As filed with the Securities and Exchange Commission on February 28, 2001
Registration No. 333-51146
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Pre-Effective Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------
EXPEDIA, INC.
(Exact name of registrant as specified in its charter)
---------------
Washington 91-1996083
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
18310 SE Eastgate Way, Suite 400
Bellevue, WA 98005
(425) 564-7200
(Address, including zip code, and telephone number
including area code, of registrant's principal executive office)
---------------
MARK S. BRITTON
Senior Vice President and General Counsel
18310 SE Eastgate Way, Suite 400
Bellevue, WA 98005
(425) 564-7200
(Name, address, including zip code and telephone number
including area code, of agent for service)
---------------
Approximate date of commencement of proposed sale to the public: At such
time or times after the effective date of this Registration Statement as the
Selling Shareholders may determine.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE(1)(3)
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Proposed
maximum
Amount Proposed maximum aggregate Amount of
Title of each class of to be offering price offering registration
securities to be registered registered per share(1)(3)price(1)(2) fee
-----------------------------------------------------------------------------------------------
Common Shares, par value $.01.. 4,845,152 shares $13.4375 $65,106,730 $17,188(3)(4)
Common Shares, par value $.01.. 4,338,732 shares $15.75 $68,335,029 $17,084(5)
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended (the "Securities Act"), solely for purposes of calculating amount
of registration fee based upon the average of the high and low prices
reported on November 29, 2000, as reported on The Nasdaq National Market.
(2) Of the 4,845,152 of securities being registered hereunder, pursuant to
Rule 429(b) under the Securities Act, an aggregate of 811,533 of
securities are being carried forward from the registrant's prior
registration statement on Form S-1 (File No. 333-40934) (the "Prior
Registration Statement").
(3) In connection with the Prior Registration Statement, registration fees of
approximately $3,612 previously were paid with respect to the 811,533 of
securities being carried forward herewith.
(4) Previously paid with original filing December 1, 2000.
(5) Estimated pursuant to Rule 457(c) under the Securities Act, solely for
purposes of calculating amount of registration fee based upon the average
of the high and low prices reported on February 22, 2001, as reported on
The Nasdaq National Market.
---------------
Pursuant to Rule 429 under the Securities Act, the prospectus set forth
herein also relates to securities registered pursuant to the Prior
Registration Statement.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
section 8(a), may determine.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
[EXPEDIA, INC. LOGO]
9,183,884 Shares
Common Stock
----------------
The selling shareholders are selling 9,183,884 shares of Expedia, Inc. common
stock. We will not receive any of the proceeds from the sale of shares by the
selling shareholders.
Our common stock is quoted on the Nasdaq National Market under the symbol
EXPE. On February 22, 2001, the last reported sale price of our common stock
was $15.50 per share.
See "Risk Factors" beginning on page 5 to read about factors you should
consider before buying shares of the common stock.
----------------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
Prospectus dated March , 2001.
TABLE OF CONTENTS
Page
----
Summary.................................................................... 3
Risk Factors............................................................... 5
Use of Proceeds............................................................ 16
Selling Shareholders....................................................... 16
Plan of Distribution....................................................... 17
Validity of the Common Stock............................................... 20
Experts.................................................................... 20
Where You Can Find More Information........................................ 20
2
SUMMARY
This summary may not contain all the information that may be important to
you. You should read this entire prospectus before making an investment
decision.
In this prospectus, the terms "Expedia" and "we" refer to Expedia, Inc. and
our subsidiaries and our predecessor, the travel business unit of Microsoft
Corporation, except where it is clear that such terms mean only Expedia, Inc.
Expedia, Inc.
We are a leading provider of branded online travel services for leisure and
small business travelers. We operate 7 websites in the United States, United
Kingdom, Germany and Canada. We offer one-stop travel shopping and reservation
services, providing reliable, real-time access to schedule, pricing and
availability information for over 450 airlines, 65,000 lodging properties and
all major car rental companies. Our acquisitions of Travelscape.com, Inc. and
VacationSpot.com, Inc. in March 2000 position us as the leader in Internet
lodging with the broadest selection of properties.
The Internet is dramatically changing the way that consumers and businesses
communicate, share information and buy and sell goods and services. The
Internet reduces inefficiencies in markets characterized by the presence of
large numbers of geographically-dispersed buyers and sellers and purchase
decisions involving large amounts of information from multiple sources. We
believe that the worldwide travel industry, which exemplifies these
characteristics, is especially well-suited to benefit from increased Internet
and electronic commerce adoption. As a result, travel has already become the
largest online retail category with estimated online transactions of $17.1
billion in 2000, growing to $49.2 billion by 2004, according to Forrester
Research, Inc.
To address this market opportunity, we have built an underlying technology
infrastructure that enables both buyers and sellers to transact through our
websites in a reliable, scalable and secure environment. We attract a large
global base of consumers and travel suppliers to our Internet-based travel
marketplace and enable them to research, buy and sell travel-related services
online. Our global travel marketplace offers consumers a convenient,
comprehensive and personalized source of travel information and services. At
the same time, our marketplace enables travel suppliers to reach a large,
global audience of consumers who are actively engaged in planning and
purchasing travel services. In our marketplace, suppliers can pursue a range of
innovative and targeted merchandising and advertising strategies designed to
increase revenues, while reducing overall transaction and customer service
costs.
Since launching our online travel service in October 1996, we have
experienced significant growth in our traffic and the amount of travel
purchased through our travel planning services. In the fiscal year ended
June 30, 2000, over $1 billion in airline ticket purchases and hotel and car
rental reservations were made through the travel planning services of
Expedia(R), Travelscape(R) and VacationSpot(TM). In the fiscal quarter ended
September 30, 2000, $467 million in purchases and reservations were made
through these same services.
We are located at 13810 SE Eastgate Way, Suite 400, Bellevue, WA 98005 and
our telephone number is (425) 564-7200.
3
The Offering
Common stock offered by selling
shareholders.................... 9,183,884 shares
Common stock to be outstanding
after this offering............. 48,551,200 shares
Use of proceeds.................. We will not receive any of the proceeds of the sales by
the selling shareholders (see Plan of Distribution and
Selling Shareholders)
Nasdaq National Market symbol.... EXPE
4
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
consider the following factors carefully before deciding to purchase shares of
common stock. Additional risks not presently known to us or that we currently
deem immaterial may also impair our business operations.
Our operating results are volatile and difficult to predict.
If we fail to meet the expectations of securities analysts or investors, the
market price of our common stock may decline significantly.
Our annual and quarterly operating results have fluctuated in the past and
may fluctuate significantly in the future due to a variety of factors, many of
which are outside of our control. Because our operating results are volatile
and difficult to predict, we believe that quarter-to-quarter comparisons of our
operating results are not a good indication of our future performance. It is
likely that in some future quarter our operating results will fall below the
expectations of securities analysts or investors. In this event, the trading
price of our common stock may decline significantly.
Factors that may cause us to fail to meet the expectations of securities
analysts or investors include the following:
. our inability to obtain new customers at reasonable cost, retain
existing customers or encourage repeat purchases
. decreases in the number of visitors to our websites or our inability to
convert visitors to our websites into customers
. our inability to adequately maintain, upgrade and develop our websites,
the systems that we use to process customers' orders and payments or our
computer network
. our inability to retain existing airlines, hotels, rental car companies
and other suppliers of travel services ("travel suppliers") or to obtain
new travel suppliers
. our inability to obtain travel products on satisfactory terms from our
travel suppliers
. the ability of our competitors to offer new or enhanced websites,
services or products or services or products with lower prices
. fluctuating gross margins due to a changing mix of revenues
. the termination of existing relationships with key service providers or
failure to develop new ones
. the amount and timing of operating costs relating to expansion of our
operations
. economic conditions specific to the Internet, online commerce and the
travel industry
Because we have a limited operating history, it is difficult to evaluate our
business and prospects.
Our business began operations in July 1994 and we launched our online travel
service in October 1996. As a result, we have only a limited operating history
from which you can evaluate our historical business. It is also difficult to
evaluate our prospective business because we face the risks frequently
encountered by early stage companies using new and unproven business models and
entering new and rapidly evolving markets, such as online commerce. These risks
include our potential failure to:
. attract additional travel suppliers and consumers to our service
. maintain and enhance our brand
. expand our service offerings
5
. operate, expand and develop our operations and systems efficiently
. maintain adequate control of our expenses
. raise additional capital
. attract and retain qualified personnel
. respond to technological changes
. respond to competitive market conditions
We depend on our relationships with travel suppliers and computer reservation
systems; adverse changes in these relationships could affect our inventory of
travel offerings.
Our business model relies on relationships with travel suppliers, and it
would be negatively affected by adverse changes in these relationships. We
depend on travel suppliers to enable us to offer our customers comprehensive
access to travel services and products. Consistent with industry practices, we
currently have few agreements with our travel suppliers obligating them to sell
services or products through our websites. It is possible that travel suppliers
may choose not to make their inventory of services and products available
through online distribution. Travel suppliers could elect to sell exclusively
through other sales and distribution channels or to restrict our access to
their inventory, either of which could significantly decrease the amount or
breadth of our inventory of available travel offerings. Of particular note is
the proposed airline direct-distribution website, which is currently named
"Orbitz." Orbitz has announced its intention to launch in June 2001 and is
reportedly owned by American Airlines, Continental Airlines, Delta Air Lines,
Northwest Airlines and United Air Lines. Forester Research reports that Orbitz
will be the only website for consumers to find unpublished special fares on
these and at least 23 other airlines. Additionally, American Airlines, United
Air Lines, Northwest Airlines, Continental Air Lines, US Airways Group and
America West Airlines entered into a joint venture to launch a separate site
known as "Hotwire," which offers unpublished special fares on certain carriers.
If a substantial number of our airline suppliers collectively agree or choose
to restrict their special fares solely to Orbitz or Hotwire, such action may
have a material adverse affect on our business. We also depend on travel
suppliers for advertising revenues. Adverse changes in any of these
relationships, whether due to Orbitz, Hotwire or otherwise, could reduce the
amount of inventory that we are able to offer through our websites.
A decline in commission rates and fees or the elimination of commissions could
reduce our revenues and margins.
A substantial majority of our online revenues depends on the commissions and
fees paid by travel suppliers for bookings made through our online travel
service. Generally, we do not have written commission agreements with our
suppliers. As is standard practice in the travel industry, we rely on informal
arrangements for the payment of commissions. Travel suppliers are not obligated
to pay any specified commission rate for bookings made through our websites. We
cannot assure you that airlines, hotel chains or other travel suppliers will
not reduce current industry commission rates or eliminate commissions entirely,
either of which could reduce our revenues and margins.
For example, in 1995, most of the major airlines placed a cap on per-ticket
commissions payable to all travel agencies for domestic airline travel. In
September 1997, the major United States airlines reduced the commission rate
payable to traditional travel agencies from 10% to 5%. In 1997, the major
United States airlines reduced the commission rate payable for online
reservations from 8% to 5%. In addition, since 1998, many airlines have
implemented a commission cap of $10.00 for domestic online roundtrip ticket
sales. Because a high percentage of our business relates to airline ticket
sales, a further reduction in airline ticket commissions could reduce our
revenues.
6
Our business is exposed to risks associated with online commerce security and
credit card fraud.
Consumer concerns over the security of transactions conducted on the Internet
or the privacy of users may inhibit the growth of the Internet and online
commerce. To transmit confidential information such as customer credit card
numbers securely, we rely on encryption and authentication technology.
Unanticipated events or developments could result in a compromise or breach of
the systems we use to protect customer transaction data. Furthermore, our
servers may also be vulnerable to viruses transmitted via the Internet. While
we proactively check for intrusions into our infrastructure, a new and
undetected virus could cause a service disruption.
To date, our results have been impacted due to reservations placed with
fraudulent credit card data. Starting in the quarter ended March 31, 2000, we
significantly increased our reserves in order to cover fraudulent credit card
transactions booked on our websites. We record these reserves because, under
current credit card practices and the rules of the Airline Reporting
Corporation, we may be held liable for fraudulent credit card transactions on
our websites and other payment disputes with customers. Since discovering this
fraudulent activity, we have put additional anti-fraud measures in place above
and beyond our existing credit card verification procedures; however, a failure
to control fraudulent credit card transactions adequately could further
adversely affect our business.
Consumers, travel suppliers and advertisers may not accept our websites as
valuable commercial tools, which would harm the growth of our business.
For us to achieve significant growth, consumers, travel suppliers and
advertisers must accept our websites as valuable commercial tools. Consumers
who have historically purchased travel products using traditional commercial
channels, such as local travel agents and calling airlines directly, must
instead purchase these products through our websites. Consumers frequently use
our websites for route pricing and other travel information and then choose to
purchase airline tickets or make other reservations directly from travel
suppliers or other travel agencies. If this practice increases, it could limit
our growth.
Similarly, travel suppliers and advertisers will also need to accept or
expand their use of our websites. Travel suppliers will need to view our
websites as efficient and profitable channels of distribution for their travel
products. Advertisers will need to view our websites as effective ways to reach
their potential customers.
In order to achieve the acceptance of consumers, travel suppliers and
advertisers contemplated by our business plan, we will need to continue to make
substantial investments in our technology and brand. However, we cannot assure
you that these investments will be successful. Our failure to make progress in
these areas will harm the growth of our business.
We expect our losses and negative cash flows to continue.
We have incurred substantial net losses and negative cash flows on both an
annual and interim basis. For the fiscal year ended June 30, 2000, we had a net
loss of $118.3 million and cash flow used by operating activities of $30.9
million. For the six-month period ended December 31, 2000, we had a net loss of
$56.1 million. We expect operating losses and negative cash flow for the
foreseeable future. If our revenues do not grow as expected, or if increases in
our expenses are not in line with our plans, there could be a material adverse
effect on our business, operating results and financial condition.
Intense competition could reduce our market share and harm our financial
performance.
The markets for the products and services offered by us are intensely
competitive. We compete with other online travel reservation services,
traditional travel agencies, travel suppliers offering their services directly
and international travel service providers competing in critical national or
regional markets, such as the United Kingdom, Germany and Canada.
7
We compete with a variety of companies with respect to each product or
service we offer. These competitors include:
. Internet travel agents such as Travelocity.com and American Express
Interactive, Inc.
. local, regional, national and international traditional travel agencies
. consolidators and wholesalers of airline tickets, hotels and other
travel products, including online consolidators such as Cheaptickets.com
and Priceline.com and online wholesalers such as Hotel Reservations
Network, Inc.
. airlines, hotels, rental car companies, cruise operators and other
travel service providers, whether working individually or collectively,
some of which are suppliers to our websites
. operators of travel industry reservation databases
In addition to the traditional travel agency channel, many travel suppliers
also offer their travel services as well as third-party travel services
directly through their own websites. These travel suppliers include many
suppliers with which we do business. In particular, five airline suppliers,
American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines
and United Air Lines, have announced their intention to fully launch a direct-
distribution website, currently named "Orbitz," by the end of July 2001.
Forester Research reports that Orbitz may be the only website for consumers to
find unpublished weekly special fares on at least 27 airlines. Additionally,
American Airlines, United Air Lines, Northwest Airlines, Continental Air Lines,
US Airways Group and America West Airlines launched a separate site known as
"Hotwire," which offers unpublished special fares on certain carriers.
Suppliers also sell their own services directly to consumers, predominantly by
telephone. As the market for online travel services grows, we believe that
travel suppliers, traditional travel agencies, travel industry information
providers and other companies will increase their efforts to develop services
that compete with our services by selling inventory from a wide variety of
suppliers. We cannot assure you that our online operations will compete
successfully with any current or future competitors.
Many of our competitors have longer operating histories, larger customer
bases, greater brand recognition and significantly greater financial, marketing
and other resources than we have and may enter into strategic or commercial
relationships with larger, more established and better-financed companies. Some
of our competitors may be able to secure services and products from travel
suppliers on more favorable terms, devote greater resources to marketing and
promotional campaigns and commit more resources to website and systems
development than we are able to devote. In addition, the introduction of new
technologies and the expansion of existing technologies may increase
competitive pressures. Increased competition may result in reduced operating
margins, as well as loss of market share and brand recognition. We cannot
assure you that we will be able to compete successfully against current and
future competitors. Competitive pressures faced by us could have a material
adverse effect on our business, operating results and financial condition.
If we fail to increase our brand recognition among consumers, we may not be
able to attract and expand our online traffic.
We believe that establishing, maintaining and enhancing the Expedia(R) brand
is a critical aspect of our efforts to attract and expand our online traffic.
The number of Internet sites that offer competing services increases the
importance of establishing and maintaining brand recognition. Many of these
Internet sites already have well-established brands in online services or the
travel industry generally. Promotion of the Expedia brand will depend largely
on our success in providing a high-quality online experience supported by a
high level of customer service. In addition, we intend to spend substantial
amounts on marketing and advertising with the intention of continuing to expand
our brand recognition to attract and retain online users and to respond to
competitive pressures. However, we cannot assure you that these expenditures
will be effective to promote our brand or that our marketing efforts generally
will achieve our goals.
8
If we are unable to introduce and sell new products and services, our brand
could be damaged.
We need to broaden the range of travel products and services and increase the
availability of products and services that we offer in order to enhance our
service. We will incur substantial expenses and use significant resources
trying to expand the range of products and services that we offer. However, we
may not be able to attract sufficient travel suppliers and other participants
to provide desired products and services to our consumers. In addition,
consumers may find that delivery through our service is less attractive than
other alternatives. If we launch new products and services and they are not
favorably received by consumers, our reputation and the value of the Expedia
brand could be damaged.
Our relationships with consumers and travel suppliers are mutually dependent
since consumers will not use a service that does not offer a broad range of
travel services. Similarly, travel suppliers will not use a service unless
consumers actively make travel purchases through it. We cannot predict whether
we will be successful in expanding the range of products and services that we
offer. If we are unable to expand successfully, this could also damage our
brand.
Due to our anticipated growth, we may be unable to plan or manage our
operations and growth effectively.
Our historical growth to date has stretched our management, systems and
resources. As we continue to increase the scope of our operations and the size
of our workforce, we will need to continue to train and manage our workforce.
We will also need to continue to improve and develop our financial and
managerial controls and our reporting systems and procedures. A failure to
plan, implement and integrate our growth plans and related systems successfully
could adversely affect our business.
Prior to our initial public offering, we used Microsoft's resources in
technology, systems, administration and other areas. Effective with our initial
public offering, we entered into a services agreement with Microsoft to provide
us with a number of services; however, we are migrating a number of these
services away from Microsoft onto our own systems and will continue to do so
over time.
Declines or disruptions in the travel industry generally could reduce our
revenues.
We rely on the health and growth of the travel industry. Travel is highly
sensitive to business and personal discretionary spending levels, and thus
tends to decline during general economic downturns. In addition, other adverse
trends or events that tend to reduce travel are likely to reduce our revenues.
These may include:
. price escalation in the airline industry or other travel-related
industries
. increased occurrence of travel-related accidents
. airline or other travel-related strikes
. political instability
. regional hostilities and terrorism
. bad weather
Interruptions in service from third parties could impair the quality of our
service.
We rely on third-party computer systems and third-party service providers,
including the computerized central reservation systems of the airline, hotel
and car rental industries to make airline ticket, hotel room and car rental
reservations and credit card verifications and confirmations.
Currently, a majority of our transactions are processed through Worldspan,
L.P. and Pegasus Solutions, Inc. We rely on TRX, Inc. to provide a significant
portion of our telephone and email customer support, as well
9
as to print and deliver airline tickets as necessary. Microsoft also services a
significant amount of our information systems as part of a services agreement.
Any interruption in these third-party services or a deterioration in their
performance could impair the quality of our service. If our arrangement with
any of these third parties is terminated, we may not find an alternate source
of systems support on a timely basis or on commercially reasonable terms. In
particular, any migration from the Worldspan system could require a substantial
commitment of time and resources and hurt our business.
Our success depends on maintaining the integrity of our systems and
infrastructure.
In order to be successful, we must provide reliable, real-time access to our
systems for our customers and suppliers. As our operations grow in both size
and scope, domestically and internationally, we will need to improve and
upgrade our systems and infrastructure to offer an increasing number of
customers and travel suppliers enhanced products, services, features and
functionality. The expansion of our systems and infrastructure will require us
to commit substantial financial, operational and technical resources before the
volume of business increases, with no assurance that the volume of business
will increase. Consumers and suppliers will not tolerate a service hampered by
slow delivery times, unreliable service levels or insufficient capacity, any of
which could have a material adverse effect on our business, operating results
and financial condition.
In this regard, our operations face the risk of systems failures. Our systems
and operations are vulnerable to damage or interruption from fire, flood, power
loss, telecommunications failure, break-ins, earthquake and similar events. Our
business interruption insurance may not adequately compensate us for losses
that may occur. The occurrence of a natural disaster or unanticipated problems
at our facilities in Washington or Nevada could cause interruptions or delays
in our business, loss of data or render us unable to process reservations. In
addition, the failure of our computer and communications systems to provide the
data communications capacity required by us, as a result of human error,
natural disaster or other operational disruptions, could result in
interruptions in our service. The occurrence of any or all of these events
could adversely affect our reputation, brand and business.
Rapid technological changes may render our technology obsolete or decrease the
competitiveness of our services.
To remain competitive in the online travel industry, we must continue to
enhance and improve the functionality and features of our websites. The
Internet and the online commerce industry are rapidly changing. In particular,
the online travel industry is characterized by increasingly complex systems and
infrastructures. If competitors introduce new services embodying new
technologies, or if new industry standards and practices emerge, our existing
websites and proprietary technology and systems may become obsolete. Our future
success will depend on our ability to do the following:
. enhance our existing services
. develop and license new services and technologies that address the
increasingly sophisticated and varied needs of our prospective customers
and suppliers
. respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis
Developing our websites and other proprietary technology entails significant
technical and business risks. We may use new technologies ineffectively or we
may fail to adapt our websites, transaction-processing systems and network
infrastructure to customer requirements or emerging industry standards. If we
face material delays in introducing new services, products and enhancements,
our customers and suppliers may forego the use of our services and use those of
our competitors.
10
The success of our business will depend on continued growth of online commerce
and Internet usage.
Because we do not intend to provide a material portion of our service through
any commercial medium other than the Internet, our future revenues and profits
depend upon the widespread acceptance and use of the Internet and online
services as a medium for commerce. Rapid growth in the use of the Internet and
online services is a recent phenomenon. This growth may not continue. A
sufficiently broad base of consumers may not accept, or continue to use, the
Internet as a medium of commerce. Demand for and market acceptance of recently
introduced products and services over the Internet involve a high level of
uncertainty.
The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and amount of traffic. Our success
will depend upon the development and maintenance of the Internet's
infrastructure to cope with this increased traffic. This will require a
reliable network backbone with the necessary speed, data capacity and security
and the timely development of complementary products for providing reliable
Internet access and services. Major online service providers and the Internet
itself have experienced outages and other delays as a result of software and
hardware failures and could face such outages and delays in the future. Outages
and delays are likely to affect the level of Internet usage and the processing
of transactions on our websites. In addition, the Internet could lose its
viability because of delays in the development or adoption of new standards to
handle increased levels of activity or of increased government regulation. The
adoption of new standards or government regulation may require us to incur
substantial compliance costs.
We are substantially controlled by Microsoft, which may impede our business
development and may prevent a takeover of Expedia, irrespective of whether it
is beneficial to our shareholders.
At December 31, 2000, Microsoft beneficially owned 33,602,258 shares of
common stock, which represents approximately 69.5% of the outstanding shares of
common stock. As long as Microsoft controls a significant percentage of the
common stock, it will be able to control all matters requiring approval by our
common shareholders, including the election of directors and the ability to
cause or prevent a change of control of Expedia. In addition, there are no
limitations on the ability of Microsoft to purchase shares of common stock in
the open market.
As part of our separation from Microsoft in connection with our initial
public offering in November 1999, we entered into various agreements with
Microsoft relating to the provision of services to us by Microsoft, our
licensing of intellectual property from Microsoft and the sharing of taxes and
purchasing of services. In one of these agreements, Microsoft has agreed not to
compete with us for a period of three years, and we may face competition from
Microsoft after this period. These agreements were not negotiated on an arm's
length basis and potentially give Microsoft a further ability to influence our
operations.
Because we are a Microsoft-affiliated entity, some potential strategic
customers and vendors may not wish to enter, or may even be contractually
prohibited from entering, into strategic relationships with us. If too many
potential strategic partners were to decline strategic relationships with us,
it could have an adverse impact on our strategy and business development.
Microsoft's voting control and provisions of Washington law affecting
acquisitions and business combinations applicable to us may discourage
transactions involving an actual or potential change of control of Expedia,
including transactions in which our shareholders might receive a premium for
their shares over the then-prevailing market price. This voting control and
these provisions of Washington law may also have a negative effect on the
market price of the common stock.
Our international operations involve risks relating to travel patterns and
practices and Internet-based commerce.
We operate in the United Kingdom, Germany, Canada and Belgium and may expand
our operations to other countries. In order to achieve wide-spread acceptance
in each country we enter, we believe that we must tailor our services to the
unique customs and cultures of that country.
11
Learning the customs and cultures of various countries, particularly with
respect to travel patterns and practices, is a difficult task and our failure
to do so could slow our growth in those countries.
We also face risks specific to Internet-based commerce in foreign markets.
Our international risks include:
. delays in the development of the Internet as a broadcast, advertising
and commerce medium in international markets
. difficulties in managing operations due to distance, language and
cultural differences, including issues associated with establishing
management systems infrastructures in individual foreign markets
. unexpected changes in regulatory requirements
. tariffs and trade barriers and limitations on fund transfers
. difficulties in staffing and managing foreign operations
. potential adverse tax consequences
. exchange rate fluctuations
. increased risk of piracy and limits on our ability to enforce our
intellectual property rights
Any of these factors could harm our business. We do not currently hedge our
foreign currency exposures.
We may be found to have infringed on intellectual property rights of others
which could expose us to substantial damages and restrict our operations.
We could face claims that we have infringed the patents, copyrights or other
intellectual property rights of others. In addition, we may be required to
indemnify travel suppliers for claims made against them. Any claims against us
could require us to spend significant time and money in litigation, delay the
release of new products or services, pay damages, develop new intellectual
property or acquire licenses to intellectual property that is the subject of
the infringement claims. These licenses, if required, may not be available on
acceptable terms or at all. As a result, intellectual property claims against
us could have a material adverse effect on our business, operating results and
financial condition.
Because our market is seasonal, our quarterly results will fluctuate.
Our business experiences seasonal fluctuations, reflecting seasonal trends
for the products and services offered by our websites. For example, demand for
travel bookings may increase in anticipation of summer vacations and holiday
periods, but online travel bookings may decline with reduced Internet usage
during the summer months. These factors could cause our revenues to fluctuate
from quarter to quarter. Our results may also be affected by seasonal
fluctuations in the inventory made available to our service by travel
suppliers.
Our success depends in large part on the continuing efforts of a few
individuals and our ability to continue to attract, retain and motivate highly
skilled employees.
We depend substantially on the continued services and performance of our
senior management, particularly Richard N. Barton, our Chief Executive Officer
and President. These individuals may not be able to fulfill their
responsibilities adequately and may not remain with us. The loss of the
services of any executive officers or other key employees could hurt our
business.
As of December 31, 2000, we employed a total of 663 full-time employees. In
order to achieve our anticipated growth, we will need to hire additional
qualified employees; however, competition for personnel throughout the
Internet industry is intense. If we do not succeed in attracting new employees
and retaining and motivating our current personnel, our business will be
adversely affected.
12
Our websites rely on intellectual property, and we cannot be sure that this
intellectual property is protected from copy or use by others, including
potential competitors.
We regard much of our content and technology as proprietary and try to
protect our proprietary technology by relying on trademarks, copyrights, trade
secret laws and confidentiality agreements with consultants. In connection with
our license agreements with third parties, we seek to control access to and
distribution of our technology, documentation and other proprietary
information. Even with all of these precautions, it is possible for someone
else to copy or otherwise obtain and use our proprietary technology without our
authorization or to develop similar technology independently. Effective
trademark, copyright and trade secret protection may not be available in every
country in which our services are made available through the Internet, and
policing unauthorized use of our proprietary information is difficult and
expensive. We cannot be sure that the steps we have taken will prevent
misappropriation of our proprietary information. This misappropriation could
have a material adverse effect on our business. In the future, we may need to
go to court to enforce our intellectual property rights, to protect our trade
secrets or to determine the validity and scope of the proprietary rights of
others. This litigation might result in substantial costs and diversion of
resources and management attention.
We currently license from third parties, including Microsoft, some of the
technologies incorporated into our websites. As we continue to introduce new
services that incorporate new technologies, we may be required to license
additional technology from Microsoft and others. We cannot be sure that these
third-party technology licenses will continue to be available on commercially
reasonable terms, if at all.
Regulatory and legal changes may impose taxes or other burdens on our business.
The laws and regulations applicable to the travel industry affect us and our
travel suppliers. We must comply with laws and regulations relating to the sale
of travel services, including those prohibiting unfair and deceptive practices
and those requiring us to register as a seller of travel, comply with
disclosure requirements and participate in state restitution funds. In
addition, many of our travel suppliers and computer reservation systems
providers are heavily regulated by the United States and other governments. Our
services are indirectly affected by regulatory and legal uncertainties
affecting the businesses of our travel suppliers and computer reservation
systems providers.
We must also comply with laws and regulations applicable to businesses
generally and online commerce. Currently, few laws and regulations directly
apply to the Internet and commercial online services. Moreover, there is
currently great uncertainty about whether or how existing laws governing issues
such as property ownership, sales and other taxes, libel and personal privacy
apply to the Internet and commercial online services. It is possible that laws
and regulations may be adopted to address these and other issues. Further, the
growth and development of the market for online commerce may prompt calls for
more stringent consumer protection laws. New laws or different applications of
existing laws would likely impose additional burdens on companies conducting
business online and may decrease the growth of the Internet or commercial
online services. In turn, this could decrease the demand for our products and
services or increase our cost of operations.
Federal legislation imposing limitations on the ability of states to tax
Internet-based sales was enacted in 1998. The Internet Tax Freedom Act, as this
legislation is known, exempts specific types of sales transactions conducted
over the Internet from multiple or discriminatory state and local taxation
through October 21, 2001. It is possible that this legislation will not be
renewed when it terminates in October 2001. Failure to renew this legislation
could allow state and local governments to impose taxes on Internet-based
sales, and these taxes could decrease the demand for our products and services
or increase our costs of operations.
13
Our stock price may experience extreme price and volume fluctuations, and
investors in our stock may not be able to resell their shares at or above the
price that they paid for them.
Due to fluctuations in the market price of our common stock, you may be
unable to resell your shares at or above the price that you paid for them. The
market price of our common stock has fluctuated in the past and is likely to be
highly volatile. In addition, the stock market in general and the market prices
of shares of Internet companies in particular, have been extremely volatile and
have experienced fluctuations that have often been unrelated or
disproportionate to the operating performance of such companies. The market
price of our common stock could continue to be highly volatile and is likely to
experience wide fluctuations in response to factors, many of which are largely
beyond our control, including the following:
. actual or anticipated variations in our quarterly operating results
. announcements of technological innovations or new services by us or our
competitors
. changes in financial estimates by securities analysts
. conditions or trends in the Internet or online commerce industries
. changes in the economic performance or market valuations of other
Internet, online commerce or travel companies
. announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments
. additions or departures of key personnel
. release of lock-up or other transfer restrictions on our outstanding
shares of common stock or sales of additional shares of common stock
. potential litigation
The market prices of the securities of Internet-related and online commerce
companies have been especially volatile. Broad market and industry factors may
adversely affect the market price of our common stock, regardless of our actual
operating performance. In the past, following periods of volatility in the
market price of their stock, many companies have been the subject of securities
class action litigation. If we were sued in a securities class action, it could
result in substantial costs and a diversion of management's attention and
resources and would adversely affect our stock price.
At various times, there will be a significant amount of common stock eligible
for sale, which could cause our stock price to fall.
Future sales of substantial amounts of common stock in the public market
could adversely affect prevailing market prices. A large number of shares
currently outstanding have not been on the market because of restrictions on
resale. Sales of substantial amounts of our common stock in the public market
after the restrictions lapse could adversely affect the prevailing market price
and impair our ability to raise equity capital in the future.
At the time of our initial public offering, Microsoft entered into an
agreement with Expedia that it would not offer, sell, contract to sell or grant
any option to purchase or otherwise dispose of our common stock, or any
securities exercisable for or convertible into our common stock, owned by it
for a period of one year after the date of our initial public offering. On
November 10, 2000, this contractual restriction lapsed and 33,000,000 shares
held by Microsoft became eligible for resale.
In March 2000, we issued 4,933,619 shares of our common stock in connection
with the acquisitions of Travelscape.com, Inc. and VacationSpot.com, Inc.
88,467 of these shares were sold under a prior registration statement on Form
S-1. The remainder of these shares are being registered under this registration
statement.
14
4,318,387 shares will be eligible for resale with the effectiveness of this
registration statement and 526,765 shares will be eligible for resale upon
their release from escrow pursuant to the escrow agreements executed in the
acquisitions.
As part of a private stock sale, we issued of 4,336,262 shares of common
stock and warrants to Microsoft, TCV IV Strategic Partners, L.P. and TCV IV,
L.P. These shares and the shares underlying the warrants are being registered
under this registration statement and will be eligible for resale with the
effectiveness of this registration statement.
This prospectus includes forward-looking statements relating to our industry
and our operations, which are inherently uncertain.
Some statements under the captions "Prospectus Summary," "Risk Factors," and
elsewhere in this prospectus as well as some statements found in our SEC
filings that are incorporated by reference into this prospectus, are forward-
looking statements. These forward-looking statements include, but are not
limited to, statements about our industry, plans, objectives, expectations,
intentions, assumptions and other statements contained in this prospectus that
are not historical facts. When used in this prospectus or our SEC filings, the
words "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate"
and similar expressions are generally intended to identify forward-looking
statements. Because these forward-looking statements involve risks and
uncertainties relating to our industry and our operations including those
described in this "Risk Factors" section, actual results may differ materially
from those expressed or implied by these forward-looking statements. This is
particularly true for a company with a limited operating history such as
Expedia and for a young and rapidly evolving industry such as the online travel
industry.
Market data and forecasts relating to our operations that are used in this
prospectus have been obtained from independent industry sources. We have not
independently verified these data and results may be materially different from
these forecasts.
15
USE OF PROCEEDS
All net proceeds from the sale of the common shares covered by this
prospectus will go to the selling shareholders who offer and sell their shares.
We will not receive any proceeds from the sale of the common shares by the
selling shareholders.
SELLING SHAREHOLDERS
The selling shareholders listed below are offering shares of our common stock
under this prospectus (collectively, the "selling shareholders").
Beneficial Ownership Beneficial Ownership
of Common Shares Number of of Common Shares After
Before Offering Shares Offering
---------------------- being ----------------------
Selling Shareholder Number Percent (1) Offered Number Percent (1)
------------------- ---------- ----------- --------- ---------- -----------
Former shareholders of
Travelscape.com,
Inc. (2)............... 660,949 1.4% 660,949 0 0
Former shareholders of
VacationSpot.com, Inc.
(3).................... 1,693,468 3.5% 1,693,468 0 0
Timothy Poster.......... 1,050,265 2.2% 1,050,265 0 0
Thomas Breitling........ 934,736 1.9% 934,736 0 0
Alan Whittern (4)....... 4,954 * 4,954 0 0
Microsoft Corporation... 33,722,710 69.3% 722,710(5) 33,000,000 68.0%
TCV III Funds (6)....... 503,250 1.0% 503,250 0 0
TCV IV Funds (7)........ 3,801,052 7.7% 3,613,552 187,500 *
--------
(1) Based on 48,551,200 outstanding shares
(2) Excludes shares held by Timothy Poster, Thomas Breitling and Alan Whittern
(3) Excludes shares held by TCV III funds
(4) Includes 2,484 shares issued as a former shareholder of VacationSpot and
2,470 shares to be issued upon exercise of a warrant that will be issued
simultaneously with the effectiveness of this registration statement.
(5) Includes 602,258 shares and 120,452 shares to be issued upon exercise of a
warrant. The warrant is currently exercisable.
(6) TCV III Funds are: TCV III (GP), which holds 3,654 shares; TCV III, L.P.,
which holds 17,358 shares; TCV III (Q), L.P., which holds 461,346 shares;
and TCV III Strategic Partners, L.P., which holds 20,892 shares. Each of
the TCV III funds is a former shareholder of VacationSpot.com, Inc. Mr.
Hoag, a director of Expedia, is a managing member of Technology Crossover
Management III, L.L.C., which is the managing general partner of TCV III
(GP) and the sole general partner of TCV III, L.P., TCV III (GP) and TCV
III Strategic Partners, L.P. Mr. Hoag disclaims beneficial ownership of
these shares except to the extent of his economic interest in them.
(7) TCV IV Funds are: TCV IV, L.P., which holds 3,083,802 shares and 580,609
shares to be issued upon exercise of a warrant; and TCV IV Strategic
Partners, L.P., which holds 114,991 shares and 21,650 shares to be issued
upon exercise of a warrant. The warrants are currently exercisable. Mr.
Hoag, a director of Expedia, is a managing member of Technology Crossover
Management IV, L.L.C., which is the general partner of the TCV IV Funds.
Mr. Hoag disclaims beneficial ownership of these shares except to the
extent of his economic interest in them.
* less than one percent (1%)
The shares held by the former shareholders of Travelscape.com, Inc. and
VacationSpot.com, Inc. were issued in connection with our acquisition of
Travelscape.com, Inc., a Delaware corporation and VacationSpot.com, Inc., a
Washington corporation. Under the terms of these acquisitions, Expedia agreed
to register the common shares received by the former shareholders in each
acquisition.
16
Alan Whittern is a former shareholder of VacationSpot.com, Inc. and will be
issued a common stock warrant to purchase 2,470 common shares in connection
with the acquisition of VacationSpot simultaneously with the effectiveness of
this registration statement. Mr. Whittern was also issued 2,484 shares in
connection with the exchange of VacationSpot.com shares for Expedia shares in
the acquisition. These shares and the shares underlying the warrant are being
registered under this registration statement.
We issued 3,011,293 common shares and warrants to purchase an additional
602,259 common shares to the TCV IV entities and 602,258 common shares and
warrants to purchase an additional 120,452 common shares to Microsoft
Corporation in a private placement. As part of this private placement, Expedia
agreed to register these common shares and the common shares underlying these
warrants.
Each of the selling shareholders who were former shareholders of
Travelscape.com, Inc. or VacationSpot.com, Inc. holds less than one percent
(1%) of Expedia's outstanding capitalization, except Timothy Poster, Thomas
Breitling and TCV III funds, whose holdings are outlined in the above table.
In the past three years, none of the selling shareholders has had a material
relationship with Expedia or its affiliates, except as follows:
. Gerald Grinstein, a director of Expedia, is a former shareholder of
VacationSpot.com, Inc. and holds and is registering 6,968 shares.
. Jay Hoag, a director of Expedia, is the managing member of Technology
Crossover Management III, L.L.C., which is the managing general partner
of TCV III (GP) and the sole general partner of TCV III, L.P., TCV III
(Q), L.P., and TCV III Strategic Partners, L.P. Mr. Hoag is also the
managing member of Technology Crossover Management IV, L.L.C., which is
the general partner of TCV IV funds. Each of the TCV III Funds was a
former shareholder of VacationSpot.com, Inc. TCV III Funds and TCV IV
Funds hold and are registering shares as outlined in the above table.
Mr. Hoag disclaims beneficial ownership of these shares except to the
extent of his economic interest in them.
. Greg Slyngstad, an officer of Expedia, is a former shareholder of
VacationSpot.com, Inc. and holds and is registering 254,636 shares.
. Timothy Poster, former Chairman of the Board of Directors of
Travelscape.com, Inc., a subsidiary of Expedia, is a former shareholder
of Travelscape.com, Inc. and holds and is registering shares as outlined
in the above table.
. Thomas Breitling, an officer of Travelscape.com, Inc., is a former
shareholder of Travelscape.com, Inc. and holds and is registering shares
as outlined in the above table.
. We are an affiliate of Microsoft Corporation, which holds and is
registering shares as outlined in the above table.
PLAN OF DISTRIBUTION
This prospectus relates to a total of 9,183,884 shares of common stock
currently outstanding and held by the selling shareholders. The selling
shareholders will act independently of us in making decisions with respect to
the timing, manner and size of each sale. The selling shareholders may sell the
shares being offered hereby on the Nasdaq National Market, or otherwise, at
prices and under terms then prevailing or at prices related to the then current
market price or at negotiated prices. As used in this prospectus, "selling
shareholders" include transferees, donees, pledgees, legatees, heirs or legal
representatives authorized to sell shares received from the named selling
shareholder after the date of this prospectus.
The selling shareholders have advised us that they have not entered into any
agreements, understandings, or arrangements with any underwriters or broker-
dealers regarding the sale of their securities, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of shares by
the selling shareholders. At the time a particular offering of common stock is
made and to the extent required, the
17
aggregate number of shares being offered, the name or names of the selling
shareholders, and the terms of the offering, including the name of names of any
underwriters, broker-dealers or agents, any discounts, concessions or
commissions and other terms constituting compensation from the selling
stockholders, and any discounts, concessions or commissions allowed or
reallowed or paid to broker-dealers, will be set forth in an accompanying
prospectus supplement.
Sales of the common stock offered hereby may be effected by or for the
account of the selling shareholders from time to time in transactions, which
may include block transactions, in the over-the-counter market, in negotiated
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to the prevailing market price, or at negotiated
prices. The selling stockholders may effect these transactions by selling the
common stock offered hereby directly to purchasers, through broker-dealers
acting as agents for the selling stockholders, or to broker-dealers that may
purchase such shares as principals and thereafter sell the shares from time to
time in transactions, which may include block transactions, in the over-the-
counter market, in negotiated transactions, through a combination of such
methods of sales or otherwise. In effecting sales, broker-dealers engaged by
selling shareholders may arrange for other broker-dealers to participate. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions, or commissions from the selling shareholders and/or the purchasers
of the common stock offered hereby for whom such broker-dealers may act as
agents or to whom they may sell as principals, or both. As to a particular
broker-dealer, such compensation might be in excess of customary commissions.
Pursuant to this prospectus, the selling shareholders may resell the shares
of common stock being registered for resale hereby:
. in transactions that are exempt from registration under the Securities
Act (including distributions by limited partnerships to their limited
partners), or
. as long as in the registration statement there is a qualification in
effect under, or an available exemption from, any applicable state
securities law with respect to the resale of such shares.
There is no assurance that any selling shareholder will sell any common stock
offered hereby, and any selling shareholder may transfer, devise or gift the
common stock by other means not described in this prospectus. For example, in
addition to selling pursuant to the registration statements of which this
prospectus is a part or to which it relates, the selling shareholders also may
sell under Rule 144.
The selling shareholders and any broker-dealers, agents, or underwriters that
participate with the selling shareholders in the distribution of common stock
offered hereby may be deemed to be "underwriters" within the meaning of the
Securities Act. Accordingly, the selling shareholders will be subject to the
prospectus delivery requirements of the Securities Act. Any commissions paid or
any discounts or concessions allowed to any such persons, and any profits
received on the resale of the common stock offered hereby and purchased by
them, may be deemed to be underwriting commissions or discounts under the
Securities Act. We will not pay any compensation to any NASD member in
connection with this offering. Brokerage commissions, if any, attributable to
the sale of the shares of common stock offered hereby will be borne by the
selling shareholders.
We will not receive any proceeds from the sale of any shares of common stock
by the selling shareholders. We have agreed to bear all expenses, other than
selling commissions, in connection with the registration and sale of the common
stock being offered by the selling shareholders. We have agreed to indemnify
certain of the selling stockholders against certain liabilities under the
Securities Act. Each selling shareholder may indemnify any broker-dealer that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act.
We have agreed with the selling shareholders to keep the registration
statement, of which this prospectus constitutes a part, effective as reasonably
deemed necessary by Expedia to enable the selling shareholders to resell their
shares that were issued in the mergers.
18
To comply with the securities laws of certain jurisdictions, if applicable,
the shares of common stock offered hereby will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the common stock offered hereby may not be sold
unless they have been registered or qualified for sale in the applicable state
or an exemption from the registration or qualifications requirement is
available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act of
1934, as amended, any person engaged in a distribution of the common stock
offered pursuant to this prospectus may be limited in its ability to engage in
market activities with respect to the common stock. Without limiting the
foregoing, each selling shareholder will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including Regulation
M. Those rules and regulations may limit the timing of purchases and sales of
any of the common stock offered by the selling stockholders pursuant to this
prospectus, which may affect the marketability of the common stock offered
hereby.
The selling shareholders also may pledge the shares of common stock being
registered for resale hereby to NASD broker/dealers pursuant to the margin
provisions of each selling shareholder's customer agreements with such
pledgees. Upon default by a selling shareholder, the pledgee may offer and sell
shares of common stock from time to time as described above.
19
VALIDITY OF THE COMMON STOCK
For purposes of this offering, Preston Gates & Ellis LLP, Seattle,
Washington, is giving its opinion on the validity of the common shares.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from Expedia, Inc.'s Annual Report on Form 10-K for the year ended
June 30, 2000 have been audited by Deloitte & Touche LLP, independent auditors,
as stated in their report, which is incorporated herein by reference, and has
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with the
Securities and Exchange Commission (the "SEC"). You may read and copy any
document that we file at the SEC's public reference rooms in Washington, D.C.,
New York, New York, and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to you free of charge at the SEC's web site at
www.sec.gov. Most of our SEC filings are also available to you free of charge
at our web site at www.expedia.com.
The common shares are traded as "National Market Securities" on the Nasdaq
National Market. Material filed by Expedia can be inspected at the offices of
the National Association of Securities Dealers, Inc., Reports Section, 1735 K
Street, N.W., Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede previously filed
information, including information contained in this document.
We incorporate by reference the documents listed below and any future filings
we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until this offering has been completed:
1. Expedia's Quarterly Report on Form 10-Q for the quarters ended
September 30, 2000 and December 31, 2000, and amendments thereto.
2. Expedia's Annual Report on Form 10-K for the year ended June 30, 2000.
3. Expedia's Proxy Statement dated October 9, 2000.
4. The description of the common stock of Expedia, which is contained in
the registration statement of Expedia filed on Form S-1, dated July 21,
2000 (333-40934).
You may request free copies of these filings by writing or telephoning us at
the following address:
Investor Relations Department
Expedia, Inc.
18310 SE Eastgate Way, Suite 400
Bellevue, Washington 98005
(425) 564-7200
email: exp-ir@expedia.com
You may also review and/or download free copies of items 1, 2 and 4 at our
website at www.expedia.com.
20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Expedia in connection with
the sale of common stock being registered. All amounts are estimates except the
SEC registration fee and the NASD filing fee.
Amount
to be
Paid
-------
SEC Registration Fee.............................................. $34,272
Printing Fees and Expenses........................................ 15,000
Legal Fees and Expenses........................................... 2,000
Accounting Fees and Expenses...................................... 4,000
Miscellaneous..................................................... 2,000
-------
Total........................................................... $57,272
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VII of our Articles of Incorporation authorizes us to indemnify any
present or former director or officer to the fullest extent not prohibited by
the Washington Business Corporation Act ("WBCA") or other applicable law now or
hereafter in force. Chapter 23B.08.510 and .570 of the WBCA authorizes a
corporation to indemnify its directors, officers, employees, or agents in terms
sufficiently broad to permit such indemnification under specific circumstances
for liabilities, including provisions permitting advances for expenses
incurred, arising under the Securities Act.
In addition, we maintain directors' and officers' liability insurance under
which our directors and officers are insured against loss, as defined in the
policy, as a result of claims brought against them for their wrongful acts in
such capacities.
ITEM 16. LIST OF EXHIBITS
The Exhibits to this registration statement are listed in the Index to
Exhibits.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of the 1933
Act;
(b) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in this registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement;
II-1
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by Expedia pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under the 1933 Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) For purposes of determining any liability under the 1933 Act, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bellevue, State of Washington on February 28, 2001.
EXPEDIA, INC.
/s/ Richard N. Barton
By: _________________________________
Richard N. Barton
President and Chief Executive
Officer (Principal Executive
Officer)
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on
February 28, 2001.
Signature Title
--------- -----
/s/ Richard N. Barton President, Chief Executive Officer, Director
______________________________________ (Principal Executive Officer)
Richard N. Barton
* Sr. Vice President, Finance; Chief Financial
______________________________________ Officer (Principal Financial and Accounting
Gregory S. Stanger Officer)
* Chairman of the Board
______________________________________
Gregory B. Maffei
* Director
______________________________________
Brad Chase
* Director
______________________________________
Gerald Grinstein
* Director
______________________________________
Jay C. Hoag
* Director
______________________________________
Laurie McDonald Jonsson
* Director
______________________________________
Richard D. Nanula
/s/ Richard N. Barton
*By:
-----------------------------
Richard N. Barton
Attorney-in-Fact
II-3
INDEX TO EXHIBITS
Exhibit
No. Description
------- -----------
3.1 Articles of Incorporation of the Registrant+
3.2 Articles of Amendment to Articles of Incorporation dated September 22,
1999+
3.2.1 Articles of Amendment to Articles of Incorporation dated October 25,
1999++
3.3 Bylaws of the Registrant+
4.1 Form of the Registrant's Common Stock Certificate+
5 Opinion of Counsel re: legality
10.1 Contribution Agreement between Expedia, Inc. and Microsoft
Corporation, effective October 1, 1999+
10.2 Services Agreement between Expedia, Inc. and Microsoft Corporation,
effective October 1, 1999+
10.3 License Agreement between Expedia, Inc. and Microsoft Corporation,
effective October 1, 1999+
10.4 Map Server License Agreement between Expedia, Inc. and Microsoft
Corporation, effective October 1, 1999+
10.5 Carriage and Cross Promotion Agreement between Expedia, Inc. and
Microsoft Corporation, effective October 1, 1999+
10.6 Tax Allocation Agreement between Expedia, Inc. and Microsoft
Corporation, effective October 1, 1999+
10.7 Shareholder Agreement between Expedia, Inc. and Microsoft Corporation,
effective October 1, 1999+
10.8 CRS Marketing, Services and Development Agreement between Microsoft
Corporation and Worldspan, L.P., dated December 15, 1995 and last
amended on April 1, 1999+***
10.9 Service Agreement between Microsoft Corporation and World Travel
Partners, L.P., dated October 9, 1996 and amended on April 1,
1999+***
10.10 1999 Stock Option Plan+
10.11 1999 Employee Stock Purchase Plan+
10.12 1999 Directors' Stock Option Plan+
10.13 Employment Agreement between Expedia, Inc. and Richard N. Barton+
10.14 Agreement and Plan of Reorganization by and among Expedia, Inc.,
Travel Enterprises, Inc., Travelscape, and certain principal
stockholders of Travelscape, dated January 31, 2000 and as amended on
March 13, 2000 and March 15, 2000++++
10.15 Agreement and Plan of Reorganization by and among Expedia, Inc.,
VacationSub, Inc., VacationSpot, and the principal stockholders of
VacationSpot, dated January 30, 2000++++
10.16 Common Stock Purchase Agreement between Expedia, Inc., TCV IV, L.P.
and TCV IV Strategic Partners, L.P., dated June 25, 2000**
10.17 Common Stock Purchase Agreement between Expedia, Inc. and Microsoft
Corporation, dated June 25, 2000**
10.18 Amendment No. 2 to Microsoft Corporation/World Travel Partners Service
Agreement effective July 1, 2000***+++++
10.19 Travelscape Office Lease and assignment thereto dated August 1,
2000+++++
10.20 Amendment to the Expedia 1999 Stock Option Plan++++++
23.1 Consent of Deloitte & Touche LLP
Exhibit
No. Description
------- -----------
23.3 Consent of Preston Gates & Ellis LLP(1)
24 Power of Attorney (contained on signature page)
--------
(1) Contained within Exhibit 5.
+ Previously filed as an exhibit to Expedia's Form S-1 filed September 23,
1999
++ Previously filed as an exhibit to Expedia's Form S-1/A filed October 26,
1999 and incorporated herein by reference
++++ Previously filed as an exhibit to Expedia's Form 8-K filed April 3, 2000
and incorporated herein by reference
+++++ Previously filed as an exhibit to Expedia's Form 10-Q filed November 14,
2000 and incorporated herein by reference
++++++ Previously filed as an exhibit to Expedia's Form 10-Q filed February 14,
2000 and incorporated herein by reference
** Previously filed as an exhibit to Expedia's Form 8-K filed September 15,
2000 and incorporated herein by reference
*** Confidential treatment granted for portions of this agreement pursuant to
Rule 406 of the Securities Act