iHeartMedia 2012 Annual Report Download - page 28

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through January 31, 2006. The taxing authority contends that these businesses fall within the definition of “communication services”
and as such are subject to the VAT. L&C and Klimes filed separate petitions to challenge the imposition of this tax.
On August 8, 2011, Brazil’s National Council of Fiscal Policy (CONFAZ) published a convenio authorizing sixteen states,
including the State of São Paulo, to issue an amnesty that would reduce the principal amount of VAT allegedly owed and reduce or
waive related interest and penalties. The State of São Paulo ratified the amnesty in late August 2011. On May 10, 2012, the State of
São Paulo published an amnesty decree that mirrors the convenio. Klimes and L&C accepted the amnesty on May 24, 2012 by
making the aggregate required payment of $10.9 million, which was recorded as an expense in the second quarter of 2012. On that
same day, Klimes and L&C filed petitions to discontinue the tax litigation based on the amnesty payments. In January 2013, we were
notified that the petitions to discontinue the litigation were granted and the lawsuits filed by Klimes and L&C were dismissed effective
June 1, 2012 and July 11, 2012, respectively.
Stockholder Litigation
Two derivative lawsuits were filed in March 2012 in Delaware Chancery Court by stockholders of Clear Channel Outdoor
Holdings, Inc., an indirect non-wholly owned subsidiary of ours, which is, in turn, an indirect wholly owned subsidiary of CC Media
Holdings, Inc. The consolidated lawsuits are captioned In re Clear Channel Outdoor Holdings, Inc. Derivative Litigation,
Consolidated Case No. 7315-CS. The complaints name as defendants certain of our and Clear Channel Outdoor Holdings, Inc.’s
current and former directors and us, as well as Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. Clear Channel Outdoor
Holdings, Inc. also is named as a nominal defendant. The complaints allege, among other things, that in December 2009 we breached
fiduciary duties to Clear Channel Outdoor Holdings, Inc. and its stockholders by allegedly requiring Clear Channel Outdoor Holdings,
Inc. to agree to amend the terms of a revolving promissory note payable by us to Clear Channel Outdoor Holdings, Inc. to extend the
maturity date of the note and to amend the interest rate payable on the note. According to the complaints, the terms of the amended
promissory note were unfair to Clear Channel Outdoor Holdings, Inc. because, among other things, the interest rate was below
market. The complaints further allege that we were unjustly enriched as a result of that transaction. The complaints also allege that the
director defendants breached fiduciary duties to Clear Channel Outdoor Holdings, Inc. in connection with that transaction and that the
transaction constituted corporate waste. On April 4, 2012, the board of directors of Clear Channel Outdoor Holdings, Inc. formed a
special litigation committee consisting of independent directors (the “SLC”) to review and investigate plaintiffs’ claims and determine
the course of action that serves the best interests of Clear Channel Outdoor Holdings, Inc. and its stockholders. On June 20, 2012, the
SLC filed a motion to stay the lawsuits for six months while it completes its review and investigation. In response, on June 27, 2012,
plaintiffs filed a motion for an expedited trial, asking the Court to schedule a trial on the merits in October 2012. On July 23, 2012, the
Court issued an order granting the motion to stay and denying the motion for an expedited trial. On January 23, 2013, the SLC filed a
motion to extend the stay for thirty days, and on January 24, 2013, the Court granted that motion, extending the stay for thirty days
from the date of the order.
Los Angeles Litigation
In 2008, Summit Media, LLC, one of our competitors, sued the City of Los Angeles, Clear Channel Outdoor, Inc. and CBS
Outdoor in Los Angeles Superior Court (Case No. BS116611) challenging the validity of a Stipulated Judgment that had been entered
into in November 2006 among the parties. Pursuant to the Stipulated Judgment, Clear Channel Outdoor, Inc. had taken down existing
billboards and converted 83 existing signs from static displays to digital displays pursuant to modernization permits issued through an
administrative process of the City. The Los Angeles Superior Court ruled in January 2010 that the Stipulated Judgment constituted an
ultra vires act of the City and nullified its existence, but did not invalidate the modernization permits issued to Clear Channel Outdoor,
Inc. and CBS. All parties appealed the ruling by the Los Angeles Superior Court to Court of Appeal for the State of California,
Second Appellate District, Division 8. At an October 30, 2012 oral argument by the parties, the California Court of Appeal read a
preliminary ruling from the bench prior to the argument indicating it would uphold the Los Angeles Superior Court’s finding that the
Stipulated Judgment was ultra vires and would remand the case to the Los Angeles Superior Court for the purpose of invalidating the
permits issued to Clear Channel Outdoor, Inc. and CBS for the digital displays that were the subject of the Stipulated Judgment. The
Court of Appeal issued its written ruling in this matter on December 10, 2012, consistent with its October 30, 2012 preliminary ruling.
Clear Channel Outdoor, Inc. filed a motion for rehearing on December 26, 2012. The Court of Appeal denied the motion for
rehearing. On January 22, 2013, Clear Channel Outdoor, Inc. filed a petition with the California Supreme Court requesting its review
of the matter.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.