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EXHIBIT 10.28
First Amendment to Tax Sharing Agreement
First Amendment dated __________, 1999, to the Tax Sharing Agreement
(the "Tax Sharing Agreement"), dated February 17, 1998, by and among Western
Wireless Corporation, a Washington Corporation, Western PCS Corporation
(presently named VoiceStream Wireless Corporation), a Washington Corporation,
and Xxxxxxxxx Telecommunications PCS (USA) Limited, a British Virgin Islands
corporation.
WHEREAS, the parties to the Tax Sharing Agreement desire to make certain
amendments thereto in light of the proposed spin-off by Western Wireless
Corporation of all of its stock in VoiceStream Wireless Corporation; and
WHEREAS, VoiceStream Wireless Corporation was reincorporated in
Washington prior to the date hereof.
NOW, THEREFORE, the parties agree that the Tax Sharing Agreement is
amended as follows:
1. All references in the Tax Sharing Agreement to Western PCS
Corporation or Western PCS shall be deemed to be references to VoiceStream
Wireless Corporation ("VoiceStream"), a Washington Corporation, and all
references in the Tax Sharing Agreement to the Western PCS Group shall be deemed
to be references to the VoiceStream Group, which shall consist of VoiceStream
and its direct and indirect subsidiaries.
2. Section 1.02 of the Tax Sharing Agreement shall be amended so that
the obligations of WWC thereunder shall be subject to Sections 1.05, 1.08, 1.14,
1.19, and 1.20. Accordingly, Section 1.02 of the Tax Sharing Agreement shall be
amended to read as follows:
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1.02 Payment of taxes by WWC. Subject to Sections 1.05, 1.08,
1.14, 1.19, and 1.20 and any rights of offset that WWC may have
under this Agreement, WWC shall pay, or cause to be paid, all
income taxes, interest, and penalties due with respect to income
earned or recognized by the VoiceStream Group.
3. Section 1.14 of the Tax Sharing Agreement is deleted in its entirety
and the following is inserted in lieu thereof:
1.14 Indemnification of the VoiceStream Group. Except as
otherwise provided in Section 1.20, WWC and each member of the
WWC Affiliated Group (other than members of the VoiceStream
Group) shall indemnify and hold each of the VoiceStream Group
members harmless from and against all federal, state, local,
foreign and other taxes and penalties and interest related
thereto due from or payable by WWC or any member of the WWC
Affiliated Group, other than taxes, penalties and interest (a)
allocable to members of the VoiceStream Group pursuant to
Sections 1.01 through 1.10 of the Agreement, (b) of members of
the VoiceStream Group that are not otherwise subject to the
provisions of this Agreement, (c) arising as a result of the
failure of any member of the VoiceStream Group to comply in all
material respects with each written representation and written
statement made concerning it in the ruling request filed with
the Internal Revenue Service by Western Wireless
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Corporation on September 28, 1998, including all accompanying
exhibits and materials and the letters filed with the Internal
Revenue Service by Western Wireless Corporation in connection
therewith on November 24, 1998, January 14, 1999, and March 3,
1999 (collectively, the "Ruling Request"), (d) arising as a
result of VoiceStream voluntarily ceasing within two years after
the Spin-off, as defined in the Ruling Request, to actively
conduct the VoiceStream Active Business, as defined in the
Ruling Request, or (e) that are provided for in Section 1.19(b).
For purposes of clause (c) of the prior sentence, the inaccuracy
as of the time of the Spin-off of any written representation or
written statement in the Ruling Request shall not constitute a
failure of any member of the VoiceStream Group to comply with
such representation or statement.
If, upon receipt by WWC of a notice of indemnification
claim by VoiceStream from VoiceStream or Investor hereunder
(other than a claim related to the taxability of the Spin-off
under Section 355 of the Code or Section 311(b) of the Code or
otherwise), WWC disputes such claim, WWC shall notify
VoiceStream and Investor of its disagreement and the basis
therefor within 30 days of receipt of the notice of claim. The
parties shall act in good faith to resolve such disagreement and
if they cannot reach a resolution, the matter shall be referred
to an independent accounting firm acceptable to all parties,
whose resolution of the matter shall be binding on the parties.
Any indemnification payment required under this Section 1.14
(other than a payment related to the taxability of the Spin-off
under Section 355 of the Code or Section 311(b) of the Code or
otherwise) shall be paid within 30 days after the
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indemnifying party receives notice of such required payment from
the indemnified party or, if disputed, within 30 days after the
resolution of such dispute as provided in the preceding
sentence. The indemnifying party shall also pay the reasonable
attorney's fees and other costs incurred by the indemnified
party with respect to the payment of such taxes and other
amounts and the pursuit of the indemnification claim.
4. Section 1.15 of the Tax Sharing Agreement is deleted in its entirety
and the following is inserted in lieu thereof:
1.15 Indemnification of WWC Affiliated Group. Except as
otherwise provided in Section 1.20, VoiceStream and each member
of the VoiceStream Group shall indemnify and hold each of the
WWC Affiliated Group members (other than the members of the
VoiceStream Group) harmless from and against all federal, state,
local, foreign and other taxes and penalties and interest
related thereto due from or payable by any member of the
VoiceStream Group and, in the case of taxes specified in Section
1.14(c), (d), or (e) of this Agreement, due from or payable by
any member of the WWC Affiliated Group (other than members of
the VoiceStream Group), other than taxes, penalties and interest
(a) allocable to members of the WWC Affiliated Group (other than
the members of the VoiceStream Group) pursuant to Sections 1.01
through 1.10 of the Agreement, (b) of members of the WWC
Affiliated Group (other than members of the VoiceStream Group)
that are not otherwise subject to the provisions of this
Agreement, (c) arising as a result of the failure of any member
of the WWC Affiliated Group (other than the members of the
VoiceStream Group) to comply in all material respects with each
written
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representation and written statement made concerning it in the
Ruling Request, (d) arising as a result of WWC voluntarily
ceasing within two years after the Spin-off to actively conduct
the WWC Active Business, as defined in the Ruling Request, or
(e) that are provided for in Section 1.19(a).
If, upon receipt by VoiceStream and Investor of a notice
of indemnification claim by WWC hereunder (other than a claim
relating to the taxability of the Spin-off under Section 355 of
the Code or Section 311(b) of the Code or otherwise),
VoiceStream or Investor disputes such claim, VoiceStream or
Investor shall notify WWC of its disagreement and the basis
therefor within 30 days of receipt of the notice of claim. The
parties shall act in good faith to resolve such disagreement and
if they cannot reach a resolution, the matter shall be referred
to an independent accounting firm acceptable to all parties,
whose resolution of the matter shall be binding on the parties.
Any indemnification payment required under this Section 1.15
(other than a payment related to the taxability of the Spin-off
under Section 355 of the Code or Section 311(b) of the Code or
otherwise) shall be paid within 30 days after the indemnifying
party receives notice of such required payment from the
indemnified party or, if disputed, within 30 days of the
resolution of such dispute as provided in the preceding
sentence. The indemnifying party shall also pay reasonable
attorney's fees and other costs incurred by the indemnified
party with
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respect to the payment of such taxes and other amounts and the
pursuit of the indemnification claim.
5. A new Section 1.19 is added to the Tax Sharing Agreement as
follows: 1.19 Code Section 355(e) Taxes. (a) Except as otherwise
provided in Section 1.20, WWC and each member of the WWC
Affiliated Group (other than members of the VoiceStream Group)
shall indemnify and hold harmless each of the VoiceStream Group
members from and against all taxes, and penalties and interest
related thereto, arising in connection with the Spin-off
pursuant to the application of Section 355(e) of the Code (and
any similar provision of state or local law) as a result of any
acquisition of a 50-percent or greater interest, within the
meaning of Section 355(e) of the Code, of WWC or any of its
successors.
(b) Except as otherwise provided in Section 1.20, VoiceStream
and each member of the VoiceStream Group shall indemnify and
hold harmless each of the WWC Affiliated Group members (other
than the members of the VoiceStream Group) from and against all
taxes, and penalties and interest related thereto, arising in
connection with the Spin-off pursuant to the application of
Section 355(e) of the Code (and any similar provision of state
or local law) as a result of any acquisition of a 50-percent or
greater interest, within the meaning of Section 355(e) of the
Code, of VoiceStream or any of its successors.
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(c) For purposes of Section 1.19 (b), the amount of any tax
arising in connection with the Spin-off pursuant to the
application of Section 355(e) of the Code (and any similar
provision of state or local law) shall be deemed to include the
present value of any net operating losses of WWC utilized by WWC
to offset gain arising in connection with the Spin-off pursuant
to the application of Section 355(e) of the Code (and any
similar provision of state or local law). The present value of
such WWC net operating losses shall be determined by mutual
agreement among WWC and VoiceStream based on (i) the maximum
federal income tax rate for corporations applicable for the year
during which the Spin-off becomes effective, (ii) reasonable
projections for the WWC Affiliated Group with regard to the
anticipated timing of the utilization by it of such losses, and
(iii) a commercially reasonable discount rate. If there is a
dispute among WWC and VoiceStream with regard to the preceding
calculation, the matter shall be referred to an independent
accounting firm acceptable to all parties, whose resolution of
the matter shall be binding on the parties.
6. A new Section 1.20 is added to the Agreement as follows:
1.20 Shared Responsibility for Certain Taxes Arising in
Connection with the Spin-off. (a) VoiceStream and each member of
the VoiceStream Group shall indemnify and hold harmless each of
the WWC Affiliated Group members (other than members of the
VoiceStream Group) from and against 50 percent of all taxes, and
50 percent of all penalties and interest related thereto,
arising in connection with the Spin-off if (1) there have
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been acquisitions of a 50-percent or greater interest, within
the meaning of Section 355(e) of the Code, of both WWC or any of
its successors and VoiceStream or any of its successors, and
each such acquisition, standing alone, would give rise to a tax
in connection with the Spin-off pursuant to the application of
Section 355(e) of the Code, or (2) both (x) a member of the WWC
Affiliated Group (other than the members of the VoiceStream
Group) has failed to comply in all material respects with each
written representation made concerning it in the Ruling Request
or WWC has voluntarily ceased within two years after the
Spin-off to actively conduct the WWC Active Business, as defined
in the Ruling Request, and as a result a tax would arise in
connection with the Spin-off pursuant to the application of
Section 355 of the Code, and (y) a member of the VoiceStream
Group has failed to comply in all material respects with each
written representation made concerning it in the Ruling Request
or VoiceStream has voluntarily ceased within two years after the
Spin-off to actively conduct the VoiceStream Active Business, as
defined in the Ruling Request, and as a result a tax would arise
in connection with the Spin-off pursuant to the application of
Section 355 of the Code. WWC and each member of the WWC
Affiliated Group shall indemnify and hold harmless each member
of the VoiceStream Group from the remaining taxes, and penalties
and interest related thereto, arising in connection with the
Spin-off in the circumstances set forth in clauses (1) and (2)
of the prior sentence.
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(b) For purposes of Section 1.20(a), the amount of any tax
arising in connection with the Spin-off pursuant to the
application of Section 355 (including Section 355(e)) of the
Code (and any similar provision of state or local law) shall be
deemed to include the present value of any net operating losses
of WWC utilized by WWC to offset gain arising in connection with
Spin-off pursuant to the application of Section 355(e) of the
Code (and any similar provision of state or local law). The
present value of such WWC net operating losses shall be
determined by mutual agreement among WWC and VoiceStream based
on (i) the maximum federal income tax rate for corporations
applicable for the year during which the Spin-off becomes
effective, (ii) reasonable projections for the WWC Affiliated
Group with regard to the anticipated timing of the utilization
by it of such losses, and (iii) a commercially reasonable
discount rate. If there is a dispute among WWC and VoiceStream
with regard to the preceding calculation, the matter shall be
referred to an independent accounting firm acceptable to all
parties, whose resolution of the matter shall be binding on the
parties.
7. A new Section 1.21 is added to the Agreement as follows:
1.21 Proceedings and Payment Related to Code Section 355 Taxes.
(a) Notwithstanding Section 1.10 of this Agreement, WWC and its
duly appointed representatives shall have the right on behalf of
all members of the VoiceStream Group to supervise or otherwise
coordinate any tax
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examination process and to negotiate, resolve, settle, and
contest any asserted tax deficiencies or assert and prosecute
any claim for tax refund related to any tax arising as a result
of the Spin-off and for which WWC has sole indemnification
responsibility under this Agreement. WWC shall consult with
VoiceStream in connection with such matters as relate to the
VoiceStream Group, shall give VoiceStream a reasonable
opportunity to participate therein (provided that WWC shall
retain ultimate control of such matters), and shall promptly
provide to VoiceStream all information relating to such matters
received by WWC or its representatives, including providing
copies of all notices, assessments, or similar documents within
10 business days of receipt.
(b) Notwithstanding Section 1.10 of this Agreement, VoiceStream
and its duly appointed representatives shall have the right on
behalf of all members of the WWC Affiliated Group to supervise
or otherwise coordinate that portion of any tax examination
process and to negotiate, resolve, settle, and contest that
portion of any asserted tax deficiencies or assert and prosecute
that portion of any claim for tax refund related to any tax
arising as a result of the Spin-off and for which VoiceStream
has sole indemnification responsibility under this Agreement.
VoiceStream shall consult with WWC in connection with such
matters, shall give WWC a reasonable opportunity to participate
therein (provided that VoiceStream shall retain ultimate control
of such matters), and shall promptly provide to WWC all
information relating to such matters received by VoiceStream or
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its representatives, including providing copies of all notices,
assessments, or similar documents within 5 business days of
receipt. WWC shall promptly notify VoiceStream in writing upon
receipt by WWC of notice of any pending or threatened federal,
state, or local tax audits or assessments for which VoiceStream
has sole indemnification responsibility under this Agreement,
provided that failure to comply with this provision shall not
affect WWC's right to indemnification hereunder.
(c) Notwithstanding Section 1.10 of this Agreement, WWC and
VoiceStream shall mutually agree how to supervise or otherwise
coordinate that portion of any tax examination process, and how
to negotiate, resolve, settle, and contest that portion of any
asserted tax deficiency, or how to prosecute that portion of any
claim for tax refund, related to any tax for which there is
shared responsibility under Section 1.20.
(d) Any indemnification payment under this Agreement related to
the taxability of the Spin-off under Section 355 of the Code or
Section 311(b) of the Code shall be made at least 3 business
days before the relevant tax becomes due (taking into account
any extensions of the due date for payment). Notice of any
payment to be made pursuant to the preceding sentence shall be
given by the indemnified party to the indemnifying party at
least 10 business days before the relevant tax becomes due.
8. A new section 1.22 is added to the Tax Sharing Agreement as
follows:
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1.22 Employee Stock Options. WWC and VoiceStream agree that
following the Spin-off, (a) WWC shall claim a deduction under
section 162 of the Code with respect to the exercise of all
employee stock options to acquire the stock of WWC, and (b)
VoiceStream shall claim a deduction under section 162 of the
Code with respect to the exercise of all employee stock options
to acquire the stock of VoiceStream. The party claiming the
deduction as set forth in the prior sentence is referred to as
the "Employer" and the other party is referred to as the
"non-Employer." In the event that the non-Employer claims a
deduction under the Code (for whatever reason) with respect to
the exercise of an employee stock option to acquire stock of the
Employer, such non-Employer shall compensate the Employer in an
amount equal to the present value of the Employer's deduction
claimed pursuant to this section 1.22. The present value of the
Employer's deduction shall be determined by mutual agreement
among WWC and VoiceStream based on (i) the maximum federal
income tax rate for corporations applicable for the year during
which the deduction was claimed by the Employer, (ii) reasonable
projections for the Employer's affiliated group with regard to
the anticipated timing of the utilization by it of such
deduction, and (iii) a commercially reasonable discount rate. If
there is a dispute among WWC and VoiceStream with regard to the
preceding calculation, the matter shall be referred to an
independent accounting firm acceptable to all parties, whose
resolution of the matter shall be binding on the parties.
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9. Section 2.01 of the Tax Sharing Agreement is amended to read as
follows: 2.01 Limitation to Consolidated Return Years. Except as
provided in Section 1.22, the obligations of the parties
hereunder shall relate solely to taxes, net operating losses and
tax attributes arising during taxable years for which the
VoiceStream Group members file a consolidated federal income Tax
Return with WWC, except that if, in a taxable year in which the
VoiceStream Group no longer files a consolidated federal income
Tax Return with WWC, the VoiceStream Group generates a net
operating loss or other tax attribute which it carries back to a
year in which the VoiceStream Group did file a consolidated
federal income Tax Return with WWC, WWC shall promptly apply for
a refund upon notice of such carryback to WWC and, upon receipt
of such refund, shall promptly pay to VoiceStream the amount of
the refund. VoiceStream shall pay and indemnify WWC for all
out-of-pocket expenses including outside accountant's fees,
attorney's fees and reasonable overhead allocation incurred by
WWC in making such refund claim and WWC shall be entitled to
offset any such expenses against the amount of any refund
received.
10. Except as expressly stated herein, the Tax Sharing Agreement is
ratified and confirmed in all respects.
IN WITNESS WHEREOF, this First Amendment has been signed on behalf of
each of the parties on the day set forth.
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WESTERN WIRELESS CORPORATION
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Title: Senior Vice President
VOICESTREAM WIRELESS CORPORATION
By: /s/ Xxxx X. Xxxxxxx
---------------------------------
Title: Chief Executive Officer
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XXXXXXXXX TELECOMMUNICATIONS
PCS (USA) LIMITED
By: /s/ Xxxx Xxxx
---------------------------------
Title: Director
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