Windstream 2015 Annual Report Download - page 60

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PROPOSAL NO. 3
RATIFICATION OF THE WINDSTREAM HOLDINGS, INC. RIGHTS PLAN
On September 17, 2015, the Board adopted a shareholder rights plan (the “Rights Plan”) designed to protect
Windstream’s valuable net operating loss carryforwards (“NOLs”) from the effect of limitations under Section 382
of the Internal Revenue Code (the “Code”), which could result in significant restrictions on the value of the NOLs.
The Board determined that the Rights Plan was warranted and in the best interests of our stockholders due to the
substantial size of net operating loss carryovers and other tax benefits of Windstream and its subsidiaries (collectively,
the “Tax Benefits”). This proposal asks our stockholders to ratify the Rights Plan (including the Rights Agreement
defined below) and participate in this important corporate decision. In sum, the Board unanimously recommends that
stockholders vote “FOR” this proposal based on the following reasons:
• Windstream had substantial NOLs of approximately $907 million as of December 31, 2015;
• These NOLs are valuable tax assets that can be used to offset future taxable income and reduce federal
income taxes;
• The Code imposes limitations on the use of NOLs in the event of an “ownership change,” which occurs
when more than 50% of a company’s stock ownership changes over a three-year period;
• After an ownership change, the amount of prior NOLs that may be used in subsequent years to offset
future taxable income and reduce federal income taxes is limited;
• Windstream and its stockholders benefit from the Rights Plan because it creates a disincentive to an
investor to trigger the Rights Plan;
• If approved, the Rights Plan will terminate in three years unless terminated earlier by the Board if it
determines that the NOLs have been exhausted or that the Rights Plan is no longer in Windstream’s
best interest;
• The Rights Plan is intended to protect stockholder value by attempting to preserve Windstream’s current
ability to use the Tax Benefits to offset future taxable income and future income tax liability, and not as
an anti-takeover measure; and
• Windstream has an independent NOL Plan Committee in place to review any proposed exception to or
waivers of the Rights Plan.
THE FAILURE TO OBTAIN STOCKHOLDER APPROVAL FOR THIS PROPOSAL WILL RESULT
IN TERMINATION OF THE RIGHTS PLAN ON SEPTEMBER 17, 2016 AND THE POTENTIAL FOR
SUBSTANTIAL IMPAIRMENT OF THE TAX BENEFITS WHICH COULD NEGATIVELY IMPACT
THE CORPORATION, AND, CONSEQUENTLY, ITS STOCKHOLDERS.
If Windstream experiences an “ownership change,” as defined in Section 382 of the Code, its ability to fully
utilize the Tax Benefits on an annual basis will be substantially limited, and the timing of the usage of the Tax Benefits
and such other benefits could be substantially delayed, which could significantly impair their value to Windstream.
The Rights Plan is intended to deter any person or group acquiring “beneficial ownership” of 4.90% or more of the
“outstanding shares” (as described below) of common stock, par value $0.0001 per share, of Windstream without the
approval of the NOL Plan Committee established by the Board, so as to limit the chance of an ownership change. It is
not meant to be utilized as an anti-takeover measure, and the Board has established a procedure administered by the
NOL Plan Committee to consider requests to exempt the acquisition of Windstream’s common stock from the Rights
Plan if it determines that doing so would not limit or impair the availability of the Tax Benefits.
The description and terms of the Rights (as defined below) applicable to the Rights Plan are set forth in the 382
Rights Agreement, dated as of September 17, 2015, by and between Windstream and Computershare Trust Company,
N.A., as Rights Agent (the “Rights Agreement”), a copy of which was filed as Exhibit 4.1 to Windstream’s Current
Report on Form 8-K filed with the SEC on September 18, 2015.