TAX MATTERS AGREEMENT BY AND BETWEEN CLEAR CHANNEL COMMUNICATIONS, INC. AND CLEAR CHANNEL OUTDOOR HOLDINGS, INC. Dated as of ___________, 2005
Exhibit 10.4
BY AND BETWEEN
CLEAR CHANNEL COMMUNICATIONS, INC.
AND
Dated as of ___________, 2005
TABLE OF CONTENTS
| Page | ||||||
Section 1. |
Definitions | 1 | ||||
Section 2. |
Tax Payments | 4 | ||||
(a) |
Estimated Income Tax Payments | 4 | ||||
(b) |
Separate Income Tax Liability | 5 | ||||
(c) |
Additional Calculations | 6 | ||||
(d) |
Timing | 6 | ||||
(e) |
Adjustments | 7 | ||||
(f) |
Other Adjustments and Indemnification | 7 | ||||
(g) |
Reimbursements | 7 | ||||
Section 3. |
Income Tax Return Preparation | 8 | ||||
Section 4. |
Audits | 8 | ||||
Section 5. |
Cooperation | 8 | ||||
(a) |
Tax Information | 8 | ||||
(b) |
Other Cooperation | 9 | ||||
(c) |
Agent | 9 | ||||
Section 6. |
Retention of Records | 10 | ||||
Section 7. |
Resolution of Disputes | 10 | ||||
Section 8. |
Spin-Off of CCO | 10 | ||||
(a) |
Indemnities for Distribution Taxes | 10 | ||||
(b) |
Covenants of CCO | 11 | ||||
(c) |
Cooperation with Letter Ruling and Tax Opinion | 11 | ||||
Section 9. |
Miscellaneous | 12 | ||||
(a) |
Term of the Agreement | 12 | ||||
(b) |
Injunctions | 12 | ||||
(c) |
Severability | 12 | ||||
(d) |
Assignment | 12 | ||||
(e) |
Further Assurances | 12 | ||||
(f) |
Parties in Interest | 13 | ||||
(g) |
Waivers, Etc | 13 | ||||
(h) |
Setoff | 13 | ||||
-i-
TABLE OF CONTENTS
(continued)
(continued)
| Page | ||||||
(i) |
Change of Law | 13 | ||||
(j) |
Confidentiality | 13 | ||||
(k) |
Headings | 13 | ||||
(l) |
Counterparts | 13 | ||||
(m) |
Notices | 14 | ||||
(n) |
Costs and Expenses | 14 | ||||
(o) |
Applicable Law | 14 | ||||
-ii-
This Tax Matters Agreement (this “Agreement”), dated as of , 2005, is
entered into by and between Clear Channel Communications, Inc., a Texas corporation
(“Parent”), and Clear Channel Outdoor Holdings, Inc., a Delaware corporation
(“CCO”).
RECITALS
WHEREAS, certain Parent Group Members (as defined below), on the one hand, and certain CCO
Group Members (as defined below), on the other hand, file Income Tax Returns (as defined below) on
a consolidated, combined and/or unitary basis for certain federal, state, local and foreign Income
Tax (as defined below) purposes;
WHEREAS, Parent prepares and files, or causes to be prepared and filed, the Income Tax Returns
of each CCO Group Member, whether or not such CCO Group Member files an Income Tax Return on a
consolidated, combined or unitary basis with any Parent Group Member;
WHEREAS, CCO intends to undertake an initial public offering (the “IPO”);
WHEREAS, following the IPO, Parent and CCO intend (i) for certain CCO Group Members to
continue to file Income Tax Returns on a consolidated, combined and/or unitary basis with certain
Parent Group Members and (ii) for Parent to continue to prepare and file, or to cause to be
prepared and filed, all Income Tax Returns of each CCO Group Member, whether or not such CCO Group
Member files an Income Tax Return on a consolidated, combined or unitary basis with any Parent
Group Member;
WHEREAS, in contemplation of the IPO, Parent and CCO desire to agree upon the method of
determining the financial consequences to each party resulting from the preparation and filing of
such Income Tax Returns;
AGREEMENT
NOW THEREFORE, in consideration of the premises set forth above and the terms and conditions
set forth below, the parties hereto agree as follows:
Section 1. Definitions. For purposes of this Agreement, the following capitalized
terms shall have the meanings set forth below:
“Adjustment” shall mean any proposed or final change in the Tax liability of any Person.
“Affiliated Group” shall mean an affiliated group of corporations within the meaning of
section 1504(a) of the Code.
“Affiliate” shall mean any Person that directly or indirectly is “controlled” by the other
Person in question. “Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of an Entity, whether through ownership
1
of voting securities, by contract or otherwise. Except as otherwise provided herein, the term
Affiliate for purposes of Section 8 shall refer to Affiliates of a Person as determined
immediately after the Distribution.
“CCO Group” shall mean CCO and its Subsidiaries. With respect to any Taxable Period beginning
before the IPO, the CCO Group shall be determined as if the CCO Group had been constituted on the
first day of such Taxable Period, and shall include the assets and operations of the outdoor
advertising businesses of Parent and its Subsidiaries as they existed for such Taxable Period.
“CCO Group Member” shall mean each member of the CCO Group.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Deconsolidation Event” shall mean, with respect to each CCO Group Member, any event or
transaction, including the Distribution, that causes such CCO Group Member to no longer be eligible
to join any Parent Group Member in filing an applicable Income Tax Return on a consolidated,
combined or unitary basis.
“Distribution” shall mean the distribution to Parent stockholders of all of the outstanding
stock of CCO owned by Parent pursuant to transactions intended to qualify as a tax-free
distribution under section 355 of the Code.
“Distribution Date” shall mean the date the Distribution becomes effective.
“Distribution Taxes” shall mean any Taxes imposed on any Parent Group Member resulting from,
or arising in connection with the failure of the Distribution to be tax-free to such Parent Group
Member under the Code, including any Tax resulting from the failure of the Distribution to qualify
under section 355 and section 368(a)(1)(D) of the Code or the application of section 355(d) or
section 355(e) of the Code to the Distribution or corresponding provisions of other Tax laws.
“Entity” shall mean a partnership (whether general or limited), a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or any other entity, without regard to whether it is treated as a
disregarded entity for U.S. federal tax purposes.
“Final Determination” shall mean the final resolution of any Tax matter, including, but not
limited to, a closing agreement with the IRS or other relevant Taxing Authority, a claim for refund
which has been allowed, a deficiency notice with respect to which the period for filing a petition
with the Tax Court or the relevant foreign, state or local tribunal has expired, or a decision of
any court of competent jurisdiction that is not subject to appeal or as to which the time for
appeal has expired.
“Income Tax Return” shall mean any Tax Return filed or required to be filed with any Taxing
Authority with respect to Income Taxes.
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“Income Taxes” shall mean all Taxes imposed on or measured in whole or in part by income,
capital or net worth or a taxable base in the nature of income, capital or net worth, including
franchise Taxes based on such factors, and shall include any addition to Tax, additional amount,
interest and penalty imposed with respect to such Taxes.
“Indemnified Party” shall mean any party that is entitled to receive payment from an
Indemnifying Party pursuant to the terms and conditions of this Agreement.
“Indemnifying Party” shall mean any party that is required to pay any other party pursuant to
the terms and conditions of this Agreement.
“IRS” shall mean the United States Internal Revenue Service or any successor thereto,
including but not limited to its agents, representatives and attorneys.
“Letter Ruling” shall mean any private letter ruling issued by the IRS and delivered to Parent
in connection with the Distribution.
“Losses” shall mean any loss, cost, fine, penalty, fee, damage, obligation, liability, payment
in settlement, Tax or other expense of any kind, including reasonable attorneys’ fees and costs,
but excluding any consequential, special, punitive or exemplary damages.
“Officer’s Certificate” shall mean any letter executed by officers of Parent and CCO provided
to tax counsel in connection with its rendering the Tax Opinion.
“Parent Group” shall mean Parent and its Subsidiaries, excluding, however, any CCO Group
Member.
“Parent Group Member” shall mean each member of the Parent Group.
“Person” shall mean an individual or any Entity.
“Ruling Request” shall mean any letter filed by Parent with the IRS requesting a ruling from
the IRS regarding certain U.S. federal income tax consequences of the Distribution (including all
attachments, exhibits and other materials submitted with such ruling request letter) and any
amendment or supplement to such ruling request letter.
“Subsidiary” shall mean, with respect to any Person, any other Person of which (i) such Person
or any 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 the other Person 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.
“Tax Benefit” shall mean a reduction in the Income Tax liability of any Person (or of the
Affiliated Group of which it is a member) for any Taxable Period. Except as otherwise provided in
this Agreement, a Tax Benefit shall be deemed to have been realized or received from a Tax Item in
a Taxable Period only if, and to the extent that, the Income Tax liability of the Person (or
3
of the Affiliated Group of which it is a member) for such Tax Period is less than it would
have been if such Income Tax liability were determined without regard to such Tax Item.
“Tax Controversy” shall mean any examination, audit, claim, dispute, litigation, proposed
settlement, proposed Adjustment or related matter with respect to Income Taxes.
“Tax Detriment” shall mean an increase in the Income Tax liability of any Person (or of the
Affiliated Group of which it is a member) for any Taxable Period. Except as otherwise provided in
this Agreement, a Tax Detriment shall be deemed to have been realized or suffered from a Tax Item
in a Taxable Period only if, and to the extent that, the Income Tax liability of the Person (or the
Affiliated Group of which it is a member) for such period is greater than it would have been if
such Income Tax liability were determined without regard to such Tax Item.
“Tax Item” shall mean any item of income, gain, loss, deduction, credit, recapture of credit
or any other item which may have the effect of increasing or decreasing Income Taxes paid or
payable by any Person (or the Affiliated Group of which it is a member).
“Tax Opinion” shall mean any opinion rendered by tax counsel addressing certain U.S. federal
income tax consequences of the Distribution under section 355 of the Code.
“Tax Return” shall mean any return, report, form or other information filed or required to be
filed with any Taxing Authority with respect to Taxes.
“Taxable Period” shall mean any taxable year or portion thereof, including any Post-Closing
IPO Straddle Period and any Pre-Closing Deconsolidation Straddle Period.
“Taxes” shall mean all federal, state, local, foreign or other governmental taxes,
assessments, duties, fees, levies or similar charges of any kind, including all income, profits,
franchise, excise, property, use, intangibles, sales, value-added, ad valorem, payroll, employment,
withholding, estimated and other taxes of any kind whatsoever, whether disputed or not, and
including all additions to tax, additional amounts, interest and penalties imposed with respect to
such taxes.
“Taxing Authority” shall mean, with respect to any Tax, the government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal, state, local or
foreign, or any agency, instrumentality or authority thereof, that imposes such Tax, and the agency
(if any) charged with the collection of such Tax, including the IRS.
Other capitalized terms defined elsewhere in this Agreement shall have the meaning given them.
Section 2. Tax Payments.
(a) Estimated Income Tax Payments. For each Taxable Period beginning after the
date of the IPO, CCO shall pay, or cause to be paid, to Parent the amount of any estimated
Income Taxes owed by any CCO Group Member and paid by Parent on such CCO Group Member’s
behalf, whether or not such estimated Income Tax is attributable to an Income Tax Return
filed on a consolidated, combined or unitary basis with any
4
Parent Group Member (“Estimated Income Tax Payments”). In the case of any
Estimated Income Tax Payments with respect to which any CCO Group Member joins any Parent
Group Member in filing an Income Tax Return on a consolidated, combined or unitary basis,
the amount of such Estimated Income Tax Payments that are owed to Parent by such CCO Group
Member shall be determined as if such CCO Group Member filed a separate Income Tax Return
based solely on the income, apportionment factors and other Tax Items of such CCO Group
Member. For any Taxable Period that begins prior to and ends after the date of the IPO (an
“IPO Straddle Period”), the Estimated Income Tax Payments of such CCO Group Member
shall be determined based on the Tax Items of such CCO Group Member that accrue after the
date of the IPO (a “Post-Closing IPO Straddle Period”), calculated as if there were
an interim closing of the books of such CCO Group Member as of the close of business on the
date of the IPO. For any Taxable Period that begins prior to and ends after the date of a
Deconsolidation Event (a “Deconsolidation Straddle Period”), the Estimated Income
Tax Payments of such CCO Group Member shall be determined based on the Tax Items of such CCO
Group Member that accrue before or on the date of the Deconsolidation Date (a
“Pre-Closing Deconsolidation Straddle Period”), calculated as if there were an
interim closing of the books of such CCO Group Member as of the close of business on the
date of the Deconsolidation Event. For purposes of determining the amount of Estimated
Income Tax Payments of each CCO Group Member, to the extent that such CCO Group Member would
be entitled to file an Income Tax Return with respect to the applicable Income Tax on a
consolidated, combined or unitary basis with any other CCO Group Member, the Estimated
Income Tax Payments of such CCO Group Members shall be determined as though such CCO Group
Members filed an Income Tax Return with respect to such Income Tax on a consolidated,
combined or unitary basis based solely on the income, apportionment factors and other Tax
Items of such CCO Group Members.
(b) Separate Income Tax Liability. For each Taxable Period beginning after the
IPO, CCO shall pay, or cause to be paid, to Parent an amount equal to the excess, if any, of
(i) the Income Taxes incurred by any CCO Group Member under applicable Tax law and paid by
Parent on such CCO Group Member’s behalf or, in the case of any Income Tax with respect to
which any CCO Group Member joins any Parent Group Member in filing an Income Tax Return on a
consolidated, combined or unitary basis, the amount of Income Taxes that would be incurred
by the CCO Group Member had such CCO Group Member filed a separate Income Tax Return based
solely on the income, apportionment factors and other Tax Items of such CCO Group Member
(“Separate Income Tax Liability”), over (ii) the aggregate amount of Estimated
Income Tax Payments actually made to Parent with respect to the Separate Income Tax
Liability for such Taxable Period. If the aggregate amount of Estimated Income Tax Payments
actually made to Parent with respect to the Separate Income Tax Liability for such Taxable
Period exceeds such Separate Income Tax Liability, Parent shall pay to CCO an amount equal
to such excess. In addition, to the extent that any Parent Group Member utilizes for any
Taxable Period beginning after the date of the IPO, any credits or deductions, including,
without limitation, foreign tax credits, alternative minimum tax credits, net operating
losses or net capital losses, which are attributable to any CCO Group Member, and such
utilization results in a Tax Benefit being realized by such Parent Group Member (treating
any credits or deductions attributable to the Parent Group
5
as utilized prior to the utilization of any credits or deductions attributable to the
CCO Group), then Parent shall pay to CCO the amount of such Tax Benefit at the time of the
filing of the Income Tax Return reflecting the realization of the Tax Benefit and such
credits or deductions for which Parent has paid CCO shall not be utilizable by any CCO Group
Member for purposes of computing such CCO Group Member’s Estimated Income Tax Payments or
Separate Income Tax Liability. For purposes of determining the amount of a CCO Group
Member’s Separate Income Tax Liability, to the extent that such CCO Group Member would be
entitled to file an Income Tax Return on a consolidated, combined or unitary basis with any
other CCO Group Member, the Separate Income Tax Liability of such CCO Group Members shall be
determined as though such CCO Group Members had filed a consolidated, combined or unitary
Income Tax Return based solely on the income, apportionment factors and other Tax Items of
such CCO Group Members.
(c) Additional Calculations. For purposes of determining the amount of a CCO
Group Member’s Estimated Income Tax Payments and Separate Income Tax Liability, Parent shall
be entitled to claim all deductions arising by reason of the exercise of any stock options
to purchase shares of Parent stock, or arising by reason of the payment of deferred or other
compensation by Parent to the extent such payment is not reimbursed by CCO. In addition,
for purposes of any Income Tax Return filed by, with respect to or on behalf of, any CCO
Group Member (whether or not such CCO Group Member files an Income Tax Return on a
consolidated, combined or unitary basis with any Parent Group Member), Parent shall be, to
the extent permitted by applicable Tax law, entitled to claim all deductions arising by
reason of the exercise of any stock options to purchase Parent stock or arising by reason of
the payment of deferred or other compensation by Parent to the extent such payment is not
reimbursed by CCO. If, pursuant to a Final Determination, all or any part of such deduction
is disallowed or is proposed to be disallowed to Parent then, to the extent permitted by
applicable Tax law, the appropriate CCO Group Member shall report such deduction on its
Income Tax Return (including an amended Income Tax Return). If a CCO Group Member realizes
a Tax Benefit in any Taxable Period beginning after the date of the IPO, as a result of a
deduction arising by reason of the exercise of any stock option to purchase shares of Parent
stock or arising by reason of the payment of deferred or other compensation by Parent to the
extent such payment is not reimbursed by CCO, CCO shall pay the amount of such Tax Benefit
to Parent.
(d) Timing. For each Taxable Period beginning after the date of the IPO,
Parent shall prepare and deliver to CCO a schedule (the “Schedule”) showing in
reasonable detail Parent’s calculation of any Estimated Income Tax Payments or Separate
Income Tax Liability, as the case may be, of each CCO Group Member and, subject to
Section 7, (i) CCO shall pay to Parent the amount of any Estimated Income Tax
Payments or Separate Income Tax Liability shown on the Schedule no later than the later of
(A) fifteen days before the date that such payment is due and payable to the applicable
Taxing Authority and (B) ten days after CCO’s receipt of the Schedule, and (ii) any payments
by Parent to CCO required pursuant to Section 2(b) hereof shall be made, based on
the Schedule, no later than the date such consolidated, combined or unitary Income Tax
Return is filed with the applicable Taxing Authority. Except as otherwise provided herein,
all indemnification or other payments to be made pursuant to this
6
Agreement shall be made within fifteen days of written notice of a request for
indemnification or payment by the Indemnified Party, which notice shall be accompanied by a
computation of the amount due. If any payments required to be made pursuant to this
Agreement (including Estimated Income Tax Payments) are not made when due, such payments
shall bear interest at the prevailing federal short-term interest rate as determined under
section 6621 of the Code.
(e) Adjustments. If, as a result of a Final Determination, there is an
Adjustment that would have the effect of increasing or decreasing a CCO Group Member’s
Separate Income Tax Liability for Taxable Periods beginning after the date of the IPO, then
CCO shall pay to Parent the amount of any increased Separate Income Tax Liability, and
Parent shall pay to CCO the amount of any decreased Separate Income Tax Liability;
provided, however, that Parent’s payment to CCO shall not exceed the net
amount of payments received by Parent from CCO with respect to the Separate Income Tax
Liability for such Taxable Periods. If, as a result of a Final Determination, there is an
Adjustment to any of the credits or deductions attributable to any CCO Group Member which
resulted in a payment by Parent to CCO pursuant to Section 2(b) of this Agreement
that would have the effect of increasing or decreasing the Tax Benefit to the Parent Group
Member utilizing such credit or deduction, then CCO shall pay to Parent the amount of any
decreased Tax Benefit and Parent shall pay to CCO the amount of any increased Tax Benefit.
(f) Other Adjustments and Indemnification. If, as a result of a Final
Determination, there is an Adjustment with respect to any Tax Item of any CCO Group Member
for any Taxable Period ending on or before the date of the IPO, including any portion of a
IPO Straddle Period ending on the date of the IPO, that results in a Tax Detriment being
realized by any Parent Group Member, or by any CCO Group Member for which the Parent Group
is otherwise liable, then CCO shall indemnify Parent against such Tax Detriment. In
addition, if there is an Adjustment pursuant to section 482 of the Code or similar authority
under applicable Tax law which results in a Tax Detriment being realized by any Parent Group
Member or any CCO Group Member, on the one hand, and a corresponding Tax Benefit being
realized by any CCO Group Member or any Parent Group Member, on the other, which is not
otherwise taken into account through payments or indemnification under this Agreement, then
CCO shall pay to Parent or Parent shall pay to CCO, as the case may be, the amount of such
Tax Benefit. Parent shall indemnify CCO to the extent that any CCO Group Member becomes
liable for the Income Tax liability of any Parent Group Member, as a result of being a
member of the Affiliated Group of which Parent is the common parent corporation, for federal
tax purposes, or a member of the combined, consolidated or unitary group, for foreign, state
or local tax purposes, which includes any Parent Group Member, in excess of the Separate
Income Tax Liability of such CCO Group Member, and, except as otherwise provided herein,
Parent shall indemnify CCO against any Income Tax liability for which CCO has paid to Parent
pursuant to this Agreement.
(g) Reimbursements. Notwithstanding the foregoing, each CCO Group Member shall
be jointly and severally liable to Parent for, and CCO, on behalf of each CCO Group Member,
shall pay, or caused to be paid, any payment made by Parent on
7
behalf of any CCO Group Member for Taxes owed by such CCO Group Member other than
pursuant to this Agreement within five days of receipt of written notification from Parent
that such payment has been made.
Section 3. Income Tax Return Preparation. Parent shall prepare and file, or cause to
be prepared and filed, all Income Tax Returns that are required under applicable law to be filed
by, with respect to or on behalf of, any CCO Group Member (whether or not such CCO Group Member
files an Income Tax Return on a consolidated, combined or unitary basis with any Parent Group
Member), including, without limitation, all Income Tax Returns which Parent determines shall be
filed on a consolidated, combined or unitary basis with any Parent Group Member, for any IPO
Straddle Period and any Taxable Period beginning before a Deconsolidation Event. CCO shall
reimburse Parent for an allocable portion of its expenses incurred in preparing and filing Income
Tax Returns on behalf of any CCO Group Member, as such allocation is reasonably determined by
Parent.
Section 4. Audits. Parent shall have sole responsibility for and control over any Tax
Controversy with respect to Income Taxes of each CCO Group Member. CCO shall reimburse Parent for
an allocable portion of its expenses incurred in conducting such Tax Controversies on behalf of any
CCO Group Member, as such allocation is reasonably determined by Parent.
Section 5. Cooperation.
(a) Tax Information.
(i) CCO shall, and shall cause each CCO Group Member, to cooperate with Parent
in the preparation and filing of Income Tax Returns, as described in Section
3, or in the conduct of Tax Controversies, as described in Section 4, by
maintaining such books and records and providing on a timely basis such information
as may be necessary or useful in the filing of such Income Tax Returns or the
conduct of such Tax Controversies and executing any documents, providing any further
information and taking any actions which Parent may reasonably request in connection
therewith.
(ii) If any CCO Group Member fails to provide any information requested
pursuant to this Section 5 on a timely basis, then Parent shall have the
right to engage an independent certified public accountant of its choice to gather
such information. CCO agrees to permit any such independent certified public
accountant full access to all Income Tax Returns and other relevant information in
the possession of any CCO Group Member during reasonable business hours, and to
reimburse or pay directly all costs and expenses incurred in connection with the
engagement of such independent certified public accountant.
(iii) If any CCO Group Member supplies information to a Parent Group Member in
connection with the preparation and filing of any Income Tax Return or in connection
with the conduct of any Tax Controversy and an officer of the requesting party signs
a statement or other document under penalties of perjury in reliance upon the
accuracy of such information, then a duly authorized officer of
8
the party supplying such information shall certify, under penalties of perjury,
the accuracy and completeness of the information so supplied. CCO shall indemnify
and hold harmless each Parent Group Member and its respective officers and
employees, against any cost, fine, penalty or other expenses of any kind
attributable to an CCO Group Member supplying a Parent Group Member with inaccurate
or incomplete information, in connection with the preparation and filing of any
Income Tax Return or in connection with the conduct of any Tax Controversy.
(b) Other Cooperation.
(i) Whenever any CCO Group Member learns of a breach or a violation of any
obligation or provision contained in this Agreement, or receives in writing from any
Taxing Authority notice of an Adjustment which may give rise to a payment under this
Agreement, CCO shall give notice to Parent within ten days of such CCO Group Member
becoming aware of such breach, violation or receipt, but if a Parent Group Member is
required to respond to the IRS or any other Taxing Authority, such notice shall be
given no less than ten days before such response is required.
(ii) Parent may consult with CCO, and CCO agrees to fully cooperate with Parent
in the negotiation, settlement or litigation of any liability for Income Taxes of
any Parent Group Member, regardless of the effect of any such negotiation,
settlement or litigation on the Separate Income Tax Liability of any CCO Group
Member.
(c) Agent. CCO, on behalf of itself and each other CCO Group Member, hereby
appoints Parent as its agent (i) for the purpose of preparing and filing any Income Tax
Return of such CCO Group Member (whether or not such Income Tax Return is filed on a
consolidated, combined or unitary basis with any Parent Group Member), (ii) for the purpose
of representing such CCO Group Member in the course of any Tax Controversy as set forth in
Section 4, and (iii) for the purpose of making any election or taking any action in
connection with any of the foregoing on behalf of each CCO Group Member. CCO, on behalf of
itself and each other CCO Group Member, hereby consents to the preparation and filing of
each such Income Tax Return and to the making of any elections and the taking of any action
as set forth above.
9
Section 6. Retention of Records. CCO agrees to retain, and cause each CCO Group
Member to retain, the appropriate records which may affect the determination of the Separate Income
Tax Liability of any CCO Group Member or the Income Tax liability of any Parent Group Member which
files an Income Tax Return on a consolidated, combined or unitary basis with any CCO Group Member
until such time as there has been a Final Determination with respect thereto. Any CCO Group Member
intending to destroy any materials, records, or documents relating to Income Taxes shall provide
Parent with 90 days advance notice and the opportunity to copy or take possession of such
materials, records and documents.
Section 7. Resolution of Disputes. Any dispute concerning the calculation or basis of
determination of any payment provided for hereunder shall be resolved by the independent certified
public accountants for Parent, whose judgment shall be conclusive and binding upon the parties.
Section 8. Spin-Off of CCO.
(a) Indemnities for Distribution Taxes.
(i) CCO’s Indemnity of Parent. Notwithstanding any provision of this
Agreement to the contrary, including Section 8(a)(iii), CCO shall indemnify
Parent, each other Parent Group Member and their respective directors, officers and
employees, and hold them harmless from and against any and all Distribution Taxes
and Losses, on an after-Tax basis, resulting from the Distribution not qualifying as
a tax-free distribution under section 355 of the Code to the extent such
Distribution Taxes and Losses arise from or are attributable to:
(1) any act, failure to act or omission of or by any CCO Group Member
that is inconsistent with any material, information, covenant or
representation in the Officer’s Certificate or the Ruling Request;
(2) any act, failure to act or omission of or by any CCO Group Member
after the Distribution Date, including a cessation, transfer to Affiliates
or disposition of its active trades or businesses, or an issuance of stock,
stock buyback or payment of an extraordinary dividend by any CCO Group
Member following the Distribution Date;
(3) any acquisition of any stock or assets of any CCO Group Member by
one or more Persons prior to or following the Distribution Date;
(4) any issuance by any CCO Group Member, or change in ownership of
stock of any CCO Group Member, that causes section 355(d) or section 355(e)
of the Code to apply to the Distribution; or
(5) a breach of any covenant set forth in Section 8(b)(i).
(ii) Parent’s Indemnity of CCO. Notwithstanding any provision of this
Agreement to the contrary, including Section 8(a)(iii), Parent shall
indemnify
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CCO, each other CCO Group Member and their respective directors, officers and
employees, and hold them harmless from and against any and all Distribution Taxes
and Losses, on an after-Tax basis, resulting from the Distribution not qualifying as
a tax-free distribution under section 355 of the Code to the extent such
Distribution Taxes and Losses arise from or are attributable to:
(1) any act, failure to act or omission of or by any Parent Group
Member that is inconsistent with any material, information, covenant or
representation in the Officer’s Certificate or the Ruling Request;
(2) any act, failure to act or omission of or by any Parent Group
Member after the Distribution Date, including a cessation, transfer to
Affiliates or disposition of its active trades or businesses, or an issuance
of stock, stock buyback or payment of an extraordinary dividend by any
Parent Group Member following the Distribution Date;
(3) any acquisition of any stock or assets of any Parent Group Member
by one or more Persons prior to or following the Distribution Date; or
(4) any issuance by any Parent Group Member, or change in ownership of
stock of any Parent Group Member, that causes section 355(d) or section
355(e) of the Code to apply to the Distribution.
(iii) Joint Responsibility for Distribution Taxes. Except as provided
in Sections 8(a)(i) and (ii), Parent and CCO shall each indemnify
the other, and its Affiliates, and their respective directors, officers and
employees and hold them harmless from and against fifty percent (50%) of any and all
Distribution Taxes and Losses, on an after-Tax basis, that result from the
Distribution not qualifying as a tax-free distribution under section 355 of the
Code.
(b) Covenants of CCO. During the 2 year period following the Distribution
Date, CCO shall not, and shall not permit any other CCO Group Member to, without the prior
written consent of Parent, which may be granted or withheld in its sole discretion: (1)
sell or transfer all or substantially all of the assets comprising the active trade or
business relied upon in connection with the Letter Ruling or any interest in any Entity that
conducts such active trade or business; (2) merge with another Entity, without regard to
which party is the surviving Entity; and (3) issue or cause to be issued stock of any CCO
Group Member (or any instrument that is convertible or exchangeable into any such stock) in
an acquisition or public or private offering, and shall not issue stock of CCO (or any
instrument that is convertible or exchangeable into any such stock) in an acquisition or
public or private offering.
(c) Cooperation with Letter Ruling and Tax Opinion. In its sole discretion and
control, Parent shall have the right to seek and obtain the Letter Ruling and the Tax
Opinion. CCO shall, and shall cause each other CCO Group Member to, assist and
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cooperate with Parent and take all actions requested by Parent in connection with (i)
any Ruling Request submitted by Parent to the IRS to obtain the Letter Ruling and (ii)
obtaining the Tax Opinion. Such assistance and cooperation shall include making any
representation or covenant or providing any material or information requested by Parent, the
IRS or tax counsel rendering the Tax Opinion; provided, no CCO Group Member shall be
required to make any representation or covenant that is inconsistent with historical facts
or as to future matters or event over which it has no control.
Section 9. Miscellaneous.
(a) Term of the Agreement. This Agreement shall become effective as of the
date of its execution and, except as otherwise expressly provided herein, shall continue in
full force and effect indefinitely.
(b) Injunctions. The parties acknowledge that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in accordance
with its specific terms or were otherwise breached. The parties hereto shall be entitled to
an injunction or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court having jurisdiction, such
remedy being in addition to any other remedy to which they may be entitled at law or in
equity.
(c) 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 set forth herein shall
remain in full force and effect, and shall in no way be affected, impaired or invalidated.
It is hereby stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without including any
of such which may be hereafter declared invalid, void or unenforceable. In the event that
any such term, provision, covenant or restriction is held to be invalid, void or
unforeseeable, the parties hereto shall use their best efforts to find and employ an
alternate means to achieve the same or substantially the same result as that contemplated by
such term, provision, covenant or restriction.
(d) Assignment. Except by operation of law or in connection with the sale of
all or substantially all the assets of a party hereto, this Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto without the
advance written consent of the other party, and any attempt to assign any rights or
obligations arising under this Agreement without such consent shall be void;
provided, however, that the provisions of this Agreement shall be binding
upon, inure to the benefit of and be enforceable by, the parties hereto and their respective
successors and permitted assigns.
(e) Further Assurances. Subject to the provisions hereof, the parties hereto
shall make, execute, acknowledge and deliver such other instruments and documents, and take
all such other actions, as may be reasonably required in order to effectuate the purposes of
this Agreement and to consummate the transactions contemplated hereby. Subject to the
provisions hereof, each of the parties shall, in connection with entering into
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this Agreement, performing its obligations hereunder and taking any and all actions
relating hereto, comply with all applicable laws, regulations, orders and decrees, obtain
all required consents and approvals and make all required filings with any Taxing Authority,
governmental agency, other regulatory or administrative agency, commission or similar
authority, and promptly provide the other parties with all such information as they may
reasonably request in order to be able to comply with the provisions of this sentence.
(f) Parties in Interest. Except as herein otherwise specifically provided,
nothing in this Agreement expressed or implied is intended to confer any right or benefit
upon any Person other than the parties hereto, their respective successors and permitted
assigns, and any Subsidiary that subsequently becomes a Parent Group Member or a CCO Group
Member.
(g) Waivers, Etc. No failure or delay on the part of the parties in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or discontinuance of steps
to enforce such right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. No modification or waiver of any provision of this
Agreement, nor the consent to any departure by the parties therefrom, shall in any event be
effective unless the same shall be in writing, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
(h) Setoff. All payments to be made by any party under this Agreement shall be
made without setoff, counterclaim or withholding, all of which are expressly waived.
(i) Change of Law. If, due to any change in applicable law or regulations or
their interpretation by any court of law or other governing body having jurisdiction
subsequent to the date of this Agreement, the performance of any provision of this Agreement
or any transaction contemplated hereby shall become impracticable or impossible, the parties
hereto shall use their best efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such provision.
(j) Confidentiality. Subject to any contrary requirement of law and the right
of each party to enforce its rights hereunder in any arbitration or legal action, each party
agrees that it shall keep strictly confidential, and shall cause its employees and agents to
keep strictly confidential, any information which it or any of its employees or agents may
acquire pursuant to, or in the course of performing its obligations under, any provision of
this Agreement.
(k) Headings. Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this Agreement.
(l) Counterparts. For the convenience of the parties, any number of
counterparts of this Agreement may be executed by the parties hereto, and each such executed
counterpart shall be, and shall be deemed to be, an original instrument.
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(m) Notices. All notices, consents, requests, instructions, approvals and
other communications provided for herein shall be validly given, made or served, if in
writing and delivered personally, by telegram or sent by registered mail, postage prepaid,
or by facsimile transmission to:
| Parent at: | ||||||
| Attn: Chief Financial Officer | ||||||
| CCO at: | ||||||
| Attn: Chief Financial Officer |
or to such other address as any party may, from time to time, designate in a written notice
given in a like manner. Notice delivered personally or given by telegram shall be deemed
delivered when received by the recipient. Notice given by mail as set out above shall be
deemed delivered five calendar days after the date the same is mailed. Notice given by
facsimile transmission shall be deemed delivered on the day of transmission provided
telephone confirmation of receipt is obtained promptly after completion of transmission.
(n) Costs and Expenses. Unless otherwise specifically provided herein, each
party agrees to pay its own costs and expenses resulting from the exercise of its respective
rights or the fulfillment of its respective obligations hereunder.
(o) Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the domestic substantive laws of the State of Texas without
regard to any choice or conflict of laws, rules or provisions that would cause the
application of the domestic substantive laws of any other jurisdiction.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed by their
respective officers, each of whom is duly authorized, all as of the day and year first above
written.
| CLEAR CHANNEL COMMUNICATIONS, INC. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | Chief Financial Officer | |||||
| CLEAR CHANNEL OUTDOOR HOLDINGS, INC. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | Chief Financial Officer | |||||
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