reflect the stock split. The holder of each share of common stock is entitled to
one vote per share.

Preferred Stock

On September 20, 1999, the shareholders approved an amendment of the
Company's certificate of incorporation, under which the Company authorized
10,467,194 shares of preferred stock, $.01 par value per share, consisting of
four series of convertible preferred stock (the "Series A Preferred," "Series B
Preferred," "Series C Preferred" and "Series D Preferred" stock). Preferred
shareholders are entitled to cumulative dividends which accrue on a daily basis
at a rate of 8% per annum. Dividends to Series A Preferred shareholders are
payable quarterly, if and when declared, in additional shares of preferred stock
or in cash at the option of the Company and subject to certain conditions. It is
the Company's present intention to pay such dividends in shares of Series A
preferred stock. Dividends to Series D Preferred shareholders are paid in cash.
As of December 31, 1999, there was $1,654,000 of accumulated, undeclared
dividends related to the Series A and Series D Preferred stock. Accumulated
dividends on Series A Preferred stock have been calculated based on the
estimated fair value of the shares to be issued as of December 31, 1999 in
respect of such dividends.

The liquidation value of convertible preferred stock is $6.00, $9.00,
$12.00, and $8.30 per share for Series A Convertible Preferred, Series B
Convertible Preferred, Series C Convertible Preferred, and Series D Convertible
Preferred, respectively, plus accumulated dividends. If liquidation proceeds are
insufficient to pay such amounts, holders would share ratably in any proceeds on
liquidation based on the number of shares into which the preferred stock is
convertible. If such proceeds are in excess of $50 million, in addition to the
liquidation preference, the holders of preferred stock are entitled to
participate ratably with common shareholders on an as-if-converted basis.

Each holder of outstanding shares of preferred stock is entitled to the
number of votes equal to the number of whole shares of common stock into which
the shares are convertible. The holders of shares of preferred stock vote
together with holders of shares of common stock as a single class. The holders
in interest of a majority of the outstanding shares of preferred stock, voting
together as a single class, are entitled to elect one director to the Company's
Board of Directors.

F-14
<PAGE> 89
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Each share of preferred stock is convertible, at the option of the holder,
into 1.27 shares of common stock, subject to certain anti-dilution provisions.
In addition, accumulated and unpaid dividends are convertible into shares of
common stock at an exchange rate equivalent to the per share liquidation value
of such stock divided by 1.27. Effective upon the closing of the sale of shares
of common stock by the Company pursuant to a qualified public offering, as
defined in the instrument governing the preferred stock, all outstanding shares
of preferred stock and accumulated undeclared dividends automatically convert to
shares of common stock.

Prior to September 20, 1999, the Company was required to redeem, in three
installments, commencing on the fourth anniversary of the date of issuance of
the first share of Series A Convertible Preferred, and continuing on the
immediately succeeding two anniversaries, the number of shares of preferred
stock held by all holders. The redemption price of a share of a series of
convertible preferred stock shall mean the original issue price of a share plus
all accrued and unpaid dividends thereon. In connection with the Series D
Convertible Preferred stock financing, the Series A Convertible Preferred
shareholders relinquished their rights to mandatory redemption. Accretion
related to the mandatory redemption feature ceased on September 20, 1999.

Convertible Promissory Notes

During June and July 1999, the Company entered into Convertible Promissory
Note Agreements (the "Notes") with certain individuals from which the Company
received a total of $1.75 million. The Company also issued 53,340 warrants to
purchase common stock at approximately $7.87 per share to the purchasers of
these Notes. These warrants were valued at approximately $19,000 using an option
valuation model. The value of these warrants was recognized as interest expense
during the year ended December 31, 1999.

These Notes were to be due on July 13, 2000 (the "maturity date") and bore
interest at 8% per annum, compounded quarterly. They could be prepaid at any
time without penalty.

Under the terms of the Notes, if the Company engaged in a subsequent
financing at any time before December 31, 1999, and provided that the financing
was for a minimum of $10,000,000, the principal outstanding under the Notes and
all accrued interest thereon would be immediately converted into shares of the
offered securities at a conversion price equal to the per share purchase price
of the offered securities. $500,000 of the amount received related to the Notes
was from a party related to an Executive Officer of the Company. This individual
invested under the same terms as other investors in the Notes. These Notes and
related accrued interest converted to Series D Convertible Preferred stock in
connection with the Series D Convertible Preferred stock sale described below.

Series D Sale

On September 20, 1999, the Company entered into a Series D Convertible
Preferred Stock Purchase Agreement (the "Series D Agreement") under which it
sold 6,024,096 shares of Series D Convertible Preferred stock at $8.30 per share
for total gross proceeds of approximately $50,000,000. The Company utilized
approximately $5,978,000 of these proceeds to repurchase 948,971 shares of
common stock (of which 666,750 shares were purchased from Board members for
approximately $4.2 million in connection with their departure from the Board)
which has been reflected as treasury stock in the accompanying financial
statements. The Company also incurred approximately $2,543,000 in offering
costs, which have been netted against the proceeds. The Company granted a
warrant to purchase 127,000 shares of common stock at approximately $7.52 per
share to a broker in connection with the Series D Agreement, the fair value of
which (approximately $458,000) was calculated using an option valuation model
and is included in offering costs. During January 2000, the company entered into
an agreement with the holder of this warrant. Upon successful completion of the
company's IPO, the exercise price of the warrant will be

F-15
<PAGE> 90
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

increased to the price per share of common stock sold in the offering. The
Company will record a charge based upon the fair value of the new warrant issued
in excess of the existing warrant based upon an option valuation model.

In connection with the Series D Agreement, the following additional
transactions occurred:

- Series A Convertible Preferred shareholders gave up their mandatory
redemption rights.

- $1,750,000 of Convertible Notes plus accrued interest that were
outstanding at the closing converted into shares of Series D Convertible
Preferred stock at $8.30 per share. The Company issued a total of 214,076
shares to settle this obligation.

- A consulting agreement was entered into with a former member of the Board
of Directors and a severance agreement was entered into with a former
executive. Both individuals had their existing incentive stock options
cancelled, and new non-qualified stock options were issued at the current
fair value. They received 76,200 and 114,300 options, respectively, to
purchase common stock at approximately $4.72. The Company recorded
expense of $37,000 and $349,000, respectively, as determined using an
option valuation model, related to these two individuals during the year
ended December 31, 1999. Additional expense of $298,000 related to the
consulting agreement will be incurred ratably during the remaining three
years of the consulting agreement, and has been recorded as deferred
compensation as of December 31, 1999.

- All preemptive rights were terminated. All Board representation
agreements were terminated.

Series A Sale

Effective December 9, 1998, the Company entered into a Convertible
Preferred Stock and Warrant Purchase Agreement (the "Preferred Stock Agreement")
under which it sold, in the Initial Closing, 833,334 shares of Series A
Convertible Preferred stock at $6 per share and a warrant to purchase 260,000
shares of Series A Convertible Preferred stock with an exercise price of $6 per
share (the "Series A Warrant"). The Series A Warrant was recorded by allocating
the fair value of this warrant determined using an option valuation model, from
the proceeds received in the Initial Closing. Proceeds from the Initial Closing
totaled $4,656,000, net of expenses of approximately $344,000. In addition, the
Company issued a warrant to purchase 63,500 shares of common stock at
approximately $4.72 per share (the "Common Warrant") to a broker in connection
with the Agreement, the fair value of which (approximately $48,000) is included
in offering costs. The fair value of the common warrants was calculated
utilizing an option valuation model.

During March 1999 (the "Second Closing") the Company sold 500,000 shares of
Series A Convertible Preferred stock at a price of $6 per share and a warrant to
purchase 40,000 shares of Series B Convertible Preferred stock at $9 per share
(the "Series B Warrant"), for gross proceeds of $3,000,000. During May 1999 (the
"Third Closing") the Company sold 333,334 shares of Series A Convertible
Preferred stock at $6 per share for gross proceeds of $2,000,000. The Company
also granted a warrant to the investors in the Third Closing to purchase 33,020
shares of common stock at approximately $7.87 per share. The fair value of these
warrants was approximately $12,000 and was calculated using an option valuation
model.

Series A and B Warrants

In conjunction with the sale of Series D Convertible Preferred stock, the
Series A Convertible Preferred shareholders exchanged their Series A and Series
B Warrants for warrants to purchase 381,000 shares of common stock at
approximately $4.72 per share. The exchange has been reflected in the financial
statements as a distribution to the preferred shareholders equivalent to the
excess of the current fair value

F-16
<PAGE> 91
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

of the new warrant over the carrying value of the existing warrants, and has
been included in the calculation of net loss attributable to common
shareholders. The new warrants issued were valued at approximately $828,000
utilizing an option valuation model.

Common Warrants

In addition to common warrants issued as described above, the Company also
issued a warrant to purchase 9,525 shares of common stock at approximately $4.72
per share in connection with a line of credit provided by a shareholder. The
fair value of this warrant (approximately $7,000) was recognized in expense
during the year ended December 31, 1998. This warrant was valued using an option
valuation model. The line of credit is no longer available and no amounts were
outstanding at December 31, 1998 or December 31, 1999.

At December 31, 1999, the Company had outstanding warrants to purchase
667,385 shares of common stock, with exercise prices ranging from approximately
$4.72 - $7.87. Expiration dates range from November 2003 through September 2005.

Stock Option Plans

During January 1997, the Board of Directors approved the 1997 Stock Option
Plan (the "1997 Plan") which provides for the granting of both incentive stock
options and non-qualified stock options to employees, officers, directors and
consultants of the Company. The 1997 Plan allows for a maximum of 1,556,890
shares for option grants to be issued prior to January 15, 2007. During February
1998, the Company established the 1998 Stock Option Plan (the "1998 Plan"). The
1998 Plan, as amended, authorized 1,187,450 shares for option grants to be
issued prior to February 2008. During September 1999, the Company established
the 1999 Stock Option Plan (the "1999 Plan"). The 1999 Plan, as amended,
authorized 2,286,000 shares for option grants prior to September 2009. The 1999
Plan permits the granting of any combination of incentive stock options and
nonqualified stock options.

Under all of the Company's stock option plans, the exercise price of any
incentive stock option shall not be less than the fair value of the stock on the
date of grant or less than 110% of the fair value in the case of optionees
holding more than 10% of the total combined voting power of all classes of stock
of the Company. Options under the Company's stock option plans are exercisable
for ten years from the date of grant, except for incentive stock options granted
to optionees holding more than 10% of the total combined voting power of all
classes of stock, which must be exercised within five years.

The Company's stock option plans generally provide for a four-year vesting
requirement with one-quarter of such shares vesting at the end of one full year
and on an annual basis thereafter. Upon a change of control, as defined, 50% of
all unvested stock options shall vest.

F-17
<PAGE> 92
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

A summary of incentive stock options awarded to employees during the years
ended December 31, 1997, 1998 and 1999 follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE EXERCISE
NUMBER OF EXERCISE PRICE
OPTIONS PRICE RANGE
--------- -------- ----------
<S> <C> <C> <C>
OUTSTANDING AS OF DECEMBER 31, 1996............ -- $ -- $ --
Granted at fair value.......................... 479,563 0.35 0.02-1.43
Exercised...................................... (367,030) 0.02 0.02
--------
OUTSTANDING AS OF DECEMBER 31, 1997............ 112,533 1.43 1.43
Granted at fair value.......................... 571,695 4.56 1.43-5.20
Forfeited...................................... (65,087) 3.09 1.43-4.72
--------
OUTSTANDING AS OF DECEMBER 31, 1998............ 619,141 4.15 1.43-5.20
Granted at fair value.......................... 521,660 5.09 4.72-6.06
Granted below fair value....................... 530,466 5.68 5.51-6.53
Forfeited...................................... (218,377) 4.85 4.72-5.20
--------
OUTSTANDING AS OF DECEMBER 31, 1999............ 1,452,890 $4.93 $1.43-6.53
======== ===== ==========
Exercisable as of December 31, 1999............ 254,025 $3.22 $1.43-5.51
======== ===== ==========
</TABLE>

A summary of non-qualified stock options awarded during the years ended
December 31, 1997, 1998 and 1999 follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE EXERCISE
NUMBER OF EXERCISE PRICE
OPTIONS PRICE RANGE
--------- -------- ----------
<S> <C> <C> <C>
OUTSTANDING AS OF DECEMBER 31, 1996............. -- $ -- $ --
Granted at fair value........................... 938,262 1.43 1.43-1.57
---------
OUTSTANDING AS OF DECEMBER 31, 1997............. 938,262 1.43 1.43-1.57
Granted at fair value........................... 938,262 4.76 3.54-5.20
---------
OUTSTANDING AS OF DECEMBER 31, 1998............. 1,212,701 2.19 1.43-5.20
Granted at fair value........................... 287,752 5.81 4.72-6.06
Granted below fair value........................ 403,682 5.23 4.72-5.51
Exercised....................................... (274,419) 1.80 1.43-4.72
Forfeited....................................... (111,610) 4.80 4.72-5.20
---------
OUTSTANDING AS OF DECEMBER 31, 1999............. 1,518,106 3.56 $1.43-6.06
========= ===== ==========
Exercisable as of December 31, 1999............. 934,158 $2.30 $1.43-5.20
========= ===== ==========
</TABLE>

F-18
<PAGE> 93
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about the Company's stock
options:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT DECEMBER 31, 1999
----------------------------------------
NUMBER REMAINING
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE OPTIONS EXERCISABLE
- -------------- ----------- ---------------- -------------------
<C> <C> <S> <C>
$1.43 809,817 7.8 years 808,548
3.54 41,910 8.4 years 29,210
4.72 700,616 7.8 years 50,800
5.20 173,990 8.5 years 106,680
5.51 965,898 9.7 years 192,945
6.06 190,500 9.7 years --
6.54 88,265 9.8 years --
--------- ---------
2,970,996 1,188,183
========= =========
</TABLE>

Compensation costs recognized during the years ended December 31, 1997,
1998 and 1999 for stock-based compensation awards totaled $251,000, $215,000 and
$804,000, respectively. The weighted average fair value at date of grant for
options granted at fair value during the years ended December 31, 1997, 1998 and
1999 was $0.37, $0.83 and $1.10, respectively. The weighted average fair value
at the date of grant for options granted below fair value during the year ended
December 31, 1999 was $4.66. The fair value of each option grant was estimated
on the date of grant using the minimum value method based upon the following
assumptions: dividend yield -- 0%; risk free interest rate -- 6% (1997); 5.1%
(1998); 4.75 -- 5.75% (1999) and weighted average expected option term -- 5
years (1997); 4 years (1998); 5 years (1999). The Company has approximately $2.8
million of deferred compensation recorded on its December 31, 1999 balance sheet
that will be expensed over the vesting period of the related options
(principally four years).

Had compensation expense for the Company's employee options been recorded
based on the fair value of the options at the grant date, as prescribed by SFAS
No 123, the Company's net loss and net loss per common share -- basic and
diluted would have been as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net loss attributable to common shareholders....... $ (963,000) $(6,458,000) $(27,561,000)
Pro forma adjustment for stock compensation
expense.......................................... (150,000) (392,000) (748,000)
----------- ----------- ------------
Pro forma net loss attributable to common
shareholders..................................... $(1,113,000) $(6,850,000) $(28,309,000)
=========== =========== ============
Net loss per common share -- basic and diluted..... $ (1.20) $ (1.88) $ (7.74)
Pro forma adjustment for stock compensation
expense.......................................... (.19) (.11) 0.1
----------- ----------- ------------
Pro forma net loss per common share -- basic and
diluted.......................................... $ (1.39) $ (1.99) $ (7.95)
=========== =========== ============
</TABLE>

Because options vest over several years and additional options are expected
to be granted in subsequent years, the pro forma impact on periods presented may
not be representative of the pro forma effects on reported net income or loss in
future years.

F-19
<PAGE> 94
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES

There is no current income tax provision or benefit for the years ended
December 31, 1997, 1998 or 1999 as the Company has generated net operating
losses for income tax purposes for which there is no carryback potential. There
is no deferred provision or benefit for income taxes recorded as the Company is
in a net deferred tax asset position for which a full valuation allowance has
been recorded due to uncertainty of realization.

Significant components of the Company's deferred tax assets and liabilities
at December 31, 1998 and 1999 consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Deferred tax assets:
Domestic net operating loss carryforwards............... $ 2,683,000 $11,761,000
Stock compensation...................................... 182,000 406,000
Other................................................... 65,000 393,000
----------- -----------
Gross deferred tax assets............................ 2,930,000 12,560,000
Less: Valuation allowance............................ (2,926,000) (12,540,000)
----------- -----------
Net deferred tax assets.............................. 4,000 20,000
Deferred tax liabilities:
Fixed assets............................................ 4,000 20,000
----------- -----------
Total deferred tax liabilities.................. 4,000 20,000
----------- -----------
Net deferred tax asset (liability)................... $ -- $ --
=========== ===========
</TABLE>

The Company has net operating loss carryforwards for income tax purposes of
approximately $7 million available at December 31, 1998 and approximately $29
million available at December 31, 1999 to offset future federal and state
taxable income. These net operating loss carryforwards begin to expire in 2011.
Should the Company undergo an ownership change as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change may be subject to annual limitation
which could reduce or defer the utilization of these losses.

Taxes computed at the statutory Federal income tax rate of 34% are
reconciled to the provision for income taxes as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------
1997 1998 1999
----------------------- ------------------------- -------------------------
% OF % OF % OF
AMOUNT PRETAX LOSS AMOUNT PRETAX LOSS AMOUNT PRETAX LOSS
--------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Federal tax benefit at
statutory rate............... $(327,000) (34.0%) $(2,188,000) (34.0%) $(8,413,000) (34.0%)
State taxes (net of federal
benefit)..................... (50,000) (5.2) (317,000) (4.9) (1,222,000) (4.9)
Change in valuation
allowance.................... 376,000 39.0 2,550,000 39.6 9,615,000 38.8
Other nondeductible expenses... 1,000 0.2 (45,000) (0.7) 20,000 0.1
--------- ----- ----------- ----- ----------- -----
Provision for income taxes..... $ -- 0 % $ -- 0 % $ -- 0 %
========= ===== =========== ===== =========== =====
</TABLE>

F-20
<PAGE> 95
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES

The Company leases certain office facilities and equipment under operating
leases. These leases are generally renewable. During December 1999, the Company
entered into a lease agreement for a new facility in Charlotte, North Carolina.
The lease expires in July 2010. The minimum lease payment is approximately
$55,000 per month. In connection with this lease agreement, the Company
subleased its existing space in Charlotte, North Carolina. The estimated loss of
$454,000 on this sublease over the remaining term has been recognized as expense
in the income statement for the year ended December 31, 1999.

The following is a schedule of future minimum rental payments required
under the leases as of December 31, 1999:

<TABLE>
<S> <C>
2000..................................................... $ 946,000
2001..................................................... 992,000
2002..................................................... 822,000
2003..................................................... 688,000
2004..................................................... 683,000
Thereafter............................................... 4,380,000
----------
$8,511,000
==========
</TABLE>

Rent expense totaled $7,000, $109,000 and $534,000 for the years ended
December 31, 1997, 1998 and 1999.

The Company is subject to various legal matters in the ordinary course of
business. In the opinion of management, the ultimate outcome of any such matters
will not have a material adverse effect on the financial condition, results of
operations or cash flows of the Company.

As of December 31, 1999, the Company was committed to approximately $6.0
million related to advertising and promotion costs through 2001.

8. SUBSEQUENT EVENTS

Warrants and Co-Branded Site Agreement

During January 2000, the Company entered into an agreement for an initial
one year period with a third-party to co-brand a web site. In connection with
this agreement, the Company agreed to give two warrants to this third-party,
each warrant is for the purchase of 95,250 shares of the Company's common stock
at $7.87 per share. The first warrant, with an underlying fair value of $11.00
is vested and exercisable at the date of grant, and expense, calculated using an
option pricing model, will be recognized ratably for services provided by
CNBC.com over the initial one year period under the agreement. The second
warrant only vests if certain performance criteria are met by the third-party
during the first year of this agreement which will result in the extension of
the agreement for an additional year. Expense related to this warrant will be
recognized based upon the excess of the market value of the Company's common
stock in relation to the exercise price of the warrant at each balance sheet
date, until the warrant is fully vested. This amount could be significant in
relation to the Company's ongoing operations. In connection with this agreement,
the Company has committed to approximately $9.8 million related to advertising
and promotion costs through 2001.

Option Grants

In January 2000, the Company granted stock options to purchase 769,225
shares of common stock to employees at an exercise price of $9.28 per share.
Based on the difference between the strike price of these

F-21
<PAGE> 96
LENDINGTREE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

options and the fair market value at the date of grant ($11.00) which was the
mid-point of the initial public offering range, the Company recorded a deferred
compensation charge of approximately $1.3 million and will amortize it to
expense over the options' four year vesting period.

Officer Loans (unaudited)

In February 2000, the Company entered into promissory notes and pledge
agreements with certain executive officers of the Company to provide a total of
approximately $600,000 to these officers for the purpose of exercising
non-qualified stock options and for paying the related withholding taxes on
such. The loans are to be repaid to the Company, plus interest at the federal
rate (as defined) in three equal installments on January 31, 2002, 2003 and
2004. The officers have pledged to the Company a security interest in the stock
issued as a result of these options being exercised. The pledged stock may not
be sold by the officers without prior written consent by the Company.

CEO Options and Loan

In January 2000, the Company granted an option to its Chief Executive
Officer to purchase up to 100,000 shares of its common stock at an exercise
price equal to the initial public offering price. The option can only be
exercised prior to the commencement of trading of the Company's common stock. If
the Chief Executive Officer were to exercise these options, the Company will
enter into a promissory note and pledge agreement with him to provide for loan
equal to the number of shares purchased multiplied by the initial public
offering price. This loan is to be repaid to the Company, plus interest at the
federal rate (as defined) in two equal installments on January 31, 2004 and
2005. The Chief Executive Officer will pledge, to the Company, a security
interest in the stock issued as a result of this option being exercised. The
pledged stock may not be sold by the Chief Executive Officer without prior
written consent by the Company.

Preferred Stock Dividends (unaudited)

On January 31, 2000, the Company's Board of Directors declared dividends
through December 31, 1999 on its Series A and Series D convertible preferred
stock. The payment of the dividends will coincide with the Company's IPO and the
automatic conversion of all outstanding shares of preferred stock into common
stock and will result in the issuance of an additional 222,396 shares of common
stock.

Investment (unaudited)

In February 2000, the Company made a $2.5 million equity investment in a
wholesale lending service. The Company's investment represents approximately
8.5% of the outstanding equity of this wholesale lending service.

Employee Stock Purchase Plan

The Board of Directors of the Company approved an Employee Stock Purchase
Plan in January 2000 and reserved for the issuance of 444,500 shares under the
plan.

F-22
<PAGE> 97

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THROUGH AND INCLUDING MARCH 11, 2000 (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 THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

3,650,000 SHARES

[LENDINGTREE, INC. LOGO]

COMMON STOCK

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PROSPECTUS

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MERRILL LYNCH & CO.

LEHMAN BROTHERS

PRUDENTIAL VOLPE TECHNOLOGY
A UNIT OF PRUDENTIAL SECURITIES

FEBRUARY 15, 2000

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