TAX SHARING AGREEMENT
Exhibit
10.3
This
Tax
Sharing Agreement (this "Agreement") is entered into as of July 17, 2006, by
and
among ALLTEL Corporation, a Delaware corporation ("AT Co."), ALLTEL Holding
Corp., a newly formed Delaware corporation and a wholly owned subsidiary of
AT
Co. ("Spinco"), and Valor Communications Group, Inc., a Delaware corporation
("Valor"). Capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings ascribed to such terms in the Distribution
Agreement, dated as of December 8, 2005, by and between AT Co. and Spinco,
as
amended on June 29, 2006 (the "Distribution Agreement").
RECITALS
Whereas,
AT Co. is the common parent corporation of an affiliated group of corporations
within the meaning of Section 1504(a) of the Internal Revenue Code of 1986,
as
amended (the "Code"), that has filed consolidated federal income tax returns.
Whereas
Spinco is a newly-formed, wholly owned subsidiary of AT Co.
Whereas,
pursuant to the Distribution Agreement, among other things, AT Co. will transfer
or cause to be transferred to Spinco or one or more subsidiaries of Spinco
(pursuant to certain preliminary restructuring transactions) all of the Spinco
Assets, Spinco will assume or cause to be assumed all of the Spinco Liabilities,
and Spinco will issue to AT Co. Spinco Common Stock and Spinco Exchange Notes
and will pay the Special Dividend
(the
"Contribution").
Whereas,
on the Distribution Date, AT Co. will distribute all of the issued and
outstanding shares of Spinco Common Stock on a pro rata basis to holders of
the
AT Co. Common Stock (the "Distribution").
Whereas,
pursuant to the Merger Agreement, dated as of December 8, 2005, by and among
AT
Co., Spinco and Valor (the " Merger Agreement"), following the Distribution,
Spinco will merge with and into Valor pursuant to the Merger.
Whereas, the parties to this Agreement intend that the Contribution, together
with the Debt Exchange, qualify as a tax-free reorganization under Section
368
of the Internal Revenue Code of 1986, as amended (the "Code"), that the
Distribution qualify as a distribution of Spinco stock to AT Co. stockholders
pursuant to Section 355 of the Code, that the Merger qualify as a tax-free
reorganization pursuant to Section 368 of the Code, and that no gain or loss
be
recognized as a result of such transactions for federal income tax purposes
by
any of AT Co., Spinco, and their respective stockholders (except to the extent
of cash received in lieu of fractional shares).
Whereas,
AT Co., Spinco and Valor desire to set forth their rights and obligations with
respect to Taxes (as defined herein) due for periods before and after the
Distribution Date.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE
I.
DEFINITIONS
"Advisory
Fees" shall have the meaning set forth in Section 3.06(b).
"Affiliate"
shall mean any Person that directly or indirectly through one or more
intermediaries Controls, is Controlled by, or is under common Control with
a
specified Person.
"Agreement"
shall have the meaning set forth in the recitals.
"Applicable
Federal Rate" shall have the meaning set forth in Section 1274(d) of the Code,
compounded quarterly.
"AT
Co."
shall have the meaning set forth in the preamble to this Agreement.
"AT
Co.
Group" shall mean AT Co. and all Subsidiaries of AT Co. at any time preceding,
at or following the Contribution, but shall not include any member of the Spinco
Group.
"AT
Consolidated Group" shall mean any consolidated, combined or unitary group
(i)
of which AT Co. is the common parent corporation at any time or (ii) that
otherwise included Spinco or any Spinco Subsidiary for any Pre-Distribution
Period.
“AT
Excess Expenses” shall have the meaning set forth in Section
3.06(a).
“AT
Tax
Expenses” shall have the meaning set forth in Section 3.06(b).
"Code"
shall have the meaning set forth in the recitals.
"Combined
Return" shall have the meaning set forth in Section 2.01.
"Contribution"
shall have the meaning set forth in the Recitals.
"Control"
or "Controlled" shall mean, with respect to any Person, the presence of one
of
the following: (i) the legal, beneficial or equitable ownership, directly or
indirectly, of more than 50% (by vote or value) of the capital or voting stock
(or other ownership or voting interest, if not a corporation) of such Person
or
(ii) the ability, directly or indirectly, to direct the voting of a majority
of
the directors of such Person's board of directors or, if the Person does not
have a board of directors, a majority of the positions on any similar body,
whether through appointment, voting agreement or otherwise.
"Controlling
Party" shall have the meaning set forth in Section 5.01.
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"Disqualifying
Action" shall have the meaning set forth in Section 10.2 of the Merger
Agreement.
"Distribution"
shall have the meaning set forth in the Recitals.
"Distribution
Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"Distribution
Date" shall have the meaning set forth in the Distribution
Agreement.
“Exchange
Note Expenses” shall have the meaning set forth in Section 3.06(b).
“Exchange
Notes” shall have the meaning set forth in Section 3.06(b).
"Final
Determination" shall have the meaning set forth in the Merger
Agreement.
"Income
Taxes" shall mean any and all Taxes based upon or measured by net or gross
income (including alternative minimum tax under Section 55 of the Code and
including any liability described in clauses (ii) or (iii) of the definition
of
"Taxes" that relates to any Income Tax).
“Investment
Banking Letter Agreements” shall have the meaning set forth in Section
3.06(b).
“Merger
Advisory Fees” shall have the meaning set forth in Section 3.06(b).
"Other
Taxes" shall mean any and all Taxes other than Income Taxes, including any
liability described in clauses (ii) or (iii) of the definition of "Taxes" that
relates to any Other Tax.
"Person"
shall mean any individual, partnership, joint venture, corporation, limited
liability company, trust, unincorporated organization, government or department
or agency of a government.
"Post-Distribution
Period" shall mean any taxable year or other taxable period beginning after
the
Distribution Date and, in the case of any taxable year or other taxable period
that begins before and ends after the Distribution Date, that part of the
taxable year or other taxable period that begins at the beginning of the day
after the Distribution Date.
"Pre-Distribution
Period" shall mean any taxable year or other taxable period that ends on or
before the Distribution Date and, in the case of any taxable year or other
taxable period that begins before and ends after the Distribution Date, that
part of the taxable year or other taxable period through the close of the
Distribution Date.
"Reimbursing
Party" shall have the meaning set forth in Section 3.05(d).
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"Reimbursed
Party" shall have the meaning set forth in Section 3.05(d).
"Separate
Return" shall have the meaning set forth in Section 2.01(b).
"Short
Period Return" shall have the meaning set forth in Section 2.01(b).
"Spinco"
shall have the meaning set forth in the Recitals.
“Spinco
Credit/Note Expenses” shall have the meaning set forth in Section
3.06(b).
"Spinco
Group" shall mean Spinco and all entities that are Subsidiaries of Spinco
immediately following the Contribution.
“Spinco
Tax Expenses” shall have the meaning set forth in Section 3.06(b).
"
Spinco
Transaction Expenses" shall have the meaning set forth in Section
3.06(a).
"Straddle
Return" shall have the meaning set forth in Section 2.01.
"Straddle
Period" shall mean any taxable period that includes but does not end on the
Distribution Date.
"Subsidiary"
shall mean a corporation, limited liability company, partnership, joint venture
or other business entity if 50% or more of the outstanding equity or voting
power of such entity is owned directly or indirectly by the corporation with
respect to which such term is used.
"Tax"
or
"Taxes" shall have the meaning set forth in the Merger Agreement.
"Tax
Attribute" shall mean any net operating loss carryover, net capital loss
carryover, investment tax credit carryover, foreign tax credit carryover,
charitable deduction carryover or other similar item that could reduce Income
Tax for a past or future taxable period.
"Tax
Benefit" shall means, in the case of separate state, local or other Income
Tax
Return, the sum of the amount by which the Tax liability (after giving effect
to
any alternative minimum or similar Tax) of a corporation to the appropriate
Taxing Authority is reduced (including by deduction, entitlement to refund,
credit or otherwise, whether available in the current taxable year, as an
adjustment to taxable income in any other taxable year or as a carryforward
or
carryback, as applicable) plus any interest from such government or jurisdiction
relating to such Tax liability, and in the case of a consolidated federal Income
Tax Return or combined, unitary or other similar state, local or other Income
Tax Return, the sum of the amount by which the Tax liability of the affiliated
group (within the meaning of Section 1504(a) of the Code) or other relevant
group of corporations to the appropriate government or jurisdiction is reduced
(including by deduction, entitlement to
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refund,
credit or otherwise, whether available in the current taxable year, as an
adjustment to taxable income in any other taxable year or as a carryforward
or
carryback, as applicable) plus any interest from such government or jurisdiction
relating to such Tax liability.
"Tax
Contest" shall have the meaning set forth in Section 5.01.
"Tax
Return" shall have the meaning set forth in the Merger Agreement.
"Taxing
Authority" shall have the meaning set forth in the Merger
Agreement.
“Transaction
Expenses” shall have the meaning set forth in Section 3.06(a).
"USF
Payments" shall have the meaning set forth in Section 2.04(a).
"USF
Tax
Amount" shall have the meaning set forth in Section 2.04(a).
"Valor"
shall have the meaning set forth in the recitals
"Valor
Group" shall mean Valor and all entities that are Subsidiaries of Valor
immediately following the Merger.
"Windstream
Corporation" shall mean the corporation surviving the Merger.
ARTICLE
II.
TAX
RETURNS AND TAX PAYMENTS
2.01
OBLIGATIONS TO FILE TAX RETURNS.
(a)
AT
Co. shall file or cause to be filed any Income Tax Return that is required
to be
filed after the Distribution Date by or with respect to any member of the Spinco
Group that (i) is filed on a consolidated, combined or unitary basis, (ii)
includes both one or more members of the AT Co. Group and one or more members
of
the Spinco Group, and (iii) is for a taxable period that includes a
Pre-Distribution Period (a "Combined Return"). Each member of the Spinco Group
hereby irrevocably authorizes and designates AT Co. as its agent, coordinator
and administrator for the purpose of taking any and all actions necessary or
incidental to the filing of any such Combined Tax Return and, except as
otherwise provided herein, for the purpose of making payments to, or collecting
refunds from, any Taxing Authority in respect of a Combined Return. Except
as
otherwise provided herein, AT Co. shall have the exclusive right to file,
prosecute, compromise or settle any claim for refund for Income Taxes in respect
of a Combined Return for which AT Co. bears responsibility hereunder and to
determine whether any refunds of such Income Taxes to which the AT Consolidated
Group may be entitled shall be received by way of refund or credit against
the
Tax liability of the AT Consolidated Group.
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(b)
Valor
shall file or cause to be filed any other Income Tax Return required to be
filed
after the Distribution Date by or with respect to one or more members of the
Spinco Group, including any such Tax Return (i) with respect to any taxable
period that includes but does not end on the Distribution Date (a "Straddle
Return"), (ii) with respect to a taxable period ending on the Distribution
Date
(a "Short Period Return"), and (iii) with respect to a taxable period beginning
after the Distribution Date (a "Separate Return"). AT Co. shall remit to Valor
in immediately available funds the amount of any Income Taxes (including
estimated Income Taxes) related to a Straddle Return or Short Period Return
for
which AT Co. is responsible hereunder, at least two Business Days before payment
of the relevant amount is due to a Taxing Authority. Valor shall file or cause
to be filed any Other Tax Return required to be filed after the Distribution
Date by one or more members of the Spinco Group.
2.02
APPROVAL OF STRADDLE RETURNS AND SHORT PERIOD RETURNS. No later than thirty
(30)
days prior to the date on which any Straddle Return or Short Period Return
is
required to be filed (taking
into account any valid extensions)
(the
"Due Date"), Valor shall submit or cause to be submitted to AT Co. the Straddle
Return or Short Period Return and
shall
make or cause to be made any and all changes to such return reasonably requested
by AT Co., to the extent that such changes relate to items for which AT Co.
has
responsibility hereunder (and for which at least substantial authority exists
within the meaning of Section 6662 of the Code and the Treasury Regulations
thereunder). Valor shall not file or allow to be filed any such Straddle Return
or Short Period Return prior to receiving written approval of the return from
AT
Co., which approval shall not be unreasonably withheld, delayed or
conditioned.
2.03
OBLIGATION TO REMIT TAXES. Subject to Section 2.01 and subject always to the
ultimate division of responsibility for Taxes set out in Section 2.04, AT Co.
and Valor shall each remit or cause to be remitted to the applicable Taxing
Authority any Taxes due in respect of any Tax Return that such party is required
to file (or, in the case of a Tax for which no Tax Return is required to be
filed, which is otherwise payable by such party or a member of such party's
group (the AT Co. Group or the Spinco Group) to any Taxing Authority) and shall
be entitled to reimbursement for such payments to the extent provided herein
or
in the Merger Agreement.
2.04
TAX
SHARING OBLIGATIONS AND PRIOR AGREEMENTS.
(a)
From
and after the Merger, Valor shall be liable for and shall indemnify and hold
the
AT Co. Group harmless against (i) any net liability for Income Taxes of a member
of the Spinco Group (and Valor and the Spinco Group shall be entitled to receive
and retain any net refund of Income Taxes or other net Tax Benefit) attributable
to the treatment of payments received from a federal or state universal services
fund ("USF Payments") in respect of the Spinco Business for the period from
January 1, 1997, to the Distribution Date, taking into account (x) any refund
of
Income Taxes with respect to USF Payments previously not treated as
contributions to capital within the meaning of Section 118(a) of the Code,
(y)
cost recovery deductions arising from property acquired with USF Payments and
(z) Income Taxes payable as a result of a failure of a USF Payment to be treated
as a
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contribution
to capital within the meaning of Section 118(a) of the Code, in each case with
respect to such period (a "USF Tax Amount"), (ii) any Other Taxes arising in
the
Pre-Distribution Period and attributable to a member of the Spinco Group or
to
the employees, assets or transactions of the Spinco Business, except for Other
Taxes arising in respect of the Contribution (including the Preliminary
Restructuring) or the Distribution and (iii) any liability for Taxes arising
in
the Post-Distribution Period and attributable to a member of the Spinco Group
or
to the assets, employees, or transactions of the Spinco Business. Except with
respect to indemnification pursuant to clause (i), all indemnification pursuant
to this Section 2.04(a) shall be on a net after-Tax basis.
(b)
Except for Taxes specifically allocated to Valor under this Agreement or for
which Valor has indemnified AT Co. pursuant to the Merger Agreement, AT Co.
shall be liable for and shall indemnify and hold Valor and its Subsidiaries
and
the Spinco Group harmless against, on a net after-Tax basis, any Tax liability
(i) of the AT Co. Group or any AT Consolidated Group or any member thereof
or
attributable to the employees, assets or transactions of the AT Co. Business
or
(ii) of the Spinco Group or any member thereof, including Taxes arising from
any
Distribution Disqualification other than Taxes for which Valor is responsible
pursuant to Article X of the Merger Agreement.
(c)
Except as set forth in this Agreement and in consideration of the mutual
indemnities and other obligations of this Agreement, any and all prior Tax
sharing or allocation agreements or practices between any member of the AT
Co.
Group and any member of the Spinco Group (including the ALLTEL Corporation
and
Subsidiaries Tax Sharing Policy in effect for taxable years ending on or after
December 31, 1991) shall be terminated with respect to the Spinco Group as
of
the Distribution Date, and no member of the Spinco Group shall have any
continuing rights or obligations thereunder.
(d)
Valor
shall be entitled to any refund of or credit for Taxes for which Valor is
responsible under this Agreement, and AT Co. shall be entitled to any refund
of
or credit for Taxes for which AT Co. is responsible under this Agreement.
Refunds for any Straddle Period shall be equitably apportioned between the
AT
Co. Group and the Spinco Group in accordance with the provisions of this
Agreement governing such periods. A party receiving a refund to which another
party is entitled pursuant to this Agreement shall pay the amount to which
such
other party is entitled within five days after the receipt of the
refund.
2.06
PERIOD THAT INCLUDES THE DISTRIBUTION DATE.
(a)
To
the extent permitted by law or administrative practice, the taxable year of
each
member of the Spinco Group with respect to any Tax shall be treated as closing
at the close of the Distribution Date.
(b)
If it
is necessary for purposes of this Agreement to determine the Tax liability
of
any member of the Spinco Group for a taxable year or period that begins on
or
before and ends after the Distribution Date and that is not treated under
Section 2.05(a) as closing at the close of the Distribution Date, the
determination shall be made, in the case of Taxes
7
that
are
based upon income or receipts, by assuming that the relevant taxable period
ended at the close of the Distribution Date, except that any exemptions,
allowances or deductions that are calculated on an annual basis shall be
apportioned on a time basis. In the case of Taxes that are imposed on a periodic
basis, are payable for a taxable period that includes (but does not end on)
the
Distribution Date, and are not based upon or related to income or receipts,
the
portion of such Tax that relates to the Pre-Distribution Period shall be deemed
to be the amount of such Tax for the entire taxable period multiplied by a
fraction the numerator of which is the number of days in the taxable period
ending on the Distribution Date and the denominator of which is the number
of
days in the entire taxable period.
(c)
For
the avoidance of doubt, Taxes allocated to the Pre-Distribution Period shall
include (i) any Tax resulting from the departure of any corporation from any
AT
Consolidated Group (resulting from the triggering into income of deferred
intercompany transactions under Section 1.1502-13 of the Treasury Regulations
or
excess loss accounts under Section 1.1502-19 of the Treasury Regulations or
otherwise) other than any such Tax that would not have arisen in the absence
of
a Disqualifying Action, and (ii) any Tax related to items of income or gain
arising with respect to any interest in an entity treated as a partnership
for
United States federal income tax purposes, held by a member of the Spinco Group
in the Pre-Distribution Period, in accordance with the principles of Section
1.1502-76(b)(2)(vi) of the Treasury Regulations.
ARTICLE
III.
CARRYBACKS;
AMENDED RETURNS; TIMING ADJUSTMENTS; COMPENSATION DEDUCTIONS
3.01
CARRYBACKS. Without the consent of AT Co., no member of the Spinco Group shall
carry back any Tax Attribute (unless required to carry back such Tax Attribute
by law) from a Post-Distribution Period to a Pre-Distribution Period. Provided
that AT Co. consents to the carryback or if the carryback is required by law,
AT
Co. (or any other member of the AT Co. Group receiving such refund) shall
promptly remit to Valor any Tax Benefit it realizes with respect to any such
carryback.
3.02
AMENDED RETURNS. Valor shall not, and shall not permit any member of the Spinco
Group to, file any amended Income Tax Return of a member of the Spinco Group
or
a Tax Return with respect to Other Taxes of a member of the Spinco Group that
is
filed on a combined basis with a member of the AT Co. Group, in each case with
respect to a Pre-Distribution Period, without first obtaining the consent of
AT
Co., which shall not be unreasonably withheld, delayed or
conditioned.
3.03
TIMING
ADJUSTMENTS.
(a)
If an
audit or other examination by any Taxing Authority with respect to any Income
Tax Return shall result (by settlement or otherwise) in any adjustment that
(A)
decreases deductions, losses or Tax credits or increases income, gains or
recapture of Tax credits of a member of the AT Consolidated Group for a
Pre-Distribution Period in respect
8
of
an
item for which AT Co. is responsible hereunder and (B) will permit the Spinco
Group to increase deductions, losses or tax credits or decrease income, gains
or
recapture of tax credits that would otherwise (but for such adjustment) have
been taken or reported with respect to the Spinco Group for one or more
Post-Distribution Periods, Valor shall, and shall cause the Spinco Group to,
pay
to AT Co. the amounts of any Tax Benefits that result therefrom within ten
(10)
days of the date on which such Tax Benefits are realized, provided, however,
that this Section 3.02(a) shall not apply to any such adjustment relating to
the
subject matter of 2.04(a)(i) and the last sentence of Section 4.01.
(b)
If an
audit or other examination by any Taxing Authority with respect to any Income
Tax Return shall result (by settlement or otherwise) in any adjustment that
(A)
decreases deductions, losses or Tax credits or increases income, gains or
recapture of Tax credits of a member of the Valor Group for a Post-Distribution
Period and (B) will permit any member of the AT Co. Group or any AT Consolidated
Group to increase deductions, losses or tax credits or decrease income, gains
or
recapture of tax credits in respect of an item for which AT Co. would be
responsible hereunder, AT Co. shall, and shall cause the AT Co. Group to, pay
to
Valor the amounts of any Tax Benefits that result therefrom within ten (10)
days
of the date on which such Tax Benefits are realized.
(c)
The
party in control of the audit or other examination to which any such adjustment
described in 3.02(a) or (b) above relates shall notify the other party and
provide it with adequate information so that it may reflect such adjustment
on
its applicable Tax Returns.
3.04.
TAX
BENEFIT REALIZED. For purposes of this Agreement, a Tax Benefit shall be deemed
to have been realized at the time any refund of Taxes is received or applied
against other Taxes due, or at the time of filing of a Tax Return (including
any
relating to estimated Taxes) on which a loss, deduction or credit is applied
in
reduction of Taxes which would otherwise be payable; provided,
however,
that,
where a party has other losses, deductions, credits or similar items available
to it, deductions, credits or items for which the other party would be entitled
to a payment under this Agreement shall be treated as the last items utilized
to
produce a Tax Benefit.
3.05
DEDUCTIONS WITH RESPECT TO RESTRICTED STOCK ISSUED PRIOR TO THE DISTRIBUTION
DATE.
(a)
All
deductions for United States federal, state and local income Tax purposes
resulting from the vesting of shares of restricted stock of AT Co. issued prior
to the Distribution Date and the related shares of Windstream Corporation
received with respect to such AT Co. shares shall be taken by AT Co. or a member
of the AT Co. Group, and no party to this Agreement shall take any position
on
any Tax Return which is inconsistent with such treatment, unless required to
do
so pursuant to a Final Determination to such effect.
(b)
If,
by reason of a subsequent Final Determination as to the treatment of any tax
deductions related to the AT Co. restricted stock or Windstream Corporation
restricted
9
stock
referred to in Section 3.05(a) above, the taxing authorities determine that
Valor is entitled to such deduction, then Valor shall, and shall cause the
Spinco Group to, pay to AT Co. the amount of any Tax Benefits that result
therefrom within ten (10) days of the date on which such Tax Benefits are
realized.
3.06
DEDUCTIONS WITH RESPECT TO TRANSACTION EXPENSES
(a)
Pursuant to Section 12.2 of the Distribution Agreement, the costs and expenses
incurred by AT Co. or Spinco or their respective Subsidiaries and described
in
that Section (“Transaction Expenses”) are to be paid (borne economically) by (i)
Spinco, in an amount up to $45.948 million (“Spinco Transaction Expenses”), and
(ii) thereafter, by AT Co. (“AT Excess Expenses”).
(b)
As
soon as is reasonably practicable after the Closing Date, AT Co. and Valor
shall
determine (i) those Transaction Expenses that are to be reported as items of
the
AT Co. Group for Tax purposes (“AT Tax Expenses”) and (ii) those Transaction
Expenses that are to be reported as items of the Spinco Group for Tax purposes
(“Spinco Tax Expenses”). In making that determination, the following principles
shall apply - (i) the costs and expenses incurred in connection with (A) the
Spinco Credit Agreement and (B) the $800 million in principal amount of Senior
Notes due 2013 issued by Windstream Corporation (collectively, “Spinco
Credit/Note Expenses”), including the aggregate fees, expenses and underwriting
discount related thereto, shall be treated as Spinco Tax Expenses; (ii) the
portion of the advisory fees (“Advisory Fees”) payable pursuant to those certain
Letter Agreements, dated December 7 and 8, 2005, among Xxxxxxxx, Inc., XX Xxxxxx
Securities, Inc., Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Inc., Alltel
Corporation and ALLTEL Holding Corp. (“Investment Banking Letter Agreements”)
that relates to the Merger (“Merger Advisory Fees”), which portion the parties
agree is $9.375 million, shall be treated as Spinco Tax Expenses; (iii) the
remaining portion of the Advisory Fees, which relate to the Contribution and
the
Distribution and which portion the parties agree is $28.125 million
(“Contribution/Distribution Advisory Fees”), shall be treated as AT Tax
Expenses; (iv) the costs and expenses (“Exchange Note Expenses”) incurred in
connection with the $1.746 billion in principal amount of Notes due 2016 issued
by Spinco (“Exchange Notes”), other than the implicit underwriting commission
arising on the transfer by AT Co. of the Exchange Notes in exchange for certain
outstanding indebtedness of AT Co. (which shall be treated as an AT Tax
Expense), shall be treated as Spinco Tax Expenses; (v) other fees and expenses
related to the Merger shall be treated as Spinco Tax Expenses; (vi) other fees
and expenses related to the Contribution and the Distribution shall be treated
as AT Tax Expenses; and (vii) costs and expenses not provided for in clauses
(i)
through (vi) shall be allocated between AT Co. and Spinco for Tax purposes
in
such reasonable manner as the parties may agree. No party shall take a position
on any Tax Return that is inconsistent with the allocations provided for in
this
paragraph (b), unless required to do so by a Final Determination to such
effect.
(c)
If,
as an original matter or by reason of a subsequent Final Determination as to
the
treatment of a Transaction Expense as an AT Tax Expense or a Spinco Tax Expense,
a Spinco Tax Expense is borne economically by AT Co. (that is, if a Spinco
Tax
Expense is
10
treated
as an AT Excess Expense), then, in accordance with Section 3.04 of this
Agreement and without duplication of the other adjustments required under this
Agreement, Valor shall, and shall cause the Spinco Group to, pay to AT Co.
the
amount of any Tax Benefits that result therefrom within ten (10) days of the
date on which such Tax Benefits are realized. For this purpose, the following
ordering conventions shall apply - (i) Spinco Transaction Expenses shall be
deemed to consist (A) first, of Spinco Credit/Note Expenses, to the full extent
thereof, (B) second, of Exchange Note Expenses, to the full extent thereof,
(C)
third, of Merger Advisory Fees, to the full extent thereof, (D) fourth, of
other
fees and expenses related to the Merger described in paragraph (b)(v) and (E)
fifth, of other Spinco Tax Expenses described in paragraph (b)(vii).
(d)
The
principles of paragraph (c) shall apply, mutatis
mutandis, if
an AT
Tax Expense is borne economically by Spinco (that is, if an AT Tax Expense
is
treated as a Spinco Transaction Expense).
ARTICLE
IV.
PAYMENTS
4.01
PAYMENTS. Except as provided in Section 2.01 and Section 3.03, payments due
under this Agreement shall be made no later than thirty (30) days after the
receipt or crediting of a refund, the realization of a Tax Benefit for which
the
other party is entitled to reimbursement, the delivery of notice of payment
of a
Tax for which the other party is responsible under this Agreement, or the
delivery of notice of a Final Determination which results in such other party
becoming obligated to make a payment hereunder to the other party hereto.
Payments due hereunder, but not made within such 30-day period, shall be
accompanied with interest at a rate equal to the Applicable Federal Rate from
the due date of such payment. Notwithstanding the foregoing, in the case of
any
payment required to be made to AT Co. by Valor as the result of a Final
Determination with respect to a USF Amount, such USF Amount may be paid in
ten
(10) equal, annual installments, commencing on a date which is not less than
thirty (30) days after the date of such Final Determination, and on each of
the
nine succeeding anniversaries of such date.
4.02
NOTICE. AT Co. and Valor shall give each other prompt written notice of any
payment that may be due to the provider of such notice under this Agreement.
ARTICLE
V.
TAX
CONTESTS
5.01
NOTICE. Valor shall promptly notify AT Co. in writing upon receipt by Valor
or
any member of the Valor Group of a written communication from any Taxing
Authority with respect to any pending or threatened audit, dispute, suit,
action, proposed assessment or other proceeding (a "Tax Contest") concerning
any
Combined Return, Straddle Return or Short Period Return or otherwise concerning
Taxes for which AT Co. may be liable under this Agreement. AT Co. shall promptly
notify Valor in writing upon
11
receipt
by AT Co. or any member of the AT Co. Group of a written communication from
any
Taxing Authority with respect to any Tax Contest concerning any Separate Return
or otherwise concerning Taxes for which Valor may be liable under this
Agreement.
5.02
CONTROL OF CONTESTS BY AT. CO. Except as provided in Section 5.03, AT Co. shall
have sole control of any Tax Contest of a member of the Spinco Group related
to
any Combined Return, Straddle Return or Short Period Return, including the
exclusive right to communicate with agents of the Taxing Authority and to
control, resolve, settle or agree to any deficiency, claim or adjustment
proposed, asserted or assessed in connection with or as a result of any such
Tax
Contest, provided, however, that (i) AT Co. shall provide Valor an opportunity
to review and comment upon AT Co.'s communications with such Taxing Authorities
to the extent such communications relate to Spinco or any member of the Spinco
Group, (ii) AT Co. shall act in good faith in connection with its control of
such Tax Contest and (iii) in the case of any such Tax Contest that relates
to
Income Taxes for which Valor has responsibility hereunder, Valor may participate
in the Tax Contest at its own expense, and AT Co. shall not settle or concede
any such Tax Contest without the prior written consent of Valor, which consent
shall not be unreasonably withheld, delayed or conditioned.
5.03
CONTROL OF CONTESTS BY VALOR. Valor shall have sole control of any Tax Contest
related to any Separate Return and any Tax Contest relating to Other Taxes
for
which Valor is responsible hereunder, including the exclusive right to control,
resolve, settle or agree to any deficiency, claim or adjustment proposed,
asserted or assessed in connection with or as a result of any such Tax
Contest.
ARTICLE
VI.
COOPERATION
6.01
GENERAL. AT Co. and Valor shall cooperate with each other in the 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 reasonably necessary to carry out the intent of this Agreement.
Each party agrees to notify the other party in writing of any audit adjustments
which do not result in Tax liability but can be reasonably expected to affect
Tax Returns of the other party, or any of its Subsidiaries, for a
Post-Distribution Period.
6.02
CONSISTENT TREATMENT.
(a)
Unless and until there has been a Final Determination to the contrary, each
party agrees to treat the Contribution, together with the Debt Exchange, as
a
reorganization qualifying under Section 368(a)(1)(D) of the Code, the
Distribution as a transaction qualifying under Sections 355 and 361 of the
Code
and the Merger as a reorganization qualifying under Section 368(a) of the Code,
pursuant to which no gain or loss is recognized by any of AT Co., Spinco, Valor
and their respective shareholders (except to the extent of cash received in
lieu
of fractional shares).
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(b)
Unless and until there has been a Final Determination to the contrary or unless
there is not at
least
substantial authority for a particular position within the meaning of Section
6662 of the Code and the Treasury Regulations thereunder,
Valor
shall file or cause to be filed all Tax Returns of a member of the Spinco Group
or relating to the Spinco Business and shall conduct any Tax Contests in respect
of a member of the Spinco Group or the Spinco Business in a manner consistent
with AT Co.'s determination of the adjusted Tax basis of any asset and the
amount of any Tax Attribute or any similar item held by the Spinco Group at
the
time of the Distribution, and, without the consent of AT Co., in the case of
a
past practice of the AT Co. Consolidated Group that is subject to a Tax Contest
at the time of the Distribution, Valor shall not permit any of the Spinco
Subsidiaries to take any position on any Tax Return, in any Tax Contest or
otherwise that is inconsistent with such past practice. For the avoidance of
doubt, this Section shall not apply to reporting under GAAP.
ARTICLE
VII.
RETENTION
OF RECORDS; ACCESS
The
AT
Co. Group and the Valor Group shall (a) in accordance with their then current
record retention policy, 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 any member of either the AT Co. Group
or the Spinco Group for any Pre-Distribution Period or any Post-Distribution
Period or for the audit of such Tax Returns; and (b) give to the other
reasonable access to such records, documents, accounting data and other
information (including computer data) and to its personnel (insuring their
cooperation) and premises, for the purpose of the review or audit of such Tax
Returns to the extent relevant to an obligation or liability of a party under
this Agreement or for purposes of the preparation or filing of any such Tax
Return, the conduct of any Tax Contest or any other matter reasonably and in
good faith related to the Tax affairs of the requesting party. At any time
after
the Distribution Date that the Valor Group proposes to destroy such material
or
information, it shall first notify the AT Co. Group in writing and the AT Co.
Group shall be entitled to receive such materials or information proposed to
be
destroyed. At any time after the Distribution Date that the AT Co. Group
proposes to destroy such material or information, it shall first notify the
Valor Group in writing and the Valor Group shall be entitled to receive such
materials or information proposed to be destroyed.
ARTICLE
VIII.
TERMINATION
OF LIABILITIES
Notwithstanding
any other provision in this Agreement, any liabilities determined under this
Agreement shall not terminate any earlier than the expiration of the applicable
statute of limitation for such liability. All other covenants under this
Agreement shall survive indefinitely.
13
ARTICLE
IX.
DISPUTE
RESOLUTION
AT
Co.
and Valor shall attempt in good faith to resolve any disagreement arising with
respect to this Agreement, including, but not limited to, any dispute in
connection with a claim by a third party (a "Dispute"). Either party may give
the other party written notice of any Dispute not resolved in the normal course
of business. If the parties cannot agree by the tenth Business Day following
the
date on which one party gives such notice (the "Dispute Date"), then the Dispute
shall be determined as follows: Within 20 days of the Dispute Date, AT Co.
and
Valor shall each appoint one arbitrator. The two arbitrators so appointed shall
appoint a third arbitrator within 30 days of the Dispute Date. If either party
shall fail to appoint an arbitrator within such 20-day period, the arbitration
shall be conducted by the sole arbitrator appointed by the other party. Whether
selected by AT Co., Valor or otherwise, each arbitrator selected to resolve
such
dispute shall be a tax lawyer who is generally recognized in the tax community
as a qualified and competent tax practitioner with experience in the tax area
involved. Such arbitrators shall be empowered to resolve the Dispute, including
by engaging nationally recognized accounting and other experts. Each of AT
Co.
and Valor shall bear 50% of the aggregate expenses of the arbitrators (or the
sole arbitrator). The decision of the arbitrators shall be rendered no later
than 90 days from the Dispute Date and shall be final.
ARTICLE
X.
MERGER
AGREEMENT CONTROLS
None
of
the provisions of this Agreement are intended to supersede any provision in
Article X of the Merger Agreement. In the event of any conflict between this
Agreement and Article X of the Merger Agreement, Article X of the Merger
Agreement shall control.
ARTICLE
XI.
MISCELLANEOUS
PROVISIONS
To
the
extent not inconsistent with any specific term of this Agreement, the following
sections of the Distribution Agreement shall apply in relevant part to this
Agreement: 12.3 (Governing Law), 12.4 (Notice), 12.5 (Amendment and
Modification), 12.6 (Successors and Assigns; No Third-Party Beneficiaries),
12.7
(Counterparts), 12.8 (Interpretation), 12.9 (Severability), 12.10 (References;
Construction), and 12.11 (Terminability).
14
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the
day and year first above written.
ALLTEL
CORPORATION
By:
/s/ Xxxxxxxx X. Xxxxxxx
Name:
Xxxxxxxx X. Xxxxxxx
Title:
Executive Vice President
ALLTEL
HOLDING CORP.
By:
/s/ Xxxx X. Xxxxxxxx
Name:
Xxxx X. Xxxxxxxx
Title:
Executive Vice President and General Counsel
VALOR
COMMUNICATIONS GROUP, INC.
By:
/s/ Xxxxxxx X. Xxxxx, Xx.,
Name:
Xxxxxxx X. Xxxxx, Xx.,
Title:
Senior Vice President, Chief Legal Officer
and
Secretary
