Exhibit
(a)(1)(A)
OFFER TO
PURCHASE FOR CASH
Up to 116,666,665 Shares of its Common Stock
At a Purchase Price Not Greater Than $30.00
Nor Less Than $27.50 Per Share
by
Expedia, Inc.
THE TENDER OFFER, PRORATION
PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON WEDNESDAY, AUGUST 8, 2007, UNLESS EXPEDIA
EXTENDS THE TENDER OFFER.
Expedia, Inc., a Delaware corporation (“Expedia”), is
offering to purchase for cash up to 116,666,665 shares of
its common stock, par value $.001 per share, upon the terms and
subject to the conditions set forth in this document and the
letter of transmittal (which together, as they may be amended
and supplemented from time to time, constitute the “tender
offer”). On the terms and subject to the conditions of the
tender offer, we will determine the single per share price, not
greater than $30.00 nor less than $27.50 per share, net to you
in cash, without interest, that we will pay for shares properly
tendered and not properly withdrawn in the tender offer, taking
into account the total number of shares so tendered and the
prices specified by the tendering stockholders. We will select
the lowest purchase price that will allow us to purchase
116,666,665 shares, or such fewer number of shares as are
properly tendered and not properly withdrawn, at prices not
greater than $30.00 nor less than $27.50 per share. Expedia will
purchase at the purchase price all shares properly tendered at
prices at or below the purchase price and not properly
withdrawn, on the terms and subject to the conditions of the
tender offer, including the odd lot, conditional tender and
proration provisions. We reserve the right, in our sole
discretion, to purchase more than 116,666,665 shares in the
tender offer, subject to applicable law. Expedia will not
purchase shares tendered at prices greater than the purchase
price and shares that we do not accept for purchase because of
proration provisions or conditional tenders. Shares not
purchased in the tender offer will be returned to the tendering
stockholders at our expense as promptly as practicable after the
expiration of the tender offer. See Section 1.
THE TENDER OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF
SHARES BEING TENDERED. THE TENDER OFFER IS, HOWEVER, SUBJECT TO
OUR RECEIPT OF FINANCING AND OTHER CONDITIONS. SEE
SECTION 7.
IMPORTANT
If you wish to tender all or any part of your shares, you must
either: (1)(a) complete and sign a letter of transmittal
according to the instructions in the letter of transmittal and
mail or deliver it, together with any required signature
guarantee and any other required documents, including the share
certificates, to The Bank of New York, the depositary for the
tender offer, or (b) tender the shares according to the
procedure for book-entry transfer described in Section 3,
or (2) request a broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for you.
If your shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee, you should
contact that person if you desire to tender your shares. If you
desire to tender your shares and (1) your share
certificates are not immediately available or cannot be
delivered to the depositary, (2) you cannot comply with
the
procedure for book-entry transfer, or (3) you cannot
deliver the other required documents to the depositary by the
expiration of the tender offer, you must tender your shares
according to the guaranteed delivery procedure described in
Section 3.
Holders or beneficial owners of shares under the Expedia
Retirement Savings Plan (if such shares are not, at the time of
tender, subject to any restrictions on transferability) who wish
to tender any of such shares in the tender offer must follow the
separate instructions and procedures described in Section 3.
OUR BOARD OF DIRECTORS HAS APPROVED THE TENDER OFFER.
HOWEVER, NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO YOU AS TO WHETHER YOU SHOULD TENDER OR REFRAIN
FROM TENDERING YOUR SHARES OR AS TO THE PRICE OR PRICES AT WHICH
YOU MAY CHOOSE TO TENDER YOUR SHARES. YOU MUST MAKE YOUR OWN
DECISION AS TO WHETHER TO TENDER YOUR SHARES AND, IF SO, HOW
MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH TO TENDER
YOUR SHARES. IN SO DOING, YOU SHOULD READ CAREFULLY THE
INFORMATION IN THIS OFFER TO PURCHASE AND IN THE LETTER OF
TRANSMITTAL, INCLUDING OUR REASONS FOR MAKING THE TENDER OFFER.
OUR DIRECTORS AND EXECUTIVE OFFICERS AND LIBERTY MEDIA
CORPORATION HAVE ADVISED US THAT THEY DO NOT INTEND TO TENDER
ANY SHARES IN THE TENDER OFFER.
The shares are listed on The Nasdaq National Market
(“Nasdaq”) under the ticker symbol “EXPE”.
We publicly announced the tender offer prior to the opening of
trading on Nasdaq on June 19, 2007. On June 18, 2007,
the reported closing price of the shares on Nasdaq was $25.50
per share. The average of the reported closing prices of the
shares on Nasdaq over the ten trading days immediately prior to
and including June 18, 2007 was $24.32 per share. We urge
stockholders to obtain current market quotations for the shares.
See Section 8.
You may direct questions and requests for assistance to
MacKenzie Partners, Inc., the information agent for the tender
offer, at their address and telephone number set forth on the
back cover page of this document. You may also direct requests
for additional copies of this document, the letter of
transmittal or the notice of guaranteed delivery to the
information agent.
June 29, 2007
We have not authorized any person to make any recommendation
on our behalf as to whether you should tender or refrain from
tendering your shares in the tender offer. We have not
authorized any person to give any information or to make any
representation in connection with the tender offer other than
those contained in this document or in the letter of
transmittal. If given or made, you must not rely upon any such
information or representation as having been authorized by
us.
We are not making the tender offer to (nor will we accept any
tender of shares from or on behalf of) holders in any
jurisdiction in which the making of the tender offer or the
acceptance of any tender of shares would not be in compliance
with the laws of such jurisdiction. However, we may, at our
discretion, take such action as we may deem necessary for us to
make the tender offer in any such jurisdiction and extend the
tender offer to holders in such jurisdiction.
TABLE OF
CONTENTS
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FORWARD-LOOKING
STATEMENTS
This offer to purchase, the documents incorporated by
reference and other written reports and oral statements made
from time to time by Expedia, Inc. may contain
“forward-looking statements” regarding future events
and our future results. These forward-looking statements reflect
the views of our management regarding current expectations and
projections about future events and are based on currently
available information. Actual results, performance or
achievement could differ materially from those contained in
these forward-looking statements for a variety of reasons,
including, without limitation, those discussed elsewhere in this
offer to purchase, the documents incorporated by reference and
in our other reports filed with the Securities and Exchange
Commission. Other unknown or unpredictable factors also could
have a material adverse effect on our business, financial
condition, results of operations and prospects. Accordingly,
readers should not place undue reliance on these forward-looking
statements. The use of words such as “anticipates,”
“estimates,” “expects,” “intends,”
“plans” and “believes,” among others,
generally identify forward-looking statements; however, these
words are not the exclusive means of identifying such
statements. In addition, any statements that refer to
expectations, projections or other characterizations of future
events or circumstances are forward-looking statements. Please
also refer to our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007 and our Annual Report
on
Form 10-K
for the year ended December 31, 2006, in each case as filed
with the Securities and Exchange Commission, for additional
information on risks and uncertainties that could cause actual
results to differ materially from those described in the
forward-looking statements or that may otherwise impact us and
our business.
These forward-looking statements are inherently subject to
uncertainties, risks and changes in circumstances that are
difficult to predict. We are not under any obligation and do not
intend to publicly update or review any of these forward-looking
statements, whether as a result of new information, future
events or otherwise, even if experience or future events make it
clear that any expected results expressed or implied by those
forward-looking statements will not be realized.
Please carefully review and consider the various disclosures
made in this offer to purchase and in our other reports filed
with the Securities and Exchange Commission that attempt to
advise interested parties of the risks and factors that may
affect our business, results of operations, financial condition
or prospects.
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SUMMARY
TERM SHEET
We are providing this summary term sheet for your
convenience. It highlights the most material information in this
document, but you should realize that it does not describe all
of the details of the tender offer to the same extent described
in this document. We urge you to read the entire document and
the letter of transmittal because they contain the full details
of the tender offer. We have included references to the sections
of this document where you will find a more complete discussion.
Unless otherwise indicated, references to shares are to shares
of our common stock, and not to shares of our Class B
common stock or any other securities.
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Who is offering to purchase my shares? |
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Expedia, Inc. is offering to purchase your shares. |
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What will the purchase price for the shares be? |
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We will determine the purchase price that we will pay per share
as promptly as practicable after the tender offer expires. The
purchase price will be the lowest price at which, based on the
number of shares tendered and the prices specified by the
tendering stockholders, we can purchase 116,666,665 shares,
or such fewer number of shares as are properly tendered and not
properly withdrawn prior to the expiration date. The purchase
price will not be greater than $30.00 nor less than $27.50 per
share. We will pay this purchase price in cash, without
interest, for all the shares we purchase under the tender offer,
even if some of the shares are tendered at a price below the
purchase price. See Section 1. |
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How many shares will Expedia purchase? |
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We will purchase 116,666,665 shares properly tendered in
the tender offer, or such fewer number of shares as are properly
tendered and not properly withdrawn prior to the expiration
date. The 116,666,665 shares represent approximately 42% of
our outstanding common stock as of June 15, 2007. The
116,666,665 shares represent approximately 38% of the total
number of shares of our outstanding common stock and
Class B common stock and 22% of the combined voting power
of our outstanding common stock and Class B common stock as
of June 15, 2007. Expedia expressly reserves the right to
purchase an additional number of shares of common stock not to
exceed 2% of the outstanding shares of common stock, and could
decide to purchase more shares, subject to applicable legal
requirements. See Section 1. The tender offer is not
conditioned on any minimum number of shares being tendered.
See Section 7. |
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What will happen if more than 116,666,665 shares are
tendered at or below the purchase price? |
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If more than 116,666,665 shares are tendered at or below
the purchase price, we will purchase all shares tendered at or
below the purchase price on a pro rata basis, except for
“odd lots” (lots held by owners of less than
100 shares), which we will purchase on a priority basis as
described in the immediately following paragraph and except for
shares that were conditionally tendered and for which the
condition was not satisfied. |
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If I own fewer than 100 shares and I tender all of my
shares, will I be subject to proration? |
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If you own beneficially or of record fewer than 100 shares
in the aggregate, you properly tender all of these shares at or
below the purchase price before the tender offer expires and you
complete the section entitled “Odd Lots” in the letter
of transmittal, we will purchase all of your shares without
subjecting them to the proration procedure. See
Section 1. |
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How will Expedia pay for the shares? |
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We anticipate that we will obtain all of the funds necessary to
purchase shares tendered in the tender offer, and to pay related
fees and expenses, through a mix of (1) the proceeds of new
bank credit facilities (which we would enter into before the
expiration of the |
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tender offer), the public or private placement of new debt
securities, and/or additional indebtedness that we expect to
incur under our current bank credit facility (which we would
amend before the expiration of the tender offer), and
(2) cash on hand. The tender offer is subject to our
receipt of financing. See Section 7 and
Section 9. |
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How long do I have to tender my shares? |
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You may tender your shares until the tender offer expires. The
tender offer will expire on Wednesday, August 8, 2007, at
5:00 p.m., New York City time, unless we extend it.
See Section 1. We may choose to extend the tender
offer for any reason, subject to applicable laws. We cannot
assure you that we will extend the tender offer or indicate the
length of any extension that we may provide. See
Section 16. If a broker, dealer, commercial bank, trust
company or other nominee holds your shares, it is likely they
have an earlier deadline for you to act to instruct them to
accept the tender offer on your behalf. We urge you to contact
the broker, dealer, commercial bank, trust company or other
nominee to find out their deadline. |
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Can the tender offer be extended, amended or terminated, and
under what circumstances? |
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We can extend or amend the tender offer in our sole discretion.
If we extend the tender offer, we will delay the acceptance of
any shares that have been tendered. We can terminate the tender
offer under certain circumstances. See Section 7 and
Section 16. |
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How will I be notified if Expedia extends the tender offer or
amends the terms of the tender offer? |
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We will issue a press release no later than 9:00 a.m., New
York City time, on the business day after the scheduled
expiration date if we decide to extend the tender offer. We will
announce any amendment to the tender offer by making a public
announcement of the amendment. See Section 16. |
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What is the purpose of the tender offer? |
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Expedia believes that the tender offer, together with an
increase in our indebtedness, is a prudent use of Expedia’s
financial resources given its business profile, cash flow,
capital structure and assets, the current market price of the
shares and the terms on which corporate credit currently is
generally available in the credit markets. Expedia further
believes that investing in its own shares is an attractive use
of capital and an efficient and effective means to provide value
to its stockholders, including by lowering the company’s
weighted average cost of capital. The tender offer represents
the opportunity for Expedia to return cash to stockholders who
elect to tender their shares, while at the same time increasing
non-tendering stockholders’ proportionate interest in
Expedia. See Section 2 and Section 11. |
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Are there any conditions to the tender offer? |
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Yes. The tender offer is subject to conditions, including the
receipt of financing, the absence of court and governmental
action prohibiting the tender offer and the absence of changes
in general market conditions or our business that, in our
reasonable judgment, are or may be materially adverse to us, as
well as other conditions. See Section 7. |
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Following the tender offer, will Expedia continue as a public
company? |
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Yes. The completion of the tender offer in accordance with its
terms and conditions will not cause Expedia’s shares to
cease to be listed on Nasdaq or to stop being subject to the
periodic reporting requirements of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). See
Section 13. |
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How do I tender my shares? |
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The tender offer will expire at 5:00 p.m., New York City
time, on Wednesday, August 8, 2007, unless Expedia extends
the tender offer. To tender your shares prior to the expiration
of the tender offer: you must deliver your share certificate(s)
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duly executed letter of transmittal to the depositary at the
address appearing on the back cover page of this document; or
the depositary must receive a confirmation of receipt of your
shares by book-entry transfer and a properly completed and duly
executed letter of transmittal; or you must request a broker,
dealer, commercial bank, trust company or other nominee to
effect the transaction for you; or you must comply with the
guaranteed delivery procedure. You should contact the
information agent if you need assistance. See Section 3
and the instructions to the letter of transmittal. |
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Please note that Expedia will not purchase your shares in the
tender offer unless the depositary receives the required
documents prior to the expiration of the tender offer. If a
broker, dealer, commercial bank, trust company or other nominee
holds your shares, it is likely that they have an earlier
deadline for you to act to instruct them to accept the tender
offer on your behalf. We urge you to contact your broker,
dealer, commercial bank, trust company or other nominee to find
out their applicable deadline. |
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Once I have tendered shares in the tender offer, can I
withdraw my tender? |
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You may withdraw any shares you have tendered at any time before
the expiration of the tender offer, which will occur at
5:00 p.m., New York City time, on Wednesday, August 8,
2007, unless we extend the tender offer, in which case you may
withdraw until the latest date to which we extend the tender
offer. If we have not accepted for payment the shares you have
tendered to us, you may also withdraw your shares after 12:00
Midnight, New York City time, on August 24, 2007. See
Section 4. |
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How do I withdraw shares I previously tendered? |
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You must deliver, on a timely basis, a written or facsimile
notice of your withdrawal to the depositary at the address
appearing on the back cover page of this document. Your notice
of withdrawal must specify your name, the number of shares to be
withdrawn and the name of the registered holder of these shares.
Some additional requirements apply if the share certificates to
be withdrawn have been delivered to the depositary or if your
shares have been tendered under the procedure for book-entry
transfer set forth in Section 3. See Section 4. |
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Individuals who own shares through the Expedia Retirement
Savings Plan who wish to withdraw their shares must follow the
instructions found in the materials sent to them separately.
See Section 3. |
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Will Expedia’s results of operations for the quarter
ending June 30, 2007 be publicly available before
the expiration of the tender offer? |
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Yes. We currently plan to issue our results of operations for
the second quarter ending June 30, 2007 on or around
August 2, 2007, and in any event prior to the expiration of
the tender offer. |
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Can I participate in the tender offer if I hold shares
through the Expedia Retirement Savings Plan? |
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Yes. Participants who hold shares of Expedia common stock
through the Expedia Retirement Savings Plan will receive
instruction forms which they may use to direct the trustee for
the plan to tender eligible shares held through their accounts.
See Section 3. |
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How do holders of vested stock options for shares participate
in the tender offer? |
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If you hold vested but unexercised options, you may exercise
such options in accordance with the terms of the applicable
stock option plans and tender the shares received upon such
exercise in accordance with this tender offer. See
Section 3. |
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How do holders of warrants or preferred stock participate in
the tender offer? |
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If you hold exercisable warrants for common stock, you may
exercise such warrants in accordance with the terms of the
applicable warrant agreement and tender the shares received upon
such exercise in accordance with this tender offer. If you hold
shares of our Series A preferred stock, you may convert
those preferred shares into shares of common stock in accordance
with the terms of the preferred stock and tender the shares
received upon such conversion in accordance with this tender
offer. See Section 3. |
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Has Expedia or its Board of Directors adopted a position on
the tender offer? |
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Our Board of Directors has approved the tender offer. However,
neither we nor our Board of Directors makes any recommendation
to you as to whether you should tender or refrain from tendering
your shares or as to the price or prices at which you may choose
to tender your shares. You must make your own decision as to
whether to tender your shares and, if so, how many shares to
tender and the price or prices at which you choose to tender
your shares. In so doing, you should read carefully the
information in this offer to purchase and in the letter of
transmittal, including our reasons for making the tender offer.
Our directors and executive officers and Liberty Media
Corporation have advised us that they do not intend to tender
any shares in the tender offer. See Section 12. |
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If I decide not to tender, how will the tender offer affect
my shares? |
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Stockholders who choose not to tender will own a greater
percentage interest in our outstanding common stock immediately
following the consummation of the tender offer. |
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When will Expedia pay for the shares I tender? |
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We will pay the purchase price, net to you in cash, without
interest, for the shares we purchase as promptly as practicable
after the expiration of the tender offer and the acceptance of
the shares for payment; provided, however, that, if proration is
required, we do not expect to announce the results of the
proration and begin paying for tendered shares until at least
five business days after the expiration of the tender offer.
See Section 5. |
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Will I have to pay brokerage commissions if I tender my
shares? |
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If you are a registered stockholder and you tender your shares
directly to the depositary, you will not incur any brokerage
commissions. If you hold shares through a broker or bank, we
urge you to consult your broker or bank to determine whether
transaction costs are applicable. See Section 3. |
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What are the U.S. federal income tax consequences if I tender
my shares? |
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Generally, you will be subject to U.S. federal income taxation
when you receive cash from us in exchange for the shares you
tender. The receipt of cash for your tendered shares generally
will be treated either as (1) consideration received in
respect of a sale or exchange of the tendered shares or
(2) a distribution from us in respect of our stock. You
should consult your tax advisor as to the particular
consequences to you of participation in the tender offer. See
Section 15. |
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Will I have to pay any stock transfer tax if I tender my
shares? |
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If you instruct the depositary in the letter of transmittal to
make the payment for the shares to the registered holder, you
will not incur any stock transfer tax. See Section 5. |
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Whom can I talk to if I have questions? |
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The information agent can help answer your questions. The
information agent is MacKenzie Partners, Inc. Their contact
information is set forth on the back cover page of this document. |
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INTRODUCTION
To the Holders of our Common Stock:
We invite our stockholders to tender shares of our common stock,
par value $.001 per share, for purchase by us. Upon the terms
and subject to the conditions set forth in this offer to
purchase and in the letter of transmittal, we are offering to
purchase up to 116,666,665 shares at a price not greater
than $30.00 nor less than $27.50 per share, net to the seller in
cash, without interest.
We will select the lowest purchase price within the range that
will allow us to buy 116,666,665 shares or, if a lesser
number of shares is properly tendered, all shares that are
properly tendered and not properly withdrawn. We will acquire
all shares that we purchase in the tender offer at the same
purchase price regardless of whether the stockholder tendered at
a lower price. However, because of the “odd lot”
priority, proration and conditional tender provisions described
in this offer to purchase, we may not purchase all of the shares
tendered at or below the purchase price if more than the number
of shares we seek are properly tendered. We will return tendered
shares that we do not purchase to the tendering stockholders at
our expense as promptly as practicable after the expiration of
the tender offer. See Section 1.
We reserve the right to purchase more than
116,666,665 shares pursuant to the tender offer, subject to
certain limitations and legal requirements. See
Section 1.
The tender offer will expire at 5:00 p.m., New York City
time, on Wednesday, August 8, 2007, unless extended (such
date and time, as the same may be extended, the “expiration
date”). We may, in our sole discretion, extend the period
of time in which the tender offer will remain open.
Stockholders must complete the section of the letter of
transmittal relating to the price at which they are tendering
shares in order to properly tender shares.
We will pay the purchase price, net to the tendering
stockholders in cash, without interest, for all shares that we
purchase. Tendering stockholders whose shares are registered in
their own names and who tender directly to The Bank of New York,
the depositary in the tender offer, will not be obligated to pay
brokerage fees or commissions or, except as set forth in
Instruction 9 to the letter of transmittal, stock transfer
taxes on the purchase of shares by us under the tender offer. If
you own your shares through a bank, broker, dealer, trust
company or other nominee and that person tenders your shares on
your behalf, that person may charge you a fee for doing so. You
should consult your bank, broker, dealer, trust company or other
nominee to determine whether any charges will apply.
The tender offer is not conditioned upon any minimum number of
shares being tendered. The tender offer is, however, subject to
the receipt of financing and certain other conditions. See
Section 7.
OUR BOARD OF DIRECTORS HAS APPROVED THE TENDER OFFER.
HOWEVER, NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO YOU AS TO WHETHER YOU SHOULD TENDER OR REFRAIN
FROM TENDERING YOUR SHARES OR AS TO THE PURCHASE PRICE OR
PURCHASE PRICES AT WHICH YOU MAY CHOOSE TO TENDER YOUR SHARES.
YOU MUST MAKE YOUR OWN DECISION AS TO WHETHER TO TENDER YOUR
SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR
PRICES AT WHICH TO TENDER YOUR SHARES. IN SO DOING, YOU SHOULD
READ CAREFULLY THE INFORMATION IN THIS OFFER TO PURCHASE AND IN
THE LETTER OF TRANSMITTAL, INCLUDING OUR REASONS FOR MAKING THE
TENDER OFFER. SEE SECTION 2. OUR DIRECTORS AND
EXECUTIVE OFFICERS AND LIBERTY MEDIA CORPORATION HAVE ADVISED US
THAT THEY DO NOT INTEND TO TENDER ANY SHARES IN THE TENDER
OFFER.
If, at the expiration date, more than 116,666,665 shares
(or such greater number of shares as we may elect to purchase,
subject to applicable law) are properly tendered at or below the
purchase price and not properly withdrawn, we will buy shares:
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first, from all holders of “odd lots” (holders of less
than 100 shares) who properly tender all their shares at or
below the purchase price selected by us and do not properly
withdraw them before the expiration date;
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second, on a pro rata basis from all other stockholders who
properly tender shares at or below the purchase price selected
by us, other than stockholders who tender conditionally and
whose conditions are not satisfied; and
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third, only if necessary to permit us to purchase
116,666,665 shares (or such greater number of shares as we
may elect to purchase, subject to applicable law) from holders
who have tendered shares at or below the purchase price subject
to the condition that a specified minimum number of the
holder’s shares be purchased if any of the holder’s
shares are purchased in the tender offer (for which the
condition was not initially satisfied) by random lot, to the
extent feasible. To be eligible for purchase by random lot,
stockholders whose shares are conditionally tendered must have
tendered all of their shares.
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We may not purchase all of the shares tendered pursuant to the
tender offer even if the shares are tendered at or below the
purchase price. See Section 1, Section 5
and Section 6, respectively, for additional
information concerning priority, proration and conditional
tender procedures.
Section 15 of this offer to purchase describes the material
United States federal income tax consequences of a sale of
shares under the tender offer.
Participants in the Expedia Retirement Savings Plan may not use
the letter of transmittal to direct the tender of their shares
held in the plan but instead must follow the separate
instructions related to those shares. If the trustee for the
plan has not received a participant’s instructions at least
three business days prior to the expiration date of the tender
offer, the trustee may not tender any shares held on behalf of
that participant.
Holders of vested but unexercised options to purchase shares may
exercise such options in accordance with the applicable option
plan and tender some or all of the shares issued upon such
exercise. Holders of exercisable warrants for common stock may
exercise such warrants in accordance with the terms of the
applicable warrant agreement and tender some or all of the
shares issued upon such exercise. Holders of our Series A
preferred stock may convert their shares into shares of common
stock in accordance with the terms of the preferred stock and
tender some or all of the shares issued upon such conversion.
In order to validly tender shares in the tender offer, you
must exercise or convert your options, warrants or preferred
stock, as the case may be. Only tenders of common stock will be
accepted under the terms of the tender offer.
As of June 15, 2007, we had issued and outstanding
278,170,459 shares of common stock and
25,599,998 shares of Class B common stock. The
116,666,665 shares of common stock that we are offering to
purchase represent approximately 42% of the shares of common
stock then outstanding, and represent approximately 38% of the
total number of shares of common stock and shares of
Class B common stock then outstanding and 22% of the total
combined voting power of the common stock and Class B
common stock then outstanding. The shares of common stock are
listed on Nasdaq under the ticker symbol “EXPE”.
See Section 8. We urge stockholders to obtain
current market quotations for the shares.
THE
TENDER OFFER
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1.
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Number of
Shares; Proration.
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General. Upon the terms and subject to the
conditions of the tender offer, Expedia will purchase
116,666,665 shares, or such fewer number of shares as are
properly tendered and not properly withdrawn in accordance with
Section 4, before the scheduled expiration date of the
tender offer, at prices not greater than $30.00 nor less than
$27.50 per share, net to the seller in cash, without interest.
The term “expiration date” means 5:00 p.m., New
York City time, on Wednesday, August 8, 2007, unless and
until Expedia, in its sole discretion, shall have extended the
period of time during which the tender offer will remain open,
in which event the term “expiration date” shall refer
to the latest time and date at which the tender offer, as so
extended by Expedia, shall expire. See Section 16 for a
description of Expedia’s right to extend, delay, terminate
or amend the tender offer. In accordance with the rules of the
Securities and Exchange Commission (the “SEC”),
Expedia may, and Expedia expressly reserves the right to,
purchase under the tender offer an additional number of shares
not to exceed 2% of the outstanding shares of common stock
without amending or extending the tender offer.
6
See Section 16. In the event of an over-subscription
of the tender offer as described below, shares tendered at or
below the purchase price will be subject to proration, except
for odd lots. The proration period and, except as described
herein, withdrawal rights, expire on the expiration date.
If we:
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increase the price to be paid for shares above $30.00 per share
or decrease the price to be paid for shares below $27.50 per
share,
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increase the number of shares being sought in the tender offer
and this increase in the number of shares sought exceeds 2% of
the outstanding shares of common stock, or
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decrease the number of shares being sought, and
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the tender offer is scheduled to expire at any time earlier than
the expiration of a period ending on the tenth business day
from, and including, the date that we first publish, send or
give notice, in the manner specified in Section 16, of any
such increase or decrease, we will extend the tender offer until
the expiration of ten business days from the date that we first
publish notice of any increase or decrease. For the purposes of
the tender offer, a “business day” means any day other
than a Saturday, Sunday or U.S. federal holiday and
consists of the time period from 12:01 a.m. through 12:00
Midnight, New York City time.
The tender offer is not conditioned on any minimum number of
shares being tendered. The tender offer is, however, subject to
the receipt of financing and certain other conditions. See
Section 7.
In accordance with Instruction 5 of the letter of
transmittal, stockholders desiring to tender shares must specify
the price or prices, not greater than $30.00 nor less than
$27.50 per share, at which they are willing to sell their shares
to Expedia under the tender offer. Alternatively, stockholders
desiring to tender shares can choose not to specify a price and,
instead, specify that they will sell their shares at the
purchase price that Expedia ultimately pays for shares properly
tendered and not properly withdrawn in the tender offer, which
could result in the tendering stockholder receiving a price per
share as low as $27.50 or as high as $30.00. If tendering
stockholders wish to maximize the chance that Expedia will
purchase their shares, they should check the box in the section
of the letter of transmittal captioned “Shares Tendered at
Price Determined Pursuant to the Tender Offer.” Note that
this election could result in the tendered shares being
purchased at the minimum price of $27.50 per share.
To tender shares properly, stockholders must specify one and
only one price box in the appropriate section in each letter of
transmittal. If you specify more than one price or if you fail
to check any price at all you will not have validly tendered
your shares. See Section 3.
As promptly as practicable following the expiration date,
Expedia will, in its sole discretion, determine the purchase
price that it will pay for shares properly tendered and not
properly withdrawn, taking into account the number of shares
tendered and the prices specified by tendering stockholders.
Expedia will select the lowest purchase price, not greater than
$30.00 nor less than $27.50 per share, net to the seller in
cash, without interest, that will enable it to purchase
116,666,665 shares, or such fewer number of shares as are
properly tendered and not properly withdrawn in the tender
offer. Expedia will purchase all shares properly tendered at or
below the purchase price (and not properly withdrawn), all at
the purchase price, upon the terms and subject to the conditions
of the tender offer, including the odd lot, proration and
conditional tender provisions.
Expedia will not purchase shares tendered at prices greater than
the purchase price and shares that it does not accept in the
tender offer because of proration provisions or conditional
tenders. Expedia will return to the tendering stockholders
shares that it does not purchase in the tender offer at
Expedia’s expense as promptly as practicable after the
expiration date. By following the instructions to the letter of
transmittal, stockholders can specify one minimum price for a
specified portion of their shares and a different minimum price
for other specified shares, but stockholders must submit a
separate letter of transmittal for shares tendered at each
price. Stockholders also can specify the order in which Expedia
will purchase the specified portions in the event that, as a
result of the proration provisions or otherwise, Expedia
purchases some but not all of the tendered shares pursuant to
the tender offer.
7
If the number of shares properly tendered at or below the
purchase price and not properly withdrawn prior to the
expiration date is fewer than or equal to
116,666,665 shares, or such greater number of shares as
Expedia may elect to purchase, subject to applicable law,
Expedia will, upon the terms and subject to the conditions of
the tender offer, purchase all such shares.
Priority of Purchases. Upon the terms and
subject to the conditions of the tender offer, if greater than
116,666,665 shares, or such greater number of shares as
Expedia may elect to purchase, subject to applicable law, have
been properly tendered at prices at or below the purchase price
and not properly withdrawn prior to the expiration date, Expedia
will purchase properly tendered shares on the basis set forth
below:
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First, we will purchase all shares tendered by all holders of
“odd lots” who:
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tender all shares owned beneficially or of record at a price at
or below the purchase price selected by us (partial tenders will
not qualify for this preference); and
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complete the section entitled “Odd Lots” in the letter
of transmittal and, if applicable, in the notice of guaranteed
delivery.
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Second, subject to the conditional tender provisions described
in Section 6, we will purchase all other shares tendered at
prices at or below the purchase price selected by us on a pro
rata basis with appropriate adjustments to avoid purchases of
fractional shares, as described below.
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Third, only if necessary to permit us to purchase
116,666,665 shares (or such greater number of shares as we
may elect to purchase, subject to applicable law), shares
conditionally tendered (for which the condition was not
initially satisfied) at or below the purchase price selected by
us, will, to the extent feasible, be selected for purchase by
random lot. To be eligible for purchase by random lot,
stockholders whose shares are conditionally tendered must have
tendered all of their shares.
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Expedia may not purchase all of the shares that a stockholder
tenders in the tender offer even if they are tendered at prices
at or below the purchase price. It is also possible that Expedia
will not purchase any of the shares conditionally tendered even
though those shares were tendered at prices at or below the
purchase price.
Odd Lots. For purposes of the tender offer,
the term “odd lots” means all shares properly tendered
prior to the expiration date at prices at or below the purchase
price and not properly withdrawn by any person, referred to as
an “odd lot” holder, who owns beneficially or of
record an aggregate of fewer than 100 shares and so
certifies in the appropriate place on the letter of transmittal
and, if applicable, on the notice of guaranteed delivery. To
qualify for this preference, an odd lot holder must tender all
shares owned beneficially or of record by the odd lot holder in
accordance with the procedures described in Section 3. As
set forth above, Expedia will accept odd lots for payment before
proration, if any, of the purchase of other tendered shares.
This preference is not available to partial tenders or to
beneficial or record holders of an aggregate of 100 or more
shares, even if these holders have separate accounts or share
certificates representing fewer than 100 shares. By
accepting the tender offer, an odd lot holder who holds shares
in its name and tenders its shares directly to the depositary
would not only avoid the payment of brokerage commissions, but
also would avoid any applicable odd lot discounts in a sale of
the odd lot holder’s shares on Nasdaq. Any odd lot holder
wishing to tender all of its shares pursuant to the tender offer
should complete the section entitled “Odd Lots” in the
letter of transmittal and, if applicable, in the notice of
guaranteed delivery.
Proration. If proration of tendered shares is
required, Expedia will determine the proration factor as soon as
practicable following the expiration date. Subject to adjustment
to avoid the purchase of fractional shares and subject to the
provisions governing conditional tenders described in
Section 6 of this offer to purchase, proration for each
stockholder that tenders shares will be based on the ratio of
the total number of shares that we accept for purchase
(excluding “odd lots”) to the total number of shares
properly tendered (and not properly withdrawn) at or below the
purchase price by all stockholders (other than “odd
lot” holders).
Because of the difficulty in determining the number of shares
properly tendered, including shares tendered by guaranteed
delivery procedures, as described in Section 3, and not
properly withdrawn, and because of the odd lot procedure and
conditional tender provisions, Expedia does not expect that it
will be able to announce the final proration factor or commence
payment for any shares purchased under the tender offer until at
least five business days after the expiration date. The
preliminary results of any proration will be announced by press
release as
8
promptly as practicable after the expiration date. Stockholders
may obtain preliminary proration information from the
information agent and may be able to obtain this information
from their brokers.
As described in Section 15, the number of shares that
Expedia will purchase from a stockholder under the tender offer
may affect the U.S. federal income tax consequences to that
stockholder and, therefore, may be relevant to that
stockholder’s decision whether or not to tender shares.
We will mail this offer to purchase and the letter of
transmittal to record holders of shares and we will furnish this
offer to purchase to brokers, dealers, commercial banks and
trust companies whose names, or the names of whose nominees,
appear on Expedia’s stockholder list or, if applicable,
that are listed as participants in a clearing agency’s
security position listing for subsequent transmittal to
beneficial owners of shares.
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2.
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Purpose
of the Tender Offer.
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Expedia believes that the tender offer, together with an
increase in our indebtedness, is a prudent use of Expedia’s
financial resources given its business profile, cash flow,
capital structure and assets, the current market price of the
shares and the terms on which corporate credit currently is
generally available in the credit markets. Expedia further
believes that investing in its own shares is an attractive use
of capital and an effective and efficient means to provide value
to its stockholders, including by lowering the company’s
weighted average cost of capital. The tender offer represents
the opportunity for Expedia to return cash to stockholders who
elect to tender their shares. Where shares are tendered by the
registered owner of those shares directly to the depositary, the
sale of those shares in the tender offer will permit the seller
to avoid the usual transaction costs associated with open market
sales. Furthermore, odd lot holders who hold shares registered
in their names and tender their shares directly to the
depositary and whose shares are purchased under the tender offer
will avoid not only the payment of brokerage commissions but
also any applicable odd lot discounts that might be payable on
sales of their shares in Nasdaq transactions.
Stockholders who do not tender their shares pursuant to the
tender offer and stockholders who otherwise retain an equity
interest in Expedia as a result of a partial tender of shares,
proration or a conditional tender for which the condition is not
satisfied will continue to be owners of Expedia and will realize
a proportionate increase in their relative equity interest in
Expedia immediately following consummation of the tender offer
and thus in Expedia’s future earnings and assets, and will
bear the attendant risks and rewards associated with owning the
equity securities of Expedia, including risks associated with
owning equity in a company that will be more highly leveraged
than Expedia is currently. The impact of the tender offer on
Expedia’s earnings per share will depend upon, among other
things, the terms and conditions of the additional indebtedness
that we expect to incur under bank credit facilities
and/or
through the issuance of new debt securities to fund the purchase
of shares in the tender offer and for general corporate
purposes, and any indebtedness we may incur to refinance that
indebtedness following the tender offer. However, in the event
that Expedia repurchases 116,666,665 shares pursuant to the
tender offer, the company believes the tender offer will be
dilutive to earnings per share. See Section 10 and
Section 11.
After the completion of the tender offer, Expedia expects to
have sufficient cash flow and access to funding to meet its cash
needs for normal operations, anticipated capital expenditures
and acquisition opportunities that may arise. However, Expedia
does from time to time evaluate potential acquisition
opportunities, which in some cases may involve a significant
amount of cash consideration, and which, as a result of the
purchase of shares in the tender offer and any such acquisitions
for cash using the proceeds of debt financing, could result in a
significant further increase in the amount of Expedia’s
indebtedness and leverage. See Section 9.
Neither Expedia nor the Expedia Board of Directors makes any
recommendation to any stockholder as to whether to tender or
refrain from tendering any shares or as to the price or prices
at which stockholders may choose to tender their shares. Expedia
has not authorized any person to make any recommendation.
Stockholders should carefully evaluate all information in the
tender offer, should consult their own investment and tax
advisors, and should make their own decisions about whether to
tender shares, and, if so, how many shares to tender and the
price or prices at which to tender. Expedia has been advised
that none of its directors or executive officers or Liberty
Media Corporation (“Liberty Media”) intends to tender
any shares in the tender offer.
9
The repurchase of 116,666,665 shares of common stock pursuant to
the tender offer is in addition to the share repurchase program
authorized by our Board of Directors in August 2006, pursuant to
which Expedia is authorized to repurchase up to an additional
20 million outstanding shares of common stock. Whether or
not we may make such repurchases or any additional repurchases
will depend on many factors, including, without limitation, the
number of shares, if any, that we purchase in this tender offer,
whether or not, in Expedia’s judgment, such future
repurchases would be accretive to earnings per share,
Expedia’s business and financial performance and situation,
the business and market conditions at the time, including the
price of the shares, and such other factors as Expedia may
consider relevant. Any future repurchases may be on the same
terms or on terms that are more or less favorable to the selling
stockholders than the terms of the tender offer.
Rule 13e-4
of the Exchange Act prohibits Expedia and its affiliates from
purchasing any shares, other than pursuant to the tender offer,
until at least ten business days after the expiration date of
the tender offer, except pursuant to certain limited exceptions
provided in
Rule 14e-5
of the Exchange Act.
Expedia will hold in treasury any shares that it acquires
pursuant to the tender offer, and such shares will be available
for Expedia to issue without further stockholder action (except
as required by applicable law or the rules of Nasdaq or any
other securities exchange on which the shares may then be
listed) for various purposes including, without limitation,
acquisitions, raising additional capital and the satisfaction of
obligations under existing or future employee benefit or
compensation programs or stock plans or compensation programs
for directors.
3. Procedures
for Tendering Shares.
Proper Tender of Shares. For stockholders to
properly tender shares under the tender offer:
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the depositary must receive, at the depositary’s address
set forth on the back cover page of this offer to purchase,
share certificates (or confirmation of receipt of such shares
under the procedure for book-entry transfer set forth below),
together with a properly completed and duly executed letter of
transmittal, including any required signature guarantees, or an
“agent’s message,” and any other documents
required by the letter of transmittal, before the tender offer
expires, or
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the tendering stockholder must comply with the guaranteed
delivery procedure set forth below.
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If a broker, dealer, commercial bank, trust company or other
nominee holds your shares, it is likely they have an earlier
deadline for you to act to instruct them to accept the tender
offer on your behalf. We urge you to contact your broker,
dealer, commercial bank, trust company or other nominee to find
out their applicable deadline.
In accordance with Instruction 5 of the letter of
transmittal, stockholders desiring to tender shares in the
tender offer must properly indicate in the section captioned
(1) “Price (in Dollars) Per Share at Which Shares are
Being Tendered” on the letter of transmittal the price (in
multiples of $0.25) at which stockholders are tendering shares
or (2) “Shares Tendered at Price Determined Pursuant
to the Tender Offer” in the letter of transmittal that the
stockholder will accept the purchase price determined by Expedia
in accordance with the terms of the tender offer.
If tendering stockholders wish to maximize the chance that
Expedia will purchase their shares, they should check the box in
the section of the letter of transmittal captioned “Shares
Tendered at Price Determined Pursuant to the Tender Offer.”
Note that this election could have the effect of decreasing the
price at which Expedia purchases tendered shares because shares
tendered using this election will be available for purchase at
the minimum price of $27.50 per share and, as a result, it is
possible that this election could result in Expedia purchasing
tendered shares at the minimum price of $27.50 per share.
A stockholder who desires to tender shares at more than one
price must complete a separate letter of transmittal for each
price at which such stockholder tenders shares, provided that a
stockholder may not tender the same shares (unless properly
withdrawn previously in accordance with Section 4) at
more than one price. To tender shares properly, stockholders
must check one and only one price box in the appropriate section
of each letter of transmittal. If you check more than one box or
if you fail to check any box at all you will not have validly
tendered your shares.
10
Odd lot holders who tender all shares must complete the section
captioned “Odd Lots” in the letter of transmittal and,
if applicable, in the notice of guaranteed delivery, to qualify
for the preferential treatment available to odd lot holders as
set forth in Section 1.
We urge stockholders who hold shares through brokers or banks
to consult the brokers or banks to determine whether transaction
costs are applicable if they tender shares through the brokers
or banks and not directly to the depositary.
Signature Guarantees. Except as otherwise
provided below, all signatures on a letter of transmittal must
be guaranteed by a financial institution (including most banks,
savings and loans associations and brokerage houses) which is a
participant in the Securities Transfer Agents Medallion Program.
Signatures on a letter of transmittal need not be guaranteed if:
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the letter of transmittal is signed by the registered holder of
the shares (which term, for purposes of this Section 3,
shall include any participant in The Depository
Trust Company, referred to as the “book-entry transfer
facility,” whose name appears on a security position
listing as the owner of the shares) tendered therewith and the
holder has not completed either the box captioned “Special
Delivery Instructions” or the box captioned “Special
Payment Instructions” in the letter of transmittal; or
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if shares are tendered for the account of a bank, broker,
dealer, credit union, savings association or other entity which
is a member in good standing of the Securities Transfer Agents
Medallion Program or a bank, broker, dealer, credit union,
savings association or other entity which is an “eligible
guarantor institution,” as such term is defined in
Rule 17Ad-15
under the Exchange Act. See Instruction 1 of the letter
of transmittal.
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If a share certificate is registered in the name of a person
other than the person executing a letter of transmittal, or if
payment is to be made to a person other than the registered
holder, then the certificate must be endorsed or accompanied by
an appropriate stock power, in either case signed exactly as the
name of the registered holder appears on the certificate, with
the signature guaranteed by an eligible guarantor institution.
Expedia will make payment for shares tendered and accepted for
payment under the tender offer only after the depositary timely
receives share certificates or a timely confirmation of the
book-entry transfer of the shares into the depositary’s
account at the book-entry transfer facility as described above,
a properly completed and duly executed letter of transmittal, or
an agent’s message in the case of a book-entry transfer,
and any other documents required by the letter of transmittal.
Method of Delivery. The method of delivery
of all documents, including share certificates, the letter of
transmittal and any other required documents, is at the election
and risk of the tendering stockholder. If you choose to deliver
required documents by mail, we recommend that you use registered
mail with return receipt requested, properly insured.
Book-Entry Delivery. The depositary will
establish an account with respect to the shares for purposes of
the tender offer at the book-entry transfer facility within two
business days after the date of this offer to purchase, and any
financial institution that is a participant in the book-entry
transfer facility’s system may make book-entry delivery of
the shares by causing the book-entry transfer facility to
transfer shares into the depositary’s account in accordance
with the book-entry transfer facility’s procedures for
transfer. Although participants in the book-entry transfer
facility may effect delivery of shares through a book-entry
transfer into the depositary’s account at the book-entry
transfer facility, either
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a properly completed and duly executed letter of transmittal,
including any required signature guarantees, or an agent’s
message, and any other required documents must, in any case, be
transmitted to and received by the depositary at its address set
forth on the back cover page of this offer to purchase before
the expiration date, or
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the guaranteed delivery procedure described below must be
followed.
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Delivery of the letter of transmittal and any other required
documents to the book-entry transfer facility does not
constitute delivery to the depositary.
11
The term “agent’s message” means a message
transmitted by the book-entry transfer facility to, and received
by, the depositary, which states that the book-entry transfer
facility has received an express acknowledgment from the
participant in the book-entry transfer facility tendering the
shares that the participant has received and agrees to be bound
by the terms of the letter of transmittal and that Expedia may
enforce the agreement against the participant.
Expedia Retirement Savings Plan. Participants
who hold shares of Expedia common stock through the Expedia
Retirement Savings Plan desiring to direct Fidelity Management
Trust Company, the trustee for the plan, to tender any
shares held through their accounts under the plan pursuant to
the tender offer must instruct the trustee to tender such shares
by properly completing, duly executing and returning to the
trustee the election forms sent separately to such participants
by Expedia. The trustee will aggregate all such tenders and
execute letters of transmittal on behalf of all plan
participants desiring to tender plan shares. Delivery of a
letter of transmittal by a participant in the plan with respect
to any plan shares does not constitute proper tender of such
shares. Only the trustee can properly tender any plan shares.
The deadline for submitting election forms to the trustee is
earlier than the expiration date because of the need to tabulate
participant instructions. If a stockholder desires to tender
shares owned outside of a plan, as well as plan shares, such
stockholder must properly complete and duly execute a letter of
transmittal for the shares owned outside the plan and deliver
such letter of transmittal directly to the depositary, and
follow the special instructions provided by Expedia for
directing the trustee to tender plan shares. Please direct any
questions regarding the tender of plan shares or the withdrawal
of plan shares previously tendered to the trustee in accordance
with the procedures described in the separate materials provided
to plan participants.
Federal Backup Withholding Tax. Under the
federal income tax backup withholding rules, 28% of the gross
proceeds payable to a stockholder or other payee pursuant to the
tender offer must be withheld and remitted to the United States
Treasury, unless the stockholder or other payee provides his or
her taxpayer identification number (employer identification
number or social security number) to the depositary and
certifies under penalties of perjury that such number is correct
or otherwise establishes an exemption. Therefore, tendering
stockholders should complete and sign the Substitute
Form W-9
included as part of the Letter of Transmittal in order to
provide the information and certification necessary to avoid
backup withholding, unless the stockholder otherwise establishes
to the satisfaction of the depositary that the stockholder is
not subject to backup withholding. Certain stockholders
(including, among others, all corporations and certain
Non-U.S. Holders
(as defined below in Section 15)) are not subject to these
backup withholding and reporting requirements. In order for a
Non-U.S. Holder
to qualify as an exempt recipient, that stockholder must submit
an IRS
Form W-8BEN
or other applicable form, signed under penalties of perjury,
attesting to that individual’s exempt status. Tendering
stockholders can obtain the applicable forms from the
depositary. See Instruction 12 of the letter of
transmittal.
TO PREVENT U.S. FEDERAL BACKUP WITHHOLDING TAX ON THE
GROSS PAYMENTS MADE TO YOU FOR SHARES PURCHASED UNDER THE TENDER
OFFER, IF YOU DO NOT OTHERWISE ESTABLISH AN EXEMPTION FROM
SUCH WITHHOLDING, YOU MUST PROVIDE THE DEPOSITARY WITH YOUR
CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE OTHER
INFORMATION BY COMPLETING THE SUBSTITUTE
FORM W-9
INCLUDED WITH THE LETTER OF TRANSMITTAL.
Federal Income Tax Withholding for
Non-U.S. Holders. Gross proceeds payable
pursuant to the tender offer to a
Non-U.S. Holder
or his or her agent will be subject to withholding of federal
income tax at a rate of 30%, unless a reduced rate of
withholding is applicable pursuant to an income tax treaty or an
exemption from withholding is applicable because such gross
proceeds are effectively connected with the conduct of a trade
or business within the United States (and, if an income tax
treaty applies, the gross proceeds are generally attributable to
a United States permanent establishment maintained by such
Non-U.S. Holder).
In order to claim a reduction of or an exemption from
withholding tax, a
Non-U.S. Holder
must deliver to the depositary a validly completed and executed
IRS
Form W-8BEN
(with respect to income tax treaty benefits) or W8-ECI (with
respect to amounts effectively connected with the conduct of a
trade or business within the United States) claiming such
exemption or reduction before the payment is made. Tendering
Non-U.S. Holders
can obtain the applicable forms from the depositary.
A
Non-U.S. Holder
may be eligible to file for a refund of such tax or a portion of
such tax if such stockholder meets the “complete
termination,” “substantially disproportionate” or
“not essentially equivalent to a dividend”
12
tests described in Section 15 or if such stockholder is
entitled to a reduced rate of withholding pursuant to a tax
treaty and Expedia withheld at a higher rate.
Non-U.S. Holders
should consult their own tax advisors regarding the tax
consequences to them of participating in the tender offer,
including the application of federal income tax withholding,
their potential eligibility for a withholding tax reduction or
exemption, and the refund procedure.
For a discussion of the material United States federal income
tax consequences to tendering stockholders, see
Section 15.
Guaranteed Delivery. If a stockholder desires
to tender shares under the tender offer and the
stockholder’s share certificates are not immediately
available or the stockholder cannot deliver the share
certificates to the depositary before the expiration date, or
the stockholder cannot complete the procedure for book-entry
transfer on a timely basis, or if time will not permit all
required documents to reach the depositary before the expiration
date, the stockholder may nevertheless tender the shares,
provided that the stockholder satisfies all of the following
conditions:
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the stockholder makes the tender by or through an eligible
guarantor institution;
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the depositary receives by hand, mail, overnight courier or
facsimile transmission, before the expiration date, a properly
completed and duly executed notice of guaranteed delivery in the
form Expedia has provided, specifying the price at which
the stockholder is tendering shares, including (where required)
a signature guarantee by an eligible guarantor institution in
the form set forth in such notice of guaranteed
delivery; and
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the depositary receives the share certificates, in proper form
for transfer, or confirmation of book-entry transfer of the
shares into the depositary’s account at the book-entry
transfer facility, together with a properly completed and duly
executed letter of transmittal, or a manually signed facsimile
thereof, and including any required signature guarantees, or an
agent’s message, and any other documents required by the
letter of transmittal, within three Nasdaq trading days after
the date of receipt by the depositary of the notice of
guaranteed delivery.
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Return of Unpurchased Shares. The depositary
will return certificates for unpurchased shares as promptly as
practicable after the expiration or termination of the tender
offer or the proper withdrawal of the shares, as applicable, or,
in the case of shares tendered by book-entry transfer at the
book-entry transfer facility, the depositary will credit the
shares to the appropriate account maintained by the tendering
stockholder at the book-entry transfer facility, in each case
without expense to the stockholder.
Determination of Validity; Rejection of Shares; Waiver of
Defects; No Obligation to Give Notice of
Defects. Expedia will determine, in its sole
discretion, all questions as to the number of shares that we
will accept, the price that we will pay for shares that we
accept and the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of shares, and
our determination will be final and binding on all parties.
Expedia reserves the absolute right to reject any or all tenders
of any shares that it determines are not in proper form or the
acceptance for payment of or payment for which Expedia
determines may be unlawful. Expedia also reserves the absolute
right to waive any defect or irregularity in any tender with
respect to any particular shares or any particular stockholder,
and Expedia’s interpretation of the terms of the tender
offer will be final and binding on all parties. No tender of
shares will be deemed to have been properly made until the
stockholder cures, or Expedia waives, all defects or
irregularities. None of Expedia, the depositary, the information
agent or any other person will be under any duty to give
notification of any defects or irregularities in any tender or
incur any liability for failure to give this notification.
Tendering Stockholder’s Representation and Warranty;
Expedia’s Acceptance Constitutes an
Agreement. A tender of shares under any of
the procedures described above will constitute the tendering
stockholder’s acceptance of the terms and conditions of the
tender offer, as well as the tendering stockholder’s
representation and warranty to Expedia that:
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the stockholder has a net long position in the shares or
equivalent securities at least equal to the shares tendered
within the meaning of
Rule 14e-4
of the Exchange Act, and
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the tender of shares complies with
Rule 14e-4.
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13
It is a violation of
Rule 14e-4
for a person, directly or indirectly, to tender shares for that
person’s own account unless, at the time of tender and at
the end of the proration period or period during which shares
are accepted by lot (including any extensions thereof), the
person so tendering:
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has a net long position equal to or greater than the amount
tendered in
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the shares, or
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securities immediately convertible into, or exchangeable or
exercisable for, the shares, and
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will deliver or cause to be delivered the shares in accordance
with the terms of the tender offer.
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Rule 14e-4
provides a similar restriction applicable to the tender or
guarantee of a tender on behalf of another person.
Expedia’s acceptance for payment of shares tendered under
the tender offer will constitute a binding agreement between the
tendering stockholder and Expedia upon the terms and conditions
of the tender offer.
Lost or Destroyed Certificates. Stockholders
whose share certificate for part or all of their shares has been
lost, stolen, misplaced or destroyed may contact The Bank of New
York, the transfer agent for Expedia shares, at the address and
telephone number set forth on the back cover of this offer to
purchase, for instructions as to obtaining a replacement share
certificate. That share certificate will then be required to be
submitted together with the letter of transmittal in order to
receive payment for shares that are tendered and accepted for
payment. The stockholder may be required to post a bond to
secure against the risk that the original share certificate may
subsequently emerge. We urge stockholders to contact The Bank of
New York immediately in order to permit timely processing of
this documentation.
Stockholders must deliver share certificates, together with a
properly completed and duly executed letter of transmittal,
including any signature guarantees, or an agent’s message,
and any other required documents to the depositary and not to
Expedia or the information agent. Expedia or the information
agent will not forward any such documents to the depositary and
delivery to Expedia or the information agent will not constitute
a proper tender of shares.
Stockholders may withdraw shares tendered under the tender offer
at any time prior to the expiration date. Thereafter, such
tenders are irrevocable, except that they may be withdrawn after
12:00 Midnight, New York City time, on August 24, 2007,
unless theretofore accepted for payment as provided in this
offer to purchase.
For a withdrawal to be effective, the depositary must timely
receive a written or facsimile transmission notice of withdrawal
at the depositary’s address set forth on the back cover
page of this offer to purchase. Any such notice of withdrawal
must specify the name of the tendering stockholder, the number
of shares that the stockholder wishes to withdraw and the name
of the registered holder of the shares. If the share
certificates to be withdrawn have been delivered or otherwise
identified to the depositary, then, before the release of the
share certificates, the serial numbers shown on the share
certificates must be submitted to the depositary and the
signature(s) on the notice of withdrawal must be guaranteed by
an eligible guarantor institution, unless the shares have been
tendered for the account of an eligible guarantor institution.
If a stockholder has tendered shares under the procedure for
book-entry transfer set forth in Section 3, any notice of
withdrawal also must specify the name and the number of the
account at the book-entry transfer facility to be credited with
the withdrawn shares and must otherwise comply with the
book-entry transfer facility’s procedures. Expedia will
determine all questions as to the form and validity (including
the time of receipt) of any notice of withdrawal, in its sole
discretion, and such determination will be final and binding on
all parties. None of Expedia, the depositary, the information
agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give this
notification.
A stockholder may not rescind a withdrawal and Expedia will deem
any shares that a stockholder properly withdraws not properly
tendered for purposes of the tender offer, unless the
stockholder properly re-tenders the withdrawn shares before the
expiration date by following one of the procedures described in
Section 3.
14
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5.
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Purchase
of Shares and Payment of Purchase Price.
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Upon the terms and subject to the conditions of the tender
offer, as promptly as practicable following the expiration date,
Expedia:
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will determine the purchase price it will pay for shares
properly tendered and not properly withdrawn before the
expiration date, taking into account the number of shares so
tendered and the prices specified by tendering stockholders, and
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will accept for payment and pay for, and thereby purchase,
shares properly tendered at prices at or below the purchase
price and not properly withdrawn prior to the expiration date.
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For purposes of the tender offer, Expedia will be deemed to have
accepted for payment, and therefore purchased, shares that are
properly tendered at or below the purchase price and are not
properly withdrawn, subject to the “odd lot,”
proration and conditional tender provisions of the tender offer,
only when, as and if it gives oral or written notice to the
depositary of its acceptance of the shares for payment under the
tender offer.
Upon the terms and subject to the conditions of the tender
offer, as promptly as practicable after the expiration date,
Expedia will accept for payment and pay a single per share
purchase price not greater than $30.00 nor less than $27.50 per
share for 116,666,665 shares, subject to increase or
decrease as provided in Section 16, if properly tendered
and not properly withdrawn, or such fewer number of shares as
are properly tendered and not properly withdrawn.
Expedia will pay for shares that it purchases under the tender
offer by depositing the aggregate purchase price for these
shares with the depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from
Expedia and transmitting payment to the tendering stockholders.
In the event of proration, Expedia will determine the proration
factor and pay for those tendered shares accepted for payment as
soon as practicable after the expiration date; however, Expedia
does not expect to be able to announce the final results of any
proration and commence payment for shares purchased until at
least five business days after the expiration date. Shares
tendered and not purchased, including all shares tendered at
prices greater than the purchase price and shares that Expedia
does not accept for purchase due to proration or conditional
tenders, will be returned to the tendering stockholder, or, in
the case of shares tendered by book-entry transfer, will be
credited to the account maintained with the book-entry transfer
facility by the participant therein who so delivered the shares,
at Expedia’s expense, as promptly as practicable after the
expiration date or termination of the tender offer without
expense to the tendering stockholders. Under no circumstances
will Expedia pay interest on the purchase price regardless of
any delay in making the payment. If certain events occur,
Expedia may not be obligated to purchase shares under the tender
offer. See Section 7.
Expedia will pay all stock transfer taxes, if any, payable on
the transfer to it of shares purchased under the tender offer.
If, however,
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payment of the purchase price is to be made to any person other
than the registered holder,
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certificate(s) for shares not tendered or tendered but not
purchased are to be returned in the name of and to any person
other than the registered holder(s) of such shares, or
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if tendered certificates are registered in the name of any
person other than the person signing the letter of transmittal,
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the amount of all stock transfer taxes, if any (whether imposed
on the registered holder or the other person), payable on
account of the transfer to the person will be deducted from the
purchase price unless satisfactory evidence of the payment
of the stock transfer taxes, or exemption therefrom, is
submitted. See Instruction 9 of the letter of
transmittal.
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6.
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Conditional
Tender of Shares.
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Subject to the exception for holders of odd lots, in the event
of an over-subscription of the tender offer, shares tendered at
or below the purchase price prior to the expiration date will be
subject to proration. See Section 1. As
15
discussed in Section 15, the number of shares to be
purchased from a particular stockholder may affect the tax
treatment of the purchase to the stockholder and the
stockholder’s decision whether to tender. Accordingly, a
stockholder may tender shares subject to the condition that
Expedia must purchase a specified minimum number of the
stockholder’s shares tendered pursuant to a letter of
transmittal if Expedia purchases any shares tendered. Any
stockholder desiring to make a conditional tender must so
indicate in the box entitled “Conditional Tender” in
the letter of transmittal and indicate the minimum number of
shares that Expedia must purchase if Expedia purchases any
shares. Stockholders should consult with their own financial or
tax advisors.
After the expiration date, if more than 116,666,665 shares
(or such greater number of shares as we may elect to purchase,
subject to applicable law) are properly tendered and not
properly withdrawn, so that we must prorate our acceptance of
and payment for tendered shares, we will calculate a preliminary
proration factor based upon all shares properly tendered,
conditionally or unconditionally. If the effect of this
preliminary proration would be to reduce the number of shares
that we purchase from any stockholder below the minimum number
specified, the shares conditionally tendered will automatically
be regarded as withdrawn (except as provided in the next
paragraph). All shares tendered by a stockholder subject to a
conditional tender that are withdrawn as a result of proration
will be returned at our expense to the tendering stockholder.
After giving effect to these withdrawals, we will accept the
remaining shares properly tendered, conditionally or
unconditionally, on a pro rata basis, if necessary. If
conditional tenders that would otherwise be regarded as
withdrawn would cause the total number of shares that we
purchase to fall below 116,666,665 (or such greater number of
shares as we may elect to purchase, subject to applicable law)
then, to the extent feasible, we will select enough of the
shares conditionally tendered that would otherwise have been
withdrawn to permit us to purchase such number of shares. In
selecting among the conditional tenders, we will select by
random lot, treating all tenders by a particular taxpayer as a
single lot, and will limit our purchase in each case to the
designated minimum number of shares to be purchased. To be
eligible for purchase by random lot, stockholders whose shares
are conditionally tendered must have tendered all of their
shares.
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7.
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Conditions
of the Tender Offer.
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Notwithstanding any other provision of the tender offer, Expedia
will not be required to accept for payment, purchase or pay for
any shares tendered, and may terminate or amend the tender offer
or may postpone the acceptance for payment of, or the purchase
of and the payment for shares tendered, subject to
Rule 13e-4(f)
under the Exchange Act, if, at any time on or after
June 29, 2007 and before the expiration date, any of the
following events shall have occurred (or shall have been
reasonably determined by Expedia to have occurred) and, in
Expedia’s reasonable judgment and regardless of the
circumstances giving rise to the event or events, such event or
events make it inadvisable to proceed with the tender offer or
with acceptance for payment:
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we shall not have received the necessary financing for the
tender offer on such terms as may be acceptable to us (the
“financing condition”);
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we shall not have received an opinion from Duff &
Phelps LLC or another nationally recognized valuation firm
satisfactory to us, in form and substance satisfactory to us, as
to the solvency of Expedia after giving effect to the tender
offer and the financing therefor;
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there shall have been threatened or instituted or there shall be
pending any action or proceeding by any government or
governmental, regulatory or administrative agency, authority or
tribunal or any other person, domestic or foreign, before any
court, authority, agency or tribunal that directly or indirectly:
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challenges the making of the tender offer, the acquisition of
some or all of the shares under the tender offer or otherwise
relates in any manner to the tender offer, or
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in Expedia’s reasonable judgment, could materially and
adversely affect the business, condition (financial or other),
assets, income, operations or prospects of Expedia or any of its
subsidiaries, or otherwise materially impair in any way the
contemplated future conduct of the business of Expedia or any of
its subsidiaries or materially impair the contemplated benefits
of the tender offer to Expedia;
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there shall have been any action threatened, pending or taken,
or approval withheld, or any statute, rule, regulation,
judgment, order or injunction threatened, proposed, sought,
promulgated, enacted, entered, amended, enforced or deemed to be
applicable to the tender offer or Expedia or any of its
subsidiaries, by any court or any authority, agency or tribunal
that, in Expedia’s reasonable judgment, would or might,
directly or indirectly:
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make the acceptance for payment of, or payment for, some or all
of the shares illegal or otherwise restrict or prohibit
completion of the tender offer,
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delay or restrict the ability of Expedia, or render Expedia
unable, to accept for payment or pay for some or all of the
shares,
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materially impair the contemplated benefits of the tender offer
to Expedia, or
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materially and adversely affect the business, condition
(financial or other), assets, income, operations or prospects of
Expedia, or any of its subsidiaries, or otherwise materially
impair in any way the contemplated future conduct of the
business of Expedia or any of its subsidiaries;
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there shall have occurred:
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any general suspension of trading in, or limitation on prices
for, securities on any national securities exchange or in the
over-the-counter market in the United States or the European
Union,
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the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or the
European Union,
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a material change in United States or any other currency
exchange rates or a suspension of or limitation on the markets
therefor,
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the commencement or escalation of a war, armed hostilities or
other international or national calamity directly or indirectly
involving the United States or any of its territories, including
but not limited to an act of terrorism,
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any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or any
event, or any disruption or adverse change in the financial or
capital markets generally or the market for loan syndications in
particular, that, in Expedia’s reasonable judgment, might
affect the extension of credit by banks or other lending
institutions in the United States,
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any change in the general political, market, economic or
financial conditions in the United States or abroad that could,
in the reasonable judgment of Expedia, have a material adverse
effect on the business, condition (financial or other), assets,
income, operations or prospects of Expedia or any of its
subsidiaries, or otherwise materially impair in any way the
contemplated future conduct of the business of Expedia or any of
its subsidiaries,
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in the case of any of the foregoing existing at the time of the
commencement of the tender offer, a material acceleration or
worsening thereof, or
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any decline in the market price of the shares or the Dow Jones
Industrial Average or the Standard and Poor’s Index of 500
Industrial Companies or the New York Stock Exchange or the
Nasdaq Composite Index by a material amount (including, without
limitation, an amount greater than 10%) from the close of
business on June 18, 2007;
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a tender offer or exchange offer for any or all of the shares
(other than this tender offer), or any merger, business
combination or other similar transaction with or involving
Expedia or any of its subsidiaries or affiliates, shall have
been proposed, announced or made by any person;
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any change or combination of changes shall have occurred or been
threatened in the business, condition (financial or other),
assets, income, operations, prospects or stock ownership of
Expedia or any of its subsidiaries, that in Expedia’s
reasonable judgment is or may reasonably be likely to be
material and adverse
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to Expedia or any of its subsidiaries or that otherwise
materially impairs in any way the contemplated future conduct of
the business of Expedia or any of its subsidiaries;
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any approval, permit, authorization, favorable review or consent
of any governmental entity required to be obtained in connection
with the tender offer shall not have been obtained on terms
satisfactory to Expedia in its reasonable judgment;
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Expedia shall not have received the Required Tax Opinion (as
defined in Section 12 below) in respect of the purchase of
shares pursuant to the tender offer (See “Interests of
Directors and Executive Officers; Transactions and Arrangements
Concerning Shares — Transactions and Arrangements
Concerning Shares — Tax Sharing Agreement”);
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Expedia reasonably determines that the completion of the tender
offer and the purchase of the shares may:
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cause the shares to be held of record by fewer than
300 persons, or
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cause the shares to cease to be traded on Nasdaq or to be
eligible for deregistration under the Exchange Act.
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The foregoing conditions are for the sole benefit of Expedia and
may be asserted by Expedia regardless of the circumstances
giving rise to any of these conditions, and may be waived by
Expedia, in whole or in part, at any time and from time to time,
before the expiration date, in its sole discretion.
Expedia’s failure at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any of these
rights, and each of these rights shall be deemed an ongoing
right that may be asserted at any time and from time to time. In
the event that the financing condition is satisfied or waived
less than five business days prior to the scheduled expiration
date of the tender offer, we will extend the tender offer to
ensure that at least five business days remain in the tender
offer following the satisfaction or waiver of the financing
condition. Any determination or judgment by Expedia concerning
the events described above will be final and binding on all
parties.
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8.
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Price
Range of Shares; Dividends.
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The shares of common stock have been listed on Nasdaq under the
ticker symbol “EXPE” since August 9, 2005. The
following table sets forth the high and low sales prices for
Expedia common stock for each of the quarterly periods presented.
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High
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Low
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Fiscal 2005:
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Third Quarter (from August 9,
2005 through September 30, 2005)
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$
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24.52
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$
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18.61
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Fourth Quarter
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26.32
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18.49
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Fiscal 2006:
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First Quarter
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$
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27.55
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$
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17.42
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Second Quarter
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20.55
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13.36
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Third Quarter
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17.28
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12.87
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Fourth Quarter
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21.29
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15.55
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Fiscal 2007:
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First Quarter
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$
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23.34
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$
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19.97
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Second Quarter (through
June 28, 2007)
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29.85
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22.44
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We publicly announced the tender offer prior to the opening of
trading on Nasdaq on June 19, 2007. On June 18, 2007,
the reported closing price of the shares on Nasdaq was $25.50
per share. The average of the reported closing prices of the
shares on Nasdaq over the ten trading days immediately prior to
and including June 18, 2007 was $24.32 per share. On
June 28, 2007, the last trading day prior to the
commencement of the tender offer, the reported closing price of
the common stock on Nasdaq was $29.49. We urge stockholders
to obtain current market quotations for the shares.
We have not historically paid dividends on our common stock or
Class B common stock. Declaration and payment of future
dividends, if any, will be at the discretion of the Board of
Directors and will depend on, among other things, our results of
operations, cash requirements and surplus, financial condition,
share dilution
18
management, legal risks, capital requirements relating to
research and development, investments and acquisitions, and
challenges to our business model and other factors that the
Board of Directors may deem relevant. In addition, our current
bank credit facility limits, and any new bank credit facilities
that we may enter into and other debt securities we may publicly
or privately issue to finance the purchase of shares in the
tender offer may limit, our ability to pay cash dividends under
certain circumstances.
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9.
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Source
and Amount of Funds.
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The tender offer is subject to the receipt of financing by
Expedia. Assuming that 116,666,665 shares are purchased in
the tender offer at a price between $27.50 and $30.00 per share,
the aggregate purchase price will be between approximately
$3.2 billion and $3.5 billion. Expedia anticipates
that it will obtain all of the funds necessary to purchase
shares tendered in the tender offer, and to pay related fees and
expenses, through a mix of (1) the proceeds of new bank
credit facilities (which we would enter into before the
expiration of the tender offer), the public or private placement
of new debt securities,
and/or
additional indebtedness that we expect to incur under our
current bank credit facility (which we would amend before the
expiration of the tender offer), and (2) cash on hand. We
expect to repay any additional indebtedness that Expedia incurs
to purchase tendered shares in the tender offer using cash from
Expedia’s operations and may refinance any such borrowing
from time to time.
Expedia expects that its related fees and expenses for the
tender offer will be approximately $2.6 million, excluding
any fees and expenses related to the financing described above.
Current Bank Credit Facility. On July 8,
2005 we entered into a Credit Agreement, as amended as of
December 7, 2006 and December 18, 2006, among us,
Expedia, Inc., a Washington corporation, Travelscape, Inc., a
Nevada corporation, Hotels.com, a Delaware corporation, and
Hotwire, Inc., a Delaware corporation, as Borrowers; the Lenders
party thereto; Bank of America, N.A., as Syndication Agent;
Wachovia Bank, N.A. and The Royal Bank of Scotland PLC, as
Co-Documentation Agents; JPMorgan Chase Bank, N.A., as
Administrative Agent; and J.P. Morgan Europe Limited, as
London Agent. The credit agreement is a $1.0 billion
five-year unsecured revolving credit facility and is
unconditionally guaranteed by certain of our subsidiaries. The
facility bears interest based on our financial leverage; as of
June 15, 2007 the applicable interest rate was equal to
LIBOR plus 50 basis points. The amount of standby letters of
credit issued under the facility reduces the amount available to
us for borrowing. As of June 15, 2007 there were
approximately $52.6 million of outstanding stand-by letters
of credit issued under the facility, leaving approximately
$947.4 million available for future borrowings. The credit
facility also contains financial covenants consisting of a
maximum leverage ratio and a minimum net worth requirement. We
would not be able to borrow the funds necessary to purchase the
shares subject to the tender offer without first amending or
refinancing the credit facility.
Risks Relating to Higher Leverage. Expedia
expects that the level of its indebtedness after completion of
the tender offer and the related financing transactions will be
substantially greater than Expedia’s historical levels of
indebtedness. Upon completion of the tender offer and assuming
we purchase 116,666,665 shares at the $30 maximum per share
purchase price, Expedia’s indebtedness is expected to be up
to approximately $4.065 billion, compared to approximately
$500 million as of June 15, 2007. See Section
10. This indebtedness could adversely affect Expedia’s
ability to raise additional capital to fund its operations and
react to changes in the economy or our industry. However,
Expedia may also have additional borrowing availability under
its existing bank credit facility
and/or new
revolving credit facilities upon completion of the tender offer.
In deciding whether or not to tender their shares in the tender
offer, stockholders should consider that Expedia’s
substantially higher leverage upon the completion of the tender
offer would subject Expedia to risks, including the following:
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a significant decrease in net operating cash flow or significant
increase in expenses of Expedia could make it difficult for
Expedia to satisfy its debt service requirements or force it to
modify its operations;
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we expect that all or a significant portion of the indebtedness
to be incurred to fund the purchase of shares in the tender
offer, as well as our existing debt, may be secured by pledges
of Expedia’s interests in certain subsidiaries and security
interests in, and mortgages on, substantially all tangible and
intangible assets, reducing Expedia’s ability to obtain
additional financing;
|
19
|
|
|
| |
•
|
Expedia’s ability to obtain additional financing for
working capital, capital expenditures, business development,
future acquisitions, debt service requirements or other purposes
may be impaired or any such financing may not be available on
terms favorable to Expedia;
|
| |
| |
•
|
a substantial portion of cash flow from operations will be
dedicated to interest expense and the payment of principal,
which will reduce the funds that would otherwise be available to
Expedia for its operations and future business opportunities;
|
| |
| |
•
|
the substantial leverage will increase Expedia’s
vulnerability to general economic downturns and adverse industry
conditions and limit its flexibility in planning for, or
reacting to, changes in its business and its industry generally;
and
|
| |
| |
•
|
a substantial portion of Expedia’s borrowings may be at
variable rates of interest, thereby exposing Expedia to the risk
of increased interest rates.
|
20
|
|
|
10.
|
Certain
Financial Information.
|
Historical Financial Information. We
incorporate by reference the financial statements and notes
thereto on pages F-1 through F-46 of our Annual Report on
Form 10-K
for the year ended December 31, 2006. In addition, we
incorporate by reference the financial information included in
Part I Item 1 (beginning on page 2) of our
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007. You should refer to
Section 11 for instructions on how you can obtain copies of
our SEC filings, including filings that contain our financial
statements.
Summary Historical Consolidated Financial
Data. The following table sets forth our summary
historical consolidated financial data for the years ended
December 31, 2006 and December 31, 2005 and the three
month periods ended March 31, 2007 and March 31, 2006,
certain selected ratios for such periods, and our financial
position at March 31, 2007. This financial data has been
derived from, and should be read in conjunction with, our
audited consolidated financial statements and the related notes
filed as part of our Annual Report on
Form 10-K
for the year ended December 31, 2006 and the unaudited
consolidated financial statements and the related notes filed as
part of our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007. Financial data for
the three month periods ended March 31, 2007 and
March 31, 2006, and the selected ratios for such periods,
are unaudited and, in the opinion of our management, include all
adjustments necessary for a fair presentation of the data. The
results of operations for the interim periods are not
necessarily indicative of the results to be expected for the
entire year.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
|
|
(In thousands, except per share and ratio data)
|
|
|
|
|
Consolidated Statements of
Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
550,511
|
|
|
$
|
493,898
|
|
|
$
|
2,237,586
|
|
|
$
|
2,119,455
|
|
|
Operating income
|
|
|
67,334
|
|
|
|
26,242
|
|
|
|
351,329
|
|
|
|
397,052
|
|
|
Other income (expense), net
|
|
|
(9,402
|
)
|
|
|
5,360
|
|
|
|
33,569
|
|
|
|
16,819
|
|
|
Income before income taxes and
minority interest
|
|
|
57,932
|
|
|
|
31,602
|
|
|
|
384,898
|
|
|
|
413,871
|
|
|
Provision for income taxes
|
|
|
(23,612
|
)
|
|
|
(9,658
|
)
|
|
|
(139,451
|
)
|
|
|
(185,977
|
)
|
|
Net income
|
|
|
34,776
|
|
|
|
23,335
|
|
|
|
244,934
|
|
|
|
228,730
|
|
|
Net earnings per share available to
common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.72
|
|
|
$
|
0.68
|
|
|
Diluted
|
|
|
0.11
|
|
|
|
0.06
|
|
|
|
0.70
|
|
|
|
0.65
|
|
|
Shares used in computing earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
307,828
|
|
|
|
345,777
|
|
|
|
338,047
|
|
|
|
336,819
|
|
|
Diluted
|
|
|
323,749
|
|
|
|
365,168
|
|
|
|
352,181
|
|
|
|
349,530
|
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed
charges(a)
|
|
|
5.24
|
x
|
|
|
8.42
|
x
|
|
|
15.16x
|
|
|
|
39.42x
|
|
|
|
|
|
(a) |
|
Earnings included in the calculation of this ratio consist of
income before income taxes and minority interest plus fixed
charges, less interest capitalized. Fixed charges include
interest expense as well as the imputed interest component of
rental expense. |
| |
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
2007
|
|
|
|
|
(In thousands,
|
|
|
|
|
except per share data)
|
|
|
|
|
Consolidated Balance Sheet
Data:
|
|
|
|
|
|
Current assets
|
|
$
|
1,114,657
|
|
|
Total assets
|
|
|
8,258,753
|
|
|
Current liabilities
|
|
|
1,928,712
|
|
|
Long-term debt
|
|
|
500,000
|
|
|
Total stockholders’ equity
|
|
|
5,297,373
|
|
|
Shares outstanding —
common stock
|
|
|
302,879
|
|
|
Book value per share(a)
|
|
|
17.49
|
|
|
|
|
|
(a) |
|
Reflects stockholders’ equity divided by shares outstanding. |
21
Summary Unaudited Pro Forma Consolidated Financial
Data. The following table sets forth summary
unaudited pro forma consolidated financial data for the year
ended December 31, 2006 and the three months ended
March 31, 2007 and certain ratios for such periods. This
summary unaudited pro forma consolidated financial data gives
effect to the purchase of shares pursuant to the tender offer,
as if such purchase had occurred on January 1, 2007 and
2006 for the consolidated statements of income data for the
three months ended March 31, 2007 and for the year ended
December 31, 2006, respectively, and on March 31, 2007
for the consolidated balance sheet data as of March 31,
2007. Such data also assumes that the purchase of shares is
financed with debt on the terms described in the footnotes to
the table below. This information should be read in conjunction
with Summary Historical Consolidated Financial Data and our
audited consolidated financial statements and the related notes
filed as part of our Annual Report on
Form 10-K
for the year ended December 31, 2006 and the unaudited
consolidated financial statements and the related notes filed as
part of our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007. This summary
unaudited pro forma consolidated financial data is not
necessarily indicative of either our financial position or
results of operations that actually would have been attained had
the purchase of shares pursuant to the tender offer and the
related financing been completed at the dates indicated, or will
be achieved in the future. There can be no assurance that we
will secure the necessary financing for the tender offer on
terms acceptable to us or at all. Our future results are subject
to prevailing economic and industry specific conditions and
financial, business and other known and unknown risks and
uncertainties, certain of which are beyond our control. These
factors include, without limitation, those described in this
offer to purchase under “Forward-Looking Statements.”
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2007
|
|
|
Year Ended December 31, 2006
|
|
|
|
|
Actual
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
Actual
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
|
(In thousands, except per share and ratio data)
|
|
|
|
|
Consolidated Statements of
Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
550,511
|
|
|
$
|
—
|
|
|
$
|
550,511
|
|
|
$
|
2,237,586
|
|
|
$
|
—
|
|
|
$
|
2,237,586
|
|
|
Operating income
|
|
|
67,334
|
|
|
|
—
|
|
|
|
67,334
|
|
|
|
351,329
|
|
|
|
—
|
|
|
|
351,329
|
|
|
Other income (expense), net
|
|
|
(9,402
|
)
|
|
|
(73,037
|
)(a)
|
|
|
(82,439
|
)
|
|
|
33,569
|
|
|
|
(291,254
|
)(a)
|
|
|
(257,685
|
)
|
|
Income (loss) before income taxes
and minority interest
|
|
|
57,932
|
|
|
|
(73,037
|
)
|
|
|
(15,105
|
)
|
|
|
384,898
|
|
|
|
(291,254
|
)
|
|
|
93,644
|
|
|
Provision for income taxes
|
|
|
(23,612
|
)
|
|
|
29,769
|
|
|
|
6,157
|
|
|
|
(139,451
|
)
|
|
|
105,523
|
|
|
|
(33,928
|
)
|
|
Net income (loss)
|
|
|
34,776
|
|
|
|
(43,269
|
)
|
|
|
(8,493
|
)
|
|
|
244,934
|
|
|
|
(185,731
|
)
|
|
|
59,203
|
|
|
Net earnings (loss) per share
available to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.11
|
|
|
|
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.72
|
|
|
|
|
|
|
$
|
0.27
|
|
|
Diluted
|
|
|
0.11
|
|
|
|
|
|
|
|
(0.04
|
)
|
|
|
0.70
|
|
|
|
|
|
|
|
0.25
|
|
|
Shares used in computing earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
307,828
|
|
|
|
(116,667
|
)(b)
|
|
|
191,161
|
|
|
|
338,047
|
|
|
|
(116,667
|
)(b)
|
|
|
221,380
|
|
|
Diluted
|
|
|
323,749
|
|
|
|
(116,667
|
)(b)
|
|
|
207,082
|
|
|
|
352,181
|
|
|
|
(116,667
|
)(b)
|
|
|
235,514
|
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges
|
|
|
5.24
|
x
|
|
|
|
|
|
|
0.83
|
x
|
|
|
15.16
|
x
|
|
|
|
|
|
|
1.29x
|
|
|
|
|
|
(a) |
|
Reflects interest expense on $3,564,600,000 in new borrowings
with average terms of approximately seven years at a stated rate
of interest of 8% per annum and amortization of estimated debt
issuance costs of $62,000,000. |
| |
|
(b) |
|
Reflects a reduction of 116,666,665 shares assumed to be
repurchased in the transaction as of the beginning of the
periods presented. |
22
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2007
|
|
|
|
|
Actual
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
|
(In thousands, except per share data)
|
|
|
|
|
Consolidated Balance Sheet
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
1,114,657
|
|
|
$
|
—
|
|
|
$
|
1,114,657
|
|
|
Total assets
|
|
|
8,258,753
|
|
|
|
62,000
|
(a)
|
|
|
8,320,753
|
|
|
Current liabilities
|
|
|
1,928,712
|
|
|
|
35,646
|
(b)
|
|
|
1,964,358
|
|
|
Long-term debt
|
|
|
500,000
|
|
|
|
3,528,954
|
(b)
|
|
|
4,028,954
|
|
|
Total stockholders’ equity
|
|
|
5,297,373
|
|
|
|
(3,502,600
|
)(c)
|
|
|
1,794,773
|
|
|
Shares outstanding —
common stock
|
|
|
302,879
|
|
|
|
(116,667
|
)(d)
|
|
|
186,212
|
|
|
Book value per share
|
|
|
17.49
|
|
|
|
|
|
|
|
9.64
|
|
|
|
|
|
(a) |
|
Reflects deferred debt issuance costs. |
| |
|
(b) |
|
Reflects indebtness of $3,564,600,000 to finance the repurchase
and all related fees, of which $35,646,000 is assumed payable
within one year. |
| |
|
(c) |
|
Reflects the repurchase of 116,666,665 shares at an average
price of $30.00 per share, plus associated transaction fees and
costs of approximately $2,600,000. |
| |
|
(d) |
|
Reflects a reduction of 116,666,665 shares assumed to be
repurchased in the transaction. |
|
|
|
11.
|
Certain
Information Concerning Expedia.
|
Expedia, Inc. is an online travel company, empowering business
and leisure travelers with the tools and information they need
to efficiently research, plan, book and experience travel. We
have created a global travel marketplace used by a broad range
of leisure and corporate travelers and offline retail travel
agents. We make available, on a stand-alone and package basis,
travel products and services provided by numerous airlines,
lodging properties, car rental companies, destination service
providers, cruise lines and other travel products and services.
Our portfolio of brands, which are described below, includes:
Expedia.com, Hotels.com, Hotwire.com, our private label programs
(Worldwide Travel Exchange and Interactive Affiliate Network),
Classic Vacations, Expedia Corporate Travel, eLong and
TripAdvisor. In addition, many of these brands have related
international points of sale.
Our executive offices are located at 3150 139th Avenue
S.E., Bellevue, Washington 98005, telephone number
(425) 679-7200.
Our Internet address is www.expediainc.com for corporate
and investor information. The information contained on our web
site or connected to our web site is not incorporated by
reference into this offer to purchase and should not be
considered part of this offer to purchase.
Additional Information. Expedia is subject to
the information requirements of the Exchange Act, and, in
accordance therewith, files periodic reports, proxy statements
and other information relating to its business, financial
condition and other matters. Expedia is required to disclose in
these proxy statements certain information, as of particular
dates, concerning the Expedia directors and executive officers,
their compensation, securities granted to them, the principal
holders of the securities of Expedia and any material interest
of such persons in transactions with Expedia. Pursuant to
Rule 13e-4(c)(2)
under the Exchange Act, Expedia has filed with the Securities
and Exchange Commission an Issuer Tender Offer Statement on
Schedule TO which includes additional information with
respect to the tender offer. This material and other information
may be inspected at the public reference facilities maintained
by the Securities and Exchange Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549. Copies
of this material can also be obtained by mail, upon payment of
the Securities and Exchange Commission’s customary charges,
by writing to the Public Reference Section at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Securities and
Exchange Commission also maintains a web site on the Internet at
www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission.
23
Results of Operations. Expedia expects to
announce definitive results for the quarter ended June 30,
2007 on or after August 2, 2007 and in any event prior to
the expiration date of the tender offer. Stockholders are
advised to review Expedia’s earnings release when available.
Incorporation by Reference. The rules of the
Securities and Exchange Commission allow us to “incorporate
by reference” information into this document, which means
that we can disclose important information to you by referring
you to another document filed separately with the Securities and
Exchange Commission. These documents contain important
information about us.
| |
|
|
|
SEC Filings (File No.
000-51447)
|
|
Period or Date Filed
|
|
|
|
|
|
|
|
Annual Report on
Form 10-K
|
|
Year ended December 31, 2006
(including information specifically incorporated by reference
into the Annual Report on Form 10-K from Expedia’s
definitive proxy statement filed on April 30, 2007)
|
|
Quarterly Report on
Form 10-Q
|
|
Quarter ended March 31, 2007
|
|
Current Reports on
Form 8-K
|
|
Filed January 25, 2007, February
15, 2007, May 8, 2007, June 19, 2007 and June 27, 2007
|
We incorporate by reference the documents listed above. You may
request a copy of these filings, at no cost, by writing or
telephoning us at our principal executive offices at the
following address: Investor Relations Department, Expedia, Inc.,
3150 139th Avenue S.E., Bellevue, Washington 98005,
telephone number
(425) 679-7200.
Please be sure to include your complete name and address in the
request.
|
|
|
12.
|
Interests
of Directors and Executive Officers; Transactions and
Arrangements Concerning Shares.
|
Interests of Directors and Executive
Officers. As of June 15, 2007, Expedia had
issued and outstanding 278,170,459 shares of common stock,
25,599,998 shares of Class B common stock,
846 shares of Series A preferred stock convertible
into 846 shares of common stock, outstanding warrants to
purchase 34,641,544 shares of common stock and outstanding
options to purchase 21,497,131 shares of common stock. The
116,666,665 shares Expedia is offering to purchase under
the tender offer represent approximately 42% of the shares of
common stock outstanding as of June 15, 2007 and
approximately 33% of the shares of common stock assuming
exercise of all outstanding and exercisable warrants and options
and the conversion of all outstanding shares of Class B
common stock and Series A preferred stock.
As of June 15, 2007, Expedia’s directors and executive
officers as a group (15 individuals) beneficially owned an
aggregate of 86,396,527 shares of common stock,
representing approximately 27% of the outstanding shares of
common stock assuming conversion or exercise of certain Expedia
equity securities as described below. The directors and
executive officers of Expedia are entitled to participate in the
tender offer on the same basis as all other stockholders.
However, they and Liberty Media have advised Expedia that they
do not intend to tender any shares in the tender offer. To
Expedia’s knowledge, none of its affiliates intends to
tender any shares in the tender offer.
The following table presents information as of June 15,
2007 relating to the beneficial ownership of Expedia’s
capital stock by (1) each director and executive officer of
Expedia, (2) all directors and executive officers of Expedia as
a group and (3) Liberty Media. Except as set forth in the
table, such persons listed in the table may be contacted at
Expedia’s corporate headquarters at 3150 139th Avenue
S.E., Bellevue, Washington 98005.
For each listed person, the number of shares of Expedia common
stock and Class B common stock and the percentage of each
such class listed assume the conversion or exercise of certain
Expedia equity securities, as described below, owned by such
person, but do not assume the conversion or exercise of any
equity securities owned by any other person, entity or group.
Shares of Expedia Class B common stock may, at the option
of the holder, be converted on a one-for-one basis into shares
of Expedia common stock. For each listed person, the number of
shares of Expedia common stock and Class B common stock and
the percentage of each such class listed include shares of
Expedia common stock and Class B common stock that may be
acquired by such person, entity or group on the conversion or
exercise of equity securities, such as stock options and
warrants, that can be converted or exercised, and restricted
stock units that have or will have vested, within 60 days
of June 15, 2007.
24
The percentage of votes for all classes of Expedia’s
capital stock is based on one vote for each share of common
stock, 10 votes for each share of Class B common stock and
two votes for each share of Series A preferred stock.
The last two columns of the table below reflect ownership and
voting percentages after giving effect to the tender offer,
assuming Expedia purchases 116,666,665 shares and that
Expedia’s directors and executive officers and Liberty
Media do not tender any shares.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
Percent of Votes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
(All Classes)
|
|
|
|
|
Expedia Common Stock
|
|
|
Expedia Class B Common Stock
|
|
|
Percent of Votes
|
|
|
After Tender
|
|
|
After Tender
|
|
|
Beneficial Owner
|
|
Shares
|
|
|
%
|
|
|
Shares
|
|
|
%
|
|
|
(All Classes)
|
|
|
Offer(+)
|
|
|
Offer(+)
|
|
|
|
|
Liberty Media Corporation 12300
Liberty Blvd. Englewood, CO 80112
|
|
|
69,219,787
|
(1)
|
|
|
22.79
|
%
|
|
|
25,599,998
|
(2)
|
|
|
100
|
%
|
|
|
56.09
|
%
|
|
|
37.00
|
%
|
|
|
71.76
|
%
|
|
Barry Diller
|
|
|
84,345,775
|
(3)
|
|
|
26.92
|
%
|
|
|
25,599,998
|
(4)
|
|
|
100
|
%
|
|
|
57.89
|
%
|
|
|
42.90
|
%
|
|
|
73.71
|
%
|
|
Victor A. Kaufman
|
|
|
839,732
|
(5)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
Dara Khosrowshahi
|
|
|
693,756
|
(6)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
A. George “Skip” Battle
|
|
|
254,703
|
(7)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
Simon J. Breakwell
|
|
|
74,330
|
(8)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
Jonathan L. Dolgen
|
|
|
19,228
|
(9)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
William R. Fitzgerald
|
|
|
0
|
(10)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
David Goldhill
|
|
|
7,500
|
(11)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
Peter M. Kern
|
|
|
7,500
|
(11)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
John C. Malone
|
|
|
0
|
(10)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Michael B. Adler
|
|
|
21,311
|
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
Kathleen K. Dellplain
|
|
|
121,396
|
(12)
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
Burke F. Norton
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Paul Onnen
|
|
|
9,360
|
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
Patricia L. Zuccotti
|
|
|
1,936
|
|
|
|
*
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
All executive officers and
directors as a group (15 persons)
|
|
|
86,396,527
|
(13)
|
|
|
27.42
|
%
|
|
|
25,599,998
|
|
|
|
100
|
%
|
|
|
58.08
|
%
|
|
|
43.55
|
%
|
|
|
73.88
|
%
|
|
|
|
|
(+) |
|
Assuming Expedia purchases 116,666,665 shares pursuant to
the tender offer and that Expedia’s directors and executive
officers and Liberty Media do not tender. |
| |
|
(*) |
|
The percentage of shares beneficially owned does not exceed 1%
of the class. |
| |
|
(1) |
|
Based on information filed on Schedule 13D/A with the SEC
on June 28, 2007 by Liberty Media, Mr. Diller and the
BDTV Entities. Consists of (i) 43,619,789 shares of
Expedia common stock held by Liberty Media,
(ii) 1,176,594 shares of Class B common stock
held by Liberty Media and (iii) 24,423,404 shares of
Class B common stock held by the BDTV Entities. The
“BDTV Entities” consist of BDTV Inc., BDTV II Inc.,
BDTV III Inc. and BDTV IV Inc. Pursuant to a Stockholders
Agreement, dated as of August 9, 2005 by and between
Liberty Media and Mr. Diller (the “Stockholders
Agreement”) described below, Mr. Diller generally has
the right to vote all of the shares of Expedia common stock and
Class B common stock held by Liberty Media and the BDTV
Entities. |
| |
|
(2) |
|
Consists of 1,176,594 shares of Expedia Class B common
stock held by Liberty Media and 24,423,404 shares of
Expedia Class B common stock held by the BDTV Entities.
Pursuant to the Stockholders Agreement, Mr. Diller
generally has the right to vote all of the shares of Expedia
common stock and Class B common stock held by Liberty Media
and the BDTV Entities. |
| |
|
(3) |
|
Based on information filed on Schedule 13D/A with the SEC
on June 28, 2007 by Liberty Media, Mr. Diller and the
BDTV Entities. Consists of (i) 5,441,618 shares of
Expedia common stock owned by Mr. Diller, (ii) options
to purchase 9,500,000 shares of Expedia common stock held
by Mr. Diller, (iii) 184,370 shares of Expedia
common stock held by a private foundation as to which
Mr. Diller disclaims beneficial ownership,
(iv) 24,423,404 shares of Expedia Class B common
stock held by the BDTV Entities (see footnote 1 above), |
25
|
|
|
|
|
|
(v) 43,619,789 shares of Expedia common stock held by
Liberty Media (see footnote 1 above) and
(vi) 1,176,594 shares of Expedia Class B common
stock held by Liberty Media (see footnote 1 above). Pursuant to
the Stockholders Agreement, Mr. Diller generally has the
right to vote all of the shares of Expedia common stock and
Class B common stock held by Liberty Media and the BDTV
Entities. Excludes shares of Expedia common stock and options to
purchase shares of Expedia common stock held by
Diane Von Furstenberg, Mr. Diller’s spouse,
as to which Mr. Diller disclaims beneficial ownership. |
| |
|
(4) |
|
Consists of 1,176,594 shares of Expedia Class B common
stock held by Liberty Media and 24,423,404 shares of
Expedia Class B common stock held by the BDTV Entities.
Pursuant to the Stockholders Agreement, Mr. Diller
generally has the right to vote all of the shares of Expedia
Class B common stock held by Liberty Media and the BDTV
Entities. |
| |
|
(5) |
|
Consists of 8,482 shares of common stock and options to
purchase 831,250 shares of common stock that are
exercisable within 60 days of June 15, 2007. |
| |
|
(6) |
|
Consists of (i) 145,560 shares of common stock and
(ii) options to purchase 548,196 shares of common
stock that are exercisable within 60 days of June 15,
2007. |
| |
|
(7) |
|
Consists of (i) 5,000 shares of common stock held by
Mr. Battle, (ii) options to purchase
232,137 shares of common stock that are exercisable within
60 days of June 15, 2007, (iii) 2,500 restricted
stock units that vest within 60 days of June 15, 2007,
(iv) 9,999 shares of common stock held by the Battle
Family Foundation, as to which Mr. Battle disclaims
beneficial ownership, and (v) 5,067 shares of common
stock held by Mr. Battle’s wife as custodian under
CAUTMA for Catherine McNelley, as to which Mr. Battle
disclaims beneficial ownership. |
| |
|
(8) |
|
Consists of 23,399 shares of common stock and the following
securities that are exercisable within 60 days of
June 15, 2007: (i) options to purchase
33,763 shares of common stock, and (ii) warrants to
purchase 17,168 shares of common stock. |
| |
|
(9) |
|
Consists of (i) 5,000 shares of common stock,
(ii) options to purchase 11,261 shares of common stock
that are exercisable within 60 days of June 15, 2007,
(iii) 2,500 restricted stock units that vest within
60 days of June 15, 2007, and
(iv) 467 shares of common stock held indirectly by a
charitable trust, of which Mr. Dolgen is a trustee and as
to which Mr. Dolgen disclaims beneficial ownership. |
| |
|
(10) |
|
Excludes shares of Expedia common stock and Class B common
stock owned by Liberty Media, as to which
Messrs. Fitzgerald and Malone disclaim beneficial ownership. |
| |
|
(11) |
|
Consists of 5,000 shares of common stock and 2,500
restricted stock units that vest within 60 days of
June 15, 2007. |
| |
|
(12) |
|
Consists of 21,767 shares of common stock and the following
securities that are exercisable within 60 days of
June 15, 2007: (i) options to purchase
93,068 shares of common stock, and (ii) a warrant to
purchase 6,561 shares of common stock. |
| |
|
(13) |
|
Consists of 49,513,125 shares of common stock,
25,599,998 shares of Class B common stock and the
following securities that vest or are exercisable within
60 days of June 15, 2007: (i) options to purchase
11,249,675 shares of common stock, (ii) warrants to
purchase 23,729 shares of common stock, and
(iii) 10,000 restricted stock units. |
Recent Securities Transactions. Based on
Expedia’s records and information provided to Expedia by
its directors, executive officers, associates and subsidiaries,
neither Expedia, nor, to the best of Expedia’s knowledge,
any directors or executive officers of Expedia or any associates
or subsidiaries of Expedia, has effected any transactions in
shares during the 60-day period before the date hereof, except
as follows:
|
|
|
| |
•
|
On June 25, 2007, Jonathan L. Dolgen, a member of
Expedia’s Board of Directors, exercised options to purchase
11,261 shares at an exercise price of $6.92 per share,
which Mr. Dolgen paid in cash. This exercise is not
reflected in the beneficial ownership table above.
|
| |
| |
•
|
Upon their reelection to the Board of Directors at
Expedia’s annual meeting of stockholders on June 6,
2007, each of the following non-employee directors received a
grant of 10,254 restricted stock units, which vest in three
equal installments commencing on the first anniversary of the
grant date: Mr. Battle, Mr. Breakwell,
Mr. Dolgen, Mr. Goldhill and Mr. Kern (the
“Non-Employee Directors”).
|
26
|
|
|
| |
•
|
On June 6, 2007, Dara Khosrowshahi, Expedia’s Chief
Executive Officer, received a grant of 100,000 restricted stock
units, which vest in five equal installments commencing on the
first anniversary of the grant date, subject to satisfaction of
certain performance-related conditions.
|
| |
| |
•
|
On June 1, 2007, Kathleen K. Dellplain, Expedia’s
Executive Vice President, Human Resources, exercised options to
purchase 7,271 shares at an exercise price of $3.69 per
share, of which 3,361 shares valued at $24.03, the closing
fair market value on the prior day, were withheld in
satisfaction of the exercise price and tax withholding
requirements on the exercise of the stock options.
|
| |
| |
•
|
On May 24, 2007, each of the Non-Employee Directors
received 2,500 shares of common stock upon vesting of
restricted stock units granted in connection with their service
on the Expedia Board of Directors.
|
| |
| |
•
|
Upon vesting of certain restricted stock units on May 16,
2007, Michael B. Adler, Expedia’s Chief Financial Officer,
received 27,570 shares of common stock, 7,293 of which were
withheld in satisfaction of tax withholding requirements.
|
| |
| |
•
|
Upon vesting of certain restricted stock units on May 9,
2007, Paul Onnen, Expedia’s Executive Vice President,
Technology, received 5,069 shares of common stock, 1,341 of
which were withheld in satisfaction of tax withholding
requirements.
|
Transactions and Arrangements Concerning Shares.
Warrants. Expedia has fully vested stock warrants
with expiration dates through February 2012 outstanding, certain
of which trade on Nasdaq under the symbols “EXPEW” and
“EXPEZ.” Each stock warrant is exercisable for a
certain number of shares of our common stock or a fraction
thereof. As of June 15, 2007, we had approximately
58.5 million warrants outstanding with a weighted average
exercise price of $22.33, which if exercised in full would
entitle holders to acquire 34.6 million of our common
shares. These warrants included:
|
|
|
| |
•
|
EXPEW Warrants. Each EXPEW warrant entitles
its holder to purchase one half of one share of Expedia common
stock at an exercise price equal to $15.61 per warrant. Each
EXPEW warrant may be exercised on any business day on or prior
to February 4, 2009. The warrants trade on Nasdaq under the
symbol “EXPEW.” As of June 15, 2007, there were
14.6 million EXPEW warrants outstanding.
|
| |
| |
•
|
EXPEZ Warrants. Each EXPEZ warrant entitles
its holder to purchase 0.969375 shares of Expedia common
stock at an exercise price equal to $11.56 per warrant. The
exercise price must be paid in cash. Each EXPEZ warrant may be
exercised on any business day on or prior to February 4,
2009. These warrants trade on Nasdaq under the symbol
“EXPEZ.” As of June 15, 2007, there were
11.4 million EXPEZ warrants outstanding.
|
| |
| |
•
|
VUE Warrants. Each Tranche 1 and
Tranche 2 VUE warrant entitles its holder to purchase one
half of a share of Expedia common stock at a weighted average
exercise price of $12.79. The exercise price must be paid in
cash. Each VUE warrant may be exercised on any business day on
or prior to May 7, 2012. As of June 15, 2007, there
were 32.2 million VUE warrants outstanding.
|
| |
| |
•
|
Integrated Warrants. Pursuant to the
separation agreement (the “separation agreement”)
entered into with IAC/InterActiveCorp (“IAC”), Expedia
has issued into an escrow account a number of shares of Expedia
common stock sufficient to satisfy the obligation for future
delivery of Expedia common stock to the holders of warrants
initially assumed or issued by IAC prior to the spin-off of
Expedia from IAC in August 2005 (the “spin-off”) who
elect to exercise them. Under the terms of the escrow agreement,
any such shares of Expedia common stock that are not delivered
to exercising warrant holders will be returned to Expedia upon
the expiration of the warrants in accordance with their terms.
As of June 15, 2007, Expedia was obligated to deliver up to
42,669 shares of Expedia common stock to IAC pursuant to
the separation agreement and the escrow agreement in connection
with the exercise of these warrants for a weighted average
exercise price per share equal to $21.43. The expiration dates
of these warrants range from November 7, 2009 to
May 19, 2010.
|
Obligations Relating to the Ask Jeeves
Notes. Under the separation agreement,
Expedia contractually assumed IAC’s obligation to deliver
Expedia common stock to the holders (upon conversion) of certain
Ask Jeeves, Inc. Zero Coupon Convertible Notes Due June 1,
2008 assumed by IAC in connection with the acquisition of Ask
27
Jeeves, Inc. Upon notice of conversion, Expedia is obligated to
deliver shares of Expedia common stock to IAC for delivery to
the holders of Ask Jeeves Notes, or deliver cash in equal value
in lieu of issuing such shares. If Expedia elects to issue cash
rather than shares, the holder may revoke its notice of
conversion. Pursuant to an escrow agreement entered into with
The Bank of New York, Expedia has deposited into an escrow
account a number of its shares of common stock sufficient to
satisfy its obligations for future delivery of Expedia shares.
Any such shares of Expedia common stock placed in escrow that
are not delivered to converting holders of notes will be
returned to Expedia at the maturity of the notes. As of
June 15, 2007, Expedia could be required to deliver up to
500,000 shares of common stock pursuant to the separation
agreement and the escrow agreement in connection with the
conversion of these notes.
Tax Sharing Agreement. IAC and Expedia
entered into a tax sharing agreement in connection with the
spin-off. The tax sharing agreement governs IAC’s and
Expedia’s respective rights, responsibilities and
obligations after the spin-off with respect to taxes for the
periods ending on or before the spin-off. Under the tax sharing
agreement Expedia generally (i) may not take (or fail to
take) any action that would cause any representations,
information or covenants in the separation documents concerning
the spin-off or documents relating to the tax opinion concerning
the spin-off to be untrue, (ii) may not take (or fail to
take) any action that would cause the spin-off to lose its tax
free status, (iii) may not sell, issue, redeem or otherwise
acquire any of its equity securities (or equity securities of
members of its group), except in specified transactions (not
including the purchase of shares pursuant to the tender offer),
for a period of 25 months following the spin-off and
(iv) may not, other than in the ordinary course of
business, sell or otherwise dispose of a substantial portion of
its assets, liquidate, merge or consolidate with any other
person for a period of 25 months following the spin-off.
During that period, Expedia may take some actions prohibited by
these covenants if it provides IAC with an Internal Revenue
Service ruling or an unqualified opinion of counsel to the
effect that these actions will not affect the tax free nature of
the spin-off, in each case satisfactory to IAC in its sole and
absolute discretion (such an opinion of counsel satisfactory to
IAC, a “Required Tax Opinion”). Notwithstanding the
receipt of any such Internal Revenue Service ruling or opinion,
Expedia must indemnify IAC for any taxes and related losses
resulting from (i) any act or failure to act described in
the covenants above, (ii) any acquisition of equity
securities or assets of Expedia or any member of its group, and
(iii) any breach by Expedia or any member of its group of
representations in the separation documents between IAC and
Expedia or the documents relating to the tax opinion concerning
the spin-off. Expedia’s obligation to accept for payment,
and pay for, shares tendered pursuant to the tender offer is
conditioned on its receipt of a Required Tax Opinion in respect
of the purchase of shares pursuant to the tender offer. See
Section 7.
Stockholders Agreement. Subject to the
terms of a Stockholders Agreement between Mr. Diller and
Liberty Media, Mr. Diller holds an irrevocable proxy to
vote shares of Expedia common stock and Class B common
stock beneficially owned by Liberty Media. By virtue of the
proxy, as well as through shares owned by Mr. Diller
directly, Mr. Diller is effectively able to control the
outcome of all matters submitted to a vote or for the consent of
Expedia’s stockholders (other than with respect to the
election by the holders of Expedia common stock of 25% of the
members of Expedia’s Board of Directors and matters as to
which Delaware law requires a separate class vote).
In addition, until the later of (1) the date
Mr. Diller no longer serves as Chairman of Expedia and
(2) the date Mr. Diller no longer holds the proxy to
vote Liberty Media’s shares of Expedia described above (or
upon Mr. Diller becoming disabled, if that occurs first),
and subject to the other provisions of the Stockholders
Agreement, neither Liberty Media nor Mr. Diller can
transfer shares of common stock or Class B common stock,
other than:
|
|
|
| |
•
|
transfers by Mr. Diller to pay taxes relating to the
granting, vesting
and/or
exercise of stock options to purchase common stock of Expedia;
|
| |
| |
•
|
transfers to each party’s respective affiliates;
|
| |
| |
•
|
pledges relating to financings, subject to certain
conditions; and
|
| |
| |
•
|
transfers of options or common stock in connection with
“cashless exercises” of Mr. Diller’s options
to purchase shares of common stock.
|
28
The restrictions on transfer are subject to a number of
exceptions (which exceptions are generally subject to the rights
of first refusal described below):
|
|
|
| |
•
|
either of Liberty Media or Mr. Diller may transfer shares
of common stock or Class B common stock to an unaffiliated
third party, subject to tag-along rights described below;
|
| |
| |
•
|
either of Liberty Media or Mr. Diller may transfer shares
of common stock or Class B common stock so long as, in the
case of Mr. Diller, he continues to beneficially own at
least 2,200,000 shares of common stock and Class B
common stock (including stock options) and, in the case of
Liberty Media, Liberty Media continues to beneficially own
2,000,000 shares of common stock and Class B common
stock, and in the case of a transfer of an interest in, or of
any of the shares of common stock or Class B common stock
held by, specified entities referred to as the “BDTV
Limited Entities,” after such transfer, Liberty Media and
Mr. Diller collectively control at least 50.1% of the total
voting power of Expedia; and
|
| |
| |
•
|
either of Liberty Media or Mr. Diller may transfer shares
of common stock or Class B common stock so long as the
transfer complies with the requirements of Rule 144 or
Rule 145 under the Securities Act, and, in the case of a
transfer of an interest in, or of any of the shares of common
stock or Class B common stock held by, the BDTV Limited
Entities, after such transfer, Liberty Media and Mr. Diller
collectively control at least 50.1% of the total voting power of
Expedia.
|
Each of Mr. Diller and Liberty Media will be entitled to a
right to “tag-along” (i.e., participate on a pro rata
basis) on sales by the other of shares of common stock or
Class B common stock to any third party. Liberty Media will
not have a tag-along right in the event of:
|
|
|
| |
•
|
sales by Mr. Diller of up to 2,000,000 shares of
common stock or Class B common stock within any rolling
twelve-month period;
|
| |
| |
•
|
transfers by Mr. Diller to pay taxes relating to the granting,
vesting and/or exercise of stock options to purchase shares of
common stock or transfers in connection with “cashless
exercises” of Mr. Diller’s options to purchase shares
of common stock;
|
| |
| |
•
|
specified “brokers’ transactions,” as defined
under the Securities Act, referred to as “market
sales;” or
|
| |
| |
•
|
generally, when Mr. Diller no longer serves as Chairman of
Expedia.
|
Mr. Diller will not have a tag-along right with respect to
hedging transactions and stock lending transactions related
thereto effected by Liberty Media, in each case meeting certain
requirements, or market sales by Liberty Media.
Each of Mr. Diller and Liberty Media has a right of first
refusal in the case of a proposed transfer by the other of
shares of Class B common stock of Expedia to a third party.
If either Liberty Media or Mr. Diller proposes to transfer
shares of Class B common stock, the other will be entitled
to swap any shares of common stock it or he owns for such shares
of Class B common stock (subject to the rights of first
refusal described above). To the extent there remain shares of
Class B common stock that the selling stockholder would
otherwise transfer to a third party, such shares must first be
converted into shares of common stock. This restriction does not
apply to, among other specified transfers, transfers among the
parties and their affiliates.
In connection with the spin-off, Mr. Diller and Liberty
Media agreed that the BDTV entities would hold shares of common
stock and Class B common stock received by each BDTV entity
as a result of the spin-off. Mr. Diller and Liberty Media
will continue to have substantially similar arrangements with
respect to the voting control and ownership of the equity of
each BDTV entity, which together hold a substantial majority of
the shares of Class B common stock. These arrangements
effectively provide that Mr. Diller controls the voting of
Expedia securities held by these entities, other than with
respect to certain actions by Expedia, and Liberty Media retains
substantially all of the equity interest in such entities.
Liberty Media may purchase Mr. Diller’s nominal equity
interest in these entities for a fixed price.
Mr. Diller’s and Liberty Media’s rights and
obligations under the Stockholders Agreement generally terminate
at such time as, in the case of Mr. Diller, he no longer
beneficially owns at least 2,200,000 shares of common stock
and Class B common stock (including stock options) and, in
the case of Liberty Media, Liberty Media no longer
29
beneficially owns at least 2,000,000 shares of common stock
and Class B common stock. Liberty Media’s tag-along
rights and obligations terminate at such time as Liberty Media
ceases to beneficially own at least 5% of the total equity
securities of Expedia. In calculating Liberty Media’s
beneficial ownership of shares of common stock and shares of
Class B common stock of Expedia, Liberty Media will be
deemed to own all shares of common stock and Class B common
stock held by the BDTV Entities. In addition,
Mr. Diller’s rights under the Stockholders Agreement
will terminate upon the later of (1) the date
Mr. Diller ceases to serve as Chairman of Expedia or
becomes disabled and (2) the date Mr. Diller no longer
holds a proxy to vote the shares of Expedia owned by Liberty
Media.
Governance Agreement. Liberty Media,
Expedia and Mr. Diller are parties to a Governance
Agreement dated as of August 9, 2005, as amended on
June 19, 2007 in connection with the announcement of the
tender offer, pursuant to which, among other things:
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Liberty Media has the right to nominate up to 20% of the number
of directors of Expedia (rounded up to the next whole number if
the number of directors is not an even multiple of five) so long
as Liberty Media beneficially owns at least 33,651,963 equity
securities of Expedia (and so long as Liberty Media’s
ownership percentage is at least equal to 15% of the total
equity securities of Expedia); and
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Liberty Media has the right to nominate one director of Expedia
so long as Liberty Media beneficially owns at least 22,434,642
equity securities of Expedia (and so long as Liberty Media owns
at least 5% of the total equity securities of Expedia).
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For so long as certain conditions relating, among other things,
to ownership are met, Expedia has agreed that, without the prior
approval of Liberty Media
and/or
Mr. Diller, as applicable, it will not engage in any
transaction that would result in Liberty Media or
Mr. Diller having to divest any part of their interests in
Expedia or any other material assets, or that would render any
such ownership illegal or would subject Mr. Diller or
Liberty Media to any fines, penalties or material additional
restrictions or limitations. In addition, for so long as such
ownership and other conditions are met, in the event that
Expedia or any of its subsidiaries incurs any new obligations
for borrowed money within the definition of “total
debt” set forth in the Governance Agreement (other than in
respect of specified refinancings) (“Incurred Debt”),
if Expedia’s “total debt ratio” (giving effect to
such new obligations) equals or exceeds 8:1, and for so long as
such ratio continues to equal or exceed 8:1, Expedia may not
take certain specified actions without the prior approval of
Liberty Media
and/or
Mr. Diller. These actions include, among other
transactions, making material amendments to the certificate of
incorporation or bylaws of Expedia, adopting any stockholder
rights plan that would adversely affect Liberty Media or
Mr. Diller, as applicable, and granting additional consent
rights to a stockholder of Expedia. If the Incurred Debt is
incurred by Expedia or a subsidiary in connection with the
acquisition of a business, the calculation of Expedia’s
“total debt ratio” takes into account certain debt and
cash of the acquired business and also takes into account twelve
months of the EBITDA (as defined in the Governance Agreement) of
the acquired business.
In the event that Expedia issues or proposes to issue any shares
of common stock or Class B common stock (with certain
limited exceptions) including shares issued upon exercise,
conversion or exchange of options, warrants and convertible
securities, Liberty Media will have preemptive rights that
entitle it to purchase a number of common shares so that Liberty
Media will maintain the identical ownership interest in Expedia
(subject to certain adjustments) that Liberty Media had
immediately prior to such issuance or proposed issuance (but not
in excess of a specified percentage). Any purchase by Liberty
Media will be allocated between common stock and Class B
common stock in the same proportion as the issuance or issuances
giving rise to the preemptive right, except to the extent that
Liberty Media opts to acquire shares of common stock in lieu of
shares of Class B common stock.
Liberty Media and Mr. Diller are entitled to customary,
transferable registration rights with respect to common stock
owned by them. Liberty Media is entitled to four demand
registration rights and Mr. Diller is entitled to three
demand registration rights. Expedia will pay the costs
associated with such registrations (other than underwriting
discounts, fees and commissions). Expedia will not be required
to register shares of its common stock if a stockholder could
sell the shares in the quantities proposed to be sold at such
time in one transaction pursuant to Rule 144 promulgated
under the Securities Act or under another comparable exemption
from registration.
Generally, the Governance Agreement will terminate:
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with respect to Liberty Media, at such time that Liberty Media
beneficially owns equity securities representing less than 5% of
the total equity securities of Expedia; and
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with respect to Mr. Diller, at the later of (1) the
date Mr. Diller ceases to be the Chairman of Expedia or
becomes disabled and (2) the date Mr. Diller no longer
holds a proxy to vote the shares of Liberty Media (as described
above).
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Indenture Governing Expedia, Inc.’s
7.456% Senior Notes due 2018. In August
2006, Expedia privately placed $500 million of senior
unsecured notes due 2018 pursuant to an indenture entered into
among The Bank of New York, as trustee, Expedia and its
subsidiary guarantors from time to time party thereto, and in
March 2007, completed an offer to exchange these notes for
registered notes having substantially the same financial terms
and covenants as the original notes (the unregistered notes and
registered notes, collectively, the “notes”). The
notes bear a fixed rate interest of 7.456% with interest payable
semi-annually in February and August of each year, beginning in
February 2007. The notes are repayable in whole or in part on
August 15, 2013, at the option of the holder of such notes,
at 100% of the principal amount plus accrued interest. Expedia
may redeem the notes in accordance with the terms of the
indenture, in whole or in part at any time at its option. The
notes are senior unsecured obligations guaranteed by certain
domestic Expedia subsidiaries and rank equally in right of
payment with all of our existing and future unsecured and
unsubordinated obligations. The notes include covenants that,
among other things, limit Expedia’s ability to
(i) incur liens, (ii) enter into sale and leaseback
transactions and (iii) merge, consolidate or sell
substantially all of its assets. In the event that Expedia
incurs indebtedness secured by liens on its properties or
assets, the indenture requires Expedia, subject to certain
exceptions, to equally and ratably secure the notes.
Board Compensation Arrangements Involving Expedia
Securities. Each director of Expedia who is
not an employee of Expedia or any of its businesses or
affiliates or a Liberty Media nominee receives an annual
retainer of $45,000. In addition, each qualifying director
receives a grant of restricted stock units with a value of
$250,000 (based on the closing price of Expedia’s common
stock on Nasdaq on the day prior to the grant), upon such
director’s initial election to office and annually
thereafter on the date of Expedia’s annual meeting of
stockholders at which the director is re-elected. These
restricted stock units vest in three equal annual installments
commencing on the first anniversary of the grant date. In
addition, each member of the audit committee receives an annual
retainer of $20,000 and each member of the compensation
committee receives an annual retainer of $15,000. The chairman
for each of the audit and compensation committees receives an
additional annual retainer of $10,000. Expedia also reimburses
directors for all reasonable expenses incurred by directors as a
result of attendance at meetings.
Under Expedia’s Non-Employee Director Deferred Compensation
Plan, Non-Employee Directors may defer all or a portion of their
annual retainer and all of their meeting attendance fees.
Eligible directors who defer their directors’ fees can
elect to have such deferred fees (i) applied to the
purchase of share units, representing the number of shares of
Expedia common stock that could have been purchased on the
relevant date, or (ii) credited to a cash fund. If any
dividends are paid on Expedia common stock, dividend equivalents
will be credited on the share units. The cash fund will be
credited with deemed interest at an annual rate equal to the
weighted-average prime or base lending rate of The Chase
Manhattan Bank (or successor thereto). Upon ceasing to be a
member of the Expedia board, a director will receive
(1) with respect to share units, such number of shares of
Expedia common stock as the share units represent and
(2) with respect to the cash fund, a cash payment. Payments
upon ceasing to be a member of the Expedia board will be made in
either one lump sum or up to five installments, as elected by
the eligible director at the time of the deferral election.
Officer and Employee Compensation Arrangements Involving
Expedia Securities. 401(k)
Plan. Expedia maintains the Expedia Retirement
Savings Plan, for which Fidelity Management Trust Company
serves as trustee under a Trust Agreement, entered into as
of August 15, 2005, between a wholly-owned subsidiary of
Expedia that serves as plan administrator and the trustee.
Participating employees may contribute up to 16% of their
eligible compensation, but not more than statutory limits.
Expedia makes a matching contribution each pay period equal to
50% of a participant’s contributions up to a 6%
contribution rate, and we may make additional annual profit
sharing contributions. Matching contributions are invested
proportionate to each participant’s voluntary contributions
in the investment options provided under the plan. Investment
options in the plan include Expedia common stock, but neither
the participant nor our matching contributions are required to
be invested in Expedia common stock.
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2005 Stock and Annual Incentive
Plan. Expedia’s 2005 Stock and Annual
Incentive Plan (the “Expedia 2005 Plan”) provides for
grants of restricted stock, restricted stock awards
(“RSA”), restricted stock units (“RSUs”),
stock options and other stock-based awards to directors,
officers, employees and consultants pursuant to award agreements
to be entered into from time to time with beneficiaries of the
awards. Expedia issues new shares to satisfy the exercise or
release of stock-based awards. RSUs, which are awards in the
form of phantom shares or units that are denominated in a
hypothetical equivalent number of shares of Expedia common
stock, are Expedia’s primary form of stock-based award. As
of June 15, 2007, Expedia had approximately
4.5 million shares of common stock reserved for new
stock-based awards under the Expedia 2005 Plan. As of
June 15, 2007, Expedia had approximately 8.6 million
RSUs outstanding, 4,400 RSAs outstanding and stock options
with respect to 21.5 million shares of Expedia common stock.
Unless otherwise provided by the Compensation Committee of the
Board of Directors in an award agreement (and with respect to
such awards granted by IAC prior to the spin-off and converted
into Expedia awards as part of the spin-off, only if provided in
an applicable award agreement or in the IAC Long Term Incentive
Plan under which such converted award was originally granted),
in the event of a “change in control” of Expedia, in
the case of officers of Expedia (and not the company’s
subsidiaries) who are Senior Vice Presidents and above as of the
time of the change in control and, in the case of other
employees of Expedia if provided by the Compensation Committee
in an award agreement (i) any stock appreciation rights and
stock options outstanding as of the date of the change in
control which are not then exercisable and vested will become
fully exercisable and vested, (ii) the restrictions and
deferral limitations applicable to RSAs will lapse and the
restricted stock underlying the awards will become free of all
restrictions and fully vested, (iii) all RSUs will be
considered to be earned and payable in full and any deferral or
other restrictions will lapse and such RSUs will be settled in
cash or shares of Expedia common stock as promptly as
practicable and (iv) bonus awards may be paid out, in whole
or in part, in the discretion of the Compensation Committee,
notwithstanding whether performance goals have been achieved. In
addition, in the event that, during the two-year period
following a change in control, a plan participant’s
employment is terminated other than for cause or disability or a
plan participant resigns for good reason, (i) any stock
appreciation rights and stock options outstanding as of the date
of the change in control will become fully exercisable and
vested and will remain exercisable for the greater of
(a) the period that they would remain exercisable absent
the change in control provision and (b) the lesser of the
expiration of the term of such stock appreciation right or stock
option or one year following such termination of employment,
(ii) the restrictions and deferral limitations applicable
to RSAs will lapse and the restricted stock underlying the
awards will become free of all restrictions and fully vested,
and (iii) all RSUs will be considered to be earned and
payable in full and any deferral or other restrictions will
lapse and such RSUs will be settled in cash or shares of Expedia
common stock as promptly as practicable.
Specific Agreements with Certain Executive
Officers. In addition to outstanding awards to
Executive Officers of Expedia described under “—
2005 Stock and Annual Incentive Plan,” Expedia is
party to the following agreements with respect to securities of
Expedia:
Barry Diller. On June 7, 2005, the IAC
Compensation Committee, pursuant to the IAC/InterActiveCorp 2005
Stock and Annual Incentive Plan (the “IAC 2005 Plan”)
granted to Mr. Diller options to purchase
4,800,000 shares of IAC common stock at an exercise price
of $32.03, representing 130% of the closing price of IAC common
stock on June 7, 2005, and options to purchase
2,800,000 shares of IAC common stock at an exercise price
of $43.12, representing 175% of the closing price of IAC common
stock on June 7, 2005. Upon completion of the spin-off,
among other things, Mr. Diller’s awards were adjusted
to grant an option to purchase 2,400,000 shares of Expedia
common stock at $28.49 per share and an option to purchase
1,400,000 shares at $38.35 per share. The stock option
agreement provides that following completion of the spin-off,
the satisfaction of conditions to vesting of
Mr. Diller’s options to purchase shares of Expedia
common stock is determined based on Mr. Diller’s
employment with Expedia.
The options have a ten-year term and vest on the fifth
anniversary of the grant date, subject to continued employment.
Upon a termination of Mr. Diller’s employment for
death, disability, by Expedia without cause, or by
Mr. Diller for good reason, the options will vest pro rata
at 20% per year of completed service from the date of grant to
the date of termination. Upon a change in control, 20% of the
options will vest, with an additional 20% vesting for each
completed year of service following the grant date.
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For purposes of the agreement, a “change in control”
is defined by reference to the IAC 2005 Plan, as follows: a
“change of control” occurs if: (a) there is a
change in the majority of our Board not endorsed by the
requisite number of incumbent board members; (b) another
party becomes the beneficial owner of at least 50% of
Expedia’s outstanding voting stock, with certain
exceptions; (c) Expedia consummates a merger,
reorganization, or consolidation with another party, or the sale
or other disposition of all or substantially all of our assets
or the purchase of assets or stock of another entity
(“Business Combination”) unless the beneficial
stockholders of Expedia immediately prior to the Business
Combination retain more than 50% of the outstanding voting stock
of the entity resulting from the Business Combination in
substantially the same proportions immediately prior to such
Business Combination; or (d) Expedia consummates a complete
liquidation or dissolution. However, the agreement provides that
notwithstanding the provisions of the plan, no change in control
will occur so long as Mr. Diller has sufficient voting
power with respect to Expedia such that he effectively controls
the election of a majority of members of the Board of Expedia.
“Good reason” is defined in the agreement to mean any
of the following actions without Mr. Diller’s consent:
(i) a reduction in his rate of annual base salary,
(ii) a relocation of his principal place of business more
than 35 miles from New York City, or (iii) a material
and demonstrable adverse change in the nature and scope of his
duties.
“Cause” is defined by reference to the IAC 2005 Plan,
as follows: (i) the willful or gross neglect by a
participant of his employment duties, (ii) the plea of
guilty or nolo contendere to, or conviction for, the commission
of a felony offense by a participant, (iii) a material
breach of the participant’s fiduciary duty owed to Expedia,
or (iv) a material breach by a participant of any
nondisclosure, non-solicitation or non-competition obligation
owed to Expedia.
Under the Equity and Bonus Compensation Agreement dated
August 24, 1995 between IAC and Mr. Diller, IAC agreed
that to the extent any payment or distribution by IAC, in
connection with a change in control of IAC, to or for the
benefit of Mr. Diller (whether under the terms of the
related agreement or otherwise) would be subject to the excise
tax imposed by §4999 of the Internal Revenue Code, then
Mr. Diller would be entitled to a
gross-up
payment covering the excise taxes (the
“gross-up”).
Under the terms of the spin-off, the
gross-up
obligation became binding upon Expedia with respect to any
payment or distribution by Expedia, in connection with a change
in control of Expedia, to or for the benefit of Mr. Diller.
Dara Khosrowshahi. Prior to the spin-off, IAC
and Dara Khosrowshahi, Expedia’s Chief Executive Officer,
agreed to amend Mr. Khosrowshahi’s outstanding equity
awards to provide that in the event of his termination of
employment without cause (including resignation by
Mr. Khosrowshahi for “good reason”), all RSUs
held by Mr. Khosrowshahi on the date of the spin-off would
vest and all options that are vested on the date of termination
would remain exercisable for a period of 24 months from the
date of termination or until the stated expiration date of the
option, whichever is shorter.
On March 7, 2006, the Compensation Committee and the
Section 16 Committee of the Board of Directors (together,
the “committees”) approved a grant to
Mr. Khosrowshahi of 800,000 RSUs that vest as follows: upon
Expedia’s achievement of (i) operating income before
amortization (“OIBA”) of $1.0 billion for a full
fiscal year (the “OIBA Target”) and (ii) either
achievement of a target increase in the price of Expedia’s
common stock or the achievement of certain EBITA targets
approved by the committees (the “RSU Performance
Goals”), 75% of the restricted stock unit grant will vest
(the “Initial Vesting”). If Mr. Khosrowshahi has
not voluntarily terminated his employment with Expedia or Mr.
Khosrowshahi’s employment has not been terminated for cause
on the first anniversary of the Initial Vesting, the remaining
portion of the restricted stock units will vest.
If Expedia terminates Mr. Khosrowshahi without cause in any
year in which Expedia achieves an OIBA target of
$900 million (the “Modified OIBA Target”) and one
of the RSU Performance Goals has been met, then 75% of the
restricted stock units will vest upon such termination of
employment and the remaining restricted stock units will be
forfeited.
If there is a change in control of Expedia, then 50% of the
outstanding restricted stock units will vest immediately,
without regard to the OIBA targets or RSU Performance Goals. If
within one year of the change in control,
Mr. Khosrowshahi’s employment is terminated without
cause or Mr. Khosrowshahi incurs a material and
demonstrable change in his duties, then the remaining restricted
stock units will vest, without regard to the performance targets
or Performance Goals.
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For purposes of calculating the OIBA Target and the Modified
OIBA Target, the operating results of all entities acquired by
Expedia will be included, starting with the first full fiscal
year after any such acquisitions. In the case of each
acquisition, the OIBA Target or Modified OIBA Target will be
increased by the amount of OIBA that Expedia expects to achieve
in the first full fiscal year following such acquisition, as
projected by Expedia at the time of the acquisition.
For the purposes of the restricted stock unit agreement, a
“change in control” is defined by reference to the
Expedia 2005 Plan, except that the agreement provides that a
change in control will include termination of the irrevocable
proxy held by Mr. Diller to vote shares of Expedia common
stock held by Liberty Media or its affiliates, or the
acquisition by Liberty Media or its affiliates of beneficial
ownership of equity securities of Expedia, whereby Liberty Media
acquires or assumes more than 35% of the voting power of the
then outstanding equity securities of Expedia entitled to vote
generally on the election of Expedia’s directors.
In connection with the foregoing arrangements,
Mr. Khosrowshahi has agreed not to compete with
Expedia’s businesses during the term of his employment with
Expedia and for a period of two years from his date of departure.
Michael B. Adler. On October 31, 2006,
Expedia entered into an employment agreement and a Restricted
Stock Unit Agreement (the “Adler RSU Agreement”) with
Michael B. Adler, Expedia’s Executive Vice President and
Chief Financial Officer. Mr. Adler was granted
84,832 restricted stock units (the “First RSU
Award”) and 53,020 restricted stock units (the
“Second RSU Award,” and together, the
“Awards”) pursuant to the Expedia 2005 Plan with 20%
of the Awards vesting on each anniversary of the Award Date over
a five-year term. Upon a Company termination of employment
without cause or an employee termination of employment for good
reason, to the extent not already vested (i) 50% of the
First RSU Award will vest, and (ii) an additional 20% of
the Second Award will vest. Both awards were contingent upon the
satisfaction of certain performance goals, which have
subsequently been met. Both awards vest upon a change in control
of Expedia.
For the purposes of the Adler RSU Agreement, a “change in
control” is defined by reference to the Expedia 2005 Plan.
In addition, the agreement provides that a change in control
will include termination of the irrevocable proxy held by Barry
Diller to vote shares of Expedia common stock held by Liberty
Media or its affiliates, or the acquisition by Liberty Media or
its affiliates of beneficial ownership of equity securities of
Expedia, whereby Liberty Media acquires or assumes more than 50%
of the voting power of the then outstanding equity securities of
Expedia entitled to vote generally on the election of
Expedia’s directors.
“Good reason” is defined under the Adler Employment
Agreement to mean the occurrence of any of the following without
Mr. Adler’s consent: (i) Expedia’s material
breach of any material provision of the employment agreement,
(ii) the material reduction in his title, duties, reporting
responsibilities or level of responsibilities, (iii) the
reduction in his base salary or percentage of discretionary
annual target bonus, or (iv) the relocation of his
principal place of employment more than 50 miles outside of
the Seattle metropolitan area.
“Cause” is defined under the Adler Employment
Agreement to mean his (i) plea of guilty or nolo contendere
to, conviction for, or the commission of, a felony offense,
(ii) material breach of a fiduciary duty owed to Expedia,
(iii) material breach of any of the covenants made pursuant
to the employment agreement, (iv) willful or gross neglect
of the material duties required by the employment agreement, or
(v) knowing and material violation of any Expedia policy
pertaining to ethics, wrongdoing or conflicts of interest,
subject to certain qualifications.
Burke F. Norton. On October 25, 2006,
Expedia entered into an employment agreement and two Restricted
Stock Unit Agreements with Burke F. Norton, Expedia’s
Executive Vice President, General Counsel and Secretary.
Mr. Norton was granted 62,235 RSUs (“tranche vesting
RSUs”) and 31,117 RSUs (“cliff vesting RSUs”)
pursuant to the Expedia 2005 Stock and Annual Incentive Plan.
The tranche vesting RSUs vest in equal increments over four
years. The cliff vesting RSUs vest in full after five years.
Both awards were contingent upon the satisfaction of certain
performance goals, which have subsequently been met.
Upon a termination of employment by Expedia without cause or an
employee termination of employment for good reason, (1) the
tranche vesting RSUs that would have vested during the twelve
months following termination and (2) a pro rata portion of
the cliff vesting RSUs will immediately vest.
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Pursuant to the terms of the RSU agreements, both awards vest
upon a change in control of Expedia, the definition of which is
the same as that in the Adler RSU Agreement described above,
provided that in specified change in control transactions the
awards will vest only following a subsequent termination of
employment by Expedia without cause or by Mr. Norton for
good reason.
The definitions of “cause” and “good reason”
under Mr. Norton’s agreements are the same as the
definitions of those terms under Mr. Adler’s
Employment Agreement.
Except as otherwise described herein, neither Expedia nor, to
the best of Expedia’s knowledge, any of its affiliates,
directors or executive officers is a party to any agreement,
arrangement or understanding with any other person relating,
directly or indirectly, to the tender offer or with respect to
any securities of Expedia, including, but not limited to, any
agreement, arrangement or understanding concerning the transfer
or the voting of the securities of Expedia, joint ventures, loan
or option arrangements, puts or calls, guarantees of loans,
guarantees against loss, or the giving or withholding of
proxies, consents or authorizations.
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13.
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Effects
of the Tender Offer on the Market for Shares; Registration under
the Exchange Act.
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The purchase by Expedia of shares under the tender offer will
reduce the number of shares that might otherwise be traded
publicly and may reduce the number of Expedia stockholders.
These reductions may reduce the volume of trading in our shares
and may result in lower stock prices and reduced liquidity in
the trading of our shares following completion of the tender
offer. As of June 15, 2007, we had issued and outstanding
approximately 278,170,459 shares of common stock. The
116,666,665 shares that we are offering to purchase
pursuant to the tender offer represent approximately 42% of the
shares of common stock outstanding as of that date. Stockholders
may be able to sell non-tendered shares in the future on Nasdaq
or otherwise, at a net price higher or lower than the purchase
price in the tender offer. We can give no assurance, however, as
to the price at which a stockholder may be able to sell such
shares in the future.
Expedia anticipates that there will be a sufficient number of
shares outstanding and publicly traded following completion of
the tender offer to ensure a continued trading market for the
shares. Based upon published guidelines of Nasdaq, Expedia does
not believe that its purchase of shares under the tender offer
will cause the remaining outstanding shares of Expedia common
stock to be delisted from trading on Nasdaq.
The shares are currently “margin securities” under the
rules of the Board of Governors of the Federal Reserve System.
This classification has the effect, among other things, of
allowing brokers to extend credit to their customers using the
shares as collateral. Expedia believes that, following the
purchase of shares under the tender offer, the shares remaining
outstanding will continue to be margin securities for purposes
of the Federal Reserve Board’s margin rules and regulations.
The shares are registered under the Exchange Act, which
requires, among other things, that Expedia furnish certain
information to its stockholders and the Securities and Exchange
Commission and comply with the Securities and Exchange
Commission’s proxy rules in connection with meetings of the
Expedia stockholders. Expedia believes that its purchase of
shares under the tender offer will not result in the shares
becoming eligible for deregistration under the Exchange Act.
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14.
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Legal
Matters; Regulatory Approvals.
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Except as described above, Expedia is not aware of any license
or regulatory permit that appears material to its business that
might be adversely affected by its acquisition of shares as
contemplated by the tender offer or of any approval or other
action by any government or governmental, administrative or
regulatory authority or agency, domestic, foreign or
supranational, that would be required for the acquisition of
shares by Expedia as contemplated by the tender offer. Should
any approval or other action be required, Expedia presently
contemplates that it will seek that approval or other action.
Expedia is unable to predict whether it will be required to
delay the acceptance for payment of or payment for shares
tendered under the tender offer pending the outcome of any such
matter. There can be no assurance that any approval or other
action, if needed, would be obtained or would be obtained
without substantial cost or conditions or that the failure to
obtain the approval or other action might not result in adverse
35
consequences to its business and financial condition. The
obligations of Expedia under the tender offer to accept for
payment and pay for shares is subject to conditions. See
Section 7.
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15.
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Material
U.S. Federal Income Tax Consequences.
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The following summary describes the material United States
federal income tax consequences relevant to the tender offer.
This discussion is based upon the Internal Revenue Code of 1986,
as amended (the “Code”), existing and proposed
Treasury Regulations, administrative pronouncements and judicial
decisions, all as in effect as of the date hereof and all of
which are subject to change, possibly with retroactive effect.
This discussion addresses only stockholders who hold their
shares as capital assets for United States federal income tax
purposes. This discussion does not purport to consider all
aspects of United States federal income taxation that might be
relevant to stockholders in light of their particular
circumstances and does not apply to holders subject to special
treatment under the United States federal income tax laws (such
as, for example, financial institutions, dealers in securities
or commodities, traders in securities who elect to apply a
mark-to-market method of accounting, insurance companies,
tax-exempt organizations, former citizens or residents of the
United States, persons who hold shares as part of a hedge,
straddle, constructive sale or conversion transaction, and
persons who acquired their shares through the exercise of
employee stock options or otherwise as compensation). This
discussion does not address any state, local or foreign tax
consequences of participating in the tender offer, nor does it
address any United States federal tax considerations other than
those pertaining to the United States federal income tax.
We have not sought, nor do we expect to seek, any ruling from
the Internal Revenue Service with respect to the matters
discussed below. There can be no assurances that the Internal
Revenue Service will not take a different position concerning
the tax consequences of the sale of shares to Expedia pursuant
to the tender offer or that any such position would be sustained.
As used herein, a “U.S. Holder” means a
beneficial owner of shares that is, for United States federal
income tax purposes, (i) a citizen or resident of the
United States, (ii) a corporation (or entity treated as a
corporation for United States federal income tax purposes)
created or organized under the laws of the United States, any
State thereof or the District of Columbia, (iii) a trust
(a) whose administration is subject to the primary
supervision of a U.S. court and which has one or more
U.S. persons who have the authority to make all substantial
decisions, or (b) that has a valid election in effect to be
treated as a U.S. person, or (iv) an estate, the
income of which is subject to United States federal income
taxation regardless of its source. As used herein, a
“Non-U.S. Holder”
means a beneficial owner of shares that is neither a
U.S. Holder nor an entity or arrangement treated as a
partnership for United States federal income tax purposes.
The United States federal income tax treatment of a person that
is a partner of an entity or arrangement treated as a
partnership for United States federal income tax purposes that
holds our shares generally will depend on the status of the
partner and the activities of the partnership. Partners in
partnerships holding our shares should consult their tax
advisors.
Non-U.S. Holders
should consult their tax advisors regarding the United States
federal income tax consequences and any applicable foreign tax
consequences of the tender offer and should also see
Section 3 for a discussion of the applicable United States
withholding rules and the potential for obtaining a refund of
all or a portion of any tax withheld.
All stockholders should consult their tax advisors to
determine the particular tax consequences to them of
participating in the tender offer.
A sale of shares for cash pursuant to the tender offer will be a
taxable transaction for United States federal income tax
purposes. A U.S. Holder who participates in the tender
offer will, depending on such U.S. Holder’s particular
circumstances, be treated either as recognizing gain or loss
from the disposition of the shares or as receiving a
distribution from us with respect to our stock.
Sale or Exchange Treatment. Under
Section 302 of the Code, a U.S. Holder will recognize
gain or loss on sale of shares for cash pursuant to the offer if
the sale:
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results in a “complete termination” of such
U.S. Holder’s equity interest in us,
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results in a “substantially disproportionate”
redemption with respect to such U.S. Holder, or
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is “not essentially equivalent to a dividend” with
respect to the U.S. Holder.
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A sale of shares pursuant to the tender offer will result in a
“complete termination” if either (i) the
U.S. Holder owns none of our shares either actually or
constructively after the shares are sold pursuant to the tender
offer, or (ii) the U.S. Holder actually owns none of
our shares immediately after the sale of shares pursuant to the
tender offer and, with respect to shares constructively owned,
is eligible to waive, and effectively waives, constructive
ownership of all such shares. U.S. Holders wishing to
satisfy the “complete termination” test through waiver
of attribution should consult their tax advisors.
A sale of shares pursuant to the tender offer will result in a
“substantially disproportionate” redemption with
respect to a U.S. Holder if the percentage of the then
outstanding shares actually and constructively owned by such
U.S. Holder immediately after the sale is less than 80% of
the percentage of the shares actually and constructively owned
by such U.S. Holder immediately before the sale. If a sale
of shares pursuant to the tender offer fails to satisfy the
“substantially disproportionate” test, the
U.S. Holder may nonetheless satisfy the “not
essentially equivalent to a dividend” test.
A sale of shares pursuant to the tender offer will satisfy the
“not essentially equivalent to a dividend” test if it
results in a “meaningful reduction” of the
U.S. Holder’s proportionate interest in us. A sale of
shares for cash that results in a relatively minor reduction of
the proportionate equity interest of a U.S. Holder whose
relative equity interest in us is minimal and who does not
exercise any control over or participate in the management of
our corporate affairs should constitute a “meaningful
reduction.”
In applying each of the Section 302 tests described above,
a U.S. Holder must take account of shares that such
U.S. Holder constructively owns under attribution rules,
pursuant to which the U.S. Holder will be treated as owning
shares owned by certain related individuals and entities, and
shares that the U.S. Holder has the right to acquire by
exercise of an option or warrant or by conversion or exchange of
a security. U.S. Holders should consult their tax advisors
regarding the application of the rules of Section 302 in
their particular circumstances.
Contemporaneous dispositions or acquisitions of shares by a
U.S. Holder or a related person may be deemed to be part of
a single integrated transaction and, if so, may be taken into
account in determining whether any of the Section 302
tests, described above, are satisfied. U.S. Holders should
be aware that proration may affect whether the sale of shares
pursuant to the tender offer will meet any of the
Section 302 tests. U.S. Holders should consult their
tax advisors regarding whether to make a conditional tender of a
minimum number of shares, and the appropriate calculation
thereof. See Section 6 for information regarding the option
to make a conditional tender of a minimum number of shares.
If a U.S. Holder satisfies any of the Section 302
tests described above, the U.S. Holder will recognize gain
or loss in an amount equal to the difference, if any, between
the amount of cash received and such U.S. Holder’s tax
basis in the shares exchanged. Any such gain or loss will be
capital gain or loss and will be long-term capital gain or loss
if the holding period of the shares exceeds one year as of the
date of the exchange. Gain or loss must be determined separately
for each block of shares. Specified limitations apply to the
deductibility of capital losses by U.S. Holders.
Distribution Treatment. If a U.S. Holder
does not satisfy any of the Section 302 tests described
above, the entire amount of cash received by such
U.S. Holder pursuant to the tender offer will be treated as
a dividend to the extent of the Holder’s allocable portion
of our current or accumulated earnings and profits, as
determined under United States federal income tax principles.
The amount of any distribution in excess of our current and
accumulated earnings and profits would be treated as a return of
capital to the extent, generally, of the U.S. Holder’s
basis in the shares exchanged, and any remainder will be treated
as capital gain. Any such gain will be capital gain and will be
long-term capital gain if the holding period of the shares
exceeds one year as of the date of the exchange. Provided
certain holding period and other requirements are satisfied,
non-corporate U.S. Holders generally will be subject to
U.S. federal income tax at a maximum rate of 15% on amounts
treated as a dividend. Such a dividend will be taxed in its
entirety, without reduction for the U.S. Holder’s tax
basis of the shares exchanged. To the extent that a purchase of
a U.S. Holder’s shares by us in the tender offer is
treated as the receipt by the U.S. Holder of a dividend,
37
the U.S. Holder’s remaining adjusted basis (reduced by
the amount, if any, treated as a return of capital) in the
purchased shares will be added to any shares retained by the
U.S. Holder.
To the extent that cash received in exchange for shares is
treated as a dividend to a corporate U.S. Holder,
(i) it may be eligible for a dividends-received deduction
and (ii) it may be subject to the “extraordinary
dividend” provisions of the Code. Corporate
U.S. Holders should consult their tax advisors concerning
the availability of the dividends-received deduction and the
application of the “extraordinary dividend” provisions
of the Code in their particular circumstances.
See Section 3 with respect to the application of United
States federal income tax withholding and
back-up
withholding tax to payments made pursuant to the tender offer.
The discussion set forth above is for general information
only. Stockholders should consult their tax advisor to determine
the particular tax consequences to them of the tender offer,
including the applicability and effect of any state, local and
foreign tax laws.
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16.
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Extension
of the Tender Offer; Termination; Amendment.
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Expedia expressly reserves the right, in its sole discretion, at
any time and from time to time, and regardless of whether or not
any of the events set forth in Section 7 shall have
occurred or shall be deemed by Expedia to have occurred, to
extend the period of time during which the tender offer is open
and thereby delay acceptance for payment of, and payment for,
any shares by giving oral or written notice of the extension to
the depositary and making a public announcement of the
extension. Expedia also expressly reserves the right, in its
sole discretion, to terminate the tender offer and not accept
for payment or pay for any shares not theretofore accepted for
payment or paid for or, subject to applicable law, to postpone
payment for shares upon the occurrence of any of the conditions
specified in Section 7 by giving oral or written notice of
termination or postponement to the depositary and making a
public announcement of termination or postponement.
Expedia’s reservation of the right to delay payment for
shares that it has accepted for payment is limited by
Rule 13e-4(f)(5)
promulgated under the Exchange Act, which requires that Expedia
must pay the consideration offered or return the shares tendered
promptly after termination or withdrawal of a tender offer.
Subject to compliance with applicable law, Expedia further
reserves the right, in its sole discretion, and regardless of
whether any of the events set forth in Section 7 shall have
occurred or shall be deemed by Expedia to have occurred, to
amend the tender offer in any respect, including, without
limitation, by decreasing or increasing the consideration
offered in the tender offer to holders of shares or by
decreasing or increasing the number of shares being sought in
the tender offer. Amendments to the tender offer may be made at
any time and from time to time effected by public announcement,
the announcement, in the case of an extension, to be issued no
later than 9:00 a.m., New York City time, on the next
business day after the last previously scheduled or announced
expiration date. Any public announcement made under the tender
offer will be disseminated promptly to stockholders in a manner
reasonably designed to inform stockholders of the change.
Without limiting the manner in which Expedia may choose to make
a public announcement, except as required by applicable law,
Expedia shall have no obligation to publish, advertise or
otherwise communicate any public announcement other than by
making a release through PR Newswire.
If Expedia materially changes the terms of the tender offer or
the information concerning the tender offer, Expedia will extend
the tender offer to the extent required by
Rules 13e-4(d)(2),
13e-4(e)(3)
and
13e-4(f)(1)
promulgated under the Exchange Act. These rules and certain
related releases and interpretations of the Securities and
Exchange Commission provide that the minimum period during which
a tender offer must remain open following material changes in
the terms of the tender offer or information concerning the
tender offer (other than a change in price or a change in
percentage of securities sought) will depend on the facts and
circumstances, including the relative materiality of the terms
or information. If:
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Expedia increases or decreases the price to be paid for shares
or increases or decreases the number of shares being sought in
the tender offer and, if an increase in the number of shares
being sought, such increase exceeds 2% of the outstanding
shares, and
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the tender offer is scheduled to expire at any time earlier than
the expiration of a period ending on the tenth business day
from, and including, the date that the notice of an increase or
decrease is first published, sent or
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given to security holders in the manner specified in this
Section 16, the tender offer will be extended until the
expiration of such ten business day period.
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In the event that the financing condition is satisfied or waived
less than five business days prior to the scheduled expiration
date of the tender offer, we will extend the tender offer to
ensure that at least five business days remain in the tender
offer following the satisfaction of the financing condition.
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Expedia has retained MacKenzie Partners, Inc. to act as
information agent and The Bank of New York to act as depositary
in connection with the tender offer. The information agent may
contact holders of shares by mail, telephone, telegraph and in
person, and may request brokers, dealers, commercial banks,
trust companies and other nominee stockholders to forward
materials relating to the tender offer to beneficial owners. The
information agent and the depositary each will receive
reasonable and customary compensation for their respective
services, will be reimbursed by Expedia for specified reasonable
out-of-pocket expenses, and will be indemnified against certain
liabilities in connection with the tender offer, including
certain liabilities under the U.S. federal securities laws.
In connection with the tender offer, Fidelity Management
Trust Company, the trustee for the Expedia Retirement
Savings Plan, may contact participants in the plan by mail,
telephone, fax and personal interviews. The trustee for the plan
receives reasonable and customary compensation for its services
and is reimbursed for certain out-of-pocket expenses pursuant to
arrangements with Expedia to act as trustee for the plan. Under
those arrangements, no separate fee is payable to the trustee in
connection with the tender offer.
No fees or commissions will be payable by Expedia to brokers,
dealers, commercial banks or trust companies (other than fees to
the information agent as described above) for soliciting tenders
of shares under the tender offer. We urge stockholders holding
shares through brokers or banks to consult the brokers or banks
to determine whether transaction costs are applicable if
stockholders tender shares through such brokers or banks and not
directly to the depositary. Expedia, however, upon request, will
reimburse brokers, dealers, commercial banks and trust companies
for customary mailing and handling expenses incurred by them in
forwarding the tender offer and related materials to the
beneficial owners of shares held by them as a nominee or in a
fiduciary capacity. No broker, dealer, commercial bank or trust
company has been authorized to act as the agent of Expedia or
the information agent for purposes of the tender offer. Expedia
will pay or cause to be paid all stock transfer taxes, if any,
on its purchase of shares, except as otherwise provided in this
document and Instruction 9 in the letter of transmittal.
Expedia is not aware of any jurisdiction where the making of the
tender offer is not in compliance with applicable law. If
Expedia becomes aware of any jurisdiction where the making of
the tender offer or the acceptance of shares pursuant thereto is
not in compliance with applicable law, Expedia will make a good
faith effort to comply with the applicable law. If, after such
good faith effort, Expedia cannot comply with the applicable
law, Expedia will not make the tender offer to (nor will tenders
be accepted from or on behalf of) the holders of shares in that
jurisdiction.
Pursuant to
Rule 13e-4(c)(2)
under the Exchange Act, Expedia has filed with the Commission an
Issuer Tender Offer Statement on Schedule TO, which
contains additional information with respect to the tender
offer. The Schedule TO, including the exhibits and any
amendments and supplements thereto, may be examined, and copies
may be obtained, at the same places and in the same manner as is
set forth in Section 11 with respect to information
concerning Expedia.
Expedia has not authorized any person to make any
recommendation on behalf of Expedia as to whether you should
tender or refrain from tendering your shares in the tender
offer. Expedia has not authorized any person to give any
information or to make any representation in connection with the
tender offer other than those contained in this offer to
purchase or in the letter of transmittal. If anyone makes any
recommendation or representation to you or gives you any
information, you must not rely upon that recommendation,
representation or information as having been authorized by
Expedia.
June 29, 2007
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The letter of transmittal and share certificates and any other
required documents should be sent or delivered by each
stockholder or that stockholder’s broker, dealer,
commercial bank, trust company or nominee to the depositary at
one of its addresses set forth below.
The
depositary for the tender offer is:
THE BANK OF NEW YORK
Telephone Assistance:
(800) 507-9357
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By Mail:
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By Hand:
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By Overnight
Delivery:
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The Bank of New York
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The Bank of New York
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The Bank of New York
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Expedia Inc.
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Tender & Exchange Dept.
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Expedia Inc.
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P.O. Box 859208
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11W
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161 Bay State Drive
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Braintree, MA
02185-9028
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101 Barclay Street
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Braintree, MA 02184
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Receive & Deliver Window
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Street Level
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New York, NY 10286
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By Facsimile:
For Eligible Institutions Only
(781) 930-4939
Confirm Facsimile Receipt
by telephone:
(781) 930-4900
Please direct any questions or requests for assistance and any
requests for additional copies of this offer to purchase, the
letter of transmittal or the notice of guaranteed delivery to
the information agent at the telephone number and address set
forth below. Stockholders also may contact their broker, dealer,
commercial bank, trust company or nominee for assistance
concerning the tender offer. Please contact the depositary
to confirm delivery of shares.
The information agent for the tender offer is:
105 Madison Avenue
New York, New York 10016
(212) 929-5500
(call collect)
E-mail:
proxy@mackenziepartners.com
or
Call Toll Free
(800) 322-2885
