Business Context and Reporting Period
This Form 8-K was filed by Expedia, Inc. on March 7, 2006. The report details the entry into a material definitive agreement regarding the compensation arrangements for Dara Khosrowshahi, the Company's Chief Executive Officer, approved by the Board of Directors' Compensation/Benefits and Section 16 Committees.
Key Financial Metrics
The filing does not provide consolidated financial statements, revenue, profit, cash flow, margins, debt, or liquidity metrics for the Company. The only financial figures disclosed relate to executive compensation:
- Annual Salary: $1,000,000 (effective February 13, 2006), increased from $550,000 in 2005.
- Restricted Stock Units (RSUs): 800,000 units granted.
- Performance Goals: Tied to common stock price increases or EBITA targets.
Material Changes Versus Prior Period
The primary material change is the significant increase in the CEO's base salary from $550,000 to $1,000,000. Additionally, the Company has established a new performance-based equity grant structure for the CEO involving 800,000 RSUs, which did not exist in the prior period.
Guidance, Outlook, and Management Commentary
The filing outlines specific vesting conditions and contingencies for the CEO's compensation package:
- Vesting Schedule: 75% of RSUs vest upon achieving Performance Goals and Operating Income Before Amortization (OIBA) targets. The remaining 25% vests on the first anniversary of the initial vesting, provided employment continues.
- Termination Without Cause: If terminated without cause in a year where OIBA targets are met, 75% of RSUs vest immediately (subject to Performance Goals).
- Change of Control: 50% of outstanding RSUs vest immediately upon a change of control. If the CEO is terminated without cause or resigns due to duty modification within one year of a change of control, the remaining RSUs vest immediately.
- Restrictive Covenants: A two-year non-compete agreement applies following the CEO's departure for any reason.
Important Facts for Investor Verification
- Verify the specific OIBA and EBITA targets approved by the Committees, as these are not quantified in this filing.
- Confirm the exact definition of "Change of Control" within the RSU grant agreement to understand acceleration triggers.
- Monitor the impact of the increased executive compensation on future operating expenses and net income.
- Review the Company's stock price performance relative to the targets set for the 2006 Cash Bonus Plan.