Expedia 2012 Annual Report Download - page 28

or exceeds 8:1 over a continuous 12-month period. We cannot assure you that Mr. Diller and Liberty will consent
to any such matter at a time when we are highly leveraged, in which case we would not be able to engage in such
transactions or take such actions.
As a result of Mr. Diller’s ownership interests and voting power, and Liberty’s ownership interests and
voting power upon Mr. Diller’s permanent departure from Expedia, Mr. Diller is currently, and in the future
Liberty may be, in a position to control or influence significant corporate actions, including, corporate
transactions such as mergers, business combinations or dispositions of assets and determinations with respect to
our significant business direction and policies. This concentrated control could discourage others from initiating
any potential merger, takeover or other change of control transaction that may otherwise be beneficial to us.
Actual or potential conflicts of interest may develop between Expedia management and directors, on
the one hand, and the management and directors of IAC or TripAdvisor, on the other.
Mr. Diller serves as our Chairman of the Board of Directors and Senior Executive, while retaining his role
as Chairman of the Board of Directors and Senior Executive of IAC, and Mr. Kaufman serves as Vice Chairman
of both Expedia and IAC. Also, Messrs. Diller, Kaufman and Khosrowshahi each serve on the Board of Directors
of TripAdvisor. The fact that Messrs. Diller and Kaufman, and Mr. Khosrowshahi with respect to TripAdvisor,
hold positions with and securities of these companies could create, or appear to create, potential conflicts of
interest for them when facing decisions that may affect both IAC and Expedia or both TripAdvisor and Expedia.
They may also face conflicts of interest with regard to the allocation of their time between the companies.
Our certificate of incorporation provides that no officer or director of Expedia who is also an officer or
director of IAC or of TripAdvisor will be liable to Expedia or its stockholders for breach of any fiduciary duty by
reason of the fact that any such individual directs a corporate opportunity to IAC or TripAdvisor instead of
Expedia, or does not communicate information regarding a corporate opportunity to Expedia because the officer
or director has directed the corporate opportunity to IAC or TripAdvisor. This corporate opportunity provision
may have the effect of exacerbating the risk of conflicts of interest between the companies because the provision
effectively shields an overlapping director/executive officer from liability for breach of fiduciary duty in the
event that such director or officer chooses to direct a corporate opportunity to IAC or TripAdvisor instead of
Expedia.
We rely on third-parties for many systems and services.
We rely on third-party service providers for certain customer care, fulfillment, processing, systems
development, technology and other services, including, increasingly, travel care and information technology
services. If these third-parties experience difficulty or fail to meet our requirements or standards or the
requirements or standards of governmental authorities, it could damage our reputation or make it difficult for us
to operate some aspects of our business. In addition, if such third-party service providers were to cease
operations, temporarily or permanently, face financial distress or other business disruption, we could suffer
increased costs and delays in our ability to provide similar services until an equivalent service provider could be
found or we could develop replacement technology or operations, any of which could have an adverse impact on
our business and financial performance.
We are exposed to various counterparty risks.
We are exposed to the risk that various counterparties, including financial entities, will fail to perform. This
creates risk in a number of areas, including with respect to our bank deposits and investments, foreign exchange
risk management, insurance coverages, and letters of credit. As it relates to deposits, as of December 31, 2012,
we held cash in bank depository accounts of $480 million (primarily in Bank of America, HSBC and JPMorgan
Chase) and held time deposits of approximately $350 million at financial institutions including, Bank of Tokyo-
Mitsubishi, Barclays, BNP Paribas, HSBC, National Australia Bank, Nordea, Royal Bank of Scotland, and
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