SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 9, 2005
EXPEDIA, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 333-124303-01 20-2705720
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification Number)
3150 139TH AVENUE SE 98005
BELLEVUE, WASHINGTON
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (425) 679-7200
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO MATERIAL DEFINITIVE AGREEMENTS.
SPIN-OFF AGREEMENTS
On December 21, 2004, IAC/InterActiveCorp ("IAC") announced its
plan to separate into two independent public companies. We refer to this
transaction as the "Spin-Off" and the new company that holds the travel and
travel-related businesses of IAC as "Expedia, Inc." Expedia, Inc. ("Expedia" or
the "Company") consists of the travel and travel-related businesses,
subsidiaries and investments formerly owned by IAC (other than Interval
International and TV Travel Shop) and TripAdvisor, Inc. On August 9, 2005, IAC
completed the Spin-Off. In connection with the Spin-Off, IAC and Expedia entered
into the following agreements (collectively, the "Spin-Off Agreements"):
o a Separation Agreement that sets forth the arrangements between IAC and
Expedia with respect to the principal corporate transactions necessary to
complete the Spin-Off, and a number of other principles governing the
relationship between IAC and Expedia following the Spin-Off.
o a Tax Sharing Agreement that will govern the respective rights,
responsibilities and obligations of IAC and Expedia after the Spin-Off with
respect to tax liabilities and benefits, tax attributes, tax contests and
other matters regarding income taxes, other taxes and related tax returns.
o an Employee Matters Agreement that will govern a wide range of compensation
and benefit issues, including the allocation between IAC and Expedia of
responsibility for the employment and benefits obligations and liabilities
of each company's current and former employees (and their dependents and
beneficiaries).
o a Transition Services Agreement that will govern the provision of
transition services from IAC to Expedia.
The section of Expedia's Registration Statement on Form S-4, as
amended (File No. 333-124303-01) (the "Registration Statement") entitled
"Relationship Between IAC and Expedia after the Spin-Off" beginning on page 50
of the Registration Statement, which sets forth descriptions of each of the
agreements listed above, is incorporated herein by reference.
GOVERNANCE AGREEMENT
On August 9, 2005, in connection with the Spin-Off, Expedia
entered into a Governance Agreement (the "Governance Agreement") with Liberty
Media Corporation ("Liberty") and Barry Diller, the Chairman and Senior
Executive of Expedia.
Representation of Liberty On the Expedia Board of Directors
Under the terms of the Governance Agreement:
o Liberty has the right to nominate up to two directors of Expedia so long as
Liberty
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beneficially owns at least 33,651,963 equity securities of Expedia
(so long as Liberty's ownership percentage is at least equal to 15% of the
total equity securities of Expedia);
o Liberty has the right to nominate one director of Expedia so long as
Liberty beneficially owns at least 22,434,642 equity securities of Expedia
(so long as Liberty owns at least 5% of the total equity securities of
Expedia); and
o Expedia will use its reasonable best efforts to cause one of Liberty's
designees to be a member of a committee of the board of directors of
Expedia and, to the extent the person designated by Liberty would qualify
as a member of the compensation committee of the board of directors of
Expedia under applicable tax and securities laws and regulations, Expedia
will seek to have that person appointed to the compensation committee of
Expedia.
Pursuant to the terms of the Governance Agreement, Expedia will
cause each director that Liberty nominates to be included in the slate of
nominees recommended by the Board of Directors of Expedia to the stockholders of
Expedia for election as directors at each annual meeting of the stockholders of
Expedia and will use all reasonable efforts to cause the election of each such
director including soliciting proxies in favor of the election of such persons.
Liberty has the right to designate a replacement director to the board of
Expedia in order to fill any vacancy of a director previously designated by
Liberty.
Contingent Matters
The Governance Agreement lists certain actions that require the
prior consent of Liberty and Mr. Diller before Expedia can take any such action.
For so long as:
o in the case of Liberty, Liberty owns at least 29,912,856 equity securities
and at least 5% of the total equity securities of Expedia (the "Liberty
Condition"); and
o in the case of Mr. Diller, he owns at least 5,000,000 common shares
(including options to purchase common shares, whether or not then
exercisable), continues to serve as chief executive officer at Expedia and
has not become disabled (the "Diller Condition," and together with the
Liberty Condition, the "Consent Conditions"), Expedia has agreed that,
without the prior approval of Liberty and/or Mr. Diller, as applicable, it
will not engage in any transaction that would result in Liberty or Mr.
Diller having to divest any part of their interests in Expedia or any other
material assets, or that would render any such ownership illegal or would
subject Mr. Diller or Liberty to any fines, penalties or material
additional restrictions or limitations.
In addition, for so long as the Consent Conditions apply, if
Expedia's "total debt ratio" (as defined in the Governance Agreement ) equals or
exceeds 4:1 over a twelve-month period, Expedia may not take any of the
following actions without the prior approval of Liberty and/or Mr. Diller:
o acquire or dispose of any assets, issue any debt or equity securities,
repurchase any debt or equity securities, or incur indebtedness, if the
aggregate value of such transaction or transactions (alone or in
combination) during any six month period equals 10% or more of
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Expedia's market capitalization;
o voluntarily commence any liquidation, dissolution or winding up of Expedia
or any material subsidiary of Expedia;
o make any material amendments to the certificate of incorporation or bylaws
of Expedia;
o engage in any line of business other than online and offline travel
services and products and related businesses, or other businesses engaged
in by Expedia as of the date of determination;
o adopt any stockholder rights plan that would adversely affect Liberty or
Mr. Diller, as applicable; or
o grant additional consent rights to a stockholder of Expedia.
Preemptive Rights
In the event that Expedia issues or proposes to issue any shares
of common stock or Class B common stock (with certain limited exceptions)
including shares issued upon exercise, conversion or exchange of options,
warrants and convertible securities, Liberty will have preemptive rights that
entitle it to purchase a number of common shares so that Liberty will maintain
the identical ownership interest in Expedia that Liberty had immediately prior
to such issuance or proposed issuance (subject to a cap). Any purchase by
Liberty will be allocated between common stock and Class B common stock in the
same proportion as the issuance or issuances giving rise to the preemptive
right, except to the extent that Liberty opts to acquire shares of common stock
in lieu of shares of Class B common stock.
Registration Rights
Liberty and Mr. Diller are entitled to customary, transferable
registration rights with respect to common stock owned by them. Liberty is
entitled to four demand registration rights and Mr. Diller is entitled to three
demand registration rights. Expedia will pay the costs associated with such
registrations (other than underwriting discounts, fees and commissions). Expedia
will not be required to register shares of its common stock if a stockholder
could sell the shares in the quantities proposed to be sold at such time in one
transaction under Rule 144 of the Securities Act or under another comparable
exemption from registration.
Termination
Generally, the Governance Agreement will terminate:
o with respect to Liberty, at such time that Liberty beneficially owns equity
securities representing less than 5% of the total equity securities of
Expedia; and
o with respect to Mr. Diller, at the later of (1) the date Mr. Diller ceases
to be the chief executive officer of Expedia or becomes disabled and (2)
the date Mr. Diller no longer holds a proxy to vote the shares of Liberty.
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RELATIONSHIP BETWEEN IAC, MR. DILLER AND LIBERTY
Mr. Diller is the Chairman and Senior Executive of Expedia. Mr.
Diller and Liberty are parties to a Stockholders Agreement, dated as of August
9, 2005 (the "Stockholders Agreement"). Among other arrangements, under the
terms of the Stockholders Agreement, Liberty grants to Mr. Diller an irrevocable
proxy with respect to all Expedia securities beneficially owned by Liberty until
such proxy terminates in accordance with the terms of the Stockholders
Agreement. As a result of the arrangements contemplated by the Stockholders
Agreement, Mr. Diller controls approximately 53% of the combined voting power of
Expedia capital stock and can effectively control the outcome of all matters
submitted to a vote or for the consent of Expedia's stockholders (other than
with respect to the election by the holders of Expedia's common stock of 25% of
the members of Expedia's Board of Directors and matters to which Delaware law
requires a separate class vote). Expedia is subject to the Marketplace Rules of
The Nasdaq Stock Market, Inc. (the "Marketplace Rules"). The Marketplace Rules
exempt "Controlled Companies," or companies of which more than 50% of the voting
power is held by an individual, group or another company, from certain
requirements. Based on the arrangements described above, Expedia is relying on
the exemption for Controlled Companies from all applicable Nasdaq requirements.
EMPLOYMENT AGREEMENT
On August 12, 2005, the Company entered into an Employment
Agreement with Mark S. Gunning, its Chief Financial Officer. The terms of the
Employment Agreement provide that Mr. Gunning will receive an annual base salary
of $325,000 per year and will be eligible to receive annual discretionary
bonuses, with a target bonus of 50% of his annual base salary. Subject to the
approval of the Expedia Compensation Committee, Mr. Gunning will be granted
restricted stock units representing shares of common stock of Expedia valued at
$500,000 pursuant to the Expedia, Inc. 2005 Stock and Annual Incentive Plan.
Upon a change of control of Expedia, 100% of Mr. Gunning's restricted stock
units will vest immediately. The term of the Employment Agreement is two years.
If (1) the Company terminates Mr. Gunning's employment prior to the expiration
of the term for any reason other than Mr. Gunning's death or disability or for
cause or (2) Mr. Gunning terminates his employment for good reason, then the
Company will continue to pay Mr. Gunning's annual base salary for the greater of
twelve months and the end of the term, subject to a mitigation obligation by Mr.
Gunning.
A copy of the Employment Agreement is included as Exhibit 10.1 to
this Form 8-K and is incorporated herein by reference.
WARRANT AGREEMENTS
On August 9, 2005, Expedia entered into Warrant Agreements in
respect of its publicly listed warrant securities (traded on the Nasdaq National
Market under the ticker symbols EXPEW and EXPEZ, respectively) with Bank of New
York and Mellon Investor Services LLC.
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EXPEW Warrants
EXPEW Warrants have been issued under a warrant agreement between
Expedia and The Bank of New York, as warrant agent. Each EXPEW Warrant entitles
its holder to purchase one half of one share of Expedia common stock at an
exercise price equal to $15.61 per warrant. The exercise price must be paid in
cash. Each EXPEW Warrant may be exercised on any business day on or prior to
February 4, 2009. Any EXPEW Warrant not exercised before that date will become
void, and all rights of the holder of the EXPEW Warrant will cease. Holders of
EXPEW Warrants will not be entitled, by virtue of being such holders, to any
rights of holders of Expedia common stock until they exercise their warrants.
The EXPEW Warrants are not subject to redemption.
The number of shares of Expedia common stock issuable upon
exercise of the EXPEW Warrants and the exercise price of the EXPEW Warrants will
be subject to adjustment from time to time upon the occurrence of any of the
following events: any stock split; any stock consolidation, combination or
subdivision; any stock dividend or other distribution; and any repurchase,
reclassification, recapitalization or reorganization and certain distributions
of rights, warrants or evidences of indebtedness or assets.
Expedia will not issue fractional shares of Expedia common stock
upon exercise of an EXPEW Warrant. Instead of issuing a fractional share of
Expedia common stock which would otherwise be deliverable upon the exercise of
an EXPEW Warrant, Expedia will pay the holder of such EXPEW Warrant an amount in
cash based on the closing price of Expedia common stock as of the exercise date
of the EXPEW Warrant.
Expedia will keep in reserve at all times before the expiration
date of the EXPEW Warrants sufficient authorized but unissued shares of Expedia
common stock for issuance in the event of exercises by the holders of EXPEW
Warrants. In addition, the EXPEW Warrants and any shares of Expedia common stock
issued upon exercise of the EXPEW Warrants have been registered under the
Securities Act of 1933, as amended.
Stockholder EXPEZ Warrants
Certain EXPEZ Warrants (the "Stockholder EXPEZ Warrants") have
been issued under a stockholder equity warrant agreement between Expedia and
Mellon Investor Services LLC, as warrant agent.
Each Stockholder EXPEZ Warrant entitles its holder to purchase
0.969375 shares of Expedia common stock at an exercise price equal to $11.56 per
warrant. The exercise price must be paid in cash. Each Stockholder EXPEZ Warrant
may be exercised on any business day on or prior to February 4, 2009. Any
Stockholder EXPEZ Warrant not exercised before that date will become void, and
all rights of the holder of the Stockholder EXPEZ Warrant will cease. Holders of
Stockholder EXPEZ Warrants will not be entitled, by virtue of being such
holders, to any rights of holders of Expedia common stock until they exercise
their warrants. The Stockholder EXPEZ Warrants are not subject to redemption.
The number of shares of Expedia common stock issuable upon
exercise of the Stockholder EXPEZ Warrants and the exercise price of the
Stockholder EXPEZ Warrants will be
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subject to adjustment from time to time upon the occurrence of any of the
following events: any stock split; any stock consolidation, combination or
subdivision; any stock dividend or other distribution; and any repurchase,
reclassification, recapitalization or reorganization; and certain distributions
of rights, warrants or evidences of indebtedness or assets.
Expedia will not issue fractional shares of Expedia common stock
upon exercise of a Stockholder EXPEZ Warrant. Instead of issuing a fractional
share of Expedia common stock which would otherwise be deliverable upon the
exercise of a Stockholder EXPEZ Warrant, Expedia will pay the holder of such
Stockholder EXPEZ Warrant an amount in cash based on the closing price of
Expedia common stock as of the exercise date of the Stockholder EXPEZ Warrant.
Expedia will keep in reserve at all times before the expiration
date of the Stockholder EXPEZ Warrants sufficient authorized but unissued shares
of Expedia common stock for issuance in the event of exercises by the holders of
Stockholder EXPEZ Warrants. In addition, the Stockholder EXPEZ Warrants and any
shares of Expedia common stock issued upon exercise of the Stockholder EXPEZ
Warrants have been registered under the Securities Act of 1933, as amended.
Employee EXPEZ Warrants
Certain EXPEZ Warrants (the "Employee EXPEZ Warrants") have been
issued under an optionholder equity warrant agreement between Expedia and Mellon
Investor Services LLC, as warrant agent. Except with respect to vesting
(including transferability prior to vesting), as described below, and applicable
withholding taxes, the Employee EXPEZ Warrants are identical in all material
respects to the Stockholder EXPEZ Warrants described above.
The Employee EXPEZ Warrants will be subject to the same vesting
schedule as the stock options in respect of which such Employee EXPEZ Warrants
were issued. The Employee EXPEZ Warrants will be forfeited and will never become
exercisable or transferable if a stock option related to the Employee EXPEZ
Warrant never vests. The Employee EXPEZ Warrants will not be subject to
redemption.
Expedia will keep in reserve at all times before the expiration
date of the Employee EXPEZ Warrants sufficient authorized but unissued shares of
Expedia common stock for issuance in the event of exercises by the holders of
vested Employee EXPEZ Warrants. In addition, the Employee EXPEZ Warrants and any
shares of Expedia common stock issued upon exercise of the Employee EXPEZ
Warrants have been registered under the Securities Act of 1933, as amended.
EXPEDIA, INC. 2005 STOCK AND ANNUAL INCENTIVE PLAN
On August 8, 2005, IAC approved the Expedia, Inc. 2005 Stock and
Annual Incentive Plan (the "2005 Incentive Plan"), which became effective on
August 9, 2005, in its capacity (at such time) as sole stockholder of Expedia. A
summary of certain important features of the 2005 Incentive Plan can be found in
the Registration Statement. The section of the Registration Statement entitled
"Expedia, Inc. 2005 Stock and Annual Incentive Plan" beginning on page 119 of
the Registration Statement is incorporated herein by reference. The foregoing
description of the 2005 Incentive Plan is
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qualified in its entirety by reference to the copy of the plan that was filed as
Exhibit 4.6 of Expedia's Post-Effective Amendment No. 1 on Form S-8 to the
Registration Statement, which is incorporated herein by reference.
In connection with the Spin-Off, non-employee members of
Expedia's Board of Directors, including A. George "Skip" Battle, Jonathan L.
Dolgen, Peter M. Kern and David Goldhill were each awarded 7,500 restricted
stock units.
EMPLOYMENT SEPARATION AGREEMENT
On August 12, 2005, the Company entered into a Separation
Agreement with Chris Bellairs, its former Chief Financial Officer. The terms of
the Separation Agreement provide that the Company will continue to pay Mr.
Bellairs his former annual base salary of $275,000 and pay for his COBRA health
insurance coverage for a period of twelve months; provided, that such payments
will be offset by any amount earned by Mr. Bellairs from another employer. On or
around the date on which the Company next pays bonuses to its employees
generally (currently anticipated to be in February 2006), the Company will pay
Mr. Bellairs $104,192, representing a pro-rated portion of his target 2005
bonus. In addition, Mr. Bellairs was granted accelerated vesting of 8,078
restricted stock units on August 12, 2005, which represents the restricted stock
units that would have vested in the one-year period following his date of
termination of employment. A copy of the Separation Agreement is included as
Exhibit 10.2 to this Form 8-K and is incorporated herein by reference.
EXPEDIA, INC. DIRECTOR DEFERRED COMPENSATION PLAN
On August 8, 2005, IAC approved the Expedia, Inc. Deferred
Compensation Plan for Non-Employee Directors (the "Director Deferred
Compensation Plan") in its capacity (at such time) as sole stockholder of
Expedia. Effective August 9, 2005, each director of Expedia who is not an
employee of Expedia or any of its businesses may defer all or a portion of their
annual retainer and meeting fees. Eligible directors who defer their directors'
fees can elect to have such deferred fees applied to the purchase of share
units, representing the number of shares of Expedia common stock that could have
been purchased on the relevant date, or credited to a cash fund. If any
dividends are paid on Expedia common stock, dividend equivalents will be
credited on the share units. The foregoing description of the Director Deferred
Compensation Plan is qualified in its entirety by reference to the copy of the
plan that was filed as Exhibit 10.6 to the Registration Statement and that is
incorporated herein by reference.
ITEM 2.01. COMPLETION OF ACQUISITION OF ASSETS.
Item 1.01 of this Form 8-K is incorporated herein by reference.
ITEM 5.01 CHANGE IN CONTROL OF THE REGISTRANT.
The section of this Form 8-K under Item 1.01 entitled
"Relationship Between IAC, Mr. Diller and Liberty" is incorporated herein by
reference.
ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF
DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS.
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Item 1.01 of this Form 8-K is incorporated herein by reference.
On August 9, 2005, and in connection with the Spin-Off, Messrs. Thomas J.
McInerney and Gregory R. Blatt (both of whom are employees of IAC) resigned as
members of Expedia's Board of Directors. On August 9, 2005, immediately
preceding the completion of the Spin-Off, the following persons were elected as
members of Expedia's Board of Directors: Barry Diller, Dara Khosrowshahi, Victor
A. Kaufman, A. George "Skip" Battle, Robert R. Bennett, Jonathan Dolgen, David
Goldhill, Peter Kern and John C. Malone. The section of the Registration
Statement entitled "Information about Expedia after the Spin-Off - Expedia
Management - Expedia Board of Directors and Executive Officers" beginning on
page 110 of the Registration Statement is incorporated herein by reference. The
section of the Registration Statement entitled "Relationship Between IAC and
Expedia after the Spin-Off - Commercial Arrangements" beginning on page 50 of
the Registration Statement is incorporated herein by reference.
Item 5.02 of this Form 8-K is qualified in its entirety by
reference to the "Summary of Expedia, Inc. Non-Employee Director Compensation
Arrangements" that was filed as Exhibit 10.7 to the Registration Statement and
is incorporated herein by reference.
ITEM 5.03. AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS.
Prior to the completion of the Spin-Off, IAC was the sole
stockholder of Expedia. In connection with the Spin-Off, Expedia amended and
restated its Certificate of Incorporation (effective August 8, 2005) and amended
and restated its Bylaws (effective August 9, 2005), including the adoption of
the Certificate of Designations for Series A Cumulative Convertible Preferred
Stock of Expedia (effective August 9, 2005).
The following is a description of the material terms of Expedia
capital stock. The following description is not meant to be complete and is
qualified by reference to Expedia's Amended and Restated Certificate of
Incorporation, Certificate of Designations for Series A Cumulative Convertible
Preferred Stock, and Amended and Restated Bylaws, which are filed as Exhibits
3.1, 3.2 and 3.3, respectively, to this Form 8-K and are incorporated herein by
reference.
EXPEDIA COMMON STOCK
In general, the holders of Expedia common stock will vote
together as a single class with the holders of Expedia Class B common stock and
Expedia Series A preferred stock on all matters, including the election of
directors; provided, however, that the holders of Expedia common stock, acting
as a single class, are entitled to elect twenty-five percent (25%) of the total
number of directors, rounded up to the next whole number in the event of a
fraction. Each outstanding share of Expedia common stock entitles the holder to
one vote when voting separately as a class, and one vote when voting together as
a single group with the holders of Expedia Class B common stock and Expedia
Series A preferred stock. The Expedia Amended and Restated Certificate of
Incorporation does not provide for cumulative voting in the election of
directors. Subject to any preferential rights of any outstanding series of
Expedia preferred stock created by the Expedia Board of Directors from time to
time, the holders of Expedia common stock will be entitled, share for share with
the holders of the Expedia Class B common stock, to such dividends as may be
declared from time to time by the Expedia Board of Directors from funds legally
available for the payment of dividends, and, upon liquidation, dissolution or
winding up, will be entitled to
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receive pro rata, share for share with the holders of the Expedia Class B common
stock, all assets available for distribution after payment of a proper amount to
the holders of any series of preferred stock that may be issued in the future.
EXPEDIA CLASS B COMMON STOCK
In general, the holders of Class B common stock will vote
together as a single class with the holders of Expedia common stock and Expedia
Series A preferred stock on all matters, including the election of directors.
The holders of Expedia Class B common stock are entitled to one vote when voting
separately as a class, and ten votes when voting together as a single group with
the holders of Expedia common stock and Expedia Series A preferred stock. The
Expedia Amended and Restated Certificate of Incorporation does not provide for
cumulative voting in the election of directors. Subject to any preferential
rights of any outstanding series of Expedia preferred stock created by the
Expedia Board of Directors from time to time, the holders of Expedia Class B
common stock are entitled, share for share with the holders of the Expedia
common stock, to such dividends as may be declared from time to time by the
Expedia Board of Directors from funds legally available for the payment of
dividends, and, upon liquidation, dissolution or winding up, are entitled to
receive pro rata, share for share with the holders of the Expedia common stock,
all assets available for distribution after payment of a proper amount to the
holders of any series of preferred stock that may be issued in the future.
EXPEDIA PREFERRED STOCK
Expedia's Board of Directors has the authority to designate, by
resolution, the powers, preferences, rights and qualifications, limitations and
restrictions of the preferred stock without any further vote or action by the
stockholders. Any shares of preferred stock so issued would have priority over
shares of Expedia common stock and shares of Expedia Class B common stock with
respect to dividend or liquidation rights or both.
Expedia has outstanding approximately 850 shares of Expedia
preferred stock, par value $0.001 per share, "Series A Cumulative Convertible
Preferred Stock," each having a $22.23 face value and a maturity date of 2022.
Each share of Expedia Series A preferred stock is convertible, at the option of
the holder at any time, into that number of shares of Expedia common stock equal
to the quotient obtained by dividing $22.23 by the conversion price per share of
Expedia common stock. The conversion price is initially equal to $30.01 per
share of Expedia common stock and is subject to downward adjustment if the price
of Expedia common stock exceeds $31.22 at the time of conversion pursuant to a
formula set forth in the certificate of designation for the Expedia Series A
preferred stock. Shares of Expedia Series A preferred stock may be put to
Expedia on the fifth, seventh, tenth and fifteenth anniversary of February 4,
2002 for cash or stock at Expedia's option. Expedia also has the right to redeem
the shares of Expedia Series A preferred stock for cash or stock commencing on
the tenth anniversary of February 4, 2002. In the event of a voluntary or
involuntary liquidation, dissolution or winding-up of Expedia, holders of
Expedia Series A preferred stock will be entitled to receive, in preference to
any holder of Expedia common stock or Expedia Class B common stock, an amount
per share equal to all accrued and unpaid dividends plus the greater of (a) face
value, or (b) the liquidating distribution that would be received had such
holder converted the Expedia Series A preferred stock into Expedia common stock
immediately prior to the liquidation, dissolution or winding-up of Expedia.
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EFFECT OF DELAWARE ANTI-TAKEOVER STATUTE
Expedia is subject to Section 203 of the Delaware General
Corporation Law ("DCGL"), which regulates corporate acquisitions. Section 203
generally prevents corporations from engaging in a business combination with any
interested stockholder for three years following the date that the stockholder
became an interested stockholder, unless that business combination has been
approved in one of a number of specific ways. For purposes of Section 203, a
"business combination" includes, among other things, a merger or consolidation
involving Expedia and the interested stockholder and a sale of more than 10% of
Expedia's assets. In general, the anti-takeover law defines an "interested
stockholder" as any entity or person beneficially owning 15% or more of a
company's outstanding voting stock and any entity or person affiliated with or
controlling or controlled by that entity or person. A Delaware corporation may
"opt out" of Section 203 with an express provision in its original certificate
of incorporation or an express provision in its certificate of incorporation or
bylaws resulting from amendments approved by holders of at least a majority of a
corporation's outstanding voting shares. Expedia has not "opted out" of the
provisions of Section 203.
ACTION BY WRITTEN CONSENT
Under the DGCL, unless a company's certificate of incorporation
expressly prohibits action by the written consent of stockholders, any action
required or permitted to be taken by its stockholders at a duly called annual or
special meeting may be taken by a consent in writing executed by stockholders
possessing the requisite votes for the action to be taken. Expedia's Amended and
Restated Certificate of Incorporation does not expressly prohibit action by the
written consent of stockholders. As a result, Mr. Diller, who currently controls
a majority of the outstanding total voting power of Expedia, will be able to
take any action to be taken by stockholders without the necessity of holding a
stockholders meeting (other than with respect to the election by the holders of
shares of Expedia common stock of 25% of the members of Expedia's Board of
Directors and certain matters as to which a separate class vote of the holders
of shares of Expedia common stock or Expedia Series A preferred stock is
required).
REMOVAL OF DIRECTORS
Expedia's Amended and Restated Bylaws provide that a director may
be removed either with or without cause, by the affirmative vote of a majority
of the voting power of shares then entitled to vote of the class or classes that
elected such director.
FILLING VACANCIES OF THE BOARD OF DIRECTORS
Expedia's Amended and Restated Bylaws permit holders of a
majority of the voting power of outstanding shares entitled to vote on a
particular directorship to fill vacancies with respect to that directorship.
CALLING OF SPECIAL MEETINGS OF STOCKHOLDERS
Expedia's Amended and Restated Bylaws provide that a special
meeting of stockholders may be called by Expedia's Chairman of the Board of
Directors or by a majority of Expedia's Board of Directors.
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REMOVAL OF CHAIRMAN
Expedia's Amended and Restated Certificate of Incorporation
provides that the Chairman of the Board of Directors may only be removed without
cause by the affirmative vote of at least 80% of the entire Board of Directors.
In addition, the Expedia Amended and Restated Certificate of Incorporation
requires a supermajority (80%) vote of each of the Board of Directors and the
voting power of the stockholders voting as a single class to amend or repeal the
foregoing provision.
CORPORATE OPPORTUNITY
The Expedia Amended and Restated Certificate of Incorporation
generally provides that no officer or director of Expedia who is also an officer
or director of IAC will be liable to Expedia or its stockholders for breach of
any fiduciary duty by reason of the fact that any such individual directs a
corporate opportunity to IAC instead of Expedia, or does not communicate
information regarding a corporate opportunity to Expedia that the officer or
director has directed to IAC.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
Item 1.01 of this Form 8-K is incorporated herein by reference.
Financial statements required by Item 9.01 relating to the Spin-Off will be
filed by later amendment to this Form 8-K, as permitted under Item 9.01(a)(4) of
Form 8-K.
The Exhibit Index filed herewith is incorporated herein by
reference.
11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EXPEDIA, INC.
Date: August 15, 2005 By: /s/ KEENAN M. CONDER
------------------------------
Name: Keenan M. Conder
Title: Senior Vice President
and General Counsel
12
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1 Amended and Restated Certificate of Incorporation of Expedia, Inc.
3.2 Series A Cumulative Convertible Preferred Stock Certificate of
Designation
3.3 Amended and Restated Bylaws of Expedia, Inc.
10.1 Employment Agreement by and between Mark Gunning and Expedia,
Inc., effective as of July 14, 2005
10.2 Separation Agreement by and between Chris Bellairs and Expedia,
Inc., effective as of August 12, 2005
10.3 Expedia, Inc. Deferred Compensation Plan for Non-Employee
Directors (incorporated by reference to Exhibit 10.6 of Expedia,
Inc.'s Registration Statement on Form S-4, as amended (File No.
333-124303-01), filed with the Securities and Exchange Commission
on June 13, 2005)
10.4 Expedia, Inc. 2005 Stock and Annual Incentive Plan (incorporated
by reference to Exhibit 4.6 of Expedia Registration Statement on
Form S-4, filed with the Securities and Exchange Commission on
August 8, 2005 (File No. 333-124303-01))
10.5 Summary of Expedia, Inc. Non-Employee Director Compensation
Arrangements (incorporated by reference to Exhibit 10.7 of
Expedia, Inc.'s Registration Statement on Form S-4, as amended
(File No. 333-124303-01), filed with the Securities and Exchange
Commission on June 13, 2005)