{"id":43243,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/agreement-re-tax-allocation-agreement-microsoft-corp-usa.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"agreement-re-tax-allocation-agreement-microsoft-corp-usa","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/agreement-re-tax-allocation-agreement-microsoft-corp-usa.html","title":{"rendered":"Agreement re: Tax Allocation Agreement &#8211; Microsoft Corp., USA Networks Inc. and Expedia Inc."},"content":{"rendered":"<pre>\n                                    AGREEMENT\n\n      THIS AGREEMENT (\"Agreement\") is entered into as of the 9th day of\nNovember, 2001 (the \"Effective Date\"), by and between Microsoft Corporation, a\nWashington corporation (\"Microsoft\"), USA Networks, Inc., a Delaware corporation\n(\"USA\") and Expedia, Inc., a Washington corporation (\"Expedia\"). Microsoft, USA\nand Expedia are hereinafter referred to collectively as the \"Parties\" and\nindividually as a \"Party\".\n\n                                   WITNESSETH:\n\n      WHEREAS, Microsoft and Expedia entered into that certain Tax Allocation\nAgreement dated as of October 1, 1999, (the \"Tax Allocation Agreement\") a copy\nof which is attached hereto; and\n\n      WHEREAS, Microsoft and Expedia have entered into that certain Amended and\nRestated Agreement and Plan of Recapitalization and Merger by and among Expedia,\nUSA, Taipei, Inc., Microsoft and Microsoft E-Holdings, Inc., dated as of July\n15, 2001 (the \"July 15, 2001 Agreement\"), pursuant to which Microsoft\nE-Holdings, Inc. will dispose of all or a portion of its shares of Expedia\nstock; and\n\n      WHEREAS, pursuant to Section 8.13 of the July 15, 2001 Agreement, the\nParties agreed that Expedia's aggregate liability to make payments under the Tax\nAllocation Agreement after July 15, 2001, with respect to any past, present or\nfuture taxable period, shall not exceed $36,300,000 and that the term \"Inherent\nBargain Element\" (as used in the Tax Allocation Agreement) shall not include any\namount with respect to any option to purchase Expedia common stock granted on or\nafter November 16, 1999; and\n\n\n                                       1\n\n\n      WHEREAS, the Parties wish to set forth in this Agreement (i) the manner in\nwhich Expedia is to compensate Microsoft for the compensation deductions\nattributable to the Inherent Bargain Element (as defined herein) in any\ncompensatory options granted prior to November 16, 1999 by Microsoft to former\nMicrosoft employees that are employed by Expedia (collectively referred to as\nthe \"Assumed Microsoft Options\"), (ii) the manner in which the economic benefit\nattributable to the Assumed Microsoft Options shall be determined, (iii) the\nmanner in which Expedia shall pay such economic benefit to Microsoft and (iv)\ncertain other rights and obligations of the Parties with respect to Taxes (as\nsuch term is defined in the July 15, 2001 Agreement).\n\n      NOW THEREFORE, in consideration of the premises and of the mutual\ncovenants and agreements hereinafter set forth, effective as of the Effective\nTime (as such term is defined in the July 15, 2001 Agreement), the Parties agree\nas follows:\n\n      1. COMPENSATION FOR DEDUCTIONS ATTRIBUTABLE TO INHERENT BARGAIN ELEMENT.\n\n            (a) Pursuant to Section 13(a) of the Tax Allocation Agreement, the\nParties hereby cancel, terminate and release any and all of their respective\nrights and obligations under Section 9 of the Tax Allocation Agreement, and the\nrights and obligations of the Parties with respect to the subject matter of such\nSection 9 of the Tax Allocation Agreement shall be governed by the terms of this\nAgreement.\n\n            Expedia shall compensate Microsoft for the U.S. federal and state\nincome tax deductions attributable to the Inherent Bargain Element in any\nAssumed Microsoft Options as described below. The \"Inherent Bargain Element\" in\neach Assumed Microsoft Option has been determined as of the date Expedia\nemployed the optionee and is equal to the excess of (i) the fair market value of\nthe shares (whether shares of \n\n\n                                       2\n\n\nMicrosoft common stock or Expedia stock) to be acquired on exercise of the\noption, determined as of the date the optionee became employed by Expedia, over\n(ii) the exercise price of the option, determined as of the date the optionee\nbecame employed by Expedia; provided however, that such term shall not include\nany amount with respect to any option to purchase Expedia common stock granted\non or after November 16, 1999. Notwithstanding anything to the contrary herein,\nfor any taxable year in which Expedia is not a member of the affiliated group\n(within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as\namended (the \"Code\")) of which Microsoft is the common parent corporation,\nExpedia will report on its U.S. federal and state income tax returns the\ndeductions attributable to the exercise of the Assumed Microsoft Options, and\nExpedia will compensate Microsoft for the amount of such deductions attributable\nto the Inherent Bargain Element in the Assumed Microsoft Options in the\nfollowing manner:\n\n            Expedia shall initially compute the \"Expedia Economic Benefit\" (as\ndefined below) for such taxable year. The Expedia Economic Benefit for each\ntaxable year shall be equal to the excess, if any, of (x) the actual U.S.\nfederal and state income tax liability (including alternative minimum tax\nliability) as calculated under Chapter 1 of the Code of Expedia that would have\nbeen payable by Expedia for such taxable year taking into account all available\ndeductions (including, but not limited to, net operating loss carryforwards,\ncapital loss carryforwards, credits and credit carryforwards), but without\ntaking into account the compensation deductions attributable to the Inherent\nBargain Element in the Assumed Microsoft Options (the \"Hypothetical Expedia Tax\nLiability\") over (y) its actual U.S. federal and state income tax liability\n(including alternative minimum tax liability) for such taxable year as\ncalculated under Chapter 1 of the Code, \n\n\n                                       3\n\n\ntaking into account all available deductions, including the compensation\ndeductions attributable to the Inherent Bargain Element in the Assumed Microsoft\nOptions. For purposes of the foregoing calculation, the amount of compensation\ndeductions attributable to Inherent Bargain Element shall be calculated on a\nfirst in, first out basis, i.e., all deductions arising upon the exercise of\nAssumed Microsoft Options shall be deemed to be attributable to the Inherent\nBargain Element to the extent of the aggregate amount of such Inherent Bargain\nElement in all such Assumed Microsoft Options, subject to the cap described in\nSection 1(b) below.\n\n            Notwithstanding anything to the contrary herein, for any taxable\nyear after March 17, 2000 in which Expedia is a member of an affiliated group\nwithin the meaning of Section 1504(a) of the Code of which Expedia is not the\ncommon parent (the \"New Group\"), and which group files consolidated federal tax\nreturns, the Expedia Economic Benefit shall be the Expedia Economic Benefit\ndetermined as set forth above as if Expedia paid taxes as corporation that was\nnot a member of the New Group, and Expedia shall use its reasonable best efforts\nnot to enter into any arrangement with any member of the New Group that would\nhave the effect of distorting Expedia's stand-alone tax liability.\n\n            (b) After determining the Expedia Economic Benefit, Expedia shall\nsubmit the computation of the Expedia Economic Benefit for each taxable year\n(with all appropriate supporting information) to Microsoft within ten days after\nthe filing of its U.S. federal income tax return for such taxable year. If\nMicrosoft does not object in writing to the computation of the Expedia Economic\nBenefit for the taxable year within thirty days of receipt of the computation\nfrom Expedia, Expedia's determination of the \n\n\n                                       4\n\n\nExpedia Economic Benefit shall become final and binding. If Microsoft objects to\nthe computation, and the parties are unable to reach an agreement by the end of\nsuch thirty-day period, the determination of the Expedia Economic Benefit shall\nbe made by a nationally-recognized accounting firm mutually agreeable to Expedia\nand Microsoft, which shall endeavor to make the final determination within\nthirty days. The determination of the independent accounting firm shall be final\nand binding. Expedia shall pay to Microsoft within fifteen days of the final\ndetermination (as provided above) of the Expedia Economic Benefit for a taxable\nyear an amount of cash equal to the Expedia Economic Benefit for such taxable\nyear; provided, however, that, notwithstanding any other provision contained in\nthis Agreement, the aggregate liability of Expedia to make payments under this\nAgreement after July 15, 2001 shall not exceed $36,300,000.\n\n      2.    MICROSOFT INDEMNITY.\n\n            Microsoft shall indemnify and hold harmless Expedia and USA from and\nagainst (i) any and all liability for Taxes (as such term is defined in the July\n15, 2001 Agreement) with respect to any \"Consolidated Return,\" \"Foreign Combined\nReturn\" or \"State\/Local Combined Return\" (as such terms are defined in the Tax\nAllocation Agreement) and (ii) any and all liability under Treasury Regulation\nSection 1.1502-6 (or any analogous provision of state, local or foreign law) as\na result of Expedia's membership in any consolidated, combined or unitary group\nof which Microsoft or any of its Subsidiaries (as such term is defined in the\nJuly 15, 2001 Agreement) is or was the common parent; provided, however, that\nnothing herein shall be deemed to give Expedia, USA or any party related thereto\nthe right to review any Tax Return (as such term is \n\n\n                                       5\n\n\ndefined in the July 15, 2001 Agreement) of the MS Affiliated Group (as such term\nis defined in the Tax Allocation Agreement) or any member thereof. Nothing in\nthis Section 2 is intended to diminish, increase or expand the obligations of\nMicrosoft set forth in the July 15, 2001 Agreement.\n\n      3.    CARRYBACKS.\n\n            Microsoft agrees not to carry back for federal, state, local or\nforeign tax purposes any net operating loss, capital loss or credit against Tax\n(as such term is defined in the July 15, 2001 Agreement) of Expedia or any of\nits Subsidiaries (as such term is defined in the July 15, 2001 Agreement) for\nany \"separate return year\" (as defined in Treasury Regulation Section 1.1502-1).\n\n      4.    MISCELLANEOUS PROVISIONS.\n\n            (a) This Agreement, together with the Tax Allocation Agreement,\nconstitutes the entire understanding of the Parties with respect to the subject\nmatter contained herein. No alternation, amendment or modification of any of the\nterms of this Agreement shall be valid unless made by an instrument signed in\nwriting by an authorized officer of each Party.\n\n            (b) This Agreement has been made in and shall be construed and\nenforced in accordance with the laws of the State of Washington from time to\ntime obtaining, without regard to any applicable conflicts of law principles.\n\n            (c) This Agreement shall be binding upon and inure to the benefit of\neach Party hereto and its respective successors and assigns.\n\n\n                                       6\n\n\n            (d) This Agreement may be executed simultaneously in two or more\ncounterparts, each of which shall be deemed an original, but all of which\ntogether shall constitute one and the same instrument.\n\n            (e) All notices and other communications hereunder shall be deemed\nto have been duly given if delivered by hand or mailed certified or registered\nmail, postage prepaid:\n\n                  (i)   Microsoft Corporation\n                        One Microsoft Way\n                        Redmond, Washington 98052-6399\n\n                        Telephone  (425) 882-808\n                        Fax        (425) 936-7329\n\n                        Attention:      Chief Financial Officer\n                                       Treasurer\n\n                        with copy to   Law and Corporate Affairs\n\n                  (ii)  Expedia, Inc.\n\n                        13810 SE Eastgate Way\n                        Suite 400\n                        Bellvue, WA  98005\n\n                        Telephone\n                        Fax         (425) 564-7240\n\n                        Attention:  President\n                                    Chief Financial Officer\n\n                  (iii) USA Networks, Inc.\n                        152 West 57th Street\n\n                        New York, NY  10019\n                        Attention: Vice President, Taxes\n                        with copy to: General Counsel\n\n                        Telephone   (212) 314-7380\n                        Fax         (212) 414-7439\n\n\n                                       7\n\n\n      (f) The headings of the paragraphs of this Agreement are inserted for\nconvenience only and shall not constitute a part hereof.\n\n\n\n                                       8\n\n\n\n\n\n            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to\nbe duly executed and their respective corporate seals to be affixed hereto, all\non the date and year first above written.\n\nMICROSOFT CORPORATION               EXPEDIA INC.\n\n\nBy \/s\/ Kevin Fay                    By \/s\/ Richard N. Barton\n  ------------------------------       -----------------------------\n   its authorized representative       its authorized representative\n\n\nUSA NETWORKS, Inc.\n\n\n\nBy \/s\/ Julius Genachowski\n   -----------------------------\n   its authorized representative \n\n\n\n\n\n                                       9\n\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[7491,8221],"corporate_contracts_industries":[9513,9525],"corporate_contracts_types":[9622,9628],"class_list":["post-43243","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-expedia-inc","corporate_contracts_companies-microsoft-corp","corporate_contracts_industries-technology__software","corporate_contracts_industries-transportation__services","corporate_contracts_types-planning","corporate_contracts_types-planning__separation"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43243","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43243"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43243"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43243"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43243"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}