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Exhibit 10.1
TAX MATTERS AGREEMENT
TAX MATTERS AGREEMENT dated as of April 9, 1999 by and among XXXXXXX
ENTERTAINMENT COMPANY, a Delaware corporation ("Xxxxxxx"), XXXXXXX TELEVISION
COMPANY, a Delaware corporation and direct wholly owned subsidiary of XXXXXXX
("GTC"), XXXXXXX COMMUNICATIONS, INC., a Texas corporation and a direct wholly
owned subsidiary of XXXXXXX ("GCI"), and CBS CORPORATION, a Pennsylvania
corporation ("CBS").
WHEREAS, pursuant to the AGREEMENT AND PLAN OF MERGER (the "Merger
Agreement"), dated as of the date hereof by and among XXXXXXX, GTC, GCI, CBS,
CBS DALLAS VENTURES, INC., ("Newco 1"), and CBS DALLAS MEDIA, INC. ("Newco 2"),
both Delaware corporations and direct wholly owned subsidiaries of CBS, Newco 1
will be merged with and into GCI (the "GCI Merger") and Newco 2 will be merged
with and into GTC (the "GTC Merger", and collectively with the GCI Merger, the
"Mergers"), with GCI and GTC as the surviving corporations;
WHEREAS, XXXXXXX BROADCASTING COMPANY, L.P., a Texas limited partnership
(the "Limited Partnership"), is engaged in the business of owning and operating
television broadcast station KTVT-TV, Fort Worth/Dallas, Texas;
WHEREAS, GCI is the sole general partner of the Limited Partnership, and
GTC is the sole limited partner of the Limited Partnership;
WHEREAS, pursuant to the Mergers, Xxxxxxx will receive shares of CBS common
stock, par value $1.00 per share (the "CBS Common Stock"), in exchange for all
of the issued and outstanding shares of GCI common stock (the "GCI Stock") and
GTC common stock (the "GTC Stock");
WHEREAS, the parties intend that for federal income tax purposes each of
the Mergers qualifies as a "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, Xxxxxxx is the common parent of an affiliated group of
corporations (the "Xxxxxxx Group") within the meaning of Section 1504(a) of the
Code and the members of the Xxxxxxx Group have heretofore joined in filing
consolidated federal income Tax Returns;
WHEREAS, CBS is the common parent of an affiliated group of corporations
(the "CBS Group") within the meaning of Section 1504(a) of the Code and the
members of the CBS Group have heretofore joined in filing consolidated federal
income Tax Returns;
WHEREAS, Xxxxxxx and CBS desire on behalf of themselves, their
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Subsidiaries and their successors to set forth their rights and obligations with
respect to Taxes relating to taxable periods before and after the Closing Date;
and
WHEREAS, CBS and Xxxxxxx desire to make certain representations, warranties
and covenants upon which Skadden, Arps, Slate, Xxxxxxx & Xxxx, LLP ("SASM&F")
will rely in rendering its opinion (the "Tax Opinion") as to the qualification
of the Mergers as "reorganizations" within the meaning of Section 368(a) of the
Code;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS(1)
1.1 "Closing Date" shall mean the last day on which, due to the Mergers,
GCI and GTC could be considered members of the Xxxxxxx Group for federal income
Tax purposes.
1.2 "Dispose" (and with correlative meaning, "Disposition") shall mean
pay, discharge, settle or otherwise dispose.
1.3 "Due Date" shall mean, with respect to any Tax Return or payment, the
date on which such Tax Return is due to be filed with or such payment is due to
be made to the appropriate Tax Authority pursuant to applicable law, giving
effect to any applicable extensions of the time for such filing or payment.
1.4 "Final Determination" shall mean (i) the entry of a decision of a
court of competent jurisdiction at such time as an appeal may no longer be taken
from such decision, (ii) the execution of a closing agreement or its equivalent
between the particular taxpayer and the relevant Tax Authority, or (iii) any
other final Disposition complying with the contest provisions of Article VI
hereof.
1.5 "Merger Subsidiaries" shall mean Newco 1 and Newco 2.
1.6 "Payee" shall have the meaning set forth in Section 5.6.
1.7 "Payor" shall have the meaning set forth in Section 5.6.
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(1) Additional definitions are in the preceding portion of this Agreement.
Unless otherwise defined herein, all capitalized terms herein shall have the
meanings ascribed thereto in the Merger Agreement.
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1.8 "Person" shall mean an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
1.9 "Post-Closing Period" shall mean any taxable period beginning after
the Closing Date.
1.10 "Post-Closing Straddle Period" shall mean with respect to a Straddle
Period, that portion of such Straddle Period that begins on the day immediately
following the Closing Date.
1.11 "Pre-Closing Period" shall mean any taxable period that ends on or
prior to the Closing Date.
1.12 "Pre-Closing Straddle Period" shall mean with respect to a Straddle
Period, that portion of such Straddle Period ending on and including the Closing
Date.
1.13 "Related Person" shall mean a related person under Treasury
Regulation Section 1.368-1(e)(3).
1.14 "Section" shall refer to a section of this Agreement unless
otherwise indicated.
1.15 "Straddle Period" shall mean any taxable period that begins before or
on and ends after the Closing Date.
1.16 "Subsidiary" shall mean, with respect to any person, any corporation
or other organization, whether incorporated or unincorporated, of which (i) such
person or any other subsidiary of such person is a general partner or (ii) at
least 50% of the securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization or at
least 50% of the value of the outstanding equity is directly or indirectly owned
or controlled by such person or by any one or more of its subsidiaries, or by
such person and one or more of its subsidiaries.
1.17 "Tax Authority" shall mean the Internal Revenue Service and any
other state, local or foreign governmental authority responsible for the
administration of Taxes.
1.18 "Tax Claim" shall mean a notice of deficiency, proposed adjustment,
assessment, audit, examination, suit, dispute or other claim with respect to
Taxes or a Tax Return.
1.19 "Underpayment Rate" shall mean the interest rate specified under
Section 6621(a)(2) of the Code.
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ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
2.1 Preparation and Filing of Pre-Closing Period Tax Returns. Xxxxxxx
shall prepare (or cause to be prepared) and timely file (or cause to be timely
filed) all Tax Returns with respect to any Pre-Closing Period that includes GCI,
GTC or the Limited Partnership (including all Tax Returns filed on a
consolidated, combined or unitary basis). Xxxxxxx shall have sole discretion as
to the positions in and with respect to any Tax Return described in the
preceding sentence to the extent that it relates to GCI, GTC or the Limited
Partnership; provided, however, that such Tax Returns shall be prepared on a
basis consistent with the past practices of GCI, GTC and the Limited
Partnership. Xxxxxxx shall deliver (or shall cause to be delivered) to CBS a pro
forma set of Tax Returns for each of GCI, GTC and the Limited Partnership for
the Pre-Closing Period ending on the Closing Date at least twenty business days
prior to the Due Date thereof.
2.2 Preparation and Filing of Certain Straddle Period Tax Returns. CBS
shall prepare (or cause to be prepared) all Straddle Period Tax Returns which
include GCI or GTC or the Limited Partnership and, at least twenty business days
prior to the Due Date thereof, shall deliver (or cause to be delivered) such Tax
Return to Xxxxxxx for its review and comment, together with a statement showing
in reasonable detail CBS's calculation of any Taxes attributable to a
Pre-Closing Straddle Period. Any Tax Return described in the preceding sentence
shall be prepared on a basis consistent with the past practice of GCI, GTC and
the Limited Partnership. Xxxxxxx shall have the right to comment on such Tax
Returns and any changes, modifications, additions, or deletions suggested by
Xxxxxxx shall be made to such Tax Returns to the extent they relate to a
Pre-Closing Straddle Period; provided, that such changes, modifications,
additions, or deletions are consistent with past practice; provided, further,
that Gaylord's comments are received by CBS at least fourteen business days
prior to the Due Date of the applicable Tax Return. If CBS does not accept any
change, modification, addition, or deletion suggested by Xxxxxxx to any Straddle
Period Tax Return, then the provisions of Article IX shall govern the dispute.
If the dispute has not been resolved prior to the Due Date for filing of the Tax
Return, the Tax Return shall be filed as originally proposed by CBS, reflecting
any items agreed to by the parties at such time. Xxxxxxx shall pay (or shall
cause to be paid) to CBS the amount of Taxes relating to any Pre-Closing
Straddle Period based on the Tax Returns prepared by CBS. When the dispute is
resolved pursuant to Article IX, a settlement payment shall be made from CBS to
Xxxxxxx in an amount equal to the excess, if any, of (i) the amounts paid by
Xxxxxxx in respect of such Taxes over (ii) the amount of Taxes for the
Pre-Closing Straddle Period finally determined to be due, plus interest at the
Chase Manhattan Bank prime rate in effect from the date of the original payment
from Xxxxxxx to CBS to the date on which CBS repays Xxxxxxx pursuant to this
paragraph. CBS shall not file (or cause to be filed) such Tax Returns without
Gaylord's written consent, which shall not be unreasonably
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withheld or delayed and shall be deemed to be given in the absence of timely
written objection.
2.3 Preparation and Filing of Post-Closing Period Tax Returns. CBS shall
prepare (or cause to be prepared) and timely file (or cause to be timely filed)
any Tax Return with respect to any of GCI, GTC or the Limited Partnership for
any Post-Closing Tax Period.
2.4 Straddle Period Tax Years. To the extent permitted by law or
administrative practice, the taxable year of GCI, GTC and the Limited
Partnership which includes the Closing Date shall be treated as closing on (and
including) the Closing Date. All Tax items of the Limited Partnership for the
period ending on the Closing Date shall be included in the Xxxxxxx Group
consolidated return, and in any state or local income tax return of GTC or GCI
for the taxable period ending on the Closing Date.
2.5 Section 754 Election. An election under Section 754 of the Code (and
comparable provisions of state or local tax law) shall be made on the Tax Return
of the Limited Partnership for its taxable year that includes or ends on the
Closing Date.
2.6 Amended Returns and Claims for Refund. Without the written consent of
Xxxxxxx, none of CBS, GCI, GTC or the Limited Partnership shall amend (or cause
to be amended), or file (or cause to be filed) a claim for a Tax refund with
respect to, any Tax Returns for a Pre-Closing Period or which relate to tax
items in a Pre-Closing Straddle Period, other than disputed items with respect
to which Xxxxxxx received payments pursuant to Section 2.2, that included
Xxxxxxx, GCI, GTC or the Limited Partnership.
ARTICLE III
PAYMENT IN RESPECT OF TAXES
3.1 Payment of Taxes by Xxxxxxx. Xxxxxxx shall pay (or cause to be paid)
in a timely manner to the appropriate Tax Authority all Taxes due with respect
to Tax Returns which it is required to file pursuant to Section 2.1. For all
Taxes in respect of Straddle Periods for which CBS is required to file (or cause
to be filed) Tax Returns pursuant to Section 2.2, Xxxxxxx shall pay CBS the
amount of such Taxes relating to any Pre-Closing Straddle Period (as determined
in accordance with Section 2.2) at least five business days prior to the Due
Date of the Tax Return reporting such Taxes.
3.2 Payment of Taxes by CBS. CBS shall remit (or cause to be remitted) in
a timely manner to the appropriate Tax Authority all Taxes due in respect of any
Tax for which it is required to file a Tax Return pursuant to Section 2.2;
provided, however,
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that Xxxxxxx shall have paid CBS for the amount of such Taxes relating to any
Pre-Closing Straddle Period, as provided in Section 3.1.
3.3 Apportionment in Straddle Periods. Where it is necessary pursuant to
this Agreement to apportion between Xxxxxxx, on the one hand, and CBS, on the
other hand, the Tax liability of GCI, GTC or the Limited Partnership for a
Straddle Period which is not treated under Section 2.4 as closing on the Closing
Date, such liability shall be apportioned between the Pre-Closing Straddle
Period and the Post-Closing Straddle Period on the basis of an interim closing
of the books, except that Taxes imposed on a periodic basis (such as real
property Taxes) shall be allocated on a daily basis.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS FOR TAX OPINION
4.1 Joint Representations, Warranties and Covenants of the Parties. Each
of CBS, Newco 1, Newco 2, Xxxxxxx, GTC, and GCI, after due inquiry, hereby
represents, warrants and covenants that, as of the date hereof and the Effective
Time:
(a) It understands that SASM&F will be relying upon the
representations, warranties and covenants set forth in this Article IV in
rendering the Tax Opinion.
(b) The consideration to be received by Gaylord in the Mergers in
exchange for the GCI Stock and the GTC Stock was negotiated by the parties to
the Merger Agreement at arm's length.
(c) There is no intercorporate indebtedness for borrowed money
existing between (x) CBS and any of its Subsidiaries and (y) Xxxxxxx and any of
its Subsidiaries, that was or will be issued, acquired, or settled at a
discount.
(d) In the Mergers, GCI Stock representing control of GCI and GTC
Stock representing control of GTC, each within the meaning of Section 368(c) of
the Code, will be exchanged for CBS Common Stock. For purposes of this
representation, GCI Stock or GTC Stock exchanged in connection with the Mergers
for cash or other property originating with CBS will be treated as outstanding
GCI Stock or GTC Stock at the Effective Time.
(e) It will not take (or cause to be taken) any position on any Tax
Return, in any proceeding before any Tax Authority, or otherwise, that is
inconsistent with the treatment of the Mergers as "reorganizations" within the
meaning of Section 368(a) of the Code, unless otherwise required or permitted by
a Final Determination. This paragraph will not be deemed violated if, with the
prior written consent of Xxxxxxx (which shall not be unreasonably withheld), CBS
makes protective
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refund claims taking a contrary position, if necessary to keep open the
applicable statutes of limitations for CBS for all taxable years since the
Closing Date, so that such statutes remain open so long as CBS is potentially
subject to an indemnification obligation under Section 5.3.
4.2 Representations, Warranties and Covenants of CBS and the Merger
Subsidiaries. Each of CBS, Newco 1 and Newco 2, after due inquiry, hereby
represents, warrants and covenants that, as of the date hereof and the Effective
Time:
(a) The facts relating to the contemplated Mergers to the extent
described in the Merger Agreement are, insofar as such facts pertain to CBS and
the Merger Subsidiaries, true and correct in all material respects.
(b) Except as provided in the Merger Agreement, CBS and each of the
Merger Subsidiaries will pay their respective expenses, if any, incurred in
connection with the Mergers. However, to the extent any expenses related to the
Mergers are to be funded directly or indirectly by a party other than the
incurring party, such expenses are within the guidelines set forth in Rev. Rul.
73-54, 1973-1 C.B. 187.
(c) Neither CBS nor either of the Merger Subsidiaries is an investment
company within the meaning of Section 368(a)(2)(F)(iii) and (iv) of the Code.
(d) Prior to the Effective Time, CBS will be in control of the Merger
Subsidiaries within the meaning of Section 368(c) of the Code.
(e) Each of the Merger Subsidiaries is a corporation directly owned
by CBS, was formed at or about the date hereof, was created for the sole purpose
of facilitating the Mergers and has not conducted any business activities other
than in connection with the Mergers.
(f) The Merger Subsidiaries will have no material liabilities assumed
by GCI or GTC, and will not transfer to GCI or GTC any assets subject to
material liabilities.
(g) After the Mergers, (i) GCI will hold at least 90% of the fair
market value of its net assets held immediately prior to the Mergers, and at
least 70% of the fair market value of its gross assets held immediately prior to
the Mergers, (ii) GTC will hold at least 90% of the fair market value of its net
assets held immediately prior to the Mergers, and at least 70% of the fair
market value of its gross assets held immediately prior to the Mergers, (iii)
GCI will hold at least 90% of the fair market value of Newco 1's net assets and
at least 70% of the fair market value of Newco 1's gross assets held immediately
prior to the Mergers and (iv) GTC will hold at least 90% of the fair market
value of Newco 2's net assets and at least 70% of the fair market value of Newco
2's gross assets held immediately prior to the Mergers. For purposes of this
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representation, (w) amounts paid by GCI or GTC to Xxxxxxx in cash or other
property (including any assets distributed to Xxxxxxx prior to the Mergers), (x)
amounts paid by either of the Merger Subsidiaries to CBS in cash or other
property, (y) amounts paid by GCI, GTC or the Merger Subsidiaries to pay
reorganization expenses, and (z) all redemptions and distributions (except for
regular, normal dividends) made prior to or after the Mergers by GTC, GCI or the
Merger Subsidiaries, in each of (w) through (z), in connection with the Mergers,
will be included as assets of GCI, GTC or the Merger Subsidiaries, respectively,
held immediately prior to the Mergers. For purposes of this representation, CBS
assumes that the last sentence of Section 4.3(e) is correct.
(h) Following the Mergers, GCI and GTC will continue their respective
historic business or use a significant portion of their respective historic
business assets in a business.
(i) None of CBS, any Related Person to CBS, or any Person acting as an
intermediary for CBS or such a Related Person has a plan or intention to acquire
any of the CBS Common Stock issued in the Mergers (provided that nothing in this
paragraph will prevent any such person from purchasing CBS Common Stock on the
open market).
(j) CBS has no plan or intention to liquidate GCI or GTC, to merge GCI
or GTC with or into another corporation, to cause GCI or GTC to issue additional
shares of stock that could result in CBS losing control of GCI or GTC within the
meaning of Section 368(c) of the Code, to sell, transfer or otherwise dispose of
the stock of GCI or GTC (except for transfers of stock described in Treasury
Regulation Section 1.368-2(k)(2)), or to cause GCI or GTC to sell, transfer or
otherwise dispose of any of its assets (except for dispositions made in the
ordinary course of business or transfers of assets described in Treasury
Regulation Section 1.368-2(k)(2)). Within the two year period following the
Closing Date, CBS will not liquidate GCI or GTC or cause GCI or GTC to merge
with or into another corporation.
(k) Neither CBS nor any of its Subsidiaries owns, directly or
indirectly, any GCI Stock or GTC Stock. Neither CBS nor any of its Subsidiaries
(during the period they have been Subsidiaries of CBS) owned, directly or
indirectly, any GCI Stock or GTC Stock in the five year period immediately prior
to the Effective Time. In addition, no Related Person of CBS (i) owns any GCI
Stock or GTC Stock or (ii) except pursuant to the Merger Agreement, will acquire
GCI Stock or GTC Stock before the Mergers in connection with the Mergers (within
the meaning of Treasury Regulation Section 1.368-1(e)(2)).
4.3 Representations, Warranties, and Covenants of Xxxxxxx, GCI and GTC.
Each of Xxxxxxx, GCI and GTC, after due inquiry, represents, warrants and
covenants that, as of the date hereof and the Effective Time:
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(a) The facts relating to the contemplated Mergers to the extent
described in the Merger Agreement are, insofar as such facts pertain to Xxxxxxx,
GCI and GTC, true and correct in all material respects.
(b) Except as provided in the Merger Agreement, Xxxxxxx, GCI and GTC
will pay their respective expenses, if any, incurred in connection with the
Mergers. However, to the extent any expenses related to the Mergers are to be
funded directly or indirectly by a party other than the incurring party, such
expenses are within the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B.
187.
(c) Neither Xxxxxxx, GCI nor GTC is an investment company within the
meaning of Section 368(a)(2)(F)(iii) and (iv) of the Code.
(d) Neither GCI nor GTC nor any Related Person to GCI or GTC has
redeemed or otherwise acquired or has any present plan or intention to redeem or
otherwise acquire any GCI Stock or GTC Stock in anticipation of the Mergers, or
otherwise as part of a plan of which the Mergers are a part. Except as
contemplated by the Merger Agreement, neither GCI nor GTC nor any Related Person
to GCI or GTC has made or has any present plan or intention to make any
extraordinary distributions with respect to GCI Stock or GTC Stock.
(e) At the time of the Mergers, (i) GCI will hold at least 90% of the
fair market value of its net assets held immediately prior to the Mergers, and
at least 70% of the fair market value of its gross assets held immediately prior
to the Mergers and (ii) GTC will hold at least 90% of the fair market value of
its net assets held immediately prior to the Mergers, and at least 70% of the
fair market value of its gross assets held immediately prior to the Mergers. For
purposes of this representation, (x) amounts paid by GCI or GTC to Xxxxxxx in
cash or other property (including any assets distributed to Xxxxxxx prior to the
Mergers), (y) amounts paid by GCI or GTC to pay reorganization expenses, and (z)
all redemptions and distributions (except for regular, normal dividends) made
prior to the Mergers by GTC or GCI, in each of (x) through (z), in connection
with the Mergers, will be included as assets of GCI or GTC, respectively, held
immediately prior to the Mergers. The sum of (A) the amounts referred to in
clauses (x) through (z) above and (B) any other amounts paid or transferred by
GCI or GTC in connection with the Mergers does not exceed 9% of the fair market
value of the net or gross assets of GCI or GTC, as applicable, held immediately
prior to the Mergers.
(f) Neither GCI nor GTC will have outstanding any warrants, options,
convertible securities, or any other type of right pursuant to which any Person
could acquire stock in GCI or GTC, that if exercised or converted, would affect
CBS's acquisition or retention of control of GCI or GTC, as defined in Section
368(c) of the Code.
(g) Neither GTC nor GCI is a party to, or is under the jurisdiction
of a court in a case under Title 11 of the United States Code, and neither
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GCI nor GTC is in receivership, foreclosure, or similar proceeding in a federal
or state court (including a case within the meaning of Section 368(a)(3)(A) of
the Code.)
ARTICLE V
INDEMNIFICATION
5.1 Obligations of Xxxxxxx. Except as provided in Section 5.3, Xxxxxxx
shall indemnify and hold the CBS Indemnitees harmless from and against the
following:
(a) any liability for Taxes of Xxxxxxx, GCI, GTC or the Limited
Partnership for any Pre-Closing Period and any Pre-Closing Straddle Period,
including any liability of any of GCI or GTC arising under the provisions of
Treasury Regulation Section 1.1502-6(a) or comparable provisions of foreign,
state or local law for any Pre-Closing Period and Pre-Closing Straddle Period
(other than liabilities for Taxes described in Section 5.2(b));
(b) any liability for income, state franchise or similar Taxes
(excluding any transfer or similar taxes covered by Section 5.1 of the Merger
Agreement) of GCI, GTC or the Limited Partnership with respect to any taxable
income recognized solely from the transfer of GTC Stock and GCI Stock to CBS in
exchange for the consideration provided for in the Merger Agreement
(c) any liability for Taxes of the CBS Indemnitees arising from a
breach of any representation or warranty contained in Section 2.6 of the Merger
Agreement, calculated as the amount of the excess of (x) the actual liability
for Taxes of the CBS Indemnitee for the relevant taxable period over (y) the
liability for Taxes of the CBS Indemnitee for such taxable period assuming such
breach of representation or warranty had not occurred but with all other facts
unchanged.
5.2 Obligations of CBS. CBS shall indemnify and hold the Xxxxxxx
Indemnitees harmless from and against the following:
(a) any liability for Taxes of GCI, GTC, or the Limited Partnership
for any Post-Closing Period and any Post-Closing Straddle Period (other than
liabilities for Taxes described in Section 5.1(b) or (c)); and
(b) any liability for Taxes of the Xxxxxxx Indemnitees arising from a
breach of any representation or warranty contained in Section 3.11 of the Merger
Agreement, calculated as the amount of the excess of (x) the actual liability
for Taxes of the Xxxxxxx Indemnitee for the relevant taxable period over (y) the
liability for Taxes of the Xxxxxxx Indemnitee for such taxable period assuming
such breach of representation, covenant or warranty had not occurred but with
all other facts unchanged.
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5.3 Additional Obligations of CBS.
(a) (i) If, notwithstanding the intention of the parties hereto,
(1) there is a Final Determination that the GTC Merger or the GCI Merger does
not qualify as a "reorganization" within the meaning of Section 368(a) of the
Code, (2) such failure to qualify as a "reorganization" is attributable to a
breach by CBS of a representation, covenant or warranty contained in Section 4.1
or Section 4.2, (3) Xxxxxxx has not breached a representation, covenant or
warranty contained in Section 4.1(b), (c), (d) or (e) and (4) there is no breach
of any representation, covenant or warranty by Xxxxxxx, GCI or GTC contained in
Section 4.3 that materially contributes to such failure to qualify as a
reorganization, then CBS shall indemnify and hold the Xxxxxxx Indemnitees
harmless from and against any liability for Taxes of Xxxxxxx, Xxxxxxx'x
Subsidiaries, GCI, GTC or the Limited Partnership arising from any such breach,
calculated as the amount of the excess of (x) the actual liability for Taxes of
Xxxxxxx, Gaylord's Subsidiaries, GCI, GTC or the Limited Partnership for the
taxable year that includes the Closing Date over (y) the liability for Taxes of
Xxxxxxx, Xxxxxxx'x Subsidiaries, GCI, GTC or the Limited Partnership for such
taxable year assuming such breach of representation, covenant or warranty had
not occurred but with all other facts unchanged. In making the calculation in
the preceding sentence, any Taxes imposed on the Xxxxxxx Indemnitees as a result
of receiving indemnity payments under this Section 5.3(a)(i) shall be
disregarded and not indemnified against by CBS.
(ii) If (1) an amount would be payable by CBS to a Xxxxxxx
Indemnitee under Section 5.3(a)(i), (2) within ten years after the Closing Date
Xxxxxxx (or a successor or affiliate) disposes of all or a portion of its CBS
Common Stock (or a successor asset which is "substituted basis property" within
the meaning of Section 7701(a)(42) of the Code) in one or more taxable
transactions and (3) as a result of the Final Determination described in Section
5.3(a)(i)(1), Xxxxxxx (or a successor or affiliate) has a tax basis in such CBS
Common Stock (or such successor asset) equal to the fair market value of such
CBS Common Stock on the Closing Date, then the amount payable by CBS to the
Xxxxxxx Indemnitees under Section 5.3(a)(i) shall be reduced (or, to the extent
that such taxable disposition within such ten year period occurs after such
Final Determination, Xxxxxxx shall reimburse CBS for any such payment) to the
extent necessary so that the Xxxxxxx Indemnitees are in the same after-Tax
position as if the Mergers qualified as "reorganizations" under Section 368(a)
of the Code (taking into account the Tax consequences of the Mergers, such
taxable disposition(s) of such CBS Common Stock (or such successor asset),
Gaylord's receipt of the indemnity payments from CBS under Section 5.3(a)(i),
and any reduction or return of such indemnity payments to CBS pursuant to this
Section 5.3(a)(ii) but disregarding any increased tax basis in the CBS Common
Stock (or such successor asset) that has not been so disposed of); provided,
however, that if the conditions described in Section 5.3(b)(i), (iii) and (iv)
are satisfied, the net amount of any payments from CBS to the Xxxxxxx
Indemnitees pursuant to this Section 5.3(a)(ii) to be retained by the Xxxxxxx
Indemnitees hereunder
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shall in no event be less than the amount payable by CBS pursuant to Section
5.3(b)(A) and (B).
(b) If, notwithstanding the intention of the parties hereto, (i) there
is a Final Determination that the GTC Merger does not qualify as a
"reorganization" within the meaning of Section 368(a) of the Code, (ii) Section
5.3(a) does not apply, (iii) CBS obtains a "cost" basis in substantially all the
assets of the Limited Partnership (based on the value of the CBS Common Stock
issued to Xxxxxxx in exchange for the stock of GTC), and (iv) CBS is not
precluded from depreciating or amortizing substantially all of the tax basis of
the otherwise depreciable or amortizable assets of the Limited Partnership
because of the "anti-churning" provisions under Section 197(f))(9) of the Code,
then CBS shall pay to Xxxxxxx the amount of (A) $40 million, subject to
reduction, as determined pursuant to Section 6.1(c), plus (B) the amount of
interest, if any, received by CBS from any Taxing Authority which is
attributable to any overpayment of Taxes solely resulting from the GTC Merger
failing to qualify as a "reorganization" within the meaning of Section 368(a) of
the Code.
5.4 Tax Obligations Arising Under a Pre-Closing Period Tax Sharing
Agreement. Except as set forth in this Agreement, all existing tax sharing
agreements and practices regarding Taxes and their payment, allocation or
sharing between any member of the Xxxxxxx Group and any of GCI, GTC or the
Limited Partnership shall be terminated as of the Closing Date and no remaining
liabilities thereunder shall exist thereafter.
5.5 Refunds. Xxxxxxx shall be entitled to any refund of Taxes of GCI, GTC
or the Limited Partnership attributable to any Pre-Closing Period and any
Pre-Closing Straddle Period; provided, however, that Xxxxxxx shall not be
entitled to any such refunds of Taxes with respect to any amounts paid to
Xxxxxxx pursuant to Section 2.2. If CBS, GCI, GTC, the Limited Partnership or
any of their Subsidiaries receives any refund of Tax to which Xxxxxxx is
entitled pursuant to this Section 5.5, CBS shall promptly notify Xxxxxxx and
shall pay the amount of any such refund promptly after the receipt of such
refund.
5.6 Payments.
(a) To the extent that a party (the "Payor") is required to make a
payment to another party (the "Payee") pursuant to this Article V, the Payor
shall pay the Payee the amount of such payment obligation no later than five
business days after the later of (i) a Final Determination or other event giving
rise to the payment obligation and (ii) the Payee's presentment to the Payor of
its calculation of the amount payable by the Payor.
(b) Any amount payable under this Article V shall be payable in cash
in immediately available funds.
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5.7 Limitations. Except as otherwise provided in this Agreement, the
principles of Section 8.5 of the Merger Agreement shall apply to any indemnity
payment under this Agreement.
5.8 Allocation of Indemnity Payments. Xxxxxxx and CBS agree to allocate
any indemnification payments received or paid by either party under this Article
V to the exchange of GTC Stock and GCI Stock, respectively, in the Mergers on
the same percentage basis as is provided in Section 1.9 of the Merger Agreement.
ARTICLE VI
TAX CLAIMS
6.1 General.
6.2 Tax Claim Management. CBS or Xxxxxxx, as the case may be, shall
promptly notify the other party in writing of any Tax Claim that may reasonably
be likely to result in liability of the other party under this Agreement;
provided, however, that the failure to provide such notice shall not diminish
the indemnifying party's obligation hereunder except to the extent such failure
actually prejudices the indemnifying party's position as a result thereof. With
respect to any such Tax Claim, the party not controlling such Tax Claim shall
(i) not make any submission to any Tax Authority without offering the other
party the opportunity to review such submission, (ii) not take any action or
make (or purport to make) any representations in connection with such Tax Claim
with respect to issues affecting the other party's indemnity hereunder, (iii)
keep the other party informed as to any information that it receives regarding
the progress of such Tax Claim, (iv) provide the other party with any
information that it receives regarding the nature and amounts of any proposed
Disposition of the Tax Claim, (v) permit the other party to participate in all
conferences, meetings or proceedings with any Tax Authority in which the
indemnified Tax Claim is or may be a subject, and (vi) permit the other party to
participate in all court appearances in which the indemnified Tax Claim is or
may be a subject. With respect to any Tax Claim relating to a Pre-Closing Period
for which Xxxxxxx is liable pursuant to this Agreement, CBS shall either file
(or cause to be filed) submissions at Gaylord's direction or appoint (or cause
to be appointed) Xxxxxxx or its authorized representatives as additional
authorized representatives entitled to communicate fully with the Internal
Revenue Service with respect to such Tax Claim.
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ARTICLE VII
COOPERATION
CBS and Xxxxxxx shall (and shall cause their respective Subsidiaries to)
cooperate with each other in the preparation and filing of any Tax Returns and
the conduct of any audit or other proceeding and each shall execute and deliver
such powers of attorney and make available such other documents as are necessary
to carry out the intent of this Agreement. Such cooperation shall include,
without limitation, (a) making employees available on a mutually convenient
basis to provide such assistance as might reasonably be required and (b)
providing such information as might reasonably be required in connection with
any such Tax Return or proceeding, including without limitation, records,
returns, schedules, documents, work papers or other relevant materials. In
addition, Xxxxxxx shall provide such available information to CBS as is
reasonably necessary for CBS to determine its tax basis in the stock of GTC and
GCI and in the Limited Partnership, and the tax basis of the Limited Partnership
in its assets.
The parties hereto shall use reasonable efforts to reduce any transfer,
sales or other similar Taxes that may be incurred with respect to the
transactions contemplated by the Merger Agreement.
ARTICLE VIII
RETENTION OF RECORDS; ACCESS
CBS, GCI, GTC and the Limited Partnership and Xxxxxxx shall (a) until the
expiration of the relevant statutes of limitations (giving effect to any
applicable extensions or waivers), retain records, documents, accounting data
and other information (including computer data) necessary for the preparation
and filing of all Tax Returns in respect of Taxes of GCI, GTC and the Limited
Partnership or for a Tax Claim by a Tax Authority relating to such Tax Returns;
and (b) give to the other group reasonable access to such records, documents,
accounting data and other information (including computer data) and to its
personnel (ensuring their cooperation) and premises, with reimbursement by the
requesting group of reasonable out-of-pocket costs incurred therewith, for the
purpose of the review or audit of such Tax Returns to the extent relevant to an
obligation or liability of any party under this Agreement. Prior to destroying
any records, documents, data or other information described in this Article
VIII, the group wishing to destroy such items shall give the other group a
reasonable opportunity to obtain such items (at such other group's expense).
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ARTICLE IX
DISPUTES
If the parties disagree as to the calculation of a Tax or the amount of
(but not liability for) any payment to be made under this Agreement, the parties
shall cooperate in good faith to resolve any such dispute, and any agreed-upon
amount shall be paid to the appropriate party. If the parties are unable to
resolve any such dispute within fifteen business days thereafter, such dispute
shall be resolved by an internationally recognized accounting firm acceptable to
both CBS and Xxxxxxx. The decision of such firm shall be final and binding. The
fees and expenses incurred in connection with such decision shall be shared by
CBS and Xxxxxxx in accordance with the final allocation of the Tax liability in
dispute. Following the decision of such accounting firm, the parties shall each
take (or cause to be taken) any action that is necessary or appropriate to
implement such decision, including, without limitation, the filing of amended
Tax Returns and the prompt payment of underpayments or overpayments, with
interest calculated on such underpayments or overpayment at the Underpayment
Rate from the date such payment was due.
ARTICLE X
SURVIVAL
Notwithstanding any other provision in this Agreement to the contrary, the
rights and obligations provided for in this Agreement shall not terminate any
earlier than the expiration of the applicable statute of limitation for the
relevant taxable periods in question (giving effect to any applicable waivers or
extensions).
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Interest on Late Payments. Any payment required by this Agreement
which is not made on or before the date required to be made hereunder shall bear
interest after such date at the Underpayment Rate.
11.2 Notices and Governing Law. All notices required or permitted to be
given pursuant to this Agreement shall be given, and the applicable law
governing the interpretation of this Agreement shall be determined, in
accordance with the applicable provisions of the Merger Agreement.
11.3 Amendments. This Agreement may not be amended except by an agreement
in writing, signed by the parties.
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11.4 Binding Effect; No Assignment; Third Party Beneficiaries. This
Agreement shall be binding on, and shall inure to the benefit of, the parties
and the respective successors, assigns, and Persons controlling any of the
corporations bound hereby. CBS, on the one hand, and Xxxxxxx, on the other hand,
hereby guarantee the performance of all actions, agreements and obligations
provided for under this Agreement of CBS's Subsidiaries and Gaylord's
Subsidiaries, respectively. CBS and Xxxxxxx shall, upon the written request of
any other party, cause any of their respective Subsidiaries to execute this
Agreement. No party to this Agreement shall assign any of its rights or delegate
any of its duties under this Agreement without the prior written consent of
Xxxxxxx, in the case of CBS, and CBS, in the case of Xxxxxxx. No Person
(including, without limitation, any employee of a party or any stockholder of a
party) shall be, or shall be deemed to be, a third party beneficiary of this
Agreement.
11.5 Entire Agreement. This Agreement constitutes the entire agreement of
the parties concerning the subject matter hereof and supersedes all prior
agreements, whether or not written, concerning such subject matter. To the
extent that the provisions of this Agreement are inconsistent with the
provisions of the Merger Agreement, the provisions of this Agreement shall
prevail.
11.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute together the same documents.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
XXXXXXX ENTERTAINMENT
COMPANY
By: ________________________________
Name:
Title:
XXXXXXX TELEVISION COMPANY
By: ________________________________
Name:
Title:
XXXXXXX COMMUNICATIONS, INC.
By: ________________________________
Name:
Title:
CBS CORPORATION
By: ________________________________
Name:
Title:
