def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ |
Filed by a Party other than the Registrant o |
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Preliminary Proxy Statement |
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to § 240.14a-12 |
EXPEDIA, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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April 28, 2008
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of
Expedia, Inc., which will be held on Wednesday, June 11,
2008, at 8:00 a.m. local time at 8800 West Sunset
Boulevard, West Hollywood, California 90069.
At the Annual Meeting, you will be asked (1) to elect ten
directors, (2) to approve an amendment to the Expedia, Inc.
2005 Stock and Annual Incentive Plan to increase the number of
shares of Expedia common stock authorized for issuance
thereunder by 7,500,000 and (3) to ratify the appointment
of Ernst & Young LLP as Expedias independent
registered public accounting firm for 2008. The Board of
Directors unanimously recommends a vote FOR each of these
proposals.
Your vote is very important. Whether or not
you plan to attend the Annual Meeting, please take the time to
vote by internet, telephone or by returning your marked, signed
and dated proxy card, so that your shares will be represented at
the Annual Meeting. If you attend the Annual Meeting, you may
vote in person if you wish, even though you have previously
submitted your vote.
Sincerely,
Dara Khosrowshahi
Chief Executive Officer
3150 139th Avenue S.E.
Bellevue, Washington 98005
EXPEDIA,
INC.
3150 139th Avenue S.E.
Bellevue, Washington 98005
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
The Annual Meeting of Stockholders of Expedia, Inc., a Delaware
corporation, will be held on Wednesday, June 11, 2008, at
8:00 a.m. local time at 8800 West Sunset Boulevard,
West Hollywood, California 90069.
Items of business at the Annual Meeting will be:
1. To elect ten members of the Board of Directors, each to
hold office for a one-year term ending on the date of the next
annual meeting of stockholders or until such directors
successor shall have been duly elected and qualified (or, if
earlier, such directors removal or resignation from the
Board of Directors);
2. To approve an amendment to the Expedia, Inc. 2005 Stock
and Annual Incentive Plan to increase the number of shares of
Expedia common stock authorized for issuance thereunder by
7,500,000;
3. To ratify the appointment of Ernst & Young LLP
as Expedias independent registered public accounting firm
for 2008; and
4. To transact such other business as may properly come
before the meeting and any adjournments or postponements thereof.
Only holders of record of outstanding shares of Expedia stock at
the close of business on April 15, 2008 are entitled to
notice of and to vote at the Annual Meeting and any adjournment
or postponement thereof.
In accordance with new rules approved by the Securities and
Exchange Commission (SEC), we sent a Notice of
Internet Availability of Proxy Materials on or about
April 28, 2008, and provided access to our proxy materials
over the internet, beginning on April 28, 2008, to the
holders of record and beneficial owners of our common stock as
of the close of business on the record date.
Only stockholders and persons holding proxies from stockholders
may attend the Annual Meeting. If your shares are registered in
your name, you must bring a form of identification to the Annual
Meeting. If your shares are held in the name of a broker, trust,
bank or other nominee, you must bring a proxy or letter from
that broker, trust, bank or other nominee that confirms you are
the beneficial owner of those shares.
By order of the Board of Directors,
Burke F. Norton
Executive Vice President, General Counsel
and Secretary
April 28, 2008
Important
Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to Be Held on
June 11, 2008
This
Proxy Statement and the 2007 Annual Report are available at:
www.proxydocs.com/expedia.
TABLE OF
CONTENTS
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Page
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Procedural Matters
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1
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Date, Time and Place of Meeting
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1
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Record Date and Voting Rights
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1
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Quorum; Abstentions; Broker Non-Votes
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2
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Solicitation of Proxies
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2
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Voting Proxies
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2
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Revocation of Proxies
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3
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Other Business
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3
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Proposal 1: Election of Directors
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4
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Nominees
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4
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Board Meetings and Committees
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6
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Director Nominations
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8
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Communications With the Board
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8
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Compensation of Non-Employee Directors
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9
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Compensation Committee Interlocks and Insider Participation
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11
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Required Vote
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11
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Proposal 2: Approval of Amendment to the
Expedia, Inc. 2005 Stock and Annual Incentive Plan to Increase
the Number of Shares Authorized for Issuance Thereunder by
7,500,000
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12
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Introduction
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12
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Proposed Expedia 2005 Plan Amendment
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12
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Summary of Terms of Expedia 2005 Plan
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12
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U.S. Federal Income Tax Consequences
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16
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Required Vote
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Proposal 3: Ratification of Appointment
of Independent Registered Public Accounting Firm
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Required Vote
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Audit Committee Report
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Fees Paid to Our Independent Registered Public Accounting Firm
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Audit and Non-Audit Services Pre-Approval Policy
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Security Ownership of Certain Beneficial Owners and Management
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Section 16(a) Beneficial Ownership Reporting Compliance
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23
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Information Concerning Executive Officers
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23
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Compensation Discussion and Analysis
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25
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Overview
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25
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Roles of Compensation Committee and Section 16 Committee
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25
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Role of Executive Officers
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25
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Role of Compensation Committee Consultants
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26
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Compensation Program Objectives
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26
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Compensation Program Elements
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26
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The Role of Peer Groups, Surveys and Benchmarking
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29
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Tax Matters
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Change in Control
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30
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Severance
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31
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Compensation Committee Report
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32
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Page
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Executive Compensation
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33
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Summary Compensation Table
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33
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2007 Grants of Plan-Based Awards
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35
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2008 Grants of Plan-Based Awards
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36
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Outstanding Equity Awards at 2007 Year-End
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37
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2007 Option Exercises and Stock Vested
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39
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Potential Payments Upon Termination or Change in Control
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39
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Equity Compensation Plan Information
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44
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Certain Relationships and Related Person Transactions
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45
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Review and Approval or Ratification of Related Person
Transactions
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45
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Related Person Transactions
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45
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Annual Reports
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48
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Proposals by Stockholders for Presentation at the 2009 Annual
Meeting
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48
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Appendix A Expedia, Inc. 2005 Stock and Annual
Incentive Plan
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A-1
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ii
PROCEDURAL
MATTERS
This Proxy Statement is being furnished to holders of common
stock, Class B common stock and Series A preferred
stock of Expedia, Inc., a Delaware corporation
(Expedia or the Company), in connection
with the solicitation of proxies by Expedias Board of
Directors for use at its 2008 Annual Meeting of Stockholders or
any adjournment or postponement thereof (the Annual
Meeting).
Expedias principal offices are located at 3150
139th Avenue S.E., Bellevue, Washington 98005. This Proxy
Statement is being made available to Expedia stockholders on or
about April 28, 2008.
Date,
Time and Place of Meeting
The Annual Meeting will be held on Wednesday, June 11,
2008, at 8:00 a.m. local time at 8800 West Sunset
Boulevard, West Hollywood, California 90069.
Only stockholders and persons holding proxies from stockholders
may attend the Annual Meeting. If your shares are registered in
your name, you must bring a form of identification to the Annual
Meeting. If your shares are held in the name of a broker, trust,
bank or other nominee, otherwise known as holding in
street name, you must bring a proxy or letter from
that broker, trust, bank or other nominee that confirms you are
the beneficial owner of those shares. Cameras and recording
devices will not be permitted at the Annual Meeting.
Record
Date and Voting Rights
General. The Board of Directors established
the close of business on April 15, 2008 as the record date
for determining the holders of Expedia stock entitled to notice
of and to vote at the Annual Meeting. On the record date,
260,644,601 shares of common stock, 25,599,998 shares
of Class B common stock and 751 shares of
Series A preferred stock were outstanding and entitled to
vote at the Annual Meeting. Expedia stockholders are entitled to
one vote for each share of common stock, ten votes for each
share of Class B common stock and two votes for each share
of Series A preferred stock held as of the record date,
voting together as a single voting group, in (i) the
election of seven of the ten director nominees, (ii) the
approval of the amendment to the Expedia, Inc. 2005 Stock and
Annual Incentive Plan (the Expedia 2005 Plan) to
increase the authorized number of shares and (iii) the
ratification of Expedias independent registered public
accounting firm. Expedia stockholders are entitled to one vote
for each share of common stock held as of the record date in the
election of the three director nominees that the holders of
Expedia common stock are entitled to elect as a separate class
pursuant to the Companys certificate of incorporation.
As of the record date, Barry Diller, the Chairman and Senior
Executive of Expedia, held an irrevocable proxy over all Expedia
securities owned by Liberty Media Corporation and its
subsidiaries (Liberty Media). This irrevocable proxy
includes authority to vote on each of the proposals presented
for approval at the Annual Meeting. Mr. Diller, through
shares that he owns as well as those subject to the Liberty
Media proxy, generally controls the vote of approximately 27% of
the outstanding shares of common stock (assuming conversion of
all shares of Class B Common stock into shares of common
stock) and 100% of the outstanding shares of Class B common
stock and, consequently, approximately 60% of the combined
voting power of the outstanding Expedia capital stock as of the
record date. As a result, regardless of the vote of any other
Expedia stockholder, Mr. Diller has control over the vote
relating to the election of seven of the ten director nominees,
approval of the amendment to the Expedia 2005 Plan and the
ratification of Expedias independent registered public
accounting firm.
Voting of Stock Held in 401(k) Plan. The
trustee of Expedias 401(k) plan for employees, Fidelity
Management Trust Company, will vote Expedia stock credited
to employee accounts in accordance with such employees
voting instructions. The trustee will vote the 401(k) plan stock
for which voting instructions are not received in the same
proportion as the shares for which voting instructions are
received.
1
Quorum;
Abstentions; Broker Non-Votes
Transaction of business at the Annual Meeting may occur if a
quorum is present. If a quorum is not present, it is expected
that the Annual Meeting will be adjourned or postponed in order
to permit additional time for soliciting and obtaining
additional proxies or votes, and, at any subsequent reconvening
of the Annual Meeting, all proxies will be voted in the same
manner as such proxies would have been voted at the original
convening of the Annual Meeting, except for any proxies that
have been effectively revoked or withdrawn.
The presence at the Annual Meeting, in person or by proxy, of
the holders of a majority of the total votes entitled to be cast
constitutes a quorum. In the election of seven of the ten
director nominees, the approval of the amendment to the Expedia
2005 Plan and the ratification of the appointment of
Expedias independent registered public accounting firm,
the presence at the Annual Meeting, in person or by proxy, of
the holders of a majority of the total votes entitled to be cast
constitutes a quorum. In the election of the three directors
whom the holders of Expedia common stock are entitled to elect
as a separate class, the presence at the Annual Meeting, in
person or by proxy, of the holders of a majority of votes of the
common stock constitutes a quorum. If a share is represented for
any purpose at the meeting, it is deemed to be present for
quorum purposes and for all other matters as well. Shares of
Expedia stock represented by a properly executed proxy will be
treated as present at the Annual Meeting for purposes of
determining a quorum, without regard to whether the proxy is
marked as casting a vote or abstaining.
Abstentions and broker non-votes are counted as present and
entitled to vote for purposes of determining a quorum. A broker
non-vote occurs when a nominee holding shares for a beneficial
owner does not vote the shares on a proposal because the nominee
does not have discretionary voting power for a particular item
and has not received instructions from the beneficial owner
regarding voting.
Solicitation
of Proxies
Expedia will bear the cost of the solicitation of proxies from
its stockholders. In addition to solicitation by mail, the
directors, officers and employees of Expedia may solicit proxies
from stockholders by telephone, by letter, by facsimile, in
person or otherwise. Following the original mailing of the
proxies and other soliciting materials, Expedia will request
brokers, trusts, banks or other nominees to forward copies of
the proxy and other soliciting materials to persons for whom
they hold shares of Expedia capital stock and to request
authority for the exercise of proxies. In such cases, Expedia,
upon the request of the brokers, trusts, banks or other
stockholder nominees, will reimburse such holders for their
reasonable expenses.
Expedia has retained MacKenzie Partners, Inc. to distribute
proxy solicitation materials to brokers, trusts, banks and other
stockholder nominees and to assist in the solicitation of
proxies from Expedia stockholders. The fee for such firms
services is estimated not to exceed $15,000 plus reimbursement
for reasonable out-of-pocket costs and expenses.
Voting
Proxies
The manner in which your shares may be voted depends on whether
you are a:
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Registered stockholder: your shares are
represented by certificates or book entries in your name on the
records of the Companys stock transfer agent,
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401(k) plan participant: your shares are held
in Expedias 401(k) plan for employees, or
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Beneficial stockholder: you hold your shares
in street name through a broker, trust, bank or
other nominee.
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Whether you hold shares directly as registered stockholder or
beneficially as a beneficial stockholder, you may direct how
your shares are voted without attending the Annual Meeting. For
directions on how to vote, please refer to the instructions
below and those on the Notice of Internet Availability, proxy
card or voting instruction form provided. To vote using the
internet or by telephone, you will be required to enter the
control number that is included on your Notice of Internet
Availability of Proxy Materials.
2
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Using the Internet. Registered Stockholders
and 401(k) plan participants may vote using the internet by
going to www.eproxy.com/expe and following the instructions.
Beneficial stockholders may vote by accessing the website
specified on the voting instruction forms provided by their
brokers, trusts, banks or other nominees.
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By Telephone. Registered stockholders and
401(k) plan participants may vote using any touch-tone telephone
from within the United States by calling
1-866-580-9477
and following the recorded instructions. Beneficial owners may
vote using any touch-tone telephone from within the United
States by calling the number specified on the voting instruction
forms provided by their brokers, trusts, banks or other nominees.
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By Mail. Registered Stockholders and 401(k)
plan participants may submit proxies by mail by requesting
printed proxy cards and marking, signing and dating the printed
proxy cards and mailing them in the accompanying pre-addressed
envelopes. Beneficial owners may vote by marking, signing and
dating the voting instruction forms provided and mailing them in
the accompanying pre-addressed envelopes.
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All proxies properly submitted and not revoked will be voted at
the Annual Meeting in accordance with the instructions indicated
thereon. If no instructions are provided, such proxies will be
voted FOR each of the proposals described in this Proxy
Statement. If you have any questions or need assistance in
voting your stock, please contact MacKenzie Partners, Inc. at
their toll-free number,
1-800-322-2885.
Voting in
Person at the Annual Meeting
You may also vote in person at the Annual Meeting. Votes in
person will replace any previous votes you have made by mail,
telephone or the internet. We will provide a ballot to
registered stockholders who request one at the meeting. Shares
held in your name as the stockholder of record may be voted on
that ballot. Shares held beneficially in street name may be
voted on a ballot only if you bring a legal proxy from the
broker, trust, bank or other nominee that holds your shares
giving you the right to vote the shares. Attendance at the
Annual Meeting without voting or revoking a previous proxy in
accordance with the voting procedures will not in and of itself
revoke a proxy.
Your vote is very important. Whether or not you plan to
attend the Annual Meeting, please take the time to vote by
internet, telephone or by returning your marked, signed and
dated proxy card, so that your shares will be represented at the
Annual Meeting.
Revocation
of Proxies
If you are a beneficial stockholder, you may revoke your proxy
or change your vote only by following the separate instructions
provided by your broker, trust, bank or other nominee.
If you are a registered stockholder, you may revoke your proxy
at any time before it is exercised at the Annual Meeting by
(i) delivering written notice, bearing a date later than
the proxy, stating that the proxy is revoked,
(ii) submitting a later-dated proxy relating to the same
stock by mail, telephone or the internet prior to the vote at
the Annual Meeting or (iii) attending the Annual Meeting
and giving notice of revocation to the inspector of elections or
voting in person. Registered holders may send any written notice
or request for a new proxy card to Expedia, Inc.,
c/o BNY
Mellon Shareowner Services, P.O. Box 11258, New York,
New York 10286, or follow the instructions provided on the
Notice of Internet Availability and proxy card to submit a new
proxy by telephone or the internet. Registered holders may also
request a new proxy card by calling 1-866-580-9477.
Other
Business
The Board of Directors does not presently intend to bring any
business before the Annual Meeting other than the proposals
discussed in this Proxy Statement and specified in the Notice of
Annual Meeting of Stockholders. The Board has no knowledge of
any other matters to be presented at the Annual Meeting other
than those described in this Proxy Statement. If any other
matters should properly come before the Annual Meeting, the
persons designated in the proxy will vote on them according to
their best judgment.
3
PROPOSAL 1:
ELECTION OF DIRECTORS
Nominees
At the Annual Meeting, a board of ten directors will be elected
to hold office until the next annual meeting of stockholders or
until their successors shall have been duly elected and
qualified (or, if earlier, such directors removal or
resignation from the Board of Directors). The Companys
certificate of incorporation provides that the holders of the
Companys common stock, acting as a single class, are
entitled to elect a number of directors equal to 25% percent of
the total number of directors, rounded up to the next whole
number of directors, which is currently three directors. The
Board has designated Messrs. Battle, Jacobson and Kern as
nominees for the positions on the Board to be elected by the
holders of Expedia common stock voting as a separate class.
Pursuant to a Governance Agreement among Expedia, Liberty Media
and Mr. Diller dated August 9, 2005, as amended (the
Governance Agreement), Liberty Media has the right
to nominate up to a number of directors equal to 20% of the
total number of the directors on the Board (rounded up to the
next whole number if the number of directors on the Board is not
an even multiple of five) for election to the Board and has
certain other rights regarding committee participation, so long
as certain stock ownership requirements applicable to Liberty
Media are satisfied. Liberty Media has designated
Dr. Malone and Mr. Fitzgerald as its nominees to the
Board. Although management does not anticipate that any of the
nominees named below will be unable or unwilling to stand for
election, in the event of such an occurrence, proxies may be
voted for a substitute nominee designated by the Board.
Background information about each of the Boards nominees
for election is set forth below.
The name and certain information regarding each nominee, as of
March 31, 2008, are set forth below. There are no family
relationships among directors or executive officers of Expedia.
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Name
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Age
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Position With Expedia, Inc.
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Barry Diller
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66
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Chairman and Senior Executive
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Dara Khosrowshahi
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38
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Director and Chief Executive Officer
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Victor A. Kaufman
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64
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Director and Vice Chairman
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A. George Skip Battle
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64
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Director
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Simon J. Breakwell
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43
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Director
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Jonathan L. Dolgen
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62
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Director
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William R. Fitzgerald
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50
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Director
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Craig A. Jacobson
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55
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Director
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Peter M. Kern
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40
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Director
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John C. Malone
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67
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Director
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Barry Diller has been the Chairman of the Board and
Senior Executive of Expedia since completion of the
Companys spin-off from IAC/InterActiveCorp
(IAC) on August 9, 2005 (the
Spin-Off). Mr. Diller has been the Chairman of
the Board and Chief Executive Officer of IAC (and its
predecessors) since August 1995. He was Chairman of the Board
and Chief Executive Officer of QVC, Inc. from December 1992
through December 1994. Mr. Diller served as the Chairman of
the Board and Chief Executive Officer of Fox, Inc. from 1984 to
1992. Prior to joining Fox, Inc., Mr. Diller served for ten
years as Chairman of the Board and Chief Executive Officer of
Paramount Pictures Corporation. Mr. Diller is currently a
member of the Boards of Directors of The Washington Post Company
and of The
Coca-Cola
Company. He also serves on the Board of Conservation
International. In addition, Mr. Diller is a member of the
Board of Councilors for the University of Southern
Californias School of Cinema - Television, the New York
University Board of Trustees and the Executive Board for the
Medical Sciences of the University of California, Los Angeles.
Dara Khosrowshahi has been a director and the Chief
Executive Officer of Expedia since completion of the Spin-Off.
Mr. Khosrowshahi served as the Chief Executive Officer of
IAC Travel, a division of IAC, from January 2005 to the Spin-Off
date. Prior to his tenure as Chief Executive Officer of IAC
Travel, Mr. Khosrowshahi served as Executive Vice President
and Chief Financial Officer of IAC from January 2002
4
to January 2005. Mr. Khosrowshahi served as IACs
Executive Vice President, Operations and Strategic Planning,
from July 2000 to January 2002 and as President, USA Networks
Interactive, a division of IAC, from 1999 to 2000.
Mr. Khosrowshahi joined IAC in 1998 as Vice President of
Strategic Planning, and was promoted to Senior Vice President in
1999. Mr. Khosrowshahi worked at Allen & Company
LLC from 1991 to 1998, where he served as Vice President from
1995 to 1998.
Victor A. Kaufman has been a director and the Vice
Chairman of Expedia since completion of the Spin-Off.
Mr. Kaufman has been a director of IAC (and its
predecessors) since 1996, and has served as the Vice Chairman of
IAC since October 1999. Mr. Kaufman served in the Office of
the Chairman in 1997 and as Chief Financial Officer of IAC from
1997 to 1999. Prior to his tenure with IAC, Mr. Kaufman
served as the Chairman and Chief Executive Officer of Savoy
Pictures Entertainment, Inc. beginning in 1992. Mr. Kaufman was
the founding Chairman and Chief Executive Officer of Tri-Star
Pictures, Inc. and served in those capacities from 1983 until
1987, at which time he became President and Chief Executive
Officer of Tri-Stars successor company, Columbia Pictures
Entertainment, Inc. He resigned from those positions in 1989
following the acquisition of Columbia by Sony USA, Inc.
Mr. Kaufman joined Columbia in 1974 and served in a variety
of senior positions at Columbia and its affiliates prior to the
founding of Tri-Star.
A. George Skip Battle has been a
director of Expedia since completion of the Spin-Off.
Mr. Battle previously served as the Executive Chairman of
Ask Jeeves, Inc. from January 2004 through July 2005, and he
served as the Chief Executive Officer of Ask Jeeves from
December 2000 until January 2004. Mr. Battle was a business
consultant and investor and served as a member of the boards of
directors of several technology companies from 1995 to 2000.
Prior thereto, Mr. Battle served with Andersen Consulting
in various roles, including Worldwide Managing Partner, Market
Development, until his retirement from Andersen Consulting in
1995. Mr. Battle is currently Chairman of the Board of Fair
Isaac Corporation, a position he has held since 2002. He is also
a director of Masters Select Equity Fund, Masters Select
International Fund, Masters Select Value Fund and Masters Select
Smaller Company Fund (all registered investment companies),
Advent Software, Inc., Netflix, Inc. and two non-profit
organizations. Mr. Battle also served as a director of
PeopleSoft, Inc. in 2004, until its acquisition by Oracle Corp.,
and of Barra, Inc. Mr. Battle holds a B.A. in economics
from Dartmouth College and an M.B.A. from the Stanford Graduate
School of Business.
Simon J. Breakwell has been a director of Expedia since
May 2006. Mr. Breakwell served as President of the European
Travel division of Expedia, Inc. from 2001 until his resignation
in May 2006. Prior to that Mr. Breakwell served as
Expedias Vice President, International from 2000 to 2001
and Senior Vice President of Sales and Marketing from 1997 to
2000. From 1997 until 1999 Mr. Breakwell served as a group
business manager at Microsoft Corporation. Prior to joining
Microsoft, Mr. Breakwell worked at British Airways, holding
a variety of sales positions from 1987 to 1993, as well as
various senior sales management positions from 1993 to 1997.
Mr. Breakwell was educated in the United Kingdom and holds
a B.A. in politics from Portsmouth Polytechnic and an M.B.A.
degree from Lancaster University.
Jonathan L. Dolgen has been a director of Expedia since
completion of the Spin-Off. Since October 2006, Mr. Dolgen
has served as senior consultant for ArtistDirect, Inc. Since
July 2004, Mr. Dolgen has also been a Senior Advisor to
Viacom, Inc. (Old Viacom), a worldwide entertainment
and media company, where he provided advisory services to the
Chief Executive Officer of Old Viacom, or others designated by
him, on an as requested basis. Effective December 31, 2005,
Old Viacom was separated into two publicly traded companies,
Viacom Inc. (New Viacom) and CBS Corporation.
Since the separation of Old Viacom, Mr. Dolgen has provided
advisory services to the chief executive officer of New Viacom,
or others designated by him, on an as-requested basis. Since
July 2004, Mr. Dolgen has been a private investor and since
September 2004, Mr. Dolgen has been a principal of Wood
River Ventures, LLC (Wood River), a private
start-up
entity that seeks investment and other opportunities primarily
in the media sector. Since April 2005, Mr. Dolgen, through
Wood River, has had an arrangement with Madison Dearborn
Partners, LLC to seek investment opportunities primarily in the
media sector. From April 1994 to July 2004, Mr. Dolgen
served as Chairman and Chief Executive Officer of the Viacom
Entertainment Group, a unit of Old Viacom, where he oversaw
various operations of Old Viacoms businesses, which during
2003 and 2004 primarily included the operations engaged in
motion picture production and distribution, television
production and distribution, regional theme parks, theatrical
exhibition and publishing. As a result of the separation of Old
Viacom, Old
5
Viacoms motion picture production and distribution and
theatrical exhibition business became part of New Viacoms
businesses, and substantially all of the remaining businesses of
Old Viacom overseen by Mr. Dolgen remained with
CBS Corporation. Mr. Dolgen began his career in the
entertainment industry in 1976, and until joining the Viacom
Entertainment Group, served in executive positions at Columbia
Pictures Industries, Inc., Twentieth Century Fox and Fox, Inc.,
and Sony Pictures Entertainment. Mr. Dolgen is also a
Director of Charter Communications, Inc. Mr. Dolgen holds a
B.S. from Cornell University and a J.D. from New York University.
William R. Fitzgerald has been a director of Expedia
since March 2006. He has served as a Senior Vice President of
Liberty Media since 2000. In addition, he has served as Chairman
of Ascent Media Group, a wholly owned subsidiary of Liberty
Media since 2000. Prior to joining Liberty Media,
Mr. Fitzgerald served as Executive Vice President and Chief
Operating Officer, Operations Administration for AT&T
Broadband (formerly known as Tele-Communications, Inc.)
(TCI) from 1999 to 2000 and was Executive Vice
President and Chief Operating Officer of TCI Communications,
Inc. from 1998 to 1999. Mr. Fitzgerald received his
undergraduate degree from Indiana University Kelley School of
Business and a masters degree from the Kellogg School of
Business at Northwestern University. Mr. Fitzgerald was
nominated as a director by Liberty Media, which currently has
the right to nominate two individuals for election to
Expedias Board of Directors pursuant to the Governance
Agreement.
Craig A. Jacobson was elected as a director of Expedia in
December 2007. Mr. Jacobson is a founding partner at the
law firm of Hansen, Jacobson, Teller, Hoberman, Newman,
Warren & Richman, L.L.P., where he has practiced
entertainment law for the past 20 years. Mr. Jacobson is a
member of the Board of Trustees at the USC Fine Arts School and
is a member of the Board of Directors of Aver Media, a privately
held Canadian lending institution.
Peter M. Kern has been a director of Expedia since
completion of the Spin-Off. Mr. Kern is a Managing Partner
of InterMedia Partners, LP, a private equity firm. Prior to
joining InterMedia, Mr. Kern was Senior Managing Director
and Principal of Alpine Capital LLC. Prior to Alpine Capital,
Mr. Kern founded Gemini Associates in 1996 and served as
its President from its inception through its merger with Alpine
Capital in 2001. Prior to founding Gemini Associates,
Mr. Kern was at the Home Shopping Network and Whittle
Communications. Mr. Kern serves the boards of Thomas
Nelson, Inc., Luxury Retreats International Holdings, Inc. and
Cine Latino, Inc., each of which is a private company.
Mr. Kern holds a B.S. from the Wharton School at the
University of Pennsylvania.
John C. Malone has been a director of Expedia since
completion of the Spin-Off. Dr. Malone has served as the
Chairman of the Board of Liberty Media since 1990, and he served
as Liberty Medias Chief Executive Officer from August 2004
through February 2006. Dr. Malone also served as Chairman
of the Board of TCI from 1996 to 1999 and as Chief Executive
Officer of TCI from 1994 to 1997. Dr. Malone also serves as
Chairman of the Board of Directors of Liberty Global, Inc. and
as Chairman of the Board of Directors and Chief Executive
Officer of Discovery Holding Company and as a director of IAC.
Dr. Malone was nominated as a director by Liberty Media,
which currently has the right to nominate two individuals for
election to Expedias Board of Directors pursuant to the
Governance Agreement.
Board
Meetings and Committees
Controlled Company Status. Expedia is subject
to The Nasdaq Stock Market Marketplace Rules (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, a group
or another company, from certain requirements.
Pursuant to a Stockholders Agreement, dated as of August 9,
2005 by and between Liberty Media and Mr. Diller (the
Stockholders Agreement), Mr. Diller, through
shares owned by him as well as those beneficially owned by
Liberty Media as of March 31, 2008, generally controls the
vote of approximately 27% of the outstanding common stock
(assuming conversion of all shares of Class B Common stock
into shares of common stock) and 100% of the outstanding
Class B common stock, and consequently, approximately 60%
of the combined voting power of the outstanding Expedia capital
stock. Mr. Diller, Liberty Media and certain of
6
their affiliates have filed a Statement of Beneficial Ownership
on Schedule 13D (and related amendments) with respect to
their Expedia holdings and related voting arrangements with the
SEC. On this basis, Expedia is relying on the exemption for
controlled companies from certain Nasdaq requirements,
including, among others, the requirement that a majority of the
Board be comprised of independent directors, the requirement
that the Compensation Committee be comprised solely of
independent directors and certain requirements relating to the
nomination of directors.
Director Independence. The Board of Directors
has determined that each of Messrs. Battle, Dolgen,
Jacobson and Kern is an independent director as
defined by the Marketplace Rules. In making its independence
determinations, the Board considered the applicable legal
standards and any relevant transactions, relationships or
arrangements.
The Board. The Board of Directors met six
times and acted by written consent once in 2007. During such
period, all the incumbent directors attended at least 75% of the
meetings of the Board and the Board committees on which they
served. Directors are not required to attend annual meetings of
Expedia stockholders. Five members of the Board attended the
2007 Annual Meeting of Stockholders.
The Board of Directors has the following standing committees:
the Audit Committee, the Compensation Committee, the
Section 16 Committee and the Executive Committee. The
Audit, Compensation and Section 16 Committees operate under
written charters adopted by the Board of Directors. These
charters are available in the Investor section of the
Companys corporate website at www.expediainc.com/ir.
Audit Committee. The Audit Committee of the
Board of Directors currently consists of three directors:
Messrs. Battle, Jacobson and Kern. Mr. Jacobson joined
the Audit Committee on December 4, 2007, replacing
Mr. David Goldhill, who had resigned as a member of the
Audit Committee effective July 30, 2007. Following
Mr. Goldhills resignation, Nasdaq notified the
Company that a cure period would be provided to allow the
Company to regain compliance with Marketplace
Rule 4350(d)(2)(A), which requires that every Nasdaq
company have an audit committee comprised of at least three
directors. On December 6, 2007, following
Mr. Jacobsons appointment to the Audit Committee,
Nasdaq notified the Company that it was again in compliance with
Marketplace Rule 4350(d)(2)(A). The Board has determined that
each of Messrs. Battle and Kern is an audit committee
financial expert, as such term is defined in the
regulations promulgated under the Securities Exchange Act of
1934, as amended (the Exchange Act).
The Audit Committee is appointed by the Board to assist the
Board with a variety of matters discussed in detail in the
Charter, including monitoring (1) the integrity of the
Companys financial reporting process, (2) the
independent registered public accounting firms
qualifications and independence, (3) the performance of the
Companys internal audit function and the independent
registered public accounting firm and (4) the
Companys compliance with legal and regulatory requirements.
Mr. Battle is the Chairman of the Audit Committee. The
Audit Committee met nine times and acted by written consent once
in 2007. The formal report of the Audit Committee with respect
to the year ended December 31, 2007, is set forth under the
heading Audit Committee Report below.
Compensation Committee. The Compensation
Committee consists of Messrs. Dolgen, Fitzgerald and Kern.
With the exception of Mr. Fitzgerald, each member is an
independent director as defined by the Marketplace
Rules. No member of the Compensation Committee is an employee of
Expedia. The Compensation Committee is responsible for
(i) administering and overseeing the Companys
executive compensation program, including salary matters, bonus
plans and stock compensation plans and (ii) approving all
grants of equity awards, but excluding matters governed by
Rule 16b-3
under the Exchange Act (see below). Mr. Dolgen is the
Chairman of the Compensation Committee. In 2007, the
Compensation Committee met seven times and acted by written
consent once. A description of the Companys processes and
procedures for the consideration and determination of executive
compensation is included in the section below titled
Compensation Discussion and Analysis.
Section 16 Committee. The Section 16
Committee consists of Messrs. Dolgen and Kern. Each member
is an independent director as defined by the
Marketplace Rules and satisfies the definition of
non-employee director for purposes of
Section 16 of the Exchange Act. The Section 16
Committee is authorized to exercise
7
all powers of the Board of Directors with respect to matters
governed by
Rule 16b-3
under the Exchange Act, including approving grants of equity
awards to Expedias executive officers. Mr. Dolgen is
the Chairman of the Section 16 Committee. The
Section 16 Committee met seven times and acted by written
consent once in 2007.
Executive Committee. The Executive Committee
consists of Messrs. Diller, Kaufman and Khosrowshahi. The
Executive Committee has all the power and authority of the Board
of Directors, except those powers specifically reserved to the
Board by Delaware law. Mr. Diller is the Chairman of the
Executive Committee. In 2007, the Executive Committee met once
and acted by written consent six times.
Other Committees. In addition to the foregoing
committees, the Board of Directors may from time to time
establish other committees of the Board consisting of one or
more of its directors.
Director
Nominations
Given the ownership structure of the Company and its status as a
controlled company, the Board of Directors does not
have a nominating committee or other committee performing
similar functions or any formal policy on director nominations.
Pursuant to the Governance Agreement, Liberty Media has the
right to nominate a number of directors equal to 20% of the
total number of the directors on the Board of Directors (rounded
up to the next whole number if the number of directors on the
Board is not an even multiple of five) for election to the Board
so long as certain stock ownership requirements are satisfied.
The Board does not have specific requirements for eligibility to
serve as a director of Expedia. However, in evaluating
candidates, regardless of how recommended, the Board considers
whether the professional and personal ethics and values of the
candidate are consistent with those of Expedia, whether the
candidates experience and expertise would be beneficial to
the Board in rendering service to Expedia, whether the candidate
is willing and able to devote the necessary time and energy to
the work of the Board and whether the candidate is prepared and
qualified to represent the best interests of Expedias
stockholders. Given the controlled status of Expedia, the Board
believes the process described above is appropriate. Liberty
Media has nominated Dr. Malone and Mr. Fitzgerald as
nominees for 2008. The other nominees to the Board were
recommended by the Chairman and then were considered and
recommended by the entire Board.
The Board of Directors does not have a formal policy regarding
the consideration of director candidates recommended by
stockholders. However, the Board would consider such
recommendations if made in the future. Stockholders who wish to
make such a recommendation should send the recommendation to
Expedia, Inc., 3150 139th Avenue S.E., Bellevue, Washington
98005, Attention: Corporate Secretary. The envelope must contain
a clear notation that the enclosed letter is a Director
Nominee Recommendation. The letter must identify the
author as a stockholder, provide a brief summary of the
candidates qualifications and history and be accompanied
by evidence of the senders stock ownership, as well as
consent by the candidate to serve as a director if elected. Any
director candidate recommendations will be reviewed by the
Corporate Secretary and, if deemed appropriate, forwarded to the
Chairman for further review. If the Chairman believes that the
candidate fits the profile of a director nominee as described
above, the recommendation will be shared with the entire Board.
Communications
With the Board
Stockholders who wish to communicate with the Board of Directors
or a particular director may send such communication to Expedia,
Inc., 3150 139th Avenue S.E., Bellevue, Washington 98005,
Attention: Corporate Secretary. The mailing envelope must
contain a clear notation indicating that the enclosed letter is
a Stockholder-Board Communication or
Stockholder-Director
Communication. All such letters must identify the author
as a stockholder, provide evidence of the senders stock
ownership and clearly state whether the intended recipients are
all members of the Board or just certain specified directors.
The Corporate Secretary will then review such correspondence and
forward it to the Board, or to the specified director(s), if
deemed appropriate. Communications that are primarily commercial
in nature, that are not relevant to stockholders or other
interested constituents or that relate to improper or irrelevant
topics will generally not be forwarded to the Board or to the
specified director(s).
8
Compensation
of Non-Employee Directors
The Board of Directors sets non-employee director compensation,
which is designed to provide competitive compensation necessary
to attract and retain high quality non-employee directors and to
encourage ownership of Company stock to further align
directors interests with those of our stockholders.
Expedia employees do not receive compensation for services as
directors, and Liberty Media nominees have historically agreed
that they would not receive compensation for their Expedia Board
service, including for 2007. During 2007, each non-employee
director of Expedia was entitled to receive the following
compensation:
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an annual retainer of $45,000, paid in equal quarterly
installments;
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a grant of restricted stock units (RSUs) with a
value of $250,000 (based on the closing price of Expedias
common stock on The Nasdaq Stock Market on the day prior to the
grant), upon such directors initial election to office and
on the date of each Expedia annual meeting of stockholders at
which the director is reelected, such RSUs to vest in three
equal installments commencing on the first anniversary of the
grant date and, in the event of a change in control (as defined
in the Expedia 2005 Plan and described in the section below
titled Potential Payments Upon Termination or Change in
Control), to vest automatically in full;
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an annual retainer of $20,000 for each member of the Audit
Committee (including the Chairman) and $15,000 for each member
of the Compensation Committee (including the Chairman); and
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an additional annual retainer of $10,000 for each of the
Chairman of the Audit Committee and the Chairman of the
Compensation Committee.
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Non-Employee
Director Deferred Compensation Plan
Under Expedias Non-Employee Director Deferred Compensation
Plan, non-employee directors may defer all or a portion of their
directors fees. Eligible directors who defer their
directors fees may elect to have such deferred fees
(i) applied to the purchase of share units, representing
the number of shares of Expedia common stock that could have
been purchased on the date such fees would otherwise be payable
or (ii) credited to a cash fund. If any dividends are paid
on Expedia common stock, dividend equivalents will be credited
on the share units. The cash fund will be credited with deemed
interest at an annual rate equal to the weighted-average prime
or base lending rate of The Chase Manhattan Bank (or successor
thereto). Upon termination of service as a director of the
Company, a director will receive (1) with respect to share
units, such number of shares of Expedia common stock as the
share units represent and (2) with respect to the cash
fund, a cash payment. Payments upon termination will be made in
either one lump sum or up to five installments, as elected by
the eligible director at the time of the deferral election.
2007
Non-Employee Director Compensation
As employees of the Company, Messrs. Diller, Kaufman and
Khosrowshahi did not receive compensation for service as
directors. Dr. Malone and Mr. Fitzgerald, who were
each nominated by Liberty Media, also did not receive
compensation for their Expedia Board service. The following
table shows the 2007 compensation information for the remaining
directors of the Company:
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Fees Earned or
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Paid in Cash
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Stock Awards
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Option Awards
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Total
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Name
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($)(1)
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($)(2)(3)
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($)(4)
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($)
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A. George Skip Battle(5)
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$
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75,000
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$
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137,927
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$
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0
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$
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212,927
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Simon J. Breakwell(6)
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45,000
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74,352
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0
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119,352
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Jonathan L. Dolgen(7)
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|
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70,000
|
|
|
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137,927
|
|
|
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0
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207,927
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David Goldhill(8)
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42,568
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234,690
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0
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277,258
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Craig A. Jacobson(9)
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4,946
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6,381
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0
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11,327
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Peter M. Kern(10)
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80,000
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137,927
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0
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217,927
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9
|
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(1) |
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This column reports the amount of cash compensation earned in
2007 for Board and committee service, including amounts deferred
at the directors election. Members of the Section 16
Committee do not receive additional compensation for service on
that committee. |
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(2) |
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This column represents the dollar amount recognized for
financial statement reporting purposes with respect to the year
ended December 31, 2007 for the fair value of RSUs granted,
in accordance with Financial Accounting Standards Board
Statement of Financial Accounting Standard No. 123 (revised
2004), Share-Based Payment (FAS 123R) and thus
includes amounts from awards granted in and prior to 2007.
Pursuant to SEC rules, we disregard the estimate of forfeitures
related to service-based vesting conditions. Assumptions used in
the calculation of these amounts are included in Note 2 to
our audited financial statements for the year ended
December 31, 2007 included in our Annual Report on
Form 10-K
filed with the SEC on February 22, 2008. These amounts
reflect the Companys accounting expense for these awards
and do not correspond to the actual value that may be recognized
by the directors. The dollar amount recognized for
Mr. Goldhill includes an accounting expense of $164,434
related to the acceleration of certain RSUs held by
Mr. Goldhill in connection with his resignation as a member
of the Board of Directors, which is described further in
footnote 8 below. |
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(3) |
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Each of Messrs. Battle, Dolgen and Kern had 17,754 RSUs
outstanding at December 31, 2007. Mr. Breakwell had
111,267 RSUs outstanding at December 31, 2007, including
96,013 RSUs previously granted for services as an employee and
15,254 RSUs granted for services as a director.
Mr. Jacobson held 7,610 RSUs at December 31, 2007.
Mr. Goldhill held no RSUs at December 31, 2007 (see
footnote 8 below). With the exception of Mr. Jacobson who
was not then a member of the Board of Directors, on June 6,
2007, the date of the Companys Annual Meeting of
Stockholders, each of the directors listed on the table above
received an award of 10,254 RSUs with a grant date fair value of
$249,993. Upon his election to the Board of Directors on
December 4, 2007, Mr. Jacobson received an award of
7,610 RSUs with a grant date fair value of $249,989. The grant
date fair value of these awards is calculated in accordance with
FAS 123R using the closing price of Expedia common stock on
The Nasdaq Stock Market on the day immediately preceding the
grant date. These fair value amounts reflect the Companys
accounting expense, and may not correspond to the actual value
that will be recognized by the directors. |
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(4) |
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Expedia has not granted any options for service as a director.
At December 31, 2007, Mr. Battle held options to
purchase 112,848 shares of Expedia common stock that were
issued in connection with IACs acquisition of Ask Jeeves,
Inc. in July 2005. |
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(5) |
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Mr. Battle is the Chairman of the Audit Committee. |
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(6) |
|
Prior to his election to the Board of Directors on May 24,
2006, Mr. Breakwell served as President of the European
Travel division of the Company and received compensation for his
services as an employee. He ceased to be an employee of the
Company at the time he was elected to the Board of Directors and
currently receives compensation from the Company for services as
a non-employee director only. |
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(7) |
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Mr. Dolgen is the Chairman of the Compensation and
Section 16 Committees. Mr. Dolgen deferred his
director fees for 2007 pursuant to Expedias Non-Employee
Director Deferred Compensation Plan, which is described above. |
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(8) |
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Mr. Goldhill resigned as a member of the Audit Committee,
effective July 30, 2007, and as a member of the Board of
Directors, effective September 7, 2007. In connection with
his resignation as a member of the Board of Directors, the
Section 16 Committee approved the accelerated vesting of
5,917 RSUs held by Mr. Goldhill, which represent the RSUs
that would have vested prior to June 11, 2008, the
anticipated date of the 2008 Annual Meeting of Stockholders.
Mr. Goldhill also held 11,837 RSUs that were not subject to
acceleration and were forfeited upon his resignation. |
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(9) |
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On December 4, 2007, the Board of Directors elected
Mr. Jacobson to serve on the Board of Directors and
appointed him to the Audit Committee. |
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(10) |
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Mr. Kern is a member of the Audit, Compensation and
Section 16 Committees. |
10
Compensation
Committee Interlocks and Insider Participation
The Board of Directors currently has a Compensation Committee,
consisting of Messrs. Dolgen, Fitzgerald and Kern, and a
Section 16 Committee, consisting of Messrs. Dolgen and
Kern. None of Messrs. Dolgen, Fitzgerald or Kern was an
executive officer of an entity for which an executive officer of
Expedia served as a member of the compensation committee or as a
director during the one-year period ended December 31, 2007.
Required
Vote
At the Annual Meeting, stockholders will be asked to elect ten
members of the Board of Directors, each to hold office for a
one-year term ending on the date of the next annual meeting of
stockholders or until each such directors successor shall
have been duly elected and qualified (or, if earlier, such
directors removal or resignation).
Election of each of Barry Diller, Dara Khosrowshahi, Victor A.
Kaufman, Simon J. Breakwell, Jonathan L. Dolgen, William R.
Fitzgerald and John C. Malone as Expedia directors requires the
affirmative vote of a plurality of the total number of votes
cast by the holders of shares of Expedia capital stock, present
in person or represented by proxy, voting together as a single
class.
Election of each of A. George Skip Battle, Craig A.
Jacobson and Peter M. Kern as Expedia common stock directors
requires the affirmative vote of a plurality of the total number
of votes cast by the holders of shares of Expedia common stock,
present in person or represented by proxy, voting together as a
separate class.
For the election of the directors, abstentions and broker
non-votes will have no effect because approval by a certain
percentage of voting stock present or outstanding is not
required.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE ELECTION OF EACH OF THE NOMINEES FOR
DIRECTOR NAMED ABOVE.
11
PROPOSAL 2:
APPROVAL OF AMENDMENT TO THE EXPEDIA, INC. 2005 STOCK
AND ANNUAL INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE THEREUNDER BY 7,500,000
Introduction
The Company awards equity compensation in order to align
compensation with long-term Company performance. In 2005, prior
to the Spin-Off, the Board of Directors adopted and
Expedias then sole stockholder, IAC, approved the Expedia,
Inc. 2005 Stock and Annual Incentive Plan (the Expedia
2005 Plan). In 2007, Expedias then stockholders
approved the Expedia 2005 Plan.
We are proposing to amend the Expedia 2005 Plan to increase the
aggregate number of shares of Expedia common stock authorized
for issuance under the plan by an additional
7,500,000 shares.
The principal features of the Expedia 2005 Plan are described
below. This summary is qualified in its entirety by reference to
the full text of the Expedia 2005 Plan, a copy of which is
attached as Appendix A to this Proxy Statement and
incorporated into this Proxy Statement by reference. Please
refer to Appendix A for more information.
Proposed
Expedia 2005 Plan Amendment
The Expedia 2005 Plan authorizes the Board of Directors
Compensation Committee or other Board committee designated by
the Board to award stock options, stock appreciation rights,
restricted stock, RSUs, other stock-based awards and bonus
awards to eligible participants for the purpose of giving the
Company a competitive advantage in attracting, motivating and
retaining officers, employees, directors and consultants and to
provide the Company with a stock and incentive plan to provide
incentives directly linked to stockholder value.
We are proposing to increase the aggregate number of shares of
Expedia common stock available under the Expedia 2005 Plan by an
additional 7,500,000 shares. As of December 31, 2007
and March 31, 2008, there were 4,339,283 shares and
1,469,948 shares, respectively, available for future
share-based awards under the plan.
We believe that the increased potential dilution level resulting
from approval of the amendment to add 7,500,000 shares to
the Expedia 2005 Plan is moderate and consistent with
stockholder interests.
Summary
of Terms of the Expedia 2005 Plan
Administration
The Expedia 2005 Plan is administered by the Compensation
Committee or such other committees of the Board of Directors as
the Board may from time to time designate. Among other things,
the Committee has the authority to select individuals to whom
awards may be granted, to determine the type of award as well as
the number of shares of Expedia common stock to be covered by
each award, and to determine the terms and conditions of any
such awards.
Eligibility
Awards may be granted under the Expedia 2005 Plan to officers,
employees, directors and consultants of Expedia and
Expedias subsidiaries and affiliates. Shares of Expedia
common stock may also be issued under the Expedia 2005 Plan
pursuant to the adjustment of awards granted under certain IAC
and other historical incentive plans. As of March 31, 2008,
approximately 7,200 individuals were eligible to participate in
the Expedia 2005 Plan.
12
Shares
Subject to the Expedia 2005 Plan
The Expedia 2005 Plan currently authorizes the issuance of up to
12,000,000 shares of Expedia common stock pursuant to new
awards under the plan, plus up to 50,002,461 shares
pursuant to the assumption of adjusted awards outstanding
following the Spin-Off. If the proposed amendment to increase
the number of shares authorized for issuance under the plan is
approved, an additional 7,500,000 shares will be authorized
for issuance under the Expedia 2005 Plan. No single participant
may be granted awards covering in excess of
8,000,000 shares of Expedia common stock over the life of
the Expedia 2005 Plan, except that this limitation does not
apply to adjusted awards.
The shares of Expedia common stock subject to grant under the
Expedia 2005 Plan are to be made available from authorized but
unissued shares or from treasury shares, as determined from time
to time by the Board of Directors. Other than adjusted awards,
to the extent that any award is forfeited, or any option or
stock appreciation right terminates, expires or lapses without
being exercised, or any award is settled for cash, the shares of
Expedia common stock subject to such awards not delivered as a
result thereof will again be available for awards under the
Expedia 2005 Plan. If the exercise price of any option
and/or the
tax withholding obligations relating to any award are satisfied
by delivering shares of Expedia common stock (by either actual
delivery or by attestation), only the number of shares of
Expedia common stock issued net of the shares of Expedia common
stock delivered or attested to will be deemed delivered for
purposes of the limits in the plan. To the extent any shares of
Expedia common stock subject to an award are withheld to satisfy
the exercise price (in the case of an option)
and/or the
tax withholding obligations relating to such award, such shares
of Expedia common stock are not generally deemed to have been
delivered for purposes of the limits set forth in the plan.
In the case of certain events affecting the capital structure of
the Company, including stock dividends and stock splits, and
certain extraordinary corporate transactions, the Committee or
the Board of Directors can make such substitutions or
adjustments as it deems appropriate and equitable to
(1) the aggregate number and kind of shares or other
securities reserved for issuance and delivery under the plan,
(2) the various maximum limitations set forth in the plan,
(3) the number and kind of shares or other securities
subject to outstanding awards, and (4) the exercise price
of outstanding options and stock appreciation rights.
As indicated above, several types of stock grants can be made
under the Expedia 2005 Plan. A summary of these grants is set
forth below. In addition, Expedia options and Expedia RSUs that
converted from IAC options and IAC RSUs in connection with the
Spin-Off are governed by the Expedia 2005 Plan to the extent
that the terms and conditions in the Expedia 2005 Plan are not
inconsistent with the terms and conditions that were applicable
to such awards immediately prior to the Spin-Off.
Stock
Options and Stock Appreciation Rights
Stock options granted under the Expedia 2005 Plan can either be
incentive stock options (ISOs) or nonqualified stock
options. Stock appreciation rights granted under the Expedia
2005 Plan can be granted either alone or in tandem with a stock
option. The exercise price of options and stock appreciation
rights cannot be less than 100% of the fair market value of the
stock underlying the options or stock appreciation rights on the
date of grant. Stock options and stock appreciation rights
cannot be repriced without stockholder approval. Optionees may
pay the exercise price in cash or, if approved by the Committee,
in Expedia common stock (valued at its fair market value on the
date of exercise) or a combination thereof, or by cashless
exercise through a broker or by withholding shares
otherwise receivable on exercise. The term of options and stock
appreciation rights are as determined by the Committee, but an
ISO may not have a term longer than ten years from the date of
grant. The Committee determines the vesting and exercise
schedule of options and stock appreciation rights, which the
Committee may waive or accelerate at any time, and the extent to
which they will be exercisable after the award holders
employment terminates. Generally, unvested options and stock
appreciation rights terminate upon the termination of
employment, and vested options and stock appreciation rights
will remain exercisable for one year after the award
holders death, disability or retirement, and 90 days
after the award holders termination for any other reason.
Vested options and stock appreciation rights also terminate upon
the optionees termination for cause (as defined in the
Expedia 2005 Plan and described under
13
Potential Payments Upon Termination or Change in Control). Stock
options and stock appreciation rights are transferable only by
will or by the laws of descent and distribution, or pursuant to
a qualified domestic relations order or in the case of
nonqualified stock options or stock appreciation rights, as
otherwise expressly permitted by the Committee including, if so
permitted, pursuant to a transfer to the participants
family members or to a charitable organization, whether directly
or indirectly or by means of a trust or partnership or otherwise.
Restricted
Stock
Restricted stock may be granted with such restriction periods as
the Committee may designate. The Committee may provide at the
time of grant that the vesting of restricted stock will be
contingent upon the achievement of applicable performance goals
and/or
continued service. In the case of performance-based awards that
are intended to qualify under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the
Code), such goals will be based on the attainment of
one or any combination of the following: specified levels of
earnings per share from continuing operations; net profit after
tax; earnings before interest, taxes, depreciation and
amortization; earnings before interest, taxes and amortization;
gross profit; cash generation; unit volume; market share; sales;
asset quality; earnings per share; operating income; revenues;
return on assets; return on operating assets; return on equity;
profits; total shareholder return (measured in terms of stock
price appreciation
and/or
dividend growth); cost saving levels; marketing-spending
efficiency; core non-interest income; change in working capital;
return on capital;
and/or stock
price, with respect to Expedia or any subsidiary, division or
department of Expedia. Such performance goals also may be based
on the attaining of specified levels of Expedia, subsidiary,
affiliate or divisional performance under one or more of the
measures described above relative to the performance of other
entities, divisions or subsidiaries. Performance goals based on
the foregoing factors are hereinafter referred to as
Performance Goals. The terms and conditions of
restricted stock awards (including any applicable Performance
Goals) need not be the same with respect to each participant.
During the restriction period, the Committee may require that
the stock certificates evidencing restricted shares be held by
Expedia. Restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, and it is
forfeited upon termination of employment, unless otherwise
provided by the Committee. Other than such restrictions on
transfer and any other restrictions the Committee may impose,
the participant will have all the rights of a stockholder with
respect to the restricted stock award.
RSUs
The Committee may grant RSUs payable in cash or shares of
Expedia common stock, conditioned on continued service
and/or the
attainment of Performance Goals determined by the Committee. The
terms and conditions of RSU awards (including any applicable
Performance Goals) need not be the same with respect to each
participant.
Other
Stock-Based Awards
Other awards of Expedia common stock and other awards that are
valued in whole or in part by reference to, or are otherwise
based on, Expedia common stock, including unrestricted stock,
dividend equivalents and convertible debentures, may be granted
under the Expedia 2005 Plan.
Bonus
Awards
Bonus awards granted to eligible employees of Expedia and its
subsidiaries and affiliates under the Expedia 2005 Plan shall be
based on the attainment of the Performance Goals established by
the Committee for the plan year or such shorter performance
period as may be established by the Committee. Bonus amounts
earned by any individual shall be limited to $10 million
for any plan year, prorated (if so determined by the Committee)
for any shorter performance period. Bonus amounts will be paid
in cash or, in the discretion of the Committee, in Expedia
common stock, as soon as practicable following the end of the
plan year. The Committee may reduce or eliminate a
participants bonus award in any year notwithstanding the
achievement of Performance Goals.
14
Change
in Control
Unless otherwise provided by the Committee in an award agreement
(and with respect to adjusted awards only if provided in an
applicable award agreement or in the IAC plan under which the
award was granted), in the event of a change in control of
Expedia, in the case of officers of Expedia, Inc., the Delaware
corporation (and not its subsidiaries), who are Senior Vice
Presidents and above as of the time of the change in control
and, in the case of other employees of Expedia if provided by
the Committee in an award agreement,
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any stock options and stock appreciation rights outstanding that
are not then exercisable and vested will become fully
exercisable and vested,
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the restrictions and deferral limitations applicable to
restricted stock will lapse and such restricted stock will
become free of all restrictions and fully vested and
transferable, and
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all RSUs will be considered to be earned and payable in full,
any deferral or other restrictions will lapse and such RSUs will
be settled in cash or shares of Expedia common stock as promptly
as practicable.
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In addition, in the event that, during the two-year period
following a change in control, a participants employment
is terminated by Expedia other than for cause or disability or a
participant resigns for good reason,
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any stock appreciation rights and stock options outstanding as
of the date of termination of employment that were outstanding
as of the date of the change in control will become fully
exercisable and vested and will remain exercisable for the
greater of (a) the period that they would remain
exercisable absent the change in control provision and
(b) the lesser of the original term or one year following
such termination of employment,
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the restrictions and deferral limitations applicable to
restricted stock will lapse, and such restricted stock will
become free of all restrictions and fully vested and
transferable, and
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all RSUs will be considered to be earned and payable in full,
any deferral or other restrictions will lapse and such RSUs will
be settled in cash or shares of Expedia common stock as promptly
as practicable, subject to applicable requirements under
Section 409A of the Code.
|
Unless otherwise provided in an award agreement, the terms
change in control, cause and good
reason are as defined in the Expedia 2005 Plan and
described in the section below titled Potential Payments
Upon Termination or Change in Control. The change in
control definition in the Expedia 2005 Plan does not include the
acquisition of voting control by Liberty Media Corporation.
Amendment
and Discontinuance
The Expedia 2005 Plan may be amended, altered or discontinued by
the Board of Directors, but no amendment, alteration or
discontinuance may impair the rights of an optionee under an
option or a recipient of a stock appreciation right, restricted
stock award, RSU award or bonus award previously granted without
the optionees or recipients consent. Amendments to
the Expedia 2005 Plan will require stockholder approval to the
extent such approval is required by law or agreement. The
Expedia 2005 Plan will terminate on August 8, 2015.
Other
Information
A new plan benefits table, as described in the federal proxy
rules, is not provided because all awards made under the Expedia
2005 Plan are discretionary. However, please refer to the
2007 Grants of Plan-Based Awards Table below, which
provides information on the grants made to the named executive
officers in the last fiscal year, and to the section above
titled Compensation of Non-Employee Directors, which
provides information on grants made to our non-employee
directors in the last fiscal year. In 2007, the Companys
executive officers, as a group, were awarded 492,198 RSUs with a
total grant date fair value of $11,062,850. In 2007, the
Companys employees, as a group excluding our executive
officers, were awarded 3,253,480
15
RSUs with a total grant date fair value of $74,650,123. Grant
date fair value is calculated using the closing price of Expedia
common stock on The Nasdaq Stock Market on the day immediately
preceding the grant date.
The closing price of Expedia common stock, as reported on The
Nasdaq Stock Market, on the last business day of the quarter
ended March 31, 2008 was $21.89 per share.
U.S.
Federal Income Tax Consequences
The following is a summary of the material U.S. federal
income tax consequences to the Company and to recipients of
stock options and stock appreciation rights under the Expedia
2005 Plan. The summary is based on the Code and the
U.S. Treasury regulations promulgated under the Code in
effect as of the date of this Proxy Statement, all of which are
subject to change with retroactive effect. The summary is not
intended to be a complete analysis or discussion of all
potential tax consequences that may be important to recipients
of awards under the Expedia 2005 Plan. The laws governing the
tax aspects of these awards are highly technical, and such laws
are subject to change. Different tax rules may apply to specific
participants and transactions under the Expeda 2005 Plan,
particularly in jurisdictions outside the United States.
Nonqualified
Stock Options and Stock Appreciation Rights
The recipient will not have any income at the time a
nonqualified stock option or stock appreciation right (a
SAR) is granted nor will the Company be entitled to
a deduction at that time. When a nonqualified option is
exercised, the optionee generally will recognize ordinary income
(whether the option price is paid in cash or by delivery or
surrender of shares of common stock), in an amount equal to the
excess of the fair market value of the shares to which the
option exercise pertains over the option exercise price. When an
SAR is exercised, the holder will recognize ordinary income
equal to the sum of (a) the gross cash proceeds payable and
(b) the fair market value on the exercise date of any
shares received. The Company will be entitled to a corresponding
deduction with respect to a nonqualified stock option or SAR
equal to the ordinary income recognized by the optionee or
holder of the SAR, provided that the deduction is not disallowed
by Section 162(m) or otherwise limited by the Code.
ISOs
A recipient will not have any income at the time an ISO is
granted or have regular taxable income at the time the ISO is
exercised. However, the excess of the fair market value of the
shares at the time of exercise over the option exercise price
will be a preference item that could create an alternative
minimum tax liability for the optionee. Such alternative minimum
tax may be payable even though the optionee receives no cash
upon the exercise of the ISO with which to pay such tax. If the
optionee disposes of the shares acquired on exercise of an ISO
after the later of two years after the grant of the ISO and one
year after exercise of the ISO, the gain recognized by the
optionee (i.e., the excess of the proceeds received over the
option exercise price), if any, will be long-term capital gain
eligible for favorable tax rates under the Code. Conversely, if
the optionee disposes of the shares within two years of the
grant of the ISO or within one year of exercise of the ISO, the
disposition will generally be a disqualifying
disposition, and the optionee will recognize ordinary
income in the year of the disqualifying disposition equal to the
lesser of (i) the excess of the fair market value of the
stock on the date of exercise over the option exercise price and
(ii) the excess of the amount received for the shares over
the option exercise price. The balance of the gain or loss, if
any, will be long-term or short-term capital gain, depending on
how long the shares were held.
The Company is not entitled to a deduction as the result of the
grant or exercise of an ISO. However, if the optionee recognizes
ordinary income as a result of a disqualifying disposition, the
Company will be entitled to a corresponding deduction equal to
the amount of ordinary income recognized by the optionee,
provided that the deduction is not disallowed by
Section 162(m) or otherwise limited by the Code. We intend
that awards granted under the Expedia 2005 Plan comply with, or
are otherwise exempt from, Section 409A of the Code.
16
Section 162(m)
Awards and Other Awards
As discussed above, the Expedia 2005 Plan allows the Committee
to make awards that would be performance-based for purposes of
exemption from the limitations of Section 162(m). Nothing
precludes the Committee from making any payments or granting any
awards that do not qualify for tax deductibility under
Section 162(m).
Required
Vote
At the Annual Meeting, stockholders will be asked to approve the
amendment to the Expedia 2005 Plan. This proposal requires the
affirmative vote of a majority of the voting power of the shares
of Expedia capital stock, present in person or represented by
proxy, voting together as a single class.
Abstentions and broker non-votes will be counted toward the
tabulation of votes cast on the approval of the amendment to the
Expedia 2005 Plan proposal and will have the same effect as
votes against that proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR APPROVAL OF THE PROPOSAL TO AMEND THE
EXPEDIA, INC. 2005 STOCK AND ANNUAL INCENTIVE PLAN TO INCREASE
THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE THEREUNDER BY
7,500,000.
17
PROPOSAL 3:
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP was Expedias independent
registered public accounting firm for the year ended
December 31, 2007. The Audit Committee of the Board of
Directors has also appointed Ernst & Young LLP as
Expedias independent registered public accounting firm for
the year ending December 31, 2008.
Selection of Expedias independent registered public
accounting firm is not required to be submitted to a vote of the
stockholders for ratification. The Sarbanes-Oxley Act of 2002
requires that the Audit Committee be directly responsible for
the appointment, compensation and oversight of the audit work of
the independent registered public accounting firm. If the
stockholders fail to vote on an advisory basis in favor of the
appointment, the Audit Committee will reconsider whether to
retain Ernst & Young LLP and may retain that firm or
another firm without resubmitting the matter to Expedia
stockholders. Even if stockholders vote on an advisory basis in
favor of the appointment, the Audit Committee may, in its
discretion, direct the appointment of a different independent
registered public accounting firm at any time during the year if
it determines that such a change would be in the best interests
of Expedia and its stockholders.
A representative of Ernst & Young LLP is expected to
be present at the Annual Meeting and will be given an
opportunity to make a statement if he or she so chooses and will
be available to respond to appropriate questions.
Required
Vote
At the Annual Meeting, stockholders will be asked to ratify the
appointment of Ernst & Young LLP as Expedias
independent registered public accounting firm for 2008. This
proposal requires the affirmative vote of a majority of the
voting power of the shares of Expedia capital stock, present in
person or represented by proxy, voting together as a single
class.
Abstentions will be counted toward the tabulations of votes cast
on the ratification of the independent registered public
accounting firm proposal and will have the same effect as votes
against the proposal. Brokers have discretion to vote on the
ratification of the independent registered public accounting
firm proposal and therefore, there will be no broker non-votes.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS EXPEDIAS INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR 2008.
18
AUDIT
COMMITTEE REPORT
The Audit Committee reviews the Companys financial
reporting process on behalf of the Board of Directors.
Management has the primary responsibility for the financial
statements, the reporting process and maintaining an effective
system of internal control over financial reporting. The
Companys independent registered public accounting firm is
engaged to audit and express opinions on the conformity of the
Companys financial statements to generally accepted
accounting principles and applicable rules and regulations, and
the effectiveness of the Companys internal control over
financial reporting.
In this context, the Audit Committee has reviewed and discussed
the audited consolidated financial statements, together with the
results of the assessment of the internal control over financial
reporting, with management and the independent registered public
accounting firm. The Audit Committee has discussed with the
independent registered public accounting firm the matters
required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees, as
amended. In addition, the Audit Committee has received the
written disclosures and the letter from the independent
registered public accounting firm required by Independence
Standards Board Standard No. 1, Independence
Discussions with Audit Committees and has discussed with
them their independence from the Company and its management.
Finally, the Audit Committee has considered whether the
independent registered public accounting firms provision
of non-audit services to the Company is compatible with their
independence.
Relying on the reviews and discussions referred to above, the
Audit Committee recommended to the Board of Directors, and the
Board has approved, that the audited consolidated financial
statements be included in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2007 filed with the SEC.
Members of the Audit Committee:
A. George Skip Battle (Chairman)
Craig A. Jacobson
Peter M. Kern
19
Fees Paid
to our Independent Registered Public Accounting Firm
The following table sets forth aggregate fees for professional
services rendered by Ernst & Young LLP for the years
ended December 31, 2007 and 2006.
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2007
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2006
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Audit Fees(1)
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$
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5,054,000
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$
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7,288,000
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Audit-Related Fees(2)
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303,000
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741,000
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Total Audit and Audit-Related Fees
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5,357,000
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8,029,000
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Tax Fees
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0
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0
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Other Fees(3)
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7,000
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4,000
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Total Fees
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$
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5,364,000
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$
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8,033,000
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(1) |
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Audit Fees include fees and expenses associated with the annual
audit of the Companys consolidated financial statements,
statutory audits, reviews of Expedias periodic reports,
accounting consultations, reviews of SEC registration statements
and consents and other services related to SEC matters. |
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(2) |
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Audit-Related Fees include fees and expenses for due diligence
in connection with acquisitions, accounting consultations and
benefit plan audits. |
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(3) |
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Other Fees consist of fees for access to Ernst & Young
LLPs online research tools. |
Audit and
Non-Audit Services Pre-Approval Policy
The Audit Committee has considered the non-audit services
provided by Ernst & Young LLP as described above and
believes that they are compatible with maintaining
Ernst & Young LLPs independence as the
Companys independent registered public accounting firm.
The Audit Committee has adopted a policy governing the
pre-approval of all audit and permitted non-audit services
performed by the Companys independent registered public
accounting firm to ensure that the provision of such services
does not impair the independent registered public accounting
firms independence from the Company and its management.
Unless a type of service to be provided by the Companys
independent registered public accounting firm has received
general pre-approval from the Audit Committee, it requires
specific pre-approval by the Audit Committee. The payment of any
proposed services in excess of pre-approved cost levels requires
specific pre-approval by the Audit Committee.
Pursuant to its pre-approval policy, the Audit Committee may
delegate its authority to pre-approve services to one or more of
its members, and has currently delegated this authority to its
Chairman, subject to a limit of $500,000 per approval. The
decisions of the Chairman (or any other member(s) to whom such
authority may be delegated) to grant pre-approvals must be
presented to the full Audit Committee at its next scheduled
meeting. The Audit Committee may not delegate its responsibility
to pre-approve services to management.
20
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information as of March 31,
2008 relating to the beneficial ownership of Expedias
capital stock by (1) each person or entity known to Expedia
to own beneficially more than 5% of the outstanding shares of
Expedias common stock and Class B common stock,
(2) each director of Expedia, (3) the named executive
officers and (4) the named executive officers, other
executive officers and directors of Expedia, as a group.
Unless otherwise indicated, beneficial owners listed in the
table may be contacted at Expedias corporate headquarters
at 3150 139th Avenue S.E., Bellevue, Washington 98005.
For each listed person, entity or group, the number of shares of
Expedia common stock and Class B common stock and the
percentage of each such class listed assume the conversion or
exercise of certain Expedia equity securities, as described
below, owned by such person, entity or group, but do not assume
the conversion or exercise of any equity securities owned by any
other person, entity or group. Shares of Expedia Class B
common stock may, at the option of the holder, be converted on a
one-for-one basis into shares of Expedia common stock. For each
listed person, entity or group, the number of shares of Expedia
common stock and Class B common stock and the percentage of
each such class listed include shares of Expedia common stock
and Class B common stock that may be acquired by such
person, entity or group on the conversion or exercise of equity
securities, such as stock options and warrants, which can be
converted or exercised, and RSUs that have or will have vested,
within 60 days of March 31, 2008.
The percentage of votes for all classes of Expedias
capital stock is based on one vote for each share of common
stock, ten votes for each share of Class B common stock and
two votes for each share of Series A preferred stock.
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Percent (%)
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Common Stock
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Class B Common Stock
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of Votes
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Beneficial Owner
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Shares
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%
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Shares
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%
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(All Classes)
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Liberty Media Corporation
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69,219,807
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(1)
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24.18
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25,599,998
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(2)
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100
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58.00
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12300 Liberty Boulevard
Englewood, CO 80112
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Legg Mason Capital Management,
Inc. and LMM LLC
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40,479,919
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(3)
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15.53
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0
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0
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7.84
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100 Light Street
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Baltimore, MD 21202
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T. Rowe Price Associates, Inc.
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|
|
29,660,849
|
(4)
|
|
|
11.38
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5.74
|
|
100 E. Pratt Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baltimore, MD 21202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry Diller
|
|
|
78,557,738
|
(5)
|
|
|
27.45
|
|
|
|
25,599,998
|
(6)
|
|
|
100
|
|
|
|
59.80
|
|
Victor A. Kaufman
|
|
|
673,060
|
(7)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
Dara Khosrowshahi
|
|
|
596,571
|
(8)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
A. George Skip Battle
|
|
|
137,914
|
(9)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
Simon J. Breakwell
|
|
|
7,981
|
(10)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
Jonathan L. Dolgen
|
|
|
16,097
|
(11)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
William R. Fitzgerald
|
|
|
0
|
(12)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Craig A. Jacobson
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Peter M. Kern
|
|
|
10,000
|
(13)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
John C. Malone
|
|
|
0
|
(12)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Michael B. Adler
|
|
|
39,283
|
(14)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
Burke F. Norton
|
|
|
2,633
|
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
Pierre V. Samec
|
|
|
4,579
|
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
All executive officers and directors as a group
(15) persons
|
|
|
80,156,926
|
(15)
|
|
|
27.87
|
|
|
|
25,599,998
|
|
|
|
100
|
|
|
|
59.95
|
|
21
|
|
|
* |
|
The percentage of shares beneficially owned does not exceed 1%
of the class. |
|
(1) |
|
Based on information filed on a Schedule 13D, as amended,
with the SEC dated October 31, 2007 by Liberty Media,
Mr. Diller and the BDTV Entities (the Liberty/Diller
Schedule 13D). Consists of
(i) 43,619,787 shares of common stock held by Liberty
Media, (ii) 22 shares of common stock held by the BDTV
Entities, (iii) 1,176,594 shares of Class B
common stock held by Liberty Media, and
(iv) 24,423,404 shares of Class B common stock
held by the BDTV Entities. The BDTV Entities consist
of BDTV Inc., BDTV II Inc., BDTV III Inc. and BDTV IV Inc.
Pursuant to the Stockholders Agreement described above in the
section titled Board Meetings and Committees,
Mr. Diller generally has the right to vote all the shares
of common stock and Class B common stock held by Liberty
Media and the BDTV Entities. |
|
(2) |
|
Consists of 1,176,594 shares of Class B common stock
held by Liberty Media and 24,423,404 shares of Class B
common stock held by the BDTV Entities. Pursuant to the
Stockholders Agreement, Mr. Diller generally has the right
to vote all the shares of common stock and Class B common
stock held by Liberty Media and the BDTV Entities. |
|
(3) |
|
Based on information filed on a Schedule 13G, as amended,
with the SEC dated February 14, 2008 by Legg Mason Capital
Management, Inc. (Capital Management) and LMM LLC
(LMM). Capital Management has shared voting and
dispositive power over 33,479,919 shares of common stock.
LMM has shared voting and dispositive power over
7,000,000 shares of common stock. |
|
(4) |
|
Based on information filed on a Schedule 13G, as amended,
with the SEC dated March 10, 2008 by T. Rowe Price
Associates, Inc. (T. Rowe). T. Rowe has sole voting
power over 7,503,069 of common stock and sole dispositive power
over 29,592,549 shares of common stock. |
|
(5) |
|
Based on information filed on the Liberty/Diller
Schedule 13D. Consists of (i) 9,153,561 shares of
common stock owned by Mr. Diller,
(ii) 184,370 shares of common stock held by a private
foundation as to which Mr. Diller disclaims beneficial
ownership, (iii) 22 shares of common stock held by the
BDTV Entities (see footnote 1 above),
(iv) 24,423,404 shares of Class B common stock
held by the BDTV Entities (see footnote 1 above),
(v) 43,619,787 shares of common stock held by Liberty
Media (see footnote 1 above) and (vi) 1,176,594 shares
of Class B common stock held by Liberty Media (see footnote
1 above). Pursuant to the Stockholders Agreement,
Mr. Diller generally has the right to vote all the shares
of common stock and Class B common stock held by Liberty
Media and the BDTV Entities. Excludes shares of common stock and
options to purchase shares of common stock held by
Mr. Dillers spouse, as to which Mr. Diller
disclaims beneficial ownership. |
|
(6) |
|
Consists of 1,176,594 shares of Class B common stock
held by Liberty Media and 24,423,404 shares of Class B
common stock held by the BDTV Entities. Pursuant to the
Stockholders Agreement, Mr. Diller generally has the right
to vote all the shares of Class B common stock held by
Liberty Media and the BDTV Entities. |
|
(7) |
|
Consists of (i) 29,310 shares of common stock and
(ii) options to purchase 643,750 shares of common
stock that are exercisable within 60 days of March 31,
2008. |
|
(8) |
|
Consists of (i) 48,375 shares of common stock and
(ii) options to purchase 548,196 shares of common
stock that are exercisable within 60 days of March 31,
2008. Excludes shares of common stock for which beneficial
ownership was transferred to Mr. Khosrowshahis spouse
pursuant to a property settlement agreement in connection with
separation proceedings. |
|
(9) |
|
Consists of (i) 7,500 shares of common stock held by
Mr. Battle, (ii) options to purchase
112,848 shares of common stock that are exercisable within
60 days of March 31, 2008, (iii) 2,500 RSUs that
vest within 60 days of March 31, 2008,
(iv) 9,999 shares of common stock held by the Battle
Family Foundation, as to which Mr. Battle disclaims
beneficial ownership and (v) 5,067 shares of common
stock held by Mr. Battles wife as custodian under
CAUTMA for Catherine McNelley, as to which Mr. Battle
disclaims beneficial ownership. |
|
(10) |
|
Consists of (i) 5,481 shares of common stock and
(ii) 2,500 RSUs that vest within 60 days of
March 31, 2008. |
22
|
|
|
(11) |
|
Consists of (i) 13,130 shares of common stock,
(ii) 2,500 RSUs that vest within 60 days of
March 31, 2008, and (iii) 467 shares of common
stock held indirectly by a charitable trust, of which
Mr. Dolgen is a trustee and as to which Mr. Dolgen
disclaims beneficial ownership. |
|
(12) |
|
Excludes shares of common stock and Class B common stock
owned by Liberty Media, as to which Dr. Malone and
Mr. Fitzgerald disclaim beneficial ownership. |
|
(13) |
|
Consists of (i) 7,500 shares of common stock and
(ii) 2,500 RSUs that vest within 60 days of
March 31, 2008. |
|
(14) |
|
Consists of (i) 11,713 shares of common stock and
(ii) 27,570 RSUs that vest within 60 days of
March 31, 2008. |
|
(15) |
|
Consists of 53,139,401 shares of common stock,
25,599,998 shares of Class B common stock and the
following securities that vest or are exercisable within
60 days of March 31, 2008: (i) options to
purchase 1,373,396 shares of common stock (ii) 37,570
RSUs and (iii) warrants to purchase 6,561 shares of
common stock. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Exchange Act, Expedia
officers and directors and persons who beneficially own more
than 10% of a registered class of Expedias equity
securities are required to file initial statements of beneficial
ownership (Form 3) and statements of changes in
beneficial ownership (Forms 4 and 5) with the SEC.
Such persons are required by the rules of the SEC to furnish
Expedia with copies of all such forms they file. Based solely on
a review of the copies of such forms furnished to Expedia
and/or
written representations that no additional forms were required,
Expedia believes that all of its directors and officers complied
with all the reporting requirements applicable to them with
respect to transactions during 2007.
Information
Concerning Executive Officers
Background information as of March 31, 2008 about each of
Expedias executive officers who does not also serve as a
director of Expedia is provided below.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position with Expedia, Inc.
|
|
Michael B. Adler
|
|
|
44
|
|
|
Executive Vice President and Chief Financial Officer
|
Kathleen K. Dellplain
|
|
|
49
|
|
|
Executive Vice President, Human Resources
|
Burke F. Norton
|
|
|
41
|
|
|
Executive Vice President, General Counsel and Secretary
|
Pierre V. Samec
|
|
|
45
|
|
|
Chief Technology Officer
|
Patricia L. Zuccotti
|
|
|
60
|
|
|
Senior Vice President, Chief Accounting Officer and Controller
|
Michael B. Adler has served as Chief Financial Officer of
Expedia since May 2006. Mr. Adler had served as Executive
Vice President, Finance during a one-month transition period
prior to the effective date of his appointment as Chief
Financial Officer of Expedia. Prior to joining Expedia,
Mr. Adler served as the Senior Vice President, Financial
Planning and Analysis for IAC. Mr. Adler was promoted to
that position in April 2005 from Vice President, Financial
Analysis and Operational Reporting, a position he had held since
January 2002. Mr. Adler joined IAC in May 2001 as Senior
Vice President, Finance and Administration, for IACs
Information and Services Group. Prior to joining IAC,
Mr. Adler held a number of positions, including Chief
Financial Officer and General Counsel for SchoolSports, Inc. and
Vice President and General Counsel for Cheyenne Software, Inc.
Prior to that, Mr. Adler practiced law with Feldman,
Waldman & Kline. Mr. Adler received his B.S. in
economics from The Wharton School, University of Pennsylvania.
Mr. Adler received his J.D. from the University of
Pennsylvania Law School.
Kathleen K. Dellplain served as Executive Vice President,
Human Resources of Expedia from the completion of the Spin-Off
until her resignation from the Company, which was effective
April 1, 2008. Ms. Dellplain served as Executive Vice
President of Human Resources of IAC Travel from September 2003
to
23
the Spin-Off date. Prior to the formation of IAC Travel in
September 2003, Ms. Dellplain served as Executive Vice
President of Human Resources of Expedia beginning in November
1999. Ms. Dellplain was initially hired by the Microsoft
Corporation in 1999 to build the human resources function of
Expedia, then a subsidiary of Microsoft, in anticipation of
Expedias initial public offering. Previously,
Ms. Dellplain served as Vice President of Human Resources
for IDX Systems Corporation from 1997 to 1999. Prior to that,
Ms. Dellplain worked as the Senior Director of Human
Resources for PHAMIS, Inc. from 1990 until its merger with IDX
Systems Corporation in 1997. Ms. Dellplain received her
B.A. from the University of Hawaii and her M.B.A. from the
University of Washington.
Burke F. Norton has served as Executive Vice President,
General Counsel and Secretary of Expedia since October 2006.
Prior to joining Expedia, Mr. Norton was a partner at the
law firm of Wilson Sonsini Goodrich & Rosati P.C.
where he practiced corporate and securities law for
11 years. Mr. Norton received his J.D. from the
University of California, Berkeley, Boalt Hall School of Law.
Pierre V. Samec has served as Chief Technology Officer of
Expedia since August 2007. Mr. Samec had previously served
as Senior Vice President, Engineering since joining Expedia in
October 2006. Prior to joining Expedia, Mr. Samec had been
Senior Vice President of the Product Group of Cartesis, Inc., a
French software and services company, since July 2004. From
December 2001 to July 2004, Mr. Samec served as Vice
President Quality Operations and Services for Business Objects,
SA, a French provider of business management solutions, and from
October 2000 until the present he has also been a partner with
Accore Inc., a U.S. management consulting and services
company that he helped form. From 1998 to 2000, Mr. Samec
was Chief Information Officer at Ventro Corporation, a company
that built and managed an electronic marketplace for
pharmaceutical and drug development companies. Prior to joining
Ventro, Mr. Samec had been Senior Vice President, Retail
Technology at Charles Schwab and Co., Inc. and had been Vice
President of Engineering at Quintus Corporation and Petrovision,
Inc., the latter having been founded by Mr. Samec in 1990.
Mr. Samec received a general engineering degree from the
Ecoles des Mines de Paris, France and M.S. and Ph.D. degrees in
Geophysics from Stanford University.
Patricia L. Zuccotti has served as Senior Vice President,
Chief Accounting Officer and Controller of Expedia since October
2005. Prior to joining Expedia, Ms. Zuccotti was employed
by Deloitte & Touche LLP, a professional services
firm, for 22 years, serving most recently as Director,
Enterprise Risk Services from June 2003 to October 2005, and as
Director, Audit from June 1993 to June 2003. Ms. Zuccotti
received her B.A. from Trinity College and her M.B.A. from the
University of Washington. She is a certified public accountant.
24
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
This Compensation Discussion and Analysis describes
Expedias executive compensation program as it relates to
the following named executive officers:
|
|
|
Barry Diller
|
|
Chairman and Senior Executive
|
Dara Khosrowshahi
|
|
Chief Executive Officer
|
Michael B. Adler
|
|
Executive Vice President and Chief Financial Officer
|
Burke F. Norton
|
|
Executive Vice President and General Counsel
|
Pierre V. Samec
|
|
Chief Technology Officer
|
Expedia has a Compensation Committee and a Section 16
Committee that together have primary responsibility for
establishing the compensation of the Companys named
executive officers.
From August 8, 2003 until the Spin-Off of Expedia from IAC
on August 9, 2005, the travel-related companies that became
Expedia were subsidiaries of IAC. As a result, compensation
policies and equity grants made during that period reflect the
compensation programs established by the Compensation Committee
of the IAC Board of Directors. Certain employment matters
relating to Expedias named executive officers are governed
by the Employee Matters Agreement entered into between IAC and
Expedia in connection with the Spin-Off. Prior to August 8,
2003, Expedia was a separately listed company through Expedia,
Inc., a Washington corporation, and its compensation policies
and grants reflect the compensation programs established by that
companys compensation committee.
Roles
of the Compensation Committee and Section 16
Committee
The Compensation Committee is appointed by the Board of
Directors, and consists entirely of directors who are
outside directors for purposes of
Section 162(m) of the Code. The Compensation Committee
currently consists of Messrs. Dolgen, Fitzgerald and Kern.
The Compensation Committee is responsible for
(i) administering and overseeing the Companys
executive compensation program, including salary matters, bonus
plans and stock compensation plans and (ii) approving all
grants of equity awards, but excluding matters governed by
Rule 16b-3
under the Exchange Act (see below). Mr. Dolgen is the
chairman of the Compensation Committee.
The Section 16 Committee is also appointed by the Board of
Directors, and consists entirely of directors who are
non-employee directors for purposes of
Rule 16b-3
under the Exchange Act. The Section 16 Committee currently
consists of Messrs. Dolgen and Kern. The Section 16
Committee is responsible for administering and overseeing
matters governed by
Rule 16b-3
under the Exchange Act, including approving grants of equity
awards to named executive officers. Mr. Dolgen is also the
chairman of the Section 16 Committee.
For the purposes of this Compensation Discussion and Analysis,
we refer to the Compensation Committee and Section 16
Committee collectively as the Compensation
Committees.
Role
of Executive Officers
Expedia management participates in reviewing and refining
Expedias executive compensation program.
Mr. Khosrowshahi, Expedias Chief Executive Officer,
annually reviews the performance of the Company and each named
executive officer with the Compensation Committees and makes
recommendations with respect to the appropriate base salary,
annual cash bonus and the grants of long-term equity incentive
awards for each named executive officer, other than in
connection with compensation for himself and Mr. Diller,
the Companys Chairman/Senior Executive. The Chief
Executive Officer and the Compensation Committees discuss each
recommendation. Based in part on these recommendations and other
considerations discussed below, the Compensation Committees
review and approve the annual compensation package of each named
executive officer.
25
Role
of Compensation Consultants
Neither the Company nor the Compensation Committees retained any
compensation consulting firm for the purposes of advising on
executive compensation issues in 2007. The Company regularly
uses survey or other data from a number of compensation
consulting firms.
Compensation
Program Objectives
Expedias executive compensation program is designed to
attract, motivate and retain highly skilled executives with the
business experience and acumen that management and the
Compensation Committees believe are necessary for achievement of
the Companys long-term business objectives. In addition,
the executive compensation program is designed to reward
short-and long-term performance and to align the financial
interests of executive officers with the interests of the
Companys stockholders. Management and the Compensation
Committees evaluate both performance and compensation levels to
ensure that the Company maintains its ability to attract and
retain outstanding employees in executive positions and that the
compensation provided to these executives remains competitive
with the compensation paid to similarly situated executives at
comparable companies. To that end, management and the
Compensation Committees believe executive compensation packages
provided by the Company to the named executive officers should
include both cash and equity-based compensation.
Compensation
Program Elements
General
The primary elements of the executive compensation program are
base salary, cash bonus and equity compensation. After
considering recommendations from management, the Compensation
Committees review these elements in light of Company and
individual performance each February. Management and the
Compensation Committees believe that there are multiple, dynamic
factors that contribute to success at an individual and business
level. Management and the Compensation Committees have therefore
avoided adopting strict formulas and have relied primarily on a
discretionary approach that allows the Compensation Committees
to set executive compensation levels on a
case-by-case
basis taking into account all relevant factors.
Following recommendations from management, the Compensation
Committees may also adjust compensation for specific individuals
at other times during the year when there are significant
changes in responsibilities or under other circumstances that
the Compensation Committees consider appropriate.
Base
Salary
Base salary represents the fixed portion of a named executive
officers compensation and is intended to provide
compensation for expected day-to-day performance. An executive
officers base salary is initially determined upon hire or
promotion based on the executive officers
responsibilities, prior experience, individual compensation
history and salary levels of other executives within the Company
and similarly situated executives at comparable companies. Base
salary is typically reviewed annually, at which time management
makes recommendations to the Compensation Committee based on
consideration of a variety of factors, including:
|
|
|
|
|
the executives total compensation relative to other
executives in similarly situated positions,
|
|
|
|
individual performance of the executive,
|
|
|
|
the executives responsibilities and individual
compensation history, including any additional compensation such
as signing bonuses or relocation benefits,
|
|
|
|
the terms of the executives employment agreement, if any,
|
|
|
|
competitive compensation market data, when available, and
|
26
|
|
|
|
|
the recommendations of the Chief Executive Officer, other than
in connection with compensation for himself and the
Chairman/Senior Executive.
|
In February 2007, after considering managements
recommendations, the Compensation Committee did not increase the
base salaries of the named executive officers. In August 2007,
the Compensation Committee approved an increase in
Mr. Samecs base salary to reflect his increased
responsibilities within the Company upon his promotion to Chief
Technology Officer of the Company. No named executive officer
received an increase to base salary in connection with the 2008
annual review.
Cash
Bonuses
Cash bonuses are granted to recognize and reward an
individuals annual contribution to Company performance. In
2007, each named executive officer, other than the
Chairman/Senior Executive and Chief Executive Officer, had a
target cash bonus based on a percentage of the executives
base salary earnings for the year. These targets ranged from 60%
to 75% of base salary. Bonus targets for executive officers are
generally established by the Compensation Committee, based on
the recommendations of management, at the time of the
executives hire or promotion and are reviewed each year by
the Chief Executive Officer with the approval of the
Chairman/Senior Executive and Compensation Committee. In
addition to annual bonuses related to performance, management
may also recommend that the Compensation Committee grant bonuses
to new executives upon hire. The Company utilizes new hire
bonuses to help attract highly skilled executives to Expedia and
to offset an executives loss of incentive compensation
from a prior employer.
In February 2008, management recommended bonuses with respect to
calendar year 2007 for each of the named executive officers
after taking into account a variety of factors, including:
|
|
|
|
|
the Companys business and financial performance, including
year-over-year performance,
|
|
|
|
the executives target cash bonus percentage, if any,
|
|
|
|
the executives individual performance,
|
|
|
|
the overall funding of the cash bonus pool,
|
|
|
|
competitive compensation market data, and
|
|
|
|
the recommendations of the Chief Executive Officer, other than
in connection with compensation for himself and the
Chairman/Senior Executive.
|
Based on these recommendations, the Compensation Committee
granted cash bonuses to each of the named executive officers.
These cash bonuses are reflected below in the Bonus
column of the table titled Summary Compensation
Table.
Equity
Compensation
Equity compensation is designed to align executive compensation
with long-term Company performance. Expedia currently utilizes
RSUs as its principal form of equity compensation. RSU awards
directly link compensation to financial performance because the
value of RSUs depends on the Companys share price. RSU
awards are also an important employee retention tool because
they generally vest over a multi-year period, subject to
continued service by the award recipient. RSU awards are
typically granted to executive officers upon hire or promotion
and annually thereafter. Except where otherwise noted,
management generally recommends annual RSU awards in February of
each year when the Compensation Committees meet to make
determinations regarding annual bonuses for the last completed
fiscal year and to set compensation levels for the current
fiscal year. The meeting at which the Compensation Committees
make these awards is generally scheduled several months in
advance and without regard to the timing of the release of
earnings or other material information.
27
The Compensation Committees review the various factors
considered by management when it establishes the Company-wide
equity grant pool, including:
|
|
|
|
|
dilution rates, taking into account projected headcount growth
and employee turnover,
|
|
|
|
non-cash compensation as a percentage of operating income before
amortization,
|
|
|
|
equity compensation utilization by peer companies, and
|
|
|
|
competitive compensation market data regarding award values.
|
For specific grants to named executive officers, management
makes recommendations to the Section 16 Committee based on
a variety of factors, including:
|
|
|
|
|
individual performance and future potential of the executive,
|
|
|
|
tenure of the executive,
|
|
|
|
award size relative to other Company executives,
|
|
|
|
the size and value of previous grants and amount of outstanding
unvested equity awards,
|
|
|
|
competitive compensation market data, to the degree that the
data is comparable, and
|
|
|
|
the recommendations of the Chief Executive Officer, other than
in connection with compensation for himself and the
Chairman/Senior Executive.
|
After review and consideration of managements
recommendations, the Section 16 Committee decides whether
to approve the grants of equity compensation to the named
executive officers. In general, RSU awards vest in equal
installments on the first five anniversaries of the grant date,
although individually negotiated arrangements and special
circumstances may result in different vesting periods.
In addition to the annual review awards granted to each named
executive officer in February 2007, the Section 16
Committee also approved an additional award to each of
Messrs. Khosrowshahi and Samec during 2007. In June 2007,
after considering the Companys performance and
Mr. Khosrowshahis individual performance, management
recommended to the Section 16 Committee that
Mr. Khosrowshahi receive an additional mid-year equity
award. After review and consideration, the Section 16
Committee approved managements recommendation to award
Mr. Khosrowshahi 100,000 RSUs. In August 2007, management
recommended and the Section 16 Committee approved an award
of 17,953 RSUs to Mr. Samec in connection with his
promotion to the role of Chief Technology Officer of the
Company. These equity awards are reflected below in the table
titled 2007 Grants of Plan-Based Awards. In
addition, equity awards to the named executive officers in
February 2008 are described below in the table titled 2008
Grants of Plan-Based Awards.
Other
Compensation
In addition to the primary elements of compensation (base
salary, cash bonuses and equity awards) described above, the
named executive officers may also receive compensation in the
following forms:
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|
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|
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401(k) Match: Executives who participate in
Expedias 401(k) Retirement Program are eligible for
Company matching contributions (as are all Expedia employees).
Expedia matches 50% of each dollar a participant contributes, up
to the first 6% of compensation.
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|
Relocation: Executives who relocate receive
relocation benefits, which may include paying for travel to
their original location for a period of time following such
relocation.
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|
|
Personal Use of Corporate Aircraft: Executives may
receive benefits attributable to (i) the personal use of an
aircraft jointly owned by IAC and Expedia or (ii) the
personal use of an aircraft owned by a subsidiary of IAC and an
affiliate of Mr. Diller.
|
In addition, in connection with the Spin-Off and in light of
Mr. Dillers senior role at both companies, Expedia
and IAC agreed to share certain expenses associated with the
provision of personal benefits to
28
Mr. Diller, including the use of automobiles for personal
purposes and certain office space and IT equipment used by
individuals who work for Mr. Diller personally. Currently,
Expedia and IAC cover 35% and 65% of these costs, respectively.
The Role
of Peer Groups, Surveys and Benchmarking
Management considers multiple data sources when reviewing
compensation information to ensure that the data reflect
compensation practices of relevant companies in terms of size,
industry and geographic location. Among other factors,
management considers the following information in connection
with its recommendations to the Compensation Committees
regarding compensation for named executive officers:
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Data from salary and equity compensation surveys that include
companies of a similar size, based on market capitalization,
revenues and other factors, and
|
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|
Data regarding compensation for certain executive officer
positions (e.g., chief executive officer and chief financial
officer) from recent proxy statements and other SEC filings of
peer companies, which include:
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|
°
|
direct industry competitors and
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|
°
|
non-industry companies with which Expedia commonly competes for
talent (including both regional and national competitors).
|
For purposes of establishing its compensation peer group for
2007, management recommended to, and reviewed with, the
Compensation Committee companies in technology, travel
and/or
e-commerce
businesses with which Expedia competes for talent at both the
executive and employee levels. The companies comprising the
compensation peer group for 2007 were:
Adobe Systems Inc.
Alaska Air Group Inc.
Amazon.com, Inc.
Cendant Corp.
E*TRADE Financial Corp.
eBay Inc.
Google Inc.
Microsoft Corp.
Monster Worldwide, Inc.
Priceline.com Inc.
Sabre Holdings Corp.
Starbucks Corp.
Starwood Hotels & Resorts Worldwide Inc.
Yahoo! Inc.
For purposes of establishing the compensation peer group for
2008, the Compensation Committee agreed with managements
proposal to remove Cendant Corp. and Sabre Holdings, each of
which completed a going private transaction during
2007, and to add Orbitz Worldwide, Inc., which completed an
initial public offering during 2007.
When available, management considers competitive market
compensation paid by other peer group companies, but does not
attempt to maintain a certain target percentile within the peer
group or otherwise rely solely on such data when making
recommendations to the Compensation Committees regarding
compensation for the named executive officers. Management and
the Compensation Committees strive to incorporate flexibility
into the compensation programs and in the assessment process to
respond to and adjust for the evolving business environment and
the value delivered by the named executive officers.
Tax
Matters
Section 162(m) of the Internal Revenue Code generally
permits a tax deduction to public corporations for compensation
over $1 million paid in any fiscal year to a
corporations chief executive officer and certain other
highly compensated executive officers only if the compensation
qualifies as being performance-based under Section 162(m).
Expedia endeavors to structure its compensation policies to
qualify as performance-based under Section 162(m) whenever
it is reasonably possible to do so while meeting Expedias
compensation objectives. For 2007, the grants of RSUs and the
payments of annual bonuses (other than for Mr. Samec prior
to his becoming an executive officer mid-year) were designed to
meet the requirements for deductible compensation.
29
Nonetheless, from time to time certain non-deductible
compensation may be paid and the Board of Directors and the
Compensation Committees reserve the authority to award
non-deductible compensation to executive officers in appropriate
circumstances. In addition, it is possible that some
compensation paid pursuant to certain equity awards that have
already been granted may be nondeductible as a result of
Section 162(m).
For purposes of allowing the Company to fully deduct all
employee compensation in accordance with Section 162(m)
and, with the exception of Mr. Samec prior to his becoming
an executive officer of the Company, the Compensation Committees
made RSU grants to all named executive officers and all annual
bonuses payable to named executive officers in 2007 subject to
the satisfaction of performance goals tied to (i) stock
price performance or (ii) growth in earnings before
interest, taxes and amortization (EBITA), in
addition to the time vesting requirements. In general, these
performance goals reflect a minimum acceptable Company
performance, but with respect to which there is substantial
uncertainty when established. Based on data provided by
management, the Compensation Committee certified that the 162(m)
goals for 2007 have been satisfied. The Compensation Committee
exercises negative discretion in setting payouts
under the annual incentive plan. By setting a high amount that
can then be reduced, the Company is advised by legal counsel
that the Companys annual incentive plan meets the
requirements of Section 162(m). As a result, while
performance targets are utilized in setting compensation under
this plan, ultimately the level of those targets and the
Compensation Committees use of negative discretion
typically result in the award of compensation as if the annual
incentive plan were operating as a discretionary plan.
Change in
Control
Under the Companys 2005 equity plan, certain executive
officers (including all the named executive officers) are
entitled to accelerated vesting of equity awards in the event of
a change in control of Expedia. The Compensation Committees
believe that accelerated vesting of equity awards in connection
with change in control transactions would provide an incentive
for these executives to continue to help execute successfully
such a transaction from its early stages until closing.
The change in control definition in the Companys 2005
equity plan does not include the acquisition of voting control
by Liberty Media Corporation (a Liberty Change in
Control). Certain executive officers, however, are
provided with acceleration of certain RSU grants following a
Liberty Change in Control.
Grants to the named executive officers that do not include full
vesting upon a change in control and grants that include a
Liberty Change in Control are described below.
Mr. Diller
In June 2005, the IAC compensation committee granted
Mr. Diller an option to purchase shares of IAC common
stock, which was converted into an option to purchase shares of
Expedia common stock in connection with the Spin-Off. The option
generally vests on the fifth anniversary of the grant date.
However, if there is a change in control of the Company,
Mr. Dillers 2005 option agreement provides for the
acceleration of the 2005 option with respect to a number of
shares underlying the option equal to 20% of the total number of
shares plus an additional 20% for each completed year of service
from the grant date. Change in control for purposes of
Mr. Dillers 2005 option agreement has the meaning set
forth in the IAC 2005 Stock and Annual Incentive Plan (which
does not include a Liberty Change in Control); provided that it
excludes any situation in which Mr. Diller retains
sufficient voting power such that, taking into account all the
circumstances, he effectively controls the election of a
majority of the Board.
Mr. Khosrowshahi
In March 2006, the Section 16 Committee granted
Mr. Khosrowshahi a performance-based RSU award. Under the
terms of the award agreement, upon (i) Expedias
achievement of operating income before amortization
(OIBA) of $1.0 billion for a full fiscal year
(the OIBA Target) and (ii) satisfaction of
performance goals tied to stock price performance or growth in
EBITA (the 2006 162(m) Goals), 75% of the RSUs will
vest (the Initial Vesting). If Mr. Khosrowshahi
has not voluntarily terminated his employment
30
with Expedia or has not been terminated for cause on the first
anniversary of the Initial Vesting, the remaining 25% of the
RSUs will vest. For a more detailed description of the vesting
provisions of this award, please see the section below titled
Potential Payments Upon Termination or Change in
Control Dara Khosrowshahi. Based on data
provided by management, the Compensation Committee has certified
that the 2006 162(m) Goals have been satisfied. The OIBA Target
has not yet been satisfied.
If there is a change in control of Expedia, then 50% of the RSUs
granted under the agreement with Mr. Khosrowshahi vest
immediately. If, within one year of the change in control,
Mr. Khosrowshahi is terminated without cause or
Mr. Khosrowshahi terminates employment following a material
modification of his duties and responsibilities, then the
remaining RSUs would vest. For the purposes of
Mr. Khosrowshahis RSU agreement, a change in
control is defined by reference to the Expedia 2005 equity
plan, as described above. However, Mr. Khosrowshahis
agreement also provides that a change in control will include
termination of the irrevocable proxy pursuant to which
Mr. Diller votes the Company shares owned by Liberty Media,
or the acquisition by Liberty Media, of beneficial ownership of
equity securities of Expedia, whereby Liberty Media acquires or
assumes more than 35% of the voting power of the then
outstanding equity securities of Expedia entitled to vote
generally on the election of Expedias directors.
Mr. Adler
and Mr. Norton
Mr. Adler and Mr. Norton received RSU awards in
connection with their appointments in 2006 as Executive Vice
President and Chief Financial Officer and Executive Vice
President and General Counsel of Expedia, respectively.
Mr. Adlers 2006 RSU awards will vest upon a change in
control and Mr. Nortons 2006 RSU awards will vest
upon a change in control followed by a qualifying termination
within two years. For purposes of Mr. Adler and
Mr. Nortons 2006 RSU award agreements, change
in control has substantially the same meaning as under
Mr. Khosrowshahis 2006 RSU award agreement, as
described above, except that the applicable threshold for an
acquisition of voting power by Liberty Media is 50%.
For a description and quantification of these change in control
benefits, please see the section below titled Potential
Payments Upon Termination or Change in Control.
Severance
The Company has entered into employment agreements with certain
executive officers, including Messrs. Adler, Norton and
Samec, pursuant to which they are entitled to receive their base
salary through the longer of the end of the term of their
employment agreement and one year, following a qualifying
termination of employment with Expedia. These arrangements are
intended to attract and retain qualified executives who may have
other employment alternatives that may appear to them to be less
risky absent these arrangements.
Not all the Companys executive officers have employment
agreements or award agreements that provide benefits in the
event their employment with Expedia is terminated. In these
cases, based on the recommendation of management, the
Compensation Committees have determined that it is in the best
interests of the Company to retain the flexibility to determine
such benefits on a
case-by-case
basis.
31
COMPENSATION
COMMITTEE REPORT
The Compensation Committees have reviewed the Compensation
Discussion and Analysis and discussed that Analysis with
management. Based on this review and discussions with
management, the Compensation Committees recommended to the Board
of Directors that the Compensation Discussion and Analysis be
included in the Companys 2008 proxy statement. This report
is provided by the following directors:
Members of the Compensation Committee:
Jonathan L. Dolgen (Chairman)
William R. Fitzgerald
Peter M. Kern
Members of the Section 16 Committee:
Jonathan L. Dolgen (Chairman)
Peter M. Kern
32
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The table below sets forth information regarding the
compensation paid or compensation expenses recognized by Expedia
for services rendered in all capacities by the named executive
officers during the fiscal year ended December 31, 2007 and
for the fiscal year ended December 31, 2006. We have also
provided supplementary information in footnote one below
regarding Victor A. Kaufman, Expedias Vice Chairman.
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Stock
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Option
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All Other
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Salary
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Bonus
|
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Awards
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Awards
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Compensation
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Total
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Name and Principal Position(1)
|
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Year
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|
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($)
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|
|
($)
|
|
|
($)(11)
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|
|
($)
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|
($)(13)
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|
|
($)
|
|
|
Barry Diller
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|
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2007
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$
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465,000
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|
|
$
|
1,250,000
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(7)
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$
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337,163
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$
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10,463,791
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(12)
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$
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554,698
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$
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13,070,652
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Chairman and Senior
Executive
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2006
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465,000
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|
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0
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|
|
0
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|
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10,463,791
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(12)
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423,435
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|
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11,352,226
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Dara Khosrowshahi
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2007
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1,000,000
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2,500,000
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(7)
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|
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5,020,570
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|
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0
|
|
|
|
89,665
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|
|
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8,610,235
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Chief Executive Officer
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2006
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|
930,770
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(2)
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0
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3,926,190
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0
|
|
|
|
6,600
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|
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4,863,560
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Michael B. Adler
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2007
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375,000
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400,000
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(7)
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527,747
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0
|
|
|
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26,865
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|
|
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1,329,612
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|
Executive Vice President
and Chief Financial Officer
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2006
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|
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230,769
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(3)
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350,000
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(8)
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|
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266,514
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|
|
|
0
|
|
|
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223,842
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|
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1,071,125
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Burke F. Norton
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2007
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375,000
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400,000
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(7)
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402,314
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0
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2,163
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1,179,477
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Executive Vice President
and General Counsel
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2006
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54,808
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(4)
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290,000
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(9)
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0
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0
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53,634
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398,442
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Pierre V. Samec
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2007
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318,077
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(5)
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212,000
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(7)
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185,026
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0
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90,505
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805,608
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Chief Technology Officer
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2006
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40,385
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(6)
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300,000
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(10)
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0
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0
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57,230
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397,615
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|
|
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(1) |
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On February 27, 2007, the Section 16 Committee granted
Mr. Kaufman, Expedias Vice Chairman, 46,061 RSUs,
which vest equally on the first five anniversaries of the grant
date and 23,030 RSUs which vest equally on the first two
anniversaries of the grant date. On February 28, 2006, the
Section 16 Committee granted Mr. Kaufman 25,627 RSUs,
12,813 of which vested on February 28, 2007 and the
remaining 12,814 of which vested on February 28, 2008. The
dollar amount recognized by Expedia for financial statement
purposes during 2007 for Mr. Kaufmans equity awards,
in accordance with FAS 123R, was $630,310. Mr. Kaufman
did not receive a salary or a cash bonus from the Company for
either 2006 or 2007. |
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(2) |
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Mr. Khosrowshahis base salary was increased from
$550,000 to $1,000,000, effective February 13, 2006. |
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(3) |
|
Mr. Adler was appointed Executive Vice President and Chief
Financial Officer of the Company effective as of May 16,
2006. Mr. Adlers base salary upon appointment was
$375,000. |
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(4) |
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Mr. Norton was appointed Executive Vice President and
General Counsel of the Company effective as of October 25,
2006. Mr. Nortons base salary upon appointment was
$375,000. |
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(5) |
|
Mr. Samecs base salary was increased from $300,000 to
$350,000 in connection with his appointment as Chief Technology
Officer effective as of August 7, 2007. |
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(6) |
|
Mr. Samec was appointed Senior Vice President, Engineering
effective as of October 30, 2006. Mr. Samecs
base salary upon appointment was $300,000. |
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(7) |
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Reflects annual cash bonuses paid in 2008, for performance in
2007 pursuant to the 2007 Cash Bonus Plan for senior executive
employees of the Company approved by the Compensation Committee
on February 27, 2007 (the 2007 Cash Bonus
Plan). Pursuant to the 2007 Cash Bonus Plan, each named
executive officer (with the exception of Mr. Samec, who was
not then an executive officer) was eligible to receive a cash
bonus, subject to (i) the achievement of performance goals
relating either to stock price performance or growth in EBITA
and (ii) a $10 million maximum amount that was
intended to preserve flexibility under Section 162(m) so
that the Company can ensure deductibility of any bonus that the
Compensation Committee determined appropriate. See the section
above titled Compensation Discussion and
Analysis Compensation Program Elements
Cash Bonuses above for a description of the 2007 Cash
Bonus Plan. Having previously certified that the relevant
performance criteria had been met, the Compensation Committees
approved cash bonus awards pursuant to the 2007 Cash Bonus Plan
to each of the named executive officers on February 28,
2008. |
33
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(8) |
|
Reflects (i) a $250,000 signing bonus granted to
Mr. Adler upon his appointment as Chief Financial Officer
of the Company and (ii) a $100,000 cash bonus awarded to
Mr. Adler for performance in 2006. Mr. Adlers
cash and signing bonuses were not subject to performance
conditions. |
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(9) |
|
Reflects (i) a $250,000 signing bonus granted to
Mr. Norton upon his appointment as Executive Vice President
and General Counsel of the Company and (ii) a $40,000 cash
bonus awarded to Mr. Norton for performance in 2006.
Mr. Nortons cash and signing bonuses were not subject
to performance conditions. |
|
(10) |
|
Reflects (i) a $280,000 signing bonus granted to
Mr. Samec upon his appointment as Senior Vice President,
Engineering and (ii) a $20,000 cash bonus awarded to
Mr. Samec for performance in 2006. Mr. Samecs
cash and signing bonuses were not subject to performance
conditions. |
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(11) |
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Reflects the dollar amount recognized for financial statement
reporting purposes during 2007 and 2006, in accordance with
FAS 123R, and thus includes amounts from awards granted in
and prior to 2007 and 2006. Pursuant to SEC rules, we disregard
the estimate of forfeitures related to service-based vesting
conditions. Assumptions used in the calculation of the amounts
for 2006 are included in Note 2 to our audited financial
statements for the year ended December 31, 2006 included in
our Annual Report on
Form 10-K
filed on February 28, 2007, and assumptions used for 2007
are included in Note 2 to our audited financial statements
for the year ended December 31, 2007 included in our Annual
Report on
Form 10-K
filed on February 22, 2008. These amounts reflect the
Companys accounting expense for these awards and do not
correspond to the actual value that may be paid to or realized
by the named executive officers. |
|
(12) |
|
On June 7, 2005, prior to the Spin-Off, the IAC
Compensation Committee granted to Mr. Diller options to
purchase IAC common stock. In connection with the Spin-Off, the
options to purchase IAC common stock were converted into options
to purchase IAC common stock and options to purchase Expedia
common stock. The amount included above relates to the options
to purchase Expedia common stock and reflects the dollar amount
recognized for financial statement reporting purposes during
2006 and 2007, in accordance with FAS 123R. A description
of Mr. Dillers options to purchase Expedia common
stock is included in the section below titled Potential
Payments Upon Termination or Change in Control Barry
Diller. |
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(13) |
|
See the table below for additional information. |
2007 All
Other Compensation
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|
|
|
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|
|
|
|
|
|
Barry
|
|
Dara
|
|
Michael B.
|
|
Burke F.
|
|
Pierre V.
|
|
|
Diller
|
|
Khosrowshahi
|
|
Adler
|
|
Norton
|
|
Samec
|
|
Personal Use of Corporate Aircraft(a)
|
|
$
|
521,302
|
|
|
$
|
82,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Relocation(b)
|
|
|
0
|
|
|
|
0
|
|
|
|
18,316
|
|
|
|
0
|
|
|
|
72,705
|
|
Tax Payments(c)
|
|
|
0
|
|
|
|
0
|
|
|
|
3,386
|
|
|
|
0
|
|
|
|
11,050
|
|
Miscellaneous(d)
|
|
|
33,396
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
401(k) Company Match(e)
|
|
|
0
|
|
|
|
6,750
|
|
|
|
5,163
|
|
|
|
2,163
|
|
|
|
6,750
|
|
|
|
|
(a) |
|
Reflects the incremental cost to Expedia for personal use of
(i) an aircraft used by Expedia pursuant to a time-sharing
agreement between Expedia and IAC, which is jointly owned by a
subsidiary of IAC and an affiliate of Mr. Diller (the
Time-Share Aircraft) and (ii) an aircraft owned
50% by each of Expedia and IAC (the Jointly-Owned
Aircraft). In 2007, the incremental cost to Expedia for
Mr. Dillers personal use of the Time-Share Aircraft
was $37,632, the amount billed by IAC for use of such aircraft.
The incremental cost to Expedia for Messrs. Diller and
Khosrowshahis personal use of the Jointly-Owned Aircraft
is based on the average variable operating cost to Expedia,
which for 2007 was $483,670 for Mr. Diller and $82,915 for
Mr. Khosrowshahi. Variable operating costs include fuel,
certain maintenance costs, navigation fees, onboard catering,
landing fees, crew travel expenses and other miscellaneous
variable costs. The total annual variable costs are divided by
the annual number of hours the Jointly- |
34
|
|
|
|
|
Owned Aircraft flew to derive an average variable cost per hour.
This average variable cost per hour is then multiplied by the
hours flown for personal use to derive the incremental cost. We
do not include fixed costs that do not change based on usage,
such as pilots salaries, the purchase costs of the
Company-owned aircraft, insurance, scheduled maintenance and
non-trip related hangar expenses. In 2007, each of
Mr. Diller and Mr. Khosrowshahi occasionally had
family members or other guests accompany him on personal trips,
at no incremental cost to the Company. |
|
(b) |
|
Represents amounts paid in connection with Messrs. Adler,
Norton and Samec relocating to Seattle upon commencement of
employment with Expedia. In each case, amounts include the cost
of flights, payments of certain brokerage and other fees,
temporary housing costs and costs to transport and store
household items. |
|
(c) |
|
Represents tax reimbursements on income imputed to
Messrs. Adler, Norton and Samec for their relocation
expenses. |
|
(d) |
|
Represents the total amount of other benefits provided, none of
which individually exceeded the greater of $25,000 or 10% of the
total amount of these benefits for the named executive. In
connection with the Spin-Off, Expedia and IAC agreed, in light
of Mr. Dillers senior role at both companies and his
anticipated use of certain resources to the benefit of both
companies, that certain expenses associated with such usage
would be shared. Mr. Diller is provided with the use of
certain automobiles for business and personal purposes, and
certain IAC-owned office space and IT equipment for use by
certain individuals who work for Mr. Diller personally. For
2007, Expedia and IAC covered 35% and 65% of these costs,
respectively. |
|
(e) |
|
Represents matching contributions of Expedia under the Expedia
401(k) Retirement Savings Plan (the Expedia 401(k)
Plan). Under the Expedia 401(k) Plan as in effect through
December 31, 2007, Expedia matches $.50 for each dollar a
participant contributes, up to the first 6% of compensation,
subject to limits imposed by the Code. |
2007
Grants of Plan-Based Awards
During 2007, the Section 16 Committee granted RSUs to the
named executive officers as follows:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future
|
|
All Other Stock
|
|
|
|
|
|
|
Payouts Under
|
|
Awards: Number of
|
|
Grant Date Fair
|
|
|
|
|
Equity Incentive
|
|
Shares or Stock
|
|
Value of Stock
|
|
|
|
|
Plan Awards
|
|
Units
|
|
Awards
|
Name
|
|
Grant Date
|
|
(#)(1)
|
|
(#)
|
|
($)(2)
|
|
Barry Diller
|
|
|
02/27/2007
|
|
|
|
92,123
|
|
|
|
|
|
|
$
|
1,999,990
|
|
Dara Khosrowshahi
|
|
|
02/27/2007
|
|
|
|
92,123
|
|
|
|
|
|
|
|
1,999,990
|
|
|
|
|
06/06/2007
|
|
|
|
100,000
|
|
|
|
|
|
|
|
2,438,000
|
|
Michael B. Adler
|
|
|
02/27/2007
|
|
|
|
39,152
|
|
|
|
|
|
|
|
849,990
|
|
Burke F. Norton
|
|
|
02/27/2007
|
|
|
|
18,424
|
|
|
|
|
|
|
|
399,985
|
|
Pierre V. Samec
|
|
|
02/27/2007
|
|
|
|
|
|
|
|
16,121
|
|
|
|
349,987
|
|
|
|
|
08/08/2007
|
|
|
|
17,953
|
(3)
|
|
|
|
|
|
|
499,991
|
|
|
|
|
(1) |
|
Represents the number of shares of Expedia common stock to be
issued upon satisfaction of the conditions to vesting, without
taking into account shares withheld to cover applicable taxes,
if any. Awards vest in five equal installments commencing on the
first anniversary of the grant date. With the exception of
Mr. Samecs February 27, 2007 award, which was
granted prior to his becoming an executive officer of the
Company, each award is also subject to the satisfaction of
performance goals tied to stock price performance or growth in
EBITA. |
|
(2) |
|
Reflects the full grant date fair value, calculated in
accordance with FAS 123R. Fair value is calculated using
the closing price of Expedia common stock on The Nasdaq Stock
Market on the day immediately |
35
|
|
|
|
|
preceding the grant date. These amounts reflect the
Companys accounting expense and may not correspond to the
actual value that will be recognized by the named executive
officers. |
|
(3) |
|
Reflects an award of RSUs to Mr. Samec approved by the
Section 16 Committee on August 8, 2007, in connection
with his promotion to the role of Chief Technology Officer of
the Company. |
On February 27, 2007, the Section 16 Committee also
granted to Mr. Kaufman 46,061 RSUs with a fair value of
$999,984 and 23,030 RSUs with a fair value of $499,981. The
grant of 46,061 RSUs vests in five equal installments, the first
of which vested on February 27, 2008, and the grant of
23,030 RSUs vests in two equal installments, the first of which
vested on February 27, 2008.
2008
Grants of Plan-Based Awards
On February 28, 2008, the Section 16 Committee
approved RSU awards to the named executive officers as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future
|
|
|
|
|
|
|
|
|
|
Payouts Under
|
|
|
Grant Date Fair
|
|
|
|
|
|
|
Equity Incentive
|
|
|
Value of Stock
|
|
|
|
|
|
|
Plan Awards
|
|
|
Awards
|
|
Name
|
|
Grant Date
|
|
|
(#)(1)
|
|
|
($)(2)
|
|
|
Barry Diller
|
|
|
02/28/2008
|
|
|
|
103,177
|
|
|
$
|
2,499,979
|
|
Dara Khosrowshahi
|
|
|
02/28/2008
|
|
|
|
206,355
|
|
|
|
4,999,982
|
|
Michael B. Adler
|
|
|
02/28/2008
|
|
|
|
39,207
|
|
|
|
949,986
|
|
Burke F. Norton
|
|
|
02/28/2008
|
|
|
|
33,016
|
|
|
|
799,978
|
|
Pierre V. Samec
|
|
|
02/28/2008
|
|
|
|
12,381
|
|
|
|
299,992
|
|
|
|
|
02/28/2008
|
|
|
|
41,271
|
|
|
|
999,996
|
(3)
|
|
|
|
(1) |
|
Represents the number of shares of Expedia common stock to be
issued upon satisfaction of the conditions to vesting, without
taking into account shares withheld to cover applicable taxes,
if any. Awards vest in five equal installments commencing on
February 28, 2009. Each award is also subject to the
satisfaction of performance goals tied to stock price
performance or growth in EBITA. |
|
(2) |
|
Reflects the full grant date fair value, calculated in
accordance with FAS 123R. Fair value is calculated using
the closing price of Expedia common stock on The Nasdaq Stock
Market on the day immediately preceding the grant date. These
amounts reflect the Companys accounting expense, and may
not correspond to the actual value that will be recognized by
the named executive officers. |
|
(3) |
|
This award is also subject to the satisfaction by
December 31, 2009 of performance goals tied to the
Companys strategic plan. |
On the same date, the Section 16 Committee also granted to
Mr. Kaufman 33,016 RSUs with a fair value of $799,978 and
16,508 RSUs with a fair value of $399,989. The grant of 33,016
RSUs will vest in five equal installments commencing on
February 28, 2009, and the grant of 16,508 RSUs will vest
in two equal installments commencing on February 28, 2009.
36
Outstanding
Equity Awards at 2007 Year-End
The following table provides information regarding the holdings
of stock options and RSUs by the named executive officers as of
December 31, 2007. The market value of the RSUs is based on
the closing price of Expedia common stock on The Nasdaq Stock
Market on December 31, 2007, the last trading day of the
year, which was $31.62.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Number of
|
|
|
Payout Value
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Unearned
|
|
|
of Unearned
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Shares, Units
|
|
|
Shares, Units
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
or Other
|
|
|
or Other
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Stock That
|
|
|
Stock That
|
|
|
Rights That
|
|
|
Rights That
|
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have Not
|
|
|
|
Grant
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
Name
|
|
Date(1)
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Barry Diller
|
|
|
06/07/2005
|
|
|
|
0
|
|
|
|
1,400,000
|
(2)
|
|
$
|
38.35
|
|
|
|
06/07/2015
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
06/07/2005
|
|
|
|
0
|
|
|
|
2,400,000
|
(2)
|
|
|
28.49
|
|
|
|
06/07/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/27/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,123
|
(3)
|
|
|
2,912,929
|
|
|
|
0
|
|
|
|
0
|
|
Dara Khosrowshahi
|
|
|
02/24/2000
|
|
|
|
10,003
|
|
|
|
0
|
|
|
|
5.94
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/02/2000
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
18.40
|
|
|
|
03/02/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/10/2000
|
|
|
|
7,500
|
|
|
|
0
|
|
|
|
19.29
|
|
|
|
05/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
07/24/2000
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
22.18
|
|
|
|
07/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/18/2000
|
|
|
|
125,000
|
|
|
|
0
|
|
|
|
16.57
|
|
|
|
12/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/25/2001
|
|
|
|
41,666
|
|
|
|
0
|
|
|
|
20.06
|
|
|
|
04/25/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/16/2001
|
|
|
|
164,027
|
|
|
|
0
|
|
|
|
21.19
|
|
|
|
12/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/12/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,111
|
(4)
|
|
|
888,870
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
02/04/2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,726
|
(5)
|
|
|
1,129,656
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
02/10/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,506
|
(6)
|
|
|
1,786,720
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
03/07/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
800,000
|
(7)
|
|
|
25,296,000
|
|
|
|
|
02/27/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,123
|
(8)
|
|
|
2,912,929
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
06/06/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(9)
|
|
|
3,162,000
|
|
|
|
0
|
|
|
|
0
|
|
Michael B. Adler
|
|
|
05/16/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,866
|
(10)
|
|
|
2,145,923
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
05/16/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,416
|
(10)
|
|
|
1,341,194
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
02/27/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,152
|
(11)
|
|
|
1,237,986
|
|
|
|
0
|
|
|
|
0
|
|
Burke F. Norton
|
|
|
10/25/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,677
|
(10)
|
|
|
1,475,927
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
10/25/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,117
|
(10)
|
|
|
983,920
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
02/27/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,424
|
(12)
|
|
|
582,567
|
|
|
|
0
|
|
|
|
0
|
|
Pierre V. Samec
|
|
|
12/20/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,407
|
(13)
|
|
|
392,309
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
02/27/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,121
|
(14)
|
|
|
509,746
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
08/08/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,953
|
(15)
|
|
|
567,674
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1) |
|
Represents the date on which the original grant was approved by
the applicable compensation committee. All awards with a grant
date prior to the effective date of the Spin-Off, August 9,
2005, were granted by IAC and were converted into Expedia equity
awards upon effectiveness of the Spin-Off. |
|
(2) |
|
Options vest in full on June 7, 2010. A description of
other material terms is included in the section below titled
Potential Payments Upon Termination or Change in Control -
Barry Diller. |
|
(3) |
|
Of these RSUs, 18,424 vested on February 27, 2008. The
remaining RSUs vest as follows: 18,425 on February 27,
2009; 18,424 on February 27, 2010 and an additional 18,425
on each of February 27, 2011 and February 27, 2012. |
|
(4) |
|
All 28,111 of these RSUs vested on February 12, 2008. |
|
(5) |
|
Of these RSUs, 17,863 vested on February 4, 2008 and an
additional 17,863 vest on February 4, 2009. |
37
|
|
|
(6) |
|
Of these RSUs, 18,836 vested on February 10, 2008. The
remaining RSUs vest as follows: 18,834 on February 10, 2009
and 18,836 on February 10, 2010. |
|
(7) |
|
The vesting provisions of this award are described in the
section below titled Potential Payments Upon Termination
or Change in Control Dara Khosrowshahi
2006 RSU Award. |
|
(8) |
|
Of these RSUs, 18,424 vested on February 27, 2008. The
remaining RSUs vest as follows: 18,425 on February 27,
2009; 18,424 on February 27, 2010 and an additional 18,425
on each of February 27, 2011 and February 27, 2012. |
|
(9) |
|
Of these RSUs, 20,000 will vest on June 6 in each of 2008, 2009,
2010, 2011 and 2012. |
|
(10) |
|
The vesting provisions of these awards are described in the
section below titled Potential Payments Upon Termination
or Change in Control Michael B. Adler, Burke F.
Norton and Pierre V. Samec 2006 RSU Awards. |
|
(11) |
|
Of these RSUs, 7,830 vested on February 27, 2008. The
remaining RSUs vest as follows: 7,830 on February 27, 2009;
7,831 on February 27, 2010; 7,830 on February 27, 2011
and an additional 7,831 on February 27, 2012. |
|
(12) |
|
Of these RSUs, 3,684 vested on February 27, 2008 and an
additional 3,685 vest on February 27 in each of 2009, 2010, 2011
and 2012. |
|
(13) |
|
Of these RSUs, 3,102 vest on October 30, 2008; 3,101 vest
on October 30, 2009 and an additional 3,102 on October 30
in each of 2010 and 2011. |
|
(14) |
|
Of these RSUs, 3,224 vested on February 27, 2008. The
remaining RSUs vest as follows: 3,224 on February 27 in each of
2009, 2010 and 2012 and an additional 3,225 on February 27,
2012. |
|
(15) |
|
Of these RSUs, 3,590 will vest on August 8, 2008; 3,591
vest on August 8, 2009; 3,590 on August 8, 2010 and an
additional 3,591 on August 8 in each of 2011 and 2012. |
38
2007
Option Exercises and Stock Vested
The following table presents information regarding the exercise
of stock options by named executive officers during 2007, and on
the vesting during 2007 of RSUs previously granted to the named
executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
Value Realized
|
|
Number of Shares
|
|
Value Realized
|
|
|
Acquired on Exercise
|
|
on Exercise
|
|
Acquired on Vesting
|
|
on Vesting
|
Name
|
|
(#)(1)
|
|
($)(2)
|
|
(#)(3)
|
|
($)(4)
|
|
Barry Diller
|
|
|
9,500,000
|
(5)
|
|
$
|
250,515,000
|
|
|
|
0
|
|
|
$
|
0
|
|
Dara Khosrowshahi
|
|
|
0
|
|
|
|
0
|
|
|
|
64,808
|
(6)
|
|
|
1,386,605
|
|
Michael B. Adler
|
|
|
0
|
|
|
|
0
|
|
|
|
27,570
|
(7)
|
|
|
674,362
|
|
Burke F. Norton
|
|
|
0
|
|
|
|
0
|
|
|
|
15,558
|
(8)
|
|
|
499,101
|
|
Pierre V. Samec
|
|
|
0
|
|
|
|
0
|
|
|
|
3,101
|
(9)
|
|
|
99,573
|
|
|
|
|
(1) |
|
Represents the gross number of shares acquired upon exercise of
vested options without taking into account any shares that may
be withheld to cover option exercise price or applicable tax
obligations. |
|
(2) |
|
Represents the value of exercised options calculated by
multiplying (i) the number of shares of Expedias
common stock to which the exercise of the option related, by
(ii) the difference between the per-share closing price of
Expedia common stock on The Nasdaq Stock Market on the date of
exercise and the exercise price of the options. |
|
(3) |
|
Represents the gross number of shares acquired upon vesting of
RSUs without taking into account any shares that may be withheld
to satisfy applicable tax obligations. |
|
(4) |
|
Represents the value of vested RSUs calculated by multiplying
the gross number of vested RSUs by the closing price of Expedia
common stock on The Nasdaq Stock Market on the vesting date or
if the vesting occurred on a day on which The Nasdaq Stock
Market was closed for trading, the next trading day. |
|
(5) |
|
In October 2007, Mr. Diller exercised options to purchase
9,500,000 shares of Expedia common stock.
2,328,910 shares were withheld and concurrently cancelled
by the Company to cover the exercise price of $8.59 per share,
and 3,459,147 shares were withheld and concurrently
cancelled to cover tax obligations, with a net delivery of
3,711,943 shares. These options were granted to
Mr. Diller in 1997. Mr. Diller exercised the options
in 2007 because the options were scheduled to expire.
Mr. Diller holds the net shares acquired upon exercise. |
|
(6) |
|
Represents the vesting of the following RSUs: 17,863 on
February 4, 2007; 18,834 on February 10, 2007 and
28,111 on February 12, 2007. |
|
(7) |
|
Vested on May 16, 2007. |
|
(8) |
|
Vested on October 25, 2007. |
|
(9) |
|
Vested on October 30, 2007. |
Potential
Payments Upon Termination or Change in Control
Certain of our compensation plans, award agreements and
employment agreements entitle some of the named executive
officers to accelerated vesting of equity awards or severance
payments in the event of a change in control of Expedia
and/or upon
the termination of the executives employment with Expedia
under specified circumstances. These plans and agreements are
described below as they apply to each named executive officer.
Barry
Diller
2005 Stock Option Agreement. On June 7,
2005, the IAC Compensation Committee, pursuant to the
IAC/InterActiveCorp 2005 Stock and Annual Incentive Plan (the
IAC 2005 Plan) granted Mr. Diller options to
purchase 4,800,000 shares of IAC common stock at an
exercise price of $32.03, representing 130% of the closing price
on The Nasdaq Stock Market of IAC common stock on June 7,
2005, and options to purchase
39
2,800,000 shares of IAC common stock at an exercise price
of $43.12, representing 175% of the closing price of IAC common
stock on The Nasdaq Stock Market on June 7, 2005. Upon
completion of the Spin-Off, Mr. Dillers awards were
adjusted to grant an option to purchase 2,400,000 shares of
Expedia common stock at $28.49 per share and an option to
purchase 1,400,000 shares of Expedia common stock at $38.35
per share. The stock option agreement provides that following
completion of the Spin-Off, the satisfaction of conditions to
vesting of Mr. Dillers options to purchase shares of
Expedia common stock is determined based on
Mr. Dillers employment with Expedia.
The options have a ten-year term and vest in full on the fifth
anniversary of the grant date, subject to continued employment.
Upon a termination of Mr. Dillers employment for
death, disability, by Expedia without cause or by
Mr. Diller for good reason, the options will vest pro rata
at 20% per year of completed service from the date of grant to
the date of termination. The stock option agreement provides
that upon a change in control, 20% of the options will
automatically vest, with an additional 20% vesting for each
completed year of service following the grant date.
The stock option agreement defines a change in
control by reference to the IAC 2005 Plan, as follows: a
change in control occurs if: (a) there is a
change in the majority of our Board not endorsed by the
requisite number of incumbent board members; (b) another
party becomes the beneficial owner of at least 50% of the
Companys outstanding voting stock, with certain
exceptions; (c) the Company consummates a merger,
reorganization or consolidation with another party, or the sale
or other disposition of all or substantially all of our assets
or the purchase of assets or stock of another entity
(Business Combination) unless the beneficial
stockholders of the Company immediately prior to the Business
Combination retain more than 50% of the outstanding voting stock
of the entity resulting from the Business Combination in
substantially the same proportions immediately prior to such
Business Combination; or (d) the Company consummates its
complete liquidation or dissolution. However, notwithstanding
the provisions of the plan, no change in control will occur for
purposes of the stock option agreement so long as
Mr. Diller has sufficient voting power with respect to
Expedia such that he effectively controls the election of a
majority of members of the Board of Expedia.
Good reason is defined in the agreement to mean any
of the following actions without Mr. Dillers consent:
(i) a reduction in his rate of annual base salary,
(ii) a relocation of his principal place of business more
than 35 miles from New York City, or (iii) a material
and demonstrable adverse change in the nature and scope of his
duties.
Cause is defined by reference to the IAC 2005 Plan,
as follows: (i) the willful or gross neglect by a
participant of his employment duties, (ii) the plea of
guilty or nolo contendere to, or conviction for, the commission
of a felony offense by a participant, (iii) a material
breach of the participants fiduciary duty owed to the
Company, or (iv) a material breach by a participant of any
nondisclosure, non-solicitation or non-competition obligation
owed to the Company.
2007 RSU Award. On February 27, 2007,
Mr. Diller was granted 93,132 RSUs under the Expedia 2005
Plan. In the event of a change in control of Expedia, the RSUs
held by officers of the Company (and not the Companys
subsidiaries) with a title of Senior Vice President or above, as
of the time of the change in control, including Mr. Diller,
will be considered to be earned and payable in full and any
deferral or other restrictions will lapse and such RSUs will be
settled in cash or shares of Expedia common stock as promptly as
practicable. The Expedia 2005 Plan definition of change in
control is substantially the same as under the IAC 2005
Plan. The RSU award was contingent on the satisfaction of
certain performance goals, which have subsequently been
satisfied.
Dara
Khosrowshahi
Spin-Off. Prior to the Spin-Off, IAC and
Mr. Khosrowshahi agreed to amend his outstanding equity
awards granted under the USA Interactive Amended and Restated
2000 Stock and Annual Incentive Plan (the IAC 2000
Plan) to provide that all RSUs held by
Mr. Khosrowshahi on the date of the Spin-Off would vest in
the event of the termination of his employment by Expedia
without cause and all options that are vested on the date of
termination will remain exercisable for a period of
24 months from the date of termination or until the stated
expiration date of the option, whichever is shorter.
Cause is defined by reference to the IAC 2000
40
Plan and has substantially the same meaning as under the IAC
2005 Plan, discussed above regarding Mr. Dillers 2005
Stock Option Agreement. Good reason is defined as an
adverse change in Mr. Khosrowshahis powers and
duties, such that his new powers and duties are inconsistent
with his position and status.
Pursuant to the IAC 2000 Plan, in the event of a change in
control, the restrictions applicable to RSUs granted under that
plan and held by Mr. Khosrowshahi will lapse and such RSUs
will become free of all restrictions and fully vested. Under the
IAC 2000 Plan, the definition of a change in control
has substantially the same meaning as under the IAC 2005 Plan,
described above under Mr. Dillers 2005 Stock Option
Agreement.
2006 RSU Award. On March 7, 2006, the
Compensation Committees approved certain compensation
arrangements with Mr. Khosrowshahi, including the grant of
800,000 RSUs pursuant to the Expedia 2005 Plan. 75% of these
RSUs will vest (the Initial Vesting) upon
Expedias (i) achievement of operating income before
amortization (OIBA) of $1.0 billion for a full
fiscal year, adjusted as described below (the OIBA
Target) and (ii) satisfaction of certain performance
goals tied to the Companys stock price performance or
growth in EBITA (the RSU Performance Goals), which
have subsequently been satisfied. If Mr. Khosrowshahi has
not voluntarily terminated his employment with Expedia or has
not been terminated for cause on the first anniversary of the
Initial Vesting, the remaining portion of the RSUs will vest. If
Expedia terminates Mr. Khosrowshahi without cause in any
year in which Expedia achieves an OIBA target of
$900 million, adjusted as described below (the
Modified OIBA Target), then 75% of the RSUs will
vest upon such termination of employment and the remaining RSUs
will be forfeited. If there is a change in control of Expedia,
then 50% of the outstanding RSUs vest immediately, without
regard to the OIBA targets. If within one year of the change in
control, Mr. Khosrowshahi is terminated without cause or
Mr. Khosrowshahi terminates employment following a
modification of his duties and responsibilities, then the
remaining RSUs will vest, without regard to the performance
targets.
For purposes of calculating the OIBA Target and the Modified
OIBA Target, the operating results of all entities acquired by
Expedia will also be included, starting with the first full
fiscal year after any such acquisitions. In the case of each
acquisition, the OIBA Target or Modified OIBA Target will be
increased by the amount of OIBA that Expedia expects to achieve
in the first full fiscal year following such acquisition, as
projected by Expedia at the time of the acquisition. The OIBA
Target and the Modified OIBA Target have not yet been met.
For the purposes of the RSU agreement, a change in
control is defined by reference to the Expedia 2005 Plan,
under which change in control has substantially the same meaning
as under the IAC 2005 Plan, as described above under
Mr. Dillers 2005 Stock Option Agreement. In addition,
the agreement provides that a change in control will include
termination of the irrevocable proxy held by Mr. Diller to
vote shares of Expedia common stock held by Liberty Media or its
affiliates, or the acquisition by Liberty Media or its
affiliates, of beneficial ownership of equity securities of
Expedia, whereby Liberty Media acquires or assumes more than 35%
of the voting power of the then outstanding equity securities of
Expedia entitled to vote generally on the election of
Expedias directors.
Under the RSU agreement, cause is defined by
reference to the Expedia 2005 Plan, and has the same meaning as
under the IAC 2005 Plan, discussed above regarding
Mr. Dillers 2005 Stock Option Agreement.
In connection with the foregoing arrangements,
Mr. Khosrowshahi has agreed not to compete with
Expedias businesses during the term of his employment with
Expedia and for a period of two years from his date of departure.
In February 2008, the Company and Mr. Khosrowshahi have
agreed that, subject to final documentation, the related RSU
agreement will be amended to provide that the Initial Vesting
shall, at the election of the Company, be subject to the
additional condition that at such time as the Company achieves
the RSU Performance Goals, Mr. Khosrowshahi shall agree to
remain employed as the Chief Executive Officer of the Company
for an additional two years following satisfaction of the RSU
Performance Goals on no less favorable terms to
Mr. Khosrowshahi than the terms of employment as in effect
at the time of such agreement.
41
2007 RSU Awards. In 2007,
Mr. Khosrowshahi was granted RSUs under the Expedia 2005
Plan. In the event of a change in control of Expedia, these RSUs
will vest as described in the section above titled Barry
Diller 2007 RSU Award.
Michael
B. Adler, Burke F. Norton and Pierre V. Samec
Employment Agreements. Expedia has entered
into an employment agreement (an Employment
Agreement) with each of Messrs. Adler, Norton and
Samec. Mr. Adlers Employment Agreement was effective
as of May 16, 2006 for a term of three years,
Mr. Nortons Employment Agreement was effective as of
October 25, 2006 for a term of three years and
Mr. Samecs Employment Agreement was effective as of
August 7, 2007 for a term of two years. Pursuant to the
Employment Agreements, if the executive terminates his
employment with the Company for good reason or the Company
terminates the executives employment with the Company
without cause, the executive is entitled to receive base salary
through the longer of (i) the completion of the term of the
Employment Agreement and (ii) one year. The executive will
be restricted from competing with the Company or soliciting or
hiring Company employees during the two-year period (a one-year
period for Mr. Samec) following the termination of
employment with the Company.
Good reason is defined under the Employment
Agreements to mean the occurrence of any of the following
without the executives consent: (i) the
Companys material breach of any material provision of the
Employment Agreement, (ii) the material reduction in the
executives duties and, for Messrs. Adler and Norton,
title, reporting responsibilities or level of responsibilities,
(iii) a material reduction in Mr. Samecs base
salary and, for Messrs. Adler and Norton, a reduction in
base salary or the percentage of the executives
discretionary annual target bonus, or (iv) for
Messrs. Adler and Norton, the relocation of the
executives principal place of employment more than
50 miles outside of the Seattle metropolitan area.
Cause is defined under the Employment Agreements to
mean the executives (i) plea of guilty or nolo
contendere to, conviction for, or the commission of, a felony
offense, (ii) material breach of a fiduciary duty owed to
the Company, (iii) material breach of any of the covenants
made pursuant to the employment agreement, (iv) willful or
gross neglect of the material duties required by the employment
agreement, or (v) knowing and material violation of any
Company policy pertaining to ethics, wrongdoing or conflicts of
interest, subject to certain qualifications.
2006 RSU Awards. Mr. Adler was granted
84,832 RSUs (the First Adler RSU Award) and 53,020
RSUs (the Second Adler RSU Award, and together, the
Adler RSU Awards) pursuant to the Expedia 2005 Plan
with 20% of the Adler RSU Awards vesting on each anniversary of
the award date over a five-year term. If Mr. Adler
terminates his employment with the Company for good reason or
the Company terminates his employment without cause, to the
extent not already vested (i) 50% of the First Adler RSU
Award will vest, and (ii) 20% of the Second Adler RSU Award
will vest for each year or partial year between the award date
and the date of termination. Both awards were contingent on the
satisfaction of certain performance goals, which have
subsequently been met.
Mr. Norton was granted 62,235 RSUs (the First Norton
RSU Award) and 31,117 RSUs (the Second Norton RSU
Award, and together, the Norton RSU Awards)
pursuant to the Expedia 2005 Plan with 25% of the First Norton
RSU Award vesting on each anniversary date of the award date
over a four-year term and 100% of the Second Norton RSU Award
vesting on the fifth anniversary of the award date. If
Mr. Norton terminates his employment with the Company for
good reason or the Company terminates his employment without
cause, (i) 25% of the First Norton RSU Award will vest and
(ii) 20% of the Second Norton RSU Award will vest for each
year or partial year between the award date and the date of
termination. Both awards were contingent on the satisfaction of
certain performance goals, which have subsequently been met.
The Adler RSU Awards and the Norton RSU Awards vest upon a
change in control of Expedia. For this purpose, the term
change in control is defined by reference to the
Expedia 2005 Plan, under which change in control has
substantially the same meaning as under the IAC 2005 Plan, as
described above under Mr. Dillers 2005 Stock Option
Agreement. In addition, Mr. Adlers RSUs will vest
upon a Liberty Change in Control, which is defined
as termination of the irrevocable proxy held by Mr. Diller
to vote shares of Expedia common stock held by Liberty Media or
its affiliates, or the acquisition by Liberty Media or its
affiliates, of
42
beneficial ownership of equity securities of Expedia, whereby
Liberty Media acquires or assumes more than 50% of the voting
power of the then outstanding equity securities of Expedia
entitled to vote generally on the election of Expedias
directors. Mr. Nortons RSUs will vest if
Mr. Norton terminates his employment with the Company for
good reason or the Company terminates his employment without
cause at any time during the two-year period following a Liberty
Change in Control.
Additional RSU Awards. Messrs. Adler,
Norton and Samec also hold RSUs under the Expedia 2005 Plan. In
the event of a change in control of Expedia, these RSUs will
vest as described in the section above titled Barry
Diller 2007 RSU Award.
The table below reflects the estimated amount of incremental
compensation payable to the named executive officers upon
termination of the executives employment in the following
circumstances: (i) a termination by the Company without
cause or by the executive for good reason not in connection with
a change in control; (ii) a termination by the Company
without cause in a fiscal year in which the Company meets the
performance goals established by the Compensation Committee;
(iii) a change in control; (iv) a termination by the
Company without cause or by the executive for good reason in
connection with a change in control; (v) disability; or
(vi) death. The table should be read in conjunction with
the descriptions of benefits above as the definitions for
change in control, cause and good
reason may vary.
The amounts shown in the table assume that the termination was
effective as of December 31, 2007 and that the price of
Expedia common stock on which certain of the calculations are
based was the closing price of $31.62 on The Nasdaq Stock Market
on that date. These amounts are estimates of the incremental
amounts that would be paid out to the executive upon such
terminations. The actual amounts to be paid out can only be
determined at the time of the executives termination of
employment or the change in control, if any.
Estimated
Potential Incremental Payments Upon Termination or Change in
Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
w/o Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
or for Good
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
w/o Cause
|
|
|
|
|
|
Reason in
|
|
|
|
|
|
|
|
|
|
w/o Cause
|
|
|
and Meets
|
|
|
Upon
|
|
|
Connection
|
|
|
|
|
|
|
|
|
|
or for Good
|
|
|
Performance
|
|
|
Change in
|
|
|
w/Change in
|
|
|
|
|
|
|
|
Name and Benefits(1)
|
|
Reason
|
|
|
Goals
|
|
|
Control (2)
|
|
|
Control (2)
|
|
|
Disability
|
|
|
Death
|
|
|
Barry Diller(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Stock Options (vesting accelerated)
|
|
$
|
3,004,800
|
|
|
$
|
0
|
|
|
$
|
4,507,200
|
|
|
$
|
0
|
|
|
$
|
3,004,800
|
|
|
$
|
3,004,800
|
|
2007 RSU Award (vesting accelerated)
|
|
|
0
|
|
|
|
|
|
|
|
2,912,929
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total Estimated Incremental Value
|
|
|
3,004,800
|
|
|
|
0
|
|
|
|
7,420,129
|
|
|
|
0
|
|
|
|
3,004,800
|
|
|
|
3,004,800
|
|
Dara Khosrowshahi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IAC 2000 Plan RSUs (vesting accelerated)
|
|
|
3,805,246
|
|
|
|
0
|
|
|
|
3,805,246
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
2006 RSU Award (vesting accelerated)(4)
|
|
|
0
|
|
|
|
18,972,000
|
|
|
|
12,648,000
|
|
|
|
12,648,000
|
|
|
|
0
|
|
|
|
0
|
|
2007 RSU Awards (vesting accelerated)(5)
|
|
|
0
|
|
|
|
0
|
|
|
|
6,074,929
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total Estimated Incremental Value
|
|
|
3,805,246
|
|
|
|
18,972,000
|
(4)
|
|
|
22,528,175
|
(4)(5)
|
|
|
12,648,000
|
(4)
|
|
|
0
|
|
|
|
0
|
|
Michael B. Adler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance (salary)
|
|
|
515,625
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
2006 First RSU Award (vesting accelerated)
|
|
|
1,072,962
|
|
|
|
0
|
|
|
|
2,145,923
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
2006 Second RSU Award (vesting accelerated)
|
|
|
268,239
|
|
|
|
0
|
|
|
|
1,341,194
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
2007 RSU Award (vesting accelerated)
|
|
|
0
|
|
|
|
0
|
|
|
|
1,237,986
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total Estimated Incremental Value
|
|
|
1,856,826
|
|
|
|
0
|
|
|
|
4,725,103
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Burke F. Norton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance (salary)
|
|
|
681,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
2006 First RSU Award (vesting accelerated)
|
|
|
368,982
|
|
|
|
0
|
|
|
|
1,475,927
|
|
|
|
1,475,927
|
(6)
|
|
|
0
|
|
|
|
0
|
|
2006 Second RSU Award (vesting accelerated)
|
|
|
196,784
|
|
|
|
0
|
|
|
|
983,920
|
|
|
|
983,920
|
(6)
|
|
|
0
|
|
|
|
0
|
|
Additional RSU Award (vesting accelerated)
|
|
|
0
|
|
|
|
0
|
|
|
|
582,567
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total Estimated Incremental Value
|
|
|
1,246,766
|
|
|
|
0
|
|
|
|
3,042,414
|
|
|
|
2,459,847
|
|
|
|
0
|
|
|
|
0
|
|
Pierre V. Samec
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance (salary)
|
|
|
560,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Additional RSU Award (vesting accelerated)
|
|
|
0
|
|
|
|
0
|
|
|
|
1,469,729
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total Estimated Incremental Value
|
|
|
560,000
|
|
|
|
0
|
|
|
|
1,469,729
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1) |
|
This table does not reflect potential payments upon termination
or change in control relating to awards made to the named
executive officers after December 31, 2007. On
February 28, 2008, the Section 16 |
43
|
|
|
|
|
Committee approved RSU awards to the named executive officers
which are described above in the table titled 2008 Grants
of Plan-Based Awards. These awards were issued under the
Expedia 2005 Plan and, for these officers, will vest upon a
change in control (a change in control is defined by
reference to the Expedia 2005 Plan, under which change in
control has substantially the same meaning as under the IAC 2005
Plan, as described above under Mr. Dillers 2005 Stock
Option Agreement). Further information on these awards is
included in the section titled 2008 Grants of Plan-Based
Awards above. |
|
(2) |
|
Some of our plans provide benefits to the named executive
officers in the event of a change in control, whether or not the
executives employment also is terminated. The amounts to
which the executive would be entitled in that event are
reflected in the column captioned Upon Change in
Control. If an executives employment also is
terminated in connection with a change in control, the
additional amounts to which the executive would be entitled as a
result of such termination are reflected in the column captioned
Termination w/o Cause or for Good Reason in Connection w/
Change in Control. |
|
(3) |
|
Mr. Diller holds unvested options to purchase
2,400,000 shares of Expedia common stock with an exercise
price of $28.49 per share and options to purchase
1,400,000 shares of Expedia common stock with an exercise
price of $38.35 per share. The closing price of Expedias
common stock, as reported on The Nasdaq Stock Market on
December 31, 2007, was $31.62 per share and therefore the
value of Mr. Dillers unvested options as of
December 31, 2007 reflects the value of the options with an
exercise price lower than the closing price of our common stock
on The Nasdaq Stock Market on that date. |
|
(4) |
|
Reflects the value of 800,000 RSUs based on the price of Expedia
common stock on December 31, 2007 of $31.62. On
February 11, 2008, Mr. Khosrowshahi transferred
beneficial ownership of 160,000 RSUs to his spouse pursuant to a
property settlement agreement in connection with separation
proceedings. |
|
(5) |
|
Reflects the value of 192,123 RSUs based on the price of Expedia
common stock on December 31, 2007 of $31.62. On
February 11, 2008, Mr. Khosrowshahi transferred
beneficial ownership of (i) 289 of the RSUs and
(ii) 15,865 shares received upon vesting of certain of
the RSUs to his spouse pursuant to a property settlement
agreement in connection with separation proceedings. |
|
(6) |
|
Mr. Nortons 2006 RSU Awards vest upon termination at
any time during the two-year period following a change in
control of Liberty Media Corporation. |
Equity
Compensation Plan Information
The following table summarizes information, as of
December 31, 2007, relating to Expedias equity
compensation plans pursuant to which grants of stock options,
restricted stock, RSUs or other rights to acquire shares may be
granted from time to time.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of Securities
|
|
|
|
Securities to be
|
|
|
|
|
|
Remaining Available
|
|
|
|
Issued Upon
|
|
|
Weighted-Average
|
|
|
for Future Issuance
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Under Equity
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Compensation Plans
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
(Excluding Securities
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (A))
|
|
Plan Category
|
|
(A)(1)
|
|
|
(B)(2)
|
|
|
(C)(3)
|
|
|
Equity compensation plans approved by security holders(4)
|
|
|
6,780,346
|
(5)
|
|
|
|
|
|
|
4,339,283
|
|
Equity compensation plans not approved by security holders(6)
|
|
|
0
|
|
|
|
|
|
|
|
100,000
|
|
Total
|
|
|
6,780,346
|
(5)
|
|
|
|
|
|
|
4,439,283
|
|
|
|
|
(1) |
|
Information excludes the following securities, which represent
IAC equity-based compensation awards that were converted into
Expedia equity-based awards on the effective date of the
Spin-Off and were outstanding as of December 31, 2007:
(i) 9,675,238 securities with a weighted-average exercise
price of $24.74 to be issued upon the exercise of outstanding
stock options, (ii) 847,349 securities with a
weighted-average exercise price of $11.56 per equivalent share
to be issued in connection with outstanding warrants to purchase
common stock and (iii) 1,444,891 securities issuable in
connection with RSUs for which there is no related exercise
price. |
44
|
|
|
(2) |
|
As of December 31, 2007, and with the exception of a grant
of 50,000 stock appreciation rights, only RSUs had been granted
under the Expedia 2005 Plan. RSUs do not have an associated
exercise price. When vested, each stock appreciation right
represents the right to receive the difference between $6.76 and
the value of one share of the common stock of eLong, Inc., a
subsidiary of the Company, at the time of exercise, to be
settled in the Companys stock. |
|
(3) |
|
Does not include proposed 7,500,000 additional authorized shares
under the Expedia 2005 Plan. |
|
(4) |
|
The Expedia 2005 Plan. |
|
(5) |
|
Does not include shares underlying RSUs granted in 2008. |
|
(6) |
|
The Expedia Deferred Compensation Plan for Non-Employee
Directors. |
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Review
and Approval or Ratification of Related Person
Transactions
In general, the Company will enter into a related person
transaction only when it has been approved by the Audit
Committee of the Board of Directors. Related persons include the
Companys executive officers, directors, 5% or more
beneficial owners of our common stock, immediate family members
of these persons and entities in which one of these persons has
a direct or indirect material interest. Related person
transactions are transactions that meet the minimum threshold
for disclosure in the proxy statement under the relevant SEC
rules (generally, transactions involving amounts exceeding
$120,000 in which a related person or entity has a direct or
indirect material interest). When a potential related person
transaction is identified, management presents it to the Audit
Committee to determine whether to approve or ratify it. When
determining whether to approve, ratify, disapprove or reject any
related person transaction, the Audit Committee considers
relevant factors, including the extent of the related
persons interest in the transaction, whether the terms are
commercially reasonable and whether the related person
transaction is consistent with the best interests of the Company
and its stockholders.
The legal and accounting departments work with business units
throughout the Company to identify potential related person
transactions prior to execution. In addition, the Company takes
the following steps with regard to related person transactions:
|
|
|
|
|
On an annual basis, each director, director nominee and
executive officer of the Company completes a Director and
Officer Questionnaire that requires disclosure of any
transaction, arrangement or relationship with the Company during
the last fiscal year in which the director, director nominee or
executive officer, or any member of his or her immediate family,
had a direct or indirect material interest.
|
|
|
|
Each director, director nominee and executive officer is
expected to promptly notify the Companys legal department
of any direct or indirect interest that such person or an
immediate family member of such person had, has or may have in a
transaction in which the Company participates.
|
|
|
|
The Company performs a quarterly search of its accounts payable,
accounts receivable and other databases to identify any other
potential related person transactions that may require
disclosure.
|
|
|
|
Any reported transaction that the Companys legal
department determines may qualify as a related person
transaction is referred to the Audit Committee.
|
If any related person transaction is not approved, the Audit
Committee may take such action as it may deem necessary or
desirable in the best interests of the Company and its
stockholders.
Related
Person Transactions
Relationships
With Officers and Directors
Subject to the terms of a Stockholders Agreement between
Mr. Diller and Liberty Media, Mr. Diller holds an
irrevocable proxy to vote shares of Expedia common stock and
Class B common stock beneficially owned
45
by Liberty Media. By virtue of the proxy, as well as through
shares owned by Mr. Diller directly, Mr. Diller is
effectively able to control the outcome of all matters submitted
to a vote or for the consent of Expedias stockholders
(other than with respect to the election by the holders of
Expedia common stock of 25% of the members of Expedias
Board of Directors and matters as to which Delaware law requires
a separate class vote).
Mr. Diller is also the chairman and chief executive officer
of IAC, and through similar arrangements between Mr. Diller
and Liberty Media, Mr. Diller is effectively able to
control the outcome of all matters submitted to a vote or for
the consent of IACs stockholders (other than with respect
to the election by the holders of IAC common stock of 25% of the
members of IACs Board of Directors and matters as to which
Delaware law requires a separate class vote).
Relationship
Between Expedia and IAC
In connection with the Spin-Off, Expedia and IAC entered into
various agreements, including, among others, a separation
agreement, a tax sharing agreement, an employee matters
agreement and a transition services agreement. Copies of each of
these agreements were filed as exhibits to Expedias
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2005.
Under the transition services agreement, IAC agreed to provide
certain assistance and services to Expedia on an interim,
transitional basis, which during 2007 consisted primarily of
assistance with governmental affairs and the leasing of certain
office space by IAC to Expedia. Charges for assistance and
services provided pursuant to this agreement are on a cost plus
fixed percentage or hourly basis, as applicable. Expedia paid
IAC approximately $420,000 for assistance and services provided
by IAC pursuant to this agreement in 2007.
In connection with the Spin-Off, Expedia and IAC also entered
into certain other arrangements, including arrangements
regarding the sharing of certain costs and the use and ownership
of certain aircraft and various commercial agreements, including
distribution and services agreements and an agreement regarding
the provision and use of certain advertising time, which are
described below.
Cost-Sharing Arrangements. Expedia and IAC
have agreed, in light of Mr. Dillers senior role at
both companies and his use of certain resources to the benefit
of both companies, that certain expenses associated with such
usage would be shared. These expenses include certain of
Mr. Dillers business expenses, costs for equipment
dedicated to Mr. Dillers use and expenses relating to
Mr. Dillers support staff, as well as certain other
costs. In 2007, Expedia paid 35% of such expenses. The aggregate
amount of costs paid to IAC by Expedia was approximately
$345,000 in 2007, which amount does not include amounts paid by
Expedia for its costs attributable to Mr. Dillers
personal use of Company aircraft.
Aircraft Agreement. In 2005, Expedia and a
subsidiary of IAC entered into a time-sharing arrangement,
pursuant to which Expedia used an aircraft jointly owned by a
subsidiary of IAC and an affiliate of Mr. Diller. Pursuant
to the time sharing arrangement, Expedia paid IAC the maximum
amount permitted under applicable Federal Aviation Association
regulations for use of the aircraft, or roughly two times the
actual fuel cost incurred in such usage, plus certain enumerated
out-of-pocket expenses. Operating costs were pro-rated based on
actual business usage by each company. Payments made by Expedia
for its portion of the costs attributable to
Mr. Dillers use of this aircraft for 2007 were
approximately $38,000.
Each of Expedia and IAC also has a 50% ownership interest in an
aircraft that may be used by both companies. Expedia and IAC
share capital costs relating to this aircraft equally and
operating costs pro-rata based on actual usage. Members of this
aircrafts flight crew are employed by an entity in which
each of Expedia and IAC has a 50% ownership interest. In 2007,
total payments of approximately $400,000 were made to this
entity by Expedia. On the fifth anniversary of the Spin-Off and
annually thereafter, or at any time when Mr. Diller ceases
to serve as Chairman of either Expedia or IAC, IAC will have a
call right and Expedia will have a put right with respect to
Expedias interest in the aircraft, in each case at fair
market value. IAC has the right to sell the aircraft on behalf
of both parties. See also footnote 13 to the section above
titled Summary Compensation Table for information
regarding personal use of these aircraft.
46
Commercial Agreements. Since the Spin-Off,
Expedia has continued to work with some of IACs businesses
pursuant to a variety of commercial relationships. These
relationships generally include (i) distribution
agreements, (ii) service agreements, and (iii) office
space lease agreements. Those agreements that, individually or
together with similar agreements, include revenues to Expedia in
excess of $120,000 are discussed below.
Pursuant to distribution agreements, certain IAC businesses make
available inventory and promotional offers from various Expedia
travel suppliers, as well as travel content and commerce links
from an Expedia business. Certain Expedia businesses make
commerce links, select ticketing and resort inventory and
discount programs offered by various IAC businesses available to
their customers. Distribution agreements typically involve the
payment of fees (usually on a fixed, per transaction, revenue
share or commission basis) from the party seeking distribution
of the product or service to the party that is providing the
distribution. Services agreements primarily involve call center
support and advertising sales services provided by IAC
businesses, as well as private-label travel services provided by
Expedia businesses.
In 2007, aggregate amounts paid by Expedia to IAC businesses
pursuant to commercial agreements, primarily for call center
services and advertising and marketing services, were
approximately $7.5 million. Aggregate payments received by
Expedia from IAC businesses during this period pursuant to
commercial agreements, primarily for advertising services and in
connection with the participation by Expedia businesses in
certain discount programs, were approximately $100,000.
Relationship
Between Expedia and Liberty Media
Liberty Media, Expedia and Mr. Diller are party to the
Governance Agreement, pursuant to which Liberty Media has the
right to nominate up to a number of directors equal to 20% of
the total number of the directors on the Board of Directors
(rounded up to the next whole number if the number of directors
on the Board of Directors is not an even multiple of five), and
has certain other rights regarding committee participation, so
long as certain stock ownership requirements applicable to
Liberty Media are satisfied. The Governance Agreement also
provides Liberty Media preemptive rights that generally entitle
it to purchase a number of Expedia common shares so that, if
Expedia issues or proposes to issue shares of Expedia common
stock or Expedia Class B common stock, Liberty Media will
maintain the same percentage ownership interest in Expedia that
Liberty Media held immediately prior to such issuance or
proposed issuance. Liberty Media was not entitled to exercise
any such preemptive rights in 2007.
Relationship
Between Expedia and Microsoft
During 2006, the Microsoft Corporation beneficially owned more
than 5% of Expedia common stock. On February 16, 2007,
Microsoft filed an amendment to its Schedule 13G originally
filed with the SEC on February 14, 2006, indicating that it
was no longer a beneficial owner of more than 5% of Expedia
common stock.
Expedia has entered into a series of commercial agreements with
Microsoft, which generally relate to the adoption of Microsoft
technology, software and functionality, branding and
advertising. Expedia believes that the terms of these agreements
are commercially appropriate. Total fees paid to Microsoft by
Expedia with respect to these arrangements in 2007 were
approximately $22.1 million. In the ordinary course of
business, and otherwise from time to time, Expedia may determine
to enter into other commercial arrangements with Microsoft and
its affiliates.
Prior to November 1999, Microsoft owned 100% of Expedias
outstanding common stock. Concurrent with Expedias
separation from Microsoft, Expedia entered into a tax allocation
agreement with Microsoft to facilitate the separation. During
2007 we realized $30.3 million of tax savings on our tax
returns, and remitted an equivalent amount to Microsoft during
this period. We have no remaining obligation to Microsoft under
this agreement as of December 31, 2007.
47
ANNUAL
REPORTS
Expedias Annual Report to Stockholders for 2007, which
includes Expedias Annual Report on
Form 10-K
for the year ended December 31, 2007 (not including
financial schedules and exhibits) is available at
www.proxydocs.com/expedia. Upon written request to Expedia,
Inc., Attention: Corporate Secretary, 3150 139th Avenue
S.E., Bellevue, Washington 98005, Expedia will provide without
charge an additional copy of Expedias 2007 Annual Report
on
Form 10-K.
Expedia will furnish any exhibit contained in the Annual
Report on
Form 10-K
upon payment of a reasonable fee. Stockholders may also review a
copy of the Annual Report on
Form 10-K
(including financial schedules and exhibits) by accessing
Expedias corporate website at www.expediainc.com or
the SECs website at www.sec.gov.
PROPOSALS BY
STOCKHOLDERS FOR PRESENTATION AT THE
2009 ANNUAL MEETING
Stockholders who wish to have a proposal considered for
inclusion in Expedias proxy materials for presentation at
the 2009 Annual Meeting of Stockholders must submit the proposal
to Expedia no later than January 1, 2009 at its principal
executive offices at 3150 139th Avenue S.E., Bellevue,
Washington 98005, Attention: Corporate Secretary. The proposal
must be made in accordance with the provisions of
Rule 14a-8
of the Exchange Act. Stockholders who intend to present a
proposal at the 2009 annual meeting of stockholders without
inclusion of the proposal in Expedias proxy materials are
required to provide notice of such proposal to Expedia at its
principal executive offices no later than March 27, 2009.
Expedia reserves the right to reject, rule out of order or take
other appropriate action with respect to any proposal that does
not comply with these and other applicable requirements.
Bellevue, Washington
April 28, 2008
48
Appendix A
EXPEDIA, INC.
2005 STOCK AND ANNUAL INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of this Plan is (a) to give the Company a
competitive advantage in attracting, retaining and motivating
officers, employees, directors
and/or
consultants and to provide the Company and its Subsidiaries and
Affiliates with a stock and incentive plan granting new Awards
to provide incentives directly linked to shareholder value and
(b) to assume and govern other awards pursuant to the
adjustment of awards granted under any IAC Long Term Incentive
Plan (as defined in the Employee Matters Agreement) in
accordance with the terms of the Employee Matters Agreement
(Adjusted Awards). Certain terms used herein have
definitions given to them in the first place in which they are
used. In addition, for purposes of this Plan, the following
terms are defined as set forth below:
(a) AFFILIATE means a corporation or
other entity controlled by, controlling or under common control
with, the Company.
(b) APPLICABLE EXCHANGE means Nasdaq or
such other securities exchange as may at the applicable time be
the principal market for the Common Stock.
(c) AWARD means an Option, Stock
Appreciation Right, Restricted Stock, Restricted Stock Unit, or
other stock-based award granted or assumed pursuant to the terms
of this Plan including Adjusted Awards.
(d) AWARD AGREEMENT means a written or
electronic document or agreement setting forth the terms and
conditions of a specific Award.
(e) BOARD means the Board of Directors
of the Company.
(f) BONUS AWARD means a bonus award made
pursuant to Section 9.
(g) CAUSE means, unless otherwise
provided in an Award Agreement, (i) Cause as
defined in any Individual Agreement to which the applicable
Participant is a party, or (ii) if there is no such
Individual Agreement or if it does not define Cause:
(A) the willful or gross neglect by a Participant of his
employment duties; (B) the plea of guilty or NOLO
CONTENDERE to, or conviction for, the commission of a felony
offense by a Participant; (C) a material breach by a
Participant of a fiduciary duty owed to the Company or any of
its subsidiaries; (D) a material breach by a Participant of
any nondisclosure, non-solicitation or non-competition
obligation owed to the Company or any of its Affiliates; or
(E) before a Change in Control, such other events as shall
be determined by the Committee and set forth in a
Participants Award Agreement. Notwithstanding the general
rule of Section 2(c), following a Change in Control, any
determination by the Committee as to whether Cause
exists shall be subject to DE NOVO review.
(h) CHANGE IN CONTROL has the meaning
set forth in Section 10(b).
(i) CODE means the Internal Revenue Code
of 1986, as amended from time to time, and any successor thereto.
(j) COMMISSION means the Securities and
Exchange Commission or any successor agency.
(k) COMMITTEE has the meaning set forth
in Section 2(a).
(l) COMMON STOCK means common stock, par
value $.001 per share, of the Company.
(m) COMPANY means Expedia, Inc., a
Delaware corporation or its successor.
(n) DISABILITY means
(i) Disability as defined in any Individual
Agreement to which the Participant is a party, (ii) if
there is no such Individual Agreement or it does not define
Disability, (A) permanent and total disability
as determined under the Companys long-term disability plan
A-1
applicable to the Participant, or (B) if there is no such
plan applicable to the Participant or the Committee determines
otherwise in an applicable Award Agreement,
Disability as determined by the Committee.
(o) DISAFFILIATION means a
Subsidiarys or Affiliates ceasing to be a Subsidiary
or Affiliate for any reason (including, without limitation, as a
result of a public offering, or a spinoff or sale by the
Company, of the stock of the Subsidiary or Affiliate) or a sale
of a division of the Company and its Affiliates.
(p) EBITA means for any period,
operating profit (loss) plus (i) amortization, including
goodwill impairment, (ii) amortization of non-cash
distribution and marketing expense and non-cash compensation
expense, (iii) disengagement expenses,
(iv) restructuring charges, (v) non cash write-downs
of assets or goodwill, (vi) charges relating to disposal of
lines of business, (vii) litigation settlement amounts and
(viii) costs incurred for proposed and completed
acquisitions.
(q) EBITDA means for any period,
operating profit (loss) plus (i) depreciation and
amortization, including goodwill impairment,
(ii) amortization of cable distribution fees,
(iii) amortization of non-cash distribution and marketing
expense and non-cash compensation expense,
(iv) disengagement expenses, (v) restructuring
charges, (vi) non cash write-downs of assets or goodwill,
(vii) charges relating to disposal of lines of business,
(viii) litigation settlement amounts and (ix) costs
incurred for proposed and completed acquisitions.
(r) ELIGIBLE INDIVIDUALS means
directors, officers, employees and consultants of the Company or
any of its Subsidiaries or Affiliates.
(s) EMPLOYEE MATTERS AGREEMENT means the
Employee Matters Agreement by and between IAC and the Company
dated as of August 9, 2005.
(t) EXCHANGE ACT means the Securities
Exchange Act of 1934, as amended from time to time, and any
successor thereto.
(u) FAIR MARKET VALUE means, unless
otherwise defined in an Award Agreement, if the Common Stock is
listed on a national securities exchange, as of any given date,
the closing price for the Common Stock on such date on the
Applicable Exchange, or if Shares were not traded on the
Applicable Exchange on such measurement date, then on the next
preceding date on which Shares were traded, all as reported by
such source as the Committee may select. If the Common Stock is
not listed on a national securities exchange, Fair Market Value
shall be determined by the Committee in its good faith
discretion.
(v) FREE-STANDING SAR has the meaning
set forth in Section 5(b).
(w) GRANT DATE means (i) the date
on which the Committee by resolution selects an Eligible
Individual to receive a grant of an Award and determines the
number of Shares to be subject to such Award or the formula for
earning a number of shares or cash amount, (ii) such later
date as the Committee shall provide in such resolution or
(iii) the initial date on which an Adjusted Award was
granted under the IAC Long Term Incentive Plan.
(x) IAC means IAC/InterActiveCorp, a
Delaware corporation.
(y) INCENTIVE STOCK OPTION means any
Option that is designated in the applicable Award Agreement as
an incentive stock option within the meaning of
Section 422 of the Code, and that in fact so qualifies.
(z) INDIVIDUAL AGREEMENT means an
employment, consulting or similar agreement between a
Participant and the Company or one of its Subsidiaries or
Affiliates.
(aa) NONQUALIFIED OPTION means any
Option that is not an Incentive Stock Option.
(bb) OPTION means an Award described
under Section 5.
(cc) PARTICIPANT means an Eligible
Individual to whom an Award is or has been granted.
A-2
(dd) PERFORMANCE GOALS means the
performance goals established by the Committee in connection
with the grant of Restricted Stock, Restricted Stock Units or
Bonus Awards or other stock-based awards. In the case of
Qualified-Performance Based Awards that are intended to qualify
under Section 162(m)(4), (i) such goals shall be based on
the attainment of one or any combination of the following:
specified levels of earnings per share from continuing
operations, net profit after tax, EBITDA, EBITA, gross profit,
cash generation, unit volume, market share, sales, asset
quality, earnings per share, operating income, revenues, return
on assets, return on operating assets, return on equity,
profits, total shareholder return (measured in terms of stock
price appreciation
and/or
dividend growth), cost saving levels, marketing-spending
efficiency, core non-interest income, change in working capital,
return on capital,
and/or stock
price, with respect to the Company or any subsidiary, division
or department of the Company that are intended to qualify under
Section 162(m)(4)(c) of the Code and (ii) such
Performance Goals shall be set by the Committee within the time
period prescribed by Section 162(m) of the Code and related
regulations. Such Performance Goals also may be based upon the
attaining of specified levels of Company, Subsidiary, Affiliate
or divisional performance under one or more of the measures
described above relative to the performance of other entities,
divisions or subsidiaries.
(ee) PLAN means this Expedia, Inc. 2005
Stock and Annual Incentive Plan, as set forth herein and as
hereafter amended from time to time.
(ff) PLAN YEAR means the calendar year
or, with respect to Bonus Awards, the Companys fiscal year
if different.
(gg) QUALIFIED PERFORMANCE-BASED AWARD
means an Award intended to qualify for the
Section 162(m) Exemption, as provided in Section 11.
(hh) RESTRICTED STOCK means an Award
described under Section 6.
(ii) RESTRICTED STOCK UNITS means an
Award described under Section 7.
(jj) RETIREMENT means retirement from
active employment with the Company, a Subsidiary or Affiliate at
or after the Participants attainment of age 65.
(kk) SECTION 162(M) EXEMPTION means
the exemption from the limitation on deductibility imposed by
Section 162(m) of the Code that is set forth in
Section 162(m)(4)(C) of the Code.
(ll) SEPARATION has the meaning set
forth in the Employee Matters Agreement.
(mm) SHARE means a share of Common Stock.
(nn) STOCK APPRECIATION RIGHT has the
meaning set forth in Section 5(b).
(oo) SUBSIDIARY means any corporation,
partnership, joint venture or other entity during any period in
which at least a 50% voting or profits interest is owned,
directly or indirectly, by the Company or any successor to the
Company.
(pp) TANDEM SAR has the meaning set
forth in Section 5(b).
(qq) TERM means the maximum period
during which an Option or Stock Appreciation Right may remain
outstanding, subject to earlier termination upon Termination of
Employment or otherwise, as specified in the applicable Award
Agreement.
(rr) TERMINATION OF EMPLOYMENT means the
termination of the applicable Participants employment
with, or performance of services for, the Company and any of its
Subsidiaries or Affiliates. Unless otherwise determined by the
Committee, if a Participants employment with, or
membership on a board of directors of, the Company and its
Affiliates terminates but such Participant continues to provide
services to the Company and its Affiliates in a non-employee
director capacity or as an employee, as applicable, such change
in status shall not be deemed a Termination of Employment. A
Participant employed by, or performing services for, a
Subsidiary or an Affiliate or a division of the Company and its
Affiliates shall be deemed to incur a Termination of Employment
if, as a result of a Disaffiliation, such Subsidiary, Affiliate,
or division ceases to be a Subsidiary, Affiliate or division, as
the case may be, and
A-3
the Participant does not immediately thereafter become an
employee of, or member of the board of directors of, the Company
or another Subsidiary or Affiliate. Temporary absences from
employment because of illness, vacation or leave of absence and
transfers among the Company and its Subsidiaries and Affiliates
shall not be considered Terminations of Employment. For the
avoidance of doubt, the Separation shall not constitute a
Termination of Employment for purposes of any Adjusted Award.
SECTION 2. ADMINISTRATION
(a) COMMITTEE. The Plan shall be
administered by the Compensation/Benefits Committee of the Board
or such other committee of the Board as the Board may from time
to time designate (the Committee), which shall be
composed of not less than two directors, and shall be appointed
by and serve at the pleasure of the Board. The Committee shall,
subject to Section 11, have plenary authority to grant
Awards pursuant to the terms of the Plan to Eligible
Individuals. Among other things, the Committee shall have the
authority, subject to the terms of the Plan and the Employee
Matters Agreement (including the original terms of the grant of
the Adjusted Award):
(i) to select the Eligible Individuals to whom Awards may
from time to time be granted;
(ii) to determine whether and to what extent Incentive
Stock Options, Nonqualified Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, other stock-based
awards, or any combination thereof, are to be granted hereunder;
(iii) to determine the number of Shares to be covered by
each Award granted hereunder;
(iv) to determine the terms and conditions of each Award
granted hereunder, based on such factors as the Committee shall
determine;
(v) subject to Section 12, to modify, amend or adjust
the terms and conditions of any Award, at any time or from time
to time;
(vi) to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall from
time to time deem advisable;
(vii) to interpret the terms and provisions of the Plan and
any Award issued under the Plan (and any agreement relating
thereto);
(viii) to establish any blackout period that
the Committee in its sole discretion deems necessary or
advisable; and
(ix) to otherwise administer the Plan.
(b) PROCEDURES.
(i) The Committee may act only by a majority of its members
then in office, except that the Committee may, except to the
extent prohibited by applicable law or the listing standards of
the Applicable Exchange and subject to Section 11, allocate
all or any portion of its responsibilities and powers to any one
or more of its members and may delegate all or any part of its
responsibilities and powers to any person or persons selected
by it.
(ii) Subject to Section 11(c), any authority granted
to the Committee may also be exercised by the full Board. To the
extent that any permitted action taken by the Board conflicts
with action taken by the Committee, the Board action shall
control.
(c) DISCRETION OF COMMITTEE. Subject to
Section 1(g), any determination made by the Committee or by
an appropriately delegated officer pursuant to delegated
authority under the provisions of the Plan with respect to any
Award shall be made in the sole discretion of the Committee or
such delegate at the time of the grant of the Award or, unless
in contravention of any express term of the Plan, at any time
thereafter. All decisions made by the Committee or any
appropriately delegated officer pursuant to the provisions of
the Plan shall be final and binding on all persons, including
the Company, Participants, and Eligible Individuals.
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(d) AWARD AGREEMENTS. The terms and
conditions of each Award, as determined by the Committee, shall
be set forth in an Award Agreement, which shall be delivered to
the Participant receiving such Award upon, or as promptly as is
reasonably practicable following, the grant of such Award. The
effectiveness of an Award shall not be subject to the Award
Agreements being signed by the Company
and/or the
Participant receiving the Award unless specifically so provided
in the Award Agreement. Award Agreements may be amended only in
accordance with Section 12 hereof.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
(a) PLAN MAXIMUMS. The maximum number of
Shares that may be delivered pursuant to Awards under the Plan
shall be the sum of (a) the number of Shares that may be
issuable upon exercise or vesting of the Adjusted Awards and
(b) 19,500,000. Shares subject to an Award under the Plan
may be authorized and unissued Shares or may be treasury Shares.
(b) INDIVIDUAL LIMITS. No Participant may
be granted Awards covering in excess of 8,000,000 Shares
during the term of the Plan; PROVIDED, that Adjusted Awards
shall not be subject to this limitation.
(c) RULES FOR CALCULATING SHARES DELIVERED.
(i) With respect to Awards other than Adjusted Awards, to
the extent that any Award is forfeited, or any Option and the
related Tandem SAR (if any) or Free-Standing SAR terminates,
expires or lapses without being exercised, or any Award is
settled for cash, the Shares subject to such Awards not
delivered as a result thereof shall again be available for
Awards under the Plan.
(ii) With respect to Awards other than Adjusted Awards, if
the exercise price of any Option
and/or the
tax withholding obligations relating to any Award are satisfied
by delivering Shares to the Company (by either actual delivery
or by attestation), only the number of Shares issued net of the
Shares delivered or attested to shall be deemed delivered for
purposes of the limits set forth in Section 3(a). To the
extent any Shares subject to an Award are withheld to satisfy
the exercise price (in the case of an Option)
and/or the
tax withholding obligations relating to such Award, such Shares
shall not be deemed to have been delivered for purposes of the
limits set forth in Section 3(a).
(d) ADJUSTMENT PROVISION. Subject to the
provisions of Section 3(e), in the event of (i) a
stock dividend, stock split, reverse stock split, share
combination, or recapitalization or similar event affecting the
capital structure of the Company (each, a Share
Change), or (ii) a merger, consolidation, acquisition
of property or shares, separation, spinoff, reorganization,
stock rights offering, liquidation, Disaffiliation, payment of
cash dividends other than an ordinary dividend or similar event
affecting the Company or any of its Subsidiaries (each, a
Corporate Transaction), the Committee or the Board
may in its discretion make such substitutions or adjustments as
it deems appropriate and equitable to (A) the aggregate
number and kind of Shares or other securities reserved for
issuance and delivery under the Plan, (B) the various
maximum limitations set forth in Sections 3(a) and 3(b)
upon Awards and upon the grants to individuals of Awards,
(C) the number and kind of Shares or other securities
subject to outstanding Awards; and (D) the exercise price
of outstanding Options and Stock Appreciation Rights. In the
case of Corporate Transactions, such adjustments may include,
without limitation, (1) the cancellation of outstanding
Awards in exchange for payments of cash, property or a
combination thereof having an aggregate value equal to the value
of such Awards, as determined by the Committee or the Board in
its sole discretion (it being understood that in the case of a
Corporate Transaction with respect to which shareholders of
Common Stock receive consideration other than publicly traded
equity securities of the ultimate surviving entity, any such
determination by the Committee that the value of an Option or
Stock Appreciation Right shall for this purpose be deemed to
equal the excess, if any, of the value of the consideration
being paid for each Share pursuant to such Corporate Transaction
over the exercise price of such Option or Stock Appreciation
Right shall conclusively be deemed valid); (2) the
substitution of other property (including, without limitation,
cash or other securities of the Company and securities of
entities other than the Company) for the Shares subject to
outstanding Awards; and (3) in connection with any
Disaffiliation, arranging for the assumption of Awards, or
replacement of Awards with new awards based on other property or
other securities (including, without limitation, other
securities of
A-5
the Company and securities of entities other than the Company),
by the affected Subsidiary, Affiliate, or division or by the
entity that controls such Subsidiary, Affiliate, or division
following such Disaffiliation (as well as any corresponding
adjustments to Awards that remain based upon Company
securities). Any adjustment under this Section 3(d) need
not be the same for all Participants.
(e) SECTION 409A. Notwithstanding
the foregoing: (i) any adjustments made pursuant to
Section 3(d) to Awards that are considered deferred
compensation within the meaning of Section 409A of
the Code shall be made in compliance with the requirements of
Section 409A of the Code; (ii) any adjustments made
pursuant to Section 3(d) to Awards that are not considered
deferred compensation subject to Section 409A
of the Code shall be made in such a manner as to ensure that
after such adjustment, the Awards either (A) continue not
to be subject to Section 409A of the Code or
(B) comply with the requirements of Section 409A of
the Code; and (iii) in any event, neither the Committee nor
the Board shall have the authority to make any adjustments
pursuant to Section 3(d) to the extent the existence of
such authority would cause an Award that is not intended to be
subject to Section 409A of the Code at the Grant Date to be
subject thereto.
SECTION 4. ELIGIBILITY
Awards may be granted under the Plan to Eligible Individuals
and, with respect to Adjusted Awards, in accordance with the
terms of the Employee Matters Agreement; PROVIDED, HOWEVER, that
Incentive Stock Options may be granted only to employees of the
Company and its subsidiaries or parent corporation (within the
meaning of Section 424(f) of the Code) and, with respect to
Adjusted Awards that are intended to qualify as incentive stock
options within the meaning of Section 421 of the Code, in
accordance with the terms of the Employee Matters Agreement.
SECTION 5. OPTIONS AND STOCK APPRECIATION RIGHTS
With respect to Adjusted Awards, the provisions below will be
applicable only to the extent that they are not inconsistent
with the Employee Matters Agreement and the terms of the
Adjusted Award assumed under the Employee Matters Agreement:
(a) TYPES OF OPTIONS. Options may be of
two types: Incentive Stock Options and Nonqualified Options. The
Award Agreement for an Option shall indicate whether the Option
is intended to be an Incentive Stock Option or a Nonqualified
Option.
(b) TYPES AND NATURE OF STOCK APPRECIATION
RIGHTS. Stock Appreciation Rights may be
Tandem SARs, which are granted in conjunction with
an Option, or Free-Standing SARs, which are not
granted in conjunction with an Option. Upon the exercise of a
Stock Appreciation Right, the Participant shall be entitled to
receive an amount in cash, Shares, or both, in value equal to
the product of (i) the excess of the Fair Market Value of
one Share over the exercise price of the applicable Stock
Appreciation Right, multiplied by (ii) the number of Shares
in respect of which the Stock Appreciation Right has been
exercised. The applicable Award Agreement shall specify whether
such payment is to be made in cash or Common Stock or both, or
shall reserve to the Committee or the Participant the right to
make that determination prior to or upon the exercise of the
Stock Appreciation Right.
(c) TANDEM SARS. A Tandem SAR may be
granted at the Grant Date of the related Option or, in the case
of a related Nonqualified Option, at any time after the Grant
Date thereof while the related Nonqualified Option remains
outstanding. A Tandem SAR shall be exercisable only at such time
or times and to the extent that the related Option is
exercisable in accordance with the provisions of this
Section 5, and shall have the same exercise price as the
related Option. A Tandem SAR shall terminate or be forfeited
upon the exercise or forfeiture of the related Option, and the
related Option shall terminate or be forfeited upon the exercise
or forfeiture of the Tandem SAR.
(d) EXERCISE PRICE. The exercise price
per Share subject to an Option or Free-Standing SAR shall be
determined by the Committee and set forth in the applicable
Award Agreement, and shall not be less than the Fair Market
Value of a share of the Common Stock on the applicable Grant
Date. In no event may any Option or Free-Standing SAR granted
under this Plan be amended, other than pursuant to
Section 3(d), to decrease the exercise price thereof or
otherwise be subject to any action that would be
A-6
treated, for accounting purposes, as a repricing of
such Option or Free-Standing SAR, unless such amendment,
cancellation, or action is approved by the Companys
shareholders.
(e) TERM. The Term of each Option and
each Free-Standing SAR shall be fixed by the Committee, but
shall not exceed ten years from the Grant Date in the case of an
Incentive Stock Option.
(f) VESTING AND EXERCISABILITY. Except as
otherwise provided herein, Options and Free-Standing SARs shall
be exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Committee. If the
Committee provides that any Option or Free-Standing SAR will
become exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or
in part, based on such factors as the Committee may determine.
In addition, the Committee may at any time accelerate the
exercisability of any Option or Free-Standing SAR.
(g) METHOD OF EXERCISE. Subject to the
provisions of this Section 5, Options and Free-Standing
SARs may be exercised, in whole or in part, at any time during
the applicable Term by giving written notice of exercise to the
Company or through the procedures established with the
Companys appointed third-party Option administrator
specifying the number of Shares as to which the Option or
Free-Standing SAR is being exercised; PROVIDED, HOWEVER, that,
unless otherwise permitted by the Committee, any such exercise
must be with respect to a portion of the applicable Option or
Free-Standing SAR relating to no less than the lesser of the
number of Shares then subject to such Option or Free-Standing
SAR or 100 Shares. In the case of the exercise of an
Option, such notice shall be accompanied by payment in full of
the purchase price (which shall equal the product of such number
of Shares multiplied by the applicable exercise price) by
certified or bank check or such other instrument as the Company
may accept. If approved by the Committee, payment, in full or in
part, may also be made as follows:
(i) Payments may be made in the form of unrestricted Shares
(by delivery of such Shares or by attestation) of the same class
as the Common Stock subject to the Option already owned by the
Participant (based on the Fair Market Value of the Common Stock
on the date the Option is exercised); PROVIDED, HOWEVER, that,
in the case of an Incentive Stock Option, the right to make a
payment in the form of already owned Shares of the same class as
the Common Stock subject to the Option may be authorized only at
the time the Option is granted.
(ii) To the extent permitted by applicable law, payment may
be made by delivering a properly executed exercise notice to the
Company, together with a copy of irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or
loan proceeds necessary to pay the purchase price, and, if
requested, the amount of any federal, state, local or foreign
withholding taxes. To facilitate the foregoing, the Company may,
to the extent permitted by applicable law, enter into agreements
for coordinated procedures with one or more brokerage firms. To
the extent permitted by applicable law, the Committee may also
provide for Company loans to be made for purposes of the
exercise of Options.
(iii) Payment may be made by instructing the Committee to
withhold a number of Shares having a Fair Market Value (based on
the Fair Market Value of the Common Stock on the date the
applicable Option is exercised) equal to the product of
(A) the exercise price multiplied by (B) the number of
Shares in respect of which the Option shall have been exercised.
(h) DELIVERY; RIGHTS OF SHAREHOLDERS. No
Shares shall be delivered pursuant to the exercise of an Option
until the exercise price therefor has been fully paid and
applicable taxes have been withheld. Except as otherwise
provided in Section 5(k) below, the applicable Participant
shall have all of the rights of a shareholder of the Company
holding the class or series of Common Stock that is subject to
the Option or Stock Appreciation Right (including, if
applicable, the right to vote the applicable Shares and the
right to receive dividends), when the Participant (i) has
given written notice of exercise, (ii) if requested, has
given the representation described in Section 14(a), and
(iii) in the case of an Option, has paid in full for such
Shares.
A-7
(i) TERMINATIONS OF EMPLOYMENT. Subject
to Section 10(c), a Participants Options and Stock
Appreciation Rights shall be forfeited upon such
Participants Termination of Employment, except as set
forth below:
(i) Upon a Participants Termination of Employment by
reason of death, any Option or Stock Appreciation Right held by
the Participant that was exercisable immediately before the
Termination of Employment may be exercised at any time until the
earlier of (A) the first anniversary of the date of such
death and (B) the expiration of the Term thereof;
(ii) Upon a Participants Termination of Employment by
reason of Disability or Retirement, any Option or Stock
Appreciation Right held by the Participant that was exercisable
immediately before the Termination of Employment may be
exercised at any time until the earlier of (A) the first
anniversary of such Termination of Employment and (B) the
expiration of the Term thereof;
(iii) Upon a Participants Termination of Employment
for Cause, any Option or Stock Appreciation Right held by the
Participant shall be forfeited, effective as of such Termination
of Employment;
(iv) Upon a Participants Termination of Employment
for any reason other than death, Disability, Retirement or for
Cause, any Option or Stock Appreciation Right held by the
Participant that was exercisable immediately before the
Termination of Employment may be exercised at any time until the
earlier of (A) the 90th day following such Termination
of Employment and (B) expiration of the Term
thereof; and
(v) Notwithstanding the above provisions of this
Section 5(i), if a Participant dies after such
Participants Termination of Employment but while any
Option or Stock Appreciation Right remains exercisable as set
forth above, such Option or Stock Appreciation Right may be
exercised at any time until the later of (A) the earlier of
(1) the first anniversary of the date of such death and
(2) expiration of the Term thereof and (B) the last
date on which such Option or Stock Appreciation Right would have
been exercisable, absent this Section 5(i)(v).
Notwithstanding the foregoing, the Committee shall have the
power, in its discretion, to apply different rules concerning
the consequences of a Termination of Employment; PROVIDED,
HOWEVER, that if such rules are less favorable to the
Participant than those set forth above, such rules are set forth
in the applicable Award Agreement. If an Incentive Stock Option
is exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, such Option
will thereafter be treated as a Nonqualified Option.
(j) NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION
RIGHTS. No Option or Free-Standing SAR shall be
transferable by a Participant other than (i) by will or by
the laws of descent and distribution, or (ii) in the case
of a Nonqualified Option or Free-Standing SAR, pursuant to a
qualified domestic relations order or as otherwise expressly
permitted by the Committee including, if so permitted, pursuant
to a transfer to the Participants family members or to a
charitable organization, whether directly or indirectly or by
means of a trust or partnership or otherwise. For purposes of
this Plan, unless otherwise determined by the Committee,
family member shall have the meaning given to such
term in General Instructions A.1(a)(5) to
Form S-8
under the Securities Act of 1933, as amended, and any successor
thereto. A Tandem SAR shall be transferable only with the
related Option as permitted by the preceding sentence. Any
Option or Stock Appreciation Right shall be exercisable, subject
to the terms of this Plan, only by the applicable Participant,
the guardian or legal representative of such Participant, or any
person to whom such Option or Stock Appreciation Right is
permissibly transferred pursuant to this Section 5(j), it
being understood that the term Participant includes
such guardian, legal representative and other transferee;
PROVIDED, HOWEVER, that the term Termination of
Employment shall continue to refer to the Termination of
Employment of the original Participant.
(k) DEFERRAL OF OPTION SHARES. The
Committee may from time to time establish procedures pursuant to
which a Participant may elect to defer, until a time or times
later than the exercise of an Option, receipt of all or a
portion of the Shares subject to such Option
and/or to
receive cash at
A-8
such later time or times in lieu of such deferred shares, all on
such terms and conditions as the Committee shall determine. If
any such deferrals are permitted, then notwithstanding
Section 5(g), a Participant who elects such deferral shall
not have any rights as a stockholder with respect to such
deferred shares unless and until shares are actually delivered
to such Participant with respect thereto, except to the extent
otherwise determined by the Committee.
SECTION 6. RESTRICTED STOCK
With respect to Adjusted Awards, the provisions below will be
applicable only to the extent that they are not inconsistent
with the Employee Matters Agreement and the terms of the
Adjusted Award assumed under the Employee Matters Agreement:
(a) NATURE OF AWARDS AND
CERTIFICATES. Shares of Restricted Stock are
actual Shares issued to a Participant, and shall be evidenced in
such manner as the Committee may deem appropriate, including
book-entry registration or issuance of one or more stock
certificates. Any certificate issued in respect of Shares of
Restricted Stock shall be registered in the name of the
applicable Participant and shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable
to such Award, substantially in the following form:
The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and conditions
(including forfeiture) of the Expedia, Inc. 2005 Stock and
Annual Incentive Plan and an Award Agreement. Copies of such
Plan and Agreement are on file at the offices of Expedia,
Inc.
The Committee may require that the certificates evidencing such
shares be held in custody by the Company until the restrictions
thereon shall have lapsed and that, as a condition of any Award
of Restricted Stock, the applicable Participant shall have
delivered a stock power, endorsed in blank, relating to the
Common Stock covered by such Award.
(b) TERMS AND CONDITIONS. Shares of
Restricted Stock shall be subject to the following terms and
conditions:
(i) The Committee may, prior to or at the time of grant,
designate an Award of Restricted Stock as a Qualified
Performance-Based Award, in which event it shall condition the
grant or vesting, as applicable, of such Restricted Stock upon
the attainment of Performance Goals. If the Committee does not
designate an Award of Restricted Stock as a Qualified
Performance-Based Award, it may also condition the grant or
vesting thereof upon the attainment of Performance Goals.
Regardless of whether an Award of Restricted Stock is a
Qualified Performance-Based Award, the Committee may also
condition the grant or vesting thereof upon the continued
service of the Participant. The conditions for grant or vesting
and the other provisions of Restricted Stock Awards (including
without limitation any applicable Performance Goals) need not be
the same with respect to each recipient. Subject to
Section 11(b), the Committee may at any time, in its sole
discretion, accelerate or waive, in whole or in part, any of the
foregoing restrictions.
(ii) Subject to the provisions of the Plan and the
applicable Award Agreement, during the period, if any, set by
the Committee, commencing with the date of such Restricted Stock
Award for which such Participants continued service is
required (the Restriction Period), and until the
later of (A) the expiration of the Restriction Period and
(B) the date the applicable Performance Goals (if any) are
satisfied, the Participant shall not be permitted to sell,
assign, transfer, pledge or otherwise encumber Shares of
Restricted Stock.
(iii) Except as provided in this Section 6 and in the
applicable Award Agreement, the applicable Participant shall
have, with respect to the Shares of Restricted Stock, all of the
rights of a stockholder of the Company holding the class or
series of Common Stock that is the subject of the Restricted
Stock, including, if applicable, the right to vote the Shares
and the right to receive any cash dividends. If so determined by
the Committee in the applicable Award Agreement and subject to
Section 14(e), (A) cash dividends on the class or
series of Common Stock that is the subject of
A-9
the Restricted Stock Award shall be automatically deferred and
reinvested in additional Restricted Stock, held subject to the
vesting of the underlying Restricted Stock, and (B) subject
to any adjustment pursuant to Section 3(d), dividends payable in
Common Stock shall be paid in the form of Restricted Stock of
the same class as the Common Stock with which such dividend was
paid, held subject to the vesting of the underlying Restricted
Stock.
(iv) Except as otherwise set forth in the applicable Award
Agreement, upon a Participants Termination of Employment
for any reason during the Restriction Period or before the
applicable Performance Goals are satisfied, all Shares of
Restricted Stock still subject to restriction shall be forfeited
by such Participant; PROVIDED, HOWEVER, that subject to Section
11(b), the Committee shall have the discretion to waive, in
whole or in part, any or all remaining restrictions with respect
to any or all of such Participants Shares of Restricted
Stock.
(v) If and when any applicable Performance Goals are
satisfied and the Restriction Period expires without a prior
forfeiture of the Shares of Restricted Stock for which legended
certificates have been issued, unlegended certificates for such
Shares shall be delivered to the Participant upon surrender of
the legended certificates.
SECTION 7. RESTRICTED STOCK UNITS
With respect to Adjusted Awards, the provisions below will be
applicable only to the extent that they are not inconsistent
with the Employee Matters Agreement and the terms of the
Adjusted Award assumed under the Employee Matters Agreement:
(a) NATURE OF AWARD. Restricted Stock
Units are Awards denominated in Shares that will be settled,
subject to the terms and conditions of the Restricted Stock
Units, either by delivery of Shares to the Participant or by the
payment of cash based upon the Fair Market Value of a specified
number of Shares.
(b) TERMS AND CONDITIONS. Restricted
Stock Units shall be subject to the following terms and
conditions:
(i) The Committee may, in connection with the grant of
Restricted Stock Units, designate them as Qualified
Performance-Based Awards, in which event it shall condition the
grant or vesting thereof upon the attainment of Performance
Goals. If the Committee does not designate Restricted Stock
Units as Qualified Performance-Based Awards, it may also
condition the grant or vesting thereof upon the attainment of
Performance Goals. Regardless of whether Restricted Stock Units
are Qualified Performance-Based Awards, the Committee may also
condition the vesting thereof upon the continued service of the
Participant. The conditions for grant or vesting and the other
provisions of Restricted Stock Awards (including without
limitation any applicable Performance Goals) need not be the
same with respect to each recipient. Subject to
Section 11(b), the Committee may at any time, in its sole
discretion, accelerate or waive, in whole or in part, any of the
foregoing restrictions. An Award of Restricted Stock Units shall
be settled as and when the Restricted Stock Units vest or at a
later time specified by the Committee or in accordance with an
election of the Participant, if the Committee so permits.
(ii) Subject to the provisions of the Plan and the
applicable Award Agreement, during the period, if any, set by
the Committee, commencing with the date of such Restricted Stock
Units Award for which such Participants continued service
is required (the Restriction Period), and until the
later of (A) the expiration of the Restriction Period and
(B) the date the applicable Performance Goals (if any) are
satisfied, the Participant shall not be permitted to sell,
assign, transfer, pledge or otherwise encumber Restricted Stock
Units.
(iii) The Award Agreement for Restricted Stock Units shall
specify whether, to what extent and on what terms and conditions
the applicable Participant shall be entitled to receive current
or deferred payments of cash, Common Stock or other property
corresponding to the dividends payable on the Common Stock
(subject to Section 14(e) below).
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(iv) Except as otherwise set forth in the applicable Award
Agreement, upon a Participants Termination of Employment
for any reason during the Restriction Period or before the
applicable Performance Goals are satisfied, all Restricted Stock
Units still subject to restriction shall be forfeited by such
Participant; PROVIDED, HOWEVER, that subject to Section 11(b),
the Committee shall have the discretion to waive, in whole or in
part, any or all remaining restrictions with respect to any or
all of such Participants Restricted Stock Units.
SECTION 8. OTHER STOCK-BASED AWARDS
Other Awards of Common Stock and other Awards that are valued in
whole or in part by reference to, or are otherwise based upon or
settled in, Common Stock, including (without limitation),
unrestricted stock, performance units, dividend equivalents, and
convertible debentures, may be granted under the Plan.
SECTION 9. BONUS AWARDS
(a) DETERMINATION OF AWARDS. The
Committee shall determine the total amount of Bonus Awards for
each Plan Year or such shorter performance period as the
Committee may establish in its sole discretion. Prior to the
beginning of the Plan Year or such shorter performance period as
the Committee may establish in its sole discretion (or such
later date as may be prescribed by the Internal Revenue Service
under Section 162(m) of the Code), the Committee shall
establish Performance Goals for Bonus Awards for the Plan Year
or such shorter period; PROVIDED, that such Performance Goals
may be established at a later date for Participants who are not
covered employees (within the meaning of
Section 162(m)(3) of the Code). Bonus amounts payable to
any individual Participant with respect to a Plan Year will be
limited to a maximum of $10 million. For performance
periods that are shorter than a Plan Year, such $10 million
maximum may be pro-rated to the extent provided by the
Committee. To the extent provided by the Committee, a
Participant may elect to defer receipt of amounts payable under
a Bonus Award for a specified period, or until a specified
event, subject in each case to the Committees approval and
to such terms as are determined by the Committee.
(b) PAYMENT OF AWARDS. Bonus Awards under
the Plan shall be paid in cash or in shares of Common Stock
(valued at Fair Market Value as of the date of payment) as
determined by the Committee, as soon as practicable following
the close of the Plan Year or such shorter performance period as
the Committee may establish. The Bonus Award for any Plan Year
or such shorter performance period to any Participant may be
reduced or eliminated by the Committee in its discretion.
SECTION 10. CHANGE IN CONTROL PROVISIONS
(a) IMPACT OF EVENT/SINGLE
TRIGGER. Unless otherwise provided in the
applicable Award Agreement, and with respect to Adjusted Awards
only, to the extent specified in an Award Agreement or the
applicable IAC Long Term Incentive Plan (it being understood
that any reference in a change in control,
change of control or similar definition of an Award
Agreement or the applicable IAC Long Term Incentive Plan for any
such Adjusted Award shall be deemed to refer to a change
in control, change of control or similar
transaction with respect to the Company (as successor to the
originally-referenced entity) for such Adjusted Award assumed
hereunder), notwithstanding any other provision of the Plan to
the contrary, immediately upon the occurrence of a Change in
Control, with respect to Awards held by officers of the Company
(and not the Companys Subsidiaries) with a title of Senior
Vice President or above as of immediately prior to the Change in
Control, and with respect to all other Participants solely to
the extent provided in the applicable Award Agreement:
(i) any Options and Stock Appreciation Rights outstanding
which are not then exercisable and vested shall become fully
exercisable and vested;
(ii) the restrictions and deferral limitations applicable
to any Restricted Stock shall lapse, and such Restricted Stock
shall become free of all restrictions and become fully vested
and transferable; and
(iii) all Restricted Stock Units shall be considered to be
earned and payable in full, and any deferral or other
restriction shall lapse and such Restricted Stock Units shall be
settled as promptly as is practicable in (subject to
Section 3(d)) the form set forth in the applicable Award
Agreement.
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(b) DEFINITION OF CHANGE IN
CONTROL. Except as otherwise may be provided in
an applicable Award Agreement, and subject to
Section 14(k)(ii), for purposes of the Plan, a Change
in Control shall mean any of the following events:
(i) The acquisition by any individual entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act), other than Barry Diller, Liberty Media
Corporation, and their respective Affiliates (a
PERSON) of beneficial ownership (within the meaning
of
Rule 13d-3
promulgated under the Exchange Act) of equity securities of the
Company representing more than 50% of the voting power of the
then outstanding equity securities of the Company entitled to
vote generally in the election of directors (the
OUTSTANDING COMPANY VOTING SECURITIES); PROVIDED,
HOWEVER, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control:
(A) any acquisition by the Company, (B) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company, or (C) any acquisition by any
corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of subsection (iii); or
(ii) Individuals who, as of the Effective Date, constitute
the Board (the INCUMBENT BOARD) cease for any reason
to constitute at least a majority of the Board; PROVIDED,
HOWEVER, that any individual becoming a director subsequent to
the Effective Date, whose election, or nomination for election
by the Companys shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as
a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual
or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the purchase
of assets or stock of another entity (a BUSINESS
COMBINATION), in each case, unless immediately following
such Business Combination, (A) all or substantially all of
the individuals and entities who were the beneficial owners of
the Outstanding Company Voting Securities immediately prior to
such Business Combination will beneficially own, directly or
indirectly, more than 50% of the then outstanding combined
voting power of the then outstanding voting securities entitled
to vote generally in the election of directors (or equivalent
governing body, if applicable) of the entity resulting from such
Business Combination (including, without limitation, an entity
which as a result of such transaction owns the Company or all or
substantially all of the Companys assets either directly
or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Voting
Securities, (B) no Person (excluding Barry Diller, Liberty
Media Corporation, and their respective Affiliates, any employee
benefit plan (or related trust) of the Company or such entity
resulting from such Business Combination) will beneficially own,
directly or indirectly, more than a majority of the combined
voting power of the then outstanding voting securities of such
entity except to the extent that such ownership of the Company
existed prior to the Business Combination and (C) at least
a majority of the members of the board of directors (or
equivalent governing body, if applicable) of the entity
resulting from such Business Combination will have been members
of the Incumbent Board at the time of the initial agreement, or
action of the Board, providing for such Business
Combination; or
(iv) Approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, the Separation shall not
constitute a Change in Control.
(c) IMPACT OF EVENT/DOUBLE
TRIGGER. Unless otherwise provided in the
applicable Award Agreement, and with respect to Adjusted Awards
only, to the extent specified in an Award Agreement,
notwithstanding any other provision of this Plan to the
contrary, upon a Participants Termination of
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Employment, during the two-year period following a Change in
Control, by the Company other than for Cause or Disability or by
the Participant for Good Reason (as defined below):
(i) any Options and Stock Appreciation Rights outstanding
as of such Termination of Employment which were outstanding as
of the date of such Change in Control (including any Options and
Stock Appreciation Rights that became vested pursuant to
Section 10(a)) shall be fully exercisable and vested and
shall remain exercisable until the later of (i) the last
date on which such Option or Stock Appreciation Right would be
exercisable in the absence of this Section 10(c) and
(ii) the earlier of (A) the first anniversary of such
Change in Control and (B) expiration of the Term of such
Option or Stock Appreciation Right;
(ii) the restrictions and deferral limitations applicable
to any Restricted Stock shall lapse, and such Restricted Stock
outstanding as of such Termination of Employment which were
outstanding as of the date of such Change in Control shall
become free of all restrictions and become fully vested and
transferable; and
(iii) all Restricted Stock Units outstanding as of such
Termination of Employment which were outstanding as of the date
of such Change in Control shall be considered to be earned and
payable in full, and any deferral or other restriction shall
lapse and such Restricted Stock Units shall be settled as
promptly as is practicable in (subject to Section 3(d)) the
form set forth in the applicable Award Agreement.
(d) For purposes of this Section 10, Good
Reason means (i) Good Reason as defined
in any Individual Agreement or Award Agreement to which the
applicable Participant is a party, or (ii) if there is no
such Individual Agreement or if it does not define Good Reason,
without the Participants prior written consent: (A) a
reduction in the Participants rate of annual base salary
from the rate of annual base salary in effect for such
Participant immediately prior to the Change in Control,
(B) a relocation of the Participants principal place
of business more than 35 miles from the city in which such
Participants principal place of business was located
immediately prior to the Change in Control or (C) a
material and demonstrable adverse change in the nature and scope
of the Participants duties from those in effect
immediately prior to the Change in Control.
SECTION 11. QUALIFIED PERFORMANCE-BASED AWARDS;
SECTION 16(B)
(a) The provisions of this Plan are intended to ensure that
all Options and Stock Appreciation Rights granted hereunder to
any Participant who is or may be a covered employee
(within the meaning of Section 162(m)(3) of the Code) in
the tax year in which such Option or Stock Appreciation Right is
expected to be deductible to the Company qualify for the
Section 162(m) Exemption, and all such Awards shall
therefore be considered Qualified Performance-Based Awards and
this Plan shall be interpreted and operated consistent with that
intention (including, without limitation, to require that all
such Awards be granted by a committee composed solely of members
who satisfy the requirements for being outside
directors for purposes of the Section 162(m)
Exemption (Outside Directors)). When granting any
Award other than an Option or Stock Appreciation Right, the
Committee may designate such Award as a Qualified
Performance-Based Award, based upon a determination that
(i) the recipient is or may be a covered
employee (within the meaning of Section 162(m)(3) of
the Code) with respect to such Award, and (ii) the
Committee wishes such Award to qualify for the
Section 162(m) Exemption, and the terms of any such Award
(and of the grant thereof) shall be consistent with such
designation (including, without limitation, that all such Awards
be granted by a committee composed solely of Outside Directors).
(b) Each Qualified Performance-Based Award (other than an
Option or Stock Appreciation Right) shall be earned, vested and
payable (as applicable) only upon the achievement of one or more
Performance Goals, together with the satisfaction of any other
conditions, such as continued employment, as the Committee may
determine to be appropriate, and no Qualified Performance-Based
Award may be amended, nor may the Committee exercise any
discretionary authority it may otherwise have under this Plan
with respect to a Qualified Performance-Based Award under this
Plan, in any manner that would cause the Qualified
Performance-Based Award to cease to qualify for the
Section 162(m) Exemption; PROVIDED, HOWEVER,
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that (i) the Committee may provide, either in connection
with the grant of the applicable Award or by amendment
thereafter, that achievement of such Performance Goals will be
waived upon the death or Disability of the Participant or a
Termination of Employment by the Company without Cause or by the
Participant for good reason (as such term may be
defined in any applicable Award Agreement) or under any other
circumstance with respect to which the existence of such
possible waiver will not cause the Award to fail to qualify for
the Section 162(m) Exemption as of the Grant Date, and
(ii) the provisions of Section 10 shall apply
notwithstanding this Section 11(b).
(c) The full Board shall not be permitted to exercise
authority granted to the Committee to the extent that the grant
or exercise of such authority would cause an Award designated as
a Qualified Performance-Based Award not to qualify for, or to
cease to qualify for, the Section 162(m) Exemption.
(d) The provisions of this Plan are intended to ensure that
no transaction under the Plan is subject to (and all such
transactions will be exempt from) the short-swing recovery rules
of Section 16(b) of the Exchange Act
(Section 16(b)). Accordingly, the composition
of the Committee shall be subject to such limitations as the
Board deems appropriate to permit transactions pursuant to this
Plan to be exempt (pursuant to
Rule 16b-3
promulgated under the Exchange Act) from Section 16(b), and
no delegation of authority by the Committee shall be permitted
if such delegation would cause any such transaction to be
subject to (and not exempt from) Section 16(b).
SECTION 12. TERM, AMENDMENT AND TERMINATION
(a) EFFECTIVENESS. The Plan shall be
effective as of the date (the Effective Date) it is
adopted by the Board, subject to the approval by the holders of
at least a majority of the voting power represented by
outstanding capital stock of the Company that is entitled
generally to vote in the election of directors.
(b) TERMINATION. The Plan will terminate
on the tenth anniversary of the Effective Date. Awards
outstanding as of such date shall not be affected or impaired by
the termination of the Plan.
(c) AMENDMENT OF PLAN. The Board may
amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would
materially impair the rights of the Participant with respect to
a previously granted Award without such Participants
consent, except such an amendment made to comply with applicable
law, stock exchange rules or accounting rules. In addition, no
such amendment shall be made without the approval of the
Companys stockholders to the extent such approval is
required by applicable law or the listing standards of the
Applicable Exchange.
(d) AMENDMENT OF AWARDS. Subject to
Section 5(d), the Committee may unilaterally amend the
terms of any Award theretofore granted, prospectively or
retroactively, but no such amendment shall (i) cause a
Qualified Performance-Based Award to cease to qualify for the
Section 162(m) Exemption or (ii) without the
Participants consent, materially impair the rights of any
Participant with respect to an Award, except such an amendment
made to cause the Plan or Award to comply with applicable law,
stock exchange rules or accounting rules.
SECTION 13. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan constitute an
unfunded plan for incentive and deferred
compensation. The Committee may authorize the creation of trusts
or other arrangements to meet the obligations created under the
Plan to deliver Common Stock or make payments; PROVIDED,
HOWEVER, that unless the Committee otherwise determines, the
existence of such trusts or other arrangements is consistent
with the unfunded status of the Plan.
SECTION 14. GENERAL PROVISIONS
(a) CONDITIONS FOR ISSUANCE. The
Committee may require each person purchasing or receiving Shares
pursuant to an Award to represent to and agree with the Company
in writing that such person is acquiring the Shares without a
view to the distribution thereof. The certificates for such
Shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan or agreements
made pursuant thereto, the Company shall not be required to
issue
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or deliver any certificate or certificates for Shares under the
Plan prior to fulfillment of all of the following conditions:
(i) listing or approval for listing upon notice of
issuance, of such Shares on the Applicable Exchange;
(ii) any registration or other qualification of such Shares
of the Company under any state or federal law or regulation, or
the maintaining in effect of any such registration or other
qualification which the Committee shall, in its absolute
discretion upon the advice of counsel, deem necessary or
advisable; and (iii) obtaining any other consent, approval,
or permit from any state or federal governmental agency which
the Committee shall, in its absolute discretion after receiving
the advice of counsel, determine to be necessary or advisable.
(b) ADDITIONAL COMPENSATION
ARRANGEMENTS. Nothing contained in the Plan shall
prevent the Company or any Subsidiary or Affiliate from adopting
other or additional compensation arrangements for its employees.
(c) NO CONTRACT OF EMPLOYMENT. The Plan
shall not constitute a contract of employment, and adoption of
the Plan shall not confer upon any employee any right to
continued employment, nor shall it interfere in any way with the
right of the Company or any Subsidiary or Affiliate to terminate
the employment of any employee at any time.
(d) REQUIRED TAXES. No later than the
date as of which an amount first becomes includible in the gross
income of a Participant for federal, state, local or foreign
income or employment or other tax purposes with respect to any
Award under the Plan, such Participant shall pay to the Company,
or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign taxes of any
kind required by law to be withheld with respect to such amount.
If determined by the Company, withholding obligations may be
settled with Common Stock, including Common Stock that is part
of the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional
on such payment or arrangements, and the Company and its
Affiliates shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment otherwise due to such
Participant. The Committee may establish such procedures as it
deems appropriate, including making irrevocable elections, for
the settlement of withholding obligations with Common Stock.
(e) LIMITATION ON DIVIDEND REINVESTMENT AND DIVIDEND
EQUIVALENTS. Reinvestment of dividends in additional
Restricted Stock at the time of any dividend payment, and the
payment of Shares with respect to dividends to Participants
holding Awards of Restricted Stock Units, shall only be
permissible if sufficient Shares are available under
Section 3 for such reinvestment or payment (taking into
account then outstanding Awards). In the event that sufficient
Shares are not available for such reinvestment or payment, such
reinvestment or payment shall be made in the form of a grant of
Restricted Stock Units equal in number to the Shares that would
have been obtained by such payment or reinvestment, the terms of
which Restricted Stock Units shall provide for settlement in
cash and for dividend equivalent reinvestment in further
Restricted Stock Units on the terms contemplated by this
Section 14(e).
(f) DESIGNATION OF DEATH BENEFICIARY. The
Committee shall establish such procedures as it deems
appropriate for a Participant to designate a beneficiary to whom
any amounts payable in the event of such Participants
death are to be paid or by whom any rights of such eligible
Individual, after such Participants death, may be
exercised.
(g) SUBSIDIARY EMPLOYEES. In the case of
a grant of an Award to any employee of a Subsidiary of the
Company, the Company may, if the Committee so directs, issue or
transfer the Shares, if any, covered by the Award to the
Subsidiary, for such lawful consideration as the Committee may
specify, upon the condition or understanding that the Subsidiary
will transfer the Shares to the employee in accordance with the
terms of the Award specified by the Committee pursuant to the
provisions of the Plan. All Shares underlying Awards that are
forfeited or canceled should revert to the Company.
(h) GOVERNING LAW AND INTERPRETATION. The
Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the
State of Delaware, without
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reference to principles of conflict of laws. The captions of
this Plan are not part of the provisions hereof and shall have
no force or effect.
(i) NON-TRANSFERABILITY. Except as
otherwise provided in Section 5(j) or by the Committee,
Awards under the Plan are not transferable except by will or by
laws of descent and distribution.
(j) FOREIGN EMPLOYEES AND FOREIGN LAW
CONSIDERATIONS. The Committee may grant Awards to
Eligible Individuals who are foreign nationals, who are located
outside the United States or who are not compensated from a
payroll maintained in the United States, or who are otherwise
subject to (or could cause the Company to be subject to) legal
or regulatory provisions of countries or jurisdictions outside
the United States, on such terms and conditions different from
those specified in the Plan as may, in the judgment of the
Committee, be necessary or desirable to foster and promote
achievement of the purposes of the Plan, and, in furtherance of
such purposes, the Committee may make such modifications,
amendments, procedures, or subplans as may be necessary or
advisable to comply with such legal or regulatory provisions.
(k) SECTION 409A SAVINGS CLAUSE.
(i) It is the intention of the Company that no Award shall
be deferred compensation subject to
Section 409A of the Code, unless and to the extent that the
Committee specifically determines otherwise as provided below,
and the Plan and the terms and conditions of all Awards shall be
interpreted accordingly.
(ii) The terms and conditions governing any Awards that the
Committee determines will be subject to Section 409A of the
Code, including any rules for elective or mandatory deferral of
the delivery of cash or shares of Common Stock pursuant thereto
and any rules regarding treatment of such Awards in the event of
a Change in Control, shall be set forth in the applicable Award
Agreement, and shall comply in all respects with
Section 409A of the Code.
(iii) Following a Change in Control, no action shall be
taken under the Plan that will cause any Award that the
Committee has previously determined is subject to
Section 409A of the Code to fail to comply in any respect
with Section 409A of the Code without the written consent
of the Participant.
(l) EMPLOYEE MATTERS
AGREEMENT. Notwithstanding anything in this Plan
to the contrary, to the extent that the terms of this Plan are
inconsistent with the terms of an Adjusted Award, the terms of
the Adjusted Award shall be governed by the Employee Matters
Agreement, the applicable IAC Long-Term Incentive Plan and the
award agreement granted thereunder.
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Votes must be indicated
(x) in Black or Blue ink.
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Please Mark Here
for Address
Change or
Comments
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SEE REVERSE SIDE |
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EXPEDIA, INC.S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 and 3 |
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FOR all nominees |
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WITHHOLD AUTHORITY to vote |
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EXCEPTIONS |
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listed below |
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for all nominees listed below |
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ELECTION OF DIRECTORS
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Nominees: |
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01 A. George "Skip" Battle*
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05 William R. Fitzgerald
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09 Dara Khosrowshahi
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02 Simon J. Breakwell
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06 Craig A. Jacobson*
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10 John C. Malone |
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03 Barry Diller
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07 Victor A. Kaufman
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04 Jonathan L. Dolgen |
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08 Peter M. Kern* |
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* To be voted upon by the holders of Expedia, Inc.s Common Stock voting as a separate class.
All
nominees will serve a term of one year or until their respective successors shall have been duly
elected and qualified (or, if earlier, such directors removal or resignation from the
Board of Directors). |
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INSTRUCTION: To withhold authority to vote for any individual nominee, mark the Exceptions
box and strike a line through that nominees name. |
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FOR |
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ABSTAIN |
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APPROVAL OF
AN AMENDMENT TO THE EXPEDIA, INC. 2005 STOCK AND
ANNUAL INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES OF
EXPEDIA COMMON STOCK AUTHORIZED FOR ISSUANCE THEREUNDER BY
7,500,000.
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RATIFICATION OF APPOINTMENT OF ERNST
& YOUNG LLP AS EXPEDIAS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2008.
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FOR
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ABSTAIN |
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SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. |
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Signature
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Signature
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Note : When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator,trustee
guardian or corporate officer or partner, please give full title as such. If a corporation, please sign in
corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized
person. |
5 FOLD AND DETACH HERE 5
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet and telephone voting are available through 11:59 PM Eastern Time
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
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INTERNET
http://www.eproxy.com/expe
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TELEPHONE
1-866-580-9477
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Use the Internet to vote your proxy.
Have your proxy card in hand
when you access the web site.
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OR |
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Use any touch-tone telephone to
vote your proxy. Have your proxy
card in hand when you call.
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If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF EXPEDIA, INC. IN CONNECTION
WITH THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 11, 2008
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The undersigned stockholder of Expedia, Inc., a Delaware corporation, hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated April 28, 2008 and hereby appoints each of Dara Khosrowshahi and Burke F. Norton proxy and attorney-in-fact, each with full power of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the Annual Meeting of Stockholders of Expedia, Inc. to be
held on Wednesday, June 11, 2008, at 8:00 a.m. local time, at 8800 West Sunset Boulevard, West Hollywood, California 90069, and at any adjournments or postponements thereof, and to vote all shares of Common Stock, Class B Common Stock and/or Series A Preferred Stock which the undersigned would be entitled to vote if then and there personally present, on the matters set forth on the reverse side hereof.
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PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE
PROVIDED. THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS
INDICATED, WILL BE VOTED FOR EACH OF THE PROPOSALS
LISTED, AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE MEETING, INCLUDING, AMONG OTHER THINGS,
CONSIDERATION OF ANY MOTION MADE FOR ADJOURNMENT OR POSTPONEMENT OF
THE MEETING.
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(Continued and to be marked, dated and signed, on the other side) |
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Address Change/Comments
(Mark the corresponding box on the
reverse side) |
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5FOLD AND DETACH HERE5
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PRINT AUTHORIZATION |
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To commence printing on this proxy card please sign, date and fax this card to: 732-802-0260
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SIGNATURE:
DATE:
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o
Mark this box if you would like the Proxy Card EDGARized: o ASCII o EDGAR II (HTML)
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(THIS BOXED AREA DOES NOT PRINT) Registered Quantity 1000,00
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