Exhibit 10.9
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into this 1st day of December, 1997, by and between Citizens Utilities Company,
a Delaware corporation ("Citizens"), and Electric Lightwave Inc., a Delaware
corporation ("ELI")
RECITALS
A. Citizens owns all of the issued and outstanding Class B Common
Stock, par value $.01 per share, of ELI.
B. ELI is effecting an initial public offering (the "Offering") of
shares of its Class A Common Stock, par value $.01 per share (the "Class A
Common Stock").
C. Upon completion of the Offering, ELI will cease to be a wholly owned
subsidiary of Citizens.
D. In connection with the Offering, ELI has filed a registration
statement with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act").
E. Each of Citizens and ELI desires to indemnify the other, and to be
indemnified by the other, against certain liabilities relating to, arising out
of or resulting from their respective businesses, operations and assets and the
above-mentioned registration statement, on the terms set forth in this
Agreement.
NOW, THEREFORE, the parties hereto agree, intending to be legally bound
hereby, as follows:
DEFINITIONS
Section 1.01 DEFINITIONS. As used in this Agreement, in addition to the
terms defined in the Preamble and Recitals hereof, the following terms shall
have the following meanings, applicable to both the singular and plural forms of
the terms described:
"1933 ACT" shall have the meaning ascribed to it in Recital D.
"1934 ACT" means the Securities and Exchange Act of 1934, as amended.
"AGREEMENT" shall have the meaning ascribed to it in the Preamble.
"BUSINESS DAY" means any calendar day which is not a Saturday, Sunday
or public holiday under the laws of the State of New York.
"CITIZENS" shall have the meaning ascribed to it in the Preamble.
"CITIZENS COMPANIES" means (unless otherwise expressly provided)
Citizens and each of its direct and indirect subsidiaries other than ELI.
"CITIZENS EMPLOYEES" means all employees or former employees of any of
the Citizens Companies other than the current or former ELI Employees.
"CITIZENS GUARANTEE" means any guarantee, surety or performance bond,
letter of credit or other contractual arrangement in effect as of the Closing
pursuant to which any Citizens Company has guaranteed or secured, or caused a
Third-Party to guarantee or secure, any liability or obligation of ELI.
"CITIZENS LIABILITIES" means all Liabilities (other than any
Liabilities for Taxes which are allocated pursuant to the Tax Agreement)
relating to, resulting from or arising out of the businesses or operations
conducted or assets owned by any of the Citizens Companies.
"CITIZENS SECURITIES LIABILITIES" means any Liability under the 1933
Act, the 1934 Act or any other federal or state securities law or regulation
resulting from or arising out of the Offering, including, without limitation,
any such Liabilities arising out of or based upon: (i) any untrue statement or
alleged untrue statement of a material fact contained in a Registration
Statement or in any Prospectus; or (ii) the omission or alleged omission to
state in a Registration Statement or Prospectus a material fact required to be
stated therein or necessary to make the statements made therein not misleading;
but only to the extent that such Liability arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission concerning the business and operations of any of the Citizens
Companies.
"CLASS A COMMON STOCK" shall have the meaning ascribed to it in Recital
B.
"CLOSING" means the consummation of the first purchase and sale of
shares of the Class A Common Stock pursuant to the Offering.
"CLOSING DATE" means the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986.
"EFFECTIVE DATE" means the date on which the purchase and sale of
shares of Class A Common Stock pursuant to the Offering first occurs.
"INDEMNIFIABLE LOSSES" shall have the meaning ascribed to it
in Section 2.
"INDEMNIFYING PARTY" shall have the meaning ascribed to it
in Section 5(a).
"INDEMNITEE" shall have the meaning ascribed to it in Section 5(a).
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"ELI" shall have the meaning ascribed to it in the Preamble.
"ELI EMPLOYEES" means all employees or former employees of ELI other
than any person who as of the Closing is an employee of any of the Citizens
Companies.
"ELI LIABILITIES" means all Liabilities (other than Liabilities for
Taxes that are allocated pursuant to the Tax Agreement) relating to, resulting
from or arising out of the businesses or operations conducted or formerly
conducted or assets owned or formerly owned by ELI.
"ELI SECURITIES LIABILITIES" means any Liability under the 1933 Act,
the 1934 Act, or any other federal or state securities law or regulation
resulting from or arising out of the Offering, including, without limitation,
any such Liability arising out of or based upon: (i) any untrue statement or
alleged untrue statement of a material fact contained in a Registration
Statement or in any Prospectus; or (ii) the omission or alleged omission to
state in a Registration Statement or Prospectus a material fact required to be
stated therein or necessary to make the statements made therein not misleading,
but only to the extent that such Liability arises out of or is based upon any
such untrue statement or alleged untrue statement or any such omission or
alleged omission concerning the businesses and operations of ELI.
"LIABILITIES" means all liabilities and obligations, actual or
contingent, liquidated or unliquidated, accrued or unaccrued, known or unknown,
whenever and however arising, including all costs and expenses (including
reasonable fees and disbursements of counsel) relating thereto, and including
without limitation liabilities and obligations arising in connection with any
actual or threatened claim, action, suit or proceeding by or before any court or
regulatory or administrative agency or commission or any arbitration panel.
"OFFERING" shall have the meaning ascribed to it in Recital B.
"PROSPECTUS" means any prospectus relating to the Offering or any
amendment or supplement thereto.
"REGISTRATION RIGHTS AGREEMENT" means that certain Registration Rights
Agreement by and between Citizens and ELI dated as of the date hereof.
"REGISTRATION STATEMENT" means any registration statement filed with
the SEC in connection with the Offering or any amendment or supplement thereto.
"SEC" shall have the meaning ascribed to it in Recital D.
"TAX AGREEMENT" means that certain Tax Sharing Agreement between
Citizens and ELI dated as of the date hereof.
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"TAXES" means any and all taxes (including interest, penalties and
additions to tax), fees and charges (including sales, use, excise, value added,
personal property and other taxes) imposed by any federal, state or local or
government tax authority in the United States of America or by any foreign
government or taxing authority.
"THIRD-PARTY CLAIM" shall have the meaning ascribed to it in
Section 5(a). "UNDERWRITING AGREEMENT" means, collectively, that certain U.S.
Underwriting Agreement between and among Lehman Brothers Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and
Deutsche Morgan Grenfell Inc. (as representatives of the several U. S.
underwriters), Citizens and ELI dated November 24, 1997, and that certain
International Underwriting Agreement between and among Lehman Brothers
International (Europe), Merrill Lynch International, Morgan Stanley & Co.
International Limited and Morgan Grenfell & Co. Limited, Citizens and ELI dated
November 24, 1997.
Section 1.02 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.
INDEMNIFICATION BY ELI
Section 2.01 INDEMNIFICATION BY ELI. ELI shall indemnify, defend and
hold harmless the Citizens Companies and the respective past, present and future
directors, officers, partners, employees, agents and representatives thereof
(regardless in each case of whether any such person serves in one or more
similar capacities for ELI) from and against any and all losses, claims,
damages, liabilities, demands, suits and actions, including all reasonable
attorneys' fees and disbursements and other costs and expenses incurred in
connection therewith (collectively, "Indemnifiable Losses"), relating to,
resulting from or arising out of: (a) any ELI Liabilities; (b) any ELI
Securities Liabilities; or (c) any misrepresentation or material breach by ELI
of any covenant of ELI or any failure by ELI to satisfy any condition required
to be satisfied by ELI or any liability of ELI for taxes arising prior to the
Offering determined to be owing by ELI for which Citizens or its consolidated
Affiliates may have a secondary liability, contained in this Agreement, the
Underwriting Agreement or any other agreement executed by ELI in connection with
the Offering, including, without limitation, the Registration Rights Agreement
and the Tax Agreement, and in addition to and notwithstanding any other
indemnification between the parties hereto as provided in any such agreement,
except to the extent that such misrepresentation, breach or failure was caused
by or resulted from any statement, act or omission within the exclusive
knowledge or control of Citizens.
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ARTICLE III
INDEMNIFICATION BY CITIZENS
Section 3.01 INDEMNIFICATION BY CITIZENS. Citizens shall indemnify,
defend and hold harmless ELI and the respective past, present and future
directors, officers, employees, partners, agents and representatives thereof
(regardless in each case of whether any such person serves in one or more
similar capacities for the Citizens Companies) from and against any and all
Indemnifiable Losses relating to, resulting from or arising out of: (a) any
Citizens Liabilities; (b) any Citizens Securities Liabilities; or (c) any
misrepresentation or material breach by Citizens of any covenant of Citizens or
any failure of Citizens to satisfy any condition required to be satisfied by
Citizens or any liability of Citizens for taxes arising prior to the Offering
determined to be owing by Citizens for which ELI may have a secondary liability,
contained in this Agreement, the Underwriting Agreement, or any other agreement
executed by Citizens in connection with the Offering, including, without
limitation, the Registration Rights Agreement and the Tax Agreement, and in
addition to and notwithstanding any other indemnification between the parties
hereto as provided in any such agreement, except to the extent that such
misrepresentation, breach or failure was caused by or resulted from any
statement, act or omission within the exclusive knowledge or control of ELI.
ARTICLE IV
GUARANTEE.
Section 4.01 GUARANTEE. ELI shall indemnify, defend and hold harmless
the Citizens Companies, and their respective directors, officers, employees,
agents and representatives, from and against any Indemnifiable Losses relating
to, resulting from, or arising out of any Citizens Guarantee, except as
prohibited by, or would conflict with, the terms of the Guaranty dated as of
April 28, 1995, of Citizens in favor of Shawmut Bank Connecticut, National
Association, BA Leasing & Capital Corporation and other Beneficiaries. Citizens
shall not terminate unilaterally or withdraw any Citizens Guarantee and shall
abide by the terms of the Citizens Guarantee. ELI shall reimburse each Citizens
Company for its direct costs (or, in the case of any Citizens Guarantee that
relates to both liabilities or obligations of ELI and one or more third parties,
a pro rata share of such direct costs), if any, of maintaining the Citizens
Guarantee.
ARTICLE V
THIRD-PARTY CLAIMS
Section 5.01 THIRD PARTY CLAIMS. (a) If any person entitled to
indemnification under this Agreement (an "Indemnitee") receives notice of
the assertion of any claim or of the commencement of any action or proceeding
by any person that is not a party to this Agreement or a subsidiary of any such
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party (a "Third-Party Claim") against such Indemnitee, the Indemnitee shall
promptly provide written notice thereof (including a description of the Third-
Party Claim and an estimate of any Indemnifiable Losses (which estimate shall
not be conclusive as to the final amount of such Indemnifiable Losses) to the
party required tO provide indemnification under this Agreement (the
"Indemnifying Party") within ten (10) Business Days after the Indemnitee's
receipt of notice of such Third-Party Claim. Any delay by the Indemnitee in
providing such written notice shall not relieve the Indemnifying Party of any
liability for indemnification hereunder except to the extent that the rights
of the Indemnifying Party are materially prejudiced by such delay.
(b) The Indemnifying Party shall have the right to participate in
or, by giving written notice to the Indemnitee, to assume the defense of any
Third-Party Claim at such Indemnifying Party's expense and by such Indemnifying
Party's own counsel (which shall be reasonably satisfactory to the Indemnitee),
and the Indemnitee will cooperate in good faith in such defense. The
Indemnifying Party shall not be liable for any legal expenses incurred by the
Indemnitee after the Indemnitee has received notice of the Indemnifying Party's
intent to assume the defense of a Third-Party Claim; provided, however, that if
the Indemnifying Party fails to take steps reasonably necessary to diligently
pursue the defense of such Third-Party Claim within ten (10) Business Days of
receipt of notice from the Indemnitee that such steps are not being taken, the
Indemnitee may assume its own defense and the Indemnifying Party shall be liable
for the reasonable costs thereof.
(c) The Indemnifying Party may settle any Third-Party Claim which
it has elected to defend so long as the written consent of the Indemnitee to
such settlement is first obtained (which consent shall not be unreasonably
withheld). The Indemnitee shall not settle any Third-Party Claim without the
written consent of the Indemnifying Party (which consent shall not be
unreasonably withheld).
In the event that a Third-Party Claim involves a proceeding as
to which both Citizens and ELI may be Indemnifying Parties, the parties hereto
agree to cooperate in good faith in a joint defense of such Third-Party Claim.
ARTICLE VI
CONTRIBUTION
Section 6.01 CONTRIBUTION. If the indemnification provided for in this
Agreement with respect to ELI Securities Liabilities or Citizens Securities
Liabilities is for any reason held by a court or other tribunal to be
unavailable on policy grounds or otherwise, Citizens and ELI shall contribute to
any Indemnifiable Losses relating to, resulting from or arising out of the ELI
Securities Liabilities or the Citizens Securities Liabilities in such proportion
as to reflect each party's relative fault in connection with such Indemnifiable
Losses. The relative fault of the parties shall be determined by reference to,
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among other things, whether the conduct or information giving rise to the
Indemnifiable Losses is attributable to Citizens or ELI and each party's
relative intent, access to information and opportunity to prevent or correct the
Indemnifiable Losses. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who is not guilty of fraudulent misrepresentation.
ARTICLE VII
COOPERATION
Section 7.01 COOPERATION. So long as any books, records and files
retained after the Closing Date by Citizens (or any of the other Citizens
Companies), on the one hand, or ELI on the other hand, relating to the
businesses, operations or assets of the other party and its subsidiaries
(including any books, records and files retained by ELI relating to the conduct
of its businesses or operations or the ownership of its assets prior to the
Closing) remain in existence and are available, such other party shall have the
right upon prior written notice to inspect and copy the same at any time during
business hours for any proper purpose, provided that such right will not extend
to any books, records or files the disclosure of which in accordance herewith
would result in a waiver of the attorney-client, work-product or other
privileges which permit non-disclosure of otherwise relevant material in
litigation or other proceedings, or which are subject on the date hereof and at
the time inspection is requested to a non-disclosure agreement with a
Third-Party and a waiver cannot reasonably be obtained. Citizens and ELI agree
that neither they nor any of their subsidiaries shall destroy any such books,
records or files without reasonable notice to the other party or if such party
receives within ten (10) Business Days of such notice any reasonable objection
from the other party to such destruction. Except in the case of dispute between
the parties hereto, Citizens and ELI shall cooperate with one another in a
timely manner in any administrative or judicial proceeding involving any matter
affecting the actual or potential liability of either party hereunder. Such
cooperation shall include, without limitation, making available to the other
party during normal business hours all books, records and information, and
officers and employees (without substantial disruption of operations or
employment) necessary or useful in connection with any inquiry, audit,
investigation or dispute, any litigation or any other matter requiring any such
books, records, information, officers or employees for any reasonable business
purpose. The party requesting or otherwise entitled to any books, records,
information, officers or employees pursuant to this Section 7 shall bear all
reasonable out-of-pocket costs and expenses (except for salaries, employee
benefits and general overhead) incurred in connection with providing such books,
records, information, officers or employees.
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ARTICLE VIII
EFFECTIVENESS
Section 8.01 EFFECTIVENESS. This Agreement shall become effective at
Closing.
ARTICLE IX
SUCCESSORS AND ASSIGNS
Section 9.01 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the parties hereto and their respective successors and permitted assigns
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement may not be assigned by either
party hereto to any other person without the prior written consent of the other
party hereto.
ARTICLE X
NO THIRD-PARTY BENEFICIARIES
Section 10.01 NO THIRD-PARTY BENEFICIARIES. Except forn the persons
entitled to indemnification pursuant to Section 2 or Section 3 hereof, each of
whom is an intended third-party beneficiary hereunder, nothing expressed or
implied in this Agreement shall be construed to give any person or entity other
than the parties hereto any legal or equitable rights hereunder.
ARTICLE XI
ENTIRE AGREEMENT
Section 11.01 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof.
ARTICLE XII
AMENDMENT
Section 12.01 AMENDMENT. This Agreement may not be amended except by an
instrument signed by the parties hereto.
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ARTICLE XIII
WAIVERS
Section 13.01 WAIVERS. No waiver of any term shall be construed as a
subsequent waiver of the same term, or a waiver of any other term, of this
Agreement. The failure of any party to assert any of its rights hereunder will
not constitute a waiver of any such rights.
ARTICLE XIV
SEVERABILITY
Section 14.01 SEVERABILITY. If any provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, such provision shall be deemed severable and all other provisions of
this Agreement shall nevertheless remain in full force and effect.
ARTICLE XV
HEADINGS
Section 15.01 HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
ARTICLE XVI
NOTICES
Section 16.01 NOTICES. All notices given in connection with this
Agreement shall be in writing. Service of such notices shall be deemed complete:
(i) if hand delivered, on the date of delivery; (ii) if by mail, on the fourth
business day following the day of deposit in the United States mail, by
certified or registered mail, first-class postage prepaid; (iii) if sent by
Federal Express or equivalent courier service, on the next business day; or (iv)
if by telecopier, upon receipt by the sender of confirmation of successful
transmission. Such notices shall be addressed to the parties at the following
addresses or at such other address for a party as shall be specified by like
notice (except that notices of change of address shall be effective upon
receipt):
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IF TO CITIZENS:
Citizens Utilities Company
High Ridge Park
P. O. Box 3801
Stamford, Connecticut 06905
Attn: Robert J. DeSantis
Fax No.: (203) 329-4625
IF TO ELI:
Electric Lightwave Inc.
8100 N.E. Parkway Drive, Suite 200
Vancouver, Washington 98662
Attn: David Sharkey
Fax No.: (360) 243-4425
ARTICLE XVII
GOVERNING LAW
Section 17.01 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with, the laws of the State of New York, without giving
effect to the principles of conflict of laws of such State or any other
jurisdiction.
ARTICLE XVIII
COUNTERPARTS
Section 18.01 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties have duly executed this Indemnification
Agreement as of the date first above written.
ELECTRIC LIGHTWAVE, INC.
By:/s/ David B. Sharkey
----------------------
Name: David B. Sharkey
Title: President
CITIZENS UTILITIES COMPANY
By:/s Robert J. DeSantis
--------------------------
Name: Robert J. DeSantis
Title: Vice President and Treasurer
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