Execution Copy
Exhibit 10.12
AMENDED AND RESTATED TAX SHARING AGREEMENT
THIS AMENDED AND RESTATED TAX SHARING AGREEMENT (the "Agreement"), dated
as of October 20, 1999, as amended and restated as of March 27, 2000, and as
further amended and restated as of November 9, 2000 is by and among FairPoint
Communications, Inc., a Delaware corporation ("FairPoint"), and its
Subsidiaries, whether presently existing or hereafter acquired (see Attachment 1
for Subsidiaries existing as of this date), as are or shall be part of the
"Affiliated Group" as hereinafter defined (hereinafter referred to individually
as "Subsidiary" and collectively as "Subsidiaries").
WITNESSETH:
WHEREAS, FairPoint and Subsidiaries are members of an affiliated group
("Group") as defined in I.R.C. Section 1504(a); and
WHEREAS, FairPoint and the Subsidiaries will file consolidated Federal
income Tax returns ("Federal Consolidated Returns") and, at FairPoint's option,
may (or, if otherwise required by law, will) file consolidated, combined and/or
unitary Tax returns for state, local and/or foreign Tax purposes ("Other
Consolidated Returns," and, collectively with Federal Consolidated Returns,
"Consolidated Returns"); and
WHEREAS, it is the intent and desire of the parties hereto that a method
be established for allocating the Group's Tax liability among its members; for
reimbursing FairPoint and/or other members for the payment of any such Tax
liability; and for reimbursing members for the use of any Tax Attribute (as
hereinafter defined) that reduces the Group's Tax liability otherwise payable.
NOW, THEREFORE, in consideration of the promises, covenants and agreements
contained herein, the parties hereto agree as follows:
1. Definitions.
2. "Tax" means any form of taxation, wherever created or imposed, and whenever
imposed by a national, municipal, governmental, state, federal, foreign, or
other body (a "Taxing Authority"), and without limiting the generality of the
foregoing, shall include any net income, alternative or add-on minimum tax,
gross income, sales, use, ad valorem, gross receipts, value added, franchise,
profits, license, transfer, recording, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profit, custom duty,
or other tax, government fee or other like assessment or charge of any kind
whatsoever, together with any related interest, penalties, or other additions to
tax, or additional amount imposed by any such Taxing Authority.
3. "Tax Attribute" means any net operating loss, net capital loss, excess
charitable contribution, foreign Tax credit, investment Tax credit or other
similar item.
4. Filing of Consolidated Returns. FairPoint will file, and the Subsidiaries
agree to join in the filing of, a Federal Consolidated Return for any taxable
year (or portion thereof) for which such corporations are permitted or required
to file a Federal Consolidated Return. In addition, each of the Subsidiaries
agrees, at FairPoint's direction, to join in any Other Consolidated Return for
any taxable year (or portion thereof) for which such corporations are permitted
or required to file a Consolidated Return.
2
5. Cooperation on Consolidated Return Matters. The Subsidiaries hereby designate
FairPoint (or FairPoint's designee) as their agent for the purpose of taking any
and all action necessary or incidental to the filing of Consolidated Returns.
The Subsidiaries agree to furnish FairPoint with any and all information
(including, without limitation, the Subsidiaries' pro-forma consolidated Tax
returns with supporting separate company pro-forma Tax returns) in the manner
and format requested by FairPoint in order to carry out the provisions of this
Agreement; to cooperate with FairPoint in any Tax return or consent contemplated
by this Agreement; to take such action with respect to such returns as FairPoint
may request, including, without limitation, the filing of all elections and the
filing of all requests for the extension of time within which to file Tax
returns; to cooperate in connection with any audit or refund claim; and to
undertake all of the foregoing obligations on a timely basis as requested by
FairPoint.
6. Apportionment of Taxes. For each taxable period (or portion thereof) for
which a Federal Consolidated Return is filed pursuant to this Agreement, each
Subsidiary shall be apportioned an amount equal to the lesser of (a) the federal
income taxes that the Subsidiary would be required to pay with respect to such
taxable year if the Subsidiary had filed a separate federal income tax return
for the current year and all prior taxable years (collectively, the "Separate
Federal Income Tax Liability"), and (b) the amount determined under Treasury
Regulations ss. 1.1552-1(a)(1) in accordance with the ratio which that portion
of the consolidated taxable income attributable to each member of the Group
having taxable income bears to the total consolidated taxable income.
7. Payment of Taxes. For each taxable period (or portion thereof) for which a
Federal Consolidated Return is filed pursuant to this Agreement, FairPoint shall
prepare or cause to be prepared the Federal Consolidated Return of the Group and
shall pay all Taxes (including any penalties, fines, interest or other additions
thereto) reported on such
3
Federal Consolidated Return to the relevant Taxing Authority. At least thirty
(30) business days after the due date of any payment FairPoint is required to
make to any Taxing Authority of any Taxes due with respect to a Federal
Consolidated Return of the Group (including, without limitation, estimated Tax
payments, extension Tax payments, deposits and Tax payments due with a
Consolidated Return), each Subsidiary that is included in such Federal
Consolidated Return shall pay to FairPoint an amount equal to its share of the
consolidated federal income Tax liability of the Group as determined under
clause (a) or (b) of Section 6 as the case may be of this Agreement.
8. Tax Benefit. FairPoint has made an election on the Group's first Federal
Consolidated Return in the manner specified in Treasury Regulations ss.
1.1502-33(d)(5) that the method described in Treasury Regulations ss.
1.1502-33(d)(3) be applied to the Group with respect to additional allocations
of income Tax liability for each taxable period (or portion thereof) for which a
Federal Consolidated Return is filed pursuant to this Agreement. Pursuant to
Treasury Regulations ss. 1.1502-33(d)(3), an additional liability will be
allocated to each member of the Group that, as a result of any Tax Attribute
arising from or generated by the activities of another member with respect to a
taxable period (or portion thereof) for which a Federal Consolidated Return was
filed, has an allocated Tax liability as determined under Section 6 of this
Agreement that is less than its Separate Federal Income Tax Liability. The
additional Tax liability allocated to such member shall be equal to 100 percent
of the excess, if any, of (i) the Separate Federal Income Tax Liability of such
member for the taxable year, over (ii) the allocated Tax liability as determined
under Section 6 above. The total of any additional amounts determined in this
Section 8 shall be paid to FairPoint and FairPoint shall immediately remit any
payments that it receives to the member that generated such Tax Attribute to
which such total is attributable or retain such amounts to which it is entitled
based on its
4
Separate Federal Income Tax Liability. Any such payment shall be made pursuant
to a consistent method which reasonably reflects such items and which is
substantiated by specific records maintained by the Group for such purposes.
9. Alternative Minimum Tax. FairPoint and Subsidiaries agree that, in any
taxable year in which any consolidated alternative minimum tax liability (AMT)
is imposed on the Group by Section 55 of the Internal Revenue Code of 1986, as
amended, FairPoint will pay the AMT and not be reimbursed by the Subsidiaries
for their proportionate share.
10. Alternative Minimum Tax Credit. FairPoint and Subsidiaries agree that in any
taxable year in which the Group reduces its consolidated regular federal income
tax liability by the minimum tax credit provided under Section 53 of the
Internal Revenue Code of 1986, as amended, FairPoint will be entitled to retain
all the reduction of the regular tax liability and will not reimburse the
Subsidiaries for their proportionate share.
11. Subsequent Adjustments. If for any taxable period (or portion thereof) for
which a Federal Consolidated Return is filed pursuant to this Agreement, the
Federal income Tax liability of the Group as reported on such Federal
Consolidated Return is adjusted, including, without limitation, by means of an
amended Tax return, a claim for refund, notification of audit changes, or an
audit by the relevant Taxing Authority, then the liabilities of FairPoint and
each Subsidiary that is included in such Federal Consolidated Return shall be
recomputed under the relevant sections of this Agreement to give effect to those
adjustments as if such adjustments had been part of the original determination
of the Group's consolidated Federal income Tax liability. In the case of a
refund, FairPoint shall make payment to each such Subsidiary of its share of the
refund within thirty (30) business days after the refund is received by
FairPoint and, in the case of an increase in Tax liability, each such Subsidiary
shall pay to FairPoint its allocable share of such increased Tax liability at
least thirty (30) business days after the date on which FairPoint
5
pays such liability to the relevant Taxing Authority. If any interest is to be
paid or received as a result of any Tax deficiency or refund, that interest
shall be allocated to FairPoint and each Subsidiary that is included in such
Federal Consolidated Return in the ratio that each such member's positive change
in income Tax liability bears to the total change in the income Tax liability of
the Group. If any penalty is to be paid or received as a result of any Tax
deficiency or refund, that penalty shall be allocated to the member whose income
resulted in the imposition of such penalty.
12. Election for Computing Earnings and Profits. For each taxable period (or
portion thereof) for which a Federal Consolidated Return is filed pursuant to
this Agreement, FairPoint shall elect (if necessary) in the manner specified in
Treasury Regulations ss. 1.1552-1(c) that the Group's consolidated Federal
income Tax liability be apportioned for purposes of computing earnings and
profits in accordance with the method provided in Section 1552(a)(1) of the
Internal Revenue Code of 1986, as amended, and Treasury Regulations ss.
1.1552-1(a)(1).
13. Other Tax Items. This Agreement shall not apply with respect to the
carryback of any Tax Attribute generated by a party and attributable to a
taxable period beginning after the date hereof in which such party is not a
member of the relevant Group.
14. Other Consolidated Returns. The Subsidiaries agree, at the request of
FairPoint, to join with FairPoint (or any direct or indirect subsidiary of
FairPoint (if relevant)) in any Other Consolidated Return for any taxable period
(or portion thereof) for which FairPoint (or any direct or indirect subsidiary
of FairPoint (if any)) elects to file an Other Consolidated Return that includes
such Subsidiaries. If at any time subsequent to the date hereof, the liability
for any state, local or foreign income, franchise or other Tax of FairPoint, the
Subsidiaries and/or any other affiliated corporation (if any) is determined on a
unitary, consolidated, group or combined basis (or any member becomes
responsible
6
for the payment of any such Tax), this Agreement shall be applied to such state,
local or foreign income, franchise or other Tax in like manner as it is applied
to matters relating to Federal income Taxes, after taking into consideration the
extent to which each party has been included in an Other Consolidated Return
that relates to those Taxes and other relevant issues.
15. Disputes. Any dispute concerning the interpretation of a Section or an
amount of payment due under this Agreement shall be resolved by FairPoint in its
reasonable discretion.
16. Successors. A party's rights and obligations under this Agreement may not be
assigned without the prior written consent of the other parties to this
Agreement. This Agreement shall be binding upon and inure to the benefit of any
successor to any party hereto.
17. Additional Subsidiaries. It is understood and agreed that any subsidiary of
FairPoint that is created after the date hereof shall automatically become a
Subsidiary hereunder by executing a counterpart hereof and delivering the same
to FairPoint.
18. Exclusive Agreement. This Agreement embodies the entire understanding among
the parties as to the subject matter hereof, and no change or modification may
be made except in writing by each of the parties.
19. Waivers. The waiver of a breach of any term or condition of this Agreement
shall not be deemed to constitute the waiver of any other breach of the same or
any other term or condition.
20. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.
7
21. Choice of Law; Amendments; Headings; Jurisdiction. This Agreement shall be
governed by the internal laws of the State of North Carolina. This Agreement may
not be amended or modified orally. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
22. Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
8
Attachment 1
IN WITNESS WHEREOF, the undersigned have executed this Tax Sharing
Agreement as of the date first written above.
FAIRPOINT COMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
ST ENTERPRISES, LTD.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
SUNFLOWER TELEPHONE COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
NORTHLAND TELEPHONE COMPANY OF VERMONT
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
NORTHLAND TELEPHONE COMPANY OF MAINE, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
ST COMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
9
ST COMPUTER RESOURCES, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
ST LONG DISTANCE, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
ST BROADCASTING
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
MJD VENTURES, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
XXXXXX TELEPHONE COMPANY
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
C-R COMMUNICATIONS, INC. AND SUBSIDIARIES
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
TACONIC TELEPHONE CORP. AND SUBSIDIARIES
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
10
ELLENSBURG TELEPHONE COMPANY AND SUBSIDIARIES
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
UTILITIES, INC. AND SUBSIDIARIES
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
CHOUTEAU TELEPHONE COMPANY
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
TELEPHONE SERVICES COMPANY
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
COLUMBUS GROVE TELEPHONE COMPANY AND SUBSIDIARIES
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
CHAUTAUQUA & ERIE TELEPHONE CORPORATION AND SUBSIDIARIES
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
MJD SERVICES CORP.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
11
BLUESTEM TELEPHONE COMPANY
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
COLUMBINE TELEPHONE COMPANY
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
BIG XXXXX TELECOM, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
ODIN TELEPHONE EXCHANGE, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
KADOKA TELEPHONE COMPANY
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
RAVENSWOOD COMMINICATIONS, INC. AND SUBSIDIARIES
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
12
ARMOUR INDEPENDENT TELPHONE CO. AND SUBSIDIARIES
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
WMW CABLE TV CO.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
UNION TELEPHONE COMPANY OF HARTFORD AND SUBSIDIARIES
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
XXXXX CITY TELEPHONE COMPANY
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
MJD HOLDINGS CORP.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
FAIRPOINT COMMUNICATIONS SOLUTIONS CORP.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
FAIRPOINT COMMUNICATIONS SOLUTIONS CORP. - NEW YORK
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
13
FAIRPOINT COMMUNICATIONS SOLUTIONS CORP. - VIRGINIA
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
FAIRPOINT SOLUTIONS CAPITAL, LLC
By: FairPoint Communications Solutions Corp.,
its Manager
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
MJD CAPITAL CORP.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President of Finance and Treasurer
14
