Exhibit 10.3
TAX SHARING AGREEMENT
     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.

 

--------------------------------------------------------------------------------

 

“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).

 

--------------------------------------------------------------------------------

 

“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

 

--------------------------------------------------------------------------------

 

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.

 

--------------------------------------------------------------------------------

 

          (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

 

--------------------------------------------------------------------------------

 

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

 

--------------------------------------------------------------------------------

 

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

 

--------------------------------------------------------------------------------

 

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

 

--------------------------------------------------------------------------------

 

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
Stephens, Inc., JP Morgan Securities, Inc., Merrill Lynch, Pierce, Fenner &
Smith 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

 

--------------------------------------------------------------------------------

 

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

 

--------------------------------------------------------------------------------

 

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).

 

--------------------------------------------------------------------------------

 

     (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.

 

--------------------------------------------------------------------------------

 

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).

 

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.

                  ALLTEL CORPORATION    
 
           
 
  By:   /s/ Sharilyn S. Gasaway    
 
           
 
                Name: Sharilyn S. Gasaway      Title:  Executive Vice
President — Chief Financial Officer
 
                ALLTEL HOLDING CORP.    
 
                By:   /s/ John P. Fletcher
 
           
 
                Name: John P. Fletcher      Title: Executive Vice President and
General Counsel
 
                VALOR COMMUNICATIONS GROUP, INC.    
 
                By:   /s/ William Ojile, Jr.
 
           
 
                Name: William Ojile, Jr.      Title: Senior Vice President,
Chief Legal Counsel and Secretary