INTERCOMPANY AGREEMENT
This Agreement (this "Agreement"), dated as of September 11, 2000, is
by and between Citizens Communications Company, a Delaware corporation
("Citizens"), and Electric Lightwave, Inc., a Delaware corporation ("ELI").
W I T N E S S E T H:
WHEREAS, Citizens owns all of the issued and outstanding Class B Common
Stock, par value $.01 per share of ELI (the "ELI Class B Common Stock") which
represents approximately 97% of the combined voting power of all of the
outstanding common stock of ELI; and
WHEREAS, Citizens and ELI desire to provide compensation incentives for
certain employees of ELI for high levels of performance and productivity; and
WHEREAS, Citizens desires to grant to certain employees of ELI an
aggregate of 205,000 shares of Citizens' common stock, par value, $.01 per share
(the "Citizens Common Stock") in the form of restricted stock awards (the
"Citizens Restricted Stock Awards") pursuant to (i) the Citizens Communications
Company Equity Incentive Plan (the "Citizens Plan") and (ii) Restricted Stock
Agreements dated as of September 11, 2000 substantially in the form attached
hereto as Exhibit A (the "Restricted Stock Agreements"); and
WHEREAS, in consideration for the Citizens Restricted Stock Awards, ELI
desires to grant to Citizens a number of restricted shares of ELI Class B Common
Stock (the "ELI Class B Restricted Shares") with a fair market value equivalent
to the fair market value of the Citizens Restricted Stock Awards (the "ELI
Restricted Stock Awards"); and
WHEREAS, each of the Compensation Committee of the Board of Directors
of Citizens and the Board of Directors of ELI has approved this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for good and other valuable consideration, receipt of which
is hereby acknowledged, the parties hereto agree as follows:
Article I. RESTRICTED STOCK AWARDS
Section 1.01 Issuance of Citizens Restricted Stock Awards.
---------------------------------------------
Citizens hereby agrees to make Citizens Restricted Stock Awards to
certain employees of ELI subject to the terms and conditions of the Citizens
Plan and the Restricted Stock Agreements. The names of each of the employees of
ELI who have been granted shares of Citizens Common Stock and the number of such
shares that have been granted to each such employee pursuant hereto are set
forth on Exhibit B of this Agreement.
Section 1.02 Restrictions on Citizens Restricted Stock Awards.
-------------------------------------------------
The Citizens Restricted Stock Awards shall be subject to the transfer
restrictions set forth in Section 2 of the Restricted Stock Agreements. Such
restrictions shall lapse as set forth in Section 3 of the Restricted Stock
Agreements. The Citizens Restricted Stock Awards shall be subject to forfeiture
as set forth in Section 4 of the Restricted Stock Agreements.
Section 1.03 Issuance of ELI Restricted Stock Awards.
---------------------------------------
In consideration for the Citizens Restricted Stock Awards, ELI hereby
agrees to grant to Citizens a number of ELI Class B Restricted Shares having an
aggregate fair market value equivalent to the aggregate fair market value of the
Citizens Restricted Stock Awards. Citizens shall be entitled to all of the
rights of a holder of shares of ELI Class B Common Stock with respect to the ELI
Class B Restricted Shares including the right to vote such shares and to receive
dividends and other distributions payable with respect to such shares since the
date hereof. Any stock dividends payable with respect to such shares shall bear
the same restrictions as the underlying shares. Said restrictions shall lapse at
the same time as restrictions lapse on the underlying shares. The ELI Class B
Restricted Shares shall be held in book entry form by ELI's transfer agent until
all restrictions lapse or such shares are forfeited as provided herein. Upon
lapse of all restrictions, a certificate or certificates representing the ELI
Class B Restricted Shares shall be delivered to Citizens upon its request.
The number of ELI Class B Restricted Shares to be issued pursuant to
this Section 1.03 shall be determined using the ratio derived from the following
formula:
(205,000 shares of Citizens Common Stock x $16.0625 average market price per
share of Citizens Common Stock
on
September 11, 2000) / $12.50 average market price per share of ELI Class A Com-
mon Stock on September 11, 2000)=263,425 shares of ELI Class B Restricted Shares
to be issued
Section 1.04 Restrictions on ELI Restricted Stock Awards.
-------------------------------------------
The ELI Restricted Stock Awards shall be subject to the same
restrictions on transfer that the Citizens Restricted Stock Awards are subject
to as described in the first sentence of Section 1.02 hereto. In the event that
the restrictions with respect to any of the shares underlying the Citizens
Restricted Stock Awards shall lapse pursuant to the terms of Section 3 of the
Restricted Stock Agreements, the restrictions with respect to a proportionate
number of ELI Class B Restricted Shares determined in accordance with Section
1.03 hereto shall also lapse. In the event that any of the Citizens Restricted
Stock Awards are forfeited pursuant to the terms of Section 4 of the Restricted
Stock Agreements, a proportionate number of ELI Class B Restricted Shares
determined in accordance with Section 1.03 shall also be forfeited by Citizens.
2
Section 1.05 Adjustment of Shares.
--------------------
Notwithstanding anything contained herein to the contrary, in the event
of any adjustment to the number of shares of Citizens Common Stock outstanding
resulting from a subdivision or consolidation of shares, whether through
reorganization, recapitalization, share split, reverse share split, share
distribution or combination of shares or the payment of a share dividend and the
number of shares of Citizens Common Stock underlying the Citizens Restricted
Stock Awards is changed, the ELI Class B Restricted Shares shall be
proportionately adjusted in accordance with Section 1.03 hereto. In the event
that there is an adjustment to the number of ELI Class B Restricted Shares, any
additional number of shares to which Citizens may become entitled by reason of
its ownership of the ELI Class B Restricted Shares shall immediately become
subject to this Agreement and shall assume the same status with respect to
restrictions as the ELI Class B Restricted Shares upon which such dividend was
paid or in substitution for which such additional securities were distributed.
Article II. REPRESENTATIONS AND WARRANTIES
Section 2.01 Citizens Representations and Warranties.
---------------------------------------
Citizens hereby represents and warrants to ELI, as set forth below:
(a) Organization; Corporate Power. Citizens is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to conduct the business in
which it is engaged.
(b) Authorization. The execution and delivery by Citizens of this Agreement
and the performance by Citizens of its obligations hereunder have been duly
authorized by all requisite corporate action. The shares of Citizens Common
Stock issued pursuant hereto have been duly authorized.
(c) Validity of Agreement. This Agreement has been duly executed and
delivered by Citizens and constitutes the legal, valid and binding obligation of
Citizens, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by general equitable principles.
(d) Validity of Securities. Upon Citizens' receipt of the ELI Class B
Restricted Shares issued in accordance with the terms of Section 1.03 hereto,
the shares of Citizens Common Stock issued and delivered as Citizens Restricted
Stock Awards in accordance with the terms of this Agreement will be duly and
validly issued, fully paid and nonassessable.
3
(e) Investment Representation. Citizens acknowledges that it is aware that
the ELI Class B Restricted Shares have not been registered under the Securities
Act of 1933, as amended (the "Act"). Citizens represents and warrants to ELI
that Citizens is acquiring the ELI Class B Restricted Shares for investment
purposes and not with a view to or for sale in connection with any distribution
thereof or with any present intention of selling the ELI Class B Restricted
Shares in connection with a distribution.
(f) Restricted Securities. Citizens is an "accredited investor" as defined
in Rule 501 of Regulation D promulgated under the Act. Citizens understands
that the ELI Class B Restricted Shares will be "restricted securities" under
applicable federal securities laws and the rules of the Securities and Exchange
Commission promulgated thereunder. Citizens acknowledges that it may dispose of
the ELI Class B Restricted Shares only pursuant to an effective registration
statement under the Act or an exemption from registration if available and only
in compliance with the terms of this Agreement and that certain Registration
Rights Agreement dated as of November 24, 1997 by and between Citizens and ELI
(the "Registration Rights Agreement"). Citizens further understands that, except
as provided in the Registration Rights Agreement, ELI has no obligation to
register the sale of the ELI Class B Restricted Shares or take any other action
so as to permit sales pursuant to the Act. Citizens further understands that
applicable state securities laws may impose additional constraints upon the sale
of securities.
Section 2.02 ELI Representations and Warranties.
----------------------------------
ELI hereby represents and warrants to Citizens, as set forth below:
(a) Organization; Corporate Power. ELI is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization and
has the corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to conduct the business in which it is
engaged.
(b) Authorization. The execution and delivery by ELI of this Agreement and
the performance by ELI of its obligations hereunder have been duly authorized by
all requisite corporate action. The ELI Class B Restricted Shares issued
pursuant hereto have been duly authorized.
(c) Validity of Agreement. This Agreement has been duly executed and
delivered by ELI and constitutes the legal, valid and binding obligation of ELI,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by general equitable principles.
(d) Validity of Securities. Upon receipt by the employees of ELI listed in
Exhibit B hereto of the shares of Citizens Common Stock issued as Citizens
Restricted Stock Awards in accordance with the terms of Section 1.01 hereto, the
ELI Class B Restricted Shares issued in accordance with the terms of this
4
Agreement will be duly and validly issued, fully paid and nonassessable.
Article III. MISCELLANEOUS.
Section 3.01 Assignment.
----------
Except as set forth in this Agreement, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. The rights under this Agreement may not
be assigned by either party hereto without the written consent of the other
party. Nothing herein is intended to confer upon any party other than the
parties or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement.
Section 3.02 Termination.
-----------
This Agreement shall commence on the date hereof and shall remain in
effect unless terminated by written amendment to this Agreement.
Section 3.03 Notices.
-------
All notices, consents, waivers, and other communications under this
Agreement will be deemed to have been duly given (i) when delivered by hand
(with written confirmation of receipt), (ii) when sent by telefax (with written
confirmation of receipt), (iii) when sent via e-mail (with electronic
confirmation of receipt), (iv) if sent by a nationally recognized overnight
delivery service (receipt requested), upon the first business day following such
mailing or (v) when received by the addressee, if sent by a regular service mail
delivery (receipt requested), in each case to the appropriate addresses set
forth below (or to such other addresses as a party may designate by notice to
the other parties):
If to Citizens, to it at:
Citizens Communications Company
Three High Ridge Park
Stamford, CT 06905
Attention: Leonard Tow
Chairman and Chief Executive Officer
If to ELI, at:
Electric Lightwave, Inc.
c/o Citizens Communications Company
Three High Ridge Park
Stamford, CT 06905
5
Attention: Rudy Graf
Chief Executive Officer
Section 3.04 Governing Law.
-------------
This Agreement shall be construed and enforced in accordance with, and
governed by, the laws of the State of Delaware without giving effect to its
conflict of law rules.
Section 3.05 Waivers; Amendments.
-------------------
No amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by both of the parties. No waiver by
either party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence. The waiver of the observance of any term of
this Agreement (either generally or in a particular instance and either
retroactively or prospectively) shall be made only with the written consent of
the party entitled to the benefit of such waiver.
Section 3.06 Headings.
--------
The article, section and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect the construction and
interpretation of this Agreement.
Section 3.07 Severability.
------------
The invalidity of all or any part of any section of this Agreement
shall not render invalid the remainder of such section or the Agreement. If any
provision of this Agreement is so broad as to be unenforceable, such provision
shall be interpreted to be only so broad as is enforceable.
6
Section 3.08 Counterparts.
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.
Section 3.09 Further Assurances.
------------------
Each of the parties hereto agrees to execute and deliver, without cost
or expense to the other party, any and all such further instruments or documents
and to take any and all such further action reasonably requested by the other
party as may be necessary or convenient in order to effectuate this Agreement
and the intent and purposes hereof.
Section 3.10 Entire Agreement.
----------------
This Agreement (together with the other agreements referred to herein)
contains the entire agreement of the parties with respect to the subject matter
set forth herein.
7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
CITIZENS COMMUNICATIONS COMPANY
By: /s/ Rudy Graf
---------------------------------------------------
Name: Rudy Graf
Title: President and Chief Operating Officer
Citizens Communications Company
ELECTRIC LIGHTWAVE, INC.
By: /s/ Dave Sharkey
---------------------------------------------------
Name: Dave Sharkey
Title: President and Chief Operating Officer
Electric Lightwave, Inc.
8
LIST OF EXHIBITS
EXHIBITS:
EXHIBIT A: Form of Restricted Stock Agreement
EXHIBIT B: List of ELI employees and number of shares of Citizens
Common Stock granted as Citizens Restricted Stock Awards
to each such officer
9