Exhibit 10.8
TAX-SHARING AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of December, 1997,
between Citizens Utilities Company, a Delaware corporation ("Citizens"), and
Electric Lightwave, Inc., a Delaware corporation ("Lightwave").
RECITALS
(A) Citizens owns all of the issued and outstanding Class B Common
Stock of Lightwave.
(B) Lightwave is effecting an initial public offering (the "Offering")
of shares of Class A Common Stock of Lightwave (the "Class A Common Stock").
(C) Upon completion of the Offering, Lightwave will cease to be a
wholly-owned subsidiary of Citizens and Lightwave may or may not cease, for
United States federal income tax purposes, to be a member of Citizens'
consolidated group.
(D) For state or local franchise or income tax purposes Lightwave may
in any event continue to be a member of certain unified, combined or
consolidated groups which include Citizens notwithstanding the results of the
Offering.
(E) The parties wish to address certain tax matters which may arise as
a result of the Offering.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and for other good and valuable consideration, and intending to be
legally bound hereby, the parties hereby agree as follows:
1.1 As used in this Agreement, in addition to the terms defined in the
Preamble and Recitals, the following terms will have the following meanings,
applicable to both the singular and plural forms of the terms described:
"CONSOLIDATED PERIODS":shall mean, with respect to Lightwave, the
taxable periods or portions thereof in which Lightwave will be a member of the
Citizens Federal Consolidated Group.
"COMBINED PERIODS":shall mean, with respect to Lightwave, the taxable
periods or portions thereof in which Lightwave will be a member of the relevant
Citizens State Group.
"EFFECTIVE DATE":means the date of this Agreement.
"CITIZENS FEDERAL CONSOLIDATED GROUP":means the affiliated group of
corporations as defined in Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code"), which includes Citizens as the common parent.
"CITIZENS STATE GROUP":shall mean any unified, combined or xxxxxxx-
dated groups for state or local franchise or income tax purposes which include
Citizens as the common parent.
1.2 INTERNAL REFERENCES. Unless the context indicates otherwise,
references to articles, sections and paragraphs shall refer to the corresponding
articles, sections and paragraphs in this Agreement, and references to the
parties shall mean the parties to this Agreement.
2. With respect to the Consolidated Periods and each of the Combined
Periods:
(a) Lightwave shall be responsible for any and all liabilities
arising as a result of federal income tax, or state or local income, franchise,
excise, single business, gross receipts or withholding tax, returns filed by, or
on behalf of, Lightwave on a separate-return basis.
(b) With respect to the portions of the Citizens Federal
Consolidated Group or Citizens State Group tax liabilities that are allocable to
Lightwave, Lightwave shall pay to Citizens an amount equal to the aggregate
relevant federal, state or local income, franchise or similar taxes which
Lightwave would have been required to pay for such period if Lightwave had filed
a separate federal, state or local income or franchise tax return in such
jurisdictions at such time. For purposes of the preceding sentence, Lightwave
shall take into account all items of gain, income, deductions, losses, credits,
carryovers of losses and credits from prioR taxable years, and all other tax
attributes of Lightwave, which attributes may be subject to limitations under
the Code and applicable Treasury Regulations or analogous provisions of state or
local law, that would have been taken into account had Lightwave actually filed
a separate return.
(c) Lightwave shall be responsible for any tax liability due
any foreign jurisdiction arising as a result of its business activities and/or
domicile.
(d) Except as set forth below, payments required pursuant to
Paragraph 2(b) of this Agreement shall be billed to Lightwave by Citizens based
upon estimated payments made by Citizens to taxing authorities, with final
billing being made after filing of the returns. Such payments will be due within
thirty (30) days of receipt of the xxxx therefore. If income tax deficiencies or
tax refunds relating to Lightwave or its subsidiaries result from a tax audit,
amended return, claim, final determination by any court or otherwise are related
to the relevant tax returns for the Consolidated or Combined Periods, the
amounts due under Paragraph 2(b) of this Agreement shall be recalculated by
Citizens' Tax Department in accordance with the terms of such Paragraph, and an
appropriate adjustment to payments due under that Paragraph shall be made.
3. Citizens shall be obligated to pay over to Lightwave the amount of
any refund of, or in respect of, taxes to the extent such amount is attributable
to taxes paid (or deemed to have been paid) by Lightwave pursuant to this
Agreement or otherwise.
4. Notwithstanding anything to the contrary herein, neither party
shall be entitled to duplicate payments from the other party hereunder.Citizens'
Vice President of Taxes, in his sole discretion, may net any payments due to
Citizens from Lightwave pursuant to this Agreement against any amount due
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from Citizens to Lightwave pursuant to this Agreement or otherwise.
5. Interest shall accrue on payments due or advances made under this
Agreement at the interest rate then being charged by the Internal Revenue
Service on United States federal income tax deficiencies.
6. Citizens agrees that it will indemnify and hold Lightwave
harmless from and against any federal income tax, or state or local unitary,
combined or consolidated income or franchise tax, liabilities (including
interest, penalties, additions to tax, legal fees, court costs and any other
reasonable costs of defense) with respect to the portion of the Citizens'
Federal Consolidated Group or Citizens' State Group tax liability which is
allocable to members of the Citizens' Federal Consolidated Group or Citizens'
State Group, respectively, other than Lightwave.
7. Lightwave agrees to: (i) provide Citizens access to Lightwave
books and records; (ii) provide Citizens with papers, schedules and any other
information or assistance necessary to prepare tax returns or make computations
pursuant to this Agreement; (iii) maintain and preserve books, records and other
information as may be needed by Citizens pursuant to this Agreement or pursuant
to the preparation of any required tax return or the conduct of any tax audit by
a governmental authority for at least such time as has been customary; (iv)
cooperate in any audit or investigation of tax returns and execute appropriate
powers of attorney in connection therewith in favor of Citizens; and (v) sign
all documents, including settlement agreements, relating to the tax returns for
Consolidated Periods and/or Combined Periods.
8. With respect to all taxable periods during a Consolidated
Period or Combined Period, Citizens shall have sole and exclusive authority and
responsibility for: (i) preparing any federal income tax, or state and local
income, franchise, excise, single business, gross receipts or withholding tax,
returns (including any amended returns or claims for refund) of Lightwave; (ii)
representing Lightwave with respect to any federal income tax, or state and
local income, franchise, excise, single business, gross receipts or withholding
tax, audit or contest (including, without limitation, any litigation regarding
either the relevant taxes or refunds of the same); (iii) engaging outside
counsel and accountants with respect to tax matters regarding Lightwave; and
(iv) performing such other acts and duties with respect to Lightwave tax returns
as Citizens determines is appropriate. Citizens' Vice President of Taxes shall
have the discretion to reasonably determine the intent of, and resolve any
ambiguities under this Agreement. Payments due under this Agreement may, in
Citizens' discretion, be evidenced by a demand promissory note bearing interest
as provided in Paragraph 4.
9. This Agreement is entered into by the parties hereto on their
own behalf as well as on behalf of Citizen's other subsidiaries. This Agreement
shall be deemed to have been joined in and consented to by all such
subsidiaries, without further action of them or the parties hereto. The parties
hereto hereby guarantee the performance by such subsidiaries of all the terms of
this Agreement. This Agreement shall also be binding upon, and inure to the
benefit of, the successors and assigns of the parties hereto.
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10. This Agreement may be executed in several counterparts, each of
which shall be an original, but all of which shall constitute one document.
11. This Agreement will be governed by, and construed in accordance
with, the laws of the State of Delaware.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
ELECTRIC LIGHTWAVE, INC.
By:/s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: President
CITIZENS UTILITIES COMPANY
By:/s/ Xxxxxx X. XxXxxxxx
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Name: Xxxxxx X. XxXxxxxx
Title: Vice President and Treasurer
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