UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 or 15(d) of the

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): December 20, 2011

 

 

EXPEDIA, INC.

(Exact name of Registrant as specified in charter)

 

 

Delaware

(State or other Jurisdiction of Incorporation)

 

000-51447   20-2705720
(Commission File Number)   (IRS. Employer Identification No.)
333 108th Avenue NE, Bellevue, WA   98004
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (425) 679-7200

Not applicable

(Former name or former address if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

The Spin-Off

Following the close of trading on the Nasdaq Stock Market on December 20, 2011, Expedia, Inc. (“Expedia”), a Delaware corporation, completed the spin-off (the “Spin-Off”) of TripAdvisor, Inc., a Delaware corporation (“TripAdvisor”) to Expedia stockholders. TripAdvisor consists of the domestic and international operations previously associated with Expedia’s TripAdvisor Media Group and is now a separately traded public company, trading under the symbol “TRIP” on The Nasdaq Global Select Market. Expedia continues to own and operate its remaining businesses—the domestic and international operations of its travel transaction brands—as a separately traded public company, trading under the symbol “EXPE” on The Nasdaq Global Select Market. Prior to the Spin-Off, TripAdvisor was a wholly-owned subsidiary of Expedia, with Expedia as its sole stockholder. Expedia effected the Spin-Off by means of a reclassification of its capital stock that resulted in the holders of Expedia capital stock immediately prior to the time of effectiveness of the reclassification having the right to receive a proportionate amount of TripAdvisor capital stock. A one-for-two reverse stock split of outstanding Expedia capital stock occurred immediately prior to the Spin-Off, with cash paid in lieu of fractional shares.

Spin-Off Agreements

In connection with the Spin-Off, Expedia and TripAdvisor entered into the following agreements (collectively, the “Spin-Off Agreements”):

1. A Separation Agreement that sets forth the arrangements between Expedia and TripAdvisor with respect to the principal corporate transactions necessary to complete the Spin-Off, and a number of other principles governing the relationship between Expedia and TripAdvisor following the Spin-Off;

2. A Tax Sharing Agreement that will govern the respective rights, responsibilities and obligations of Expedia and TripAdvisor after the Spin-Off with respect to tax liabilities and benefits, tax attributes, tax contests and other matters regarding income taxes, other taxes and related tax returns;

3. An Employee Matters Agreement that will govern a wide range of compensation and benefit issues, including the allocation between Expedia and TripAdvisor of responsibility for the employment and benefit obligations and liabilities of each company’s current and former employees (and their dependents and beneficiaries);

4. A Transition Services Agreement that will govern the provision of transition services between Expedia and TripAdvisor.

A summary of certain important features of the Spin-Off Agreements can be found in Amendment No. 4 to Expedia’s Registration Statement on Form S-4 (File No. 333-175828) (the “Registration Statement”), which was filed with the Securities and Exchange Commission on November 1, 2011. The section of the Registration Statement entitled “Proposal 1—The Spin-Off Proposal—Relationship Between Expedia and TripAdvisor after the Spin-Off”

 

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beginning on page 72 of the Registration Statement is incorporated by reference into this Current Report on Form 8-K. The Separation Agreement, the Tax Sharing Agreement, the Employee Matters Agreement and the Transition Services Agreement are attached to this Current Report on Form 8-K as Exhibits 2.1, 10.2, 10.3 and 10.4, respectively, and incorporated herein by reference.

Amended and Restated Governance Agreement

On December 20, 2011, in connection with the Spin-Off, Expedia entered into an Amended and Restated Governance Agreement (the “Governance Agreement”) with Liberty Interactive Corporation (“Liberty”) and Barry Diller, the Chairman of the Board of Directors of Expedia and Expedia’s Senior Executive. The Governance Agreement replaces the previous governance agreement among Expedia, Liberty and Mr. Diller dated August 9, 2005, as amended on June 19, 2007. The summary of the material terms of the Governance Agreement set forth below is qualified in its entirety by the full text of the Governance Agreement, which is attached to this Current Report on Form 8-K as Exhibit 10.1 and incorporated herein by reference. On December 20, 2011, in connection with the Spin-Off, Liberty and Mr. Diller also entered into an Amended and Restated Stockholders Agreement (the “Stockholders Agreement”).

Representation of Liberty on the Expedia Board of Directors

Under the terms of the Governance Agreement:

 

   

Liberty has the right to nominate up to such number of Expedia directors as is equal to 20% of the total number of Expedia directors (rounded up to the next whole number if the total number of directors is not an even multiple of 5) so long as Liberty beneficially owns at least 16,825,982 equity securities of Expedia (so long as Liberty’s ownership percentage is at least equal to 15% of the total equity securities of Expedia);

 

   

Liberty has the right to nominate one director of Expedia so long as Liberty beneficially owns at least 11,217,321 equity securities of Expedia (so long as Liberty owns at least 5% of the total equity securities of Expedia); and

 

   

Expedia will use its reasonable best efforts to cause one of Liberty’s designees to be a member of a committee of the Board of Directors of Expedia and, to the extent the person designated by Liberty would qualify as a member of the compensation committee of the Board of Directors of Expedia under applicable tax and securities laws and regulations, Expedia will seek to have that person appointed to the compensation committee of Expedia.

Pursuant to the terms of the Governance Agreement, Expedia will cause each director that Liberty nominates to be included in the slate of nominees recommended by the Board of Directors of Expedia to the stockholders of Expedia for election as directors at each annual meeting of the stockholders of Expedia and will use all reasonable efforts to cause the election of each such director including soliciting proxies in favor of the election of such persons. Liberty has the right to designate a replacement director to the board of Expedia in order to fill any vacancy of a director previously designated by Liberty. Liberty would have the right to

 

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transfer this ability to nominate candidates to the board of Expedia, subject to the same ownership requirements as Liberty’s current nomination rights, to its transferee in a Block Sale (as discussed below), provided that the transferee’s nominees are independent directors and are approved by Expedia’s Nominating Committee (or equivalent committee of the board of Expedia). In addition, the spun-off or split-off company in a Distribution Transaction will succeed to Liberty’s rights under the Governance Agreement, including Liberty’s right to nominate directors.

Contingent Matters

The Governance Agreement lists certain actions that require the prior consent of Liberty and Mr. Diller before Expedia can take any such action, which are referred to herein as “Contingent Matters.”

For so long as:

 

   

in the case of Liberty, Liberty owns at least 14,956,428 equity securities and at least 5% of the total equity securities of Expedia (the “Liberty Condition”); and

 

   

in the case of Mr. Diller, he owns at least 2,500,000 common shares (including options to purchase common shares, whether or not then exercisable), continues to serve as chairman of Expedia and has not become disabled (the “Diller Condition,” and together with the Liberty Condition, the “Consent Conditions”),

Expedia has agreed that, without the prior approval of Liberty and/or Mr. Diller, as applicable, it will not engage in any transaction that would result in Liberty 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 to any fines, penalties or material additional restrictions or limitations.

In addition, for so long as the Consent Conditions apply, if Expedia (or any of its subsidiaries) incurs any indebtedness (other than a customary refinancing not to exceed the principal amount of the existing obligation being refinanced), after which Expedia’s “total debt ratio” (as defined in the Governance Agreement) equals or exceeds 8:1, then for so long as the total debt ratio continues to equal or exceed 8:1, Expedia may not take any of the following actions without the prior approval of Liberty and/or Mr. Diller:

 

   

acquire or dispose of any assets, issue any debt or equity securities, repurchase any debt or equity securities, or incur indebtedness, if the aggregate value of such transaction or transactions (alone or in combination) during any six month period equals 10% or more of Expedia’s market capitalization;

 

   

voluntarily commence any liquidation, dissolution or winding up of Expedia or any material subsidiary of Expedia;

 

   

make any material amendments to the certificate of incorporation or bylaws of Expedia;

 

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engage in any line of business other than online and offline travel services and products and related businesses, or other businesses engaged in by Expedia as of the date of determination of the total debt ratio;

 

   

adopt any stockholder rights plan that would adversely affect Liberty or Mr. Diller, as applicable; or

 

   

grant additional consent rights to a stockholder of Expedia.

Preemptive Rights

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 will have preemptive rights that entitle it to purchase a number of common shares of Expedia so that Liberty will maintain the identical ownership interest in Expedia (subject to certain adjustments) that Liberty had immediately prior to such issuance or proposed issuance (but not in excess of 20.01%). Any purchase by Liberty 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 opts to acquire shares of common stock in lieu of shares of Class B common stock.

Registration Rights

Liberty and Mr. Diller are entitled to customary, transferable registration rights with respect to shares of common stock of Expedia owned by them. Liberty 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 under Rule 144 of the Securities Act or under another comparable exemption from registration.

In connection with a transfer of Expedia securities to an unaffiliated third party, Liberty or Mr. Diller may assign any of its or his then-remaining demand registration rights to the third party transferee, if upon the transfer the transferee acquires beneficial ownership of more than 5% of the outstanding equity securities of Expedia. If upon the transfer the transferee acquires beneficial ownership of equity securities of Expedia representing less than 5% of the outstanding equity securities, but having at least $250 million in then-current market value, Liberty or Mr. Diller may assign one of its or his remaining demand registration rights, which the transferee may exercise only in connection with an offering of shares of common stock of Expedia having $100 million or more in market value.

Inapplicability of Anti-Takeover Provisions to Distribution Transaction or Block Sale

Pursuant to the Governance Agreement, Expedia will not, in the case of a Distribution Transaction (as discussed below), implement any anti-takeover provision (including any shareholder rights plan) or, in the case of a Block Sale (as discussed below), will render inapplicable any such anti-takeover provision:

 

   

the purpose or reasonably evident effect of which is to restrict or limit Liberty’s ability to engage in a Distribution Transaction or a Block Sale; or

 

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the purpose or reasonably evident effect of which is to impose a material economic detriment on the company to which Expedia equity securities are transferred in connection with a qualifying Distribution Transaction (and whose shares are distributed to the public stockholders of Liberty) or that would impose a material economic detriment on the transferee in a Block Sale.

In addition, the Board of Directors of Expedia will approve the transfer of Class B common stock and common stock in a Distribution Transaction or Block Sale (up to a 30% ownership level in the case of a Block Sale) for purposes of Section 203 of the Delaware General Corporation Law (“DGCL”), which is the prohibition on transactions with interested stockholders under Delaware state law. In the case of a Block Sale, however, such approval for purposes of Section 203 of the DGCL will be subject to the imposition of contractual restrictions on the Block Sale transferee analogous to the provisions of Section 203 of the DGCL (as further described below).

Restrictions on Block Sale Transferee

For three years following a Block Sale by Liberty, the transferee will be subject to the following restrictions with regard to Expedia, unless the restrictions terminate early in the circumstances discussed below:

 

   

an ownership cap set at 30% of the total equity securities of the company (which would apply to any “group” of which the transferee or its affiliates is a member), subject to adjustment under certain circumstances;

 

   

specified “standstill” restrictions limiting the transferee’s ability, at such time as any directors nominated by the transferee are serving on the Board of Directors, to, among other things, engage in proxy contests, propose transactions involving the company, form a “group” (as defined in the Securities Exchange Act of 1934) or influence the management of Expedia. These restrictions, other than the prohibition on proxy contests, would terminate if the transferee relinquishes all rights to nominate directors under the Governance Agreement; and

 

   

contractual provisions analogous to the provisions of Section 203 of the DGCL that would prohibit the transferee from engaging in specified “business combination” transactions with Expedia without the prior approval by Expedia, acting through a committee of independent directors.

The contractual provisions mirroring Section 203 of the DGCL would not apply to the transferee if upon the Block Sale it would not be an “interested stockholder” (as determined pursuant to Section 203 of the DGCL) of Expedia. However, if these contractual provisions

 

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become applicable at the time of the Block Sale, they will continue in effect for the term of the standstill restrictions even if the transferee would subsequently cease to qualify as an “interested stockholder” (as determined pursuant to Section 203 of the DGCL). The standstill restrictions and 30% ownership cap, as well as the termination provisions, would apply to subsequent transferees of all or substantially all of the shares transferred in a prior Block Sale, but in any event would not extend past the third anniversary of the original Block Sale. With respect to such unaffiliated subsequent transferees of the shares transferred in a prior Block Sale, the statutory (rather than contractual) anti-takeover restrictions of Section 203 of the DGCL would apply subject to the waiver, at the time of a transfer, by Expedia.

Prior to the expiration of the three year term, the standstill restrictions, including the cap on ownership described above, would terminate at the earlier of (i) Mr. Diller and his affiliates “actually owning” securities representing more than 50% of the total voting power of Expedia or (ii) the Block Sale transferee and its affiliates beneficially owning (as defined in the Governance Agreement) securities representing less than 12% of the total voting power of Expedia and Mr. Diller beneficially owning (as defined in the Governance Agreement) securities representing more than 40% of the total voting power of Expedia. For this purpose, securities “actually owned” by Mr. Diller and his affiliates will include all securities of Expedia held by Mr. Diller and his “affiliates,” plus those shares of Class B common stock for which Mr. Diller and his “affiliates” have a right to “swap” shares of common stock (as discussed below) but for which the swap right has not been exercised, minus the securities Mr. Diller and his “affiliates” currently hold but would need to exchange for the Class B common stock in such swap right.

The above restrictions may be waived at any time, by Expedia, acting through a committee of independent directors.

Other Block Sale Provisions

Any Block Sale by Liberty within the two years immediately following the completion of the TripAdvisor Spin-Off will require the consent of Expedia and TripAdvisor. Expedia and TripAdvisor will not withhold their consent to such Block Sale if they determine in good faith (a) that a safe harbor exists for the Block Sale under Section 355(e) of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder, or (b) that during the two years immediately prior to the TripAdvisor Spin-Off there were no substantial negotiations with the transferee in such Block Sale regarding the Block Sale.

If Mr. Diller does not acquire from Liberty all shares of Class B common stock proposed to be transferred in a Block Sale or in a transfer of all of the Class B common stock and common stock beneficially owned by Liberty through the exercise of his “swap” rights or right of first refusal under the Stockholders Agreement (resulting in such Class B common stock of Liberty being converted into, or exchanged for, shares of common stock of Expedia before the Block Sale), for a period of two years after the Block Sale, Mr. Diller will have the right from time to time to acquire from Expedia an equal number of shares of Class B Common Stock held in treasury, either by purchase at fair market value, through an exchange of an equivalent number of shares of common stock, or a combination thereof. Mr. Diller may exercise this right either alone or in conjunction with one or more third-parties so long as Mr. Diller retains voting control over the Class B common stock acquired. Prior to the two year period following a Block Sale,

 

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Mr. Diller’s right to acquire Class B common stock from Expedia will be suspended immediately upon the entry by Expedia into a merger agreement providing for a merger that constitutes a change of control of Expedia, and will terminate irrevocably upon the consummation of a tender or exchange offer for securities representing a majority of the total voting power of Expedia or a merger that constitutes a change of control of Expedia.

Certain Waivers

During the term of the Stockholders Agreement, without Expedia’s consent (to be exercised by a committee of independent directors), Mr. Diller will not waive Liberty’s obligation under the Stockholders Agreement to convert or exchange its shares of Class B common stock to shares of common stock in specified circumstances. This consent right is not applicable if Mr. Diller no longer has any rights under the Stockholders Agreement. In certain circumstances this consent right will survive a mutual termination of the Stockholders Agreement for a period of up to one year.

Termination

Generally, the Governance Agreement will terminate:

 

   

with respect to Liberty, at such time that Liberty beneficially owns equity securities representing less than 5% of the total equity securities of Expedia; and

 

   

with respect to Mr. Diller, at such time as Mr. Diller ceases to be the chairman of Expedia or becomes disabled.

With respect to the provisions governing “Contingent Matters,” such provisions will terminate as to Mr. Diller and Liberty as set forth under “—Contingent Matters,” above.

Distribution Transactions

Liberty will be permitted to spin-off or split-off to its public stockholders all (but not less than all) of its equity ownership in Expedia in a transaction meeting specified requirements (a “Distribution Transaction”) without first complying with the transfer restrictions under the Stockholders Agreement, including Mr. Diller’s tag-along right, right of first refusal, swap right and conversion requirement, and without being subject to the application of certain anti-takeover provisions, as described above under “The Governance Agreement—Inapplicability of Anti-Takeover Provisions to Distribution Transaction or Block Sale.” The spun-off or split-off company will be required to assume all of Liberty’s obligations (including the proxy given to Mr. Diller under the Stockholders Agreement) and will succeed to Liberty’s rights under the Governance Agreement and Stockholders Agreement (including Liberty’s right to nominate directors).

Block Sales

So long as Liberty’s equity ownership in Expedia does not exceed 30% of the total equity securities of Expedia and Mr. Diller continues to hold a proxy over Liberty’s shares in Expedia under the Stockholders Agreement, Liberty will be permitted to sell all (but not less than all) of such equity interest in Expedia to an unaffiliated third party (a “Block Sale”), without being subject to the application of certain anti-takeover provisions, as described above under “The Governance Agreement—Inapplicability of Anti-Takeover Provisions to Distribution Transaction or Block Sale,” subject to prior compliance with Mr. Diller’s tag-along right, right of first refusal and swap right under the Stockholders Agreement, as well as the requirement that Liberty convert shares of Class B common stock to shares of common stock or exchange them for common stock with Expedia before the Block Sale.

Prior to any Block Sale, Liberty will be required to exchange and/or convert any shares of Class B common stock proposed to be transferred in such Block Sale, to the extent Mr. Diller does not acquire such shares pursuant to exercise of his right of first refusal or swap rights, for newly-issued common stock (subject to application of relevant securities laws).

Relationship Between Expedia, Mr. Diller and Liberty

Mr. Diller is the Senior Executive and Chairman of the Board of Expedia. Mr. Diller and Liberty are parties to the Stockholders Agreement. Among other arrangements, under the terms of the Stockholders Agreement, Liberty grants to Mr. Diller an irrevocable proxy with respect to all Expedia securities beneficially owned by Liberty on all matters submitted to a stockholder vote or by which the stockholders may act by written consent (other than with respect to “Contingent Matters” with respect to which Liberty has not consented), until such proxy terminates in accordance with the terms of the Stockholders Agreement. As a result of the arrangements contemplated by the Stockholders Agreement, as of December 20, 2011, Mr. Diller controls approximately 62.43% of the combined voting power of Expedia capital stock and can effectively 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’s common stock of 25% of the members of Expedia’s Board of Directors and matters to which Delaware law requires a separate class vote). Upon Mr. Diller ceasing to serve in his capacity as Chairman of Expedia, or his becoming disabled, Liberty may effectively control the voting power of Expedia capital stock through its ownership of common shares of Expedia.

 

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ITEM 1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT

On December 20, 2011, prior to consummation of the Spin-Off, Expedia called for redemption on January 19, 2012 (the “Redemption Date”) all $400 million aggregate principal amount of its outstanding 8.5% senior notes due 2016 (the “2016 Notes”). Simultaneously, Expedia discharged the indenture governing the 2016 Notes (the “2016 Notes Indenture”) by depositing $451 million with The Bank of New York Mellon Trust Company, N.A., as trustee under the 2016 Notes Indenture (the “Trustee”), and irrevocably instructing the Trustee to apply such funds to the payment of principal of, and premium and interest on, the 2016 Notes to the Redemption Date in accordance with the terms of the 2016 Notes Indenture, with any excess to be returned to Expedia. The redemption price of the 2016 Notes is equal to 100% of the principal amount of the outstanding 2016 Notes plus a make-whole premium as of, and accrued and unpaid interest to, the Redemption Date. The funds deposited with the Trustee to discharge the 2016 Notes Indenture included the proceeds of a dividend in the amount of $405,516,330.07 received by Expedia from TripAdvisor Holdings, LLC.

In connection with the Spin-Off, TripAdvisor Holdings, LLC and TripAdvisor LLC, both post-Spin-Off subsidiaries of TripAdvisor, were released from their guarantees of obligations under Expedia’s existing $750 million revolving credit facility, $500 million aggregate principal amount of 7.456% senior notes due 2018 and $750 million aggregate principal amount of 5.95% senior notes due 2020.

ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

The first paragraph of Item 1.01 of this Current Report on Form 8-K, entitled “The Spin-Off,” is incorporated herein by reference. The unaudited pro forma condensed consolidated financial information of Expedia and related notes thereto, which are attached to this Current Report on Form 8-K Exhibit 99.1, are incorporated herein by reference.

ITEM 2.04 TRIGGERING EVENTS THAT ACCELERATE OR INCREASE A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT

Please see Item 1.02 above, which is incorporated herein by reference.

ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.

On March 7, 2006, Expedia and Dara Khosrowshahi, the chief executive officer of Expedia, entered into a Restricted Stock Unit Agreement (as amended, the “DK RSU Agreement”) covering 800,000 shares of Expedia common stock, with vesting of such restricted stock units generally subject to the satisfaction of performance goals, including achievement of a specified level of operating income before amortization (“OIBA”) in a given fiscal year. In connection with the Spin-Off, the parties agreed to divide the original award between Expedia and TripAdvisor, in accordance with the treatment of shares of Expedia common stock in the Spin-Off, such that the initial award has been converted into (1) restricted stock units covering 400,000 shares of Expedia common stock governed by an amended and restated DK RSU

 

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Agreement (the “Amended and Restated DK RSU Agreement”) and (2) restricted stock units covering 400,000 shares of TripAdvisor common stock governed by an agreement between Mr. Khosrowshahi and TripAdvisor. On December 20, 2011, Expedia and Mr. Khosrowshahi entered into to the Amended and Restated DK RSU Agreement. Below is a description of the material terms of the Amended and Restated DKU RSU Agreement. The description below is qualified by reference to the Amended and Restated DK RSU Agreement, which is attached to this Current Report on Form 8-K as Exhibit 10.5.

Award. The Amended and Restated DK RSU Agreement covers restricted stock units with respect to 400,000 shares of Expedia common stock (the “RSUs”)

Vesting (Generally). Subject to Mr. Khosrowshahi’s continued employment through the applicable vesting date, 75% of the RSUs will vest upon Expedia’s achievement of a specified level of Expedia OIBA (the “OIBA Target”); provided that at the election of Expedia, such vesting will be conditioned on Mr. Khosrowshahi agreeing to remain employed as the chief executive officer of Expedia for an additional two years following satisfaction of the OIBA Target. The OIBA Target will be determined after December 31, 2011 by adjusting the OIBA goal in effect prior to the Spin-Off to account for the occurrence of the Spin-Off.

Twenty-Five percent of the RSUs will vest on the one year anniversary of the satisfaction of the OIBA Target, or, if earlier, upon Mr. Khosrowshahi’s termination of employment by Expedia without “Cause” (as defined in the Amended and Restated DK RSU Agreement) following satisfaction of the OIBA Target; provided that this vesting event will not occur and Mr. Khosrowshahi will forfeit all outstanding RSUs in the event that Mr. Khosrowshahi voluntarily terminates his employment with Expedia or Expedia terminates Mr. Khosrowshahi’s employment with Expedia for Cause.

Termination without Cause . If Expedia terminates Mr. Khosrowshahi’s employment without Cause in any year in which Expedia achieves a specified level of OIBA that is lower than the OIBA Target (the “Modified OIBA Target”), 75% of the RSUs will vest upon such termination of employment. The Modified OIBA Target will be determined after December 31, 2011 by adjusting the modified OIBA goal in effect prior to the Spin-Off to account for the occurrence of the Spin-Off.

Change of Control. If there is a change of control of Expedia, 50% of the then outstanding RSUs immediately will vest without regard to the satisfaction of the OIBA Target or the Modified OIBA Target. If within one year following the change of control, Expedia terminates Mr. Khosrowshahi’s employment without Cause or Mr. Khosrowshahi terminates employment following a material and demonstrable adverse change in the nature and scope of Mr. Khosrowshahi’s duties, the remaining RSUs will vest, without regard to the satisfaction of the OIBA Target or the Modified OIBA Target.

Restrictive Covenants . Following Mr. Khosrowshahi ceasing to be employed by Expedia for any reason, Mr. Khosrowshahi will be bound by a non-compete agreement with Expedia to refrain from competing with Expedia for a period of two years from his date of departure.

 

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Section 162(m) of the Internal Revenue Code . A performance goal established for purposes of Section 162(m) of the Internal Revenue Code was previously satisfied.

ITEM 5.03. AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR.

On December 20, 2011, Expedia filed a Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which became effective upon filing and is attached as Exhibit 3.1 hereto.

ITEM 8.01 OTHER EVENTS.

The reverse stock split and Spin-Off referred to above resulted in certain adjustments to the outstanding warrants exercisable for shares of Expedia common stock until they expire on May 7, 2012. Specifically, outstanding warrants previously exercisable for 0.5 shares of Expedia common stock at an exercise price of $14.45 per warrant have been converted into: (i) warrants exercisable for one-quarter (0.25) of a share of Expedia common stock at an exercise price of $6.80 per warrant; and (ii) warrants exercisable for one-quarter (0.25) of a share of TripAdvisor common stock at an exercise price of $7.66 per warrant. Outstanding warrants previously exercisable for 0.5 shares of Expedia common stock at an exercise price of $12.23 per warrant have been converted into: (i) warrants exercisable for one-quarter (0.25) of a share of Expedia common stock at an exercise price of $5.76 per warrant and (ii) warrants exercisable for one-quarter (0.25) of a share of TripAdvisor common stock at an exercise price of $6.48 per warrant.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

 

Exhibit
No.

  

Description

  2.1

   Separation Agreement by and between TripAdvisor, Inc. and Expedia, Inc., dated as of December 20, 2011

  3.1

   Restated Certificate of Incorporation of Expedia, Inc.

10.1

   Amended and Restated Governance Agreement, by and among Expedia, Inc., Liberty Interactive Corporation and Barry Diller, dated as of December 20, 2011

10.2

   Tax Sharing Agreement by and between TripAdvisor, Inc. and Expedia, Inc., dated as of December 20, 2011

10.3

   Employee Matters Agreement by and between TripAdvisor, Inc. and Expedia, Inc., dated as of December 20, 2011

10.4

   Transition Services Agreement by and between TripAdvisor, Inc. and Expedia, Inc., dated as of December 20, 2011

10.5

   Second Amended and Restated Expedia, Inc. Restricted Stock Unit Agreement for Dara Khosrowshahi, dated as of December 20, 2011

99.1

   Expedia, Inc. unaudited pro forma condensed consolidated balance sheet as of September 30, 2011 and unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2011 and for each of the years in the three-year period ended December 31, 2010 and related notes thereto

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

EXPEDIA, INC.
By:  

/s/ M ARK D. O KERSTROM

Name:   Mark D. Okerstrom
Title:   Executive Vice President & Chief Financial Officer

Date: December 27, 2011

 

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EXHIBIT INDEX

 

Exhibit
No.

  

Description

  2.1

   Separation Agreement by and between TripAdvisor, Inc. and Expedia, Inc., dated as of December 20, 2011

  3.1

   Restated Certificate of Incorporation of Expedia, Inc.

10.1

   Amended and Restated Governance Agreement, by and among Expedia, Inc., Liberty Interactive Corporation and Barry Diller, dated as of December 20, 2011

10.2

   Tax Sharing Agreement by and between TripAdvisor, Inc. and Expedia, Inc., dated as of December 20, 2011

10.3

   Employee Matters Agreement by and between TripAdvisor, Inc. and Expedia, Inc., dated as of December 20, 2011

10.4

   Transition Services Agreement by and between TripAdvisor, Inc. and Expedia, Inc., dated as of December 20, 2011

10.5

   Second Amended and Restated Expedia, Inc. Restricted Stock Unit Agreement for Dara Khosrowshahi, dated as of December 20, 2011

99.1

   Expedia, Inc. unaudited pro forma condensed consolidated balance sheet as of September 30, 2011 and unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2011 and for each of the years in the three-year period ended December 31, 2010 and related notes thereto

 

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Exhibit 2.1

SEPARATION AGREEMENT

by and between

EXPEDIA, INC.

and

TRIPADVISOR, INC.

Dated as of December 20, 2011


TABLE OF CONTENTS

 

ARTICLE I

     INTERPRETATION      2   

1.01.

     Definitions      2   

1.02.

     Schedules      13   
ARTICLE II      THE SEPARATION      14   

2.01.

     Separation      14   

2.02.

     Implementation      14   

2.03.

     Transfer of Separated Assets; Assumption of Assumed Liabilities      14   

2.04.

     Separated Assets      15   

2.05.

     Deferred Separated Assets      16   

2.06.

     Excluded Assets      16   

2.07.

     Liabilities      16   

2.08.

     Third Party Consents and Government Approvals      17   

2.09.

     Preservation of Agreements      18   

2.10.

     Ancillary Agreements      18   

2.11.

     Resignations      18   

2.12.

     Cooperation      18   

2.13.

     Intercompany Accounts Between the Expedia Group and the TripAdvisor Group      18   

2.14.

     Disclaimer of Representations and Warranties      19   
ARTICLE III      DEFERRED SEPARATION TRANSACTIONS      19   

3.01.

     Deferred Transfer Assets      19   

3.02.

     Unreleased Liabilities      20   

3.03.

     No Additional Consideration      21   
ARTICLE IV      TREATMENT OF OLD EXPEDIA WARRANTS IN THE SEPARATION      21   

4.01.

     Old Expedia Warrants      21   

4.02.

     Stock Certificates and Related Matters      22   
ARTICLE V      COVENANTS      23   

5.01.

     General Covenants      23   

5.02.

     Covenants of TripAdvisor      23   

5.03.

     Cash Balance True Up      24   
ARTICLE VI      THE RECLASSIFICATION      24   

6.01.

     Conditions to the Reclassification      24   

6.02.

     Actions in Connection with the Reclassification      26   
ARTICLE VII      MUTUAL RELEASES; INDEMNIFICATION      26   

7.01.

     Release of Pre-Separation Claims      26   

7.02.

     Indemnification by TripAdvisor      29   

7.03.

     Indemnification by Expedia      29   

7.04.

     Procedures for Indemnification of Third Party Claims      30   

 

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7.05.

     Procedures for Indemnification of Direct Claims      31   

7.06.

     Adjustments to Liabilities      31   

7.07.

     Payments      32   

7.08.

     Contribution      32   

7.09.

     Remedies Cumulative      33   

7.10.

     Survival of Indemnities      33   

7.11.

     Shared Liabilities      33   
ARTICLE VIII      INSURANCE      34   

8.01.

     Insurance Matters      34   
ARTICLE IX      EXCHANGE OF INFORMATION; CONFIDENTIALITY      35   

9.01.

     Agreement for Exchange of Information; Archives      35   

9.02.

     Ownership of Information      36   

9.03.

     Compensation for Providing Information      36   

9.04.

     Record Retention      36   

9.05.

     Other Agreements Providing for Exchange of Information      37   

9.06.

     Production of Witnesses; Records; Cooperation      37   

9.07.

     Confidentiality      38   

9.08.

     Protective Arrangements      39   

9.09.

     Disclosure of Third Party Information      39   
ARTICLE X      DISPUTE RESOLUTION      40   

10.01.

     Interpretation; Agreement to Resolve Disputes      40   

10.02.

     Dispute Resolution; Mediation      40   

10.03.

     Arbitration      41   

10.04.

     Costs      41   

10.05.

     Continuity of Service and Performance      41   
ARTICLE XI      FURTHER ASSURANCES      41   

11.01.

     Further Assurances      41   
ARTICLE XII      CERTAIN OTHER MATTERS      43   

12.01.

     Auditors and Audits; Annual and Quarterly Financial Statements and Accounting      43   
ARTICLE XIII      SOLE DISCRETION OF EXPEDIA; TERMINATION      45   

13.01.

     Sole Discretion of Expedia      45   

13.02.

     Termination      45   
ARTICLE XIV      MISCELLANEOUS      45   

14.01.

     Limitation of Liability      45   

14.02.

     Counterparts      45   

14.03.

     Entire Agreement      45   

14.04.

     Construction      46   

14.05.

     Signatures      47   

14.06.

     Assignability      47   

 

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14.07.

     Third Party Beneficiaries      47   

14.08.

     Payment Terms      47   

14.09.

     Governing Law      48   

14.10.

     Notices      48   

14.11.

     Severability      48   

14.12.

     Publicity      49   

14.13.

     Survival of Covenants      49   

14.14.

     Waivers of Default; Conflicts      49   

14.15.

     Amendments      49   

 

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SEPARATION AGREEMENT

This SEPARATION AGREEMENT, dated as of December 20, 2011, is entered into by and between Expedia, Inc., a Delaware corporation (“ Expedia ”), and TripAdvisor, Inc., a Delaware corporation and wholly owned subsidiary of Expedia (“ TripAdvisor ”).

RECITALS:

WHEREAS, the Board of Directors of Expedia (“ Expedia Board ”) has determined it is in the best interests of Expedia and its stockholders to separate Expedia and TripAdvisor into two publicly-traded companies by separating the businesses comprising Expedia’s TripAdvisor media group from Expedia’s remaining businesses by way of Expedia and its Subsidiaries effecting the Separation Transactions (as defined below), and thereafter implementing a reclassification of the capital stock of Expedia pursuant to the Spin-Off Charter Amendments (as defined below);

WHEREAS, following the merger of a wholly owned subsidiary of Expedia with and into Expedia on December 14, 2011, the outstanding shares of capital stock of Expedia consist solely of common stock, par value $0.001 per share, of Expedia (“ Old Expedia Common Stock ”) and Class B common stock, par value $0.001 per share, of Expedia (“ Old Expedia Class B Common Stock ” and, together with the Old Expedia Common Stock, the “ Old Expedia Capital Stock ”);

WHEREAS, the Expedia Board has adopted a resolution approving amendments to Expedia’s amended and restated certificate of incorporation (the “ Spin-Off Charter Amendments ”) and recommended that the holders of Expedia capital stock approve and adopt the Spin-Off Charter Amendments pursuant to Section 242 of the General Corporation Law of the State of Delaware (the “ DGCL ”), whereby, among other matters, the Old Expedia Common Stock and the Old Expedia Class B Common Stock will be reclassified (the “ Reclassification ”) as follows:

Each then issued and outstanding share of Old Expedia Common Stock will be reclassified into (a) one share of common stock, par value $0.0001 per share, of Expedia (“ New Expedia Common Stock ”) and (b) 1/100th of a share of Series 1 Mandatory Exchangeable preferred stock, par value $0.001 per share, of Expedia (the “ New Expedia Series 1 Preferred Stock ”), which 1/100th of a share of New Expedia Series 1 Preferred Stock shall, pursuant to its terms, automatically and immediately exchange into one share of common stock, par value $0.001 per share, of TripAdvisor (“ TripAdvisor Common Stock ”);

Each then issued and outstanding share of Old Expedia Class B Common Stock will be reclassified into (a) one share of Class B common stock, par value $0.0001 per share, of Expedia and (b) 1/100th of a share of Series 2 Mandatory Exchangeable preferred stock, par value $0.001 per share, of Expedia (the “ New Expedia Series 2 Preferred Stock ”), which 1/100th of a share of New Expedia Series 2 Preferred Stock shall, pursuant to its terms, automatically and immediately exchange into one share of Class B common stock, par value $0.001 per share, of TripAdvisor (“ TripAdvisor Class B Common Stock ”);

 

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WHEREAS, at a meeting of stockholders of Expedia held on December 6, 2011, the holders of Old Expedia Capital Stock and the holders of formerly outstanding shares of Series A Cumulative Convertible Preferred Stock, par value $0.001 per share, of Expedia approved, by the requisite votes, the Spin-Off Charter Amendments and an amendment to Expedia’s amended and restated certificate of incorporation pursuant to which Expedia will implement a one-for-two reverse stock split with respect to the Old Expedia Common Stock and Old Expedia Class B Common Stock prior to implementing the Reclassification (the “ Reverse Stock Split ”);

WHEREAS, pursuant to their terms, the warrants to purchase shares of Old Expedia Common Stock set forth on  Schedule 1.01(a)  (the “ Old Expedia Warrants ”) will be converted into (a) warrants to purchase shares of New Expedia Common Stock (“ New Expedia Warrants ”) and (b) warrants to purchase shares of TripAdvisor Common Stock (“ TripAdvisor Warrants ”);

WHEREAS, in connection with the separation of Expedia and TripAdvisor, TripAdvisor and its Subsidiaries will, subject to the terms and provisions of this Agreement, enter into credit facilities separate from those of Expedia, the net cash proceeds of borrowings under which will be distributed by TripAdvisor Holdings to Expedia prior to the Contribution (as hereinafter defined) and the Reclassification;

WHEREAS, the Parties wish to set forth in this Agreement the terms on which, and the conditions subject to which, they intend to implement the measures described above; and

WHEREAS, Expedia and TripAdvisor intend that the Separation (as defined below) and the Reclassification will qualify for United States federal income tax purposes as transactions that are generally tax free under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and hereby adopt this Agreement as a “ plan of reorganization.

NOW THEREFORE, in consideration of the mutual agreements, covenants and other provisions set forth in this Agreement, the Parties hereby agree as follows:

ARTICLE I

INTERPRETATION

1.01. Definitions . The capitalized words and expressions and variations thereof used in this Agreement or in its schedules, unless a clearly inconsistent meaning is required under the context, shall have the meanings set forth below:

2011 Internal Control Audit and Management Assessments ” has the meaning set forth in Section 12.01(b).

 

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AAA ” has the meaning set forth in Section 10.03.

Accounts Receivable ” means in respect of any Person, (a) all trade accounts and notes receivable and other rights to payment from customers and all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or otherwise disposed of or services rendered to customers, (b) all other accounts and notes receivable and all security for such accounts or notes, and (c) any claim, remedy or other right relating to any of the foregoing.

Action ” means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by any Person or any Governmental Authority or before any Governmental Authority or any arbitration or mediation tribunal.

Affiliate ” of any Person means any other Person that, directly or indirectly, controls, is controlled by, or is under common control with such first Person as of the date on which or at any time during the period for when such determination is being made. For purposes of this definition, “ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract or otherwise, and the terms “ Controlling ” and “ Controlled ” have meanings correlative to the foregoing.

Agent ” has the meaning set forth in Section 4.02.

Agreement ” means this Separation Agreement, including all of the Schedules hereto.

Ancillary Agreements ” has the meaning set forth in Section 2.10.

Applicable Law ” means any applicable law, statute, rule or regulation of any Governmental Authority or any outstanding order, judgment, injunction, ruling or decree by any Governmental Authority.

Appurtenances ” means, in respect of any Land, all privileges, rights, easements, servitudes, hereditaments and appurtenances and similar interests belonging to or for the benefit of such Land, including all easements and servitudes appurtenant to and for the benefit of any Land (a “ Dominant Parcel ”) for, and as the primary means of, access between, the Dominant Parcel and a public way, or for any other use upon which lawful use of the Dominant Parcel for the purposes for which it is presently being used is dependent, and all rights existing in and to any streets, alleys, passages and other rights-of-way included therein or adjacent thereto.

Asset-Related Claims ” means, in respect of any Asset, all claims of the owner against Third Parties relating to such Asset, whether choate or inchoate, known or unknown, absolute or contingent, disclosed or non-disclosed.

 

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Assets ” means assets, properties and rights (including goodwill), wherever located (including in the possession of owners or Third Parties or elsewhere), whether real, personal or mixed, tangible or intangible, movable or immovable, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of a Person, including the following:

(a) Real Property;

(b) Tangible Personal Property;

(c) Inventories;

(d) Accounts Receivable;

(e) Contractual Assets;

(f) Governmental Authorizations;

(g) Business Records;

(h) Intangible Property Rights;

(i) Insurance Benefits;

(j) Asset-Related Claims; and

(k) Deposit Rights.

Assumed Liabilities ” has the meaning set forth in Section 2.07.

Business Concern ” means any corporation, company, limited liability company, partnership, joint venture, trust, unincorporated association or any other form of association.

Business Day ” means any day excluding (a) Saturday, Sunday and any other day which, in New York City is a legal holiday or (b) a day on which banks are authorized by Applicable Law to close in New York City.

Business Records ” means, in respect of any Person, all data and Records relating to such Person, including client and customer lists and Records, referral sources, research and development reports and Records, cost information, sales and pricing data, customer prospect lists, customer and vendor data, production reports and Records, service and warranty Records, equipment logs, operating guides and manuals, financial and accounting Records, personnel Records (subject to Applicable Law), creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and records.

Claim Notice ” has the meaning set forth in Section 7.04(b).

 

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Code ” has the meaning set forth in the recitals hereto.

Confidential Information ” has the meaning set forth in Section 9.07(a).

Consent ” means any approval, consent, ratification, waiver or other authorization.

Contract ” means any contract, agreement, lease, purchase and/or commitment, license, consensual obligation, promise or undertaking (whether written or oral and whether express or implied) that is legally binding on any Person or any part of its property under Applicable Law, including all claims or rights against any Person, choses in action and similar rights, whether accrued or contingent with respect to any such contract, agreement, lease, purchase and/or commitment, license, consensual obligation, promise or undertaking, but excluding this Agreement and any Ancillary Agreement save as otherwise expressly provided in this Agreement or in any Ancillary Agreement.

Contractual Asset ” means, in respect of any Person, any Contract of, or relating to, such Person, any outstanding offer or solicitation made by, or to, such Person to enter into any Contract, and any promise or undertaking made by any other Person to such Person, whether or not legally binding.

Contribution ” means the contribution by Expedia of all of the outstanding equity interests in TripAdvisor Holdings to TripAdvisor.

Deferred Beneficiary ” has the meaning set forth in Section 3.01(b).

Deferred Excluded Asset ” has the meaning set forth in Section 3.01(a).

Deferred Separated Asset ” has the meaning set forth in Section 3.01(a).

Deferred Transactions ” has the meaning set forth in Section 11.01(a)(ii).

Deferred Transfer Asset ” has the meaning set forth in Section 3.01(a).

Deposit Rights ” means rights relating to deposits and prepaid expenses, claims for refunds and rights of set-off in respect thereof.

DGCL ” has the meaning set forth in the recitals hereto.

Disclosing Party ” has the meaning set forth in Section 9.08.

Dispute ” has the meaning set forth in Section 10.02(a).

Dispute Notice ” has the meaning set forth in Section 10.02(a).

Effective Date ” means December 20, 2011.

Effective Date Cash Balance ” has the meaning set forth in Section 5.03.

 

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Effective Time ” means 5:20 p.m., Eastern standard time, on the Effective Date.

EHS Liabilities ” means any Liability arising from or under any Environmental Law or Occupational Health and Safety Law.

Employee Matters Agreement ” means the Employee Matters Agreement among the Parties to be dated as of even date herewith.

Encumbrance ” means, with respect to any asset, mortgages, liens, hypothecations, pledges, charges, security interests or encumbrances of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under Applicable Law.

Environmental Law ” means any Applicable Law from any Governmental Authority (a) relating to the protection of the environment (including air, water, soil and natural resources) or (b) the use, storage, handling, release or disposal of Hazardous Substances.

Exchange Act ” means the United States Securities Exchange Act of 1934, as amended.

Excluded Assets ” has the meaning set forth in Section 2.06(a).

Expedia ” has the meaning set forth in the preamble hereto.

Expedia’s Auditors ” has the meaning set forth in Section 12.01(a).

Expedia Board ” has the meaning set forth in the recitals hereto.

Expedia Claims ” has the meaning set forth in Section 7.01(b).

Expedia Group ” means Expedia, its Subsidiaries (other than any member of the TripAdvisor Group) and their respective domestic and international businesses, assets and liabilities.

Expedia Indemnified Parties ” has the meaning set forth in Section 7.02.

Expedia Parties ” has the meaning set forth in Section 7.01(a).

Expedia Releasors ” has the meaning set forth in Section 7.01(b).

Expedia Warrant Factor ” means 0.47023, which equals (x) (a) $28.55, the closing per-share price of Old Expedia Common Stock trading “regular way” on December 20, 2011, as listed on the Nasdaq as of 4:00 p.m. Eastern time, minus (b) $15.125, 0.5 times the closing per-share price of TripAdvisor Common Stock in the “when issued market” on December 20, 2011, as listed on the Nasdaq as of 4:00 p.m. Eastern time, divided by (y) $28.55, the closing per-share price of Old Expedia Common Stock trading “regular way” on December 20, 2011, as listed on the Nasdaq as of 4:00 p.m. Eastern time.

 

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GAAP ” has the meaning set forth in Section 2.04(d).

Governmental Authority ” means any court, arbitration panel, governmental or regulatory authority, agency, stock exchange, commission or body.

Governmental Authorization ” means any Consent, license, certificate, franchise, registration or permit issued, granted, given or otherwise made available by, or under the authority of, any Governmental Authority or pursuant to any Applicable Law.

Ground Lease ” means any long-term lease (including any emphyteutic lease) of Land in which most of the rights and benefits comprising ownership of the Land and the Improvements thereon or to be constructed thereon, if any, and the Appurtenances thereto for the benefit thereof, are transferred to the tenant for the term thereof.

Ground Lease Property ” means, in respect of any Person, any Land, Improvement or Appurtenance of such Person that is subject to a Ground Lease.

Group ” means the Expedia Group or the TripAdvisor Group, as the context requires.

Hazardous Substance ” means any substance to the extent presently listed, defined, designated or classified as hazardous, toxic or radioactive under any applicable Environmental Law, including petroleum and any derivative or by-products thereof.

Improvements ” means, in respect of any Land, all buildings, structures, plants, fixtures and improvements located on such Land, including those under construction.

Indemnified Party ” has the meaning set forth in Section 7.04(a).

Indemnifying Party ” has the meaning set forth in Section 7.04(b).

Information ” means any information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, test procedures, research, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, manufacturing techniques, manufacturing variables, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, products, product plans, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer information, customer services, supplier information, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data.

 

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Insurance Benefits ” means, in respect of any Asset or Liability, all insurance benefits, including rights to Insurance Proceeds, arising from or relating to such Asset or Liability.

Insurance Proceeds ” means those monies (in each case net of any costs or expenses incurred in the collection thereof and net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments)):

(a) received by an insured from an insurance carrier; or

(b) paid by an insurance carrier on behalf of the insured.

Intangible Property Rights ” means, in respect of any Person, all intangible rights and property of such Person, including IT Assets, going concern value and goodwill.

Intercompany Accounts ” means all balances related to indebtedness, including any intercompany indebtedness, loan, guaranty, receivable, payable or other account between a member of the Expedia Group, on the one hand, and a member of the TripAdvisor Group, on the other hand.

Inventories ” means, in respect of any Person, all inventories of such Person wherever located, including all finished goods (whether or not held at any location or facility of such Person or in transit to or from such Person), work in process, raw materials, spare parts and all other materials and supplies to be used or consumed by the Person in production of finished goods.

IRS Ruling ” has the meaning set forth in Section 6.02(a).

IT Assets ” means computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, all other information technology equipments and all associated documentation.

Land ” means, in respect of any Person, all parcels and tracts of land in which the Person has an ownership interest.

Liability ” means, with respect to any Person, any and all losses, claims, charges, debts, demands, actions, causes of action, suits, damages, obligations, payments, costs and expenses, sums of money, accounts, reckonings, bonds, specialties, indemnities and similar obligations, exoneration covenants, contracts, controversies, agreements, promises, doings, omissions, variances, guarantees, make whole agreements and similar obligations, and other liabilities and requirements, including all contractual obligations, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, joint or several, whenever arising, and including those arising under any Applicable Law, Action, threatened or contemplated Action (including the costs and expenses of demands, assessments, judgments, settlements and compromises relating thereto and attorneys’ fees and any and all costs and expenses, whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened or contemplated Actions) or Order of any

 

-8-


Governmental Authority or any award of any arbitrator or mediator of any kind, and those arising under any contract, commitment or undertaking, in each case, whether or not recorded or reflected or otherwise disclosed or required to be recorded or reflected or otherwise disclosed, on the books and records or financial statements of any Person, including any Specified Financial Liability, EHS Liability or Liability for Taxes.

Nasdaq ” means the Nasdaq Stock Market.

New Expedia Common Stock ” has the meaning set forth in the recitals hereto.

New Expedia Series 1 Preferred Stock ” has the meaning set forth in the recitals hereto.

New Expedia Series 2 Preferred Stock ” has the meaning set forth in the recitals hereto.

New Expedia Warrants ” has the meaning set forth in the recitals hereto.

Notice Period ” has the meaning set forth in Section 7.04(b).

Occupational Health and Safety Law ” means any Applicable Law designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (such as those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions.

Old Expedia Capital Stock ” has the meaning set forth in the recitals hereto.

Old Expedia Class B Common Stock ” has the meaning set forth in the recitals hereto.

Old Expedia Common Stock ” has the meaning set forth in the recitals hereto.

Old Expedia Warrants ” has the meaning set forth in the recitals hereto.

Order ” means any order, injunction, judgment, decree, ruling, assessment or arbitration award of any Governmental Authority or arbitrator.

Ordinary Course of Business ” means any action taken by a Person that is in the ordinary course of the normal, day-to-day operations of such Person and is consistent with the past practices of such Person.

Parties ” together and each “ Party ” individually, means the parties to this Agreement and, in the singular, means either of them.

Person ” means any individual, Business Concern or Governmental Authority.

Potential Contributor ” has the meaning set forth in Section 7.06(a).

 

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Prime Rate ” means the rate which JPMorgan Chase Bank, N.A. (or any successor thereto or other major money center commercial bank agreed to by the Parties hereto) announces from time to time as its prime lending rate, as in effect from time to time.

Prospectus ” means the prospectus forming part of the Registration Statement as it may be amended or supplemented from time to time.

Providing Party ” has the meaning set forth in Section 9.08.

Real Property ” means any Land and Improvements and all Appurtenances thereto and any Ground Lease Property.

Reclassification ” has the meaning set forth in the recitals hereto.

Record ” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

Registration Statement ” means the registration statement on Form S-4 first filed by Expedia and TripAdvisor with the SEC on July 27, 2011 (together with all amendments thereto) in connection with the registration under the Securities Act of the shares of New Expedia Common Stock, the shares of TripAdvisor Common Stock, the New Expedia Warrants and the TripAdvisor Warrants.

Regulation S-K ” means Regulation S-K of the General Rules and Regulations promulgated by the SEC pursuant to the Securities Act.

Remaining Expedia Businesses ” means all Expedia businesses other than the Separated Businesses.

Remaining Expedia Entity ” means any Business Concern that is a member of the Expedia Group on and after the Effective Time.

Representatives ” means, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants or attorneys.

Requesting Party ” has the meaning set forth in Section 9.01(a).

Response ” has the meaning set forth in Section 10.02(a).

Retained Liabilities ” has the meaning set forth in Section 2.07.

Retaining Person ” has the meaning set forth in Section 3.01(b).

Reverse Stock Split ” has the meaning set forth in the recitals hereto.

SEC ” means the Securities and Exchange Commission.

Securities Act ” means the United States Securities Act of 1933, as amended.

 

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Senior Party Representatives ” has the meaning set forth in Section 10.02(a).

Separated Assets ” has the meaning set forth in Section 2.04.

Separated Businesses ” (a) the businesses and operations of TripAdvisor and its subsidiaries as described in the Prospectus, (b) any other business conducted primarily through the use of the Separated Assets prior to the Effective Time and (c) the businesses and operations of the Business Concerns acquired or established by or for TripAdvisor or any of its Subsidiaries after the date of this Agreement.

Separated Entities ” means those Business Concerns which are identified on Schedule 2.04(b) and which on and after the Effective Time shall form part of the TripAdvisor Group.

Separation ” means the transfer of the Separated Entities and Separated Businesses, directly or indirectly, from Expedia to TripAdvisor.

Separation Transactions ” has the meaning set forth in Section 2.02(a).

Shared Liability ” means any Liability from, relating to, arising out of, or derivative of any matter, claim or litigation, whether actual or potential, associated with any securities law litigation relating to any public disclosure (or absence of public disclosure) with respect to the Separated Businesses or the Separated Entities made by Expedia prior to the Effective Time, including the fees and expenses of outside counsel retained by Expedia in connection with the defense and/or settlement of any such matter. For purposes of this definition, the phrase “securities law litigation” shall include claims alleging any untrue statement or omission to state a material fact in alleged violation of the Securities Act, the Exchange Act or any similar state law and any claims premised on, related to or derivative of such alleged statements, omissions or violations, whether payable to any current, past or future holders of Expedia or TripAdvisor securities, to any of the co-defendants in such action or to any Governmental Authority. For the avoidance of doubt, Shared Liability shall include those matters set forth on Schedule 2.07(c) . Notwithstanding anything in Section 7.06 to the contrary, the amount of any Shared Liability shall be net of any insurance proceeds actually recovered by or on behalf of any member of the Expedia Group or any member of the TripAdvisor Group.

Specified Financial Liabilities ” means, in respect of any Person, all liabilities, obligations, contingencies, instruments and other Liabilities of a financial nature with Third Parties of, or relating to, such Person, including any of the following:

(a) foreign exchange contracts;

(b) letters of credit;

(c) guarantees of Third Party loans;

(d) surety bonds (excluding surety for workers’ compensation self-insurance);

 

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(e) interest support agreements on Third Party loans;

(f) performance bonds or guarantees issued by Third Parties;

(g) swaps or other derivatives contracts;

(h) recourse arrangements on the sale of receivables or notes; and

(i) indemnities for damages for any breach of, or any inaccuracy in, any representation or warranty or any breach of, or failure to perform or comply with, any covenant, undertaking or obligation.

Spin-Off Charter Amendments ” has the meaning set forth in the recitals hereto.

Subsidiary ” of any Person means any corporation, partnership, limited liability entity, joint venture or other organization, whether incorporated or unincorporated, of which a majority of the total voting power of capital stock or other interests entitled (without the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof, is at the time owned or controlled, directly or indirectly, by such Person.

Tangible Personal Property ” means, in respect of any Person, all machinery, equipment, tools, furniture, office equipment, supplies, materials, vehicles and other items of tangible personal or movable property (other than Inventories and IT Assets) of every kind and wherever located that are owned or leased by the Person, together with any express or implied warranty by the manufacturers, sellers or lessors of any item or component part thereof and all maintenance Records and other documents relating thereto.

Tax ” or “ Taxes ” has the meaning set forth in the Tax Sharing Agreement.

Tax Sharing Agreement ” means the Tax Sharing Agreement among the Parties to be dated as of even date herewith.

Third Party ” means a Person (a) that is not a Party to this Agreement, other than a member of the Expedia Group or a member of the Trip Advisor Group, and (b) that is not an Affiliate thereof.

Third Party Claim ” has the meaning set forth in Section 7.04(b).

Third Party Consent ” has the meaning set forth in Section 2.08.

Transfer Impediment ” has the meaning set forth in Section 3.01(a).

Transition Services Agreement ” means the Transition Services Agreement among the Parties to be dated as of even date herewith.

TripAdvisor Annual Report ” has the meaning set forth in Section 12.01(d).

 

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TripAdvisor’s Auditors ” has the meaning set forth in Section 12.01(a).

TripAdvisor Claims ” has the meaning set forth in Section 7.01(a). “ TripAdvisor ” has the meaning set forth in the preamble hereto.

TripAdvisor Class B Common Stock ” has the meaning set forth in the recitals hereto.

TripAdvisor Common Stock ” has the meaning set forth in the recitals hereto.

TripAdvisor Group ” means the Separated Entities, the domestic and international businesses, Subsidiaries and investments owned, operated and/or managed thereby and the assets and liabilities contained therein.

TripAdvisor Group Balance Sheet ” means the combined balance sheet of “TripAdvisor Holdings” as of September 30, 2011, substantially in the form attached as Schedule 1.01(b) .

TripAdvisor Holdings ” means TripAdvisor Holdings, LLC, a Massachusetts limited liability company and a direct wholly owned subsidiary of Expedia.

TripAdvisor Indemnified Parties ” has the meaning set forth in Section 7.03.

TripAdvisor Opening Balance Sheet ” has the meaning set forth in Section 2.04(e).

TripAdvisor Parties ” has the meaning set forth in Section 7.01(b).

TripAdvisor Releasors ” has the meaning set forth in Section 7.01(a).

TripAdvisor Warrant Factor ” means 0.52977, which equals (x) $15.125, 0.5 times the closing per-share price of TripAdvisor Common Stock in the “when issued market” on December 20, 2011, as listed on the Nasdaq as of 4:00 p.m. Eastern time, divided by (y) $28.55, the closing per-share price of Old Expedia Common Stock trading “regular way” on December 20, 2011, as listed on the Nasdaq as of 4:00 p.m. Eastern time.

Unreleased Liabilities ” has the meaning set forth in Section 3.02.

Unreleased Person ” has the meaning set forth in Section 3.02.

1.02. Schedules . The following schedules are attached to this Agreement and form a part hereof:

 

Schedule 1.01(a)

   Old Expedia Warrants

Schedule 1.01(b)

   TripAdvisor Group Balance Sheet

Schedule 2.02(a)

   Separation Transactions

Schedule 2.04(a)

   Separated Assets

Schedule 2.04(b)

   Separated Entities

Schedule 2.06(a)

   Excluded Assets

Schedule 2.07(a)

   Assumed Liabilities

Schedule 2.07(b)

   Retained Liabilities

Schedule 2.07(c)

   Shared Liabilities

Schedule 3.01

   Deferred Transferred Assets

Schedule 5.02(c)

   Unreleased Guarantees

 

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ARTICLE II

THE SEPARATION

2.01. Separation . To the extent not already complete, Expedia and TripAdvisor agree to implement the Separation and to cause the Separated Businesses to be transferred to TripAdvisor and its Subsidiaries and the Remaining Expedia Businesses to be held by Expedia and its Subsidiaries (other than TripAdvisor or its Subsidiaries) as of the Effective Time, on the terms and subject to the conditions set forth in this Agreement. The Parties acknowledge that the Separation is intended to result in TripAdvisor, directly or indirectly, operating the Separated Businesses, owning the Separated Assets and assuming the Assumed Liabilities as set forth in this Article II.

2.02. Implementation . The Separation shall be completed in accordance with the agreed general principles, objectives and other provisions set forth in this Article II and shall be implemented in the following manner:

(a) through the completion of the steps described on Schedule 2.02(a) (the “ Separation Transactions ”);

(b) through the transfer from time to time following the Effective Time of the Deferred Transfer Assets as described in Article III;

(c) through the completion from time to time following the Effective Time of the Deferred Transactions, as described in Section 11.01(a); and

(d) through the performance by the Parties of all other provisions of this Agreement.

2.03. Transfer of Separated Assets; Assumption of Assumed Liabilities . On the terms and subject to the conditions set forth in this Agreement, and in furtherance of the Separation, with effect as of the Effective Time:

(a) To the extent not already complete, Expedia agrees to cause the Separated Assets to be contributed, assigned, transferred, conveyed and delivered, directly or indirectly, to TripAdvisor and TripAdvisor agrees to accept from Expedia all of the Separated Assets and all of Expedia’s rights, title and interest in and to all Separated Assets, except with respect to the Deferred Separated Assets and Unreleased Liabilities, if any.

 

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(b) TripAdvisor agrees to accept, assume and faithfully perform, discharge and fulfill all of the Assumed Liabilities in accordance with their respective terms.

2.04. Separated Assets . For the purposes of this Agreement, “ Separated Assets ” shall mean, without duplication, those Assets whether now existing or hereinafter acquired prior to the Effective Time, used or contemplated to be used or held for use exclusively or primarily in the ownership, operation or conduct of the Separated Businesses or relating exclusively or primarily to the Separated Businesses or to a Separated Entity including the following:

(a) all Assets expressly identified in this Agreement or in any Ancillary Agreement or in any Schedule or Exhibit hereto or thereto, including those, if any, listed on Schedule 2.04(a) , as Assets to be transferred to, or retained by, TripAdvisor or any other member of the TripAdvisor Group;

(b) the outstanding capital stock, units or other equity interests of the Separated Entities as listed on Schedule 2.04(b) and the Assets owned by such Separated Entities;

(c) all Assets properly reflected on the TripAdvisor Group Balance Sheet, excluding Assets disposed of by Expedia or any other Subsidiary or entity controlled by Expedia subsequent to the date of the TripAdvisor Group Balance Sheet;

(d) all Assets that have been written off, expensed or fully depreciated by Expedia or any Subsidiary or entity controlled by Expedia that, had they not been written off, expensed or fully depreciated, would have been reflected on the TripAdvisor Group Balance Sheet in accordance with accounting principles generally accepted in the United States (“ GAAP ”);

(e) all Assets acquired by Expedia or any Subsidiary or entity controlled by Expedia after the date of the TripAdvisor Group Balance Sheet and that would be reflected on the balance sheet of TripAdvisor as of the Effective Date, after, for the avoidance of doubt, giving effect to the Separation Transactions (the “ TripAdvisor Opening Balance Sheet ”), if such balance sheet were prepared in accordance with GAAP; and

(f) all Assets transferred to TripAdvisor or any member of the TripAdvisor Group pursuant to Section 11.01(a); provided , however , that any such transfer shall take effect under Section 11.01(a) and not under this Section 2.04.

Notwithstanding the foregoing, there shall be excluded from the definition of Assets under this Section 2.04 Business Records to the extent they are included in or primarily relate to any Excluded Asset or Retained Liability or Remaining Expedia Business or their transfer is prohibited by Applicable Law or pursuant to agreements between Expedia or any other member of the Expedia Group and Third Parties or otherwise would subject Expedia or any other member of the Expedia Group to liability for such transfer. Access to such excluded Business Records shall be governed by Article IX.

 

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2.05. Deferred Separated Assets . Notwithstanding anything to the contrary contained in Section 2.04 or elsewhere in this Agreement, Separated Assets shall not include any Deferred Separated Assets. The transfer to TripAdvisor (or any other member of the TripAdvisor Group) of any such Deferred Separated Asset shall only be completed at the time, in the manner and subject to the conditions set forth in Article III.

2.06. Excluded Assets . (a) Notwithstanding anything to the contrary contained in Section 2.04 or elsewhere in this Agreement, the following Assets of Expedia (or of any other relevant member of the Expedia Group) shall not be transferred to TripAdvisor (or any other member of the TripAdvisor Group), shall not form part of the Separated Assets and shall remain the exclusive property of Expedia or the relevant member of the Expedia Group on and after the Effective Time (the “ Excluded Assets ”):

(i) any Asset expressly identified on Schedule 2.06(a) ; and

(ii) any Asset transferred to Expedia or to any other relevant member of the Expedia Group pursuant to Section 11.01(a); provided , however , that any such transfers shall take effect under Section 11.01(a) and not under this Section 2.06.

(b) Notwithstanding anything to the contrary in this Agreement, Excluded Assets shall not include Deferred Excluded Assets. The transfer to Expedia (or to the relevant member of the Expedia Group) of any such Asset shall be completed at the time, in the manner and subject to the conditions set forth in Article III.

2.07. Liabilities . For the purposes of this Agreement, Liabilities shall be identified as “ Assumed Liabilities ” or as “ Retained Liabilities ” under the following principles:

(a) any Liability which is expressly identified on Schedule 2.07(a) is an Assumed Liability;

(b) any Liability which is expressly identified on Schedule 2.07(b) is a Retained Liability;

(c) 50% of any Shared Liability shall be an Assumed Liability and 50% of any Shared Liability shall be a Retained Liability;

(d) any Liability of a Separated Entity, whether arising or accruing prior to, on or after the Effective Time and whether the facts on which it is based occurred on, prior to or after the Effective Time and whether or not reflected on the TripAdvisor Group Balance Sheet or on the TripAdvisor Opening Balance Sheet, is an Assumed Liability, unless it is expressly identified in this Agreement (including on any Schedule) or in any Ancillary Agreement as a Liability to be assumed or retained by Expedia (or any other member of the Expedia Group), in which case it is a Retained Liability;

(e) any Liability relating to, arising out of, or resulting from the conduct of, a Separated Business (as conducted at any time prior to, on or after the Effective Time) or

 

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relating to a Separated Asset or a Deferred Separated Asset and whether arising or accruing prior to, on or after the Effective Time and whether the facts on which it is based occurred on, prior to or after the Effective Time and whether or not reflected on the TripAdvisor Balance Sheet or the TripAdvisor Opening Balance Sheet, is an Assumed Liability, unless it is expressly identified in this Agreement (including on any Schedule) or in any Ancillary Agreement as a Liability to be assumed or retained by Expedia (or any other member of the Expedia Group), in which case it is a Retained Liability;

(f) any Liability which is reflected or otherwise disclosed as a liability or obligation of the TripAdvisor Group on the TripAdvisor Group Balance Sheet is an Assumed Liability;

(g) any Liability which would be reflected or otherwise disclosed on the TripAdvisor Group Balance Sheet, if such balance sheet were prepared under GAAP, is an Assumed Liability;

(h) any Liability pursuant to contracts entered into by Expedia and/or any member of the Expedia Group (i) in connection with the acquisition, by Expedia and/or any member of the Expedia Group, of any Separated Entity and/or Separated Business or (ii) otherwise relating primarily to a Separated Entity and/or the conduct of a Separated Business is an Assumed Liability, unless it is expressly identified in this Agreement (including on any Schedule) or in any Ancillary Agreement as a Liability to be assumed or retained by Expedia (or any other member of the Expedia Group), in which case it is a Retained Liability;

(i) any Liability of a Remaining Expedia Entity, whether arising or accruing prior to, on or after the Effective Time and whether the facts on which it is based occurred on, prior to or after the Effective Time, is a Retained Liability, unless it is determined to be an Assumed Liability pursuant to clause (a) or (c) - (h) above, in which case it is an Assumed Liability;

(j) any Liability relating to, arising out of, or resulting from the conduct of, a Remaining Expedia Business (as conducted at any time prior to, on or after the Effective Time) or relating to an Excluded Asset and whether arising or accruing prior to, on or after the Effective Time and whether the facts on which it is based occurred on, prior to or after the Effective Time, is a Retained Liability, unless it is determined to be an Assumed Liability pursuant to clause (a) or (c) - (h) above, in which case it is an Assumed Liability; and

(k) any Liability of TripAdvisor or any other member of the TripAdvisor Group under this Agreement or any Ancillary Agreement is an Assumed Liability and any Liability of Expedia or any other member of the Expedia Group under this Agreement or any Ancillary Agreement is a Retained Liability.

2.08. Third Party Consents and Government Approvals . To the extent that the Separation or any transaction contemplated thereby requires a Consent from any Third Party (a “ Third Party Consent ”) or any Governmental Authorization, the Parties will use

 

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commercially reasonable efforts to obtain all such Third Party Consents and Governmental Authorizations prior to the Effective Time. If the Parties fail to obtain any such Third Party Consent or Governmental Authorization prior to the Effective Time, the matter shall be dealt with in the manner set forth in Article III.

2.09. Preservation of Agreements . Expedia and TripAdvisor agree that all written agreements, arrangements, commitments and understandings between any member or members of the TripAdvisor Group, on the one hand, and any member or members of the Expedia Group, on the other hand, shall remain in effect in accordance with their terms from and after the Effective Time, unless otherwise terminated by the Parties.

2.10. Ancillary Agreements . On or prior to the Effective Date, the Parties shall execute and deliver or, as applicable, cause the appropriate members of their respective Groups to execute and deliver, each of the following agreements (collectively, the “ Ancillary Agreements ”):

(a) the Employee Matters Agreement;

(b) the Tax Sharing Agreement;

(c) the Transition Services Agreement; and

(d) such other agreements and instruments as may relate to or be identified in any of the foregoing agreements.

2.11. Resignations . (a) Expedia agrees to cause each Person who is a director or an officer of any Separated Entity and who will not be or become an employee of the TripAdvisor Group (or any member thereof) on the Effective Date to resign from such position with effect as of the Effective Date.

(b) TripAdvisor agrees to cause each Person who is a director or an officer of a Remaining Expedia Entity and who will become an employee of the TripAdvisor Group (or any member thereof) on the Effective Date to resign from such position with effect as of the Effective Date; provided , however , that this Section 2.11(b) shall not apply to Mr. Barry Diller.

(c) Each of Expedia and TripAdvisor agrees to obtain all such letters of resignation or other evidence of such resignations as may be necessary or desirable in performing their respective obligations under this Section 2.11.

2.12. Cooperation . The Parties shall cooperate in all aspects of the Separation and shall sign all such documents and perform all such other acts as may be necessary or desirable to give full effect to the Separation; and each of Expedia and TripAdvisor shall cause each other member of its respective Group to do likewise.

2.13. Intercompany Accounts Between the Expedia Group and the TripAdvisor Group . From and after the Effective Time, except as otherwise expressly provided in any

 

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Ancillary Agreement, TripAdvisor agrees to cause any Intercompany Account payable by any member of the TripAdvisor Group to any member of the Expedia Group to be satisfied in full when due. From and after the Effective Time, except as otherwise expressly provided in any Ancillary Agreement, Expedia agrees to cause any Intercompany Account payable by any member of the Expedia Group to any member of the TripAdvisor Group to be satisfied in full when due.

2.14. Disclaimer of Representations and Warranties . (a) Each of the Parties (on behalf of itself and each other member of its respective Group) understands and agrees that, except as expressly set forth herein or in any Ancillary Agreement, no Party to this Agreement, any Ancillary Agreement or any other agreement or document contemplated by this Agreement, any Ancillary Agreement or otherwise, makes any representation or warranty, express or implied, regarding any of the Separated Assets, Separated Entities, Separated Businesses, Excluded Assets, Assumed Liabilities or Retained Liabilities including any warranty of merchantability or fitness for a particular purpose, or any representation or warranty regarding any Consents or Governmental Authorizations required in connection therewith or their transfer, regarding the value or freedom from Encumbrances of, or any other matter concerning, any Separated Asset or Excluded Asset, or regarding the absence of any defense or right of setoff or freedom from counterclaim with respect to any claim or other Separated Asset or Excluded Asset, including any Account Receivable of either Party, or as to the legal sufficiency of any assignment, document or instrument delivered hereunder to convey title to any Separated Asset or Excluded Asset upon the execution, delivery and filing hereof or thereof.

(b) Except as may expressly be set forth herein or in any Ancillary Agreement, all Separated Assets and Excluded Assets are being transferred on an “as is, where is” basis, at the risk of the respective transferees without any warranty whatsoever on the part of the transferor, formal or implicit, legal, statutory or conventional.

ARTICLE III

DEFERRED SEPARATION TRANSACTIONS

3.01. Deferred Transfer Assets . (a) If the transfer to, or retention by, any member of the TripAdvisor Group of any Asset that would otherwise constitute a Separated Asset (a “ Deferred Separated Asset ”) or the transfer to, or retention by, any member of the Expedia Group of any Asset that would otherwise constitute an Excluded Asset (a “ Deferred Excluded Asset ,” and together with a Deferred Separated Asset, a “ Deferred Transfer Asset ”) cannot be accomplished without giving rise to a violation of Applicable Law, or without obtaining a Third Party Consent or a Governmental Authorization (collectively, a “ Transfer Impediment ”), and any such Third Party Consent or Governmental Authorization has not been obtained prior to the Effective Time, then such Asset shall be dealt with in the manner described in this Section 3.01. Such Deferred Transfer Assets shall include without limitation any such identified on Schedule 3.01; provided, for the avoidance of doubt, a Deferred Transfer Asset need not be identified on such schedule in order to have such status.

 

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(b) Pending removal of such Transfer Impediment, the Person holding the Deferred Transfer Asset (the “ Retaining Person ”) shall hold such Deferred Transfer Asset for the use and benefit, insofar as reasonably possible, of the Party to whom the transfer of such Asset could not be made at the Effective Time (the “ Deferred Beneficiary ”). The Retaining Person shall use commercially reasonable efforts to preserve such Asset and its right, title and interest therein and take all such other action as may reasonably be requested by the Deferred Beneficiary (in each case, at such Deferred Beneficiary’s expense) in order to place such Deferred Beneficiary, insofar as reasonably possible, in the same position as it would be in if such Asset had been transferred to it or retained by it with effect as of the Effective Time and so that, subject to the standard of care set forth above, all the benefits and burdens relating to such Deferred Transfer Asset, including possession, use, risk of loss, potential for gain, enforcement of rights against third parties and dominion, control and command over such Asset, are to inure from and after the Effective Time to such Deferred Beneficiary and the members of its Group. The provisions set forth in this Article III contain all the obligations of the Retaining Person vis-à-vis the Deferred Beneficiary with respect to the Deferred Transfer Asset and the Retaining Person shall not be bound vis-à-vis the Deferred Beneficiary by any other obligations under Applicable Law.

(c) The Parties shall continue on and after the Effective Time to use commercially reasonable efforts to remove all Transfer Impediments; provided , however , that neither Party shall be required to make any unreasonable payment or assume any material obligations therefor. As and when any Transfer Impediment is removed, the relevant Deferred Transfer Asset shall forthwith be transferred to its Deferred Beneficiary at no additional cost and in a manner and on terms consistent with the relevant provisions of this Agreement and the Ancillary Agreements, including Section 2.14(b) hereof, and any such transfer shall take effect as of the date of its actual transfer.

(d) Notwithstanding the foregoing or any provision of Applicable Law, a Retaining Person shall not be obligated, in connection with the foregoing, to expend any money in respect of a Deferred Transfer Asset unless the necessary funds are advanced by the Deferred Beneficiary of such Deferred Transfer Asset, other than reasonable attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by the Deferred Beneficiary of such Deferred Transfer Asset.

3.02. Unreleased Liabilities . If at any time on or after the Effective Time, any member of the Expedia Group shall remain obligated to any Third Party in respect of any Assumed Liability or any member of the TripAdvisor Group shall remain obligated to any Third Party in respect of any Retained Liability, the following provisions shall apply. The Liabilities referred to in this Section 3.02 are hereinafter referred to as the “ Unreleased Liabilities ” and the Person remaining obligated for such Liability in a manner contrary to what is intended under this Agreement is hereinafter referred to as the “ Unreleased Person .”

(a) Each Unreleased Person shall remain obligated to Third Parties for such Unreleased Liability as provided in the relevant Contract, Applicable Law or other source of such Unreleased Liability and shall pay and perform such Liability as and when required, in accordance with its terms.

 

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(b) Expedia shall indemnify, defend and hold harmless each TripAdvisor Indemnified Party that is an Unreleased Person against any Liabilities arising in respect of each Unreleased Liability of such Person; and TripAdvisor shall indemnify, defend and hold harmless each Expedia Indemnified Party that is an Unreleased Person against any Liabilities arising in respect of each Unreleased Liability of such Person. Expedia and TripAdvisor shall take, and shall cause the members of their respective Groups to take, such other actions as may be reasonably requested by the other in accordance with the provisions of this Agreement in order to place Expedia and TripAdvisor, insofar as reasonably possible, in the same position as they would be in if such Unreleased Liability had been fully contributed, assigned, transferred, conveyed, and delivered to, and accepted and assumed or retained, as applicable, by the other Party (or any relevant member of its Group) with effect as of the Effective Time and so that all the benefits and burdens relating to such Unreleased Liability, including possession, use, risk of loss, potential for gain, and dominion, control and command over such Unreleased Liability, are to inure from and after the Effective Time to the member or members of the Expedia Group or the TripAdvisor Group, as the case may be.

(c) The Parties shall continue on and after the Effective Time to use commercially reasonable efforts to cause each Unreleased Person to be released from each of its Unreleased Liabilities.

(d) If, as and when it becomes possible to delegate, novate or extinguish any Unreleased Liability in favor of an Unreleased Person, the Parties shall promptly sign all such documents and perform all such other acts, and shall cause each member of their respective Groups, as applicable, to sign all such documents and perform all such other acts, as may be necessary or desirable to give effect to such delegation, novation, extinction or other release without payment of any further consideration by the Unreleased Person.

3.03. No Additional Consideration . For the avoidance of doubt, the transfer or assumption of any Assets or Liabilities under this Article III shall be effected without any additional consideration by either Party hereunder.

ARTICLE IV

TREATMENT OF OLD EXPEDIA WARRANTS IN THE SEPARATION

4.01. Old Expedia Warrants .

(a) At the Effective Time, the Old Expedia Warrants will be adjusted based upon the following principles:

(i) the number of shares of New Expedia Common Stock subject to each New Expedia Warrant will equal the number of shares of Old Expedia Common Stock underlying the Old Expedia Warrant immediately prior to the Reclassification (it being understood that prior to the Reclassification the Reverse Stock Split will result in an adjustment to the number of shares of Old Expedia Common Stock underlying the Old Expedia Warrant as identified on Schedule 1.01(a) );

 

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(ii) the per warrant exercise price of the New Expedia Warrant (rounded up to the nearest whole cent) will equal the per warrant exercise price of the Old Expedia Warrant prior to the Reclassification multiplied by the Expedia Warrant Factor.

(iii) the number of shares of TripAdvisor Common Stock subject to the TripAdvisor Warrant will equal the number of shares of Old Expedia Common Stock underlying the Old Expedia Warrant immediately prior to the Reclassification (it being understood that prior to the Reclassification the Reverse Stock Split will result in an adjustment to the number of shares of Old Expedia Common Stock underlying the Old Expedia Warrant as identified on Schedule 1.01(a) ); and

(iv) the per warrant exercise price of the TripAdvisor Warrant (rounded up to the nearest whole cent) will equal the per warrant exercise price of the Old Expedia Warrant prior to the Reclassification multiplied by the TripAdvisor Warrant Factor.

(b) Expedia shall be responsible for all obligations with respect to the New Expedia Warrants. TripAdvisor shall be responsible for all obligations with respect to the TripAdvisor Warrants. The warrant agreement that currently governs the Old Expedia Warrants shall continue to govern the New Expedia Warrants, as adjusted in accordance with the terms hereof and Expedia shall be responsible for the obligations arising thereunder. To memorialize and satisfy its obligations hereunder, TripAdvisor shall enter into a warrant agreement with respect to the TripAdvisor Warrants with the agent for such TripAdvisor Warrants and TripAdvisor shall be responsible for the obligations arising under any such agreement. The failure of TripAdvisor to enter into any such agreement shall not relieve TripAdvisor of its obligations with respect to the TripAdvisor Warrants.

4.02. Stock Certificates and Related Matters . Subject to the terms of this Agreement and the satisfaction or waiver of the conditions set forth in Article VI hereof, Expedia and TripAdvisor (as applicable) shall deliver to the applicable agent or depositary (such agent or depositary, as the case may be, the “ Agent ”) cash and securities (either in certificated or electronic book-entry form at the option of Expedia) representing all of the securities to be issued in connection with the Reclassification and the transactions contemplated by Section 4.01 (except to the extent that Expedia determines in its sole discretion that currently outstanding certificates representing Old Expedia Capital Stock and/or Old Expedia Warrants, following the Effective Time, shall represent the securities into which such Old Expedia Capital Stock and/or Old Expedia Warrants are convertible in the Reclassification and related transactions), and shall instruct the Agent to distribute, on or as soon as practicable following the Effective Date, such

 

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securities to holders of record of Old Expedia Capital Stock and Old Expedia Warrants on the Effective Date. TripAdvisor agrees to provide all share certificates or other similar documentation and any information that the Agent shall require in order to effect the distributions contemplated by this Section 4.02. All securities of Expedia and TripAdvisor issued in connection with the Reclassification shall be duly authorized, validly issued, fully paid and nonassessable. Expedia and/or TripAdvisor may require that holders of Old Expedia Capital Stock and/or Old Expedia Warrants return any certificates or instruments representing such securities prior to Expedia and/or TripAdvisor issuing new certificates or instruments (if any) representing the new securities into which such Old Expedia Capital Stock and/or Old Expedia Warrants are convertible in the Reclassification and related transactions.

ARTICLE V

COVENANTS

5.01. General Covenants . Each Party covenants with and in favor of the other Party that it shall, subject, in the case of Expedia, to Article XIII:

(a) do and perform all such acts and things, and execute and deliver all such agreements, assurances, notices and other documents and instruments as may reasonably be required of it to facilitate the carrying out of the intent and purpose of this Agreement;

(b) cooperate with and assist the other Party, both before and after the Effective Time, in dealing with transitional matters relating to or arising from the Separation, the Reclassification, this Agreement or the Ancillary Agreements; and

(c) cooperate in preparing and filing all documentation (i) to effect all necessary applications, notices, petitions, filings and other documents; and (ii) to obtain as promptly as reasonably practicable all Consents and Governmental Authorizations necessary or advisable to be obtained from any Third Party and/or any Governmental Authority in order to consummate the transactions contemplated by this Agreement (including all approvals required under any applicable antitrust laws).

5.02. Covenants of TripAdvisor . In addition to the covenants of TripAdvisor provided for elsewhere in this Agreement, TripAdvisor covenants and agrees with and in favor of Expedia that it shall:

(a) use commercially reasonable efforts and do all things reasonably required of it to cause the Separation and the Reclassification to be completed, including cooperating with Expedia to obtain: the approval for the listing of the TripAdvisor Common Stock on the Nasdaq or such other securities exchange or inter-dealer quotation system as is reasonably acceptable to Expedia;

(b) use its commercially reasonable efforts to take all such action as may be necessary or desirable under applicable state securities and blue sky laws of the United States (and any comparable laws under any foreign jurisdictions) in connection with the Separation and Reclassification;

 

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(c) use its commercially reasonable efforts to cause any member of the Expedia Group to be released, as soon as reasonably practicable, from any guarantees given by any member of the Expedia Group for the benefit of any Separated Entity (including without limitation any such guarantees listed on Schedule 5.02(c)) and (to the extent necessary to secure such releases) to cause itself or one or more members of the TripAdvisor Group to be substituted in all respects for any member of the Expedia Group in respect of such guarantees, provided , that in the event that, notwithstanding the commercially reasonable efforts of TripAdvisor, TripAdvisor is unable to obtain such guarantee releases, TripAdvisor hereby agrees to indemnify and hold Expedia and the other members of the Expedia Group harmless from and against all Liabilities incurred by them in connection with, arising out of or resulting from such guarantees; and

(d) perform and, as applicable, cause each member of the TripAdvisor Group to perform each of its and their respective obligations under each Ancillary Agreement.

5.03. Cash Balance True-Up . In the event that, after review and reconciliation, the amount of cash and cash equivalents reflected on the TripAdvisor Opening Balance Sheet (less any amounts borrowed on the Effective Date by TripAdvisor Holdings, LLC under its revolving credit facility) (the “ Effective Date Cash Balance ”) is greater than $165 million, TripAdvisor shall make one or more payments to Expedia as promptly as practicable after the Effective Date, but in no event more than ninety (90) days after the Effective Date, totaling an amount equal to the excess of the Effective Date Cash Balance over $165 million. In the event that, after review and reconciliation, the Effective Date Cash Balance is less than $165 million, Expedia shall make one or more payments to TripAdvisor as promptly as practicable after the Effective Date, but in no event more than ninety (90) days after the Effective Date, totaling an amount equal to the excess of $165 million over the Effective Date Cash Balance. Notwithstanding Section 14.08, payments pursuant to this Section 5.03 shall not bear any interest.

ARTICLE VI

THE RECLASSIFICATION

6.01. Conditions to the Reclassification . (a) In addition to, and without in any way limiting, Expedia’s rights under Section 13.01, completion of the Reclassification is subject to the fulfillment of each of the following conditions:

(i) no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened by the SEC;

(ii) the TripAdvisor Common Stock to be distributed pursuant to the Reclassification and related transactions shall have been accepted for listing on

 

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the Nasdaq or such other securities exchange or inter-dealer quotation system as is reasonably acceptable to Expedia, subject to compliance with applicable listing requirements;

(iii) the Nasdaq shall have confirmed that the New Expedia Common Stock will continue trading in the same manner as the Old Expedia Common Stock following the Effective Date;

(iv) no Order or other legal restraint or prohibition preventing the consummation of the Reclassification or any of the transactions contemplated by this Agreement or any Ancillary Agreement, including the transactions to effect the Separation, shall be threatened, pending or in effect;

(v) any material Consents and Governmental Authorizations necessary to complete the Separation and the Reclassification shall have been obtained and be in full force and effect;

(vi) the Expedia Board shall have approved the Separation and Reclassification and shall not have abandoned, deferred or modified the Separation or the Reclassification at any time prior to the Effective Date;

(vii) each of the Ancillary Agreements shall have been duly executed and delivered by the parties thereto and shall be in effect;

(viii) the Expedia Board shall have received a written solvency opinion in a form acceptable to the Expedia Board from Duff & Phelps, LLC regarding solvency matters in connection with the Separation and Reclassification and other transactions contemplated hereby, which opinion shall not have been withdrawn or modified;

(ix) the Expedia Board shall have received an opinion of Wachtell, Lipton, Rosen & Katz, in form and substance satisfactory to the Expedia Board, to the effect that the Separation and the Reclassification will qualify as transactions that are generally tax free under Sections 355 and 368(a)(1)(D) of the Code (to the extent such qualification is not addressed by an Internal Revenue Service private letter ruling (the “ IRS Ruling ”) received by Expedia), which opinion (and, in the event Expedia shall have received the IRS Ruling, the IRS Ruling) shall not have been withdrawn or modified; and

(x) the Expedia Board shall have received such other opinions or reports as the Expedia Board may reasonably request in form and substance reasonably satisfactory to the Expedia Board.

(b) The foregoing conditions are for the sole benefit of Expedia and shall not give rise to or create any duty on the part of Expedia or the Expedia Board to waive or not to waive such conditions or in any way limit Expedia’s right to terminate this Agreement as set forth in Article XIII or alter the consequences of any such termination from those specified in such Article XIII. Any determination made by Expedia prior to the Separation and the Reclassification concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 6.01 shall be final and conclusive.

 

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6.02. Actions in Connection with the Reclassification . (a) TripAdvisor shall file such amendments and supplements to the Registration Statement as Expedia may reasonably request, and such amendments as may be necessary in order to cause the same to become and remain effective as required by Applicable Law, including filing such amendments and supplements to the Registration Statement as may be required by the SEC or federal, state or foreign securities laws. Expedia shall mail to the holders of Old Expedia Common Stock and Old Expedia Class B Common Stock and others as appropriate, at such appropriate time as Expedia shall determine, the proxy statement/prospectus forming a part of the Registration Statement, as well as any other information concerning TripAdvisor, its business, operations and management, the Separation and such other matters as Expedia shall reasonably determine are necessary and as may be required by Applicable Law.

(b) TripAdvisor shall also cooperate with Expedia in preparing, filing with the SEC and causing to become effective registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the Separation or other transactions contemplated by this Agreement and the Ancillary Agreements. Promptly after receiving a request from Expedia, to the extent requested, TripAdvisor shall prepare and, in accordance with Applicable Law, file with the SEC any such documentation that Expedia determines is necessary or desirable to effectuate the Reclassification, and Expedia and TripAdvisor shall each use commercially reasonable efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable.

(c) Nothing in this Section 6.02 shall be deemed, by itself, to shift Liability for any portion of the Registration Statement or any Prospectus to Expedia.

ARTICLE VII

MUTUAL RELEASES; INDEMNIFICATION

7.01. Release of Pre-Separation Claims . (a) Except as provided in Section 7.01(c), effective as of the Effective Time, TripAdvisor does hereby, on behalf of itself and each other member of the TripAdvisor Group, their respective Affiliates (other than any member of the Expedia Group), successors and assigns, and all Persons that at any time prior to the Effective Time have been stockholders (other than any member of the Expedia Group), directors, officers, agents or employees of any member of the TripAdvisor Group (in each case, in their respective capacities as such) (the “ TripAdvisor Releasors ”), unequivocally, unconditionally and irrevocably release and discharge each of Expedia, the other members of the Expedia Group, their respective Affiliates (other than any member of the TripAdvisor Group), successors and assigns, and all Persons that at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Expedia Group (in each case, in their respective

 

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capacities as such), and their respective heirs, executors, trustees, administrators, successors and assigns (the “ Expedia Parties ”), from any and all Actions, causes of action, choses in action, cases, claims, suits, debts, dues, damages, judgments and liabilities, of any nature whatsoever, in law, at equity or otherwise, whether direct, derivative or otherwise, which have been asserted against an Expedia Party or which, whether currently known or unknown, suspected or unsuspected, fixed or contingent, and whether or not concealed or hidden, the TripAdvisor Releasors ever could have asserted or ever could assert, in any capacity, whether as partner, employer, agent or otherwise, either for itself or as an assignee, heir, executor, trustee, administrator, successor or otherwise for or on behalf of any other Person, against the Expedia Parties, relating to any claims or transactions or occurrences whatsoever, up to but excluding the Effective Time, including in connection with the transactions and all activities to implement the Separation and the Reclassification (the “ TripAdvisor Claims ”); and the TripAdvisor Releasors hereby unequivocally, unconditionally and irrevocably agree not to initiate proceedings with respect to, or institute, assert or threaten to assert, any TripAdvisor Claim.

(b) Except as provided in Section 7.01(c), effective as of the Effective Time, Expedia does hereby, on behalf of itself and each other member of the Expedia Group, their respective Affiliates (other than any member of the TripAdvisor Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Expedia Group (in each case, in their respective capacities as such) (the “ Expedia Releasors ”), unequivocally, unconditionally and irrevocably release and discharge each of TripAdvisor, the other members of the TripAdvisor Group, their respective Affiliates (other than any member of the Expedia Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders (other than any member of the Expedia Group), directors, officers, agents or employees of any member of the TripAdvisor Group (in each case, in their respective capacities as such), and their respective heirs, executors, trustees, administrators, successors and assigns (the “ TripAdvisor Parties ”), from any and all Actions, causes of action, choses in action, cases, claims, suits, debts, dues, damages, judgments and liabilities, of any nature whatsoever, in law, at equity or otherwise, whether direct, derivative or otherwise, which have been asserted against a TripAdvisor Party or which, whether currently known or unknown, suspected or unsuspected, fixed or contingent, and whether or not concealed or hidden, the Expedia Releasors ever could have asserted or ever could assert, in any capacity, whether as partner, employer, agent or otherwise, either for itself or as an assignee, heir, executor, trustee, administrator, successor or otherwise for or on behalf of any other Person, against the TripAdvisor Parties, relating to any claims or transactions or occurrences whatsoever, up to but excluding the Effective Time including in connection with the transactions and all activities to implement the Separation and the Reclassification (the “ Expedia Claims ”); and the Expedia Releasors hereby unequivocally, unconditionally and irrevocably agree not to initiate proceedings with respect to, or institute, assert or threaten to assert, any Expedia Claim.

(c) Nothing contained in Section 7.01(a) or 7.01(b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement, any agreement,

 

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arrangement, commitment or understanding that is contemplated by Section 2.09 or any other agreement, arrangement, commitment or understanding that is entered into after the Effective Time between any member of the TripAdvisor Group, on the one hand, and any member of the Expedia Group, on the other hand, nor shall anything contained in those sections be interpreted as terminating as of the Effective Time any rights under any such agreements, contracts, commitments or understandings. For purposes of clarification, nothing contained in Section 7.01(a) or 7.01(b) shall release any Person from:

(i) any Liability provided in or resulting from this Agreement or any of the Ancillary Agreements;

(ii) any Liability provided in or resulting from any agreement among any members of the Expedia Group or the TripAdvisor Group that is contemplated by Section 2.09 (including for greater certainty, any Liability resulting or flowing from any breaches of such agreements that arose prior to the Effective Time);

(iii) any Liability provided in or resulting from any other agreement, arrangement, commitment or understanding that is entered into after the Effective Time between any member of the TripAdvisor Group, on the one hand, and any member of the Expedia Group, on the other hand;

(iv)(A) with respect to TripAdvisor, any Assumed Liability and (B) with respect to Expedia, any Retained Liability;

(v) any Liability that the Parties may have with respect to indemnification or contribution pursuant to Article III of this Agreement or this Article VII for Third Party Claims;

(vi) any Liability for unpaid Intercompany Accounts; or

(vii) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 7.01.

In addition, nothing contained in Section 7.01(a) or (b) hereof shall release any Party from honoring its existing obligations to indemnify any director, officer or employee of either Group who was a director, officer or employee of such Party on or prior to the Effective Time, to the extent that such director, officer or employee becomes a named defendant in any litigation involving such Party and was entitled to such indemnification pursuant to then existing obligations.

(d) TripAdvisor shall not make, and shall not permit any other member of the TripAdvisor Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Expedia or any member of the Expedia Group or any other Person released pursuant to Section 7.01(a), with respect to any Liabilities released pursuant to Section 7.01(a). Expedia shall not make, and shall not permit any other member of the Expedia Group to make, any claim or demand, or commence any Action asserting any claim or demand,

 

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including any claim of contribution or any indemnification, against TripAdvisor or any other member of the TripAdvisor Group or any other Person released pursuant to Section 7.01(b), with respect to any Liabilities released pursuant to Section 7.01(b).

7.02. Indemnification by TripAdvisor . Except as provided in Sections 7.04 and 7.05 and subject to Section 14.01, TripAdvisor shall, and shall cause the other members of the TripAdvisor Group to, fully indemnify, defend and hold harmless Expedia, each other member of the Expedia Group and each of their respective current and former directors, officers and employees, and each of the heirs, executors, trustees, administrators, successors and assigns of any of the foregoing (collectively, the “ Expedia Indemnified Parties ”), from and against any and all Liabilities of the Expedia Indemnified Parties relating to, arising out of or resulting from any of the following items (without duplication):

(a) any Separated Business, any Separated Entity, any Separated Asset, any Assumed Liability or, subject to Article III, any Deferred Separated Asset;

(b) any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of, this Agreement or any of the Ancillary Agreements, by TripAdvisor or any other member of the TripAdvisor Group, subject to any limitation on liability set forth in any Ancillary Agreement for any such breach or failure to perform or comply with any covenant, undertaking or obligation under such Ancillary Agreement; and

(c) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent relating to the TripAdvisor Group contained in the Registration Statement or any other filings made with the SEC in connection with the Separation and Reclassification.

7.03. Indemnification by Expedia . Except as provided in Sections 7.04 and 7.05 and subject to Section 14.01, Expedia shall indemnify, defend and hold harmless TripAdvisor, each other member of the TripAdvisor Group and each of their respective current and former directors, officers and employees, and each of the heirs, executors, trustees, administrators, successors and assigns of any of the foregoing (collectively, the “ TripAdvisor Indemnified Parties ”), from and against any and all Liabilities of the TripAdvisor Indemnified Parties relating to, arising out of or resulting from any of the following items (without duplication):

(a) the Excluded Assets, any Remaining Expedia Business or any Retained Liability;

(b) any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of, this Agreement or any of the Ancillary Agreements, by Expedia or any other member of the Expedia Group, subject to any limitation on liability set forth in any Ancillary Agreement for any such breach or failure to perform or comply with any covenant, undertaking or obligation under such Ancillary Agreement; and

 

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(c) except to the extent set forth in Section 7.02(c), any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading contained in the Registration Statement.

7.04. Procedures for Indemnification of Third Party Claims . (a) All claims for indemnification relating to a Third Party Claim by any indemnified party (an “ Indemnified Party ”) hereunder shall be asserted and resolved as set forth in this Section 7.04.

(b) In the event that any written claim or demand for which an indemnifying party (an “ Indemnifying Party ”) may have liability to any Indemnified Party hereunder, is asserted against or sought to be collected from any Indemnified Party by a Third Party (a “ Third Party Claim ”), such Indemnified Party shall promptly, but in no event more than ten (10) days following such Indemnified Party’s receipt of a Third Party Claim, notify the Indemnifying Party in writing of such Third Party Claim, the amount or the estimated amount of damages sought thereunder to the extent then ascertainable (which estimate shall not be conclusive of the final amount of such Third Party Claim), any other remedy sought thereunder, any relevant time constraints relating thereto and, to the extent practicable, and any other material details pertaining thereto (a “ Claim Notice ”); provided , however , that the failure to timely give a Claim Notice shall affect the rights of an Indemnified Party hereunder only to the extent that such failure has a material prejudicial effect on the defenses or other rights available to the Indemnifying Party with respect to such Third Party Claim. The Indemnifying Party shall have thirty (30) days (or such lesser number of days set forth in the Claim Notice as may be required by court proceeding in the event of a litigated matter) after receipt of the Claim Notice (the “ Notice Period ”) to notify the Indemnified Party whether it desires to defend the Indemnified Party against such Third Party Claim.

(c) In the event that the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against a Third Party Claim, the Indemnifying Party shall have the right to defend the Indemnified Party by appropriate proceedings and shall have the sole power to direct and control such defense, with counsel reasonably satisfactory to the Indemnified Party at the Indemnifying Party’s expense. Once the Indemnifying Party has duly assumed the defense of a Third Party Claim, the Indemnified Party shall have the right, but not the obligation, to participate in any such defense and to employ separate counsel of its choosing. The Indemnified Party shall participate in any such defense at its expense, provided that such expense shall be the responsibility of the Indemnifying Party if (i) the Indemnifying Party and the Indemnified Party are both named parties to the proceedings and the Indemnified Party shall have reasonably concluded that representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them (in which case the Indemnifying Party shall not be responsible for expenses in respect of more than one counsel for the Indemnified Party in any single jurisdiction), or (ii) the Indemnified Party assumes the defense of a Third Party Claim after the Indemnifying Party has failed to diligently defend a Third Party Claim it has assumed the defense of, as provided in the first sentence of this Section 7.04(c). The

 

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Indemnifying Party shall not, without the prior written consent of the Indemnified Party, settle, compromise or offer to settle or compromise any Third Party Claim on a basis that would result in (i) the imposition of a consent order, injunction or decree that would restrict the future activity or conduct of the Indemnified Party or any of its Affiliates, (ii) a finding or admission of a violation of Applicable Law or violation of the rights of any Person by the Indemnified Party or any of its Affiliates or (iii) a finding or admission that would have an adverse effect on other claims made or threatened against the Indemnified Party or any of its Affiliates.

(d) If the Indemnifying Party (i) elects not to defend the Indemnified Party against a Third Party Claim, whether by not giving the Indemnified Party timely notice of its desire to so defend or otherwise or (ii) after assuming the defense of a Third Party Claim, fails to take reasonable steps necessary to defend diligently such Third Party Claim within ten (10) days after receiving written notice from the Indemnified Party to the effect that the Indemnifying Party has so failed, the Indemnified Party shall have the right but not the obligation to assume its own defense; it being understood that the Indemnified Party’s right to indemnification for a Third Party Claim shall not be adversely affected by assuming the defense of such Third Party Claim. The Indemnified Party shall not settle a Third Party Claim without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld.

(e) The Indemnified Party and the Indemnifying Party shall cooperate in order to ensure the proper and adequate defense of a Third Party Claim, including by providing access to each other’s relevant business records and other documents, and employees; it being understood that the reasonable costs and expenses of the Indemnified Party relating thereto shall be Liabilities, subject to indemnification.

(f) The Indemnified Party and the Indemnifying Party shall use commercially reasonable efforts to avoid production of confidential information (consistent with Applicable Law), and to cause all communications among employees, counsel and others representing any party to a Third Party Claim to be made so as to preserve any applicable attorney-client or work-product privileges.

7.05. Procedures for Indemnification of Direct Claims . Any claim for indemnification made directly by the Indemnified Party against the Indemnifying Party that does not result from a Third Party Claim shall be asserted by written notice from the Indemnified Party to the Indemnifying Party specifically claiming indemnification hereunder. Such Indemnifying Party shall have a period of 45 days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such 45-day period, such Indemnifying Party shall be deemed to have accepted responsibility to make payment and shall have no further right to contest the validity of such claim. If such Indemnifying Party does respond within such 45-day period and rejects such claim in whole or in part, such Indemnified Party shall be free to pursue resolution as provided in Article X.

7.06. Adjustments to Liabilities . (a) If an Indemnified Party receives any payment from an Indemnifying Party in respect of any Liabilities and the Indemnified

 

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Party could have recovered all or a part of such Liabilities from a Third Party (a “ Potential Contributor ”) based on the underlying claim or demand asserted against such Indemnifying Party, such Indemnified Party shall, to the extent permitted by Applicable Law, assign such of its rights to proceed against the Potential Contributor as are necessary to permit such Indemnifying Party to recover from the Potential Contributor the amount of such payment.

(b) If notwithstanding Section 7.06(a) an Indemnified Party receives an amount from a Third Party in respect of a Liability that is the subject of indemnification hereunder after all or a portion of such Liability has been paid by an Indemnifying Party pursuant to this Agreement, the Indemnified Party shall promptly remit to the Indemnifying Party the excess (if any) of (i) the amount paid by the Indemnifying Party in respect of such Liability, plus the amount received from the Third Party in respect thereof, over (ii) the full amount of the Liability.

(c) An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other Third Party shall be entitled to a “wind-fall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions hereof.

7.07. Payments . The Indemnifying Party shall pay all amounts payable pursuant to this Article VII by wire transfer of immediately available funds, promptly following receipt from an Indemnified Party of a bill, together with all accompanying reasonably detailed backup documentation, for a Liability that is the subject of indemnification hereunder, unless the Indemnifying Party in good faith disputes the Liability, in which event it shall so notify the Indemnified Party. In any event, the Indemnifying Party shall pay to the Indemnified Party, by wire transfer of immediately available funds, the amount of any Liability for which it is liable hereunder no later than three (3) days following any final determination of such Liability and the Indemnifying Party’s liability therefor. A “final determination” shall exist when (a) the parties to the dispute have reached an agreement in writing, (b) a court of competent jurisdiction shall have entered a final and non-appealable order or judgment, or (c) an arbitration or like panel shall have rendered a final non-appealable determination with respect to disputes the parties have agreed to submit thereto.

7.08. Contribution . If the indemnification provided for in this Article VII shall, for any reason, be unavailable or insufficient to hold harmless the Indemnified Party hereunder in respect of any Liability, then each Indemnifying Party shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such Liability, in such proportion as shall be sufficient to place the Indemnified Party in the same position as if such Indemnified Party were indemnified hereunder, the Parties intending that their respective contributions hereunder be as close as possible to the indemnification under Sections 7.02 and 7.03. If the contribution provided for in the previous sentence shall, for any reason, be unavailable or

 

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insufficient to put the Indemnified Party in the same position as if it were indemnified under Section 7.02 or 7.03, as the case may be, then the Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party as a result of such Liability, in such proportion as shall be appropriate to reflect the relative benefits received by and the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other hand with respect to the matter giving rise to the Liability.

7.09. Remedies Cumulative . The remedies provided in this Article VII shall be cumulative and, subject to the provisions of Article X, shall not preclude assertion by any Indemnified Party of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

7.10. Survival of Indemnities . The rights and obligations of each of Expedia and TripAdvisor and their respective Indemnified Parties under this Article VII shall survive the distribution, sale or other transfer by any Party of any Assets or the delegation or assignment by it of any Liabilities.

7.11. Shared Liabilities . Notwithstanding anything to the contrary contained in this Agreement:

(a) In order to facilitate the defense of any Shared Liability, the Parties agree that (i) the Parties shall cooperate in the defense of any Shared Liability; (ii) each Party shall be responsible for the costs of its own in-house counsel and other internal personnel in the defense of any Shared Liability; (iii) Expedia shall be entitled to control the defense and/or settlement of any Shared Liability, although TripAdvisor shall be entitled to observe with counsel of its own selection and at its own expense; provided , however , that after the Effective Time Expedia shall not settle all or any portion of any Shared Liability unless any remaining Liability of TripAdvisor and its Affiliates and their respective current and former officers and directors relating to the Shared Liability will be fully released as a result of such settlement.

(b) The Parties agree to act in good faith and to use their reasonable best efforts to preserve and maximize the insurance benefits due to be provided under all policies of insurance and to cooperate with one another as necessary to permit each other to access or obtain the benefits under those policies; provided , however , that nothing hereunder shall be construed to prevent any party or any other Person from asserting claims for insurance benefits or accepting insurance benefits provided by the policies. The Parties agree to exchange information upon reasonable request of the other Party regarding requests that they have made for insurance benefits, notices of claims, occurrences and circumstances that they have submitted to the insurance companies or other entities managing the policies, responses they have received from those insurance companies or entities, including any payments they have received from the insurance companies and any agreements by the insurance companies to make payments, and any other information that the Parties may need to determine the status of the insurance policies and the continued availability of benefits thereunder.

 

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(c) If any Party receives notice or otherwise learns of the assertion by any person or entity (including a Governmental Authority) of a Shared Liability, that Party shall give the other Party written notice of such Shared Liability, providing notice of such Shared Liability in reasonable detail. The failure to give notice under this subsection shall not relieve any Party of its Liability for any Shared Liability except to the extent the Party is actually prejudiced by the failure to give such notice. Expedia and TripAdvisor shall be deemed to be on notice of any Shared Liability pending prior to the Effective Time.

ARTICLE VIII

INSURANCE

8.01. Insurance Matters . (a) TripAdvisor does hereby, for itself and each other member of the TripAdvisor Group, agree that no member of the Expedia Group or any Expedia Indemnified Party shall have any liability whatsoever as a result of the insurance policies and practices of Expedia and its Affiliates as in effect at any time prior to the Effective Time, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise; provided this Section 8.01(a) shall not negate Expedia’s agreement under Section 8.01(b).

(b) Expedia agrees to use its reasonable best efforts to cause the interest and rights of TripAdvisor and the other members of the TripAdvisor Group as of the Effective Time as insureds or beneficiaries or in any other capacity under occurrence-based insurance policies and programs (and under claims-made policies and programs to the extent a claim has been submitted prior to the Effective Time) of Expedia or any other member of the Expedia Group in respect of periods prior to the Effective Time to survive the Effective Time for the period for which such interests and rights would have survived without regard to the transactions contemplated hereby to the extent permitted by such policies, and Expedia shall continue to administer such policies and programs on behalf of TripAdvisor and the other members of the TripAdvisor Group, subject to TripAdvisor’s reimbursement to Expedia and the other relevant members of the Expedia Group for the actual out-of-pocket costs of such ongoing administration and the internal costs (based on the proportion of the amount of time actually spent on such matter to such employee’s normal working time) of any employee or agent of Expedia of any other relevant member of the Expedia Group who will be required to spend at least ten percent of his or her normal working time over any ten (10) Business Days working with respect to any such matter. Any proceeds received by Expedia or any other member of the Expedia Group after the Effective Time under such policies and programs in respect of TripAdvisor and the other members of the TripAdvisor Group shall be for the benefit of TripAdvisor and the other members of the TripAdvisor Group.

(c) This Agreement is not intended as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of any member of the Expedia Group in respect of any insurance policy or any other contract or policy of insurance.

 

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(d) Nothing in this Agreement shall be deemed to restrict any member of the TripAdvisor Group from acquiring at its own expense any other insurance policy in respect of any Liabilities or covering any period.

ARTICLE IX

EXCHANGE OF INFORMATION; CONFIDENTIALITY

9.01. Agreement for Exchange of Information; Archives . (a) Without limiting any rights or obligations under any Ancillary Agreement between the Parties and/or any other member of their respective Groups relating to confidentiality, each of Expedia and TripAdvisor agrees to provide, and to cause its Representatives, its Group members and its respective Group members’ Representatives to provide, to the other Group and any member thereof (a “ Requesting Party ”), at any time before, on or after the Effective Date, subject to the provisions of Section 9.04 and as soon as reasonably practicable after written request therefor, any Information within the possession or under the control of such Party or one of such Persons which the Requesting Party reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on the Requesting Party (including under applicable securities laws) by a Governmental Authority having jurisdiction over the Requesting Party, (ii) for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation or similar requirements of the Requesting Party, in each case other than claims or allegations that one Party to this Agreement or any of its Group members has or brings against the other Party or any of its Group members, or (iii) subject to the foregoing clause (ii) above, to comply with its obligations under this Agreement or any Ancillary Agreement; provided , however , that in the event that any Party determines that any such provision of Information could be commercially detrimental, violate any Applicable Law or agreement, or waive any attorney-client privilege, the Parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence. More particularly, and without limitation to the generality of the foregoing sentence, the Parties agree that the provisions of the Tax Sharing Agreement shall govern with respect to the sharing of Information relating to Tax.

(b) After the Effective Time, TripAdvisor and the other members of TripAdvisor Group shall have access during regular business hours (as in effect from time to time), and upon reasonable advance notice, to the documents and objects of historical significance that relate to the Separated Businesses, the Separated Assets or the Separated Entities and that are located in archives retained or maintained by Expedia or any other member of the Expedia Group. TripAdvisor and the other members of the TripAdvisor Group may obtain copies (but not originals) of documents for bona fide business purposes and may obtain objects for exhibition purposes for commercially reasonable periods of time if required for bona fide business purposes, provided that TripAdvisor shall cause any such objects to be returned promptly, at TripAdvisor’s

 

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expense, in the same condition in which they were delivered to TripAdvisor or any other member of the TripAdvisor Group and TripAdvisor and the other members of the TripAdvisor Group shall comply with any rules, procedures or other requirements, and shall be subject to any restrictions (including prohibitions on removal of specified objects), that are then applicable to Expedia or such other member of the Expedia Group. In any event, the foregoing shall not be deemed to restrict the access of Expedia or any other member of the Expedia Group to any such documents or objects. Nothing herein shall be deemed to impose any Liability on Expedia or any other member of the Expedia Group if documents or objects referred to in this Section 9.01 are not maintained or preserved by Expedia or any other member of the Expedia Group. Alternatively, Expedia, acting reasonably, may request from TripAdvisor and any other member of the TripAdvisor Group that they provide it, with reasonable advance notice, with a list of the requested Information that relates to the Separated Businesses, the Separated Assets or the Separated Entities and Expedia shall use, and shall cause the other members of the Expedia Group that are in possession of the Information requested to use, commercially reasonable efforts to locate all requested Information that is owned or possessed by Expedia or any of its Group members or Representatives. Expedia will make available all such Information for inspection by TripAdvisor or any other relevant member of the TripAdvisor Group during normal business hours at the place of business reasonably designated by Expedia. Subject to such confidentiality or security obligations as Expedia or the other relevant members of its Group may reasonably deem necessary, TripAdvisor and the other relevant members of the TripAdvisor Group may have all requested Information duplicated. Alternatively, Expedia or the other relevant members of the Expedia Group may choose to deliver to TripAdvisor, at TripAdvisor’s expense, all requested Information in the form reasonably requested by TripAdvisor or any other member of the TripAdvisor Group. At Expedia’s request, TripAdvisor shall cause such Information when no longer needed to be returned to Expedia at TripAdvisor’s expense.

9.02. Ownership of Information . Any Information owned by a Party or any of its Group members and that is provided to a Requesting Party pursuant to Section 9.01 shall be deemed to remain the property of the providing party. Unless specifically set forth herein or in any Ancillary Agreement, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Information.

9.03. Compensation for Providing Information . The Party requesting Information agrees to reimburse the other Party for the reasonable costs, if any, of creating, gathering and copying such Information, to the extent that such costs are incurred for the benefit of the Requesting Party. Except as may be otherwise specifically provided elsewhere in this Agreement, in the Ancillary Agreements, or in any other agreement between the Parties, such costs shall be computed in accordance with the providing Party’s standard methodology and procedures.

9.04. Record Retention . To facilitate the possible exchange of Information pursuant to this Article IX and other provisions of this Agreement after the Effective Time, the Parties agree to use commercially reasonable efforts to retain, and to cause the members of their respective Group to retain, all Information in their respective possession or control at the Effective Time in accordance with the policies of the Expedia Group as

 

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in effect at the Effective Time or such other policies as may be reasonably adopted by the appropriate Party after the Effective Time. No Party will destroy, or permit any member of its Group to destroy, any Information which the other Party or any member of its Group may have the right to obtain pursuant to this Agreement prior to the fifth (5th) anniversary of the Effective Time without first notifying the other Party of the proposed destruction and giving the other Party the opportunity to take possession of such Information prior to such destruction.

9.05. Other Agreements Providing for Exchange of Information . The rights and obligations granted or created under this Article IX are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange, retention or confidential treatment of Information set forth in any Ancillary Agreement.

9.06. Production of Witnesses; Records; Cooperation . (a) After the Effective Time, but only with respect to a Third Party Claim, each Party hereto shall use commercially reasonable efforts to, and shall cause the other relevant members of its Group to use commercially reasonable efforts to, make available to the Requesting Party or any member of the Requesting Party’s Group, upon written request, its then former and current Representatives (and the former and current Representatives of its respective Group members) as witnesses and any books, records or other documents within its control (or that of its respective Group members) or which it (or its respective Group members) otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such Representatives) or books, records or other documents may reasonably be required in connection with any Action in which the Requesting Party may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder. The Requesting Party shall bear all costs and expenses in connection therewith.

(b) If a Party, being entitled to do so under this Agreement, chooses to defend or to seek to settle or compromise any Third Party Claim, the other Party shall use commercially reasonable efforts to make available to such Party, upon written request, its then former and current Representatives and those of its respective Group members as witnesses and any books, records or other documents within its control (or that of its respective Group members) or which it (or its respective Group members) otherwise has the ability to make available, to the extent that any such Person (giving consideration to business demands of such Representatives) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, as the case may be, and shall otherwise cooperate in such defense, settlement or compromise, as the case may be.

(c) Without limiting the foregoing, the Parties shall cooperate and consult, and shall cause their respective Group members to cooperate and consult, to the extent reasonably necessary with respect to any Actions (except in the case of an Action by one Party against the other).

(d) The obligation of the Parties to provide witnesses pursuant to this Section 9.06 is intended to be interpreted in a manner so as to facilitate cooperation and shall

 

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include the obligation to provide as witnesses inventors and other employees without regard to whether the witness or the employer of the witness could assert a possible business conflict (subject to the limitation set forth in the first sentence of Section 9.06(a) regarding Third Party Claims).

(e) In connection with any matter contemplated by this Section 9.06, the Parties will enter into, and shall cause all other relevant members of their respective Groups to enter into, a mutually acceptable joint defense agreement so as to maintain to the extent practicable any applicable attorney-client privilege or work-product privileges of any member of any Group.

9.07. Confidentiality . (a) Subject to Section 9.08, each of Expedia and TripAdvisor shall hold, and shall cause its respective Group members and its respective Affiliates (whether now an Affiliate or hereafter becoming an Affiliate) and its Representatives to hold, in strict confidence, with at least the same degree of care that applies to Expedia’s confidential and proprietary Information pursuant to policies in effect as of the Effective Time, all confidential and proprietary Information concerning the other Group (or any member thereof) that is either in its possession (including Information in its possession prior to the date hereof) or furnished by the other Group (or any member thereof) or by any of its Affiliates (whether now an Affiliate or hereafter becoming an Affiliate) or their respective Representatives at any time pursuant to this Agreement or any Ancillary Agreement or the transactions contemplated hereby or thereby (any such Information referred to herein as “ Confidential Information ”), and shall not use, and shall cause its respective Group members, Affiliates and Representatives not to use, any such Confidential Information other than for such purposes as shall be expressly permitted hereunder or thereunder. Notwithstanding the foregoing, Confidential Information shall not include Information that is or was (i) in the public domain other than by the breach of this Agreement or by breach of any other agreement relating to confidentiality between or among the Parties and/or their respective Group members, their respective Affiliates or Representatives, (ii) lawfully acquired by such Party (or any member of the Group to which such Party belongs or any of such Party’s Affiliates) from a Third Party not bound by a confidentiality obligation, or (iii) independently generated or developed by Persons who do not have access to, or descriptions of, any such confidential or proprietary Information of the other Party (or any member of the Group to which such Party belongs).

(b) Each Party shall maintain, and shall cause its respective Group members to maintain, policies and procedures, and develop such further policies and procedures as will from time to time become necessary or appropriate, to ensure compliance with Section 9.07(a).

(c) Each Party agrees not to release or disclose, or permit to be released or disclosed, any Confidential Information of the other Party to any other Person, except its Representatives who need to know such Confidential Information (who shall be advised of their obligations hereunder with respect to such Confidential Information), except in compliance with Section 9.08. Without limiting the foregoing, when any Information furnished by the other Party after the Effective Time pursuant to this Agreement or any

 

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Ancillary Agreement is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each Party will promptly, after request of the other Party and at the election of the Party receiving such request, destroy or return to the other Party all such Information in a printed or otherwise tangible form (including all copies thereof and all notes, extracts or summaries based thereon), and use reasonable best efforts to delete all Information in an electronic or otherwise intangible form and certify to the other Party that it has destroyed such Information (and such copies thereof and such notes, extracts or summaries based thereon). Notwithstanding the foregoing, the Parties agree that to the extent some Information to be destroyed or returned is retained as data or records for the purpose of business continuity planning or is otherwise not accessible in the Ordinary Course of Business, such data or records shall be destroyed in the Ordinary Course of Business in accordance, if applicable, with the business continuity plan of the applicable Party.

9.08. Protective Arrangements . In the event that any Party or any member of its Group or any Affiliate of such Party or any of their respective Representatives either determines that it is required to disclose any Confidential Information (the “ Disclosing Party ”) pursuant to Applicable Law or receives any demand under lawful process or from any Governmental Authority to disclose or provide Confidential Information of the other Party (or any member of the Group to which such Party belongs) (the “ Providing Party ”), the Disclosing Party shall, to the extent permitted by Applicable Law, promptly notify the other Party prior to the Disclosing Party disclosing or providing such Confidential Information and shall use commercially reasonable efforts to cooperate with the Providing Party so that the Providing Party may seek any reasonable protective arrangements or other appropriate remedy and/or waive compliance with this Section 9.08. All expenses reasonably incurred by the Disclosing Party in seeking a protective order or other remedy will be borne by the Providing Party. Subject to the foregoing, the Disclosing Party may thereafter disclose or provide such Confidential Information to the extent (but only to the extent) required by such Applicable Law (as so advised by legal counsel) or by lawful process or by such Governmental Authority and shall promptly provide the Providing Party with a copy of the Confidential Information so disclosed, in the same form and format as disclosed, together with a list of all Persons to whom such Confidential Information was disclosed.

9.09. Disclosure of Third Party Information . TripAdvisor acknowledges that it and the other members of the TripAdvisor Group may have in its or their possession confidential or proprietary Information of Third Parties that was received under confidentiality or non-disclosure agreements with such Third Party while part of the Expedia Group. TripAdvisor will hold, and will cause the other members of its Group and its and their respective Representatives to hold, in strict confidence the confidential and proprietary Information of Third Parties to which TripAdvisor or any other member of the TripAdvisor Group has access, in accordance with the terms of any agreements entered into prior to the Effective Time between one or more members of the Expedia Group (whether acting through, on behalf of, or in connection with, the Separated Businesses) and such Third Parties.

 

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ARTICLE X

DISPUTE RESOLUTION

10.01. Interpretation; Agreement to Resolve Disputes . Except as otherwise specifically provided in any Ancillary Agreement, the procedures for discussion, negotiation and dispute resolution set forth in this Article X shall apply to all disputes, controversies or claims (whether sounding in contract, tort or otherwise) that may arise out of or relate to, or arise under or in connection with this Agreement or any Ancillary Agreement, or the transactions contemplated hereby or thereby (including all actions taken in furtherance of the transactions contemplated hereby or thereby on or prior to the date hereof), or the commercial or economic relationship of the Parties relating hereto or thereto, between or among any member of the Expedia Group on the one hand and the TripAdvisor Group on the other hand. Each Party agrees on behalf of itself and each member of its respective Group that the procedures set forth in this Article X shall be the sole and exclusive procedures in connection with any dispute, controversy or claim relating to any of the foregoing matters and irrevocably waives any right to commence any Action in or before any Governmental Authority, except as otherwise required by Applicable Law.

10.02. Dispute Resolution; Mediation .

(a) Either Party may commence the dispute resolution process of this Section 10.02 by giving the other Party written notice (a “ Dispute Notice ”) of any controversy, claim or dispute of whatever nature arising out of or relating to this Agreement or the breach, termination, enforceability or validity thereof (a “ Dispute ”) which has not been resolved in the normal course of business. The Parties shall attempt in good faith to resolve any Dispute by negotiation between executives of each Party hereto (“ Senior Party Representatives ”) who have authority to settle the Dispute and who are at a higher level of management than the persons who have direct responsibility for the administration of this Agreement. Within 15 days after delivery of the Dispute Notice, the receiving Party shall submit to the other a written response (the “ Response ”). The Dispute Notice and the Response shall include (i) a statement setting forth the position of the Party giving such notice and a summary of arguments supporting such position and (ii) the name and title of such Party’s Senior Party Representative and any other persons who will accompany the Senior Party Representative at the meeting at which the Parties will attempt to settle the Dispute. Within 30 days after the delivery of the Dispute Notice, the Senior Party Representatives of both Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the Dispute. The Parties shall cooperate in good faith with respect to any reasonable requests for exchanges of information regarding the Dispute or a Response thereto.

(b) If the Dispute has not been resolved within 60 days after delivery of the Dispute Notice, or if the Parties fail to meet within 30 days after delivery of the Dispute Notice as hereinabove provided, the Parties shall make a good faith attempt to settle the Dispute by mediation pursuant to the provisions of this Section 10.02 before resorting to arbitration contemplated by Section 10.03 or any other dispute resolution procedure that may be agreed by the Parties.

 

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(c) All negotiations, conferences and discussions pursuant to this Section 10.02 shall be confidential and shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations, conferences and discussions that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future arbitration.

(d) Unless the Parties agree otherwise, the mediation shall be conducted in accordance with the CPR Institute for Dispute Resolution Model Procedure for Mediation of Business Disputes in effect on the date of this Agreement by a mediator mutually selected by the Parties.

(e) Within 30 days after the mediator has been selected as provided above, both Parties and their respective attorneys shall meet with the mediator for one mediation session of at least four hours, it being agreed that each Party representative attending such mediation session shall be a Senior Party Representative with authority to settle the Dispute. If the Dispute cannot be settled at such mediation session or at any mutually agreed continuation thereof, either Party may give the other and the mediator a written notice declaring the mediation process at an end.

10.03. Arbitration . If the Dispute has not been resolved by the dispute resolution process described in Section 10.02, the Parties agree that any such Dispute shall be settled by binding arbitration before the American Arbitration Association (“ AAA ”) in Wilmington, Delaware pursuant to the Commercial Rules of the AAA. Any arbitrator(s) selected to resolve the Dispute shall be bound exclusively by the laws of the State of Delaware without regard to its choice of law rules. Any decisions of award of the arbitrator(s) will be final and binding upon the Parties and may be entered as a judgment by the Parties hereto. Any rights to appeal or review such award by any court or tribunal are hereby waived to the extent permitted by law.

10.04. Costs . The costs of any mediation or arbitration pursuant to this Article X shall be shared equally between the Parties.

10.05. Continuity of Service and Performance . Unless otherwise agreed in writing, the Parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article X with respect to all matters not subject to such dispute, controversy or claim.

 

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ARTICLE XI

FURTHER ASSURANCES

11.01. Further Assurances . (a) Each Party covenants with and in favor of the other Party as follows:

(i) except as provided in Section 13.01, prior to, on and after the Effective Time, each Party hereto shall, and shall cause the other relevant members of its Group to, cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party, to execute, acknowledge and deliver, or use commercially reasonable efforts to cause to be executed and delivered, all instruments, assurances or documents, including instruments of conveyance, assignments and transfers, and to make all filings with, and to obtain all consents, approvals or authorizations of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument (including any Consents or Governmental Authorizations), and to take all such other actions as such Party may reasonably be requested to take by the other Party hereto (or any member of its Group) from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to give effect to the provisions, obligations and purposes of this Agreement and the Ancillary Agreements and the transfers of the Separated Businesses and of the Separated Assets and the assignment and assumption of the Assumed Liabilities and the other transactions contemplated hereby and thereby; and

(ii) to the extent that Expedia or TripAdvisor discovers at any time following the Effective Time any Asset that was intended to be transferred to TripAdvisor or any other member of the TripAdvisor Group pursuant to this Agreement was not so transferred at the Effective Time, Expedia shall, or shall cause the other relevant members of its Group to promptly, assign and transfer to TripAdvisor or any other member of the TripAdvisor Group reasonably designated by TripAdvisor such Asset and all right, title and interest therein in a manner and on the terms consistent with the relevant provisions of this Agreement, including, without limitation, Section 2.14(b). Similarly, to the extent that Expedia or TripAdvisor discovers at any time following the Effective Time any Asset that was intended to be retained by Expedia or any other member of the Expedia Group was not so retained at the Effective Time, TripAdvisor shall, or shall cause the other relevant members of its Group to promptly to, assign and transfer to Expedia or any other member of the Expedia Group reasonably designated by Expedia such Asset and all right, title and interest therein in a manner and on the terms consistent with the relevant provisions of this Agreement, including, without limitation, Section 2.14(b). For the avoidance of doubt, the transfer of any Assets under this paragraph (a) shall be effected without any additional consideration by either Party hereunder (such deferred transfers being referred to as “ Deferred Transactions ”).

(b) On or prior to the Effective Time, Expedia and TripAdvisor, in their respective capacities as direct and indirect parent companies of the members of their respective Groups, shall each approve or ratify any actions of the members of their respective Groups as may be necessary or desirable to give effect to the transactions contemplated by this Agreement and the Ancillary Agreements.

(c) Prior to the Effective Time, if a Party identifies any commercial or other service that is needed to assure a smooth and orderly transition of the businesses in

 

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connection with the consummation of the transactions contemplated hereby, and that is not otherwise governed by the provisions of this Agreement or any Ancillary Agreement, the Parties will cooperate in determining whether there is a mutually acceptable arms’ length basis on which the other Party can provide such service.

ARTICLE XII

CERTAIN OTHER MATTERS

12.01. Auditors and Audits; Annual and Quarterly Financial Statements and Accounting . Each Party agrees that during the one hundred and eighty (180) days following the Effective Time and in any event solely with respect to the preparation and audit of each of Expedia’s and TripAdvisor’s financial statements for the year ending December 31, 2011, the printing, filing and public dissemination of such financial statements, the audit of Expedia’s internal control over financial reporting and management’s assessment thereof and management’s assessment of Expedia’s disclosure controls and procedures, in each case made as of December 31, 2011:

(a) Date of Auditors’ Opinion . TripAdvisor shall use commercially reasonable efforts to enable TripAdvisor’s auditors (“ TripAdvisor’s Auditors ”) to complete their audit such that they will date their opinion on TripAdvisor’s audited annual financial statements on the same date that Expedia’s auditors (“ Expedia’s Auditors ”) date their opinion on Expedia’s audited annual financial statements (except to the extent an earlier date is necessary to comply with SEC rules), and to enable Expedia to meet its timetable for the printing, filing and public dissemination of Expedia’s annual financial statements.

(b) Annual Financial Statements . (i) Expedia shall provide to TripAdvisor on a timely basis all Information reasonably required to meet TripAdvisor’s schedule for the preparation, printing, filing, and public dissemination of its annual financial statements and for management’s assessment of the effectiveness of its disclosure controls and procedures in accordance with Item 307 of Regulation S-K and (ii) TripAdvisor shall provide to Expedia on a timely basis all Information reasonably required to meet Expedia’s schedule for its report on internal control over financial reporting in accordance with Item 308 of Regulation S-K and its auditor’s audit of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the SEC’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder (such assessments and audit being referred to as the “ 2011 Internal Control Audit and Management Assessments ”). Without limiting the generality of the foregoing, TripAdvisor will provide all required financial and other Information with respect to TripAdvisor and its Subsidiaries to TripAdvisor’s Auditors in a sufficient and reasonable time and in sufficient detail to permit TripAdvisor’s Auditors to take all steps and perform all reviews necessary to provide sufficient assistance to Expedia’s Auditors with respect to Information to be included or contained in Expedia’s annual financial statements and to permit Expedia’s Auditors and Expedia’s management to complete the 2011 Internal Control Audit and Management Assessments.

 

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(c) Access to Personnel and Books and Records . TripAdvisor shall authorize TripAdvisor’s Auditors to make available to Expedia’s Auditors both the personnel who performed or are performing the annual audits of TripAdvisor and work papers related to the annual audits of TripAdvisor, in all cases within a reasonable time prior to TripAdvisor’s Auditors’ opinion date, so that Expedia’s Auditors are able to perform the procedures they consider necessary to take responsibility for the work of TripAdvisor’s Auditors as it relates to Expedia’s Auditors’ report on Expedia’s financial statements, all within sufficient time to enable Expedia to meet its timetable for the printing, filing and public dissemination of Expedia’s annual financial statements. Similarly, Expedia shall authorize Expedia’s Auditors to make available to TripAdvisor’s Auditors both the personnel who performed or are performing the annual audits of Expedia and work papers related to the annual audits of Expedia, in all cases within a reasonable time prior to Expedia’s Auditors’ opinion date, so that TripAdvisor’s Auditors are able to perform the procedures they consider necessary to take responsibility for the work of Expedia’s Auditors as it relates to TripAdvisor’s Auditors’ report on TripAdvisor’s financial statements, all within sufficient time to enable TripAdvisor to meet its timetable for the printing, filing and public dissemination of TripAdvisor’s annual financial statements. TripAdvisor shall make available to Expedia’s Auditors and Expedia’s management TripAdvisor’s personnel and TripAdvisor books and records in a reasonable time prior to Expedia’s Auditors’ opinion date and Expedia’s management’s assessment date so that Expedia’s Auditors and Expedia’s management are able to perform the procedures they consider necessary to conduct the 2011 Internal Control Audit and Management Assessments.

(d) TripAdvisor Annual Report . TripAdvisor will deliver to Expedia a substantially final draft, as soon as the same is prepared, of the first report to be filed with the SEC that includes TripAdvisor’s audited financial statements for the year ending December 31, 2011 (the “ TripAdvisor Annual Report ”); provided , however , that TripAdvisor may continue to revise such TripAdvisor Annual Report prior to the filing thereof, which changes will be delivered to Expedia as soon as reasonably practicable; provided , further , that Expedia’s and TripAdvisor’s personnel will actively consult with each other regarding any changes which TripAdvisor may consider making to the TripAdvisor Annual Report and related disclosures prior to the anticipated filing with the SEC, with particular focus on any changes which would have an effect upon Expedia’s financial statements or related disclosures.

Nothing in this Section 12.01 shall require either party to violate any agreement with any Third Party regarding the confidentiality of confidential and proprietary Information relating to that Third Party or its business; provided , however , that in the event that a Party is required under this Section 12.01 to disclose any such Information, such Party shall use commercially reasonable efforts to seek to obtain such Third Party Consent to the disclosure of such Information.

 

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ARTICLE XIII

SOLE DISCRETION OF EXPEDIA; TERMINATION

13.01. Sole Discretion of Expedia . Notwithstanding any other provision of this Agreement, until the occurrence of the Effective Time, Expedia shall have the sole and absolute discretion:

(a) to determine whether to proceed with all or any part of the Separation, including any Separation Transaction, or the Reclassification, and to determine the timing of and any and all conditions to the completion of the Separation and the Reclassification or any part thereof or of any other transaction contemplated by this Agreement; and

(b) to amend or otherwise change, delete or supplement, from time to time, any term or element of the Separation, including any Separation Transaction, or the Reclassification or any other transaction contemplated by this Agreement.

13.02. Termination . This Agreement and all Ancillary Agreements may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Effective Time by and in the sole and absolute discretion of Expedia without the approval of TripAdvisor or of the stockholders of Expedia. In the event of such termination, no Party shall have any liability of any kind to the other Party or any other Person. After the Effective Date, this Agreement may not be terminated except by an agreement in writing signed by the Parties.

ARTICLE XIV

MISCELLANEOUS

14.01. Limitation of Liability . In no event shall any member of the Expedia Group or the TripAdvisor Group be liable to any member of the other Group for any special, consequential, indirect, collateral, incidental or punitive damages or lost profits or failure to realize expected savings or other commercial or economic loss of any kind, however caused and on any theory of liability (including negligence) arising in any way out of this Agreement, whether or not such Person has been advised of the possibility of any such damages; provided , however , that the foregoing limitations shall not limit either Party’s indemnification obligations for Liabilities with respect to Third Party Claims as set forth in Article VII. The provisions of Article X shall be the Parties’ sole recourse for any breach hereof.

14.02. Counterparts . This Agreement and each Ancillary Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties thereto and delivered to the other party or parties.

14.03. Entire Agreement . This Agreement, the Ancillary Agreements, and the Schedules and Exhibits hereto and thereto and the specific agreements contemplated hereby or thereby contain the entire agreement between the Parties with respect to the

 

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subject matter hereof and supersede all previous agreements, oral or written, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter. No agreements or understandings with respect to the subject matter hereof or thereof exist between the Parties other than those set forth or referred to herein or therein.

14.04. Construction . In this Agreement and each of the Ancillary Agreements, unless a clear contrary intention appears:

(a) the singular number includes the plural number and vice versa;

(b) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement or the relevant Ancillary Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

(c) reference to any gender includes each other gender;

(d) reference to any agreement, document or instrument means such agreement, document or instrument as amended, modified, supplemented or restated, and in effect from time to time in accordance with the terms thereof subject to compliance with the requirements set forth herein or in the relevant Ancillary Agreement;

(e) reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

(f) “herein,” “hereby,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement or to the relevant Ancillary Agreement as a whole and not to any particular article, section or other provision hereof or thereof;

(g) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term;

(h) the Table of Contents and headings are for convenience of reference only and shall not affect the construction or interpretation hereof or thereof;

(i) with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding;” and

(j) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

 

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14.05. Signatures . Each Party acknowledges that it and the other Party (and the other members of their respective Groups) may execute certain of the Ancillary Agreements by facsimile, stamp or mechanical signature. Each Party expressly adopts and confirms each such facsimile, stamp or mechanical signature made in its respective name (or that of the applicable member of its Group) as if it were a manual signature, agrees that it will not assert that any such signature is not adequate to bind such Party to the same extent as if it were signed manually and agrees that at the reasonable request of the other Party at any time it will as promptly as reasonably practicable cause each such Ancillary Agreement to be manually executed (any such execution to be as of the date of the initial date thereof).

14.06. Assignability . Except as set forth in any Ancillary Agreement, this Agreement and each Ancillary Agreement shall be binding upon and inure to the benefit of the Parties hereto and thereto, respectively, and their respective successors and assigns; provided , however , that except as specifically provided in any Ancillary Agreement, no Party hereto or thereto may assign its respective rights or delegate its respective obligations under this Agreement or any Ancillary Agreement without the express prior written consent of the other parties hereto or thereto.

14.07. Third Party Beneficiaries . Except for the indemnification rights under this Agreement of any Expedia Indemnified Party or any TripAdvisor Indemnified Party in their respective capacities as such and for the release under Section 7.01 of any Person provided therein and except as specifically provided in any Ancillary Agreement, (a) the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the parties hereto and thereto and their respective successors and permitted assigns and are not intended to confer upon any Person, except the parties hereto and thereto and their respective successors and permitted assigns, any rights or remedies hereunder and (b) there are no third party beneficiaries of this Agreement or any Ancillary Agreement; and neither this Agreement nor any Ancillary Agreement shall provide any Third Party with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.

14.08. Payment Terms . (a) Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount to be paid or reimbursed by one Party to the other under this Agreement shall be paid or reimbursed hereunder within thirty (30) days after presentation of an invoice or a written demand therefor and setting forth, or accompanied by, reasonable documentation or other reasonable explanation supporting such amount.

(b) Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement (and any amount billed or otherwise invoiced or demanded and properly payable that is not paid within thirty (30) days of such bill, invoice or other demand) shall bear interest at a rate per annum equal to the Prime Rate plus 2% (or the maximum legal rate, whichever is lower), calculated for the actual number of days elapsed, accrued from the date on which such payment was due up to the date of the actual receipt of payment.

 

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14.09. Governing Law . Except as set forth in Article X, this Agreement and each Ancillary Agreement, shall be governed by and construed and interpreted in accordance with the internal laws of the State of Delaware, irrespective of the choice of laws principles of the State of Delaware, as to all matters, including matters of validity, construction, effect, enforceability, performance and remedies.

14.10. Notices . All notices or other communications under this Agreement and, unless expressly provided therein, each Ancillary Agreement, shall be in writing and shall be deemed to be duly given when delivered in person or successfully transmitted by facsimile, addressed as follows:

If to Expedia, to:

Expedia, Inc.

333 108 th Avenue NE

Bellevue, WA 98004

Attention: General Counsel

Fax: (425) 679-7200

with a copy to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, NY 10019

Attention: Andrew J Nussbaum, Esq.

Fax: (212) 403-2000

If to TripAdvisor, to:

TripAdvisor, Inc.

141 Needham Street

Newton, MA 02464

Attention: General Counsel

Fax: (617) 670-6300

Any Party may, by notice to the other Party as set forth herein, change the address or fax number to which such notices are to be given.

14.11. Severability . If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby or thereby, as the case may be, is not affected in any manner adverse to any party hereto or thereto. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

 

-48-


14.12. Publicity . Prior to the Effective Time, Expedia shall be responsible for issuing any press releases or otherwise making public statements with respect to this Agreement, the Separation, the Reclassification or any of the other transactions contemplated hereby and thereby, and TripAdvisor shall not make such statements without the prior written consent of Expedia. Prior to the Effective Time, Expedia and TripAdvisor shall each consult with the other prior to making any filings with any Governmental Authority with respect thereto.

14.13. Survival of Covenants . Except as expressly set forth in this Agreement or any Ancillary Agreement, any covenants, representations or warranties contained in this Agreement and each Ancillary Agreement shall survive the Separation and Reclassification and shall remain in full force and effect.

14.14. Waivers of Default; Conflicts . (a) Waiver by any Party of any default by the other Party of any provision of this Agreement or any Ancillary Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

(b) Each Party acknowledges that each of the Parties and each member of their respective Group are all currently represented by members of Expedia’s legal department and Expedia’s outside counsel. Each of Expedia (on behalf of itself and every member of its Group), on the one hand, and TripAdvisor (on behalf of itself and every member of its Group), on the other hand, waives any conflict with respect to such common representation that may arise before, at or after the Effective Time.

14.15. Amendments . This Agreement may be amended, supplemented, modified or abandoned at any time prior to the Effective Time by and in the sole and absolute discretion of Expedia without the approval of TripAdvisor or of the stockholders of Expedia. After the Effective Time, no provisions of this Agreement or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified by any Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.]

 

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IN WITNESS WHEREOF, the Parties have caused this Separation Agreement to be executed by their duly authorized representatives.

 

EXPEDIA, INC.

By:

 

/s/ Mark D. Okerstrom

Name:

  Mark D. Okerstrom

Title:

  Executive Vice President & Chief Financial Officer

TRIPADVISOR, INC.

By:

 

/s/ Stephen Kaufer

Name:

  Stephen Kaufer

Title:

  President & Chief Executive Officer

 

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Expedia-TripAdvisor Separation Agreement – Schedules

 

FINAL 12.20.11         

 

Schedule 1.01(a) - Old Expedia Warrants

Schedule 1.01(b) - TripAdvisor Group Balance Sheet

Schedule 2.02(a) - Separation Transactions

Schedule 2.04(a) - Separated Assets

Schedule 2.04(b) - Separated Entities

Schedule 2.06(a) - Excluded Assets

Schedule 2.07(a) - Assumed Liabilities

Schedule 2.07(b) - Retained Liabilities

Schedule 2.07(c) - Shared Liabilities

Schedule 3.07 - Deferred Separated Assets

Schedule 5.02(c) - Unreleased Guarantees

Exhibit 3.1

RESTATED CERTIFICATE OF INCORPORATION

OF

EXPEDIA, INC.

Expedia, Inc. (hereinafter called the “ Corporation ”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify:

1. The name of the Corporation is: Expedia, Inc. The original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on April 18, 2005. An Amended and Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on August 8, 2005. Three Certificate of Amendments were filed with the Secretary of State of the State of Delaware on December 20, 2011.

2. This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Amended and Restated Certificate of Incorporation of this corporation as heretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation; provided, however, that this Restated Certificate of Incorporation does omit such provisions as contemplated by Section 245(c) of the Delaware General Corporation Law.

3. The Restated Certificate of Incorporation herein certified has been duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware.

4. The text of the Certificate of Incorporation as heretofore amended or supplemented is hereby restated to read as herein set forth in full:

ARTICLE I

The name of the Corporation is Expedia, Inc.

ARTICLE II

The address of the Corporation’s registered office in the State of Delaware is 160 Greentree Drive, Suite 101, Dover, Kent County, Delaware 19904. The name of the registered agent at such address is National Registered Agents, Inc.

ARTICLE III

The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law.

ARTICLE IV

The Corporation shall have the authority to issue two billion one hundred million (2,100,000,000) shares of stock, comprised of one billion six hundred million (1,600,000,000) shares of $0.0001 par value Common Stock, four hundred million (400,000,000) shares of $0.0001 par value Class B Common Stock, and one hundred million (100,000,000) shares of $0.001 par value Preferred Stock.


A statement of the designations of each class and the powers, preferences and rights, and qualifications, limitations or restrictions thereof is as follows:

A. Common Stock .

(1) The holders of the Common Stock shall be entitled to receive, share for share with the holders of shares of Class B Common Stock, such dividends if, as and when declared from time to time by the Board of Directors.

(2) In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of the Corporation, the holders of the Common Stock shall be entitled to receive, share for share with the holders of shares of Class B Common Stock, all the assets of the Corporation of whatever kind available for distribution to Stockholders, after the rights of the holders of the Preferred Stock have been satisfied.

(3) Each holder of Common Stock shall be entitled to vote one vote for each share of Common Stock held as of the applicable date on any matter that is submitted to a vote or to the consent of the Stockholders of the Corporation. Except as otherwise provided herein or by the General Corporation Law of the State of Delaware, the holders of Common Stock and the holders of Class B Common Stock shall at all times vote on all matters (including the election of directors) together as one class.

B. Class B Common Stock .

(1) The holders of the Class B Common Stock shall be entitled to receive, share for share with the holders of shares of Common Stock, such dividends if, as and when declared from time to time by the Board of Directors.

(2) In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of the Corporation, the holders of the Class B Common Stock shall be entitled to receive, share for share with the holders of shares of Common Stock, all the assets of the Corporation of whatever kind available for distribution to Stockholders, after the rights of the holders of the Preferred Stock have been satisfied.

(3) Each holder of Class B Common Stock shall be entitled to vote ten votes for each share of Class B Common Stock held as of the applicable date on any matter that is submitted to a vote or to the consent of the Stockholders of the Corporation. Except as otherwise provided herein or by the General Corporation Law of the State of Delaware, the holders of Common Stock and the holders of Class B Common Stock shall at all times vote on all matters (including the election of directors) together as one class.


C. Other Matters Affecting Shareholders of Common Stock and Class B Common Stock .

(1) In no event shall any stock dividends or stock splits or combinations of stock be declared or made on Common Stock or Class B Common Stock unless the shares of Common Stock and Class B Common Stock at the time outstanding are treated equally and identically, except that such dividends or stock splits or combinations shall be made in respect of shares of Common Stock and Class B Common Stock in the form of shares of Common Stock or Class B Common Stock, respectively.

(2) Shares of Class B Common Stock shall be convertible into shares of the Common Stock of the Corporation at the option of the holder thereof at any time on a share for share basis. Such conversion ratio shall in all events be equitably preserved in the event of any recapitalization of the Corporation by means of a stock dividend on, or a stock split or combination of, outstanding Common Stock or Class B Common Stock, or in the event of any merger, consolidation or other reorganization of the Corporation with another corporation.

(3) Upon the conversion of Class B Common Stock into shares of Common Stock, said shares of Class B Common Stock shall be retired and shall not be subject to reissue.

(4) Notwithstanding anything to the contrary in this Certificate of Incorporation, the holders of Common Stock, acting as a single class, shall be entitled to elect twenty-five percent (25%) of the total number of directors, and in the event that twenty-five percent (25%) of the total number of directors shall result in a fraction of a director, then the holders of the Common Stock, acting as a single class, shall be entitled to elect the next higher whole number of directors.

D. Preferred Stock .

The Board of Directors shall, by resolution, designate the powers, preferences, rights and qualifications, limitations and restrictions of the Preferred Stock. Pursuant to subsection 242(b) of the Delaware General Corporation Law, the number of authorized shares of Preferred Stock or any class or series thereof may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the Corporation entitled to vote irrespective of such subsection.

ARTICLE V

The Board of Directors of the Corporation is expressly authorized to make, alter or repeal By-Laws of the Corporation, but the Stockholders may make additional By-Laws and may alter or repeal any By-Law whether adopted by them or otherwise.

ARTICLE VI

Elections of directors need not be by written ballot except and to the extent provided in the By-Laws of the Corporation.

ARTICLE VII

The Corporation is to have perpetual existence.


ARTICLE VIII

Each person who is or was or had agreed to become a director or officer of the Corporation, or each such person who is or was serving or who had agreed to serve at the request of the Board of Directors or an officer of the Corporation as an employee or agent of the Corporation or as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person), shall be indemnified by the Corporation, in accordance with the By-Laws of the Corporation, to the full extent permitted from time to time by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) or any other applicable laws as presently or hereinafter in effect. Without limiting the generality or the effect of the foregoing, the Corporation may enter into one or more agreements with any person that provide for indemnification greater or different than that provided in this Article VIII. Any amendment or repeal of this Article VIII shall not adversely affect any right or protection existing hereunder immediately prior to such amendment or repeal.

ARTICLE IX

A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. Any amendment or repeal of this Article IX shall not adversely affect any right or protection of a director of the Corporation existing immediately prior to such amendment or repeal. The liability of a director shall be further eliminated or limited to the full extent permitted by Delaware law, as it may hereafter be amended.

ARTICLE X

Meetings of stockholders may be held within or without the State of Delaware, as determined by the Board of Directors. The books of the Corporation may be kept (subject to any provision contained in the Delaware General Corporation Law) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation.

ARTICLE XI

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the Delaware General Corporation Law, and all rights conferred upon stockholders herein are granted subject to this reservation except that under no circumstances may such amendment be adopted except as prescribed by Article IV, above, and provided further that the rights of the Class B Common Stock may not be amended, altered, changed or repealed without the approval of the holders of the requisite number of said shares of Class B Common Stock.


ARTICLE XII

The number of directors of the Corporation shall be such number as shall be determined from time to time by resolution of the Board of Directors.

The Chairman of the Board of Directors of the Corporation may only be removed without cause by the affirmative vote of at least 80% of the entire Board of Directors. The provisions of this paragraph may not be amended, altered, changed or repealed, or any provision inconsistent therewith adopted, without the approval of at least (i) 80% of the entire Board of Directors and (ii) 80% of the voting power of the Corporation’s outstanding voting securities, voting together as a single class. This paragraph shall be of no force and effect following such time as the Chairman of the Board of Directors as of August 9, 2005 ceases to be Chairman of the Board of Directors pursuant to the terms of this paragraph and the Stockholders Agreement dated as of August 9, 2005 between Liberty Media Corporation and Barry Diller (the “ Stockholders Agreement ”). This paragraph shall only apply with respect to a removal of the Chairman of the Board of Directors without Cause as such term is defined in the Stockholders Agreement.

ARTICLE XIII

A. Competition and Corporate Opportunities .

To the extent provided in the following sentence, the Corporation renounces any interest or expectancy of the Corporation or any of its Affiliated Companies in, or in being offered an opportunity to participate in, any Dual Opportunity about which a Dual Role Person acquires knowledge. A Dual Role Person shall have no duty to communicate or offer to the Corporation or any of its Affiliated Companies any Dual Opportunity that such Dual Role Person has communicated or offered to IAC or TripAdvisor, shall not be prohibited from communicating or offering any Dual Opportunity to IAC or TripAdvisor, and shall not be liable to the Corporation or its stockholders for breach of any fiduciary duty as a stockholder, director or officer of the Corporation, as the case may be, resulting from (i) the failure to communicate or offer to the Corporation or any of its Affiliated Companies any Dual Opportunity that such Dual Role Person has communicated or offered to IAC or to TripAdvisor or (ii) the communication or offer to IAC or TripAdvisor of any Dual Opportunity, so long as (x) the Dual Opportunity does not become known to the Dual Role Person in his or her capacity as a director or officer of the Corporation, and (y) the Dual Opportunity is not presented by the Dual Role Person to any party other than IAC or TripAdvisor and the Dual Role Person does not pursue the Dual Opportunity individually.

B. Certain Matters Deemed not Corporate Opportunities .

In addition to and notwithstanding the foregoing provisions of this Article XIII, the Corporation renounces any interest or expectancy of the Corporation or any of its Affiliated Companies in, or in being offered an opportunity to participate in, any business opportunity that the Corporation is not financially able or contractually permitted or legally able to undertake. Moreover, nothing in this Article XIII shall amend or modify in any respect any written contractual agreement between IAC or TripAdvisor on the one hand and the Corporation or any of its Affiliated Companies on the other hand.


C. Certain Definitions .

For purposes of this Article XIII:

Affiliate ” means with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For purposes of the foregoing definition, the term “controls,” “is controlled by,” or “is under common control with” means the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

Affiliated Company ” means (i) with respect to the Corporation, any Person controlled by the Corporation, (ii) with respect to IAC, any Person controlled by IAC and (iii) with respect to TripAdvisor, any Person controlled by TripAdvisor.

Dual Opportunity ” means any potential transaction or matter which may be a corporate opportunity for the Corporation or any of its Affiliated Companies, on the one hand, and either or both of (x) IAC/InterActiveCorp or its Affiliated Companies (“IAC”) or (y) TripAdvisor, Inc. or its Affiliated Companies (“TripAdvisor”), on the other hand.

Dual Role Person ” means any individual who is an officer or director of both the Corporation and either or both of IAC or TripAdvisor.

Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

D. Termination .

The provisions of this Article XIII shall have no further force or effect at such time as (i) none of the Corporation, TripAdvisor and IAC are Affiliates of any of the other and (ii) none of the directors and/or officers of IAC or TripAdvisor serve as directors and/or officers of the Corporation and its Affiliated Companies; provided , however , that any such termination shall not terminate the effect of such provisions with respect to any agreement, arrangement or other understanding between the Corporation or an Affiliated Company thereof on the one hand, and IAC or TripAdvisor, on the other hand, that was entered into before such time or any transaction entered into in the performance of such agreement, arrangement or other understanding, whether entered into before or after such time.

E. Deemed Notice .

Any person or entity purchasing or otherwise acquiring or obtaining any interest in any capital stock of the Corporation shall be deemed to have notice and to have consented to the provisions of this Article XIII.


F. Severability .

The invalidity or unenforceability of any particular provision, or part of any provision, of this Article XIII shall not affect the other provisions or parts hereof, and this Article XIII shall be construed in all respects as if such invalid or unenforceable provisions or parts were omitted.

G. Effectiveness . That said Restated Certificate of Incorporation of Expedia, Inc. shall become effective at 5:30 p.m., Eastern Standard Time, on December 20, 2011.

*        *        *         *        *        *

[signature appears on next page]


IN WITNESS WHEREOF, Expedia, Inc. has caused this Restated Certificate of Incorporation to be duly executed and acknowledged by its duly authorized officer this 20 th day of December, 2011.

 

EXPEDIA, INC.
By:  

/s/ Mark D. Okerstrom

Name:   Mark D. Okerstrom
Title:   Executive Vice President and Chief Financial Officer

Exhibit 10.1

 

 

 

AMENDED AND RESTATED

GOVERNANCE AGREEMENT

among

EXPEDIA, INC.,

LIBERTY INTERACTIVE CORPORATION,

and

BARRY DILLER

Dated as of December 20, 2011

 

 

 


TABLE OF CONTENTS

 

            Page  
ARTICLE I   
TRANSFEREES   
ARTICLE II   
     BOARD OF DIRECTORS AND RELATED MATTERS   

Section 2.01.

     Board of Directors      2   

Section 2.02.

     Management of the Business      2   

Section 2.03.

     Contingent Matters      3   

Section 2.04.

     Notice of Events      4   

Section 2.05.

     Certain Hedging Transactions      5   

Section 2.06.

     Notice of Sale of Company Class B Stock      5   
ARTICLE III   
PREEMPTIVE RIGHTS   

Section 3.01.

     Liberty Preemptive Rights      5   
ARTICLE IV   
REPRESENTATIONS AND WARRANTIES   

Section 4.01.

     Representations and Warranties of the Company      6   

Section 4.02.

     Representations and Warranties of the Stockholders      7   
ARTICLE V   
DISTRIBUTION TRANSACTION AND BLOCK SALE   

Section 5.01.

     Distribution Transaction      8   

Section 5.02.

     Block Sale; Purchase/Exchange Right      9   
ARTICLE VI   
DEFINITIONS   

Section 6.01.

     “Affiliate”      12   

Section 6.02.

     “Beneficial Ownership”      13   

Section 6.03.

     “Block Sale”      13   

 

-i-


Section 6.04.

     “Block Sale Transferee”      13   

Section 6.05.

     “business day”      13   

Section 6.06.

     “Chairman”      13   

Section 6.07.

     “Chairman Termination Date”      13   

Section 6.08.

     “Commission”      13   

Section 6.09.

     “Company”      13   

Section 6.10.

     “Company Class B Stock”      13   

Section 6.11.

     “Company Common Shares”      13   

Section 6.12.

     “Company Common Stock”      14   

Section 6.13.

     “Consenting Party”      14   

Section 6.14.

     “Demand Registration”      14   

Section 6.15.

     “DGCL”      14   

Section 6.16.

     “Disabled”      14   

Section 6.17.

     “Distribution Transaction”      14   

Section 6.18.

     “EBITDA”      14   

Section 6.19.

     “Effective Time”      14   

Section 6.20.

     “Equity Securities”      14   

Section 6.21.

     “Exchange Act”      15   

Section 6.22.

     “Excluded Issuance”      15   

Section 6.23.

     “Expedia”      15   

Section 6.24.

     “Fair Market Value”      15   

Section 6.25.

     “Hedging Transaction”      15   

Section 6.26.

     “Insider”      15   

Section 6.27.

     “Issue Price”      15   

Section 6.28.

     “Lapse Date”      16   

Section 6.29.

     “Liberty”      16   

Section 6.30.

     “Liberty Director”      16   

Section 6.31.

     “Liberty Holdco”      16   

Section 6.32.

     “Liberty Holders”      16   

Section 6.33.

     “Liberty Proxy”      16   

Section 6.34.

     “Liberty Spinco”      16   

Section 6.35.

     “Litigation”      16   

Section 6.36.

     “Mr. Diller”      16   

Section 6.37.

     “Ownership Percentage”      16   

Section 6.38.

     “Permitted Transferee”      16   

Section 6.39.

     “Person”      17   

Section 6.40.

     “Qualified Distribution Transferee”      17   

Section 6.41.

     “Restricted Equity Security”      17   

Section 6.42.

     “Restricted Stock”      17   

Section 6.43.

     “Sale Transaction”      17   

Section 6.44.

     “Securities Act”      17   

Section 6.45.

     “Standstill Agreement”      17   

Section 6.46.

     “Stockholder Group”      17   

Section 6.47.

     “Stockholders”      17   

Section 6.48.

     “Stockholders Agreement”      17   

Section 6.49.

     “Subsidiary”      17   

 

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Section 6.50.

     “Third-Party Transferee”      18   

Section 6.51.

     “Total Debt”      18   

Section 6.52.

     “Total Debt Ratio”      18   

Section 6.53.

     “Total Equity Securities”      18   

Section 6.54.

     “Transfer”      18   

Section 6.55.

     “TripAdvisor”      18   

Section 6.56.

     “Voting Securities”      19   
ARTICLE VII   
MISCELLANEOUS   

Section 7.01.

     Notices      19   

Section 7.02.

     Amendments; No Waivers      20   

Section 7.03.

     Company Consent Right to Waiver of Liberty Conversion Obligations in Stockholders Agreement      20   

Section 7.04.

     Successors And Assigns      21   

Section 7.05.

     Governing Law; Consent To Jurisdiction      21   

Section 7.06.

     Counterparts      22   

Section 7.07.

     Specific Performance      22   

Section 7.08.

     Registration Rights      22   

Section 7.09.

     Termination      23   

Section 7.10.

     Severability      23   

Section 7.11.

     Cooperation      23   

Section 7.12.

     Adjustment of Share Numbers and Prices      23   

Section 7.13.

     Effective Time      24   

Section 7.14.

     Entire Agreement      24   

Section 7.15.

     Interpretation      24   

Section 7.16.

     Headings      24   

Exhibit A Form of Standstill Agreement

 

-iii-


Amended and Restated Governance Agreement

Amended and Restated Governance Agreement, dated as of December 20, 2011 (the “ Agreement ”), among Expedia, Inc., a Delaware corporation (“ Expedia ,” or the “ Company ”), Liberty Interactive Corporation, a Delaware corporation formerly known as Liberty Media Corporation, for itself and on behalf of the members of its Stockholder Group (“ Liberty ”), and Mr. Barry Diller (“ Mr. Diller ”) for himself and on behalf of the members of his Stockholder Group.

WHEREAS, the parties hereto have agreed that the Company, Liberty and Mr. Diller shall enter into this Agreement in order to amend and restate in its entirety the respective rights and obligations of the parties set forth in the Governance Agreement, dated as of August 9, 2005, as amended on June 19, 2007.

WHEREAS, the Company, Liberty and Mr. Diller desire to establish in this Agreement certain provisions concerning Liberty’s and Mr. Diller’s relationships with the Company.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the Company, Liberty and Mr. Diller hereby agree as follows:

ARTICLE I

TRANSFEREES

No Third Party Transferee shall have any rights or obligations under this Agreement, except as specifically provided for in this Agreement and except that (a) if such Third Party Transferee shall acquire Beneficial Ownership of more than 5% of the outstanding Total Equity Securities upon consummation of any Transfer or series of related Transfers from a Stockholder, to the extent such Stockholder has the right to Transfer a Demand Registration and assigns such right in connection with a Transfer, such Third Party Transferee shall have the right to initiate one or more Demand Registrations pursuant to Section 7.08 or any registration rights agreement that replaces or supersedes Section 7.08 (and shall be entitled to such other rights that a Stockholder would have applicable to such Demand Registration) and (b) if such Third Party Transferee shall acquire Beneficial Ownership of 5% or less of the outstanding Total Equity Securities but shall acquire Beneficial Ownership of Company Common Shares (or other equity securities of the Company) with a Fair Market Value of at least $250,000,000 upon consummation of any Transfer or series of related Transfers from a Stockholder, to the extent such Stockholder has the right to Transfer a Demand Registration and assigns such right in connection with a Transfer, such Third Party Transferee shall have the right to initiate one (but not more than one) Demand Registration pursuant to Section 7.08 or any registration rights agreement that replaces or supersedes Section 7.08 (and shall be entitled to such other rights that a Stockholder would have applicable to such Demand Registration), provided that, in the case of this clause (b), such Third Party Transferee may exercise such Demand Registration only in connection with a registered public offering of Company Common Stock having a Fair Market Value at least equal to $100,000,000, subject (in each of clauses (a) and (b)) to the obligations of such Stockholder applicable to such demand (and the number of Demand Registrations to which such Stockholder is entitled under Section 7.08 hereof shall be correspondingly decreased).


ARTICLE II

BOARD OF DIRECTORS AND RELATED MATTERS

Section 2.01. Board of Directors .

(a) Liberty shall have the right to nominate up to such number of Liberty Directors as is equal to 20% of the total number of directors on the Board of Directors (rounded up to the next whole number if the total number of directors on the Board of Directors is not an even multiple of 5) so long as Liberty Beneficially Owns at least 16,825,982 Equity Securities (so long as the Ownership Percentage of Liberty is at least equal to 15% of the Total Equity Securities). Liberty shall have the right to nominate one Liberty Director so long as Liberty Beneficially Owns at least 11,217,321 Equity Securities (so long as Liberty’s Ownership Percentage is at least equal to 5% of the Total Equity Securities). As of the date hereof, the Liberty Directors are John C. Malone and William R. Fitzgerald.

(b) The Company shall cause each Liberty Director to be included in the slate of nominees recommended by the Board of Directors to the Company’s stockholders for election as directors at each annual meeting of the stockholders of the Company and shall use all reasonable efforts to cause the election of each Liberty Director, including soliciting proxies in favor of the election of such persons.

(c) Within a reasonable time prior to the filing with the Commission of its proxy statement or information statement with respect to each meeting of stockholders at which directors are to be elected, the Company shall, to the extent Liberty is entitled to representation on the Company’s Board of Directors in accordance with this Agreement, provide Liberty with the opportunity to review and comment on the information contained in such proxy or information statement applicable to the director nominees designated by Liberty.

(d) In the event that a vacancy is created at any time by the death, disability, retirement, resignation or removal (with or without cause) of any Liberty Director, Liberty shall have the right to designate a replacement Liberty Director to fill such vacancy, and the Company agrees to use its best efforts to cause such vacancy to be filled with the replacement Liberty Director so designated. Upon the written request of Liberty, each Stockholder shall vote (and cause each of the members of its Stockholder Group to vote, if applicable), or act by written consent with respect to, all Equity Securities Beneficially Owned by it and otherwise take or cause to be taken all actions necessary to remove the director designated by Liberty and to elect any replacement director designated by Liberty as provided in the first sentence of this Section 2.01(d).

Section 2.02. Management of the Business . Except as indicated in Section 2.03 below or as required by Delaware law or the Certificate of Incorporation of the Company and the By-Laws and the agreements contemplated thereby, Mr. Diller, so long as he is Chairman and has not become Disabled, will continue to have full authority to operate the day-to-day business

 

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affairs of the Company to the same extent as prior to the date hereof. The Company shall use its reasonable best efforts to cause one Liberty Director designated by Liberty for such purpose to be appointed as a member of a committee of the Board of Directors and, to the extent such person qualifies under applicable law (including stock exchange requirements, as applicable, and tax laws) and Section 16(b) under the Exchange Act or other similar requirements, all committees and subcommittees of the Board of Directors that make determinations relating to the compensation of executives of the Company.

Section 2.03. Contingent Matters . So long as Liberty or Mr. Diller Beneficially Owns, in the case of Liberty, at least 14,956,428 Equity Securities (so long as such Ownership Percentage equals at least 5% of the Total Equity Securities), or, in the case of Mr. Diller, at least 2,500,000 Company Common Shares with respect to which he has a pecuniary interest and the Chairman Termination Date (as defined in the Stockholders Agreement and not as defined in this Agreement) has not occurred and Mr. Diller has not become Disabled, neither the Company nor any Subsidiary shall take any of the following actions (any such action, a “ Contingent Matter ”) without the prior approval of Mr. Diller and/or Liberty, whichever (or both) satisfy the foregoing Beneficial Ownership requirements:

(a) any transaction not in the ordinary course of business, launching new or additional channels or engaging in any new field of business, in any case, that will result in, or will have a reasonable likelihood of resulting in, Liberty or Mr. Diller or any Affiliate thereof being required under law to divest itself of all or any part of its Beneficial Ownership of Company Common Shares, or interests therein, or any other material assets of such Person, or that will render such Person’s continued ownership of such securities, shares, interests or assets illegal or subject to the imposition of a fine or penalty, or that will impose material additional restrictions or limitations on such Person’s full rights of ownership (including, without limitation, voting) thereof or therein. This Contingent Matter will be applied based only on the Beneficial Ownership of Company Common Shares, interests therein or other material assets of Liberty or Mr. Diller or any Affiliate thereof as of the date hereof; or

(b) if the Company or any of its Subsidiaries incurs any obligations (other than in respect of the customary refinancing of an amount not to exceed the principal amount of the existing obligation being refinanced) included within the definition of Total Debt (the “ Incurred Debt ”) upon which (and after giving effect to such) incurrence the Total Debt Ratio equals or exceeds 8:1 (for this purpose (x) calculating Total Debt as if the Incurred Debt had been incurred on the last day of the most recently ended fiscal quarter of the Company (the “ Balance Sheet Date ”) and (y) if the Incurred Debt is being incurred in whole or in part to fund the acquisition by the Company or any of its Subsidiaries of any Person or business (whether by way of a merger, stock purchase, asset purchase or otherwise) (an “ Acquisition ”) then (A) in addition to the adjustment set forth in clause (x) above, Total Debt shall be calculated to be Total Debt of the Company and its Subsidiaries plus Total Debt of the Person or business acquired in the Acquisition (substituting, for this purpose, such Person or business for the Company and its Subsidiaries in the definition of Total Debt) as of the Balance Sheet Date to the extent applicable to the business(es) or assets being acquired and (B) there shall be added to the EBITDA otherwise used in calculating the Total Debt Ratio at the Balance Sheet Date an amount equal to the EBITDA of the acquired Person or business (substituting, for this purpose, such Person or business for the Company and its Subsidiaries in the definition of EBITDA) for the four fiscal

 

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quarter period ending as of the Balance Sheet Date to the extent applicable to the business(es) or assets being acquired), then, for so long as the Total Debt Ratio continues to equal or exceed 8:1:

(i) any acquisition or disposition (including pledges), directly or indirectly, by the Company or any of its Subsidiaries of any assets (including debt and/or equity securities) or business (by merger, consolidation or otherwise), the grant or issuance of any debt or equity securities of the Company or any of its Subsidiaries (other than, in the case of any of the foregoing, as contemplated by Section 3.01 of this Agreement), the redemption, repurchase or reacquisition of any debt or equity securities of the Company or any of its Subsidiaries, by the Company or any such Subsidiary, or the incurrence of any indebtedness, or any combination of the foregoing, in any such case, in one transaction or a series of transactions in a six-month period, with a value of 10% or more of the market value of the Total Equity Securities at the time of such transaction, provided that the prepayment, redemption, repurchase or conversion of prepayable, callable, redeemable or convertible securities in accordance with the terms thereof shall not be a transaction subject to this paragraph;

(ii) voluntarily commencing any liquidation, dissolution or winding up of the Company or any material Subsidiary;

(iii) any material amendments to the Certificate of Incorporation or Bylaws of the Company (including the issuance of preferred stock pursuant to the “blank check” authorization in the Certificate of Incorporation, having super voting rights (more than 1 vote per share) or entitled to vote as a class on any matter (except to the extent such class vote is required by Delaware law or to the extent the holder of such preferred stock may have the right to elect directors upon the occurrence of a default in payment of dividends or redemption price));

(iv) engagement by the Company in any line of business other than online and offline travel services and products and related businesses, or other businesses engaged in by the Company as of the date of determination of the Total Debt Ratio;

(v) adopting any stockholder rights plan (or any other plan or arrangement that could reasonably be expected to disadvantage any stockholder on the basis of the size or voting power of its shareholding) that would adversely affect Liberty or Mr. Diller; and

(vi) entering into any agreement with any holder of Equity Securities in such stockholder’s capacity as such, which grants such stockholder approval rights similar in type and magnitude to those set forth in this Section 2.03.

Section 2.04. Notice of Events . In the event that (a) the Company intends to engage in a transaction of a type that is described in Section 2.03, and (b) the Company does not intend to

 

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seek consent from Liberty and/or Mr. Diller, whichever (or both) are required to consent to a Contingent Matter (a “ Consenting Party ”) due to the Company’s good faith belief that the specific provisions of Section 2.03 do not require such consent but that reasonable people acting in good faith could differ as to whether consent is required pursuant to such Section, the Company shall notify the Consenting Parties as to the material terms of the transaction (including the Company’s estimate of the timing thereof) by written notice (including a statement of the Total Debt Ratio) delivered as far in advance of engaging in such transaction as is reasonably practicable unless such transaction was previously publicly disclosed.

Section 2.05. Certain Hedging Transactions . Prior to entering into any Hedging Transaction with respect to more than 4.9% of the outstanding Company Common Shares (based on the number of Company Common Shares outstanding as reported in the Company’s most recently filed report on Form 8-K, Form 10-Q or Form 10-K), Liberty shall give notice to the chief financial officer of the Company (including a brief description of the general structure of the Hedging Transaction contemplated and the potential timing of such Hedging Transaction), which notice must be received no less than one full business day (but not less than 24 hours), but no more than ten business days, prior to the proposed date of effectiveness of such Hedging Transaction. Upon receipt of such notice, the Company will have the right, which must be exercised by notice to Liberty delivered no more than 24 hours after receipt of such notice from Liberty, to require Liberty to delay such Hedging Transaction if (i) the Company has determined in good faith that such Hedging Transaction would adversely affect a contemplated significant corporate transaction (including financing) of the Company and (ii) all Insiders of the Company have been prohibited during such delay period from buying or selling equity securities of the Company (other than transactions between an Insider and the Company in accordance with the terms of any Company equity security or any plan or agreement pursuant to which any such security was granted or issued). The period during which Liberty will be required to delay such Hedging Transaction will not exceed ten business days after the proposed date (as specified in such notice) of effectiveness of such Hedging Transaction, or, if sooner, the date the Company informs Insiders that they may trade in equity securities of the Company.

Section 2.06. Notice of Sale of Company Class B Stock . Prior to effecting any Transfer of Company Class B Stock other than to a member of such transferring Stockholder’s Stockholder Group, the transferring Stockholder shall deliver written notice to the Company, which shall deliver such notice to the Board of Directors of the Company, which notice shall specify (i) the Person to whom the transferring Stockholder proposes to make such Transfer and (ii) the number or amount of the shares of Company Class B Stock to be Transferred.

ARTICLE III

PREEMPTIVE RIGHTS

Section 3.01. Liberty Preemptive Rights . (a) In the event that after the date hereof, the Company issues or proposes to issue (other than to the Company and its Affiliates or Liberty and its Affiliates, and other than pursuant to an Excluded Issuance) any Company Common Shares (including Company Common Shares issued upon exercise, conversion or exchange of options, warrants and convertible securities (other than shares of Company Common Stock issued upon conversion of shares of Company Class B Stock)) and such issuance, together with any prior

 

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issuances aggregating less than 1% with respect to which Liberty’s preemptive right has not become exercisable, shall be in excess of 1% of the total number of Company Common Shares outstanding after giving effect to such issuance (an “ Additional Issuance ”), the Company shall give written notice to Liberty not later than five business days after the issuance, specifying the number of Company Common Shares issued or to be issued and the Issue Price (if known) per share. Liberty shall have the right (but not the obligation) to purchase or cause one or more of the Liberty Holdcos to purchase for cash a number (but not less than such number) of Company Common Shares (allocated between Company Common Stock and Company Class B Stock in the same proportion as the issuance or issuances giving rise to the preemptive right hereunder, except to the extent that Liberty opts to receive Company Common Stock in lieu of Company Class B Stock), so that Liberty and the Liberty Holdcos shall collectively maintain the identical percentage equity Beneficial Ownership interest in the Company that Liberty and the Liberty Holdcos collectively owned immediately prior to the Additional Issuance requiring notice from the Company to Liberty described in the first sentence of this paragraph (but not in excess of 20.01% of the outstanding Total Equity Securities) after giving effect to such Additional Issuance and to shares of Company Common Stock that are to be issued to Liberty and the Liberty Holdcos pursuant to this Section 3.01, by sending an irrevocable written notice to the Company not later than fifteen business days after receipt of such notice of an Additional Issuance (or, if later, two business days following the determination of the Issue Price) from the Company that it elects to purchase or to cause one or more of the Liberty Holdcos to purchase all of such Company Common Shares (the “ Additional Shares ”). The closing of the purchase of Additional Shares shall be the later of ten business days after the delivery of the notice of election by Liberty and five business days after receipt of any necessary regulatory approvals.

(b) The purchase or redemption of any Company Common Shares by the Company or any of its Affiliates shall not result in an increase in the percentage of Company equity that Liberty may be entitled to acquire pursuant to the preemptive right in Section 3.01(a) above.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.01. Representations and Warranties of the Company . The Company represents and warrants to Mr. Diller and Liberty that: (a) the Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunder; (b) the execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or any of the transactions contemplated hereby; (c) this Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, and, assuming this Agreement constitutes a valid and binding obligation of each Stockholder, is enforceable against the Company in accordance with its terms; (d) neither the execution, delivery or performance of this Agreement by the Company constitutes a breach or violation of or conflicts with the Company’s Certificate of Incorporation or By-laws or any material agreement to which the

 

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Company is a party; (e) none of such material agreements would impair in any material respect the ability of the Company to perform its obligations hereunder; and (f)(i) the shares of Company Common Stock (or such other securities of the Company into which such shares are then convertible) issuable to Liberty in the exchange contemplated by Section 5.02(c) and the shares of Company Class B Stock issuable to Mr. Diller pursuant to the Purchase/Exchange Right, in each case, upon issuance will be duly authorized, validly issued, fully paid and nonassessable and not subject to, or issued in violation of, any purchase option, redemption, call option, right of first refusal, preemptive right, subscription right or any similar right in any such case granted by, or exercisable for the benefit of, the Company (other than any such restrictions or rights under this Agreement, the Stockholders Agreement or applicable state and federal securities laws) and (ii) in the case of the shares of Company Common Stock issuable to Liberty in the exchange contemplated by Section 5.02(c), if the Company Common Stock (or such securities of the Company into which such shares are then convertible) is then listed on a national securities exchange, the Company will use its reasonable best efforts to cause such shares of Company Common Stock or such other securities to be approved for listing on such national securities exchange upon issuance (subject only to official notice of issuance).

Section 4.02. Representations and Warranties of the Stockholders . Each Stockholder, severally as to itself (and, in the case of Mr. Diller, as applicable), represents and warrants to the Company and the other Stockholder that (a) it is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and he or it, as the case may be, has the power and authority (corporate or otherwise) to enter into this Agreement and to carry out his or its obligations hereunder, (b) the execution and delivery of this Agreement by such Stockholder and the consummation by such Stockholder of the transactions contemplated hereby have been duly authorized by all necessary action on the part of such Stockholder and no other proceedings on the part of such Stockholder are necessary to authorize this Agreement or any of the transactions contemplated hereby, (c) this Agreement has been duly executed and delivered by such Stockholder and constitutes a valid and binding obligation of such Stockholder, and, assuming this Agreement constitutes a valid and binding obligation of the Company and the other Stockholder, is enforceable against such Stockholder in accordance with its terms, (d) neither the execution, delivery or performance of this Agreement by such Stockholder constitutes a breach or violation of or conflicts with its certificate of incorporation or by-laws (or similar governing documents) or any material agreement to which such Stockholder is a party and (e) none of such material agreements would impair in any material respect the ability of such Stockholder to perform its obligations hereunder.

 

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ARTICLE V

DISTRIBUTION TRANSACTION AND BLOCK SALE

Section 5.01. Distribution Transaction .

(a) In the event Liberty desires to effect a Distribution Transaction in which it will Transfer all of the Company Common Shares Beneficially Owned by it (other than any Restricted Equity Securities) to a Qualified Distribution Transferee (which Transfer, for the avoidance of doubt, will be deemed to occur on the date such Qualified Distribution Transferee ceases to be a Subsidiary of Liberty), the Company, Mr. Diller, Liberty and the Qualified Distribution Transferee and, if applicable under the proviso to this Section 5.01(a), the Liberty Spinco, will enter into an amendment to this Agreement on or prior to the date of consummation of such Distribution Transaction to: (i) effective immediately prior to such Distribution Transaction (but subject to the consummation of the Distribution Transaction) assign all rights and obligations of Liberty under this Agreement (including its rights pursuant to Articles II and III and Section 7.08 hereof) to the Qualified Distribution Transferee, (ii) have such Qualified Distribution Transferee agree to accept, as of immediately prior to the effective time of such Distribution Transaction (but subject to the consummation of the Distribution Transaction), such assignment of rights and agree to assume and perform all liabilities and obligations of Liberty hereunder to be performed following the effective time of such Distribution Transaction, (iii) effective immediately prior to such Distribution Transaction (but subject to the consummation of the Distribution Transaction) substitute such Qualified Distribution Transferee for Liberty (and the stockholder group of the Qualified Distribution Transferee for the Liberty Stockholder Group) for all purposes under this Agreement and (iv) provide for (w) a representation from Liberty that such amendment is being entered into in connection with a Distribution Transaction involving the Qualified Distribution Transferee pursuant to Section 5.01 of this Agreement, (x) Liberty’s acknowledgement that it shall not be entitled to any benefits under this Agreement following such Distribution Transaction, (y) each of the Company’s and Mr. Diller’s acknowledgement that Liberty shall not be subject to any liability under this Agreement to it or him, as applicable, following such Distribution Transaction (except for any liability arising from any breach of this Agreement by Liberty or relating to any actions or events occurring, in each case, on or prior to the date of the Distribution Transaction) and (z) Liberty’s acknowledgement that neither the Company nor Mr. Diller shall be subject to any liability to Liberty under this Agreement following such Distribution Transaction (except for any liability arising from any breach of this Agreement by the Company or Mr. Diller, as applicable, or relating to any actions or events occurring, in each case, on or prior to the date of the Distribution Transaction); provided , that if the Qualified Distribution Transferee is not the Liberty Spinco, then the Liberty Spinco shall also become a party to this Agreement and in such case each reference in the foregoing clauses (i) through (iv) to Qualified Distribution Transferee shall be to the Liberty Spinco and the Qualified Distribution Transferee shall become a party to this Agreement as a member of the Liberty Spinco’s stockholder group.

(b) The Company agrees that:

(i) it shall not adopt any stockholder rights plan or similar plan or agreement (or amend or modify any such plan or agreement) or adopt or

 

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approve any charter or by-law provision, in each case, the purpose or reasonably evident effect of which is to (x) restrict or limit Liberty’s ability to engage in a Distribution Transaction with a Qualified Distribution Transferee or (y) impose on the Qualified Distribution Transferee, or cause the Qualified Distribution Transferee to incur or suffer, material economic detriment (including through disproportionate dilution, relative to other holders of Company Common Shares, or through a requirement to purchase or otherwise acquire, or offer to acquire, additional equity securities of the Company in the form of a mandatory offer requirement or similar provision) as a result of its receipt or continued ownership of Company Common Shares or other equity securities of the Company Transferred to it in a Distribution Transaction; provided that, any adoption, approval, amendment or modification by the Company of any stockholder rights plan (or similar plan or agreement) or charter or by-law provision having anti-takeover provisions of general applicability, which does not cause Liberty to incur or suffer material economic detriment as a result of its ownership of Company Common Shares or other equity securities of the Company upon such adoption, approval, amendment or modification (and, assuming the Distribution Transaction occurred on such date, would not cause a Qualified Distribution Transferee to incur or suffer such effects upon the consummation of the Distribution Transaction), shall not be deemed to have any purpose or effect specified in clause (y) above; and

(ii) as promptly as reasonably practicable following the written request of Liberty and prior to the consummation of a Distribution Transaction involving a Qualified Distribution Transferee, the Board of Directors will approve the Transfer of Company Common Shares to the Qualified Distribution Transferee in such Distribution Transaction for purposes of Section 203(a)(1) of the DGCL in the event that the Qualified Distribution Transferee’s ownership of Company Common Shares immediately following the Distribution Transaction would cause it to become an “interested stockholder” for purposes of Section 203 of the DGCL.

Section 5.02. Block Sale; Purchase/Exchange Right .

(a) Liberty shall have the rights and obligations set forth in Section 5.02(b) and Section 5.02(c) in respect of a Block Sale provided that the following conditions are satisfied at the time of such proposed Block Sale:

(i) Mr. Diller still holds the Liberty Proxy;

(ii) Liberty does not Beneficially Own Equity Securities in excess of 30% of the Total Equity Securities (excluding, for such purposes, any increase in Liberty’s Beneficial Ownership resulting from any redemption, repurchase or reacquisition of any Equity Securities by the Company);

(iii) if such proposed Block Sale would be consummated on or prior to the second anniversary of December 20, 2011, the Company and

 

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TripAdvisor have consented in writing to such Block Sale (which consent will be delivered by the Company and TripAdvisor if the Company and TripAdvisor acting in good faith determine that either (x) any of the “Safe Harbors” set forth in Treas. Reg. § 1.355-7(d) applies to such Block Sale or (y) there was no “agreement, understanding, arrangement or substantial negotiations” with the Block Sale Transferee regarding such Block Sale or any “similar acquisition” (as such terms are defined in Treas. Reg. § 1.355-7(h)) during the two-year period ending on December 20, 2011); and

(iv) Liberty has complied with its obligations under Sections 4.2, 4.3 and 4.4 of the Stockholders Agreement in connection with such proposed Block Sale.

(b) The Company agrees that as promptly as reasonably practicable following receipt of a written request therefor from Liberty, in connection with any Block Sale that complies with Section 5.02(a):

(i) to the extent necessary, it shall amend any stockholder rights plan or similar plan or agreement (or take all steps necessary to amend any charter or bylaw provision) then in effect (x) the purpose or reasonably evident effect of which is to restrict or limit Liberty’s ability to engage in a Block Sale that complies with Section 5.02(a) or (y) that would impose on the Block Sale Transferee, or cause the Block Sale Transferee to incur or suffer, material economic detriment (including through disproportionate dilution, relative to other holders of Company Common Shares, of the Block Sale Transferee’s equity or voting power or through a requirement to purchase or otherwise acquire, or offer to acquire, additional equity securities of the Company in the form of a mandatory offer requirement or similar provision) as a result of the Block Sale Transferee’s and its Affiliates’ receipt or continued ownership of Company Common Shares or other equity securities of the Company in the Block Sale, such that the acquisition and continued ownership by the proposed Block Sale Transferee of Company Common Shares or other equity securities of the Company in such Block Sale or thereafter in an amount permitted by the Standstill Agreement will not result in the imposition of any such restriction, limitation or economic detriment or cost under any such plan or agreement (or charter or bylaw provision having anti-takeover provisions); provided that such amendment shall be conditioned upon the Block Sale Transferee entering into a Standstill Agreement with the Company; and

(ii) prior to the Block Sale Transferee becoming an “interested stockholder” (as such term is defined in Section 203(c)(5) of the DGCL) with respect to the Company and subject to the execution by the Block Sale Transferee of a Standstill Agreement with the Company and the accuracy of the representation contained in Section 6.2(b) of the Standstill Agreement, the Board of Directors shall approve (x) the Block Transferee as an “interested stockholder” within the meaning of Section 203(c)(5) of the DGCL and (y) the receipt of Company Common Shares by the Block Sale Transferee pursuant to the Block

 

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Sale for purposes of Section 203(a)(1) of the DGCL (but, for the avoidance of doubt, the Board of Directors shall have no obligation to approve any such transaction with respect to a Subsequent Transferee (as defined in the Standstill Agreement)).

(c) In the event that Liberty is required to exchange Company Class B Stock for newly issued shares of Company Common Stock or other securities pursuant to Section 4.4(b)(ii) of the Stockholders Agreement, the Company hereby agrees that it will exchange all remaining shares of Company Class B Stock not acquired by Mr. Diller pursuant to Sections 4.3 or 4.4 of the Stockholders Agreement for the number and type of shares of Company Common Stock (or such other securities of the Company into which such shares of Company Class B Stock are then convertible) Liberty would have received upon conversion of such shares of Company Class B Stock and shall keep available in its treasury and not cancel such shares of Company Class B Stock exchanged by Liberty until the termination of the Purchase/Exchange Right as described below. After such exchange, or, in the event the conditions to such exchange are not satisfied and Liberty is instead required to convert its remaining shares of Company Class B Stock in accordance with Section 4.4(b)(i) of the Stockholders Agreement (by reason of the proviso to Section 4.4(b)(ii) of the Stockholders Agreement), then after such conversion, Mr. Diller shall have the right (the “ Purchase/Exchange Right ”), exercisable at any time and from time to time on or prior to the second anniversary of the date of the Block Sale or the transaction giving rise to the obligation of Liberty to exchange or convert its Company Class B Stock as described above (subject to the provisos in Section 5.02(d)(i) and Section 5.02(d)(ii)) (the “ Purchase/Exchange Period ”), either to:

(i) purchase from the Company a number of shares of Company Class B Stock up to the number of shares of Company Class B Stock that Liberty exchanged for, or converted into, Company Common Stock (or such lesser amount of Company Class B Stock), at a price per share of Company Class B Stock equal to the Fair Market Value of a share of Company Common Stock at the time of such purchase; or

(ii) exchange an equivalent number of shares of Company Common Stock for a number of shares of Company Class B Stock, up to the number of shares of Company Class B Stock that Liberty exchanged for, or converted into, Company Common Stock (or such lesser amount of Company Class B Stock).

(d) The Purchase/Exchange Right may be exercised by Mr. Diller directly or together with other third parties, provided that Mr. Diller retains voting control over any such Company Class B Stock purchased or exchanged, and provided further that during the Purchase/Exchange Period:

(i) the Purchase/Exchange Right will be suspended upon the entry by the Company into an agreement providing for a Sale Transaction and will remain suspended for so long as such agreement (or any successor agreement) has not been terminated; and

 

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(ii) the Purchase/Exchange Right will terminate upon the consummation of a tender or exchange offer for securities representing more than 50% of the total voting power of all outstanding Voting Securities of the Company or consummation of a Sale Transaction.

(e) The Board of Directors of the Company, or a committee thereof consisting of non-employee directors (as such term is defined for purposes of Rule 16b-3 under the Exchange Act), shall with respect to each exercise of the Purchase/Exchange Right or as may be otherwise requested by Mr. Diller, adopt resolutions and otherwise take all actions necessary to cause any acquisitions or deemed acquisitions from the Company of Company Class B Stock transferred to Mr. Diller pursuant to this Agreement and the Purchase/Exchange Right and any dispositions or deemed dispositions to the Company of Company Common Stock pursuant to this Agreement and the Purchase/Exchange Right to be exempt under Rule 16b-3 under the Exchange Act.

(f) In connection with a Block Sale pursuant to the conditions of Section 5.02(a) in which the Block Sale Transferee receives the right to nominate candidates to the Board of Directors pursuant to the Standstill Agreement: (i) Liberty shall, on or prior to consummation of the Block Sale, cause the Liberty Directors to resign from the Board of Directors effective as of the consummation of such Block Sale; and (ii) the Company shall use its best efforts to cause such vacancy to be filled with the candidate(s) nominated by the Block Sale Transferee (subject to the approval of such candidates by the nominating committee or equivalent committee of the Board of Directors (or the Board of Directors) as described in the Standstill Agreement).

(g) For the avoidance of doubt, none of the provisions of Section 5.02(a), 5.02(b), or 5.02(f) shall be applicable in the event Liberty Transfers all of the Company Common Shares (or other equity securities of the Company) Beneficially Owned by it (other than any Restricted Equity Securities) to a Third-Party Transferee and such Third Party Transferee elects not to enter into a Standstill Agreement or such Third Party Transferee’s Ownership Percentage exceeds or, upon consummation of such Transfer would exceed, 30% of the Total Equity Securities.

ARTICLE VI

DEFINITIONS

For purposes of this Agreement, the following terms shall have the following meanings:

Section 6.01. “ Affiliate ” shall have the meaning set forth in Rule 12b-2 under the Exchange Act (as in effect on the date of this Agreement). For purposes of this definition, (i) natural persons shall not be deemed to be Affiliates of each other, (ii) none of Mr. Diller, Liberty or any of their respective Affiliates shall be deemed to be an Affiliate of the Company or its Affiliates, (iii) none of the Company, Liberty or any of their respective Affiliates shall be deemed to be an Affiliate of Mr. Diller or his Affiliates, (iv) none of the Company, Mr. Diller or any of their respective Affiliates shall be deemed to be an Affiliate of Liberty or its Affiliates, (v) the Company shall not be deemed to be an Affiliate of TripAdvisor based upon the common control of the Company and TripAdvisor by the Stockholders and (vi) the Company shall not be deemed to be an Affiliate of IAC/InterActiveCorp to the extent such relationship would otherwise be based on the common control of the Company and IAC/InterActiveCorp by Mr. Diller.

 

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Section 6.02. “ Beneficial Ownership ” or “ Beneficially Own ” shall have the meaning given such term in Rule 13d-3 under the Exchange Act and a Person’s Beneficial Ownership of Company Common Shares shall be calculated in accordance with the provisions of such Rule; provided , however , that for purposes of Beneficial Ownership, (a) a Person shall be deemed to be the Beneficial Owner of any Equity Securities which may be acquired by such Person (disregarding any legal impediments to such Beneficial Ownership), whether within 60 days or thereafter, upon the conversion, exchange or exercise of any warrants, options (which options held by Mr. Diller shall be deemed to be exercisable), rights or other securities issued by the Company or any Subsidiary thereof and (b) no Person shall be deemed to Beneficially Own any Equity Securities solely as a result of such Person’s execution of this Agreement (including by virtue of holding a proxy with respect to any Equity Securities), or the Stockholders Agreement, or with respect to which such Person does not have a pecuniary interest.

Section 6.03. “ Block Sale ” shall mean a Transfer, in a single transaction (other than a Transfer to a Qualified Distribution Transferee) of all of the Equity Securities Beneficially Owned by Liberty (other than any Restricted Equity Securities) at such time to a Person (other than Mr. Diller, a Permitted Transferee, a Permitted Designee or the Company) not affiliated with Liberty (i) whose Ownership Percentage upon, and giving effect to, such Transfer does not exceed 30% of the Total Equity Securities and (ii) who enters into a standstill agreement with the Company in the form attached as Exhibit A to this Agreement (a “ Standstill Agreement ” and such Transferee, the “ Block Sale Transferee ”).

Section 6.04. “ Block Sale Transferee ” shall have the meaning set forth in Section 6.03.

Section 6.05. “ business day ” shall mean any day other than a Saturday, a Sunday or any other day on which banks in New York, New York may, or are required to, remain closed.

Section 6.06. “ Chairman ” shall mean the Chairman of the Board of Directors of the Company or any successor entity.

Section 6.07. “ Chairman Termination Date ” shall mean the date that Mr. Diller no longer serves as Chairman.

Section 6.08. “ Commission ” shall mean the Securities and Exchange Commission.

Section 6.09. “ Company ” shall have the meaning set forth in the Recitals to this Agreement.

Section 6.10. “ Company Class B Stock ” shall mean class B common stock, $0.001 par value per share, of the Company.

Section 6.11. “ Company Common Shares ” shall mean shares of Company Common Stock and Company Class B Stock.

 

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Section 6.12. “ Company Common Stock ” shall mean common stock, $0.001 par value per share, of the Company.

Section 6.13. “ Consenting Party ” shall have the meaning set forth in Section 2.04.

Section 6.14. “ Demand Registration ” shall have the meaning set forth in Section 7.08(b).

Section 6.15. “ DGCL ” shall mean the General Corporation Law of the State of Delaware.

Section 6.16. “ Disabled ” shall mean the disability of Mr. Diller after the expiration of more than 180 consecutive days after its commencement which is determined to be total and permanent by a physician selected by Liberty and reasonably acceptable to Mr. Diller, his spouse or a personal representative designated by Mr. Diller; provided that Mr. Diller shall be deemed to be disabled only following the expiration of 90 days following receipt of a written notice from the Company and such physician specifying that a disability has occurred if within such 90-day period he fails to return to managing the business affairs of the Company. Total disability shall mean mental or physical incapacity that prevents Mr. Diller from managing the business affairs of the Company.

Section 6.17. “ Distribution Transaction ” shall mean any transaction pursuant to which the equity interests of a Subsidiary of Liberty which directly or indirectly holds all Company Common Shares Beneficially Owned (other than any Restricted Equity Securities) by Liberty at such time (a “ Liberty Spinco ”) are distributed, directly or indirectly (whether by redemption, dividend, share distribution, merger or otherwise) to all or substantially all of the holders of one or more classes or series of the common stock of Liberty that are registered under Section 12(b) or 12(g) of the Exchange Act (such holders of one or more such classes or series, “ Liberty Holders ”), on a pro rata basis with respect to each such class or series (other than with respect to the payment of cash in lieu of fractional shares), or such equity interests of such Liberty Spinco are available to be acquired by Liberty Holders (including through any rights offering, exchange offer, exercise of subscription rights or other offer made available to Liberty Holders), on a pro rata basis with respect to each such class or series (other than with respect to the payment of cash in lieu of fractional shares), whether voluntary or involuntary.

Section 6.18. “ EBITDA ” shall mean, for any period, for the Company and its Subsidiaries (on a pro forma basis to the extent the applicable period includes any period prior to the separation of TripAdvisor from the Company), on a combined consolidated basis: net income plus (to the extent reflected in the determination of net income) (i) provision for income taxes, (ii) minority interest, (iii) interest income and expense, (iv) depreciation and amortization, (v) amortization of cable distribution fees, and (vi) amortization of non-cash distribution and marketing expense and non-cash compensation expense.

Section 6.19. “ Effective Time ” shall have the meaning set forth in Section 7.13.

Section 6.20. “ Equity Securities ” shall mean the equity securities of the Company calculated on a Company Common Stock equivalent basis, including the Company Common Shares and those shares issuable upon exercise, conversion or redemption of other securities of the Company not otherwise included in this definition.

 

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Section 6.21. “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

Section 6.22. “ Excluded Issuance ” shall mean any issuance of Company Common Shares (i) in a Sale Transaction, or (ii) which is “restricted stock” or the ownership of which is otherwise subject to forfeiture (“ Restricted Stock ”), provided that for purposes of this definition and Section 3.01 of this Agreement any stock covered by the provisions of clause (ii) shall be deemed to have been issued for purposes of Section 3.01 of this Agreement on the date (the “ Lapse Date ”) the restrictions on such stock lapse or on which the stock is no longer subject to forfeiture.

Section 6.23. “ Expedia ” shall have the meaning set forth in the recitals to this Agreement.

Section 6.24. “ Fair Market Value ” for a security publicly traded on a recognized exchange shall be the average closing price of such security for the three trading days ending on the applicable day (or, if such day is not a trading day, the trading day immediately preceding the applicable day), and for all other securities or property “Fair Market Value” shall be determined, by a nationally recognized investment banking firm which has not been engaged by the Company or Liberty or their respective Affiliates (including with respect to the Company, (a) for so long as Mr. Diller is Senior Executive of TripAdvisor, TripAdvisor and (b) for so long as Mr. Diller is Senior Executive of IAC/InterActiveCorp, IAC/InterActiveCorp) for the prior three years, selected by (i) the Company and (ii) Liberty; provided that, if the Company and Liberty cannot agree on such an investment banking firm within 10 business days, such investment banking firm shall be selected by a panel designated in accordance with the rules of the American Arbitration Association. The fees, costs and expenses of the American Arbitration Association and the investment banking firm so selected shall be borne equally by the Company and Liberty.

Section 6.25. “ Hedging Transaction ” shall have the meaning ascribed to such term in the Stockholders Agreement.

Section 6.26. “ Insider ” shall mean all directors of the Company and all officers of the Company required to file a statement with respect to the Company pursuant to Section 16(a) of the Exchange Act.

Section 6.27. “ Issue Price ” shall mean the price per share equal to (i) in connection with an underwritten offering of Company Common Shares, the initial price at which the stock is offered to the public or other investors, (ii) in connection with other sales of Company Common Shares for cash, the cash price paid for such stock, (iii) in connection with the deemed issuances of Restricted Stock, the Fair Market Value of the stock on the Lapse Date (as defined in the definition of “Excluded Issuance” above), (iv) in connection with the issuance of Company Common Shares as consideration in an acquisition by the Company, the average of the Fair Market Value of the stock for the five trading days ending on the third trading day immediately

 

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preceding (a) the date upon which definitive agreements with respect to such acquisition were entered into if the number of Company Common Shares issuable in such transaction is fixed on that date, or (b) such later date on which the consideration, or remaining portion thereof, issuable in such transaction becomes fixed, (v) in connection with a compensatory issuance of shares of Company Common Shares, the Fair Market Value of the Company Common Stock, and (vi) in all other cases, including, without limitation, in connection with the issuance of Company Common Shares pursuant to an option, warrant or convertible security (other than in connection with issuances described in clause (v) above), the Fair Market Value of the Company Common Shares on the date of issuance.

Section 6.28. “ Lapse Date ” shall have the meaning set forth in Section 6.22.

Section 6.29. “ Liberty ” shall have the meaning set forth in the Recitals to this Agreement.

Section 6.30. “ Liberty Director ” shall mean (a) any executive officer or director of Liberty designated by Liberty to serve on the Company’s Board of Directors, provided that the Company’s Board of Directors is not unable, in the exercise of its fiduciary responsibilities, to recommend that the Company’s stockholders elect such individual to serve on the Company’s Board of Directors, or (b) any other Person designated by Liberty who is reasonably acceptable to the Company.

Section 6.31. “ Liberty Holdco ” shall mean any holding company wholly owned by Liberty and reasonably acceptable to the Company, formed solely for the purpose of acquiring and holding an equity interest in the Company.

Section 6.32. “ Liberty Holders ” shall have the meaning set forth in Section 6.17.

Section 6.33. “ Liberty Proxy ” shall have the meaning ascribed to such term in the Stockholders Agreement.

Section 6.34. “ Liberty Spinco ” shall have the meaning set forth in Section 6.17.

Section 6.35. “ Litigation ” shall have the meaning set forth in Section 7.05.

Section 6.36. “ Mr. Diller ” shall have the meaning set forth in the Recitals to this Agreement.

Section 6.37. “ Ownership Percentage ” means, with respect to any Stockholder, at any time, the ratio, expressed as a percentage, of (i) the Equity Securities Beneficially Owned by such Stockholder (disregarding any legal impediments to such Beneficial Ownership) and its Affiliates to (ii) the sum of (x) the Total Equity Securities and (y) with respect to such Stockholder, any Company Common Shares included in clause (i) that are issuable upon conversion, exchange or exercise of Equity Securities that are not included in clause (x).

Section 6.38. “ Permitted Transferee ” shall mean Liberty or Mr. Diller and the members of their respective Stockholder Groups.

 

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Section 6.39. “ Person ” shall mean any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization, government or department or agency of a government.

Section 6.40. “ Qualified Distribution Transferee ” shall mean any Person that meets the following conditions: (i) at the time of any acquisition by it of Beneficial Ownership of Equity Securities, it is a Subsidiary of Liberty, (ii) thereafter, by reason of a Distribution Transaction, it ceases to be a Subsidiary of Liberty, (iii) if the Distribution Transaction pursuant to which such Person ceases to be a Subsidiary of Liberty occurs prior to the second anniversary of the Effective Time, then, immediately prior to such Distribution Transaction, such Person (or, if such Person is not the Liberty Spinco, the Liberty Spinco) is a wholly owned Subsidiary of Liberty, and (iv) prior to such Distribution Transaction (a) it and, if required by Section 5.01(a), the Liberty Spinco, enters into the amendment contemplated by Section 5.01(a) hereof and (b) it and, if required by Section 5.1 of the Stockholders Agreement, the Liberty Spinco enters into the amendment contemplated by Section 5.1 thereof.

Section 6.41. “ Restricted Equity Security ” shall mean any option, warrant, right or other security issued by the Company that by its terms is not transferable by the holder of such option, warrant, right or other security at such time of determination.

Section 6.42. “ Restricted Stock ” shall have the meaning set forth in Section 6.22.

Section 6.43. “ Sale Transaction ” shall mean a merger, consolidation or amalgamation between the Company and another entity (other than an Affiliate of the Company) in which the Company is to be acquired by such other entity or a Person who controls such entity, or a sale of all or substantially all of the assets of the Company to another entity, other than an Affiliate of the Company.

Section 6.44. “ Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

Section 6.45. “ Standstill Agreement ” shall have the meaning set forth in Section 6.03.

Section 6.46. “ Stockholder Group ” shall mean (a) in respect of Liberty, the Liberty Stockholder Group (as defined in the Stockholders Agreement) and (b) in respect of Mr. Diller, the Diller Stockholder Group (as defined in the Stockholders Agreement).

Section 6.47. “ Stockholders ” shall mean Liberty and Mr. Diller.

Section 6.48. “ Stockholders Agreement ” shall mean the Amended and Restated Stockholders Agreement dated as of the date hereof between Liberty and Mr. Diller.

Section 6.49. “ Subsidiary ” shall mean, as to any Person, any corporation or other Person at least a majority of the shares of stock or other ownership interests of which having general voting power under ordinary circumstances to elect a majority of the Board of Directors or similar governing body of such corporation or other entity (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency) is, at the time as of which the determination is being made, owned by such Person, or one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries.

 

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Section 6.50. “ Third-Party Transferee ” shall have the meaning ascribed to such term in the Stockholders Agreement.

Section 6.51. “ Total Debt ” shall mean all obligations of the Company and its Subsidiaries for money borrowed, at such time (including all long-term senior and subordinated indebtedness, all short-term indebtedness, the stated amount of all letters of credit issued for the account of the Company or any of its Subsidiaries and (without duplication) all unreimbursed draws thereunder (but excluding trade letters of credit)), net of cash (other than working capital) or cash equivalent securities, as shown on the consolidated quarterly or annual financial statements, including the notes thereto, of the Company and its Subsidiaries included in the Company’s filings under the Exchange Act for such period, determined in accordance with GAAP, provided , however , that Total Debt shall not include hedging, pledging, securitization or similar transactions involving securities owned by the Company or its Subsidiaries to monetize the underlying securities, to the extent such securities are the sole means of satisfying such obligations and otherwise the fair value thereof.

Section 6.52. “ Total Debt Ratio ” shall mean, at any time, the ratio of (i) Total Debt of the Company and its Subsidiaries on a combined consolidated basis as of such time to (ii) EBITDA for the four fiscal quarter period ending as of the last day of the most recently ended fiscal quarter as of such time.

Section 6.53. “ Total Equity Securities ” at any time shall mean, subject to the next sentence, the total number of the Company’s outstanding equity securities calculated on a Company Common Stock equivalent basis. Any Equity Securities Beneficially Owned by a Person that are not outstanding Voting Securities but that, upon exercise, conversion or exchange, would become Voting Securities, shall be deemed to be outstanding for the purpose of computing Total Equity Securities and the percentage of Equity Securities owned by such Person but shall not be deemed to be outstanding for the purpose of computing Total Equity Securities and the percentage of the Equity Securities owned by any other Person.

Section 6.54. “ Transfer ” shall mean, directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Company Common Shares Beneficially Owned by such Stockholder or any interest in any Company Common Shares Beneficially Owned by such Stockholder, provided , however , that, a merger or consolidation in which a Stockholder is a constituent corporation shall not be deemed to be the Transfer of any Company Common Shares Beneficially Owned by such Stockholder ( provided , that a significant purpose of any such transaction is not to avoid the provisions of this Agreement). For purposes of this Agreement, the conversion of Company Class B Stock into Company Common Stock shall not be deemed to be a Transfer.

Section 6.55. “ TripAdvisor ” means TripAdvisor, Inc., a Delaware corporation.

 

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Section 6.56. “ Voting Securities ” shall mean at any particular time the shares of any class of capital stock of the Company which are then entitled to vote generally in the election of directors.

ARTICLE VII

MISCELLANEOUS

Section 7.01. Notices . All notices, requests and other communications to any party hereunder shall be in writing (including telecopy) and shall be given, if to Liberty, to:

Liberty Interactive Corporation

12300 Liberty Boulevard

Englewood, Colorado 80112

Attention: General Counsel

Facsimile: (720) 875-5401

with a copy to:

Baker Botts L.L.P.

30 Rockefeller Plaza

44th Floor

New York, New York 10112

Attention: Frederick H. McGrath

Facsimile: (212) 408-2501

if to Mr. Diller, to:

Barry Diller

Chairman

Expedia, Inc.

c/o IAC/InterActiveCorp

555 West 18th Street

New York, New York 10011

Attention: General Counsel

Facsimile: (212) 632-9551

with a copy to:

Expedia, Inc.

333 108th Avenue N.E.

Bellevue, Washington 98004

Attention: General Counsel

Facsimile: (425) 679-7240

 

 

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with a copy to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Attention: Andrew J. Nussbaum

Facsimile: (212) 403-2000

if to the Company, to:

Expedia, Inc.

333 108th Avenue N.E.

Bellevue, Washington 98004

Attention: General Counsel

Facsimile: (425) 679-7240

with a copy to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Attention: Andrew J. Nussbaum

Facsimile: (212) 403-2000

or such address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective when delivered personally, telegraphed, or telecopied, or, if mailed, five business days after the date of the mailing.

Section 7.02. Amendments; No Waivers . (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the party whose rights or obligations hereunder are affected by such amendment, or in the case of a waiver, by the party or parties against whom the waiver is to be effective. Any amendment or waiver by the Company shall be authorized by a majority of the Board of Directors (excluding for this purpose any director who is a Liberty Director as provided for in this Agreement), except as otherwise provided in Section 7.03.

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 7.03. Company Consent Right to Waiver of Liberty Conversion Obligations in Stockholders Agreement . Any waiver by Mr. Diller of Liberty’s obligation (or the obligation of any member of Liberty’s Stockholder Group), pursuant to Section 4.4(b) of the Stockholders Agreement, to convert or exchange shares of Company Class B Stock into shares of Company Common Stock before Transferring shares of Company Class B Stock to a third party (including as required in connection with any Hedging Transaction) will be subject to the consent of the Company (the Company’s right to so consent, the “ Waiver Consent Right ”), which consent will

 

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be exercisable by the vote of (i) a majority of the members of the Board of Directors who are “independent directors” as defined by applicable stock exchange listing rules (which, for this purpose, shall exclude any director who is a Liberty Director) or (ii) a majority of the members of a committee of the Board of Directors composed solely of such independent directors (each of (i) and (ii), a “ Special Committee ”). If, pursuant to Sections 6.2(a) or 6.2(b) of the Stockholders Agreement (without giving effect to any amendment, waiver or modification of the Stockholders Agreement following the execution thereof that is not approved by a Special Committee), Mr. Diller has ceased to be entitled to exercise his rights under the Stockholders Agreement, the Waiver Consent Right will terminate and no such consent will thereafter be required in connection with Liberty’s Transfer of shares of Company Class B Stock.

In the event the Stockholders Agreement is mutually terminated by Mr. Diller and Liberty, then:

(a) if, at the time the Stockholders Agreement is mutually terminated, Mr. Diller would, but for such mutual termination, have ceased to be entitled to exercise his rights under the Stockholders Agreement pursuant to Sections 6.2(a) or 6.2(b) thereof (without giving effect to any amendment, waiver or modification of the Stockholders Agreement following the execution thereof that is not approved by a Special Committee), the Waiver Consent Right will terminate at the same time the Stockholders Agreement is mutually terminated; or

(b) if, at the time the Stockholders Agreement is mutually terminated, Mr. Diller would have been entitled to exercise his rights under the Stockholders Agreement (without giving effect to any amendment, waiver or modification of the Stockholders Agreement following the execution thereof that is not approved by a Special Committee) had such mutual termination not occurred, then the Waiver Consent Right will continue until the earlier of: (i) such time as Mr. Diller would have, pursuant to Sections 6.2(a) or 6.2(b) of the Stockholders Agreement, ceased to be entitled to exercise his rights under the Stockholders Agreement (without giving effect to any amendment, waiver or modification of the Stockholders Agreement following the execution thereof that is not approved by a Special Committee) had the Stockholders Agreement remained in full force and effect and (ii) the one-year anniversary of the date the Stockholders Agreement is mutually terminated.

Section 7.04. Successors And Assigns . Except as provided in Article I or as provided for in Section 5.01(a), neither this Agreement nor any of the rights or obligations under this Agreement shall be assigned, in whole or in part (except by operation of law pursuant to a merger of Liberty with another Person a significant purpose of which is not to avoid the provisions of this Agreement), by any party without the prior written consent of the other parties hereto. Subject to the foregoing, the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

Section 7.05. Governing Law; Consent To Jurisdiction . This Agreement shall be construed in accordance with and governed by the internal laws of the State of Delaware, without giving effect to the principles of conflicts of laws. Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the non-exclusive jurisdiction of the courts of the State of Delaware, for any action, proceeding or investigation in any court or before any governmental authority (“ Litigation ”) arising out of or relating to this Agreement and the transactions

 

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contemplated hereby and further agrees that service of any process, summons, notice or document by U.S. mail to its respective address set forth in this Agreement shall be effective service of process for any Litigation brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of this Agreement or the transactions contemplated hereby in the courts of the State of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum. Each of the parties irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any and all rights to trial by jury in connection with any Litigation arising out of or relating to this Agreement or the transactions contemplated hereby.

Section 7.06. Counterparts . This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

Section 7.07. Specific Performance . The Company, Mr. Diller and Liberty each acknowledge and agree that the parties’ respective remedies at law for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and, in recognition of that fact, agree that, in the event of a breach or threatened breach by Mr. Diller, the Company or Liberty of the provisions of this Agreement, in addition to any remedies at law, Mr. Diller, Liberty and the Company, respectively, without posting any bond shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.

Section 7.08. Registration Rights . (a) Liberty and Mr. Diller shall be entitled to customary registration rights relating to Company Common Stock owned by them as of the date hereof or acquired from the Company (including upon conversion of Company Class B Stock) in the future (including the ability to transfer registration rights as set forth in this Agreement in connection with the sale or other disposition of Company Common Stock).

(b) If requested by a Stockholder, the Company shall be required promptly to cause the Company Common Stock owned by such Stockholder or its Affiliates to be registered under the Securities Act in order to permit such Stockholder or such Affiliate to sell such shares in one or more (but not more than (i) in the case of Liberty, four and (ii) in the case of Mr. Diller, three) registered public offerings (each, a “ Demand Registration ”). Each Stockholder shall also be entitled to customary piggyback registration rights. If the amount of shares sought to be registered by a Stockholder and its Affiliates pursuant to any Demand Registration is reduced by more than 25% pursuant to any underwriters’ cutback, then such Stockholder may elect to request the Company to withdraw such registration, in which case, such registration shall not count as one of such Stockholder’s Demand Registrations. If a Stockholder requests that any Demand Registration be an underwritten offering, then such Stockholder shall select the underwriter(s) to administer the offering, provided that such underwriter(s) shall be reasonably satisfactory to the Company. If a Demand Registration is an underwritten offering and the managing underwriter advises the Stockholder initiating the Demand Registration in writing that in its opinion the total number or dollar amount of securities proposed to be sold in such offering is such as to materially and adversely affect the success of such offering, then the Company will

 

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include in such registration, first, the securities of the initiating Stockholder, and, thereafter, any securities to be sold for the account of others who are participating in such registration (as determined on a fair and equitable basis by the Company). In connection with any Demand Registration or inclusion of a Stockholder’s or its Affiliate’s shares in a piggyback registration, the Company, such Stockholder and/or its Affiliates shall enter into an agreement containing terms (including representations, covenants and indemnities by the Company and such Stockholder), and shall be subject to limitations, conditions, and blackout periods, customary for a secondary offering by a selling stockholder. The costs of the registration (other than underwriting discounts, fees and commissions) shall be paid by the Company. The Company shall not be required to register such shares if a Stockholder would be permitted to sell the Company Common Stock in the quantities proposed to be sold at such time in one transaction under Rule 144 of the Securities Act or under another comparable exemption therefrom.

(c) If the Company and a Stockholder cannot agree as to what constitutes customary terms within ten days of such Stockholder’s request for registration (whether in a Demand Registration or a piggyback registration), then such determination shall be made by a law firm of national reputation mutually acceptable to the Company and such Stockholder.

Section 7.09. Termination . Except as otherwise provided in this Agreement, this Agreement shall terminate (a) as to Liberty, at such time that Liberty Beneficially Owns Equity Securities representing less than 5% of the Total Equity Securities and (b) as to Mr. Diller, at such time that the Chairman Termination Date has occurred or at such time as he becomes Disabled. In respect of “Contingent Matters,” such provisions shall terminate as to Mr. Diller and Liberty as set forth therein.

Section 7.10. Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated, provided that the parties hereto shall negotiate in good faith to attempt to place the parties in the same position as they would have been in had such provision not been held to be invalid, void or unenforceable.

Section 7.11. Cooperation . Each of Liberty and Mr. Diller covenants and agrees with the other to use its reasonable best efforts to cause the Company to fulfill the Company’s obligations under this Agreement.

Section 7.12. Adjustment of Share Numbers and Prices . If, after the effective time of this Agreement, there is a subdivision, split, stock dividend, combination, reclassification or similar event with respect to any of the shares of capital stock referred to in this Agreement, then, in any such event, the numbers and types of shares of such capital stock referred to in this Agreement and, if applicable, the prices of such shares, shall be adjusted to the number and types of shares of such capital stock that a holder of such number of shares of such capital stock would own or be entitled to receive as a result of such event if such holder had held such number of shares immediately prior to the record date for, or effectiveness of, such event, and the prices for such shares shall be similarly adjusted.

 

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Section 7.13. Effective Time . This Agreement shall become effective as of the date hereof, immediately following consummation of TripAdvisor’s spin-off from the Company and transactions relating thereto (the “ Effective Time ”).

Section 7.14. Entire Agreement . Except as otherwise expressly set forth herein, this Agreement and the Stockholders Agreement embody the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way (including, without limitation, effective upon the date hereof, all stockholders agreements relating to the Company (other than the Stockholders Agreement) between Liberty and Mr. Diller).

Section 7.15. Interpretation . References in this Agreement to Articles and Sections shall be deemed to be references to Articles and Sections of this Agreement unless the context shall otherwise require. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of such agreement or instrument.

Section 7.16. Headings . The titles of Articles and Sections of this Agreement are for convenience only and shall not be interpreted to limit or otherwise affect the provisions of this Agreement.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Governance Agreement to be duly executed as of the day and year first above written.

 

EXPEDIA, INC.
By  

/s/ Mark D. Okerstrom

Name:   Mark D. Okerstrom
Title:   Executive Vice President and Chief
  Financial Officer
LIBERTY INTERACTIVE CORPORATION
By  

/s/ John C. Malone

Name:   John C. Malone
Title:   Chairman of the Board
 

/s/ Barry Diller

  BARRY DILLER

[SIGNATURE PAGE TO AMENDED AND RESTATED EXPEDIA

GOVERNANCE AGREEMENT]


EXHIBIT A

FORM OF STANDSTILL AGREEMENT


FORM OF STANDSTILL AGREEMENT

This STANDSTILL AGREEMENT, dated as of [ ] and effective as of the Effective Date (as defined below) (this “ Agreement ”), is entered into by and among the Persons set forth on Annex A hereto (collectively, the “ Block Sale Transferee ”) and Expedia, Inc., a Delaware corporation (the “ Company ,” which term shall, for purposes of this Agreement, include its direct and indirect subsidiaries) (each, a “ Party ” and collectively, the “ Parties ”).

W I T N E S S E T H:

WHEREAS, the Company is a party to a governance agreement dated as of December 20, 2011 (the “ Governance Agreement ”), among the Company, Liberty Interactive Corporation (“ Liberty ”), for itself and on behalf of the members of its Stockholder Group and Mr. Barry Diller (“ Mr. Diller ”), for himself and on behalf of the members of his Stockholder Group;

WHEREAS, the Governance Agreement requires that, prior to the consummation of a Transfer qualifying as a Block Sale, the Block Sale Transferee shall have executed a standstill agreement with the Company;

WHEREAS, pursuant to Section 5.02(b)(ii) of the Governance Agreement, the Company has agreed that, prior to the Block Sale Transferee becoming an “interested stockholder” (as such term is defined in Section 203(c)(5) of the DGCL) with respect to the Company, the Board of Directors of the Company will approve (x) the Block Sale Transferee as an “interested stockholder” within the meaning of Section 203(c)(5) of the DGCL and (y) the receipt of Company Common Shares by the Block Sale Transferee pursuant to the Block Sale for purposes of Section 203(a)(1) of the DGCL, with the condition that the Block Sale Transferee execute this Agreement;

WHEREAS, this Agreement shall be effective as of the date of consummation of the Block Sale (the “ Effective Date ”); and

WHEREAS, capitalized terms used and not otherwise defined herein shall have the meaning ascribed to such terms in the Governance Agreement.

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement and other consideration, the adequacy of which is hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

 

1. Definitions .

1.1 The term “ Actual Ownership ” (and the related term “ Actually Own ”) shall mean as of any date of determination, an amount equal to the sum of (a) the number of Company Common Shares (or other Voting Securities) issued and outstanding and actually owned by Mr. Diller and his Affiliates as of such date (excluding shares of Company Common Stock that Mr. Diller and his Affiliates could exchange pursuant to clause (c) ), plus (b) the number of shares of Company Class B Stock owned by any third party that has acquired shares of Company Class B Stock pursuant to the exercise of the Purchase/Exchange Right in accordance with Section 5.02(d)


of the Governance Agreement, plus (c) the number of shares of Company Class B Stock Mr. Diller and his Affiliates would actually own if Mr. Diller exercised (directly or with an Affiliate) the Purchase/Exchange Right pursuant to Section 5.02(c)(ii) of the Governance Agreement utilizing the shares of Company Common Stock issued and outstanding and actually owned by Mr. Diller and his Affiliates as of such date; provided , that, notwithstanding anything to the contrary in this Section 1.1 , for the avoidance of doubt, Actual Ownership shall not include Company Common Shares (or other equity securities of the Company) which are deemed Beneficially Owned by Mr. Diller solely by virtue of voting power granted to Mr. Diller pursuant to a proxy granted by Liberty.

1.2 The term “ business day ” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the City of New York.

1.3 The term “ DGCL ” means the General Corporation Law of the State of Delaware, as amended.

1.4 The term “ group ” shall have the meaning given to that term (or as that term is used) in Section 13(d)(3) of the Exchange Act.

1.5 The term “ proxy ” shall have the meaning ascribed to such term in Rule 14a-1 promulgated under the Exchange Act.

1.6 The term “ Rights Offering ” means the issuance by the Company to holders of Company Common Stock (or other equity securities of the Company) of rights to buy, within a fixed time period, a proportional number of newly issued shares of Company Common Stock (or other equity securities of the Company).

1.7 The term “ SEC ” means the Securities and Exchange Commission.

1.8 The term “ solicitation ” shall have the meaning ascribed to such term in Rule 14a-1 promulgated under the Exchange Act.

 

2. Share Ownership .

2.1 Limitation on Share Ownership . From the Effective Date until the third anniversary of the Effective Date (the “ Standstill Period ”), the Block Sale Transferee and its Affiliates shall not acquire Beneficial Ownership of any Equity Securities that would cause the Block Sale Transferee, its Affiliates or any group of which any of them are a part to Beneficially Own in the aggregate more than thirty percent (30%) of the Total Equity Securities (subject to adjustment pursuant to this Section 2.1, the “ Ownership Limitation ”); provided , however, that the Block Sale Transferee shall not be in breach of the Ownership Limitation to the extent that its Beneficial Ownership of Equity Securities exceeds the Ownership Limitation as a result of (x) a reduction in the number of Total Equity Securities (whether due to a redemption, share buyback, reverse stock split or similar transaction effected by the Company or any of its Subsidiaries), (y) a distribution that was made by the Company pursuant to a Rights Offering or a distribution that was made generally to holders of Company Common Shares (or other equity securities of the Company) as a result of their ownership of Company Common Shares (or other equity securities of the Company) including, without limitation, pursuant to a shareholder rights plan or similar

 

2


plan or agreement, or (z) the acquisition by the Block Sale Transferee or its Affiliates of any Company Common Shares (or other equity securities of the Company) as a result of the exercise (or exchange) of any rights (1) distributed to the Block Sale Transferee or its Affiliates by the Company pursuant to clause (y) above and (2) acquired, directly or indirectly, by the Block Sale Transferee or its Affiliates from third parties (“ Third Party Rights ”), subject, as to the exercise (or exchange) of the Third Party Rights, to the following limitations: (A) in the event that the Company or any of its Subsidiaries enters into an agreement with a standby purchaser or underwriter (a “ Standby Purchaser ”) pursuant to which such Standby Purchaser will purchase and exercise rights or otherwise purchase Company Common Shares (or other equity securities) that would have been issuable upon the exercise of rights which expire unexercised upon the expiration of such offering or distribution (such offering or distribution, an “ Underwritten Offering ”), then the Block Sale Transferee and its Affiliates will only be permitted to exercise such Third Party Rights to the extent that, assuming the Standby Purchaser exercised rights or acquired shares in accordance with its obligations under such agreement with the Company, such exercise would not result in the Block Sale Transferee and its Affiliates exceeding the Ownership Limitation in effect immediately prior to the commencement of such Rights Offering or other distribution and (B) in the event such offering or distribution is not an Underwritten Offering, or in the event of a separation or distribution of rights pursuant to a shareholder rights plan or similar plan or agreement, the Block Sale Transferee and its Affiliates will not be entitled to exercise (or exchange) Third Party Rights to the extent that after giving effect to the exercise (or exchange) of all rights distributed to the Block Sale Transferee and its Affiliates by the Company, such exercise (or exchange) of Third Party Rights would result in the Block Sale Transferee and its Affiliates having Beneficial Ownership of Equity Securities, determined immediately following the closing of such offering or distribution or (in the case of a shareholder rights plan or similar plan or agreement) at such time as all of the Company’s stockholders electing to exercise rights (excluding any “acquiring person”) have exercised such rights or, if applicable, the Company has exchanged the rights held by all of the Company’s stockholders (other than by the “acquiring person”), in an amount that exceeds the Ownership Limitation in effect immediately prior to the commencement of such offering, distribution or separation, as applicable. In the event that the Block Sale Transferee’s Beneficial Ownership of Equity Securities exceeds the Ownership Limitation as a result of actions referred to in clauses (x) or (z) of this Section 2.1 (or any combination thereof and the Block Sale Transferee is otherwise in compliance with the provisions of this Section 2.1 ), then the Ownership Limitation shall be deemed increased to that percentage which is equal to the Block Sale Transferee’s Beneficial Ownership of Total Equity Securities immediately following (i) for purposes of clause (x), the event that caused such increase and (ii) for purposes of clause (z), the closing of such Rights Offering or distribution or (in the case of a shareholder rights plan or similar plan or agreement) at such time as all of the Company’s stockholders electing to exercise rights (excluding any “acquiring person”) have exercised such rights or, if applicable, the Company has exchanged the rights held by all of the Company’s stockholders (other than by the “acquiring person”), and thereafter the Block Sale Transferee and its Affiliates shall not acquire any Company Common Shares (or other equity securities of the Company) that would result in it exceeding such adjusted Ownership Limitation except as otherwise permitted by this Section 2.1 . The Block Sale Transferee acknowledges and agrees that nothing in this Section 2.1 is intended to limit or restrict the operation of any shareholder rights plan or similar plan or agreement adopted by the Company.

 

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2.2 Share Ownership Notice . Within 5 business days after the end of each calendar quarter during the Standstill Period, commencing with the quarter ending [ ], the Block Sale Transferee shall provide written notice to the Company of the number of Equity Securities Beneficially Owned by the Block Sale Transferee at the end of such quarter. Upon a written request by the Block Sale Transferee to the Company, the Company shall provide within 10 business days of the receipt of such written request a written notice to the Block Sale Transferee of the number of Equity Securities Beneficially Owned and Actually Owned by Mr. Diller as of such date, and the Block Sale Transferee agrees to hold the information contained in such notice in confidence (except in the event that the Block Sale Transferee is required by law, regulation, legal process, regulatory authority (including, without limitation, any stock exchange) or other applicable judicial or governmental order to disclose the information contained in such notice or to the extent necessary to exercise or enforce any of its rights under this Agreement).

 

3. Standstill and Related Provisions .

3.1 Standstill Provisions . During the Standstill Period, unless expressly authorized in writing to do so by a majority of the members of the Board of Directors, acting through a committee of directors that qualify as “independent directors” as defined by applicable stock exchange listing rules [(which term, for this purpose, will exclude any directors nominated by the Block Sale Transferee)] 1 , the Block Sale Transferee shall not, and shall cause its Affiliates not to, directly or indirectly, acting alone or as part of a group:

 

  (a)

make, or in any way participate in any solicitation of any proxy [(but without regard to the exclusion set forth in Rule 14a-1(l)(2)(iv) under the Exchange Act from the definition of “solicitation”)] 2 to vote any Company Common Shares (or other equity securities of the Company) with respect to any matter (including, without limitation, any contested solicitation for the election of directors with respect to the Company), other than solicitations or acting as a participant in support of all of the Company’s nominees [including, without limitation, the nominees of the Block Sale Transferee pursuant to Article 5 ] 3 ;

 

  (b) form, join in or in any way participate in a group (for the avoidance of doubt, the Block Sale Transferee shall not be deemed to have formed, joined in or in any way participated in a group with the Company as a result of the Block Sale Transferee’s execution of this Agreement) with respect to the Company Common Shares (or other equity securities of the Company) or deposit any Company Common Shares (or other equity securities of the Company) in a voting trust or similar arrangement or subject any Company Common Shares (or other equity securities of the Company) to any voting agreement or similar arrangement, or grant any proxy with respect to any Company Common Shares (or other equity securities of the Company) (other than to a designated representative of the

 

 

1  

Note to form: bracketed language to be removed if Block Sale Transferee does not accept the board nomination rights.

2  

Note to form: bracketed language to be removed if Block Sale Transferee does not accept the board nomination rights.

3  

Note to form: bracketed language to be removed if Block Sale Transferee does not accept the board nomination rights.

 

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  Company pursuant to a proxy statement of the Company), other than as contemplated by the Governance Agreement or the Stockholders Agreement or the transactions contemplated thereby;

 

  (c)

seek to call, or to request the calling of, or call a special meeting of the stockholders of the Company, or seek to make, or make, a stockholder proposal (whether pursuant to Rule 14a-8 under the Exchange Act or otherwise) at any meeting of the stockholders of the Company, or make a request for a list of the Company’s stockholders, or[, other than pursuant to the Block Sale Transferee’s nomination rights in accordance with Article 5 of this Agreement,] 4 seek election of a representative to the Board of Directors, seek to place a representative on the Board of Directors or seek the removal of any director from the Board of Directors, or otherwise acting alone, or by participating in a group, seek to control or influence the governance or policies of the Company;

 

  (d) effect or seek to effect (including, without limitation, by entering into any discussions, negotiations, agreements or understandings whether or not legally enforceable with any third Person), offer or propose (whether publicly or otherwise) to effect, or cause or participate in, or in any way assist or facilitate any other Person to effect or seek, offer or propose (whether publicly or otherwise) to effect or participate in any acquisition of any Company Common Shares (or other equity securities of the Company) (or Beneficial Ownership thereof) in excess of the Ownership Limitation, except in accordance with Section 2.1 ; provided , that, for the avoidance of doubt, the Block Sale Transferee is permitted to Transfer to an unaffiliated third party any Company Common Shares (or other equity securities of the Company) Beneficially Owned by the Block Sale Transferee, subject to the provisions of Article 8 hereof, if applicable;

 

  (e) effect or seek to effect (including, without limitation, by entering into any discussions, negotiations, agreements or understandings whether or not legally enforceable with any third Person), offer or propose (whether publicly or otherwise) to effect, or cause or participate in, or in any way assist or facilitate any other Person to effect or seek, offer or propose (whether publicly or otherwise) to effect or participate in (i) any tender offer or exchange offer, merger, acquisition, share exchange or other business combination involving the Company or any of its Subsidiaries, (ii) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company or any of its Subsidiaries or any material portion of its or their businesses, or (iii) any acquisition of any material assets or businesses of the Company or any of its Subsidiaries;

 

  (f) publicly disclose, or cause or, in a material manner, facilitate the public disclosure (including without limitation through the filing by it of any document or report with the SEC or any other governmental agency or any disclosure to any

 

 

4  

Note to form: bracketed language to be removed if Block Sale Transferee does not accept the board nomination rights.

 

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  journalist, member of the media or securities analyst) of any intent, purpose, plan or proposal to obtain any waiver, or consent under, or any amendment of, any of the provisions of Section 2.1 , this Section 3.1 , or Article 4 (except as described in Section 4.1 ) or bring any action to (i) contest the validity of Section 2.1 , this Section 3.1 or Article 4 , or (ii) seek a release from the restrictions contained in Section 2.1 , this Section 3.1 or Article 4 ;

 

  (g) unless required by law, make or issue or cause to be made or issued any public disclosure, announcement or statement (including without limitation the filing of any document or report with the SEC or any other governmental agency or any disclosure to any journalist, member of the media or securities analyst) (i) in support of any solicitation described in paragraph (a) above (other than solicitations by the Company), (ii) in support of any matter described in paragraph (c) above, (iii) concerning any potential matter described in paragraph (d) above; (iv) concerning any potential matter described in paragraph (e) above; or (v) negatively commenting upon the Company’s corporate strategy, business, corporate activities, board of directors or management (for the avoidance of doubt, making any factual statement about the Company’s corporate strategy, business, corporate activities, board of directors or management shall not be prohibited by this Section 3.1(g)(v) ); or

 

  (h) enter into any discussions, negotiations, agreements or understandings with any Person with respect to any of the foregoing or advise, assist or seek to persuade others to take any action with respect to any of the foregoing.

Notwithstanding the foregoing, (a) [the restrictions in Sections 3.1(d), 3.1(e) , 3.1(f) , 3.1(g)(iii) , 3.1(g)(iv) , 3.1(g)(v) and  3.1(h) (to the extent it relates to any of the foregoing) shall not apply at any time that (i) the Company fails to comply in all material respects with its obligations under Article 5 hereof, which failure continues unremedied for a period of 10 business days following receipt by the Company of a written notice from the Block Sale Transferee of such failure or (ii) the Block Sale Transferee has relinquished its nomination rights pursuant to Article 5 and all Block Sale Transferee nominated directors have resigned; or (b)] 5 in the event that (x) the Board of Directors determines that the Company should engage in any transaction described in Section 3.1(e)(i) or 3.1(e)(ii) , the Block Sale Transferee shall be permitted to participate in such Board of Directors’ approved transaction as a shareholder on the same terms and conditions as any other shareholder of the Company, (y) the Board of Directors determines that the Company should solicit from one or more Persons or enter into discussions with one or more Persons regarding, or invites any other Person or group to make a proposal (without similarly inviting the Block Sale Transferee to make a similar proposal) with respect to an acquisition of (i) all or substantially all of the equity securities or assets of the Company or any of its Subsidiaries (by merger, tender offer or otherwise) or (ii) any material assets or businesses of the Company or any of its Subsidiaries, the Block Sale Transferee shall have the right to make a non-public competing proposal to the Board of Directors in compliance with any written procedures generally applicable to Persons making proposals provided by the Company

 

 

5  

Note to form: enumerated restrictions to be removed if the Block Sale Transferee does not accept the board nomination rights.

 

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or the Board of Directors or (z) any third party that is not an Affiliate of the Block Sale Transferee makes a bona fide offer or proposal, with respect to a matter described in Section 3.1(d) or 3.1(e) above (a “ Third Party Proposal ”), the Block Sale Transferee (A) shall have the right to make a non-public competing proposal to the Board of Directors and may publicly announce that it has made a competing proposal to the Board of Directors so long as such public announcement does not constitute an offer or a solicitation to any recipient thereof and (B) may tender, exchange or otherwise sell or transfer its Company Common Shares (or other equity securities of the Company) to such third party in accordance with the Third Party Proposal; provided , however , that in the case of clauses (y)  and (z) , the Block Sale Transferee shall be prohibited from participating with, joining in a group with or providing financing to any such third party).

[For the avoidance of doubt, any discussions involving the directors nominated by the Block Sale Transferee pursuant to Article 5 hereof (i) at a meeting of the Board of Directors or (ii) with management of the Company, other members of the Board of Directors or any of the Company’s advisors or representatives, in the case of clauses (i) and (ii), while acting in such directors’ capacity as members of the Board of Directors, shall not be deemed to violate any of the provisions of this Article 3 .] 6

 

4. Restriction on Business Combinations

4.1 If, at the Effective Date and after taking into consideration the effect of the Block Sale, the Block Sale Transferee would be an “interested stockholder” for purposes of Section 203(c)(5) of the DGCL, then during the Standstill Period any “business combination” (as such term is defined in Section 203(c)(3) of the DGCL) between the Company and the Block Sale Transferee or any of its Affiliates will require approval by the Board of Directors, acting through a committee of directors that qualify as “independent directors” as defined by applicable stock exchange listing rules [(which term will, for this purpose, exclude any directors nominated by the Block Sale Transferee)] 7 ; provided , that the execution and delivery by the Company or any of its Subsidiaries of any contract or agreement with respect to a proposed “business combination” of the type described in Section 203(c)(3)(v) of the DGCL to which the Block Sale Transferee or its “affiliates” (as such term is defined in Section 203(c)(1) of the DGCL) is a party shall constitute conclusive evidence of such approval only with respect to such contract or agreement (and the performance thereof) to the Block Sale Transferee; and provided , further , that the entrance into such contract shall constitute a waiver of the restrictions in Section 3.1(f) with respect to such contract or agreement.

 

5. [Board Representation

5.1 The Block Sale Transferee shall have the right to nominate up to such number of directors to the Board of Directors as is equal to 20% of the total number of directors on the Board of Directors (rounded up to the next whole number if the total number of directors on the Board of Directors is not an even multiple of 5) so long as the Block Sale Transferee

 

 

6  

Note to form: bracketed language to be removed if Block Sale Transferee does not accept the board nomination rights.

7  

Note to form: bracketed language to be removed if Block Sale Transferee does not accept the board nomination rights.

 

7


Beneficially Owns at least 16,825,982 Equity Securities (so long as the Ownership Percentage of the Block Sale Transferee is at least equal to 15% of the Total Equity Securities), provided that all Liberty Directors have resigned from the Board of Directors. The Block Sale Transferee shall have the right to nominate one director to the Board of Directors so long as the Block Sale Transferee Beneficially Owns at least 11,217,321 Equity Securities (so long as the Block Sale Transferee’s Ownership Percentage is at least equal to 5% of the Total Equity Securities), provided that all Liberty Directors have resigned from the Board of Directors.

5.2 Each director nominee proposed by the Block Sale Transferee must qualify as an “independent director” as defined by applicable stock exchange listing rules. The director nominees proposed by the Block Sale Transferee must be approved by the nominating committee of the Board of Directors (which committee shall be comprised solely of “independent directors” as defined by applicable stock exchange listing rules (which term, for this purpose, will exclude any directors nominated by the Block Sale Transferee)) (or by an equivalent committee of the Board of Directors or, if no such committee exists, by a committee of “independent directors” as defined by applicable stock exchange listing rules (which term, for this purpose, will exclude any directors nominated by the Block Sale Transferee)), and, if such approval is not granted to one or more of the Block Sale Transferee’s proposed nominees, the Block Sale Transferee shall have the right to propose additional nominees until approval has been granted to that number of nominees equal to the number of directors the Block Sale Transferee is entitled to nominate pursuant to Section 5.1 .

5.3 Subject to the approval of the Block Sale Transferee’s nominees as described in Section 5.2 and provided that the Block Sale Transferee has provided (or caused to be provided) the Company with all information reasonably requested by the Company relating to its nominees to the extent required under applicable law to be included in any proxy statement of the Company and in any other solicitation materials to be delivered to stockholders of the Company in connection with a stockholders meeting, the Company shall cause each director nominee of the Block Sale Transferee that has received such approval to be included in the slate of nominees recommended by the Board of Directors to the Company’s stockholders for election as directors at each annual meeting of the stockholders of the Company and shall use all reasonable efforts to cause the election of each director nominee of the Block Sale Transferee that has received such approval, including soliciting proxies in favor of the election of such persons.

5.4 In the event that a vacancy is created at any time by the death, disability, retirement, resignation or removal (with or without Cause) of any Director nominated by the Block Sale Transferee pursuant to Section 5.1 , or by any increase in the number of directors constituting the entire Board (such that the Block Sale Transferee, pursuant to Section 5.1 , is entitled to additional representation on such Board to maintain its right to nominate directors constituting 20% (rounded up) of the total number of directors on the Board), the Block Sale Transferee shall, subject to Section 5.2 , have the right to designate a replacement or additional Director to fill such vacancy, and the Company shall use all reasonable efforts to cause such vacancy to be filled with the replacement or additional Director so designated.

5.5 The Company shall use its best efforts to cause the candidate(s) nominated by the Block Sale Transferee (subject Section 5.2 hereof and Section 5.02(f) of the Governance Agreement) to be appointed to the Board of Directors at the next regularly scheduled meeting of the Board of Directors immediately following the Effective Date.] 8

 

 

8  

Note to form: to be included if Block Sale Transferee accepts the board nomination rights.

 

8


6. Representations and Warranties . 9

6.1 Authority; Binding Agreement of Company; Anti-takeover . The Company represents that (a) this Agreement and the performance by the Company of its obligations hereunder (i) has been duly authorized, executed and delivered by it, and is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, (ii) does not require the approval of the stockholders of the Company, and (iii) does not violate any material law, any order of any court or other agency of government, the charter or other organizational document of the Company, or any stock exchange rule or regulation, (b) prior to the Block Sale Transferee becoming an “interested stockholder” (as such term is defined in Section 203(c)(5) of the DGCL) with respect to the Company and subject to the execution by the Block Sale Transferee of this Agreement and the accuracy of the representation contained in Section 6.2(b), the Board of Directors has approved (x) the Block Sale Transferee as an “interested stockholder” within the meaning of Section 203(c)(5) of the DGCL and (y) the receipt of Company Common Shares by the Block Sale Transferee pursuant to the Block Sale for purposes of Section 203(a)(1) of the DGCL and (c) the Company has amended any stockholder rights plan or similar plan or agreement (or taken all steps necessary to amend any charter or bylaw provision) then in effect that would impose on the Block Sale Transferee, or cause the Block Sale Transferee to incur or suffer, material economic detriment (including through disproportionate dilution, relative to other holders of Company Common Shares, of the Block Sale Transferee’s equity or voting power or through a requirement to purchase or otherwise acquire, or offer to acquire, additional equity securities of the Company in the form of a mandatory offer requirement or similar provision) as a result of the Block Sale Transferee’s and its Affiliates’ receipt or continued ownership of Company Common Shares or other equity securities of the Company in the Block Sale, such that the acquisition and continued ownership by the proposed Block Sale Transferee of Company Common Shares or other equity securities of the Company in such Block Sale or thereafter in an amount permitted by this Agreement will not result in the imposition of any such restriction, limitation or economic detriment or cost under any such plan or agreement (or charter or bylaw provision having anti-takeover provisions).

6.2 Authority; Binding Agreement of Block Sale Transferee; Ownership of Shares . Each of the parties listed on Annex A hereto, severally as to itself, represents and warrants that (a) this Agreement and the performance by such Person of its obligations hereunder (i) has been duly authorized, executed and delivered by such Person, and is a valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, (ii) does not require approval by any owners or holders of any equity interest in such Person (except as has already been obtained), and (iii) does not violate any material law, any order of any court or other agency of government, the charter or other organizational documents of such Person, as amended, or constitute a breach or violation of or conflict with any material agreement to which such Person

 

 

9  

Nothing contained in Article 6 shall constitute consent by the committee of directors that qualify as “independent directors” as defined by applicable stock exchange listing rules (which term, for this purpose, will exclude any directors nominated by the Block Sale Transferee) to any waiver of any obligation to convert Company Class B Stock into shares of Company Common Stock.

 

9


is bound and none of such material agreements would impair in any material respect the ability of such Person to perform its obligations hereunder, (b) prior to the approval described in Section 6.1(b) above, the Block Sale Transferee was not an “interested stockholder” within the meaning of Section 203(c)(5) of the DGCL with respect to the Company and (c) as of the date hereof, after taking into account the Company Common Shares to be acquired by the Block Sale Transferee in the Block Sale and based upon the number of Company Common Shares outstanding as set forth in the Company’s latest Report on Form 10-K or Form 10-Q, as applicable, the Block Sale Transferee does not Beneficially Own Company Common Shares in excess of the Ownership Limitation.

6.3 Interests in Company Common Shares . Each of the parties listed on Annex A hereto, severally as to itself, represents and warrants that, as of the Effective Date, it is or will be, as applicable, the Beneficial Owner of the number and type of Company Common Shares (or other equity securities of the Company) set forth (including, without limitation, as to the form of ownership) on Annex B hereto.

6.4 Compliance with Laws . Each of the parties listed on Annex A hereto, severally as to itself, represents and warrants that (a) it is aware, and that it has advised and will advise its Affiliates, that federal and state securities laws prohibit any Person who has material, non-public information about a company from purchasing or selling securities of such a company or from communicating such information to any other Person under circumstances in which it is reasonably foreseeable that the Person is likely to purchase or sell those securities, and (b) it will, and will cause its Affiliates to, comply with federal and state securities laws in connection with any purchase of the Company’s securities contemplated by this Agreement.

 

7. Termination .

7.1 Termination . This Agreement will terminate and cease to be of any further force or effect, except with respect to Article 9 of this Agreement (with respect to actions, events or causes of action arising prior to, or in connection with, such termination), upon the earlier to occur of (i) the expiration of the Standstill Period or (ii) such time as (A) all or substantially all of the assets or equity securities of the Company have been acquired (whether by merger, tender offer or otherwise) by a third party and (B) the Block Sale Transferee or any of its Affiliates ceases to own any Company Common Shares (or other equity securities of the Company); provided that the provisions of Article 2 and Article 3 of this Agreement shall terminate and be of no further force and effect prior to the end of the Standstill Period upon the earlier to occur of:

 

  (a) such time as the Actual Ownership of Voting Securities represents in excess of 50% of the aggregate voting power of the total Voting Securities ( provided that for purposes of calculating the aggregate voting power of the total Voting Securities for purposes of this Section 7.1(a) , total Voting Securities shall: (1) include those shares of Company Class B Stock as to which Mr. Diller and his Affiliates at such time could receive pursuant to the Purchase/Exchange Right provided for in Section 5.02(c) of the Governance Agreement solely by exchanging an equivalent number of issued and outstanding shares of Company Common Stock actually owned by Mr. Diller and such Affiliates at such time, and (2) exclude such shares of Company Common Stock that could be exchanged as of such date by Mr. Diller and such Affiliates pursuant to clause (1)); or

 

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  (b) such time as both (i) the Block Sale Transferee, its Affiliates or any group of which any of them are a part Beneficially Owns less than 12% of the aggregate voting power of the Total Equity Securities and (ii) Mr. Diller Beneficially Owns greater than 40% of the aggregate voting power of the Total Equity Securities ( provided that for purposes of this Section 7.1(b)(ii) , Mr. Diller’s Beneficial Ownership shall not include Company Common Shares which are deemed Beneficially Owned by Mr. Diller solely by virtue of voting power granted to Mr. Diller pursuant to any Proxy granted by Liberty).

7.2 Notice of Termination of Article 2 and Article 3 . In the event that any Party becomes aware of the occurrence of the events described in Section 7.1(a) or Section 7.1(b) , such Party shall, within 2 business days, deliver a notice to each of the other Parties of its belief that Article 2 and Article 3 of this Agreement have terminated pursuant to Section 7.1(a) or Section 7.1(b) , as applicable, and such notice shall describe in reasonable detail the basis for such Party’s assertion that the applicable thresholds have been met. In the event that any of the other Parties dispute that such events of termination have occurred, such Party shall, within 2 business days, deliver a notice to the other Parties identifying the basis for such dispute. In connection with any termination pursuant to Section 7.1(a) or (b) , any acquisitions or dispositions of Company Common Shares occurring after the date specified in the original notice of termination (the “ Termination Date ”) will be disregarded, provided that if Article 2 and Article 3 of this Agreement shall have terminated pursuant to Section 7.1(b) , the Block Sale Transferee shall have no agreement regarding the re-acquisition of the shares described in Section 7.1(b)(i) .

 

8.

Subsequent Transferees . 10

8.1 Except in the event the Block Sale Transferee sells or transfers its Company Common Shares (or other equity securities of the Company) to a third party in accordance with a Third Party Proposal, the transferee of all or substantially all of the Company Common Shares transferred to the Block Sale Transferee in the Block Sale (the “ Subsequent Transferee ”) shall agree to assume and perform all obligations and be subject to, and bound by all restrictions of the Block Sale Transferee pursuant to this Agreement during the remainder of the Standstill Period (other than (i)  Article 6 , (ii) the provisions of Article 4 if such transferee (a) is not an “affiliate” (as such term is defined in Section 203(c)(1) of the DGCL) of the Block Sale Transferee at the time of such transfer and (b) was not such an “affiliate” (as such term is defined in Section 203(c)(1) of the DGCL) on the Effective Date [and (ii) the provisions of Article 5 and Sections 3.1(d), 3.1(e) , 3.1(f) , 3.1(g)(iii), 3.1(g)(iv) , 3.1(g)(v) and 3.1(h) hereunder] 11 ), as if such transferee were the Block Sale Transferee ( provided , however , that the Effective Date shall continue to be defined as the date of consummation of the Block Sale). For the avoidance of doubt, the Parties acknowledge and agree that no Subsequent Transferee shall have a right to a

 

 

10  

Nothing contained in Article 8 shall constitute consent by the committee of directors that qualify as “independent directors” as defined by applicable stock exchange listing rules (which term, for this purpose, will exclude any directors nominated by the Block Sale Transferee) to any waiver of any obligation to convert Company Class B Stock into shares of Company Common Stock.

11  

Note to form: to be included if the Block Sale Transferee accepts the board nomination rights.

 

11


waiver of Section 203(a)(1) of the DGCL in connection with such Subsequent Transferee’s acquisition of Company Common Shares Transferred to the Block Sale Transferee in a Block Sale under this Agreement, the Governance Agreement or otherwise.

8.2 Prior to and as a condition to the acquisition by the Subsequent Transferee of the Company Common Shares Transferred to the Block Sale Transferee in the Block Sale, the Block Sale Transferee (or any Subsequent Transferee who transfers such Company Common Shares) agrees to cause such Subsequent Transferee to execute an Assumption Agreement substantially in the form attached hereto as Annex C (the “ Assumption Agreement ”), which shall also be signed by the Company and the Block Sale Transferee.

 

9. Miscellaneous .

9.1 Breach . The Block Sale Transferee shall be responsible for any breach of this Agreement by it or any of its Affiliates of the terms applicable to its Affiliates, and the Block Sale Transferee agrees to take all reasonable measures to avoid any breach of this Agreement by any of its Affiliates of the terms applicable to its Affiliates. The foregoing obligation shall not limit the remedies available to the Company for any such breach of this Agreement.

9.2 Adjustment of Shares Numbers . If, after the execution of this Agreement (or the Assumption Agreement), there is a subdivision, split, stock dividend, combination, reclassification or similar event with respect to any of the shares of capital stock of the Company referred to in this Agreement, then, in any such event, the numbers and types of shares of such capital stock referred to in this Agreement (and if applicable, the share prices thereof) shall be adjusted to the number and types of shares of such capital stock that a holder of such number of shares of such capital stock would own or be entitled to receive as a result of such event if such holder had held such number of shares immediately prior to the record date for, or effectiveness of, such event.

9.3 Modification and Waiver . This Agreement may be modified or waived only by a separate writing by the Company, acting through a committee of directors on the Board of Directors that qualify as “independent directors” as defined by applicable stock exchange listing rules [(which term, for this purpose, will exclude any directors nominated by the Block Sale Transferee)] 12 , on the one hand, and the Block Sale Transferee, on the other hand, expressly so modifying or waiving this Agreement. The Company shall represent to the Block Sale Transferee that such committee has approved the execution and delivery by the Company of any such modification or waiver by an authorized officer of the Company, which representation will constitute conclusive evidence that such modification or waiver has been validly approved by the Company in accordance with the first sentence of this Section 9.3 . It is understood and agreed that no failure or delay by the Company or the Block Sale Transferee in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

 

 

12  

Note to form: to be included if the Block Sale Transferee accepts the board nomination rights.

 

12


9.4 Severability . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement. In the event that any of the provisions of this Agreement shall be held by a court or other tribunal of competent jurisdiction to be illegal, invalid or unenforceable, such provisions shall be deemed limited or eliminated only to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect.

9.5 Entire Agreement . This Agreement contains the entire agreement between the Company and the Block Sale Transferee concerning the subject matter hereof.

9.6 Remedies . It is understood and agreed that money damages may not be a sufficient remedy for any breach of this Agreement and, in addition to all other remedies that any Party may have at law or in equity, each Party shall be entitled to equitable relief, including, without limitation, injunction and specific performance, as a remedy for any such breach and each Party hereby waives any requirement for the securing or posting of any bond in connection with such remedy.

9.7 Governing Law; Consent to Jurisdiction . This Agreement shall be construed in accordance with and governed by the internal laws of the State of Delaware, without giving effect to the principles of conflicts of laws. Each of the Parties hereby irrevocably and unconditionally consents to submit to the non-exclusive jurisdiction of the courts of the State of Delaware, for any action, proceeding or investigation in any court or before any governmental authority (“ Litigation ”) arising out of or relating to this Agreement and the transactions contemplated hereby and further agrees that service of any process, summons, notice or document by U.S. mail to its respective address set forth in this Agreement shall be effective service of process for any Litigation brought against it in any such court. Each of the Parties hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of this Agreement or the transactions contemplated hereby in the courts of the State of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum. Each of the Parties irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any and all rights to trial by jury in connection with any Litigation arising out of or relating to this Agreement or the transactions contemplated hereby.

9.8 Assignment; Binding Effect . Except as otherwise contemplated hereby, without the prior consent of the other Parties (which in the case of the Company shall be through a committee of directors on the Board of Directors that qualify as “independent directors” as defined by applicable stock exchange listing rules [(which term, for this purpose, will exclude any directors nominated by the Block Sale Transferee)] 13 ), no Party may assign its rights or obligations (other than by operation of law) under this Agreement to any Person. This Agreement shall be binding upon the Block Sale Transferee and its successors and permitted assigns and shall inure to the benefit of, and be enforceable by, the Company and its successors and permitted assigns.

 

 

13  

Note to form: bracketed language to be removed if Block Sale Transferee does not accept the board nomination rights.

 

13


9.9 Expenses . All costs and expenses incurred in connection with this Agreement shall be paid by the Party incurring such cost or expense.

9.10 Headings . Headings included in this Agreement are for the convenience of the Parties only and shall be given no substantive or interpretive effect.

9.11 Counterparts; Signatures . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. This Agreement or any counterpart may be executed and delivered by facsimile or electronic transmission copies, each of which shall be deemed to be an original.

9.12 Notices . All notices, requests and other communications to any party hereunder shall be in writing (including telecopy) and shall be given, if to the Block Sale Transferee, to:

[ ]

[ ]

[ ],[ ] [ ]

Attention: [ ]

Facsimile: [ ]

with a copy to:

[ ]

[ ]

[ ],[ ] [ ]

Attention: [ ]

Facsimile: [ ];

if to the Company, to:

Expedia, Inc.

333 108th Avenue N.E.

Bellevue, Washington 98004

Attention: General Counsel

Facsimile: (425) 679-7240

with a copy to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Attention: Andrew J. Nussbaum

Facsimile: (212) 403-2000

or such address or facsimile number as such party may hereafter specify for the purpose by notice to the other Parties. Each such notice, request or other communication shall be effective when delivered personally, telegraphed, or telecopied, or, if mailed, 5 business days after the date of the mailing.

( Signature page follows )

 

14


IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed and delivered as of the date first above written.

 

EXPEDIA, INC.
By:  

 

Name:  
Title:  
[BLOCK SALE TRANSFEREE]
By:  

 

Name:  
Title:  


Annex A

Parties to the Agreement

[Block Sale Transferee]

 

A-1


Annex B

Beneficial Ownership

 

B-1


Annex C

FORM OF ASSUMPTION AGREEMENT

ASSUMPTION AGREEMENT

This ASSUMPTION AGREEMENT (this “ Agreement ”) is made as of [ ], by and among [Block Sale Transferee] , [a [ ]] (“ Assignor ”), [Subsequent Transferee] , [a [ ]] (“ Assignee ”), and Expedia, Inc., a Delaware corporation (the “ Company ,” which term shall, for purposes of this Agreement, include its direct and indirect subsidiaries).

W I T N E S S E T H :

WHEREAS, Assignor is party to that certain Standstill Agreement, dated as of [ ], by and between Assignor and the Company (the “ Standstill Agreement ”);

WHEREAS, capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Standstill Agreement;

WHEREAS, pursuant to Section 8.2 of the Standstill Agreement, prior to and as a condition to the acquisition by Assignee of all or substantially all of the Company Common Shares Transferred to Assignor in the Block Sale (the “ Subsequent Transfer ”), Assignor, Assignee and the Company agree to enter into this Agreement;

WHEREAS, Assignee desires to assume and perform all rights and obligations and be subject to, and bound by all restrictions under the Standstill Agreement; and

WHEREAS, Assignor and Assignee desire to enter into this Agreement in connection with the Subsequent Transfer.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.

Assumption . Effective as of the date hereof and immediately prior to the consummation of the Subsequent Transfer (but subject to the consummation of the Subsequent Transfer), Assignee assumes all rights of, and agrees to perform all obligations and be subject to, and bound by all restrictions imposed upon, the Assignor under the Standstill Agreement (other than the terms, covenants, conditions, and obligations arising under (i) Article 6 of the Standstill Agreement, [[(ii) Article 4 of the Standstill Agreement] 14 or [(iii) Article 5 and Sections 3.1(d) , 3.1(e) , 3.1(f) , 3.1(g)(iii) , 3.1(g)(iv) , 3.1(g)(v) and 3.1(h) of the Standstill Agreement] 15 ]).

 

2. Company Agreement . The Company hereby consents to the assumption set forth herein and agrees that, unless the context of the Standstill Agreement otherwise requires, Assignee will be substituted for Assignor for all such purposes of the Standstill Agreement and will be

 

 

14  

Note to form: to be included if Subsequent Transferee is not an Affiliate of Assignor and was not an Affiliate of Assignor as of the Effective Date.

15  

Note to form: to be included if the Block Sale Transferee accepts the board nomination rights.


  entitled to exercise any rights of the Assignor thereunder (other than any rights arising under Article 4 or Article 5 of the Standstill Agreement) and the Company will perform all of its obligations under the Standstill Agreement (other than the obligations arising under Article 4 or Article 5 of the Standstill Agreement).

 

3.

Representations and Warranties of the Assignee . Each of the parties on Appendix A, severally as to itself, represents and warrants that (a) this Agreement and the performance by such party of its obligations hereunder (i) has been duly authorized, executed and delivered by such party, and is a valid and binding obligation of such party, enforceable against such party in accordance with its terms, (ii) does not require approval by any owners or holders of any equity interest in such party (except as has already been obtained), and (iii) does not violate any material law, any order of any court or other agency of government, the charter or other organizational documents of such party, as amended, or constitute a breach or violation of or conflict with any material agreement to which such party is bound and none of such material agreements would impair in any material respect the ability of such party to perform its obligations hereunder, (b) as of the date hereof, after taking into account the Company Common Shares to be acquired by the Assignee in the Subsequent Transfer and based upon the number of Company Common Shares outstanding as set forth in the Company’s latest Report on Form 10-K or Form 10-Q, as applicable, the Assignee does not Beneficially Own Company Common Shares in excess of the Ownership Limitation, and (c) as of the date hereof, it is the Beneficial Owner of the number and type of Company Common Shares (or other equity securities of the Company) set forth (including, without limitation, as to the form of ownership) on Appendix B hereto. [Each of the parties on Appendix A, severally as to itself, represents and warrants that (a) as of the date hereof, it is an “affiliate” (as such term is defined in Section 203(c)(1) of the DGCL) of Assignor and (b) as of the Effective Date, it was not an “affiliate” (as such term is defined in Section 203(c)(1) of the DGCL) of Assignor.] 16

 

4.

[Section 203 of the DGCL . The parties hereto acknowledge and agree that the Company has not waived Section 203(a)(1) of the DGCL with respect to the Subsequent Transfer and the Assignee, and the execution by the Company of this Agreement shall not be construed to waive any of the provisions of Section 203(a)(1) of the DGCL.] 17

 

5.

[Article 4 of the Standstill Agreement . Assignee acknowledges and agrees that it will be bound by the provisions of Article 4 of the Standstill Agreement.] 18

 

6.

Representations and Warranties of the Company . The Company represents and warrants that a committee of directors that qualify as “independent directors” as defined by applicable stock exchange listing rules [(which term, for this purpose, will exclude any directors nominated by the Block Sale Transferee)] 19 has approved the Company’s acknowledgement and agreement of this Agreement.

 

 

16  

Note to form: insert if Assignee is, as of the assumption agreement, an “affiliate” (as such term is defined in Section 203(c)(1) of the DGCL) of Assignor, and (b) as of the Effective Date, it was not an “affiliate” (as such term is defined in Section 203(c)(1) of the DGCL) of Assignor.

17  

Note to form: insert if the Company has not waived DGCL section 203(a)(1) with respect to the Subsequent Transfer and the Assignee.

18  

Note to form: insert if Assignee is (a) as of the date of the assumption agreement, an “affiliate” (as such term is defined in Section 203(c)(1) of the DGCL) of Assignor, and (b) as of the Effective Date, it was not an “affiliate” (as such term is defined in Section 203(c)(1) of the DGCL) of Assignor.

19  

Note to form: bracketed language to be removed if Block Sale Transferee does not accept the board nomination rights.


7. Further Assurances . From time to time following the date hereof, and without any further consideration or other payment, Assignor shall execute and deliver such other instruments of conveyance, assignment, transfer and delivery and execute and deliver such other documents and take or cause to be taken such other actions as Assignee reasonably may request in order to consummate, complete and carry out the transactions contemplated by this Agreement.

 

8. Successors . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns.

 

9. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. This Agreement or any counterpart may be executed and delivered by facsimile or electronic transmission copies, each of which shall be deemed to be an original.

 

10. Entire Agreement . This Agreement contains the entire agreement between the parties hereto concerning the subject matter hereof

 

11. Severability . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement. In the event that any of the provisions of this Agreement shall be held by a court or other tribunal of competent jurisdiction to be illegal, invalid or unenforceable, such provisions shall be deemed limited or eliminated only to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect.

 

12. Governing Law . This Agreement shall be construed in accordance with and governed by the internal laws of the State of Delaware, without giving effect to the principles of conflicts of laws. Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the non-exclusive jurisdiction of the courts of the State of Delaware, for any action, proceeding or investigation in any court or before any governmental authority (“ Litigation ”) arising out of or relating to this Agreement and the transactions contemplated hereby and further agrees that service of any process, summons, notice or document by U.S. mail to its respective address set forth in this Agreement shall be effective service of process for any Litigation brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of this Agreement or the transactions contemplated hereby in the courts of the State of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum. Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any and all rights to trial by jury in connection with any Litigation arising out of or relating to this Agreement or the transactions contemplated hereby.


[ The remainder of this page intentionally left blank. ]


IN WITNESS WHEREOF, the parties hereto hereby cause this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

ASSIGNOR:
[BLOCK SALE TRANSFEREE]
By:  

 

Name:  
Title:  
ASSIGNEE:
[SUBSEQUENT TRANSFEREE]
By:  

 

Name:  
Title:  
EXPEDIA, INC.
By:  

 

Name:  
Title:  


Appendix A

Parties to the Agreement

[Assignee]


Appendix B

Beneficial Ownership

Exhibit 10.2

TAX SHARING AGREEMENT

by and between

EXPEDIA, INC.

and

TRIPADVISOR, INC.

Dated as of

December 20, 2011


TAX SHARING AGREEMENT

This TAX SHARING AGREEMENT (this “ Agreement ”), dated as of December 20, 2011, by and between Expedia, Inc., a Delaware corporation (“ Parent ”), and TripAdvisor, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“ SpinCo ”).

W I T N E S S E T H

WHEREAS, Parent and SpinCo have entered into a Separation Agreement, dated as of December, 2011 (the “ Separation Agreement ”), providing for the Separation of the Parent Group from the SpinCo Group;

WHEREAS, pursuant to the terms of the Separation Agreement, Parent will contribute all of the Separated Assets to SpinCo and its Subsidiaries and will cause SpinCo and its Subsidiaries to assume the Assumed Liabilities;

WHEREAS, for U.S. federal Income Tax purposes, it is intended that the Contribution and the Spin-Off shall qualify as a tax-free transaction under Sections 355(a) and 368(a)(1)(D) of the Code;

WHEREAS, at the close of business on the Distribution Date, the taxable year of SpinCo shall close for U.S. federal Income Tax purposes; and

WHEREAS, the parties hereto wish to provide for the payment of Taxes and entitlement to Refunds thereof, allocate responsibility and provide for cooperation in connection with the filing of returns in respect of Taxes, and provide for certain other matters relating to Taxes.

NOW, THEREFORE, in consideration of the premises and the representations, covenants and agreements herein contained and intending to be legally bound hereby, Parent and SpinCo hereby agree as follows:

1. Definitions . Capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Separation Agreement. For purposes of this Agreement, the following terms shall have the meanings set forth below:

Actually Realized ” or “ Actually Realizes ” shall mean, for purposes of determining the timing of the incurrence of any Spin-Off Tax Liability, Income Tax Liability or Other Tax Liability or the realization of a Refund (or any related Tax cost or benefit), whether by receipt or as a credit or other offset to Taxes payable, by a Person in respect of any payment, transaction, occurrence or event, the time at which the amount of Taxes paid (or Refund realized) by such Person is increased above (or reduced below) the amount of Taxes that such Person would have been required to pay (or Refund that such Person would have realized) but for such payment, transaction, occurrence or event.

 

- 2 -


Aggregate Spin-Off Tax Liabilities ” shall mean the sum of the Spin-Off Tax Liabilities with respect to each Taxing Jurisdiction.

Business Day ” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions located in the State of New York are authorized or obligated by law or executive order to close.

Carryback ” shall mean the carryback of a Tax Attribute (including, without limitation, a net operating loss, a net capital loss or a tax credit) by a member of the SpinCo Group from a Post-Distribution Taxable Period to a Pre-Distribution Taxable Period during which such member of the SpinCo Group was included in a Combined Return filed for such Pre-Distribution Taxable Period.

Cash Acquisition Merger ” shall mean a merger of a newly formed Subsidiary of SpinCo with a corporation, limited liability company, limited partnership, general partnership or joint venture (in each case, not previously owned directly or indirectly by SpinCo) pursuant to which SpinCo acquires such corporation, limited liability company, limited partnership, general partnership or joint venture solely for cash and no Equity Securities of SpinCo or any SpinCo Subsidiary are issued, sold, redeemed or acquired, directly or indirectly.

Code ” shall mean the Internal Revenue Code of 1986, as amended.

Combined Return ” shall mean a consolidated, combined or unitary Income Tax Return or Other Tax Return that actually includes, by election or otherwise, one or more members of the Parent Group together with one or more members of the SpinCo Group (including, for the avoidance of doubt, any such Income Tax Return that is a consolidated U.S. federal Income Tax Return of the Parent Consolidated Group).

Contribution ” shall mean those certain capital contributions to SpinCo by Parent made in connection with the Spin-Off.

Distribution Date ” shall mean the date on which the Spin-Off is completed.

Distribution-Related Proceeding ” shall mean any Proceeding in which the IRS, another Tax Authority or any other party asserts a position that could reasonably be expected to adversely affect the Tax-Free Status of the Spin-Off Transactions.

EMA ” shall mean the Employee Matters Agreement by and between Parent and SpinCo dated as of December 20, 2011.

Equity Securities ” shall mean any stock or other securities treated as equity for U.S. federal Income Tax purposes, options, warrants, rights, convertible debt, or any other instrument or security that affords any Person the right, whether conditional or otherwise, to acquire stock or to be paid an amount determined by reference to the value of stock.

 

- 3 -


Expedia Service Provider ” shall mean any “Expedia Employee” as such term is defined in the EMA or any other provider of services to any member of the Parent Group.

Final Determination ” shall mean the final resolution of liability for any Tax, which resolution may be for a specific issue or adjustment or for a taxable period, (a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the laws of any Taxing Jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for Refund or the right of the Tax Authority to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as the case may be); (b) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (c) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the laws of any Taxing Jurisdiction; (d) by any allowance of a Refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such Refund may be recovered (including by way of offset) by the Taxing Jurisdiction imposing such Tax; or (e) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the parties.

IAC Tax Sharing Agreement ” shall mean the Tax Sharing Agreement, dated as of August 9, 2005, by and between IAC/InterActiveCorp, a Delaware corporation, and Parent.

Income Taxes ” (a) shall mean (i) any U.S. federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments that are based upon, measured by, or calculated with respect to (A) net income or profits (including, but not limited to, any capital gains, gross receipts, or minimum tax, and any tax on items of tax preference, but not including sales, use, value added, real property gains, real or personal property, transfer or similar taxes), (B) multiple bases (including, but not limited to, corporate franchise, doing business or occupation taxes), if one or more of the bases upon which such tax may be based, by which it may be measured, or with respect to which it may be calculated is described in clause (a)(i)(A) of this definition, or (C) any net worth, franchise or similar tax, in each case together with (ii) any interest and any penalties, fines, additions to tax or additional amounts imposed by any Tax Authority with respect thereto and (b) shall include any transferee or successor liability in respect of an amount described in clause (a) of this definition.

Income Tax Benefit ” shall mean, with respect to the effect of any Carryback on the Income Tax Liability of Parent or the Parent Group for any taxable period, the excess of (a) the hypothetical Income Tax Liability of Parent or the Parent Group for such taxable period, calculated as if such Carryback had not been utilized but with all other facts unchanged over (b) the actual Income Tax Liability of Parent or the Parent Group for such taxable period, calculated taking into account such Carryback (and treating a Refund as a negative Income Tax Liability, for purposes of such calculation).

 

- 4 -


Income Tax Liabilities ” shall mean all liabilities for Income Taxes.

Income Tax Return ” shall mean any return, report, filing, statement, questionnaire, declaration or other document required to be filed with a Tax Authority in respect of Income Taxes.

Indemnified Party ” shall mean any Person seeking indemnification pursuant to the provisions of this Agreement.

Indemnifying Party ” shall mean any party hereto from which any Indemnified Party is seeking indemnification pursuant to the provisions of this Agreement.

IRS ” shall mean the Internal Revenue Service of the United States.

Losses ” shall mean any and all losses, liabilities, claims, damages, obligations, payments, costs and expenses, matured or unmatured, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown (including, without limitation, the costs and expenses of any and all Actions, threatened Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys’ fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened Actions).

Option ” shall have the meaning ascribed to such term in the EMA.

Other Tax Liabilities ” shall mean all liabilities for Other Taxes.

Other Tax Returns ” shall mean any return, report, filing, statement, questionnaire, declaration or other document required to be filed with a Tax Authority in respect of Other Taxes.

Other Taxes ” shall mean any U.S. federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments of any nature whatsoever, and without limiting the generality of the foregoing, shall include superfund, sales, use, ad valorem, value added, occupancy, transfer, recording, withholding, payroll, employment, excise, occupation, premium or property taxes (in each case, together with any related interest, penalties and additions to tax, or additional amounts imposed by any Tax Authority thereon); provided , however , that Other Taxes shall not include any Income Taxes.

Parent Combined Return Taxes ” shall mean any Taxes (or estimated Taxes) due or required to be paid with respect to or required to be reported on any consolidated U.S. federal Income Tax Return of the Parent Consolidated Group or any other Combined Tax Return that are attributable to any member of the Parent Group.

Parent Consolidated Group ” shall mean the affiliated group of corporations (within the meaning of Section 1504(a) of the Code without regard to the exclusions in Section 1504(b)(1) through (8)) of which Parent is the common parent (and any predecessor or successor to such affiliated group).

 

- 5 -


Parent Group ” shall mean (a) Parent and each Person that is a direct or indirect Subsidiary of Parent (including any Subsidiary of Parent that is disregarded for U.S. federal Income Tax purposes (or for purposes of any state, local, or foreign tax law)) immediately after the Spin-Off after giving effect to the Spin-Off Transactions, (b) any corporation (or other Person) that shall have merged or liquidated into Parent or any such Subsidiary and (c) any predecessor or successor to any Person otherwise described in this definition.

Parent Separate Return ” shall mean any Separate Return required to be filed by Parent or any member of the Parent Group.

Permitted Transaction ” shall mean any transaction that satisfies the requirements of Section 4(c).

Person ” shall mean any individual, partnership, joint venture, limited liability company, corporation, association, joint stock company, trust, unincorporated organization or similar entity or a governmental authority or any department or agency or other unit thereof.

Post-Distribution Taxable Period ” shall mean a taxable period that, to the extent it relates to a member of the SpinCo Group, begins after the Distribution Date.

Pre-Distribution Taxable Period ” shall mean a taxable period that, to the extent it relates to a member of the SpinCo Group, ends on or before the Distribution Date.

Private Letter Ruling ” shall mean (a) any private letter ruling issued by the IRS in connection with the Spin-Off Transactions or (b) any similar ruling issued by any other Tax Authority in connection with the Spin-Off Transactions.

Private Letter Ruling Documents ” shall mean (a) any Private Letter Ruling, any request for a Private Letter Ruling submitted to the IRS (including the request for rulings submitted by Parent to the IRS on July 26, 2011), together with the appendices and exhibits thereto and any supplemental filings or other materials subsequently submitted to the IRS in connection with the Spin-Off Transactions, or (b) any similar filings submitted to any other Tax Authority in connection with any such request for a Private Letter Ruling.

Proceeding ” shall mean any audit or other examination, or judicial or administrative proceeding relating to liability for, or Refunds or adjustments with respect to, Taxes.

Refund ” shall mean any refund of Taxes, including any reduction in Tax Liabilities by means of a credit, offset or otherwise.

Representative ” shall mean with respect to a Person, such Person’s officers, directors, employees and other authorized agents.

 

- 6 -


Restriction Period ” shall mean the period beginning on the date hereof and ending on the twenty five (25) month anniversary of the Distribution Date.

RSU ” shall have the meaning ascribed to such term in the EMA.

Separate Return ” shall mean (a) in the case of any Tax Return required to be filed by any member of the SpinCo Group (including any consolidated, combined or unitary return), any such Tax Return that does not include any member of the Parent Group and (b) in the case of any Tax Return required to be filed by any member of the Parent Group (including any consolidated, combined or unitary return), any such Tax Return that does not include any member of the SpinCo Group.

Separation Agreement ” shall have the meaning set forth in the recitals of this Agreement.

SpinCo Adjustment ” shall mean an adjustment of any item of income, gain, loss, deduction or credit attributable to any member of the SpinCo Group (including, in the case of any state or local consolidated, combined or unitary income or franchise Taxes, a change in one or more apportionment factors of members of the SpinCo Group) pursuant to a Final Determination for a Pre-Distribution Taxable Period.

SpinCo Business ” shall mean each trade or business actively conducted (within the meaning of Section 355(b) of the Code) by SpinCo or any member of the SpinCo Group immediately after the Spin-Off, as set forth in the Private Letter Ruling Documents and the Tax Opinion Documents.

SpinCo Combined Return Taxes ” shall mean any Taxes (or estimated Taxes) due or required to be paid with respect to or required to be reported on any consolidated U.S. federal Income Tax Return of the Parent Consolidated Group or any other Combined Tax Return that are attributable to any member of the SpinCo Group.

SpinCo Consolidated Group ” shall mean the affiliated group of corporations (within the meaning of Section 1504(a) of the Code without regard to the exclusions in Section 1504(b)(1) through (8)) of which SpinCo is the common parent, determined immediately after the Spin-Off (and any predecessor or successor to such affiliated group other than the Parent Consolidated Group).

SpinCo Group ” shall mean (a) SpinCo and each Person that is a direct or indirect Subsidiary of SpinCo (including any Subsidiary of SpinCo that is disregarded for U.S. federal Income Tax purposes (or for purposes of any state, local, or foreign tax law)) immediately after the Spin-Off after giving effect to the Spin-Off Transactions, (b) any corporation (or other Person) that shall have merged or liquidated into SpinCo or any such Subsidiary and (c) any predecessor or successor to any Person otherwise described in this definition.

SpinCo Separate Return ” shall mean any Separate Return required to be filed by SpinCo or any member of the SpinCo Group, including, without limitation, (a) any consolidated U.S. federal Income Tax Return of the SpinCo Consolidated Group

 

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required to be filed with respect to a Post-Distribution Taxable Period and (b) any consolidated U.S. federal Income Tax Return for any group of which any member of the SpinCo Group was the common parent.

SpinCo Tax Benefit ” shall mean, with respect to any Taxing Jurisdiction, any decrease in Tax Liability (or increase in a Refund) Actually Realized with respect to a Combined Return that is attributable to a SpinCo Adjustment.

SpinCo Tax Liability ” shall mean, with respect to any Taxing Jurisdiction, any increase in Tax Liability (or reduction in a Refund) Actually Realized with respect to a Combined Return that is attributable to a SpinCo Adjustment.

Spin-Off ” shall mean the distribution of TripAdvisor Common Stock and TripAdvisor Class B Common Stock pursuant to the Reclassification.

Spin-Off Transactions ” shall mean the Contribution together with the Spin-Off.

Spin-Off Tax Liabilities ” shall mean, with respect to any Taxing Jurisdiction, the sum of (a) any increase in Tax Liability (or reduction in a Refund) Actually Realized as a result of any corporate-level gain or income recognized with respect to the failure of the Spin-Off Transactions to qualify for Tax-Free Status under the Income Tax Laws of such Taxing Jurisdiction pursuant to any settlement, Final Determination, judgment, assessment, proposed adjustment or otherwise, (b) interest on such amounts calculated pursuant to such Taxing Jurisdiction’s laws regarding interest on Tax Liabilities at the highest Underpayment Rate for corporations in such Taxing Jurisdiction from the date such additional gain or income was recognized until full payment with respect thereto is made pursuant to Section 3 hereof (or in the case of a reduction in a Refund, the amount of interest that would have been received on the foregone portion of the Refund but for the failure of the Spin-Off Transactions to qualify for Tax-Free Status), and (c) any penalties actually paid to such Taxing Jurisdiction that would not have been paid but for the failure of the Spin-Off Transactions to qualify for Tax-Free Status in such Taxing Jurisdiction.

Tax Attribute ” shall mean a consolidated, combined or unitary net operating loss, net capital loss, unused investment credit, unused foreign tax credit, or excess charitable contribution (as such terms are used in Treasury Regulation Sections 1.1502-79 and 1.1502-79A or comparable provisions of foreign, state or local tax law), or a minimum tax credit or general business credit.

Tax Authority ” shall mean a governmental authority (foreign or domestic) or any subdivision, agency, commission or authority thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including, without limitation, the IRS).

Tax Benefits ” shall have the meaning set forth in Section 3(a) hereof.

 

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Tax Counsel ” shall mean tax counsel of recognized national standing that is acceptable to Parent.

Taxes ” shall mean Income Taxes and Other Taxes.

Tax-Free Status ” shall mean the qualification of the Contribution and the Spin-Off, taken together, (a) as a reorganization described in Sections 355(a) and 368(a)(1)(D) of the Code, (b) as a transaction in which the stock distributed thereby is “qualified property” for purposes of Sections 355(d), 355(e) and 361(c) of the Code, and (c) as a transaction in which Parent, SpinCo and the shareholders of Parent recognize no income or gain for U.S. federal Income Tax purposes pursuant to Sections 355, 361 and 1032 of the Code other than, in the case of Parent and SpinCo, intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code.

Taxing Jurisdiction ” shall mean the United States and every other government or governmental unit having jurisdiction to tax Parent or SpinCo or any of their respective Affiliates.

Tax Liabilities ” shall mean any liabilities for Taxes.

Tax Opinion ” shall mean any tax opinion issued by Tax Counsel in connection with the Spin-Off Transactions.

Tax Opinion Documents ” shall mean the Tax Opinion and the information and representations provided by, or on behalf of, Parent or SpinCo to Tax Counsel in connection therewith.

Tax-Related Losses ” shall mean:

(a) the Aggregate Spin-Off Tax Liabilities,

(b) all accounting, legal and other professional fees, and court costs incurred in connection with any settlement, Final Determination, judgment or other determination with respect to such Aggregate Spin-Off Tax Liabilities, and

(c) all costs, expenses and damages associated with stockholder litigation or controversies and any amount paid by Parent or SpinCo in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Tax Authority payable by Parent or SpinCo or their respective Affiliates, in each case, resulting from the failure of the Spin-Off Transactions to qualify for Tax-Free Status.

Tax Returns ” shall mean Income Tax Returns and Other Tax Returns.

TripAdvisor Service Provider ” shall mean any “TripAdvisor Employee” as such term is defined in the EMA or any other provider of services to any member of the SpinCo Group.

 

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Underpayment Rate ” shall mean the annual rate of interest described in Section 6621(c) of the Code for large corporate underpayments of Income Tax (or similar provision of state, local, or foreign Income Tax law, as applicable), as determined from time to time.

Unqualified Tax Opinion ” shall mean an unqualified opinion of Tax Counsel on which Parent may rely to the effect that a transaction (a) will not disqualify the Spin-Off Transactions from having Tax-Free Status, assuming that the Spin-Off Transactions would have qualified for Tax-Free Status if such transaction did not occur, and (b) will not adversely affect any of the conclusions set forth in the Private Letter Ruling or the Tax Opinion; provided , that any tax opinion obtained in connection with a proposed acquisition of Equity Securities of SpinCo (or any entity treated as a successor to SpinCo) entered into during the Restriction Period shall not qualify as an Unqualified Tax Opinion unless such tax opinion concludes that such proposed acquisition will not be treated as “part of a plan (or series of related transactions),” within the meaning of Section 355(e) of the Code and the Treasury Regulations promulgated thereunder, that includes the Spin-Off.

2. Tax Returns; Payment of Taxes .

(a) Filing of Tax Returns; Payment of Taxes .

(i) Parent Consolidated Returns; Other Combined Returns . Parent shall prepare and file or cause to be prepared and filed (A) all consolidated U.S. federal Income Tax Returns of the Parent Consolidated Group and (B) all other Combined Returns. Except as provided in Section 2(a)(ii) or Section 2(a)(iii), Parent shall pay, or cause to be paid, and shall be responsible for, any and all Taxes due or required to be paid with respect to or required to be reported on any such Tax Return.

(ii) SpinCo Adjustments . SpinCo shall pay, or cause to be paid, and shall be responsible for, any SpinCo Tax Liabilities and shall be entitled to all SpinCo Tax Benefits.

(iii) Post-Distribution Combined Returns . In the event that any Combined Return is required to be filed pursuant to applicable law in any Taxing Jurisdiction for any Post-Distribution Taxable Period, Parent shall pay, or cause to be paid, and shall be responsible for, any and all Taxes due or required to be paid with respect to or required to be reported on any such Tax Return that are Parent Combined Return Taxes and SpinCo shall pay, or cause to be paid, and shall be responsible for, any and all Taxes due or required to be paid with respect to or required to be reported on any such Tax Return that are SpinCo Combined Return Taxes.

(iv) Parent Separate Returns . Parent shall prepare and file or cause to be prepared and filed all Parent Separate Returns. Parent shall pay, or cause to be paid, and shall be responsible for, any and all Taxes due or required to be paid with respect to or required to be reported on any Parent Separate Return (including any increase in such Tax Liabilities attributable to a Final Determination).

 

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(v) SpinCo Separate Returns . SpinCo shall prepare and file or cause to be prepared and filed all SpinCo Separate Returns. SpinCo shall pay, or cause to be paid, and shall be responsible for, any and all Taxes due or required to be paid with respect to or required to be reported on any SpinCo Separate Return (including any increase in such Tax Liabilities attributable to a Final Determination).

(b) Preparation of Tax Returns .

(i) Parent (or its designee) shall determine the entities to be included in any Combined Return and make or revoke any Tax elections, adopt or change any Tax accounting methods, and determine any other position taken on or in respect of any Tax Return required to be prepared and filed by Parent pursuant to Section 2(a)(i) or Section 2(a)(iii). Notwithstanding the immediately preceding sentence, any Tax Return filed by Parent pursuant to Section 2(a)(i) or Section 2(a)(iii) shall, to the extent relating to SpinCo or the SpinCo Group, be prepared in good faith. For the avoidance of doubt, with respect to the consolidated U.S. federal Income Tax Return of the Parent Consolidated Group for any taxable year that includes the Spin-Off, Parent shall determine in its sole discretion whether to elect ratable allocation under Treasury Regulation Section 1.1502-76. SpinCo shall, and shall cause each member of the SpinCo Group to, take all actions necessary to give effect to such election. SpinCo shall, and shall cause each member of the SpinCo Group to, prepare and submit at Parent’s request (but in no event later than ninety (90) days after such request), at SpinCo’s expense, all information that Parent shall reasonably request, in such form as Parent shall reasonably request, including any such information requested to enable Parent to prepare any Tax Return required to be filed by Parent pursuant to Section 2(a)(i) or Section 2(a)(iii). Parent shall make any such Tax Return and related workpapers available for review by SpinCo to the extent such Tax Return relates to Taxes for which SpinCo would reasonably be expected to be liable or with respect to which SpinCo would reasonably be expected to have a claim. If practicable, Parent shall make any such Tax Return available for review sufficiently in advance of the due date for filing such Tax Return to provide SpinCo an opportunity to analyze and comment on such return. Parent and SpinCo shall attempt in good faith to resolve any issues arising out of the review of any such Tax Return.

(ii) Except as required by applicable law or as a result of a Final Determination, neither Parent nor SpinCo shall (nor shall cause or permit any members of the Parent Group or SpinCo Group, respectively, to) take any position that is either inconsistent with the treatment of the Spin-Off Transactions as having Tax-Free Status (or analogous status under state, local or foreign law) or, with respect to a specific item of income, deduction, gain, loss, or credit on any Tax Return, treat such specific item in a manner which is inconsistent with the manner such specific item is reported on a Tax Return prepared or filed by Parent pursuant to Section 2(a) hereof (including, without limitation, the claiming of a deduction previously claimed on any such Tax Return).

3. Indemnification for Taxes .

(a) Indemnification by Parent . From and after the Distribution Date, except as otherwise provided in Section 3(b), Parent and each member of the Parent Group shall jointly and severally indemnify, defend and hold harmless SpinCo and each member of the

 

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SpinCo Group and each of their respective Representatives and Affiliates (and the heirs, executors, successors and assigns of any of them) from and against, without duplication, (i) all Spin-Off Tax Liabilities incurred by any member of the Parent Group, (ii) all Tax Liabilities that any member of the Parent Group is responsible for pursuant to Section 2, and (iii) all Tax Liabilities, Spin-Off Tax Liabilities and Tax-Related Losses incurred by any member of the Parent Group or SpinCo Group by reason of the breach by Parent or any member of the Parent Group of any of Parent’s representations or covenants hereunder or made in connection with the Private Letter Ruling or the Tax Opinion and, in each case, any related costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses); provided , however , that neither Parent nor any member of the Parent Group shall have any obligation to indemnify, defend or hold harmless any Person pursuant to this Section 3(a) to the extent that such indemnification obligation is otherwise attributable to any breach by SpinCo or any member of the SpinCo Group of any of SpinCo’s representations or covenants hereunder (including any representations made in connection with the Private Letter Ruling or the Tax Opinion). If the indemnification obligation of Parent or any member of the Parent Group under this Section 3(a) (or the adjustment giving rise to such indemnification obligation) results in (i) increased deductions, losses, or credits, or (ii) decreases in income, gains or recapture of Tax credits (“ Tax Benefits ”) to SpinCo or any member of the SpinCo Group, which would not, but for the indemnification obligation (or the adjustment giving rise to such indemnification obligation), be allowable, then SpinCo shall pay Parent the amount by which such Tax Benefit actually reduces, in cash, the amount of Tax that SpinCo or any member of the SpinCo Group would have been required to pay and bear (or increases, in cash, the amount of a Refund to which SpinCo or any member of the SpinCo Group would have been entitled) but for such indemnification obligation (or adjustment giving rise to such indemnification obligation). SpinCo shall pay Parent for such Tax Benefit no later than five (5) Business Days after such Tax Benefit is Actually Realized.

(b) Indemnification by SpinCo . From and after the Distribution Date, SpinCo and each member of the SpinCo Group shall jointly and severally indemnify, defend and hold harmless Parent and each member of the Parent Group and each of their respective Representatives and Affiliates (and the heirs, executors, successors and assigns of any of them) from and against, without duplication, (i) all Tax Liabilities (including, all SpinCo Tax Liabilities), Spin-Off Tax Liabilities and Tax-Related Losses that SpinCo or any member of the SpinCo Group is responsible for under Section 2 or Section 4 (including, without limitation, any Tax Liabilities, Spin-Off Tax Liabilities or Tax-Related Losses arising with respect to a Permitted Transaction for which SpinCo is liable pursuant to Section 4(e)(i)), (ii) all indemnity payments required to made by any member of the Parent Group pursuant to the IAC Tax Sharing Agreement to the extent relating to Taxes attributable to any member of the SpinCo Group and (iii) all Tax Liabilities, Spin-Off Tax Liabilities and Tax-Related Losses incurred by any member of the Parent Group or SpinCo Group by reason of the breach by SpinCo or any member of the SpinCo Group of any of SpinCo’s representations or covenants hereunder (including any representations made in connection with the Private Letter Ruling or the Tax Opinion (irrespective of whether Parent made the same representation on behalf of, or with respect to SpinCo)) and, in each case, any related costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses). If the indemnification obligation of SpinCo or any member of the SpinCo Group under this Section 3(b) (or the adjustment giving rise to such indemnification obligation) results in a Tax Benefit to Parent or any member of the Parent Group, which would not, but for the Tax which is the subject of the indemnification obligation

 

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(or the adjustment giving rise to such indemnification obligation), be allowable, then Parent shall pay SpinCo the amount by which such Tax Benefit actually reduces, in cash, the amount of Tax that Parent or any member of the Parent Group would have been required to pay and bear (or increases, in cash, the amount of a Refund to which Parent or any member of the Parent Group would have been entitled) but for such indemnification (or adjustment giving rise to such indemnification obligation). Parent shall pay SpinCo for such Tax Benefit no later than five (5) Business Days after such Tax Benefit is Actually Realized.

(c) Timing of Indemnification . Any payment and indemnification made pursuant to this Section 3 (other than a payment for any Tax Benefit, the timing of which is provided in Sections 3(a) and 3(b) above) shall be made by the Indemnifying Party promptly, but, in any event, no later than:

(i) in the case of an indemnification obligation with respect to any Tax Liabilities (including any SpinCo Tax Liabilities and any Spin-Off Tax Liabilities), the later of (A) five (5) Business Days after the Indemnified Party notifies the Indemnifying Party and (B) five (5) Business Days prior to the date the Indemnified Party is required to make a payment of Taxes, interest, or penalties to the applicable Tax Authority (including a payment with respect to an assessment of a Tax deficiency by any Taxing Jurisdiction or a payment made in settlement of an asserted Tax deficiency) or realizes a reduced Refund; and

(ii) in the case of any payment or indemnification of any Losses not otherwise described in clause (i) of this Section 3(c) (including, but not limited to, any Losses described in clause (b) or (c) of the definition of Tax-Related Losses, attorneys’ fees and expenses and other indemnifiable Losses), the later of (A) five (5) Business Days after the Indemnified Party notifies the Indemnifying Party and (B) five (5) Business Days prior to the date the Indemnified Party makes a payment thereof.

4. Spin-Off Related Matters .

(a) Representations .

(i) Private Letter Ruling and Tax Opinion Documents . SpinCo hereby represents and warrants that (A) it has examined the Private Letter Ruling Documents and the Tax Opinion Documents (including, without limitation, the representations to the extent that they relate to the plans, proposals, intentions, and policies of SpinCo, its Subsidiaries, the SpinCo Business, or the SpinCo Group) and (B) to the extent in reference to SpinCo, its Subsidiaries, the SpinCo Business, or the SpinCo Group, the facts presented and the representations made therein are true, correct and complete.

(ii) Tax-Free Status . SpinCo hereby represents and warrants that it has no plan or intention of taking any action, or failing to take any action or knows of any circumstance, that could reasonably be expected to (A) cause the Spin-Off Transactions not to have Tax-Free Status or (B) cause any representation or factual statement made in this Agreement, the Separation Agreement, the Private Letter Ruling Documents, the Tax Opinion Documents or any of the Ancillary Agreements to be untrue.

 

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(iii) Plan or Series of Related Transactions . SpinCo hereby represents and warrants that during the two-year period ending on the Distribution Date, there was no “agreement, understanding, arrangement, substantial negotiations or discussions” (as such terms are defined in Treasury Regulation Section 1.355-7(h)) by any one or more officers or directors of any member of the SpinCo Group or by any other person or persons with the implicit or explicit permission of one or more of such officers or directors regarding an acquisition of all or a significant portion of the Equity Securities of SpinCo (and any predecessor); provided , that no representation or warranty is made by SpinCo regarding any “agreement, understanding, arrangement, substantial negotiations or discussions” (as such terms are defined in Treasury Regulation Section 1.355-7(h)) by any one or more officers or directors of Parent.

(b) Covenants .

(i) Actions Consistent with Representations and Covenants . Neither Parent nor SpinCo shall take any action or permit any member of the Parent Group or the SpinCo Group, respectively, to take any action, or shall fail to take any action or permit any member of the Parent Group or the SpinCo Group, respectively, to fail to take any action, where such action or failure to act would be inconsistent with or cause to be untrue any material information, covenant or representation in this Agreement, the Separation Agreement, the Private Letter Ruling Documents, the Tax Opinion Documents or any of the Ancillary Agreements.

(ii) Preservation of Tax-Free Status; SpinCo Business . SpinCo shall not (A) take any action (including, but not limited to, any cessation, transfer or disposition of all or any portion of any SpinCo Business, payment of extraordinary dividends and acquisitions or issuances of stock) or permit any member of the SpinCo Group to take any such action, and SpinCo shall not fail to take any such action or permit any member of the SpinCo Group to fail to take any such action, in each case, unless such action or failure to act could not reasonably be expected to cause the Spin-Off Transactions to fail to have Tax-Free Status or could not require Parent or SpinCo to reflect a liability or reserve for Taxes with respect to the Spin-Off Transactions in its financial statements, and (B) until the first day after the Restriction Period, engage in any transaction (including, without limitation, any cessation, transfer or disposition of all or any portion of any SpinCo Business) that could reasonably be expected to result in it or any member of the SpinCo Group ceasing to be a company engaged in any SpinCo Business.

(iii) Sales, Issuances and Redemptions of Equity Securities . Until the first day after the Restriction Period, none of SpinCo or any member of the SpinCo Group shall, or shall agree to, sell or otherwise issue to any Person, or redeem or otherwise acquire from any Person, any Equity Securities of SpinCo or any member of the SpinCo Group; provided , however , that (A) the adoption by SpinCo of a shareholder rights plan shall not constitute a sale or issuance of such Equity Securities, (B) SpinCo and the members of the SpinCo Group may repurchase such Equity Securities to the extent that such repurchases meet the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30, (C) SpinCo may issue such Equity Securities to the extent such issuances satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d), and (D) members of the SpinCo Group other than SpinCo may issue or sell Equity Securities to other

 

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members of the SpinCo Group, and may redeem or purchase Equity Securities from other members of the SpinCo group, in each case, to the extent not inconsistent with the Tax-Free Status of the Spin-Off Transactions.

(iv) Tender Offers; Other Business Combination Transactions . Until the first day after the Restriction Period, none of SpinCo or any member of the SpinCo Group shall (A) solicit any Person to make a tender offer for, or otherwise acquire or sell, the Equity Securities of SpinCo, (B) participate in or support any unsolicited tender offer for, or other acquisition, issuance or disposition of, the Equity Securities of SpinCo or (C) approve or otherwise permit any proposed business combination or any transaction which, in the case of clauses (A), (B) or (C), individually or in the aggregate, together with any transaction occurring within the four-year period beginning on the date which is two years before the Distribution Date and any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Spin-Off, could result in one or more Persons acquiring (except for acquisitions that otherwise satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d)) directly or indirectly stock representing a 40% or greater interest, by vote or value, in SpinCo (or any successor thereto). In addition, none of SpinCo or any member of the SpinCo Group shall at any time, whether before or subsequent to the expiration of the Restriction Period, engage in any action described in clauses (A), (B) or (C) of the preceding sentence if it is pursuant to an arrangement negotiated (in whole or in part) prior to the first anniversary of the Spin-Off, even if at the time of the Spin-Off or thereafter such action is subject to various conditions.

(v) Dispositions of Assets . Until the first day after the Restriction Period, none of SpinCo or any member of the SpinCo Group shall sell, transfer, or otherwise dispose of or agree to sell, transfer or otherwise dispose of assets (including, for such purpose, any shares of capital stock of a Subsidiary and any transaction treated for tax purposes as a sale, transfer or disposition) that, in the aggregate, constitute more than 30% of the consolidated gross assets of SpinCo or the SpinCo Group. The foregoing sentence shall not apply to (A) sales, transfers, or dispositions of assets in the ordinary course of business, (B) any cash paid to acquire assets from an unrelated Person in an arm’s-length transaction, (C) any assets transferred to a Person that is disregarded as an entity separate from the transferor for U.S. federal Income Tax purposes or (D) any mandatory or optional repayment (or pre-payment) of any indebtedness of SpinCo or any member of the SpinCo Group. The percentages of gross assets or consolidated gross assets of SpinCo or the SpinCo Group, as the case may be, sold, transferred, or otherwise disposed of, shall be based on the fair market value of the gross assets of SpinCo and the members of the SpinCo Group as of the Distribution Date. For purposes of this Section 4(b)(v), a merger of SpinCo or one of its Subsidiaries with and into any Person shall constitute a disposition of all of the assets of SpinCo or such Subsidiary.

(vi) Liquidations, Mergers, Reorganizations . Until the first day after the Restriction Period, neither SpinCo nor any of its Subsidiaries shall, or shall agree to, voluntarily dissolve or liquidate (including by converting into an entity that is treated as a “disregarded entity” or partnership for U.S. federal Income Tax purposes) or engage in any transaction involving a merger (except for a Cash Acquisition Merger), consolidation or other reorganization; provided , that, mergers of direct or indirect wholly-owned Subsidiaries of

 

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SpinCo solely with and into SpinCo or with other direct or indirect wholly-owned Subsidiaries of SpinCo, and liquidations of SpinCo’s subsidiaries are not subject to this Section 4(b)(vi) to the extent not inconsistent with the Tax-Free Status of the Spin-Off Transactions.

(c) Permitted Transactions .

Notwithstanding the restrictions otherwise imposed by Sections 4(b)(iii) through 4(b)(vi), during the Restriction Period, SpinCo may (i) issue, sell, redeem or otherwise acquire (or cause a member of the SpinCo Group to issue, sell, redeem or otherwise acquire) Equity Securities of SpinCo or any member of the SpinCo Group in a transaction that would otherwise breach the covenant set forth in Section 4(b)(iii), (ii) approve, participate in, support or otherwise permit a proposed business combination or transaction that would otherwise breach the covenant set forth in Section 4(b)(iv), (iii) sell or otherwise dispose of the assets of SpinCo or any member of the SpinCo Group in a transaction that would otherwise breach the covenant set forth in Section 4(b)(v), or (iv) merge SpinCo or any member of the SpinCo Group with another entity without regard to which party is the surviving entity in a transaction that would otherwise breach the covenant set forth in Section 4(b)(vi), if and only if such transaction would not violate Section 4(b)(i) or Section 4(b)(ii) and prior to entering into any agreement contemplating a transaction described in clauses (i), (ii), (iii) or (iv), and prior to consummating any such transaction, SpinCo shall request that Parent obtain a private letter ruling (or, if applicable, a supplemental private letter ruling) from the IRS and/or any other applicable Tax Authority in accordance with Section 4(d)(ii) of this Agreement to the effect that such transaction will not affect the Tax-Free Status of the Spin-Off Transactions and Parent shall have received such private letter ruling, in form and substance satisfactory to Parent in its sole and absolute discretion, exercised in good faith; provided , that to the extent (A) such private letter ruling cannot be obtained from the IRS under Rev. Proc. 2011-3, 2011-1 I.R.B. 111 (as amended from time to time) (or from any other applicable Tax Authority under any analogous procedure of such Tax Authority) or (B) Parent determines in its sole and absolute discretion not to seek to obtain such private letter ruling, in lieu of such private letter ruling (1) SpinCo shall obtain Parent’s written consent (which may be withheld at Parent’s sole discretion) or (2) SpinCo shall provide Parent with an Unqualified Tax Opinion, in form and substance satisfactory to Parent in its sole and absolute discretion, exercised in good faith (and in determining whether an opinion is satisfactory, Parent may consider, among other factors, the appropriateness of any underlying assumptions and management’s representations if used as a basis for the opinion).

(d) Private Letter Rulings and Restrictions on SpinCo .

(i) Private Letter Ruling at Parent’s Request . Parent shall have the right to obtain a private letter ruling from the IRS and/or any other applicable Tax Authority (or, if applicable, a supplemental private letter ruling) in its sole discretion, exercised in good faith. If Parent determines to obtain any such private letter ruling, SpinCo shall (and shall cause each member of the SpinCo Group to) cooperate with Parent and take any and all actions reasonably requested by Parent in connection with obtaining such private letter ruling (including, without limitation, by making any representation or covenant or providing any materials or information requested by any Tax Authority; provided , that SpinCo shall not be required to make (or cause any member of the SpinCo Group to make) any representation or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control).

 

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In connection with obtaining a private letter ruling pursuant to this Section 4(d)(i), (A) Parent shall, to the extent practicable, consult with SpinCo reasonably in advance of taking any material action in connection therewith; (B) Parent shall (1) reasonably in advance of the submission of any documents relating to such private letter ruling, provide SpinCo with a draft copy thereof, (2) reasonably consider SpinCo’s comments on such draft copy, and (3) provide SpinCo with a final copy; and (C) Parent shall provide SpinCo with notice reasonably in advance of, and SpinCo shall have the right to attend and participate in, any formally scheduled meetings with any Tax Authority (subject to the approval of the Tax Authority) that relate to such private letter ruling.

(ii) Private Letter Rulings at SpinCo’s Request . Parent agrees that at the reasonable request of SpinCo pursuant to Section 4(c), Parent shall (and shall cause each member of the Parent Group to) cooperate with SpinCo and use its reasonable best efforts to seek to obtain, as expeditiously as possible, a private letter ruling from the IRS and/or any other applicable Tax Authority (or, if applicable, a supplemental private letter ruling) for the purpose of confirming compliance on the part of SpinCo or any member of the SpinCo Group with its obligations under Section 4(b) of this Agreement; provided , however , that in no event shall Parent be required to file any request for a private letter ruling under this Section 4(d)(ii) unless SpinCo represents that (A) it has read the request for such private letter ruling and any materials, appendices and exhibits submitted or filed therewith, and (B) all information and representations, if any, relating to any member of the SpinCo Group, contained in the related private letter ruling documents are true, correct and complete in all material respects. SpinCo shall reimburse Parent for all reasonable costs and expenses incurred by the Parent Group in obtaining a private letter ruling requested by SpinCo within ten (10) Business Days after receiving an invoice from Parent therefor. SpinCo hereby agrees that Parent shall have sole and exclusive control over the process of obtaining any private letter ruling, and that only Parent shall apply for any private letter ruling. In connection with obtaining a private letter ruling pursuant to this Section 4(d)(ii), (A) Parent shall, to the extent practicable, consult with SpinCo reasonably in advance of taking any material action in connection therewith; (B) Parent shall (1) reasonably in advance of the submission of any related private letter ruling documents, provide SpinCo with a draft copy thereof, (2) reasonably consider SpinCo’s comments on such draft copy, and (3) provide SpinCo with a final copy; and (C) Parent shall provide SpinCo with notice reasonably in advance of, and SpinCo shall have the right to attend and participate in, any formally scheduled meetings with any Tax Authority (subject to the approval of the Tax Authority) that relate to such private letter ruling.

(iii) Prohibition on SpinCo . SpinCo hereby agrees that, except to the extent permitted by Section 4(d)(ii), neither it nor any member of the SpinCo Group shall seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise) concerning the Spin-Off Transactions (or the impact of any transaction on the Spin-Off Transactions).

 

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(e) Liability of SpinCo for Undertaking Certain Actions . Notwithstanding anything in this Agreement to the contrary, SpinCo and each member of the SpinCo Group shall be responsible for any and all Tax-Related Losses that are attributable to, or result from:

(i) any act or failure to act by SpinCo or any member of the SpinCo Group, which action or failure to act breaches any of the covenants described in Section 4(b)(i) through 4(b)(vi) of this Agreement (determined without regard to the exceptions or provisos set forth in such provisions or in Section 4(c), so that SpinCo and each member of the SpinCo Group shall be responsible for any and all Tax-Related Losses even if such Tax-Related Losses are attributable to or result from any act or failure to act pursuant to an exception or proviso described in Section 4(b)(i) through 4(b)(vi) or in Section 4(c)), expressly including, for this purpose, any Permitted Transaction and any act or failure to act that breaches Section 4(b)(i) or 4(b)(ii), regardless of whether such act or failure to act is permitted by Section 4(b)(iii) through 4(b)(vi);

(ii) any acquisition of Equity Securities of SpinCo or any member of the SpinCo Group by any Person or Persons (including, without limitation, as a result of an issuance of SpinCo Equity Securities or a merger of another entity with and into SpinCo or any member of the SpinCo Group) or any acquisition of assets of SpinCo or any member of the SpinCo Group (including, without limitation, as a result of a merger) by any Person or Persons; and

(iii) any breach by SpinCo or any member of the SpinCo Group of a representation or covenant made in this Agreement, the Separation Agreement, the Ancillary Agreement, any Private Letter Ruling Documents or any Tax Opinion Documents.

(f) Cooperation .

(i) Without limiting the prohibition set forth in Section 4(d)(iii), until the first day after the Restriction Period, SpinCo shall furnish Parent with a copy of any private letter ruling request that any member of the SpinCo Group may file with the IRS or any other Tax Authority and any opinion received that in any respect relates to, or otherwise reasonably could be expected to have any effect on, the Tax-Free Status of the Spin-Off Transactions.

(ii) Parent shall reasonably cooperate with SpinCo in connection with any request by SpinCo for an Unqualified Tax Opinion pursuant to Section 4(c).

(iii) Until the first day after the Restriction Period, SpinCo will provide adequate advance notice to Parent in accordance with the terms of Section 4(f)(iv) of any action described in Sections 4(b)(i) through 4(b)(vi) within a period of time sufficient to enable Parent to seek injunctive relief pursuant to Section 4(g) in a court of competent jurisdiction.

(iv) Each notice required by Section 4(f)(iii) shall set forth the terms and conditions of any such proposed transaction, including, without limitation, (A) the nature of any related action proposed to be taken by the board of directors of SpinCo, (B) the approximate number of Equity Securities (and their voting and economic rights) of SpinCo or any member of the SpinCo Group (if any) proposed to be sold or otherwise issued, (C) the approximate value of SpinCo’s assets (or assets of any member of the SpinCo Group) proposed to be transferred, and (D) the proposed timetable for such transaction, all with sufficient particularity to enable Parent to seek such injunctive relief. Promptly, but in any event within thirty (30) days, after Parent receives such written notice from SpinCo, Parent shall notify SpinCo in writing of Parent’s decision to seek injunctive relief pursuant to Section 4(g).

 

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(v) From and after the Distribution Date until the first day after the Restriction Period, neither SpinCo nor any member of the SpinCo Group shall take (or refrain from taking) any action to the extent that such action or inaction would have caused a representation given by SpinCo in connection with the Private Letter Ruling and/or the Tax Opinion to have been untrue as of the relevant representation date, had SpinCo or any member of the SpinCo Group intended to take (or refrain from taking) such action on the relevant representation date.

(g) Enforcement . The parties hereto acknowledge that irreparable harm would occur in the event that any of the provisions of this Section 4 were not performed in accordance with their specific terms or were otherwise breached. The parties hereto agree that, in order to preserve the Tax-Free Status of the Spin-Off Transactions, injunctive relief is appropriate to prevent any violation of the foregoing covenants; provided , however , that injunctive relief shall not be the exclusive legal or equitable remedy for any such violation.

5. Refunds . Parent shall be entitled to all Refunds in respect of Taxes paid with respect to any Tax Return for which Parent or any member of the Parent Group is responsible pursuant to Section 2, except to the extent such Refunds are solely attributable to SpinCo Tax Benefits. SpinCo shall be entitled to all Refunds in respect of Taxes paid with respect to any Tax Return for which SpinCo or any member of the SpinCo Group is responsible pursuant to Section 2 or which are solely attributable to SpinCo Tax Benefits. Notwithstanding the foregoing, in the event a party obtains a Refund of Taxes for which it was indemnified by another party, the indemnifying party shall be entitled to such Refund. For the absence of doubt, a party entitled to a Refund pursuant to this Section 5 shall also be entitled to (and the party receiving such Refund shall pay over to such other party) any interest thereon received from the applicable Tax Authority, or, in the case of any Combined Return, the amount of any interest thereon that would have been received from such Tax Authority had such Refund related to a hypothetical Tax Return that did not include the other party or any member of such other party’s group but with all other facts unchanged. A party receiving a Refund to which another party is entitled pursuant to this Section 5 shall pay the amount to which such other party is entitled (including interest in accordance with the preceding sentence) within fifteen (15) Business Days after such Refund is Actually Realized. Each of Parent and SpinCo shall cooperate with the other party in connection with any claim for Refund in respect of any Tax for which any member of the Parent Group or the SpinCo Group, as the case may be, is responsible pursuant to Section 2.

6. Tax Contests .

(a) Notification . Each of Parent and SpinCo shall notify the other party in writing of any communication with respect to any pending or threatened Proceeding in connection with any Tax Liability (or any issue related thereto) of Parent or any member of the Parent Group, or SpinCo or any member of the SpinCo Group, respectively, for which a member of the SpinCo Group or the Parent Group, respectively, may be responsible pursuant to this Agreement within ten (10) Business Days of receipt; provided , however , that in the case of any

 

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Distribution-Related Proceeding (whether or not SpinCo or Parent may be responsible thereunder), such notice shall be provided no later than ten (10) Business Days after Parent or SpinCo, as the case may be, first receives written notice from the IRS or other Tax Authority of such Distribution-Related Proceeding). Each of Parent and SpinCo shall include with such notification a true, correct and complete copy of any written communication, and an accurate and complete written summary of any oral communication, received by Parent or a member of the Parent Group, or SpinCo or a member of the SpinCo Group, respectively. The failure of Parent or SpinCo timely to forward such notification in accordance with the immediately preceding sentence shall not relieve SpinCo or Parent, respectively, of any obligation to pay such Tax Liability or indemnify Parent and the members of the Parent Group, or SpinCo and the members of the SpinCo Group, respectively, and their respective Representatives, Affiliates, successors and assigns therefor, except to the extent that the failure timely to forward such notification actually prejudices the ability of SpinCo or Parent to contest such Tax Liability or increases the amount of such Tax Liability.

(b) Representation with Respect to Tax Disputes . Parent (or such member of the Parent Group as Parent shall designate) shall have the sole right to represent the interests of the members of the Parent Group and the members of the SpinCo Group and to employ counsel of its choice at its expense in any Proceeding (including any Distribution-Related Proceeding) relating to (i) any consolidated U.S. federal Income Tax Returns of the Parent Consolidated Group, (ii) any other Combined Returns and (iii) any Parent Separate Returns. SpinCo (or such member of the SpinCo Group as SpinCo shall designate) shall have the sole right to represent the interests of the members of the SpinCo Group and to employ counsel of its choice at its expense in any Proceeding relating to SpinCo Separate Returns.

(c) Power of Attorney . Each member of the SpinCo Group shall execute and deliver to Parent (or such member of the Parent Group as Parent shall designate) any power of attorney or other document requested by Parent (or such designee) in connection with any Proceeding described in the first sentence of Section 6(b).

(d) Distribution-Related Proceedings, Proceedings with Respect to SpinCo Tax Liabilities .

(i) In the event of any Distribution-Related Proceeding or Proceeding relating to a SpinCo Tax Liability as a result of which SpinCo could reasonably be expected to become liable for Tax or any Tax-Related Losses and with respect to which Parent has the right to represent the interests of the members of the Parent Group and/or the members of the SpinCo Group pursuant to Section 6(b) above, (A) Parent shall consult with SpinCo reasonably in advance of taking any significant action in connection with such Proceeding, (B) Parent shall consult with SpinCo and offer SpinCo a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such Proceeding, (C) Parent shall defend such Proceeding diligently and in good faith as if it were the only party in interest in connection with such Proceeding, and (D) Parent shall provide SpinCo copies of any written materials relating to such Proceeding received from the relevant Tax Authority. Notwithstanding anything in the preceding sentence to the contrary, the final determination of the positions taken, including with respect to settlement or other disposition, in (i) any Distribution-Related Proceeding, or (ii) any other Proceeding relating to a SpinCo Tax Liability,

 

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which other Proceeding would not reasonably be expected to result in a liability for additional Taxes in an amount exceeding five (5) million dollars for a single Tax year, shall be made in the sole discretion of Parent and shall be final and not subject to the dispute resolution provisions of Section 9 (and Article X of the Separation Agreement). With respect to any Proceeding relating to a SpinCo Tax Liability (other than any Distribution-Related Proceeding), which could reasonably be expected to result in a liability for additional Taxes in an amount exceeding five (5) million dollars for a single Tax year, SpinCo shall be entitled to participate in such Proceeding, and Parent shall not settle, compromise or abandon any such Proceeding without obtaining the prior written consent of SpinCo, which consent shall not be unreasonably withheld.

(ii) In the event of any Distribution-Related Proceeding with respect to any SpinCo Separate Return, (A) SpinCo shall consult with Parent reasonably in advance of taking any significant action in connection with such Proceeding, (B) SpinCo shall consult with Parent and offer Parent a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such Proceeding, (C) SpinCo shall defend such Proceeding diligently and in good faith as if it were the only party in interest in connection with such Proceeding, (D) Parent shall be entitled to participate in such Proceeding and receive copies of any written materials relating to such Proceeding received from the relevant Tax Authority, and (E) SpinCo shall not settle, compromise or abandon any such Proceeding without obtaining the prior written consent of Parent, which consent shall not be unreasonably withheld.

7. Apportionment of Tax Attributes; Carrybacks .

(a) Apportionment of Tax Attributes .

(i) If the Parent Consolidated Group has a Tax Attribute, the portion, if any, of such Tax Attribute apportioned to SpinCo or any member of the SpinCo Consolidated Group and treated as a carryover to the first Post-Distribution Taxable Period of SpinCo (or such member) shall be determined by Parent in accordance with Treasury Regulation Sections 1.1502-21, 1.1502-21T, 1.1502-22, 1.1502-79 and, if applicable, 1.1502-79A.

(ii) No Tax Attribute with respect to consolidated U.S. federal Income Tax of the Parent Consolidated Group, other than those described in Section 7(a)(i), and no Tax Attribute with respect to consolidated, combined or unitary state, local, or foreign Income Tax, in each case, arising in respect of a Combined Return shall be apportioned to SpinCo or any member of the SpinCo Group, except as Parent (or such member of the Parent Group as Parent shall designate) determines is otherwise required under applicable law.

(iii) Parent (or its designee) shall determine the portion, if any, of any Tax Attribute which must (absent a Final Determination to the contrary) be apportioned to SpinCo or any member of the SpinCo Group in accordance with this Section 7(a) and applicable law, and the amount of tax basis and earnings and profits to be apportioned to SpinCo or any member of the SpinCo Group in accordance with applicable law, and shall provide written notice of the calculation thereof to SpinCo as soon as practicable after the information necessary to make such calculation becomes available to Parent.

 

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(iv) The written notice delivered by Parent pursuant to Section 7(a)(iii) shall be binding on all members of the SpinCo Group and shall not be subject to dispute resolution. Except as otherwise required by applicable law or pursuant to a Final Determination, SpinCo shall not take any position (whether on a Tax Return or otherwise) that is inconsistent with the information contained in the written notice delivered by Parent pursuant to Section 7(a)(iii).

(b) Carrybacks . Except to the extent otherwise consented to by Parent or prohibited by applicable law, SpinCo shall elect to relinquish, waive or otherwise forgo all Carrybacks. In the event that SpinCo (or the appropriate member of the SpinCo Group) is prohibited by applicable law to relinquish, waive or otherwise forgo a Carryback (or Parent consents to a Carryback), (i) Parent shall cooperate with SpinCo, at SpinCo’s expense, in seeking from the appropriate Tax Authority such Refund as reasonably would result from such Carryback, and (ii) SpinCo shall be entitled to any Income Tax Benefit Actually Realized by a member of the Parent Group (including any interest thereon received from such Tax Authority), to the extent that such Refund is directly attributable to such Carryback, within fifteen (15) Business Days after such Refund is Actually Realized; provided , however , that SpinCo shall indemnify and hold the members of the Parent Group harmless from and against any and all collateral Tax consequences resulting from or caused by any such Carryback, including (but not limited to) the loss or postponement of any benefit from the use of Tax attributes generated by a member of the Parent Group or an Affiliate thereof if (x) such Tax attributes expire unutilized, but would have been utilized but for such Carryback, or (y) the use of such Tax attributes is postponed to a later taxable period than the taxable period in which such Tax attributes would have been utilized but for such Carryback. If there is a Final Determination that results in any change to or adjustment of an Income Tax Benefit Actually Realized by a member of the Parent Group that is directly attributable to a Carryback, then Parent (or its designee) shall make a payment to SpinCo, or SpinCo shall make a payment to Parent (or its designee), as may be necessary to adjust the payments between SpinCo and Parent (or its designee) to reflect the payments that would have been made under this Section 7(b) had the adjusted amount of such Income Tax Benefit been taken into account in computing the payments due under this Section 7(b).

8. Cooperation and Exchange of Information .

(a) Cooperation and Exchange of Information . Each of Parent and SpinCo, on behalf of itself and each member of the Parent Group and the SpinCo Group, respectively, agrees to provide the other party (or its designee) with such cooperation or information as such other party (or its designee) reasonably shall request in connection with the determination of any payment or any calculations described in this Agreement, the preparation or filing of any Tax Return or claim for Refund, or the conduct of any Proceeding. Such cooperation and information shall include, without limitation, upon reasonable notice (i) promptly forwarding copies of appropriate notices and forms or other communications (including, without limitation, information document requests, revenue agent’s reports and similar reports, notices of proposed adjustments and notices of deficiency) received from or sent to any Tax Authority or any other administrative, judicial or governmental authority, (ii) providing copies of all relevant Tax Returns, together with accompanying schedules and related workpapers, documents relating to rulings or other determinations by any Tax Authority, and

 

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such other records concerning the ownership and tax basis of property, or other relevant information, (iii) the provision of such additional information and explanations of documents and information provided under this Agreement (including statements, certificates, forms, returns and schedules delivered by either party) as shall be reasonably requested by Parent (or its designee) or SpinCo (or its designee), as the case may be, (iv) the execution of any document that may be necessary or reasonably helpful in connection with the filing of any Tax Return, a claim for a Refund, or in connection with any Proceeding, including such waivers, consents or powers of attorney as may be necessary for Parent or SpinCo, as the case may be, to exercise its rights under this Agreement, and (v) the use of Parent’s or SpinCo’s, as the case may be, reasonable efforts to obtain any documentation from a governmental authority or a third party that may be necessary or reasonably helpful in connection with any of the foregoing. It is expressly the intention of the parties to this Agreement to take all actions that shall be necessary to establish Parent as the sole agent for Tax purposes of each member of the SpinCo Group with respect to all Combined Returns. Upon reasonable notice, each of Parent and SpinCo shall make its, or shall cause the members of the Parent Group or the SpinCo Group, as applicable, to make their, employees and facilities available on a mutually convenient basis to provide explanation of any documents or information provided hereunder. Any information obtained under this Section 8 shall be kept confidential, except as otherwise reasonably may be necessary in connection with the filing of Tax Returns or claims for Refund or in conducting any Proceeding.

(b) Retention of Records . Each of Parent and SpinCo agrees to retain all Tax Returns, related schedules and workpapers, and all material records and other documents as required under Section 6001 of the Code and the Treasury Regulations promulgated thereunder (and any similar provision of state, local, or foreign law) existing on the date hereof or created in respect of (i) any taxable period that ends on or before or includes the Distribution Date or (ii) any taxable period that may be subject to a claim hereunder until the later of (A) the expiration of the statute of limitations (including extensions) for the taxable periods to which such Tax Returns and other documents relate and (B) the Final Determination of any payments that may be required in respect of such taxable periods under this Agreement. From and after the end of the period described in the preceding sentence of this Section 8(b), if a member of the Parent Group or the SpinCo Group wishes to dispose of any such records and documents, then Parent or SpinCo, as the case may be, shall provide written notice thereof to the other party and shall provide the other party the opportunity to take possession of any such records and documents within ninety (90) days after such notice is delivered; provided , however , that if such other party does not, within such 90-day period, confirm its intention to take possession of such records and documents, Parent or SpinCo, as the case may be, may destroy or otherwise dispose of such records and documents.

(c) Remedies . Each of Parent and SpinCo hereby acknowledges and agrees that (i) the failure of any member of the Parent Group or the SpinCo Group, as the case may be, to comply with the provisions of this Section 8 may result in substantial harm to the Parent Group or the SpinCo Group, as the case may be, including the inability to determine or appropriately substantiate a Tax Liability (or a position in respect thereof) for which the Parent Group (or a member thereof) or the SpinCo Group (or a member thereof), as applicable, would be responsible under this Agreement or appropriately defend against an adjustment thereto by a Tax Authority, (ii) the remedies available to the Parent Group for the breach by a member of the SpinCo Group of its obligations under this Section 8 shall include (without limitation) the

 

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indemnification by SpinCo of the Parent Group for any Tax Liabilities incurred or any Tax Benefit lost or postponed by reason of such breach and the forfeiture by the SpinCo Group of any related rights to indemnification by Parent and (iii) the remedies available to the SpinCo Group for the breach by a member of the Parent Group of its obligations under this Section 8 shall include (without limitation) the indemnification by Parent of the SpinCo Group for any Tax Liabilities incurred or any Tax Benefit lost or postponed by reason of such breach and the forfeiture by the Parent Group of any related rights to indemnification by SpinCo.

(d) Reliance by Parent . If any member of the SpinCo Group supplies information to a member of the Parent Group in connection with a Tax Liability and an officer of a member of the Parent Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the Parent Group identifying the information being so relied upon, the chief financial officer of SpinCo (or his or her designee) shall certify in writing that to his knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete. SpinCo agrees to indemnify and hold harmless each member of the Parent Group and its directors, officers and employees from and against any fine, penalty, or other cost or expense of any kind attributable to a member of the SpinCo Group having supplied, pursuant to this Section 8, a member of the Parent Group with inaccurate or incomplete information in connection with a Tax Liability.

(e) Reliance by SpinCo . If any member of the Parent Group supplies information to a member of the SpinCo Group in connection with a Tax Liability and an officer of a member of the SpinCo Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the SpinCo Group identifying the information being so relied upon, the chief financial officer of Parent (or his or her designee) shall certify in writing that to his knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete. Parent agrees to indemnify and hold harmless each member of the SpinCo Group and its directors, officers and employees from and against any fine, penalty, or other cost or expense of any kind attributable to a member of the Parent Group having supplied, pursuant to this Section 8, a member of the SpinCo Group with inaccurate or incomplete information in connection with a Tax Liability.

9. Resolution of Disputes . The provisions of Article X of the Separation Agreement (Dispute Resolution) shall apply to any dispute arising in connection with this Agreement; provided , however , that in the case of disputes arising under this Agreement, Parent and SpinCo shall jointly select the arbitrator, who shall be an attorney or accountant who is generally recognized in the tax community as a qualified and competent tax practitioner with experience in the tax area involved in the issue or issues to be resolved.

10. Payments .

(a) Method of Payment . All payments required by this Agreement shall be made by (i) wire transfer to the appropriate bank account as may from time to time be designated by the parties for such purpose; provided , that on the date of such wire transfer, notice of the transfer is given to the recipient thereof in accordance with Section 11, or (ii) any other method agreed to by the parties. All payments due under this Agreement shall be deemed to be paid when available funds are actually received by the payee.

 

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(b) Interest . Any payment required by this Agreement that is not made on or before the date required hereunder shall bear interest, from and after such date through the date of payment, at the Underpayment Rate.

(c) Characterization of Payments . For all Income Tax purposes, the parties hereto agree to treat, and to cause their respective Affiliates to treat, (i) any payment required by this Agreement or by the Separation Agreement, as either a contribution by Parent to SpinCo or a distribution by SpinCo to Parent, as the case may be, occurring immediately prior to the Spin-Off and (ii) any payment of interest or non-federal Income Taxes by or to a Tax Authority, as taxable or deductible, as the case may be, to the party entitled under this Agreement to retain such payment or required under this Agreement to make such payment, in either case, except as otherwise mandated by applicable law or a Final Determination; provided , that in the event it is determined (A) pursuant to applicable law that it is more likely than not, or (B) pursuant to a Final Determination, that any such treatment is not permissible (or that an Indemnified Party nevertheless suffers an Tax detriment as a result of such payment), the payment in question shall be adjusted to place the Indemnified Party in the same after-Tax position it would have enjoyed absent such applicable law or Final Determination.

11. Compensatory Equity Interests Treatment .

(a) Deductions. To the extent permitted by law, (i) Parent (or the appropriate member of the Parent Group) shall claim all Income Tax deductions arising by reason of (x) exercises of Options or compensatory warrants held by any Expedia Service Provider to acquire Parent common stock or SpinCo common stock, (y) payments made with respect to Parent RSUs held by any Expedia Service Provider, or (z) payments made with respect to SpinCo RSUs held by Mr. Dara Khosrowshahi and (ii) SpinCo (or the appropriate member of the SpinCo Group) shall claim all Income Tax deductions arising by reason of (x) exercises of Options or compensatory warrants held by any TripAdvisor Service Provider to acquire Parent common stock or SpinCo common stock or (y) payments made with respect to SpinCo RSUs held by any TripAdvisor Service Provider. For purposes of this Section 11, Mr. Barry Diller shall be treated as an Expedia Service Provider only with respect to his Options to acquire Parent common stock and his Parent RSUs and as a TripAdvisor Service Provider only with respect to his Options to acquire SpinCo common stock and his SpinCo RSUs; provided , however , (i) if there is a Final Determination that Parent and not SpinCo is entitled to a deduction with respect to any such SpinCo Options or SpinCo RSUs held by Mr. Barry Diller, Parent shall pay to SpinCo, when Actually Realized, any Tax Benefit relating thereto and (ii) if there is a Final Determination that SpinCo and not Parent is entitled to a deduction with respect to any such Parent Options or Parent RSUs held by Mr. Barry Diller, SpinCo shall pay to Parent, when Actually Realized, any Tax Benefit relating thereto. For the avoidance of doubt, Mr. Dara Khosrowshahi shall be treated as an Expedia Service Provider for all Tax purposes, including with respect to his Parent RSUs and SpinCo RSUs, and Parent shall claim all Income Tax deductions arising by reason of payments made with respect to such Parent RSUs and SpinCo RSUs; provided , however , if there is a Final Determination that SpinCo and not Parent is entitled to a deduction with respect to any such SpinCo RSUs held by Mr. Khosrowshahi, SpinCo shall pay to Parent, when Actually Realized, any Tax Benefit relating thereto.

 

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(b) Withholding and Reporting . Parent shall, to the extent required by law, withhold applicable Taxes and satisfy applicable Tax reporting obligations with respect to (x) exercises of Options or compensatory warrants held by Expedia Service Providers to acquire Parent common stock or SpinCo common stock. (y) payments made with respect to Parent RSUs held by Expedia Service Providers and (z) payments made with respect to SpinCo RSUs held by Mr. Dara Khosrowshahi. SpinCo shall, to the extent required by law, withhold applicable Taxes and satisfy applicable Tax reporting obligations with respect to (x) exercises of Options or compensatory warrants held by TripAdvisor Service Providers to acquire Parent common stock or SpinCo common stock and (y) payments made with respect to SpinCo RSUs held by TripAdvisor Service Providers. Unless otherwise determined by Parent in its sole discretion, Tax withholding and reporting with respect to exercises of Options or compensatory warrants described in this Section 11(b) shall be conducted in a manner consistent with past practice of Parent (including as historically conducted by Morgan Stanley on behalf of Parent with respect to analogous exercises of Options or compensatory warrants to acquire Parent common stock or IAC/InterActiveCorp common stock in connection with the spin-off of Parent from IAC/InterActiveCorp).

12. Notices . Notices, requests, permissions, waivers, and other communications hereunder shall be in writing and shall be deemed to have been duly given upon (a) a transmitter’s confirmation of a receipt of a facsimile transmission (but only if followed by confirmed delivery of a standard overnight courier the following Business Day or if delivered by hand the following Business Day), or (b) confirmed delivery of a standard overnight courier or delivered by hand, to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice):

 

If to Parent, to:     

Expedia, Inc.

333 108 th Avenue NE

Bellevue, WA 98004

Attention: General Counsel

Telecopier: (425) 679-7200

With a copy to:     

Wachtell, Lipton, Rosen & Katz

51 W. 52 nd St.

New York, NY 10019

Attention: Andy Nussbaum

Telecopier: (212) 403-2000

If to SpinCo to:     

TripAdvisor, Inc.

141 Needham Street

Newton, MA 02464

Attention: General Counsel

Telecopier: (617) 670-6300

 

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Such names and addresses may be changed by notice given in accordance with this Section 12.

13. Designation of Affiliate . Each of Parent and SpinCo may assign any of its rights or obligations under this Agreement to any member of the Parent Group or the SpinCo Group, respectively, as it shall designate; provided , however , that no such assignment shall relieve Parent or SpinCo, respectively, of any obligation hereunder, including any obligation to make a payment hereunder to SpinCo or Parent, respectively, to the extent such designee fails to make such payment.

14. Miscellaneous . Except to the extent otherwise provided in this Agreement, this Agreement shall be subject to the provisions of Article XIV (Miscellaneous) of the Separation Agreement to the extent set forth therein.

 

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the day and year first written above.

 

EXPEDIA, INC.
By:  

/s/ Mark D. Okerstrom

Name:   Mark D. Okerstrom
Title:  

Executive Vice President &

Chief Financial Officer

TRIPADVISOR, INC.
By:  

/s/ Stephen Kaufer

Name:   Stephen Kaufer
Title:   President & Chief Executive Officer

 

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Exhibit 10.3

EMPLOYEE MATTERS AGREEMENT

by and between

EXPEDIA, INC.

and

TRIPADVISOR, INC.

Dated as of December 20, 2011


TABLE OF CONTENTS

 

            Page  

ARTICLE I

     DEFINITIONS      1   

ARTICLE II

     GENERAL PRINCIPLES      7   

2.1

     Employment of TripAdvisor Employees      7   

2.2

     Assumption and Retention of Liabilities; Related Assets      7   

2.3

     TripAdvisor Participation in Expedia Benefit Plans      8   

2.4

     Terms of Participation by TripAdvisor Employees in TripAdvisor Benefit Plans      8   

2.5

     Commercially Reasonable Efforts      8   

2.6

     Regulatory Compliance      8   

2.7

     Approval by Expedia as Sole Stockholder      9   

ARTICLE III

     SAVINGS PLANS      9   

3.1

     Savings Plan      9   

3.2

     Stock Considerations      9   

ARTICLE IV

     HEALTH AND WELFARE PLANS      10   

4.1

     U.S. Health and Welfare Plans      10   
    

(a)

     Transition Period      10   
    

(b)

     Establishment of TripAdvisor Health and Welfare Plans      10   
    

(c)

     Flexible Benefit Plan      10   
    

(d)

     COBRA and HIPAA Compliance      11   

4.2

     Non-U.S. Health and Welfare Plans      11   

4.3

     Retention of Sponsorship and Liabilities      11   

4.4

     Vendor Contracts      12   
    

(a)

     Third-Party ASO Contracts, Group Insurance Policies and HMOs      12   
    

(b)

     Effect of Change in Rates      12   

4.5

     Workers’ Compensation Liabilities      12   

4.6

     Payroll Taxes and Reporting of Compensation      13   

ARTICLE V

     EXECUTIVE BENEFITS AND OTHER BENEFITS      13   

5.1

     Assumption of Obligations      13   

5.2

     Expedia Incentive Plans      13   
     (a)      TripAdvisor Bonus Awards      13   
     (b)      Expedia Bonus Awards      13   

5.3

     Expedia Long-Term Incentive Plan      14   
     (a)      Vested Expedia Options      14   
     (b)     

Unvested Expedia Options Held by Expedia Employees (other than Barry Diller) and Former Expedia Employees

     15   

 

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(c)       

  

Unvested Expedia Options Held by TripAdvisor Employees (other than Barry Diller) and Former TripAdvisor Employees

     15   
    

(d)      

  

Unvested Expedia Options Held by Barry Diller

     16   
    

(e)       

  

Expedia RSUs Held by Expedia Employees (other than Expedia RSUs Held by Barry Diller and other than the DK Performance-Based Expedia RSUs) and Former Expedia Employees and Expedia RSUs Awarded in Respect of Service as an Expedia Director

     17   
    

(f)       

  

Expedia RSUs Held by TripAdvisor Employees (other than Barry Diller) and Former TripAdvisor Employees

     17   
    

(g)      

  

Expedia RSUs Held by Barry Diller

     18   
    

(h)      

  

DK Performance-Based Expedia RSUs

     18   
    

(i)       

  

Foreign Grants/Awards

     19   
    

(j)       

  

Miscellaneous Option and Other RSU Terms

     19   
    

(k)      

  

Waiting Period for Exercisability of Options and Grant of Options and RSUs

     20   
    

(l)       

  

Equity Plan Administrator

     20   

5.4

     Restrictive Covenants      20   

5.5

     Employment Agreements      21   

5.6

     Registration Requirements      21   

5.7

     Expedia Executive DC Plan      21   

5.8

     Severance      21   

5.9

     Miscellaneous      22   

ARTICLE VI

     GENERAL AND ADMINISTRATIVE      22   

6.1

     Sharing of Participant Information      22   

6.2

     Reasonable Efforts/Cooperation      22   

6.3

     No Third-Party Beneficiaries      22   

6.4

     Audit Rights With Respect to Information Provided      23   

6.5

     Fiduciary Matters      23   

6.6

     Consent of Third Parties      23   

ARTICLE VII

     MISCELLANEOUS      24   

7.1

     Effect If Effective Time Does Not Occur      24   

7.2

     Relationship of Parties      24   

7.3

     Affiliates      24   

7.4

     Notices      24   

7.5

     Incorporation of Separation Agreement Provisions      25   

 

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EMPLOYEE MATTERS AGREEMENT

This Employee Matters Agreement (this “ Agreement ”), dated as of December 20, 2011, with effect as of the Effective Time, is entered into by and between Expedia, Inc., a Delaware corporation (“ Expedia ”), and TripAdvisor, Inc., a Delaware corporation (“ TripAdvisor ,” and together with Expedia, the “ Parties ”).

RECITALS :

WHEREAS, Expedia and TripAdvisor have entered into a Separation Agreement pursuant to which the Parties have set out the terms on which, and the conditions subject to which, they wish to implement the Separation (as defined in the Separation Agreement) (such agreement, as amended, restated or modified from time to time, the “ Separation Agreement ”).

WHEREAS, in connection therewith, Expedia and TripAdvisor have agreed to enter into this Agreement to allocate between them assets, liabilities and responsibilities with respect to certain employee compensation, pension and benefit plans, programs and arrangements and certain employment matters.

NOW THEREFORE, in consideration of the mutual agreements, covenants and other provisions set forth in this Agreement, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Unless otherwise defined in this Agreement, capitalized words and expressions and variations thereof used in this Agreement or in its Appendices have the meanings set forth below. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Separation Agreement.

1.1 “ Affiliate ” has the meaning given that term in the Separation Agreement.

1.2 “ Agreement ” means this Employee Matters Agreement, including all the Schedules hereto.

1.3 “ Ancillary Agreements ” has the meaning given that term in the Separation Agreement.

1.4 “ Approved Leave of Absence ” means an absence from active service (a) due to an individual’s inability to perform his or her regular job duties by reason of illness or injury and resulting in eligibility to receive benefits pursuant to the terms of the Expedia Short-Term Disability Plan or the Expedia Long-Term Disability Plan, or (b) pursuant to an approved leave policy with a guaranteed right of reinstatement.

1.5 “ ASO Contract ” has the meaning set forth in Section 4.4(a).


1.6 “ Auditing Party ” has the meaning set forth in Section 6.4(a).

1.7 “ Benefit Plan ” means, with respect to an entity or any of its Subsidiaries, (a) each “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) and all other employee benefits arrangements, policies or payroll practices (including, without limitation, severance pay, sick leave, vacation pay, salary continuation, disability, retirement, deferred compensation, bonus, stock option or other equity-based compensation, hospitalization, medical insurance or life insurance) sponsored or maintained by such entity or by any of its Subsidiaries (or to which such entity or any of its Subsidiaries contributes or is required to contribute) and (b) all “employee pension benefit plans” (as defined in Section 3(2) of ERISA), occupational pension plan or arrangement or other pension arrangements sponsored, maintained or contributed to by such entity or any of its Subsidiaries (or to which such entity or any of its Subsidiaries contributes or is required to contribute). For the avoidance of doubt, “Benefit Plans” includes Health and Welfare Plans and Executive Benefit Plans. When immediately preceded by “Expedia,” Benefit Plan means any Benefit Plan sponsored, maintained or contributed to by Expedia or an Expedia Entity or any Benefit Plan with respect to which Expedia or an Expedia Entity is a party. When immediately preceded by “TripAdvisor,” Benefit Plan means any Benefit Plan sponsored, maintained or contributed to by TripAdvisor or any TripAdvisor Entity or any Benefit Plan with respect to which TripAdvisor or a TripAdvisor Entity is a party.

1.8 “ COBRA ” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code § 4980B and ERISA §§ 601 through 608.

1.9 “ Code ” means the Internal Revenue Code of 1986, as amended, or any successor federal income tax law. Reference to a specific Code provision also includes any proposed, temporary or final regulation in force under that provision.

1.10 “ Committee ” has the meaning set forth in Section 5.3(a).

1.11 “ DK Performance-Based Expedia RSUs ” means the 800,000 Expedia RSUs granted to Dara Khosrowshahi on March 7, 2006.

1.12 “ Effective Date ” has the meaning given that term in the Separation Agreement.

1.13 “ Effective Time ” has the meaning given that term in the Separation Agreement.

1.14 “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific provision of ERISA also includes any proposed, temporary or final regulation in force under that provision.

1.15 “ Expedia ” has the meaning set forth in the preamble to this Agreement.

1.16 “ Expedia Allocation Factor ” means the quotient obtained by dividing the Expedia Post-Separation Stock Value by the sum of the Expedia Post-Separation Stock Value and the TripAdvisor Stock Value.

 

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1.17 “ Expedia Common Stock ” means, with respect to periods prior to the Separation, shares of common stock, $0.001 par value per share, of Expedia, and with respect to periods following the Separation, shares of common stock, $0.0001 par value per share, of Expedia.

1.18 “ Expedia Director DC Plan ” means the Expedia, Inc. Non-Employee Director Deferred Compensation Plan, in effect as of the time relevant to the applicable provision of this Agreement.

1.19 “ Expedia Employee ” means any individual who, immediately prior to the Effective Time, is either actively employed by, or then on Approved Leave of Absence from, any Expedia Entity.

1.20 “ Expedia Entities ” means the members of the Expedia Group, as defined in the Separation Agreement, and their respective Subsidiaries and Affiliates, excluding any business or operations (whether current or historical, regardless of whether discontinued or sold) that are included in the Separated Businesses.

1.21 “ Expedia Executive Benefit Plans ” means the executive benefit and nonqualified plans, programs, agreements, and arrangements established, sponsored, maintained, or agreed upon, by any Expedia Entity for the benefit of employees and former employees of any Expedia Entity before the Effective Time. For the avoidance of doubt, “Expedia Executive Benefit Plans” includes the Expedia Executive DC Plan.

1.22 “ Expedia Executive DC Plan ” means the Expedia Executive Deferred Compensation Plan, in effect as of the time relevant to the applicable provision of this Agreement.

1.23 “ Expedia Flexible Benefit Plan ” means the flexible benefit plan maintained by Expedia as in effect as of the time relevant to the applicable provision of this Agreement.

1.24 “ Expedia Incentive Plans ” means any of the annual or short term incentive plans of Expedia, all as in effect as of the time relevant to the applicable provisions of this Agreement.

1.25 “ Expedia Long-Term Incentive Plan ” means the Amended and Restated Expedia, Inc. 2005 Stock and Annual Incentive Plan.

1.26 “ Expedia Post-Separation Stock Value ” means the closing per-share price of Expedia Common Stock in the “when issued market” on December 20, 2011, as listed on the NASDAQ as of 4:00 P.M. New York City time.

1.27 “ Expedia Ratio ” means the quotient obtained by dividing the Expedia Stock Value by the Expedia Post-Separation Stock Value.

1.28 “ Expedia Retirement Savings Plan ” means the Expedia, Inc. Retirement Savings Plan as in effect as of the time relevant to the applicable provision of this Agreement.

 

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1.29 “ Expedia Stock Value ” means the closing per-share price of Expedia Common Stock trading “regular way with due bills” on December 20, 2011, as listed on the NASDAQ as of 4:00 P.M., New York City time.

1.30 “ Former Expedia Employee ” means any individual who as of the Effective Time is a former employee of the Expedia Group or the TripAdvisor Group, and whose last employment with the Expedia Group or TripAdvisor Group, was with an Expedia Entity.

1.31 “ Former TripAdvisor Employee ” means any individual who as of the Effective Time is a former employee of the TripAdvisor Group or the Expedia Group, and whose last employment with the TripAdvisor Group or Expedia Group, was with a TripAdvisor Entity.

1.32 “ Former TripAdvisor Non-U.S. Employee ” means any Former TripAdvisor Employee whose last employment was with a TripAdvisor Entity located outside of the U.S.

1.33 “ Former TripAdvisor U.S. Employee ” means any Former TripAdvisor Employee whose last employment was with a TripAdvisor Entity located in the U.S.

1.34 “ Group Insurance Policies ” has the meaning set forth in Section 4.4(a).

1.35 “ Health and Welfare Plans ” means any plan, fund or program which was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, medical (including PPO, EPO and HDHP coverages), dental, prescription, vision, short-term disability, long-term disability, life and AD&D, employee assistance, group legal services, wellness, cafeteria (including premium payment, health flexible spending account and dependent care flexible spending account components), travel reimbursement, transportation, or other benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs or day care centers, scholarship funds, or prepaid legal services, including any such plan, fund or program as defined in Section 3(1) of ERISA.

1.36 “ HIPAA ” means the health insurance portability and accountability requirements for “group health plans” under the Health Insurance Portability and Accountability Act of 1996, as amended.

1.37 “ HMO ” means a health maintenance organization that provides benefits under the Expedia Medical Plans or the TripAdvisor Medical Plans.

1.38 “ HMO Agreements ” has the meaning set forth in Section 4.4(a).

1.39 “ H&W Transition Period ” has the meaning set forth in Section 4.1(a).

1.40 “ H&W Transition Period Amount ” has the meaning set forth in Section 4.1(a).

1.41 “ Immediately after the Effective Date ” means on the first moment of the day after the Effective Date.

 

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1.42 “ Liability ” has the meaning given that term in the Separation Agreement.

1.43 “ Medical Plan ” when immediately preceded by “Expedia,” means the Benefit Plan under which medical benefits are provided to Expedia Employees established and maintained by Expedia. When immediately preceded by TripAdvisor, Medical Plan means the Benefit Plan under which medical benefits are provided to TripAdvisor Employees to be established by TripAdvisor pursuant to Article IV.

1.44 “ NASDAQ ” means the National Association of Securities Dealers Inc. Automated Quotation System.

1.45 “ Non-parties ” has the meaning set forth in Section 6.4(b).

1.46 “ Option ” when immediately preceded by “Expedia” means an option (either nonqualified or incentive) to purchase shares of Expedia Common Stock pursuant to the Expedia Long-Term Incentive Plan. When immediately preceded by “TripAdvisor,” Option means an option (either nonqualified or incentive) to purchase shares of TripAdvisor Common Stock following the Effective Time pursuant to the TripAdvisor Long-Term Incentive Plan.

1.47 “ Participating Company ” means (a) Expedia and (b) any other Person (other than an individual) that participates in a plan sponsored by any Expedia Entity.

1.48 “ Parties ” has the meaning set forth in the preamble to this Agreement.

1.49 “ Person ” has the meaning given that term in the Separation Agreement.

1.50 “ RSU ” (a) when immediately preceded by “Expedia,” means units issued under an Expedia Benefit Plan representing a general unsecured promise by Expedia to pay the value of shares of Expedia Common Stock in cash or shares of Expedia Common Stock and, (b) when immediately preceded by “TripAdvisor,” means units issued under a TripAdvisor Benefit Plan representing a general unsecured promise by TripAdvisor to pay the value of shares of TripAdvisor Common Stock in cash or shares of TripAdvisor Common Stock.

1.51 “ Reverse Stock Split ” has the meaning given that term in the Separation Agreement.

1.52 “ Securities Act ” has the meaning set forth in Section 5.6.

1.53 “ Separated Businesses ” has the meaning given that term in the Separation Agreement.

1.54 “ Separation ” has the meaning given that term in the Separation Agreement.

1.55 “ Separation Agreement ” has the meaning set forth in the recitals to this Agreement.

 

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1.56 “ Subsidiary ” has the meaning given that term in the Separation Agreement.

1.57 “ Transition Services Agreement ” means the Transition Services Agreement entered into as of the date hereof between Expedia and TripAdvisor.

1.58 “ TripAdvisor ” has the meaning set forth in the preamble to this Agreement.

1.59 “ TripAdvisor Allocation Factor ” means the quotient obtained by dividing the TripAdvisor Stock Value by the sum of the Expedia Post-Separation Stock Value and the TripAdvisor Stock Value.

1.60 “ TripAdvisor Common Stock ” has the meaning given that term in the Separation Agreement.

1.61 “ TripAdvisor Employee ” means any individual who, immediately prior to the Effective Time, is either actively employed by, or then on Approved Leave of Absence from, a TripAdvisor Entity.

1.62 “ TripAdvisor Entities ” means the TripAdvisor Group as defined in the Separation Agreement and any business or operations (whether current or historical regardless of whether discontinued or sold) included in the Separated Businesses.

1.63 “ TripAdvisor Executive Benefit Plans ” means the executive benefit and nonqualified plans, programs, and arrangements established, sponsored, maintained, or agreed upon, by any TripAdvisor Entity for the benefit of employees and former employees of any TripAdvisor Entity before the Effective Time.

1.64 “ TripAdvisor Flexible Benefit Plan ” means the flexible benefit plan to be established by TripAdvisor pursuant to Section 4.1(c) of this Agreement as in effect as of the time relevant to the applicable provision of this Agreement.

1.65 “ TripAdvisor Long-Term Incentive Plan ” means the long-term incentive plan or program to be established by TripAdvisor, effective immediately prior to the Effective Date, in connection with the treatment of Options and RSUs as described in Article V.

1.66 “ TripAdvisor Non-U.S. Employee ” means a TripAdvisor Employee whose principal place of employment or engagement is outside the U.S.

1.67 “ TripAdvisor Ratio ” means the quotient obtained by dividing the Expedia Stock Value by the TripAdvisor Stock Value.

1.68 “ TripAdvisor Retirement Savings Plan ” means the 401(k) and profit sharing plan established by TripAdvisor, as in effect on the date of this Agreement.

 

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1.69 “ TripAdvisor Retirement Savings Plan Trust ” means a trust relating to the TripAdvisor Retirement Savings Plan intended to qualify under Section 401(a) and be exempt under Section 501(a) of the Code.

1.70 “ TripAdvisor Stock Value ” means the closing per-share price of TripAdvisor Common Stock trading in the “when issued market” on December 20, 2011, as listed on the NASDAQ as of 4:00 P.M., New York City time.

1.71 “ TripAdvisor U.S. Employee ” means a TripAdvisor Employee whose principal place of employment or engagement is in the U.S.

1.72 “ U.S. ” means the 50 United States of America and the District of Columbia.

ARTICLE II

GENERAL PRINCIPLES

2.1 Employment of TripAdvisor Employees . All TripAdvisor Employees shall continue to be employees of TripAdvisor or another TripAdvisor Entity, as the case may be, immediately after the Effective Time. Notwithstanding any provision of this Agreement to the contrary, for purposes of this Agreement, the Parties shall treat the individuals (i) listed on Schedule A hereto as Expedia Employees, (ii) listed on Schedule B hereto as TripAdvisor Employees, in each case, following the Effective Time and until the Parties mutually agree otherwise in writing. As soon as practicable following such time as (i) Expedia establishes a corporate entity in China that has legal authority to hire employees, Expedia shall cause such entity to extend written offers of employment to each individual listed on Schedule A hereto, (ii) TripAdvisor establishes a corporate entity in Korea that has legal authority to hire employees, TripAdvisor shall cause such entity to extend a written offer of employment to the individual listed in Section 1 of Schedule B hereto, and (iii) TripAdvisor establishes a corporate entity in Australia that has legal authority to hire employees, TripAdvisor shall cause such entity to extend a written offer of employment to the individual listed in Section 2 of Schedule B hereto. Each offer referred to in the immediately preceding sentence shall provide for compensation, benefits and terms of employment at least as favorable as those in effect at TripAdvisor or Expedia, as applicable, immediately prior to the other company (Expedia or TripAdvisor, as applicable) making such offer.

2.2 Assumption and Retention of Liabilities; Related Assets .

(a) As of the Effective Date, except as expressly provided in this Agreement, the Expedia Entities shall assume or retain and Expedia hereby agrees to pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all Expedia Benefit Plans with respect to all Expedia Employees, Former Expedia Employees and their dependents and beneficiaries, (ii) all Liabilities with respect to the employment or termination of employment of all Expedia Employees, Former Expedia Employees, and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or nonpayroll worker of any Expedia Entity or in any other employment, non-employment, or retainer arrangement, or relationship with any Expedia Entity), in each case to the extent arising in connection with or as a result of employment with or the performance of services to any Expedia Entity, and (iii) any other Liabilities expressly assigned to Expedia under this Agreement. All assets held in trust to fund the Expedia Benefit Plans and all insurance policies funding the Expedia Benefit Plans shall be Expedia Assets (as defined in the Separation Agreement), except to the extent specifically provided otherwise in this Agreement.

 

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(b) From and after the Effective Date, except as expressly provided in this Agreement, TripAdvisor and the TripAdvisor Entities shall assume or retain, as applicable, and TripAdvisor hereby agrees to pay, perform, fulfill and discharge, in due course in full, (i) all Liabilities under all TripAdvisor Benefit Plans, (ii) all Liabilities with respect to the employment or termination of employment of all TripAdvisor Employees, Former TripAdvisor Employees, and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or nonpayroll worker of TripAdvisor or any TripAdvisor Entity or in any other employment, non-employment, or retainer arrangement, or relationship with TripAdvisor or a TripAdvisor Entity), in each case to the extent arising in connection with or as a result of employment with or the performance of services to any TripAdvisor Entity, and (iii) any other Liabilities expressly assigned to TripAdvisor or any TripAdvisor Entity under this Agreement.

2.3 TripAdvisor Participation in Expedia Benefit Plans . Except as expressly provided in this Agreement and the Transition Services Agreement, effective as of the Effective Time, TripAdvisor and each other TripAdvisor Entity shall cease to be a Participating Company in any Expedia Benefit Plan, and Expedia and TripAdvisor shall take all necessary action to effectuate such cessation as a Participating Company.

2.4 Terms of Participation by TripAdvisor Employees in TripAdvisor Benefit Plans . Expedia and TripAdvisor shall agree on methods and procedures, including, without limitation, amending the respective Benefit Plan documents, to prevent TripAdvisor Employees from receiving duplicative benefits from the Expedia Benefit Plans and the TripAdvisor Benefit Plans. With respect to TripAdvisor Employees, each TripAdvisor Benefit Plan shall provide that all service, all compensation and all other benefit-affecting determinations that, as of the Effective Time, were recognized under the corresponding Expedia Benefit Plan shall, as of Immediately after the Effective Date or any subsequent effective date for such TripAdvisor Benefit Plan, receive full recognition, credit and validity and be taken into account under such TripAdvisor Benefit Plan to the same extent as if such items occurred under such TripAdvisor Benefit Plan, except to the extent that duplication of benefits would result or for benefit accrual under any defined benefit pension plan.

2.5 Commercially Reasonable Efforts . Expedia and TripAdvisor shall use commercially reasonable efforts to (a) enter into any necessary agreements to accomplish the assumptions and transfers contemplated by this Agreement; and (b) provide for the maintenance of the necessary participant records, the appointment of the trustees and the engagement of recordkeepers, investment managers, providers, insurers, and other third parties reasonably necessary to maintaining and administering the Expedia Benefit Plans and the TripAdvisor Benefit Plans.

2.6 Regulatory Compliance . Expedia and TripAdvisor shall, in connection with the actions taken pursuant to this Agreement, reasonably cooperate in making any and all appropriate filings required under the Code, ERISA and any applicable securities laws,

 

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implementing all appropriate communications with participants, transferring appropriate records and taking all such other actions as the requesting party may reasonably determine to be necessary or appropriate to implement the provisions of this Agreement in a timely manner.

2.7 Approval by Expedia as Sole Stockholder . Prior to the Effective Time, Expedia shall cause TripAdvisor to adopt the TripAdvisor Long-Term Incentive Plan.

ARTICLE III

SAVINGS PLANS

3.1 Savings Plan . TripAdvisor has established the TripAdvisor Retirement Savings Plan and the TripAdvisor Retirement Savings Plan Trust. Expedia has caused the accounts of the TripAdvisor Employees and Former TripAdvisor Employees under the Expedia Retirement Savings Plan (including any outstanding participant loans) to be transferred to the TripAdvisor Retirement Savings Plan and the TripAdvisor Retirement Savings Plan Trust in cash or such other assets as mutually agreed by Expedia and TripAdvisor. TripAdvisor shall cause the TripAdvisor Retirement Savings Plan to assume and be solely responsible for all Liabilities for plan benefits under the TripAdvisor Retirement Savings Plan to or relating to TripAdvisor Employees and Former TripAdvisor Employees whose accounts have been transferred from the Expedia Retirement Savings Plan. Expedia and TripAdvisor agree to cooperate in making all appropriate filings and taking all reasonable actions required to implement the provisions of this Section 3.1; provided that TripAdvisor acknowledges that it will be responsible for complying with any requirements and applying for any Internal Revenue Service determination letters with respect to the TripAdvisor Retirement Savings Plan.

3.2 Stock Considerations . There is no Expedia Common Stock held in the TripAdvisor Retirement Savings Plan. To the extent that Expedia Employees or Former Expedia Employees receive shares of TripAdvisor Common Stock in connection with the Separation with respect to Expedia Common Stock held under the Expedia Retirement Savings Plan, such shares will be deposited in a TripAdvisor Common Stock Fund under the Expedia Retirement Savings Plan, subject to such limitations, or the removal of the TripAdvisor Common Stock Fund, in each case, as determined solely by Expedia or the applicable fiduciary of the Expedia Retirement Savings Plan. Following the Effective Date, Expedia Employees and Former Expedia Employees shall not be permitted to acquire shares of TripAdvisor Common Stock in the TripAdvisor Common Stock Fund under the Expedia Retirement Savings Plan. Expedia and TripAdvisor shall assume sole responsibility for ensuring that their respective savings plans are maintained in compliance with applicable laws with respect to holding shares of their respective common stock and common stock of the other entity.

 

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ARTICLE IV

HEALTH AND WELFARE PLANS

4.1 U.S. Health and Welfare Plans

(a) Transition Period . Expedia will cause the Expedia Health and Welfare Plans in effect on the Effective Date to provide coverage to TripAdvisor U.S. Employees and Former TripAdvisor U.S. Employees (and, in each case, their beneficiaries and dependents) from and after the Effective Date until December 31, 2011 (such period, the “ H&W Transition Period ”) on the same basis as immediately prior to the Effective Date and in accordance with the terms of Expedia’s Health and Welfare Plans. No later than January 31, 2012, Expedia shall provide to TripAdvisor an invoice for providing coverage to the TripAdvisor U.S. Employees and the Former TripAdvisor U.S. Employees under the Expedia Health and Welfare Plans during the H&W Transition Period, the amount of such invoice to equal the product (such product, the “ H&W Transition Period Amount ”) obtained by multiplying (i) the amount that Expedia would charge TripAdvisor in respect of providing coverage to the TripAdvisor U.S. Employees and Former TripAdvisor U.S. Employees under the Expedia Health and Welfare Plans during December 2011 if the Effective Time did not occur, calculated in accordance with past practice, and (ii) 35%. TripAdvsior shall remit to Expedia the H&W Transition Period Amount no later than February 15, 2012. Expedia’s calculation of the H&W Transition Period Amount pursuant to this Section 4.1(a) shall be final and binding upon TripAdvisor.

(b) Establishment of TripAdvisor Health and Welfare Plans .

(i) Effective as of January 1, 2012, TripAdvisor shall adopt Health and Welfare Plans for the benefit of TripAdvisor U.S. Employees and Former TripAdvisor U.S. Employees, and TripAdvisor shall be responsible for all Liabilities relating to, arising out of or resulting from health and welfare coverage (including COBRA continuation coverage) or claims incurred by or on behalf of TripAdvisor U.S. Employees, Former TripAdvisor U.S. Employees or their covered dependents under the TripAdvisor Health and Welfare Plans prior to, on or after the Effective Date. No Expedia Health and Welfare Plan shall be required to make COBRA continuation coverage available to any TripAdvisor U.S. Employees, Former TripAdvisor U.S. Employees or their covered dependents after the H&W Transition Period.

(ii) For the avoidance of doubt, with respect to any TripAdvisor U.S. Employee who becomes disabled under the terms of the Expedia Health and Welfare Plans and becomes entitled to receive long-term or short-term disability benefits prior to January 1, 2012, such TripAdvisor U.S. Employee shall receive long-term or short-term disability benefits under the TripAdvisor Health and Welfare Plans on and after January 1, 2012 in accordance with the terms of the TripAdvisor Health and Welfare Plans.

(c) Flexible Benefit Plan . TripAdvisor shall continue to participate in the Expedia Flexible Benefit Plan until December 31, 2011 for the benefit of TripAdvisor U.S. Employees. Effective as of January 1, 2012, TripAdvisor shall establish the TripAdvisor Flexible Benefit Plan.

 

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(d) COBRA and HIPAA Compliance . Expedia shall be responsible for administering compliance with the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the Expedia Health and Welfare Plans with respect to Expedia Employees and Former Expedia Employees and their covered dependents who incur a COBRA qualifying event or loss of coverage under the Expedia Health and Welfare Plans at any time before, on or after the Effective Time. Until December 31, 2011, Expedia shall be responsible for administering compliance with the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the Expedia Health and Welfare Plans with respect to TripAdvisor Employees and Former TripAdvisor Employees and their covered dependents who incur a COBRA qualifying event or loss of coverage under the Expedia Health and Welfare Plans at any time through December 31, 2011. On and after January 1, 2011, TripAdvisor or another TripAdvisor Entity shall be responsible for administering compliance with the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the TripAdvisor Health and Welfare Plans and/or the Expedia Health and Welfare Plans with respect to TripAdvisor Employees and Former TripAdvisor Employees and their covered dependents who incur a COBRA qualifying event or loss of coverage under the TripAdvisor Health and Welfare Plans and/or the Expedia Health and Welfare Plans at any time before, on or after the Effective Time. The Parties hereto agree that the consummation of the transactions contemplated by this Agreement and the Separation Agreement shall not constitute a COBRA qualifying event for any purpose of COBRA.

4.2 Non-U.S. Health and Welfare Plans . Effective as of the Effective Date, TripAdvisor shall adopt Health and Welfare Plans for the benefit of TripAdvisor Non-U.S. Employees and Former TripAdvisor Non-U.S. Employees, and TripAdvisor shall be responsible for all Liabilities relating to, arising out of or resulting from health and welfare coverage or claims incurred by or on behalf of TripAdvisor Non-U.S. Employees, Former TripAdvisor Non-U.S. Employees or their covered dependents under the TripAdvisor Health and Welfare Plans prior to, on or after the Effective Date.

4.3 Retention of Sponsorship and Liabilities . Following the Effective Date, Expedia shall retain:

(a) sponsorship of all Expedia Health and Welfare Plans and any trust or other funding arrangement established or maintained with respect to such plans, including any “voluntary employee’s beneficiary association,” or any assets held as of the Effective Date with respect to such plans; and

(b) all Liabilities relating to, arising out of, or resulting from health and welfare coverage or claims incurred by or on behalf of Expedia Employees or Former Expedia Employees or their covered dependents under the Expedia Health and Welfare Plans prior to, on or after the Effective Date.

 

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Other than as contemplated by Section 4.1(a) with respect to the H&W Transition Period, Expedia shall not assume any Liability relating to health and welfare claims incurred by or on behalf of TripAdvisor Employees or Former TripAdvisor Employees or their respective covered dependents prior to, on or after the Effective Date, and such claims shall be satisfied pursuant to Section 4.1(b)(i) and Section 4.2.

4.4 Vendor Contracts .

(a) Third-Party ASO Contracts, Group Insurance Policies and HMOs . Expedia and TripAdvisor shall use commercially reasonable efforts to obligate the third party administrator of each administrative-services-only contract with a third-party administrator that relates to any of the Expedia Health and Welfare Plans (an “ ASO Contract ”), each group insurance policy that relates to any of the Expedia Health and Welfare Plans (“ Group Insurance Policies ”) and each agreement with a Health Maintenance Organization that provides medical services under the Expedia Health and Welfare Plans (“ HMO Agreements ”), in each case, in existence as of the date of this Agreement that is applicable to TripAdvisor Employees, to enter into a separate ASO Contract, Group Insurance Policy and HMO Agreement, as applicable, with TripAdvisor providing for similar terms and conditions as are contained in the ASO Contracts, Group Insurance Policies and HMO Agreements, as applicable, to which Expedia is a party. Such terms and conditions shall include the financial and termination provisions, performance standards, methodology, auditing policies, quality measures and reporting requirements.

(b) Effect of Change in Rates . Expedia and TripAdvisor shall use commercially reasonable efforts to cause each of the insurance companies and third-party administrators providing services and benefits under the Expedia Health and Welfare Plans and the TripAdvisor Health and Welfare Plans to maintain the premium and/or administrative rates based on the aggregate number of participants in both the Expedia Health and Welfare Plans and the TripAdvisor Health and Welfare Plans as of immediately prior to the Effective Date through the end of the year in which the Effective Date occurs. To the extent they are not successful in such efforts, Expedia and TripAdvisor shall each bear the revised premium or administrative rates attributable to the individuals covered by their respective Health and Welfare Plans.

4.5 Workers’ Compensation Liabilities . All workers’ compensation Liabilities relating to, arising out of, or resulting from any claim by an Expedia Employee, Former Expedia Employee, TripAdvisor Employee and Former TripAdvisor Employee that results from an accident occurring, or from an occupational disease which becomes manifest, on or before the Effective Time shall be retained by Expedia. All workers’ compensation Liabilities relating to, arising out of, or resulting from any claim by an Expedia Employee or Former Expedia Employee that results from an accident occurring, or from an occupational

 

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disease which becomes manifest, on or after the Effective Date shall be retained by Expedia. All workers’ compensation Liabilities relating to, arising out of, or resulting from any claim by a TripAdvisor Employee or Former TripAdvisor Employee that results from an accident occurring, or from an occupational disease which becomes manifest, on or after the Effective Date shall be retained by TripAdvisor. For purposes of this Agreement, a compensable injury shall be deemed to be sustained upon the occurrence of the event giving rise to eligibility for workers’ compensation benefits or at the time that an occupational disease becomes manifest, as the case may be. Expedia, TripAdvisor and the other TripAdvisor Entities shall cooperate with respect to any notification to appropriate governmental agencies of the effective time and the issuance of new, or the transfer of existing, workers’ compensation insurance policies and claims handling contracts.

4.6 Payroll Taxes and Reporting of Compensation . Expedia and TripAdvisor shall, and shall cause the other Expedia Entities and the other TripAdvisor Entities to, respectively, take such action as may be reasonably necessary or appropriate in order to minimize Liabilities related to payroll taxes after the Effective Date. Expedia and TripAdvisor shall, and shall cause the other Expedia Entities and the other TripAdvisor Entities to, respectively, each bear its responsibility for payroll tax obligations and for the proper reporting to the appropriate governmental authorities of compensation earned by their respective employees after the Effective Time, including compensation related to the exercise of Options.

ARTICLE V

EXECUTIVE BENEFITS AND OTHER BENEFITS

5.1 Assumption of Obligations . Except as provided in this Agreement, effective as of the Effective Time, TripAdvisor shall assume and be solely responsible for all Liabilities to or relating to TripAdvisor Employees and Former TripAdvisor Employees under all Expedia Executive Benefit Plans and TripAdvisor Executive Benefit Plans. The Parties hereto agree that none of the transactions contemplated by the Separation Agreement or any of the Ancillary Agreements, including, without limitation, this Agreement, constitutes a “change in control,” “change of control” or similar term, as applicable, within the meaning of any Benefit Plan, the Expedia Long-Term Incentive Plan or the TripAdvisor Long-Term Incentive Plan.

5.2 Expedia Incentive Plans .

(a) TripAdvisor Bonus Awards . TripAdvisor shall be responsible for determining all bonus awards that would otherwise be payable under the Expedia Incentive Plans to TripAdvisor Employees for the year in which the Effective Time occurs. TripAdvisor shall also determine for TripAdvisor Employees (i) the extent to which established performance criteria (as interpreted by TripAdvisor, in its sole discretion) have been met, and (ii) the payment level for each TripAdvisor Employee. TripAdvisor shall assume all Liabilities with respect to any such bonus awards payable to TripAdvisor Employees for the year in which the Effective Time occurs and thereafter.

(b) Expedia Bonus Awards . Expedia shall retain all Liabilities with respect to any bonus awards payable under the Expedia Incentive Plans to Expedia Employees for the year in which the Effective Time occurs and thereafter.

 

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5.3 Expedia Long-Term Incentive Plan . Expedia and TripAdvisor shall use commercially reasonable efforts to take all actions necessary or appropriate so that each outstanding Option and RSU granted under any Expedia Long-Term Incentive Plan held by any individual shall be adjusted as set forth in this Article V. The adjustments set forth below shall be the sole adjustments made with respect to Expedia Options and Expedia RSUs in connection with the Reverse Stock Split and the other transactions contemplated by the Separation Agreement. Following the Separation, for any award adjusted under this Section 5.3, any reference to a “change in control,” “change of control” or similar definition in an award agreement, employment agreement or the Expedia Long-Term Incentive Plan (x) with respect to post-Separation equity awards denominated in shares of Expedia Common Stock, such reference shall be deemed to refer to a “change in control,” “change of control” or similar definition as set forth in the applicable award agreement, employment agreement or the Expedia Long-Term Incentive Plan, and (y) with respect to post-Separation equity awards denominated in shares of TripAdvisor Common Stock, such reference shall be deemed to refer to a “Change in Control” as defined in the TripAdvisor Long-Term Incentive Plan.

(a) Vested Expedia Options . As determined by the Compensation Committee of the Expedia Board of Directors (the “ Committee ”) pursuant to its authority under the Expedia Long-Term Incentive Plan, each Expedia Option that is vested as of the Effective Time shall be converted into both a TripAdvisor Option and an Expedia Option and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Expedia Option immediately prior to the Effective Time; provided , however , that from and after the Effective Time:

(i) the number of shares of Expedia Common Stock subject to such Expedia Option, rounded down to the nearest whole share, shall be equal to the product obtained by multiplying (A) the Expedia Ratio by (B) the Expedia Allocation Factor by (C) the number of shares of Expedia Common Stock subject to such Expedia Option immediately prior to the Reverse Stock Split and the Effective Time,

(ii) the number of shares of TripAdvisor Common Stock subject to such TripAdvisor Option, rounded down to the nearest whole share, shall be equal to the product obtained by multiplying (A) the TripAdvisor Ratio by (B) the TripAdvisor Allocation Factor by (C) the number of shares of Expedia Common Stock subject to Expedia Option immediately prior to the Reverse Stock Split and the Effective Time,

(iii) the per share exercise price of such Expedia Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (x) the per share exercise price of such Expedia Option immediately prior to the Reverse Stock Split and the Effective Time by (y) the Expedia Ratio, and

(iv) the per share exercise price of the TripAdvisor Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (x) the per share exercise price of the Expedia Option immediately prior to the Reverse Stock Split and the Effective Time by (y) the TripAdvisor Ratio;

 

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provided , further , however , that (x) the exercise price, the number of shares of Expedia Common Stock and TripAdvisor Common Stock subject to such options and the terms and conditions of exercise of such options shall be determined in a manner consistent with the requirements of Section 409A of the Code, and (y) in the case of any Expedia Option to which Section 421 of the Code applies by reason of its qualification under Section 422 of the Code as of immediately prior to the Effective Time, the exercise price, the number of shares of Expedia Common Stock and TripAdvisor Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 424(a) of the Code.

(b) Unvested Expedia Options Held by Expedia Employees (other than Barry Diller) and Former Expedia Employees . As determined by the Committee pursuant to its authority under the Expedia Long-Term Incentive Plan, each Expedia Option held by an Expedia Employee (other than Barry Diller) or a Former Expedia Employee that is unvested as of the Effective Time shall be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Expedia Option immediately prior to the Effective Time; provided , however , that from and after the Effective Time:

(i) the number of shares of Expedia Common Stock subject to such Expedia Option, rounded down to the nearest whole share, shall be equal to the product obtained by multiplying (A) the number of shares of Expedia Common Stock subject to such Expedia Option immediately prior to the Reverse Stock Split and the Effective Time by (B) the Expedia Ratio, and

(ii) the per share exercise price of such Expedia Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (A) the per share exercise price of such Expedia Option immediately prior to the Reverse Stock Split and the Effective Time by (B) the Expedia Ratio;

provided , further , however , that (x) the exercise price, the number of shares of Expedia Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 409A of the Code, and (y) in the case of any Expedia Option to which Section 421 of the Code applies by reason of its qualification under Section 422 of the Code as of immediately prior to the Effective Time, the exercise price, the number of shares of Expedia Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 424(a) of the Code.

(c) Unvested Expedia Options Held by TripAdvisor Employees (other than Barry Diller) and Former TripAdvisor Employees . As determined by the Committee pursuant to its authority under the Expedia Long-Term Incentive Plan, each Expedia Option held by a TripAdvisor Employee (other than Barry Diller) or Former TripAdvisor Employee that is unvested as of the Effective Time shall be converted into a TripAdvisor Option and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Expedia Option immediately prior to the Effective Time; provided , however , that from and after the Effective Time:

(i) the number of shares of TripAdvisor Common Stock subject to such Option, rounded down to the nearest whole share, shall be equal to the product obtained by multiplying (A) the number of shares of Expedia Common Stock subject to such Expedia Option immediately prior to the Reverse Stock Split and the Effective Time by (B) the TripAdvisor Ratio, and

 

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(ii) the per share exercise price of such TripAdvisor Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (A) the per share exercise price of such Expedia Option immediately prior to the Reverse Stock Split and the Effective Time by (B) the TripAdvisor Ratio;

provided , further , however , that (x) the exercise price, the number of shares of TripAdvisor Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 409A of the Code, and (y) in the case of any Expedia Option to which Section 421 of the Code applies by reason of its qualification under Section 422 of the Code as of the Effective Time, the exercise price, the number of shares of TripAdvisor Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 424(a) of the Code.

(d) Unvested Expedia Options Held by Barry Diller . As determined by the Committee pursuant to its authority under the Expedia Long-Term Incentive Plan, each Expedia Option held by Barry Diller that is unvested as of the Effective Time shall be converted into both a TripAdvisor Option and an Expedia Option and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Expedia Option immediately prior to the Effective Time; provided , however , that from and after the Effective Time:

(i) the number of shares of Expedia Common Stock subject to such Expedia Option, rounded down to the nearest whole share, shall be equal to the product obtained by multiplying (A) the Expedia Ratio by (B) the Expedia Allocation Factor by (C) the number of shares of Expedia Common Stock subject to such Expedia Option immediately prior to the Reverse Stock Split and the Effective Time,

(ii) the number of shares of TripAdvisor Common Stock subject to such TripAdvisor Option, rounded down to the nearest whole share, shall be equal to the product obtained by multiplying (A) the TripAdvisor Ratio by (B) the TripAdvisor Allocation Factor by (C) the number of shares of Expedia Common Stock subject to the Expedia Option immediately prior to the Reverse Stock Split and the Effective Time,

(iii) the per share exercise price of such Expedia Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (A) the per share exercise price of such Expedia Option immediately prior to the Reverse Stock Split and the Effective Time by (B) the Expedia Ratio, and

 

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(iv) the per share exercise price of the TripAdvisor Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (A) the per share exercise price of the Expedia Option immediately prior to the Reverse Stock Split and the Effective Time by (B) the TripAdvisor Ratio;

provided , further , however , that the exercise price, the number of shares of Expedia Common Stock and TripAdvisor Common Stock subject to such options and the terms and conditions of exercise of such options shall be determined in a manner consistent with the requirements of Section 409A of the Code. Following the Effective Time, the satisfaction of conditions to vesting of Barry Diller’s Expedia Options governed by this Section 5.3(d) will be determined based on Barry Diller’s employment with Expedia, and the satisfaction of conditions to vesting of Barry Diller’s TripAdvisor Options governed by this Section 5.3(d) will be determined based on Barry Diller’s employment with TripAdvisor.

(e) Expedia RSUs Held by Expedia Employees (other than Expedia RSUs Held by Barry Diller and other than the DK Performance-Based Expedia RSUs) and Former Expedia Employees and Expedia RSUs Awarded in Respect of Service as an Expedia Director . As determined by the Committee pursuant to its authority under the Expedia Long-Term Incentive Plan (or in the case of Expedia RSUs held under the Expedia Director DC Plan, by the Expedia Board of Directors pursuant to its authority under the Expedia Director DC Plan), Expedia RSUs held by an Expedia Employee or a Former Expedia Employee (other than Expedia RSUs held by Barry Diller and other than the DK Performance-Based Expedia RSUs) and Expedia RSUs awarded in respect of service as an Expedia director (whether pursuant to the Expedia Long-Term Incentive Plan or the Expedia Director DC Plan) shall be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Expedia RSUs immediately prior to the Effective Time; provided , however , that from and after the Effective Time, the number of Expedia RSUs, rounded to the nearest whole share, shall be equal to the product obtained by multiplying (i) the number of Expedia RSUs immediately prior to the Reverse Stock Split and the Effective Time by (ii) the Expedia Ratio.

(f) Expedia RSUs Held by TripAdvisor Employees (other than Barry Diller) and Former TripAdvisor Employees . As determined by the Committee pursuant to its authority under the Expedia Long-Term Incentive Plan, the Expedia RSUs held by a TripAdvisor Employee (other than Barry Diller) or a Former TripAdvisor Employee as of the Effective Time shall be converted into TripAdvisor RSUs, and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Expedia RSUs immediately prior to the Effective Time; provided , however , that from and after the Effective Time, the number of TripAdvisor RSUs, rounded to the nearest whole share, shall be equal to the product obtained by multiplying (i) the number of Expedia RSUs immediately prior to the Reverse Stock Split and the Effective Time by (ii) the TripAdvisor Ratio.

 

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(g) Expedia RSUs Held by Barry Diller . As determined by the Committee pursuant to its authority under the Expedia Long-Term Incentive Plan, the Expedia RSUs held by Barry Diller as of the Effective Time shall be converted into:

(i) Expedia RSUs, and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Expedia RSUs immediately prior to the Effective Time; provided , however , that from and after the Effective Time, (A) the number of Expedia RSUs, rounded to the nearest whole share, shall be equal to one half the number of Expedia RSUs immediately prior to the Reverse Stock Split and the Effective Time, and (B) the amount of any corresponding accrued and unpaid dividends, rounded to the nearest whole cent, shall be equal to the product obtained by multiplying (1) the amount of any corresponding accrued and unpaid dividends immediately prior to the Reverse Stock Split and the Effective Time, by (2) the Expedia Allocation Factor, and

(ii) TripAdvisor RSUs, and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Expedia RSUs immediately prior to the Effective Time; provided , however , that from and after the Effective Time (A) the number of TripAdvisor RSUs, rounded to the nearest whole share, shall be equal to one half the number of Expedia RSUs immediately prior to the Reverse Stock Split and the Effective Time, and (B) the amount of any corresponding accrued and unpaid dividends, rounded to the nearest whole cent, shall be equal to the product obtained by multiplying (1) the amount of any corresponding accrued and unpaid dividends immediately prior to the Reverse Stock Split and the Effective Time, by (2) the TripAdvisor Allocation Factor.

Following the Effective Time, the satisfaction of conditions to vesting of Barry Diller’s Expedia RSUs governed by this Section 5.3(g) will be determined based on Barry Diller’s employment with Expedia, and the satisfaction of conditions to vesting of Barry Diller’s TripAdvisor RSUs governed by this Section 5.3(g) will be determined based on Barry Diller’s employment with TripAdvisor.

(h) DK Performance-Based Expedia RSUs . As determined by the Committee pursuant to its authority under the Expedia Long-Term Incentive Plan, the DK Performance-Based Expedia RSUs that are outstanding as of the Effective Time shall be converted into:

(i) Expedia RSUs, and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Expedia RSUs immediately prior to the Effective Time; provided , however , that from and after the Effective Time (A) the number of Expedia RSUs, rounded to the nearest whole share, shall be equal to one half the number of Expedia RSUs immediately prior to the Reverse Stock Split and the Effective Time, (B) the vesting of such Expedia RSUs will be determined in accordance with the terms of an amended and restated award agreement between Dara Khosrowshahi and Expedia, and (C) the amount of any

 

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corresponding accrued and unpaid dividends, rounded to the nearest whole cent, shall be equal to the product obtained by multiplying (1) the amount of any corresponding accrued and unpaid dividends immediately prior to the Reverse Stock Split and the Effective Time, by (2) the Expedia Allocation Factor; and

(ii) TripAdvisor RSUs, and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Expedia RSUs immediately prior to the Effective Time; provided , however , that from and after the Effective Time (A) the number of TripAdvisor RSUs, rounded to the nearest whole share, shall be equal to one half the number of Expedia RSUs immediately prior to the Reverse Stock Split and the Effective Time, (B) the vesting of such TripAdvisor RSUs will be determined in accordance with the terms of an award agreement between Dara Khosrowshahi and TripAdvisor, and (C) the amount of any corresponding accrued and unpaid dividends, rounded to the nearest whole cent, shall be equal to the product obtained by multiplying (1) the amount of any corresponding accrued and unpaid dividends immediately prior to the Reverse Stock Split and the Effective Time, by (2) the TripAdvisor Allocation Factor.

(i) Foreign Grants/Awards . To the extent that any of the Expedia RSUs or any of the Expedia Options are granted to non-U.S. employees under any domestic or foreign equity-based incentive program sponsored by an Expedia Entity, Expedia and TripAdvisor shall use their commercially reasonable efforts to preserve, at and after the Effective Time, the value and tax treatment accorded to such Expedia Options and such Expedia RSUs granted to non-U.S. employees under any domestic or foreign equity-based incentive program sponsored by an Expedia Entity.

(j) Miscellaneous Option and Other RSU Terms . After the Effective Date, Expedia Options and Expedia RSUs (including any corresponding dividend equivalents) adjusted pursuant to Section 5.3, regardless of by whom held, shall be settled by Expedia pursuant to the terms of the Expedia Long-Term Incentive Plan, and TripAdvisor Options and TripAdvisor RSUs (including any corresponding dividend equivalents), regardless of by whom held, shall be settled by TripAdvisor pursuant to the terms of the TripAdvisor Long-Term Incentive Plan. Accordingly, it is intended that, to the extent of the issuance of such TripAdvisor Options and TripAdvisor RSUs in connection with the adjustment provisions of this Section 5.3, the TripAdvisor Long-Term Incentive Plan shall be considered a successor to the Expedia Long-Term Incentive Plan and to have assumed the obligations of the applicable Expedia Long-Term Incentive Plan to make the adjustment of the Expedia Options and Expedia RSUs as set forth in this Section 5.3. The Effective Time shall not constitute a termination of employment for any TripAdvisor Employees for purposes of any Expedia Option or Expedia RSU and, except as otherwise provided in this Agreement, with respect to grants adjusted pursuant to this Section 5.3, employment with TripAdvisor shall be treated as employment with Expedia with respect to Expedia Options held by TripAdvisor Employees and employment with Expedia shall be treated as employment with TripAdvisor with respect to TripAdvisor Options held by Expedia Employees. Barry Diller shall be treated as (i) an Expedia Employee with respect to the vesting and exercisability of Expedia equity awards, and (ii) a TripAdvisor Employee with respect to the vesting and excercisability of TripAdvisor equity awards.

 

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(k) Waiting Period for Exercisability of Options and Grant of Options and RSUs . The Expedia Options and TripAdvisor Options shall not be exercisable during a period beginning on a date prior to the Effective Date determined by Expedia in its sole discretion, and continuing until the Expedia Post-Separation Stock Value and the TripAdvisor Stock Value are determined after the Effective Time, or such longer period as Expedia, with respect to Expedia Options, and TripAdvisor, with respect to TripAdvisor Options, determines necessary to implement the provisions of this Section 5.3. The Expedia RSUs and TripAdvisor RSUs shall not be settled during a period beginning on a date prior to the Effective Date determined by Expedia in its sole discretion, and continuing until the Expedia Post-Separation Stock Value and the TripAdvisor Stock Value are determined immediately after the Effective Time, or such longer period as Expedia, with respect to Expedia RSUs, and TripAdvisor, with respect to TripAdvisor RSUs, determines necessary to implement the provisions of this Section 5.3.

(l) Equity Plan Administrator . Each of Expedia and TripAdvisor agrees that it will use Morgan Stanley Smith Barney to administer all employee equity awards that are outstanding immediately following the Effective Time (including all such equity awards that are adjusted in accordance with this Section 5.3).

5.4 Restrictive Covenants . Following the Effective Date, TripAdvisor shall use commercially reasonable efforts to monitor the TripAdvisor Employees and Former TripAdvisor Employees to determine whether any such TripAdvisor Employees or Former TripAdvisor Employees have breached any of the restrictive covenants in the agreements evidencing the terms of their Expedia Options and Expedia Awards. As soon as practicable following TripAdvisor’s reasonable belief that a TripAdvisor Employee or Former TripAdvisor Employee has breached any such covenant, TripAdvisor shall provide Expedia in writing with the name and address of such employee or former employee and a description of the breach that such employee or former employee is believed to have committed. Notwithstanding the foregoing or anything in any agreement evidencing the terms of any Expedia Options and Expedia Awards or otherwise to the contrary, it shall not be a violation of any Expedia non-competition or non-solicitation of clients or customers covenant for a TripAdvisor Employee to engage in acts on behalf of TripAdvisor or a TripAdvisor Entity that are otherwise prohibited by the terms of such non-competition or non-solicitation of clients or customers covenants and it shall not be a violation of any TripAdvisor non-competition or non-solicitation of clients or customers covenant for an Expedia Employee to engage in acts on behalf of Expedia or an Expedia Entity that are otherwise prohibited by the terms of such non-competition or non-solicitation of clients or customers covenants. In addition, following the Effective Time, the restrictive covenants (including, without limitation, any proprietary rights agreements or confidential information covenants) to which any TripAdvisor Employee or Former TripAdvisor Employee are party shall run in favor of TripAdvisor (and, to the extent relating to Expedia, shall run in favor of Expedia to the same extent that they ran in favor of Expedia immediately prior to the Effective Time; provided , that the Effective Time shall be treated as a termination of

 

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employment from Expedia for purposes of the duration of Expedia’s ability to enforce the restrictive covenant) and the restrictive covenants to which any Expedia Employee or Former Expedia Employee are party shall run in favor of Expedia.

5.5 Employment Agreements . Any employment agreement between Expedia and a TripAdvisor Employee or Former TripAdvisor Employee shall as of the Effective Time be assigned by Expedia to TripAdvisor and assumed by TripAdvisor.

5.6 Registration Requirements . TripAdvisor agrees that it shall maintain on a continuous basis an effective registration statement under the Securities Act of 1933, as amended (the “ Securities Act ”) (and maintain the prospectus contained therein for its intended use) with respect to the shares of TripAdvisor Common Stock authorized for issuance under the TripAdvisor Long-Term Incentive Plan. Expedia agrees that, following the Effective Date, it shall use reasonable efforts to continue to maintain a Form S-8 Registration Statement with respect to and cause to be registered pursuant to the Securities Act, the shares of Expedia Common Stock authorized for issuance under the Expedia Long-Term Incentive Plan as required pursuant to the Securities Act and any applicable rules or regulations thereunder.

5.7 Expedia Executive DC Plan . Expedia shall retain, or cause its Subsidiaries to retain, all Assets and all Liabilities arising out of or relating to the Expedia Executive DC Plan, and shall make payments to all participants in such plans who are TripAdvisor Employees or Former TripAdvisor Employees in accordance with the terms of the Expedia Executive DC Plan. Expedia and TripAdvisor acknowledge that none of the transactions contemplated by the Separation Agreement will trigger a payment or distribution of compensation under the Expedia Executive DC Plan for any TripAdvisor Employee or Former TripAdvisor Employee and, consequently, that the payment or distribution of any compensation to which any TripAdvisor Employee or Former TripAdvisor Employee is entitled under the Expedia Executive DC Plan will occur upon such TripAdvisor Employee’s separation from service from TripAdvisor and its Subsidiaries or at such other time as provided in the Expedia Executive DC Plan or such TripAdvisor Employee’s or Former TripAdvisor Employee’s deferral election.

5.8 Severance . A TripAdvisor Employee shall not be deemed to have terminated employment for purposes of determining eligibility for severance benefits in connection with or in anticipation of the consummation of the transactions contemplated by the Separation Agreement. TripAdvisor shall be solely responsible for all Liabilities in respect of all costs arising out of payments and benefits relating to the termination or alleged termination of any TripAdvisor Employee or Former TripAdvisor Employee’s employment that occurs prior to, as a result of, in connection with or following the consummation of the transactions contemplated by the Separation Agreement, including any amounts required to be paid (including any payroll or other taxes), and the costs of providing benefits, under any applicable severance, separation, redundancy, termination or similar plan, program, practice, contract, agreement, law or regulation (such benefits to include any medical or other welfare benefits, outplacement benefits, accrued vacation, and taxes).

 

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5.9 Miscellaneous . Immediately following the Effective Time, references to Expedia Common Stock in the Expedia Long-Term Incentive Plan and the Expedia Director DC Plan shall mean common stock, $0.0001 par value per share, of Expedia, and such plans automatically shall be amended to reflect the foregoing without any further action.

ARTICLE VI

GENERAL AND ADMINISTRATIVE

6.1 Sharing of Participant Information . Expedia and TripAdvisor shall share, and Expedia shall cause each other Expedia Entity to share, and TripAdvisor shall cause each other TripAdvisor Entity to share with each other and their respective agents and vendors (without obtaining releases) all participant information necessary for the efficient and accurate administration of each of the TripAdvisor Benefit Plans and the Expedia Benefit Plans. Expedia and TripAdvisor and their respective authorized agents shall, subject to applicable laws, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other Party, to the extent necessary for such administration. Until the Effective Time, all participant information shall be provided in the manner and medium applicable to Participating Companies in Expedia Benefit Plans generally, and thereafter through the end of the H&W Transition Period, all participant information shall be provided in a manner and medium as may be mutually agreed to by Expedia and TripAdvisor.

6.2 Reasonable Efforts/Cooperation . Each of the Parties hereto will use its commercially reasonable efforts to promptly take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by this Agreement. Each of the Parties hereto shall cooperate fully on any issue relating to the transactions contemplated by this Agreement for which the other Party seeks a determination letter or private letter ruling from the Internal Revenue Service, an advisory opinion from the Department of Labor or any other filing (including, but not limited to, securities filings (remedial or otherwise)), consent or approval with respect to or by a governmental agency or authority in any jurisdiction in the U.S. or abroad.

6.3 No Third-Party Beneficiaries . This Agreement is solely for the benefit of the Parties and is not intended to confer upon any other Persons any rights or remedies hereunder. Except as expressly provided in this Agreement, nothing in this Agreement shall preclude Expedia or any other Expedia Entity, at any time after the Effective Time, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any Expedia Benefit Plan, any benefit under any Benefit Plan or any trust, insurance policy or funding vehicle related to any Expedia Benefit Plan. Except as expressly provided in this Agreement, nothing in this Agreement shall preclude TripAdvisor or any other TripAdvisor Entity, at any time after the Effective Time, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any TripAdvisor Benefit Plan, any benefit under any Benefit Plan or any trust, insurance policy or funding vehicle related to any TripAdvisor Benefit Plan.

 

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6.4 Audit Rights With Respect to Information Provided .

(a) Each of Expedia and TripAdvisor, and their duly authorized representatives, shall have the right to conduct reasonable audits with respect to all information required to be provided to it by the other Party under this Agreement. The Party conducting the audit (the “ Auditing Party ”) may adopt reasonable procedures and guidelines for conducting audits and the selection of audit representatives under this Section 6.4. The Auditing Party shall have the right to make copies of any records at its expense, subject to any restrictions imposed by applicable laws and to any confidentiality provisions set forth in the Separation Agreement, which are incorporated by reference herein. The Party being audited shall provide the Auditing Party’s representatives with reasonable access during normal business hours to its operations, computer systems and paper and electronic files, and provide workspace to its representatives. After any audit is completed, the Party being audited shall have the right to review a draft of the audit findings and to comment on those findings in writing within thirty business days after receiving such draft.

(b) The Auditing Party’s audit rights under this Section 6.4 shall include the right to audit, or participate in an audit facilitated by the Party being audited, of any Subsidiaries and Affiliates of the Party being audited and to require the other Party to request any benefit providers and third parties with whom the Party being audited has a relationship, or agents of such Party, to agree to such an audit to the extent any such Persons are affected by or addressed in this Agreement (collectively, the “ Non-parties ”). The Party being audited shall, upon written request from the Auditing Party, provide an individual (at the Auditing Party’s expense) to supervise any audit of a Non-party. The Auditing Party shall be responsible for supplying, at the Auditing Party’s expense, additional personnel sufficient to complete the audit in a reasonably timely manner. The responsibility of the Party being audited shall be limited to providing, at the Auditing Party’s expense, a single individual at each audited site for purposes of facilitating the audit.

6.5 Fiduciary Matters . It is acknowledged that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good faith determination that to do so would violate such a fiduciary duty or standard. Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.

6.6 Consent of Third Parties . If any provision of this Agreement is dependent on the consent of any third party (such as a vendor) and such consent is withheld, the Parties hereto shall use commercially reasonable efforts to implement the applicable provisions of this Agreement to the full extent practicable. If any provision of this Agreement cannot be

 

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implemented due to the failure of such third party to consent, the Parties hereto shall negotiate in good faith to implement the provision in a mutually satisfactory manner. The phrase “commercially reasonable efforts” as used herein shall not be construed to require any Party to incur any non-routine or unreasonable expense or Liability or to waive any right.

ARTICLE VII

MISCELLANEOUS

7.1 Effect If Effective Time Does Not Occur . If the Separation Agreement is terminated prior to the Effective Time, then this Agreement shall terminate and all actions and events that are, under this Agreement, to be taken or occur effective immediately prior to or as of the Effective Time, or Immediately after the Effective Date, or otherwise in connection with the Separation Transactions, shall not be taken or occur except to the extent specifically agreed by Expedia and TripAdvisor.

7.2 Relationship of Parties . Nothing in this Agreement shall be deemed or construed by the Parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the Parties, it being understood and agreed that no provision contained herein, and no act of the Parties, shall be deemed to create any relationship between the Parties other than the relationship set forth herein.

7.3 Affiliates . Each of Expedia and TripAdvisor shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by another Expedia Entity or a TripAdvisor Entity, respectively.

7.4 Notices . All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed given to a Party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses and facsimile numbers and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number or person as a Party may designate by notice to the other Parties):

(a) if to Expedia:

Expedia, Inc.

333 108 th Avenue NE

Bellevue, WA 98004

Attention: General Counsel

Facsimile No.: (425) 679-7251

 

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with a copy to: