Expedia 2013 Annual Report Download - page 29

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member of our senior management or key employees, the loss of whom could seriously harm our business.
Competition for well-qualified employees in certain aspects of our business, including software engineers,
developers, product management personnel, development personnel, and other technology professionals, also
remains intense.
Our continued ability to compete effectively depends on our ability to attract new employees and to retain
and motivate our existing employees. If we do not succeed in attracting well-qualified employees or retaining or
motivating existing employees, our business would be adversely affected. We do not maintain any key person
life insurance policies.
We have in the past and may again in the future, restructure portions of our global workforce to simplify and
streamline our organization, improve our cost structure and strengthen our overall businesses. These changes
could affect employee morale and productivity and be disruptive to our business and financial performance.
Mr. Diller currently controls Expedia. If Mr. Diller ceases to control the company, Liberty Interactive
Corporation may effectively control the company.
Subject to the terms of a Stockholders Agreement between Mr. Diller and Liberty Interactive Corporation,
Mr. Diller holds an irrevocable proxy to vote shares of Expedia stock held by Liberty. Accordingly, Mr. Diller
effectively controls the outcome of all matters submitted to a vote or for the consent of our stockholders (other
than with respect to the election by the holders of common stock of 25% of the members of our Board of
Directors and matters as to which Delaware law requires a separate class vote). Upon Mr. Diller’s permanent
departure from Expedia, the irrevocable proxy would terminate and depending on the capitalization of Expedia at
such time, Liberty could effectively control the voting power of our capital stock. Mr. Diller, through shares he
owns beneficially as well as those subject to the irrevocable proxy, controlled approximately 58% of the
combined voting power of the outstanding Expedia capital stock as of December 31, 2013.
In addition, under a Governance Agreement among Mr. Diller, Liberty Interactive Corporation and Expedia,
Inc., as amended, each of Mr. Diller and Liberty generally has the right to consent to limited matters in the event
that we incur debt such that our ratio of total debt to EBITDA, as defined in the Governance Agreement, equals
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, 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. The fact that Mr. Diller and Mr. Kaufman hold positions with and securities of both
companies could create, or appear to create, potential conflicts of interest for them when facing decisions that
may affect both IAC 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 be liable to Expedia or its stockholders for breach of any fiduciary duty by reason of the fact that
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