TripAdvisor 2011 Annual Report Download - page 57

Table of Contents
Expedia and its subsidiaries have agreed to indemnify us and our affiliates and their respective current and former directors, officers and
employees for any losses arising out of any breach of the Separation Agreement, the Tax Sharing Agreement, the Transition Services
Agreement, the Employee Matters Agreement and any failure by Expedia to assume and perform any of the Expedia liabilities. We have also
agreed to indemnify Expedia against any liabilities relating to our financial and business information included in the proxy statement/prospectus
on Form S-4 filed with the SEC on November 1, 2011. In addition, we and Expedia each have generally agreed to bear 50% of the costs and
liabilities associated with any securities law litigation relating to public disclosures prior to the Spin-
Off with respect to the businesses or entities
that comprise TripAdvisor following the Spin-Off, regardless of whether the litigation arose prior to or after the Spin-Off. Following the Spin-
Off, we now bear 100% of the costs and liabilities associated with any other litigation relating to the conduct, prior to or after the Spin-Off, of
the businesses or entities that comprise TripAdvisor following the Spin-Off, regardless of whether the litigation arose before or after the Spin-
Off.
Tax Sharing Agreement
The Tax Sharing Agreement governs Expedia’s and our respective rights, responsibilities and obligations after the Spin-
Off with respect to
various tax matters. Generally, the Tax Sharing Agreement provides that although Expedia will remit taxes payable with respect to our income
included on its consolidated income tax returns, pre-distribution taxes that are attributable to the business of one party, including audit
adjustments with respect to consolidated periods, will be borne solely by that party. Pursuant to the Tax Sharing Agreement, Expedia will
prepare and file the federal consolidated return, and any other income tax returns that include Expedia and us with the appropriate tax authorities
and will remit any taxes relating thereto to the relevant tax authority. We will prepare and file all separate company tax returns for TripAdvisor
and our consolidated subsidiaries, and pay all taxes due with respect to such tax returns for all taxable periods. In general, Expedia controls all
audits and administrative matters relating to the consolidated return of the Expedia group and any other income tax return that include Expedia
and us.
Under the Tax Sharing Agreement, we generally (i) may not take (or fail to take) any action that would cause any representations,
information or covenants in the separation documents 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
equity securities or equity securities of the members of our group, except in specified transactions until January 21, 2014 and (iv) during that
same period, may not, other than in the ordinary course of business, sell or otherwise dispose of a substantial portion of our assets, liquidate,
merge or consolidate with any other person. During this period, we may take certain actions prohibited by these covenants if we provide Expedia
with an IRS 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 Expedia in its sole and absolute discretion exercised in good faith. Notwithstanding the receipt of any such IRS ruling or
opinion, we must indemnify Expedia for any taxes and related losses resulting from (i) any act or failure to act described in the covenants above,
(ii) any acquisition of our equity securities or assets or those of any member of our group, and (iii) any breach by us or any member of our group
of representations in the separation documents between us and Expedia or the documents relating to the tax opinion concerning the Spin-Off.
Under U.S. federal income tax laws, we and Expedia are severally liable for all of Expedia’s federal income taxes attributable to the
periods prior to and including the taxable year of Expedia, ended on December 31, 2011. Thus, if Expedia fails to pay the taxes attributable to it
under the Tax Sharing Agreement for periods prior to and including the taxable year ended December 31, 2011, we may be responsible for these
tax liabilities.
Employee Matters Agreement
The Employee Matters Agreement covers a wide range of compensation and benefit issues related to the Spin-Off. In general, under the
Employee Matters Agreement, Expedia will assume or retain (i) all liabilities with respect to Expedia employees, former Expedia employees and
their dependents and beneficiaries under all
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