AMENDED AND RESTATED
TAX MATTERS AGREEMENT
THIS AMENDED AND RESTATED TAX MATTERS AGREEMENT is made as of the
8th day of October, 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, Xxxxxxx, GTC, GCI and CBS entered into the Tax Matters
Agreement dated April 9, 1999 (the "Original Tax Matters Agreement"), and such
parties desire to amend and restate the Original Tax Matters Agreement in its
entirety;
WHEREAS pursuant to the AGREEMENT AND PLAN OF MERGER dated as of
April 9, 1999, as amended as of October 8, 1999 (the "CBS Merger Agreement")
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
Preferred Stock (as defined in the CBS Merger Agreement) 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, CBS entered into a merger agreement dated as of September
6, 1999, as amended and restated as of October 8, 1999 (as it may be further
amended from time to time, the "Viacom Merger Agreement"), with VIACOM INC., a
Delaware corporation ("Viacom"), pursuant to which and subject to the terms
and conditions thereof, the holders of CBS Common Stock (as defined in the CBS
Merger Agreement) will receive shares of Viacom Class B Common Stock (as
defined in the Viacom Merger Agreement) in exchange for their CBS Common Stock
upon the effective time of the Merger (as defined in the Viacom Merger
Agreement, and referred to herein as the "Viacom Merger"), and the holders of
CBS Preferred Stock will receive shares of Viacom Series C Preferred Stock (as
defined in the Viacom Merger Agreement) in exchange for their CBS Preferred
Stock upon the effective time of the Viacom Merger (the "Viacom Effective
Time");
WHEREAS, Xxxxxxx and CBS desire on behalf of themselves, their
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 hereby amend and restate the
Original Tax Matters Agreement in its entirety and hereby agree as follows:
ARTICLE I
Definitions*
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
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* 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 CBS Merger Agreement.
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.
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.
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 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, 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 CBS 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 Preferred 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 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 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 CBS 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 CBS 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 April 9, 1999, 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 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) Except for exchanges of CBS Preferred Stock for Viacom
Series C Preferred Stock pursuant to the Viacom Merger, 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 Preferred
Stock issued in the Mergers.
(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 the transfer by CBS
of the stock of GCI or GTC to Viacom pursuant to the Viacom Merger), 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, except pursuant to the
CBS Merger Agreement, no Related Person to CBS (i) owns or will own any GCI
Stock or GTC Stock before the Mergers or (ii) 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)).
(l) The consideration to be received by Gaylord in the Viacom
Merger in exchange for the CBS Preferred Stock was negotiated by the parties
to the Viacom Merger Agreement at arm's length.
(m) prior to the Viacom Effective Time, CBS, GTC, GCI and
Viacom shall execute the First Amendment to Amended and Restated Tax Matters
Agreement attached hereto as Annex A (the "First Amendment").
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:
(a) The facts relating to the contemplated Mergers to the
extent described in the CBS 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 CBS 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 CBS 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 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.)
(h) Xxxxxxx has no plan or intention to convert any CBS
Preferred Stock into CBS Common Stock prior to the Viacom Merger.
(i) Xxxxxxx has no plan or intention to convert any Viacom
Series C Preferred Stock received in exchange for its CBS Preferred Stock in
the Viacom Merger into Viacom Class B Common Stock.
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 CBS
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 CBS 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 CBS
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 CBS 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.
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) a breach by CBS of a representation, covenant or
warranty contained in Section 4.1 or Section 4.2 of this Agreement, (B)
any amendment to the Viacom Merger Agreement attached as Schedule 5.13 to
the CBS Merger Agreement (regardless of the effective date of such
amendment), or (C) a failure of any representation, covenant or warranty
contained in the First Amendment to be true (whether or not such First
Amendment is executed as of the Viacom Effective Time),
(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 (A) breach of any representation, covenant
or warranty by Xxxxxxx, GCI or GTC contained in Section 4.3, (B)
conversion by Xxxxxxx of any Viacom Series C Preferred Stock into Viacom
Class B Common Stock, or (C) conversion of CBS Preferred Stock into
shares of CBS Common Stock prior to the Viacom Merger, that in any case
(A), (B) or (C), 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, Gaylord's 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,
Xxxxxxx'x Subsidiaries, GCI, GTC or the Limited Partnership for the taxable
year that includes the Closing Date over (y) the liability for Taxes of
Xxxxxxx, Gaylord's 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 (including a
constructive sale under Section 1259 of the Code) of all or a portion of its
CBS Preferred Stock (or a successor asset which is "substituted basis
property" within the meaning of Section 7701(a)(42) of the Code including the
CBS Common Stock, the Viacom Series C Preferred Stock and the Viacom Class B
Common Stock) 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 Preferred Stock (or such successor
asset) equal to the fair market value of such CBS Preferred 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 Preferred 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
Preferred 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 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 Preferred 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.
5.7 Limitations. Except as otherwise provided in this Agreement, the
principles of Section 8.5 of the CBS 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
CBS Merger Agreement.
5.9 Exclusive Remedy. The parties acknowledge and agree that the
right of the Xxxxxxx Indemnitees for indemnification as provided for in
Section 5.3 shall be the sole and exclusive remedy of the Xxxxxxx Indemnitees
in the event of any breach by CBS, Newco 1 or Newco 2 of any of their
respective representations, covenants and warranties contained in Section 4.1
and 4.2 of this Agreement.
ARTICLE VI
Tax Claims
6.1 General.
(a) Xxxxxxx shall have exclusive control over Tax Claims for
which Xxxxxxx is liable pursuant to Section 5.1, and any other Tax Claim
concerning the status of the GTC Merger as a reorganization under Section
368(a) of the Code (any such claim, a "Merger Claim") that is not covered by
Section 6.1(b) or (c).
(b) CBS and Xxxxxxx shall jointly control (at each party's own
expense) any Merger Claim that would result in an indemnity obligation under
Section 5.3(a) hereof, if Section 5.3(a)(ii) does not apply. Neither party may
settle,
concede or make any concession (including failure to appeal such Merger Claim)
without the other party's written consent.
(c) With respect to any Merger Claim, if (1) it would result in
an indemnity obligation under Section 5.3(a) and Section 5.3(a)(ii) applies,
or it would result in an indemnity obligation under Section 5.3(b) and (2) the
net present value of the Tax benefits reasonably expected to be received by
CBS and its Subsidiaries as a result of a Final Determination with respect to
such Merger Claim (the "CBS Tax Benefit") is less than $40 million, then
Xxxxxxx shall be entitled to elect either (x) to jointly control the Merger
Claim with CBS as described in Section 6.1(b), in which case CBS's
indemnification obligation under Section 5.3(b)(A) (directly or through the
operation of Section 5.3(a)(ii)) shall be $40 million, or (y) to have
exclusive control over the Merger Claim as described in Section 6.1(a) (but
subject to CBS's right to participate in, but not control, the Merger Claim at
its own expense), in which case CBS's indemnification obligation under Section
5.3(b)(A) (directly or through the operation of Section 5.3(a)(ii)) shall be
the lesser of $40 million and the amount of the CBS Tax Benefit.
(d) CBS shall have exclusive control over all other Tax Claims.
(e) The party controlling a Tax Claim pursuant to this Section
6.1 shall have the sole right to contest, litigate and Dispose of such Tax
Claim and to employ counsel of its choice at its sole expense.
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.
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 CBS 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).
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 CBS Merger Agreement.
11.3 Amendments. This Agreement may not be amended except by an
agreement in writing, signed by the parties.
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 CBS 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
XXXXXXX ENTERTAINMENT COMPANY
By:
/s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title:
XXXXXXX TELEVISION COMPANY
By:
/s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title:
XXXXXXX COMMUNICATIONS, INC.
By:
/s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title:
CBS CORPORATION
By:
/s/ Xxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxx
Title:
