ServiceMagic 2009 Annual Report Download - page 15

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Table of Contents
Risk Factors
Mr. Diller currently controls IAC. If Mr. Diller ceases to control IAC, Liberty Media Corporation may effectively control IAC.
Subject to the terms of an amended and restated stockholders agreement between Mr. Diller and Liberty, Mr. Diller has an irrevocable
proxy to vote shares of IAC common stock and IAC Class B common stock held by Liberty. Accordingly, as of the date of this report, Mr. Diller
effectively controls the outcome of all matters submitted to a vote or for the consent of IAC stockholders (other than with respect to the election
by the holders of IAC common stock of 25% of the members of IAC's Board of Directors and matters as to which Delaware law requires a
separate class vote). Upon Mr. Diller's permanent departure from IAC, the irrevocable proxy terminates and, depending upon the capitalization
of IAC at such time, Liberty may effectively control the voting power of the capital stock of IAC through its ownership of IAC Class B common
stock.
In addition, under an amended and restated governance agreement among IAC, Liberty and Mr. Diller, Mr. Diller generally has the right to
consent to limited matters in the event that IAC's ratio of total debt to EBITDA (as defined in the governance agreement) equals or exceeds 4:1
over a continuous 12-month period. While Mr. Diller may not currently exercise this right, no assurances can be given that this right will not be
triggered in the future, and if so, that Mr. Diller will consent to any of the limited matters at such time, in which case IAC would not be able to
engage in transactions or take actions covered by this consent right.
As a result of Mr. Diller's ownership interests and voting power (and Liberty's ownership interests and voting power), Mr. Diller currently is
(and upon Mr. Diller's permanent departure from IAC in the future, Liberty may be) in a position to control or influence significant corporate
actions, including without limitation, corporate transactions such as mergers, business combinations or dispositions of assets and determinations
with respect to IAC's 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 IAC, which could adversely affect the market price of
IAC securities.
Furthermore, given this concentrated control, IAC currently falls within the definition of a "Controlled Company" within the meaning of
The Marketplace Rules of The Nasdaq Stock Market (the "Marketplace Rules"). As a Controlled Company, IAC is permitted, and has elected, to
opt out of certain corporate governance requirements in the Marketplace Rules applicable to non-controlled companies, specifically, those that
would otherwise require: (i) IAC's Board of Directors to have a majority of "independent" directors (within the meaning of the Marketplace
Rules) and (ii) nominations to IAC's Board of Directors to be selected, or recommended for selection, either by a nominating committee
comprised entirely of independent directors or by a majority of independent directors. Accordingly, IAC stockholders may not have the same
protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Marketplace Rules.
We depend on our key personnel.
Our future success will depend upon the continued ability to identify, hire, develop, motivate and retain highly skilled individuals, with the
continued contributions of senior management, particularly Barry Diller, the Chairman and CEO of IAC, being especially critical to our success.
If Mr. Diller no longer serves in, or serves in some lesser capacity than, his current role, our business, financial condition and results of
operations, as well as the market price of IAC securities, could be adversely affected. Competition for well-qualified employees across IAC and
its various businesses is intense, and our continued ability to compete effectively depends, in part, upon our ability to attract new employees.
While we have established programs to attract new employees and provide incentives to retain existing employees, particularly senior
management, we cannot assure you that we will be able to attract new employees or retain the services of Mr. Diller, other members of senior
management or any other key
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