Orbitz 2011 Annual Report Download - page 87

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
87
Net Operating Losses
In December 2009, as permitted under the U.K. group relief provisions, we surrendered $17.2 million of net operating
losses generated in 2007 to Donvand Limited, a subsidiary of Travelport. A full valuation allowance had previously been
established for these net operating losses.
Separation Agreement
We entered into a Separation Agreement with Travelport at the time of the IPO. This agreement, as amended, provided
the general terms for the separation of our respective businesses. When we were a wholly-owned subsidiary of Travelport,
Travelport provided guarantees, letters of credit and surety bonds on our behalf under our commercial agreements and leases
and for the benefit of regulatory agencies. Under the Separation Agreement, we were required to use commercially reasonable
efforts to have Travelport released from any then outstanding guarantees and surety bonds. As a result, Travelport no longer
provides surety bonds on our behalf or guarantees in connection with commercial agreements or leases entered into or replaced
by us subsequent to the IPO.
In addition, under the Separation Agreement, Travelport is obligated to continue to issue letters of credit on our behalf so
long as Travelport and its affiliates (as defined in the Separation Agreement, as amended) own at least 50% of our voting stock,
in an aggregate amount not to exceed $75.0 million (denominated in U.S. dollars). Travelport charges us fees for issuing,
renewing or extending letters of credit on our behalf. In addition, in December 2011, we agreed to make a one-time payment to
Travelport, on February 1, 2012, of $3.0 million related to fees associated with a recent amendment to the Travelport credit
facility under which Travelport issues letters of credit on behalf of the Company. This payment is subject to a refund provision
through September 30, 2013 if Travelport is no longer obligated to provide letters of credit on behalf of the Company or if we
obtain our own letter of credit facility. We are recognizing the $3.0 million payment to Travelport over the term of its
underlying credit facility, or approximately two and a half years. The expenses related to these fees are included in interest
expense in our consolidated statements of operations. At December 31, 2011 and December 31, 2010, there were $74.2 million
and $72.3 million of outstanding letters of credit issued by Travelport on our behalf, respectively (see Note 9 - Commitments
and Contingencies).
Master License Agreement
We entered into a Master License Agreement with Travelport at the time of the IPO. Pursuant to this agreement,
Travelport licenses certain of our intellectual property and pays us fees for related maintenance and support services. The
licenses include our supplier link technology; portions of ebookers' booking, search and vacation package technologies; certain
of our products and online booking tools for corporate travel; portions of our private label vacation package technology; and
our extranet supplier connectivity functionality.
The Master License Agreement granted us the right to use a corporate online booking product developed by Travelport.
We have entered into a value added reseller license with Travelport for this product.
GDS Service Agreements
In connection with the IPO, we entered into the Travelport GDS Service Agreement, which expires on December 31,
2014. The Travelport GDS Service Agreement is structured such that we earn incentive revenue for each air, car and hotel
segment that is processed through the Travelport GDSs. This agreement requires that we process a certain minimum number of
segments for our domestic brands through the Travelport GDSs each year. Our domestic brands were required to process a total
of 32.8 million, 33.7 million and 36.0 million segments through the Travelport GDSs during the years ended December 31,
2011, 2010 and 2009, respectively. Of the required number of segments, 16.0 million segments were required to be processed
each year through Worldspan, and 16.8 million, 17.7 million and 20.0 million segments were required to be processed through
Galileo during the years ended December 31, 2011, 2010 and 2009, respectively. The required number of segments processed
in future years for Worldspan is fixed at 16.0 million segments, while the required number of segments for Galileo is subject to
adjustment based upon the actual segments processed by our domestic brands in the preceding year. Our failure to process at
least 95% of these segments through the Travelport GDSs would result in a shortfall payment of $1.25 per segment below the
required minimum. We are not subject to these minimum volume thresholds to the extent that we process all eligible segments
through the Travelport GDS. No payments were made to Travelport related to the minimum segment requirement for our
domestic brands for the years ended December 31, 2011, 2010 and 2009.