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Exhibit
10.11
TAX SHARING
AGREEMENT
This Tax Sharing Agreement (the “
Agreement ”) is entered into as of November 30,
2007, by and among WINDSTREAM CORPORATION, a Delaware corporation
(“ WIN ”), WINDSTREAM REGATTA HOLDINGS, INC., a
Delaware corporation newly formed by WIN (“ Holdings
”), and REGATTA HOLDING I, L.P., a Delaware limited
partnership, REGATTA HOLDING II, L.P., a Delaware limited
partnership, and REGATTA HOLDING III, L.P., a Delaware limited
partnership (each a “ WCAS Sub ” and together
the “ WCAS Subs ”).
RECITALS
WHEREAS, as of the date
hereof, WIN is the common parent of an affiliated group of domestic
corporations within the meaning of Section 1504(a) of the
Code, and the members of the affiliated group have heretofore
joined in filing consolidated federal income Tax
Returns;
WHEREAS, pursuant to the
Amended and Restated Share Exchange Agreement, dated as of
August 16, 2007, as subsequently amended, by and between WIN,
the WCAS Subs, the Parents, and the Additional WCAS Holders (the
“ Share Exchange Agreement ”), (i) WIN will
contribute, or cause to be contributed, to the Division
Subsidiaries all of the assets and liabilities primarily associated
with the operation of the business of the Division pursuant to
certain restructuring transactions, including one or more
distributions and/or contributions of assets and/or equity
securities (collectively, the “ Restructuring
Transactions ”) and (ii) in exchange for the
contribution to Holdings of all of the issued and outstanding
capital stock of the Company and other assets related to the
Business of the Division, Holdings will distribute to WIN the
Holdings Shares and the Holdings Exchange Notes and pay to WIN the
Special Dividend, all upon the terms and subject to the conditions
set forth in the Share Exchange Agreement (the transactions
described in this clause (ii) are collectively referred to
herein as the “ Contribution ”);
WHEREAS, pursuant to the
Share Exchange Agreement, on the Closing Date, WIN shall transfer
to the WCAS Subs and the Additional WCAS Holders 100 percent of the
Holdings Shares in exchange for shares of WIN Common Stock of which
the WCAS Subs and the Additional WCAS Holders are the record and
beneficial owners (the “ Exchange ”);
WHEREAS, pursuant to the
Share Exchange Agreement, on the Closing Date, WIN expects to
effect the exchange of the Holdings Exchange Notes for outstanding
WIN debt obligations (“ WIN Notes ”) held by one
or more creditors of WIN (the “ Debt Exchange
”);
WHEREAS, the Parties to this
Agreement intend that the Contribution, together with the Exchange
and the Debt Exchange, qualify as a tax-free reorganization under
Section 368 of the Code, that the Exchange qualify as a
tax-free distribution under Section 355(a) of the Code, and
that the Share Exchange Agreement constitute a “plan of
reorganization” within the meaning of Sections 361 and 368 of
the Code; and
WHEREAS, in connection with
the Exchange, the Parties desire to enter into this Agreement to
provide for certain Tax matters, including the assignment of
responsibility for the preparation and filing of Tax Returns, the
payment of and indemnification for Taxes, entitlement to refunds of
Taxes, and the prosecution and defense of any Tax
Contest;
NOW, THEREFORE, in
consideration of the mutual agreements, provisions and covenants
contained in this Agreement, the Parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 General .
Capitalized terms used in this Agreement and not defined herein
shall have the meanings that such terms have in the Share Exchange
Agreement. As used in this Agreement, the following terms shall
have the following meanings:
“ Action ”
means any demand, action, claim, suit, countersuit, litigation,
arbitration, prosecution, proceeding (including any civil,
criminal, administrative, investigative or appellate proceeding),
hearing, inquiry, audit, examination or investigation commenced,
brought, conducted or heard by or before, or otherwise involving,
any court, grand jury or other Governmental Authority or any
arbitrator or arbitration panel.
“ Additional WCAS
Holders ” shall have the meaning specified in the Share
Exchange Agreement.
“ Agreement
” shall have the meaning specified in the
preamble.
“ Affiliate
” shall have the meaning specified in the Share Exchange
Agreement.
“ Ancillary
Agreements ” shall have the meaning specified in the
Share Exchange Agreement.
“ Business Day
” or “ Business Days ” shall have the
meaning specified in the Share Exchange Agreement.
“ Closing Date
” shall have the meaning specified in the Share Exchange
Agreement.
“
Closing-of-the-Books Method ” shall mean the
apportionment of items between portions of a Taxable period based
on a closing of the books as of the end of the Closing Date,
provided that any items not susceptible to such apportionment shall
be apportioned on the basis of elapsed days during the relevant
portion of the Taxable period.
“ Code ”
shall have the meaning specified in the Share Exchange
Agreement.
“ Company
” shall have the meaning specified in the Share Exchange
Agreement.
“ Confidentiality
Agreement ” shall have the meaning specified in the Share
Exchange Agreement.
“ Contribution
” shall have the meaning specified in the
recitals.
“ Damages
” shall have the meaning specified in the Share Exchange
Agreement.
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“ Debt Exchange
” shall have the meaning specified in the
recitals.
“ Dispute
” shall have the meaning specified in
Section 2.10.
“ Dispute Date
” shall have the meaning specified in
Section 2.10.
“ Disqualifying
Action ” shall mean any action, including entering into
any agreement, understanding or arrangement or any substantial
negotiations with respect to any transaction or series of
transactions, or the failure to take any action expressly required
pursuant to this Agreement, the Share Exchange Agreement or the Tax
Materials (for the avoidance of doubt, including any such action or
failure to take action that is pursuant to any plan, agreement,
understanding or arrangement existing in whole or in part prior to
the Closing Date), that would, in each case, cause an Exchange
Disqualification to occur; provided , however , that,
in the case of (x) the Parents and the WCAS Subs, or
(y) from and after the Closing Date, Holdings and the Division
Subsidiaries, the term “Disqualifying Action” shall not
include (i) any action that is expressly required by the terms
of the Share Exchange Agreement or any of the Ancillary Agreements,
(ii) any action that would not have caused an Exchange
Disqualification to occur but for a WIN Action, (iii) for the
avoidance of doubt, any action taken by Holdings or any of the
Division Subsidiaries prior to the Closing Date or (iv) any
action taken solely to mitigate the adverse effects on the Tax-Free
Status of the Transactions of a breach by Holdings or any of the
Division Subsidiaries, occurring prior to the Closing Date, of a
representation, warranty or covenant contained in the Share
Exchange Agreement or any of the Ancillary Agreements, regardless
of whether such breach or its effects continue after the Closing
Date.
“ Division
” shall have the meaning specified in the Share Exchange
Agreement.
“ Division
Subsidiaries ” shall have the meaning specified in the
Share Exchange Agreement.
“ Exchange
” shall have the meaning specified in the
recitals.
“ Exchange
Disqualification ” shall mean that (i) the
Contribution, taken together with the Exchange and the Debt
Exchange, fails to qualify as a tax-free reorganization under
Section 368 of the Code; (ii) the Exchange, as such,
fails to qualify as a distribution of Holdings Shares to the WCAS
Subs pursuant to Section 355 of the Code, pursuant to which no
gain or loss is recognized for federal income tax purposes by any
of WIN, Holdings or the WCAS Subs, except to the extent of cash
received in lieu of fractional shares; (iii) the Debt Exchange
fails to constitute a transfer of qualified property to WIN’s
creditors in connection with the reorganization within the meaning
of Section 361(c)(3) of the Code, and/or (iv) the Special
Dividend fails to qualify as money transferred to creditors or
distributed to shareholders in connection with the reorganization
within the meaning of Section 361(b)(1) of the Code, but only
to the extent that the Special Dividend does not exceed WIN’s
tax basis in the stock of Holdings immediately prior to the Special
Dividend and that WIN distributes the Special Dividend to its
creditors or shareholders in connection with the
Contribution.
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“ Exchange Taxes
” shall mean all Taxes (other than Transfer Taxes), as
determined by a Final Determination, resulting from the
Restructuring Transactions, the Contribution, the Exchange or the
Debt Exchange.
“ Final
Determination ” shall mean a determination within the
meaning of Section 1313 of the Code or any similar provision
of state or local Tax law.
“ Forward
Commitmen t” shall mean the conditional forward
underwriting commitment (if any) among Wachovia Securities and the
WCAS Subs with respect to the Holdings Exchange Notes.
“ Governmental
Entity ” shall have the meaning specified in the Share
Exchange Agreement.
“ Holdings
” shall have the meaning specified in the
recitals.
“ Holdings
Consolidated Group ” shall mean any consolidated,
combined or unitary group of which Holdings is the common parent
corporation.
“ Holdings Exchange
Notes ” shall have the meaning specified in the Share
Exchange Agreement.
“ Holdings
Shares ” shall have the meaning specified in the Share
Exchange Agreement.
“ IRS ”
shall mean the Internal Revenue Service.
“ Maximum Yield
” shall mean the yield specified in the Forward Commitment
(if any) as the maximum interest rate for the Holdings Exchange
Notes.
“ Parent ”
shall have the meaning specified in the Share Exchange
Agreement.
“ Party ”
shall mean any of WIN, Holdings or the WCAS Subs, as the context
may require.
“ Person ”
shall have the meaning specified in the Share Exchange
Agreement.
“ Post-Closing
Period ” shall mean any Taxable year or other Taxable
period beginning after the Closing Date and, in the case of any
Taxable year or other Taxable period that begins on or before and
ends after the Closing Date, that part of the Taxable year or other
Taxable period that begins at the beginning of the Business Day
after the Closing Date.
“ Potential
Disqualifying Action ” shall have the meaning specified
in Section 3.2(b).
“ Pre-Closing
Period ” shall mean any Taxable year or other Taxable
period that ends on or before the Closing Date and, in the case of
any Taxable year or other Taxable
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period that begins on or
before and ends after the Closing Date, that part of the Taxable
year or other Taxable period through the end of the Closing
Date.
“ Restricted
Period ” shall mean the two (2) year period
commencing on the Closing Date.
“ Restructuring
Transactions ” shall have the meaning specified in the
recitals.
“ Ruling Request
” shall mean the request for the Tax-Free Reorganization
Ruling, the Tax-Free Split-Off Ruling (including the
Section 355(d) Ruling), the Tax-Free Debt Exchange Ruling, and
the Tax-Free Special Dividend Ruling, to be submitted by WIN (and,
to the extent applicable, the WCAS Subs) to the IRS.
“ Rulings
” shall mean the Tax-Free Reorganization Ruling, the Tax-Free
Split-Off Ruling (including the Section 355(d) Ruling), the
Tax-Free Debt Exchange Ruling and the Tax-Free Special Dividend
Ruling.
“ Section 355(d)
Breach ” shall mean the inaccuracy, incorrectness or
incompleteness of any factual information provided to the IRS by or
on behalf of any Parent or WCAS Sub or any affiliate of any Parent
or WCAS Sub in connection with the Section 355(d) Ruling
(including, but not limited to, the materials describing changes in
the ownership of Valor Communications Group, Inc.
(“Valor”) and its predecessors and the transactions
related to the formation of Valor and issuances of stock of Valor
prior to the merger of ALLTEL Holding Corp. with and into
Valor).
“ Section 355(d)
Ruling ” shall mean a private letter ruling from the IRS,
explicit or implicit in the acceptance of factual (rather than
legal) representations in connection with the Tax-Free Split-Off
Ruling, to the effect that, in the Exchange, the WCAS Subs
(determined after applying Section 355(d)(7)) will not receive
50 percent or more of the Holdings Shares in exchange for WIN
Common Stock that was acquired by purchase (as defined in
Section 355(d)(5) and (8)) during the five-year period
(determined after applying Section 355(d)(6)) ending on the
Closing Date.
“ Straddle
Period ” shall mean any Taxable period commencing on or
prior to, and ending after, the Closing Date.
“ Subsidiary
” shall have the meaning specified in the Share Exchange
Agreement.
“ Special
Dividend ” shall have the meaning specified in the Share
Exchange Agreement.
“ Tax ”
(and, with correlative meaning, “ Taxable ”)
shall mean (i) any and all U.S. federal, state, local and
foreign taxes, including income, alternative or add-on minimum,
gross receipts, profits, lease, service, service use, wage,
employment, workers compensation, business occupation,
environmental, estimated, excise, sales, use, transfer, license,
payroll, franchise, severance, stamp, occupation, windfall profits,
withholding, social security, unemployment, disability, ad valorem,
capital stock, paid in capital, recording, registration, property,
real property gains, value added, business license,
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custom duties and other
taxes, charges, fees, levies, imposts, duties or assessments of any
kind whatsoever, imposed or required to be withheld by any Taxing
Authority, including any interest, additions to Tax or penalties
applicable or related thereto, (ii) any liability for the
Taxes of any Person under Treasury Regulation Section 1.1502-6
(or similar provision of state or local law), and (iii) any
liability for the payment of any amount of a type described in
clause (i) or clause (ii) as a result of any obligation
to indemnify or otherwise assume or succeed to the liability of any
other Person.
“ Tax Benefit
” shall mean 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), 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 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 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). 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 a Tax Return (including any Tax Return 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 or a reduction in indemnity payments
or other offset under the Share Exchange Agreement shall be treated
as the last items utilized to produce a Tax Benefit.
“ Tax
Certificates ” shall mean the certificates, in customary
form, of officers of the Parties that will be provided to
(i) WIN’s tax counsel in connection with the Tax-Free
Reorganization Opinion, the WIN Tax-Free Split-Off Opinion and the
Tax-Free Debt Exchange Opinion and (ii) WCAS Subs’ tax
counsel in connection with the WCAS Subs Tax-Free Split-Off
Opinion.
“ Tax Contest
” shall have the meaning specified in
Section 5.1.
“ Tax-Free Debt
Exchange Opinion ” shall mean a written opinion of
WIN’s tax counsel, addressed to WIN and dated as of the
Closing Date, in form and substance reasonably satisfactory to WIN
and the WCAS Subs, to the effect that the Holdings Exchange Notes
will qualify as “securities” of Holdings within the
meaning of Section 361 of the Code.
“ Tax-Free Debt
Exchange Ruling ” shall mean a private letter ruling from
the IRS to the effect that, in general, WIN will not recognize gain
or loss for federal income tax purposes in connection with the
consummation of the Debt Exchange.
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“ Tax-Free
Reorganization Opinion ” shall mean a written opinion of
WIN’s tax counsel, addressed to WIN and dated as of the
Closing Date, in form and substance reasonably satisfactory to WIN
and the WCAS Subs, to the effect that the Contribution, taken
together with the Exchange and the Debt Exchange, will qualify as a
tax-free reorganization under Section 368(a)(1)(D) of the
Code.
“ Tax-Free
Reorganization Ruling ” shall mean a private letter
ruling from the IRS to the effect that the Contribution, taken
together with the Exchange and the Debt Exchange, will qualify as a
tax-free reorganization under Section 368(a)(1)(D) of the
Code.
“ Tax-Free Special
Dividend Ruling ” shall mean a private letter ruling from
the IRS, based on customary representations by WIN, to the effect
that the Special Dividend will qualify as money transferred to
creditors or distributed to shareholders in connection with the
reorganization within the meaning of Section 361(b)(1) of the
Code.
“ Tax-Free Split-Off
Ruling ” shall mean a private letter ruling from the IRS
to the effect that the Exchange, as such, will qualify as a
distribution of Holdings Shares pursuant to Section 355 of the
Code, pursuant to which no gain or loss will be recognized for
federal income tax purposes by any of WIN, Holdings or the WCAS
Subs.
“ Tax-Free Status of
the Transactions ” shall mean that (i) the
Contribution, taken together with the Exchange and the Debt
Exchange, qualifies as a tax-free reorganization pursuant to
Section 368(a)(1)(D) of the Code, (ii) the Debt Exchange
constitutes a transfer of qualified property to WIN’s
creditors in connection with the reorganization within the meaning
of Section 361(c)(3) of the Code, (iii) the Exchange, as
such, qualifies as a distribution of Holdings Shares to the WCAS
Subs pursuant to Section 355 of the Code, pursuant to which no
gain or loss is recognized for federal income tax purposes by any
of WIN, Holdings or the WCAS Subs, except to the extent of cash
received in lieu of fractional shares, and (iv) the Special
Dividend qualifies as money transferred to creditors or distributed
to shareholders in connection with the reorganization within the
meaning of Section 361(b)(1) of the Code, to the extent that
the Special Dividend does not exceed WIN’s tax basis in the
stock of Holdings immediately prior to the Special Dividend and
that WIN distributes the Special Dividend to its creditors or
shareholders in connection with the Contribution.
“ Tax Materials
” shall have the meaning set forth in
Section 2.2.
“ Tax Opinions
” shall mean the Tax-Free Reorganization Opinion, the WIN
Tax-Free Split-Off Opinion, the WCAS Subs Tax-Free Split-Off
Opinion and the Tax-Free Debt Exchange Opinion.
“ Tax-Related
Losses ” shall have the meaning set forth in
Section 2.4(b)(iii).
“ Tax Return
” shall have the meaning specified in the Share Exchange
Agreement.
“ Taxing
Authority ” shall have the meaning specified in the Share
Exchange Agreement.
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“ Transfer Taxes
” shall mean all sales, use, privilege, transfer,
documentary, stamp, recording, and similar Taxes and fees
(including any penalties, interest or additions thereto) imposed
upon any Party in connection with the Exchange.
“ WCAS Subs Tax-Free
Split-Off Opinion ” shall mean a written opinion of the
WCAS Subs’ tax counsel, addressed to the WCAS Subs and dated
as of the Closing Date, in form and substance reasonably
satisfactory to WIN and the WCAS Subs, to the effect that the
Exchange, as such, will qualify as a distribution of Holdings
Shares pursuant to Section 355(a) of the Code, pursuant to
which no gain or loss will be recognized for federal income tax
purposes by any of the WCAS Subs.
“ WIN Action
” shall mean (i) any transaction with respect to the
stock or assets of WIN or the WIN Subsidiaries that occurs after
the Closing Date, (ii) any failure by WIN after the Closing
Date to maintain its status as a company engaged in the conduct of
an active trade or business or (iii) (x) the failure of
any representation made by WIN in connection with the Rulings or
the Tax Opinions or any subsequent ruling or opinion in connection
with the Exchange, in each case with respect to WIN or the
businesses conducted by WIN or the plans, proposals, intentions and
policies of WIN after the Closing Date, to have been true and
correct in all material respects when made, or (y) the failure
by WIN or the WIN Subsidiaries to comply with any covenant made by
WIN in connection with the Rulings or the Tax Opinions or any
subsequent ruling or opinion in connection with the
Exchange.
“ WIN Common
Stock ” shall have the meaning specified in the Share
Exchange Agreement.
“ WIN Consolidated
Group ” shall mean any consolidated, combined or unitary
group (i) of which WIN is the common parent corporation at any
time or (ii) that otherwise included Holdings or any of the
Division Subsidiaries for any Pre-Closing Period.
“ WIN Notes
” shall have the meaning specified in the
recitals.
“ WIN
Subsidiaries ” shall mean all direct and indirect
Subsidiaries of WIN, other than Holdings and the Division
Subsidiaries.
“ WIN Tax-Free
Split-Off Opinion ” shall mean a written opinion of
WIN’s tax counsel, addressed to WIN and dated as of the
Closing Date, in form and substance reasonably satisfactory to WIN
and the WCAS Subs, to the effect that the Exchange will qualify as
a distribution of Holdings Shares pursuant to Section 355 of
the Code, pursuant to which no gain or loss will be recognized for
federal income tax purposes by any of WIN or Holdings.
“ WLM ”
shall have the meaning specified in the Share Exchange
Agreement.
Section 1.2 References;
Interpretation . References in this Agreement to any gender
include references to all genders, and references to the singular
include references to the plural and vice versa. The word
“including” when used in this Agreement shall be deemed
to be
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followed by the phrase “without
limitation”. Unless the context otherwise requires,
references in this Agreement to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of,
and Exhibits and Schedules to, such Agreement. Unless the context
otherwise requires, the words “hereof”,
“hereby”, and “herein” and words of similar
meaning when used in this Agreement refer to this Agreement in its
entirety and not to any particular Article, Section or provision of
this Agreement.
ARTICLE II
TAX RETURNS AND TAX
PAYMENTS
Section 2.1 Obligations to
File Tax Returns .
(a) Except as provided
herein, WIN shall have the sole and exclusive responsibility for
the preparation and filing of all Tax Returns that include Holdings
or any of the Division Subsidiaries or that otherwise relate to the
Division for any Pre-Closing Period. Holdings, on behalf of itself
and each Division Subsidiary, hereby irrevocably authorizes and
designates WIN as its agent, coordinator and administrator for the
purpose of taking any and all actions necessary or incidental to
the filing of any such Tax Return and for the purpose of making
payments to, or collecting refunds from, any Taxing Authority in
respect of any such Tax Return. Except as otherwise provided
herein, WIN shall have the exclusive right to file, prosecute,
compromise or settle any claim for refund for Taxes in respect of a
Tax Return for which WIN bears responsibility under this
Section 2.1(a) and to determine whether any refunds of such
Taxes to which the WIN Consolidated Group may be entitled shall be
received by way of refund or credit against the Tax liability of
the WIN Consolidated Group.
(b) Except as provided
herein, Holdings shall have the sole and exclusive responsibility
for the preparation of all Tax Returns that include Holdings or any
of the Division Subsidiaries or that otherwise relate to the
Division for any Post-Closing Period. Except as otherwise provided
herein, Holdings shall have the exclusive right to file, prosecute,
compromise or settle any claim for refund for Taxes in respect of a
Tax Return for which Holdings bears responsibility under this
Section 2.1(b) and to determine whether any refunds of such
Taxes to which the Holdings Consolidated Group may be entitled
shall be received by way of refund or credit against the Tax
liability of the Holdings Consolidated Group.
(c) To the extent permitted
by law or administrative practice in any jurisdiction in which Tax
Returns that include Holdings or any of the Division Subsidiaries
or that otherwise relate to the Division are filed, the Parties
shall cause the current Taxable period of Holdings or any Division
Subsidiary to end at the end of the Closing Date.
(d) Except as provided
herein, WIN shall have the sole and exclusive responsibility for
the preparation and filing of all Tax Returns that include Holdings
or any of the Division Subsidiaries or that otherwise relate to the
Division for any Straddle Period. No later than sixty
(60) Business Days prior to the date on which any such
Straddle Period Tax Return is required to be filed (taking into
account any valid extensions), WIN shall submit or cause to be
submitted to Holdings a draft of such Straddle Period Tax Return
for Holdings’ review. WIN shall make or cause to be made any
and all changes to such Tax Return reasonably requested by
Holdings, to the extent that such changes do not increase the
amount of Tax for which WIN is
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responsible hereunder and shall
consider, in good faith, other changes reasonably requested by
Holdings; provided , however, that Holdings must submit to
WIN its proposed changes to such Tax Return in writing within
thirty (30) Business Days of receiving such Tax
Return.
Section 2.2 Manner of
Preparation . Unless and until there has been a Final
Determination to the contrary, all Tax Returns of or that include
Holdings, any of the Division Subsidiaries, WIN, the WCAS Subs, the
Parents, or any of their respective Subsidiaries shall be prepared
in a manner that is consistent with (A) the Ruling Request,
(B) the Rulings, (C) the Tax Opinions, (D) the Tax
Certificates, and (E) any other materials delivered or
deliverable in connection with the issuance of the Rulings and the
rendering of the Tax Opinions
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