ServiceMagic 2013 Annual Report Download - page 13

Table of Contents
Item 1A. Risk Factors
Cautionary Statement Regarding Forward-Looking Information
This annual report on Form 10-K contains “forward1looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify
forward1looking statements. These forward1looking statements include, among others, statements relating to: IAC's future financial
performance, IAC's business prospects and strategy, anticipated trends and prospects in the industries in which IAC's businesses operate and
other similar matters. These forward1
looking statements are based on IAC management's expectations and assumptions about future events as of
the date of this annual report, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
Actual results could differ materially from those contained in these forward1looking statements for a variety of reasons, including, among
others, the risk factors set forth below. Other unknown or unpredictable factors that could also adversely affect IAC's business, financial
condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward1looking statements
discussed in this annual report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward1looking
statements, which only reflect the views of IAC management as of the date of this annual report. IAC does not undertake to update these
forward1looking statements.
Risk Factors
Mr. Diller owns a significant percentage of the voting power of our stock and will be able to exercise significant influence over the
composition of our Board of Directors, matters subject to stockholder approval and our operations.
As of January 31, 2014, Mr. Diller owned 5,789,499 shares of IAC Class B common stock representing 100% of IAC’s outstanding Class B
common stock and approximately 43.1% of the total outstanding voting power of IAC. As of this date, Mr. Diller also owned 855,734 vested
options to purchase IAC common stock and 150,000 unvested options to purchase IAC common stock.
In addition, under an amended and restated governance agreement between IAC and Mr. Diller, for so long as Mr. Diller serves as IAC’s
Chairman and Senior Executive, he 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 four to one over a continuous twelve1month period. While Mr. Diller may not currently
exercise this right, no assurances can be given that this right will not become exercisable 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 interest, voting power and the contractual rights described above, Mr. Diller currently is in a position
to influence, subject to our organizational documents and Delaware law, the composition of IAC’s Board of Directors and the outcome of
corporate actions requiring stockholder approval, such as mergers, business combinations and dispositions of assets, among other corporate
transactions. In addition, this concentration of voting power could discourage others from initiating a 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.
We depend on our key personnel.
Our future success will depend upon our continued ability to identify, hire, develop, motivate and retain highly skilled individuals, with the
continued contributions of our senior management being especially critical to our success. 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 our senior
management, we cannot assure you that we will be able to attract new employees or retain the services of our senior management or any other
key employees in the future.
We depend upon arrangements with Google and any adverse change in this relationship could adversely affect our business, financial
condition and results of operations.
A substantial portion of our consolidated revenue is attributable to a services agreement with Google that expires on March 31, 2016.
Pursuant to this agreement, we display and syndicate paid listings provided by Google in response to search queries generated by users of our
Search & Applications properties. In exchange for making our search traffic available to Google, we receive a share of the revenue generated by
the paid listings supplied to us, as well as certain other search1related services.
10