ServiceMagic 2015 Annual Report Download - page 31

TableofContents
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AircraftArrangements.EachofIACandExpediahasa50%ownershipinterestintwoaircraftthatareusedbybothcompanies(the“Aircraft”).IAC
andExpediaenteredintoanamendedandrestatedoperatingagreementthatallocatesthecostsofoperatingandmaintainingtheAircraftbetweentheparties.Fixed
costsareallocated50%toeachcompanyandvariablecostsareallocatedbasedonusage.Thesecostsaregenerallypaidbyeachcompanytothirdpartiesin
accordancewiththetermsoftheamendedandrestatedoperatingagreement.
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IntheeventMr.DillerceasestoserveasChairmanofeitherIACorExpedia,eachofIACandExpediawillhaveaputright(totheotherparty)with
respecttoitsownedinterestintheaircraftthatitdoesnotprimarilyuse(withsuchdeterminationtobebasedonrelativeusageoverthetwelvemonthspreceding
suchevent),ineachcase,atfairmarketvaluefortheaircraftinquestion.
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MembersoftheflightcrewfortheAircraftareemployedbyanentityinwhicheachofIACandExpediahasa50%ownershipinterest.IACandExpedia
haveagreedtosharecostsrelatingtoflightcrewcompensationandbenefitsprorataaccordingtoeachcompany’srespectiveusageoftheAircraft,forwhichthey
areseparatelybilledbytheentitydescribedabove.During2015,totalpaymentsintheamountofapproximately$1.8millionweremadetothisentitybyIAC.
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CommercialAgreements.InconnectionwithandfollowingtheExpediaSpin-Off,certainIACbusinessesenteredintocommercialagreementswith
certainExpediabusinesses.IACbelievesthatthesearrangementsareordinarycourseandhavebeennegotiatedatarm’slength.Inaddition,IACbelievesthatnone
ofthesearrangements,whethertakenindividuallyorintheaggregate,constituteamaterialcontracttoIAC.Noneofthesearrangements,whethertaken
individuallyortogetherwithothersimilaragreements,involvedpaymentstoorfromIACanditsbusinessesinexcessof$120,000in2015.
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DIRECTORINDEPENDENCE
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UndertheMarketplaceRules,theBoardhasaresponsibilitytomakeanaffirmativedeterminationthatthosemembersoftheBoardwhoserveas
independentdirectorsdonothaveanyrelationshipsthatwouldinterferewiththeexerciseofindependentjudgmentincarryingouttheresponsibilitiesofadirector.
Inconnectionwiththeindependencedeterminationsdescribedbelow,theBoardreviewedinformationregardingtransactions,relationshipsandarrangements
relevanttoindependence,includingthoserequiredbytheMarketplaceRules.Thisinformationisobtainedfromdirectorresponsestoquestionnairescirculatedby
Companymanagement,aswellasfromCompanyrecordsandpubliclyavailableinformation.Followingthisdetermination,Companymanagementmonitorsthose
transactions,relationshipsandarrangementsthatwererelevanttosuchdetermination,aswellasperiodicallysolicitsupdatedinformationpotentiallyrelevantto
independencefrominternalpersonnelanddirectors,todeterminewhethertherehavebeenanydevelopmentsthatcouldpotentiallyhaveanadverseimpactonthe
Board’spriorindependencedetermination.
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InFebruary2016,theBoarddeterminedthateachofMessrs.Bronfman,Eisner,Lourd,Rosenblatt,SpoonandZanninoandMmes.ClintonandHammer
isindependent.Inconnectionwiththisdetermination,theBoardconsideredthatintheordinarycourseofbusiness,IACanditsbusinessessellproductsand
servicesto,purchaseproductsandservicesfrom,co-investwithanddevelopandproduceprojectswith,companiesatwhichcertaindirectorsareemployedorserve
asdirectors,oroverwhichcertaindirectorsotherwiseexertcontrol.Furthermore,theBoardconsideredwhethertherewereanypaymentsmadeto(orreceived
from)suchentitiesbyIACanditsbusinesses.SpecificpaymentstheBoardconsideredareasfollows:
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·thepaymentofalicensefee(fortheonlinedistributionofafilm)byanIACbusinesstoaportfoliocompanyofTornante(Mr.EisnerisChairmanof
Tornante);
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·thepaymentoflicensefees(forthedistributionofprogramming)toanIACbusinessbycertainbusinessesoverseenandmanagedbyMs.Hammerin
herroleasChairmanofNBCUniversalCableEntertainment(Ms.Hammerisnotanamedexecutiveofficeroftheultimateparentcorporationthat
ownsandcontrolsNBCUniversal);
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·paymentsforservicesmadebyanIACbusinesstoCAA,whereMr.LourdisManagingDirector;
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·aco-investmentbyIACinanentityinwhichPolarisPartnerswasanexistingequityinvestor,aswellaspaymentsforservicesbetweentheCompany
andcertainPolarisPartnersportfoliocompanies(Mr.SpoonwasaManagingGeneralPartner(nowPartnerEmeritus)ofPolarisPartners);and
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·paymentsfordatalicensingservicesmadebyanIACbusinesstoaportfoliocompanyofCCMPCapitalAdvisors,LLC,whereMr.Zanninoisa
ManagingDirectorandmemberofthefirm’sInvestmentCommittee.TheagreementpursuanttowhichtheIACbusinessmadethesepaymentswas
enteredintobythepartiesbeforeMr.ZanninobeganservingontheBoardandbeforeCCMPacquiredthecompany.
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