EXHIBIT 10.10
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made and entered into
this ______ day of November, 1997, by and between Citizens Utilities Company, a
Delaware corporation ("Citizens"), and Electric Lightwave Inc., a Delaware
corporation ("XXX").
RECITALS
A. Citizens owns all of the issued and outstanding Class B Common Stock,
par value $0.01 per share, of XXX ("Class B Common Stock").
B. XXX is effecting an initial public offering (the "Initial Public
Offering") of its shares of Class A Common Stock, par value $.01 per share
("Class A Common Stock").
C. Upon completion of the Initial Public Offering, XXX will cease to be a
wholly-owned subsidiary of Citizens.
D. The parties desire to enter into this Agreement to set forth their
agreement regarding (i) certain registration rights with respect to Class A
Common Stock and Class B Common Stock (and any other securities issued in
respect thereof or in exchange therefor); and (ii) certain representations,
warranties, covenants and agreements applicable to XXX and Citizens.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, Citizens and XXX, for themselves, their successors and assigns, hereby
agree as follows:
ARTICLE I
DEFINITIONS
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Section 1.1 DEFINITIONS. As used in this Agreement, the following terms
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will have the following meanings, applicable both to the singular and the plural
forms of the terms described:
"AFFILIATE" means, with respect to any Person, any Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to vote a majority of the securities having voting power for the election of
directors of such Person or otherwise to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; provided,
however, that for the purposes of this Agreement, XXX shall not be deemed to be
an Affiliate of Citizens, and Citizens and its subsidiaries (other than XXX)
shall not be deemed to be an Affiliate of XXX.
"AGREEMENT" has the meaning ascribed hereto in the preamble, as such
agreement may be amended and supplemented from time to time in accordance with
its terms.
"CITIZENS" has the meaning ascribed thereto in the preamble hereto.
"CITIZENS TRANSFEREE" has the meaning ascribed thereto in Section 2.9.
"CLASS A COMMON STOCK" has the meaning ascribed thereto in the recitals to
this Agreement.
"CLASS B COMMON STOCK" has the meaning ascribed thereto in the recitals to
this Agreement.
"COMMON STOCK" means the Class B Common Stock, the Class A Common Stock,
any other class of XXX capital stock having the right to vote generally for the
election of directors.
"COMPANY SECURITIES" has the meaning ascribed thereto in Section 2.2(b).
"DISADVANTAGEOUS CONDITION" has the meaning ascribed thereto in Section
1.1(a).
"XXX" has the meaning ascribed thereto in the preamble hereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any successor statute.
"HOLDER" means Citizens and any Transferee.
"HOLDER SECURITIES" has the meaning ascribed thereto in Section 2.2(b).
"INITIAL PUBLIC OFFERING" has the meaning ascribed thereto in the recitals
to this Agreement.
"INITIAL PUBLIC OFFERING DATE" means the date of completion of the sale of
Class A Common Stock in the Initial Public Offering.
"OTHER HOLDERS" has the meaning ascribed thereto in Section 2.2(c).
"OTHER SECURITIES" has the meaning ascribed thereto in Section 2.2.
"PERSON" means any individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated organization, government (and
any department or agency thereof) or other entity.
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"REGISTRABLE SECURITIES" means Class A Common Stock, Class B Common Stock,
and any stock or other securities into which or for which such Class A Common
Stock or Class B Common Stock may hereafter be changed, converted or exchanged
and any other shares or securities issued to Holders of such Class A Common
Stock or Class B Common Stock (or such shares or other securities into which or
for which such shares are so changed, converted or exchanged) upon any
reclassification, share combination, share subdivision, share dividend, share
exchange, merger, consolidation or similar transaction or event. As to any
particular Registrable Securities, such Registrable Securities shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale by the Holder thereof shall have been declared effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement; (ii) they shall have been distributed to the
public in accordance with Rule 144; (iii) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been delivered by XXX and subsequent disposition of them
shall not require registration or qualification of them under the Securities Act
or any state securities or blue sky law then in effect; or (iv) they shall have
ceased to be outstanding.
"REGISTRATION EXPENSES" means any and all expenses incident to performance
of or compliance with any registration of securities pursuant to Article II,
including, without limitation: (i) the fees, disbursements and expenses of
ELI's counsel and accountants and the reasonable fees and expenses of counsel
selected by the Holders in accordance with this Agreement in connection with the
registration of the securities to be disposed of; (ii) all expenses, including
filing fees, in connection with the preparation, printing and filing of the
registration statement, any preliminary prospectus or final prospectus, any
other offering document and amendments and supplements thereto and the mailing
and delivering of copies thereof to any underwriters and dealers; (iii) the cost
of printing or producing any agreements among underwriters, underwriting
agreements, and blue sky or legal investment memoranda, any selling agreements
and any other documents in connection with the offering, sale or delivery of the
securities to be disposed of; (iv) all expenses in connection with the
qualification of the securities to be disposed of for offering and sale under
state securities laws, including the fees and disbursements of counsel for the
underwriters or the Holders of securities in connection with such qualification
and in connection with any blue sky and legal investment surveys; (v) the filing
fees incident to securing any required review of the terms of the sale of the
securities to be disposed of by each securities exchange and automated inter-
dealer quotation system which a class of common equity securities of XXX is
listed; (vi) transfer agents' and registrars' fees and expenses and the fees and
expenses of any other agent or trustee appointed in connection with such
offering; (vii) all security engraving and security printing expenses; (viii)
all fees and expenses payable in connection with the listing of the securities
on any securities exchange or automated inter-dealer quotation system or the
rating of such securities; (ix) any other fees and disbursements of underwriters
customarily paid by the issuers of securities, but excluding underwriting
discounts and commissions and transfer taxes, if any; and (x) other reasonable
out-of-pocket expenses of Holders other than legal fees and expenses referred to
in clause (i) and (iv) above.
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"RULE 144" means Rule 144 (or any successor rule to similar effect)
promulgated under the Securities Act.
"RULE 415 OFFERING" means an offering on a delayed or continuous basis
pursuant to Rule 415 (or any successor rule to similar effect) promulgated under
the Securities Act.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor statute.
"SELLING HOLDER" has the meaning ascribed thereto in Section 2.4(e).
"TRANSFEREE" has the meaning ascribed thereto in Section 2.9.
Section 1.2 INTERNAL REFERENCES.
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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.
ARTICLE II
REGISTRATION RIGHTS
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Section 2.1 DEMAND REGISTRATION/REGISTRABLE SECURITIES.
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(a) Upon written notice provided at any time after the Initial Public
Offering Date from any Holder of Registrable Securities requesting that XXX
effect the registration under the Securities Act of any or all of the
Registrable Securities held by such Holder, which notice shall specify the
intended method or methods of disposition of such Registrable Securities, XXX
shall use its best efforts to effect the registration under the Securities Act
and applicable state securities laws of such Registrable Securities for
disposition in accordance with the intended method or methods of disposition
stated in such request (including in a Rule 415 Offering, if XXX is then
eligible to register such Registrable Securities on Form S-3 (or a successor
form) for such offering); provided that:
(i) With respect to any registration statement filed, or to be
filed, pursuant to this Section 2.1, if XXX shall furnish to the Holders of
Registrable Securities that have made such request a certified resolution
of the board of directors of XXX (adopted by the affirmative vote of a
majority of the directors) stating that in the board of directors' good
faith judgment it would, because of the existence of, or in anticipation
of, any acquisition or financing activity, or the unavailability for
reasons beyond ELI's reasonable control of any required financial
statements, or any other event or condition of similar significance to XXX,
be significantly disadvantageous (a "Disadvantageous Condition") to XXX for
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such a registration statement to be maintained effective, or to be filed
and become effective, and setting forth the general reasons for such
judgment, XXX shall be entitled to cause such registration statement not to
be filed or to be withdrawn and the effectiveness of such registration
statement terminated. In the event no registration statement has yet been
filed, XXX shall be entitled not to file any such registration statement,
until such Disadvantageous Condition no longer exists (notice of which XXX
shall promptly deliver to such Holders). Upon receipt of any such notice of
a Disadvantageous Condition, such Holders shall forthwith discontinue use
of the prospectus contained in such registration statement and, if so
directed by XXX, each such Holder will deliver to XXX all copies, other
than permanent file copies then in such Holder's possession, of the
prospectus then covering such Registrable Securities current at the time of
receipt of such notice; provided, that the filing of any such registration
statement may not be delayed for a period in excess of two (2) months due
to the occurrence of any particular Disadvantageous Condition;
(ii) After Citizens ceases to beneficially own (within the
meaning of Rule 13d-3 of the Exchange Act or any successor provision) less
than 40% of the outstanding Common Stock, the Holders of Registrable
Securities may collectively exercise their rights under this Section 2.1 on
not more than three (3) occasions (it being acknowledged that prior thereto
there shall be no limit to the number of occasions on which such Holders
(other than any of the Citizens Transferees and their Affiliates (and any
subsequent direct or indirect Transferees of Registrable Securities from
such Citizens Transferee and any of its Affiliates)) may exercise such
rights);
(iii) The Holders of Registrable Securities shall not have the
right to exercise registration rights pursuant to this Section 2.1 in any
six-month period following the registration and sale of Registrable
Securities effected pursuant to a prior exercise of the registration rights
provided in this Section 2.1; and
(iv) XXX shall be under no obligation to include any
Registrable Securities in a registration statement unless XXX shall have
received from the Holders of Registrable Securities a request for inclusion
of not less than 75,000 Registrable Securities.
(b) Notwithstanding any other provision of this Agreement to the
contrary, a registration requested by a Holder of Registrable Securities
pursuant to this Section 2.1 shall not be deemed to have been effected (and,
therefore, not requested for purposes of paragraph (a), above): (i) unless it
has become effective; (ii) if after it has become effective such registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason other than a
misrepresentation or an omission by such Holder and, as a result thereof, the
Registrable Securities requested to be registered cannot be completely
distributed in accordance with the plan of distribution set forth in the related
registration statement; or (iii) if the conditions to closing specified in the
purchase agreement or underwriting
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agreement entered into in connection with such registration are not satisfied or
waived other than by reason of some act or omission by such Holder of
Registrable Securities.
(c) In the event that any registration pursuant to this Section 2.1
shall involve, in whole or in part, an underwritten offering, the Holders of a
majority of the Registrable Securities to be registered shall have the right to
designate an underwriter or underwriters, reasonably acceptable to XXX, as the
lead or managing underwriters of such underwritten offering and, in connection
with each registration pursuant to this Section 2.1, such Holders may select one
legal counsel to represent all such Holders.
(d) XXX shall have the right to cause the registration of additional
equity securities for sale for the account of any Person (including, without
limitation, XXX and any existing or former directors, officers or employees of
XXX) in any registration of Registrable Securities requested by the Holders
pursuant to paragraph (a), above; provided, that if such Holders are advised in
writing (with a copy to XXX) by a nationally recognized investment banking firm
selected by such Holders reasonably acceptable to XXX (which shall be the lead
underwriter or a managing underwriter in the case of an underwritten offering)
that, in such firm's good faith view, all or a part of such additional equity
securities cannot be sold and the inclusion of such additional equity securities
in such registration would be likely to have an adverse effect on the price,
timing or distribution of the offering and sale of the Registrable Securities
then contemplated by any Holder, the registration of such additional equity
securities or part thereof shall not be permitted. The Holders of the
Registrable Securities to be offered may require that any such additional equity
securities be included in the offering proposed by such Holders on the same
conditions as the Registrable Securities that are included therein. In the
event that the number of Registrable Securities requested to be included in a
registration statement by the Holders thereof exceeds the number which, in the
good faith view of such investment banking firm, can be sold without adversely
affecting the price, timing, distribution or sale of securities in the offering,
the number shall be allocated pro rata among the requesting Holders on the basis
of the relative number of Registrable Securities then held by each such Holder
(provided that any number in excess of a Holder's request may be reallocated
among the remaining requesting Holders in a like manner).
Section 2.2 PIGGYBACK REGISTRATION. In the event that XXX at any time
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after the Initial Public Offering Date proposes to register any of its Common
Stock, any other of its equity securities or securities convertible into or
exchangeable for its equity securities (collectively, including Common Stock,
"Other Securities") under the Securities Act, whether or not for sale for its
own account, in a manner that would permit registration of Registrable
Securities for sale for cash to the public under the Securities Act, it shall at
each such time give prompt written notice to each Holder of Registrable
Securities of its intention to do so and of the rights of such Holder under this
Section 2.2. Subject to the terms and conditions hereof, such notice shall offer
each such Holder the opportunity to include in such registration statement such
number of Registrable Securities as such Holder may request. Upon the written
request of any such Holder made within 15 days after the receipt of ELI's notice
(which request shall specify the number of Registrable Securities intended to be
disposed of and the intended method of
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disposition thereof), XXX shall use its best efforts to effect, in connection
with the registration of the Other Securities, the registration under the
Securities Act of all Registrable Securities which XXX has been so requested to
register, to the extent required to permit the disposition (in accordance with
such intended methods thereof) of the Registrable Securities so requested to be
registered; provided, that:
(a) If, at any time after giving such written notice of its intention
to register any Other Securities and prior to the effective date of the
registration statement filed in connection with such registration, XXX shall
determine for any reason not to register the Other Securities, XXX may, at its
election, give written notice of such determination to such Holders and
thereupon XXX shall be relieved of its obligation to register such Registrable
Securities in connection with the registration of such Other Securities, without
prejudice, however, to the rights of the Holders of Registrable Securities
immediately to request that such registration be effected as a registration
under Section 2.1 to the extent permitted thereunder;
(b) If the registration referred to in the first sentence of this
Section 2.2 is to be an underwritten registration on behalf of XXX, and a
nationally recognized investment banking firm selected by XXX advises XXX in
writing that, in such firm's good faith view, the inclusion of all or a part of
such Registrable Securities in such registration would be likely to have an
adverse effect upon the price, timing or distribution of the offering and sale
of the Other Securities then contemplated, XXX shall include in such
registration:
(i) first, all Other Securities which XXX proposes to sell for
its own account ("Company Securities");
(ii) second, up to the full number of Registrable Securities
held by Citizens or its Affiliates that are requested to be included in
such registration (Registrable Securities that are so held being sometimes
referred to herein as "Holder Securities") in excess of the number of
Company Securities to be sold in such offering which, in the good faith
view of such investment banking firm, can be sold without adversely
affecting such offering and the sale of the Other Securities then
contemplated (and (x) if such number is less than the full number of such
Holder Securities, such number shall be allocated by Citizens or (y) in the
event that such investment banking firm advises that less than all of such
Holder Securities may be included in such offering, Citizens and its
Affiliates may withdraw its or their request for registration of their
Registrable Securities under this Section 2.2 and 90 days subsequent to the
effective date of the registration statement for the registration of such
Other Securities request that such registration be effected as a
registration under Section 2.1 to the extent permitted thereunder);
(iii) third, up to the full number of the Other Securities
(other than Company Securities), if any, in excess of the number of Company
Securities and Registrable Securities to be sold in such offering which, in
the good faith view of such investment banking firm, can be so sold without
so adversely affecting such
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offering (and, if such number is less than the full number of such Other
Securities, such number shall be allocated pro rata among the holders of
such Other Securities (other than Company Securities) on the basis of the
number of securities requested to be included therein by each such holder);
(c) If the registration referred to in the first sentence of this
Section 2.2 is to be an underwritten secondary registration on behalf of holders
of Other Securities (the "Other Holders"), and the lead underwriter or managing
underwriter advises XXX in writing that in their good faith view, all or a part
of such additional securities cannot be sold and the inclusion of such
additional securities in such registration would be likely to have an adverse
effect on the price, timing or distribution of the offering and sale of the
Other Securities then contemplated, XXX shall include in such registration the
number of securities (including Registrable Securities) that such underwriters
advise can be so sold without adversely affecting such offering, allocated pro
rata among the Other Holders and the Holders of Registrable Securities on the
basis of the number of securities (including Registrable Securities) requested
to be included therein by each Other Holder and each Holder of Registrable
Securities; provided, that if such registration statement is to be filed at any
time after Citizens ceases to beneficially own less than 40% of the outstanding
Common Stock, and if such Other Holders have requested that such registration
statement be filed pursuant to demand registration rights granted to them by
ELI, ELI shall include in such registration:
(i) first, Other Securities sought to be included therein by
the Other Holders pursuant to the exercise of such demand registration
rights; and
(ii) second, the number of Holder Securities sought to be
included in such registration in excess of the number of Other Securities
sought to be included in such registration by the Other Holders which in
the good faith view of such investment banking firm, can be so sold without
so adversely affecting such offering (and (x) if such number is less than
the full number of such Holder Securities, such number shall be allocated
by Citizens or (y) in the event that such investment banking firm advises
that less than all of such Holder Securities may be included in such
offering, Citizens and its Affiliates may withdraw its or their request for
registration of their Registrable Securities under this Section 2.2 and 90
days subsequent to the effective date of the registration statement for the
registration of such Other Securities request that such registration be
effected as a registration under Section 2.1 to the extent permitted
thereunder).
(d) XXX shall not be required to effect any registration of
Registrable Securities under this Section 2.2 incidental to the
registration of any of its securities in connection with mergers,
acquisitions, exchange offers, subscription offers, dividend reinvestment
plans or stock option or other executive or employee benefit or
compensation plans;
(e) XXX shall be under no obligation to include any Registrable
Securities in a registration statement unless XXX shall have received from
the Holders of
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Registrable Securities a request for inclusion of not less than 75,000
Registrable Securities; and
(f) No registration of Registrable Securities effected under this
Section 2.2 shall relieve XXX of its obligation to effect a registration of
Registrable Securities pursuant to Section 2.1.
Section 2.3 EXPENSES. Except as provided herein, XXX shall pay all
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Registration Expenses with respect to a particular offering (or proposed
offering). Notwithstanding the foregoing, each Holder and XXX shall be
responsible for its own internal administrative and similar costs, which shall
not constitute Registration Expenses.
Section 2.4 REGISTRATION AND QUALIFICATION. If and whenever XXX is
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required to effect the registration of any Registrable Securities under the
Securities Act as provided in Section 2.1 or 2.2, and subject to Section
2.1(a)(i), as applicable, XXX shall as promptly as practicable:
(a) Prepare, file and use its best efforts to cause to become
effective a registration statement under the Securities Act relating to the
Registrable Securities to be offered;
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
Registrable Securities until the earlier of: (A) such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition set forth in such registration statement; (B) the
expiration of six-months after such registration statement becomes effective;
provided, that such six-month period shall be extended for such number of days
that equals the number of days elapsing from (x) the date the written notice
contemplated by paragraph (f) below is given by XXX to (y) the date on which XXX
delivers to the Holders of Registrable Securities the supplement or amendment
contemplated by paragraph (f) below;
(c) Furnish to the Holders of Registrable Securities and to any
underwriter of such Registrable Securities such number of conformed copies of
such registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary prospectus
and any summary prospectus), in conformity with the requirements of the
Securities Act, such documents incorporated by reference in such registration
statement or prospectus, and such other documents, as the Holders of Registrable
Securities or such underwriter may reasonably request, and a copy of any and all
transmittal letters or other correspondence to or received from, the SEC or any
other governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange) relating to
such offering;
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(d) Use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the Holders of such Registrable Securities or
any underwriter of such Registrable Securities shall request, and use its best
efforts to obtain all appropriate registrations, permits and consents in
connection therewith, and do any and all other acts and things which may be
necessary or advisable to enable the Holders of Registrable Securities or any
such underwriter to consummate the disposition in such jurisdictions of its
Registrable Securities covered by such registration statement; provided, that
XXX shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any such jurisdiction wherein it is not so
qualified or to consent to general service of process in any such jurisdiction;
(e) Use its best efforts to: (i) furnish to each Holder of Registrable
Securities included in such registration (each, a "Selling Holder") and to any
underwriter of such Registrable Securities an opinion of counsel for XXX
addressed to each Selling Holder and dated the date of the closing under the
underwriting agreement (if any) (or if such offering is not underwritten, dated
the effective date of the registration statement); and (ii) furnish to each
Selling Holder a "cold comfort" letter addressed to each Selling Holder and
signed by the independent public accountants who have audited the financial
statements of XXX included in such registration statement; in each such case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and such other
matters as the Selling Holders may reasonably request and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements;
(f) As promptly as practicable, notify the Selling Holders in writing:
(i) at any time when a prospectus relating to a registration pursuant to Section
2.1 and 2.2 is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and (ii) of any request by the SEC or any
other regulatory body or other body having jurisdiction for any amendment of or
supplement to any registration statement or other document relating to such
offering, and in either such case, at the request of the Selling Holders prepare
and furnish to the Selling Holders a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading;
(g) If reasonably requested by the lead or managing underwriters, use
its best efforts to list all such Registrable Securities covered by such
registration on each
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securities exchange and automated inter-dealer quotation system on which the
Common Stock of XXX is then listed;
(h) To the extent reasonably requested by the lead or managing
underwriters, send appropriate officers of XXX to attend any "road shows"
scheduled in connection with any such registration, with all out-of-pocket costs
and expense incurred by XXX or such officers in connection with such attendance
to be paid by XXX;
(i) Furnish for delivery in connection with the closing of any
offering of Registrable Securities pursuant to a registration effected pursuant
to Section 2.1 or 2.2 unlegended certificates representing ownership of the
Registrable Securities being sold in such denominations as shall be requested by
the Selling Holders or the underwriters; and
(j) XXX may require each Selling Holder of Registrable Securities as
to which any registration is being effected to xxxxxxx XXX with such information
regarding such seller and pertinent to the disclosure requirements relating to
the registration and the distribution of such securities as XXX may from time to
time reasonably request in writing.
Section 2.5 CONVERSION OF OTHER SECURITIES, ETC. In the event that any
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Holder offers any options, rights, warrants or other securities issued by it or
any other Person that are offered with, convertible into or exercisable or
exchangeable for any Registrable Securities, the Registrable Securities
underlying such options, rights, warrants or other securities shall continue to
be eligible for registration pursuant to Sections 2.1 and 2.2.
Section 2.6 UNDERWRITING; DUE DILIGENCE.
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(a) If requested by the underwriters for any underwritten offering of
Registrable Securities pursuant to a registration requested under this Article
II, XXX shall enter into an underwriting agreement with such underwriters for
such offering, which agreement will contain such representations and warranties
by XXX and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnification and contribution provisions substantially to
the effect and to the extent provided in Section 2.7, and agreements as to the
provision of opinions of counsel and accountants' letters to the effect and to
the extent provided in Section 2.4(e). The Selling Holders on whose behalf the
Registrable Securities are to be distributed by such underwriters shall be
parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, XXX to and for the
benefit of such underwriters, shall also be made to and for the benefit of such
Selling Holders. Such underwriting agreement shall also contain such
representations and warranties by such Selling Holders and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, indemnification and
contribution provisions substantially to the effect and to the extent provided
in Section 2.7 .
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(b) In connection with the preparation and filing of each registration
statement registering Registrable Securities under the Securities Act pursuant
to this Article II, XXX shall give the Holders of such Registrable Securities
and the underwriters, if any, and their respective counsel and accountants, such
reasonable and customary access to its books and records and such opportunities
to discuss the business of XXX with its officers and the independent public
accountants who have certified the financial statements of XXX as shall be
necessary, in the opinion of such Holders and such underwriters or their
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act; provided, that such Holders and the underwriters and their
respective counsel and accountants shall use their reasonable best efforts to
coordinate any such investigation of the books and records of XXX and any such
discussions with ELI's officers and accountants so that all such investigations
occur at the same time and all such discussions occur at the same time.
Section 2.7 INDEMNIFICATION AND CONTRIBUTION. (a) In the case of each
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offering of Registrable Securities made pursuant to this Article II, XXX agrees
to indemnify and hold harmless, to the extent permitted by law, each Selling
Holder, each underwriter of Registrable Securities so offered and each Person,
if any, who controls any of the foregoing Persons within the meaning of the
Securities Act and the officers, directors, affiliates, employees and agents of
each of the foregoing, against any and all losses, liabilities, costs (including
reasonable attorney's fees and disbursements), claims and damages, joint or
several, to which they or any of them may become subject, under the Securities
Act or otherwise, including any amount paid in settlement of any litigation
commenced or threatened, insofar as such losses, liabilities, costs, claims and
damages (or actions or proceedings in respect thereof, whether or not such
indemnified Person is a party thereto) arise out of or are based upon any untrue
statement by XXX or alleged untrue statement by XXX of a material fact contained
in the registration statement (or in any preliminary or final prospectus
included therein) or in any offering memorandum or other offering document
relating to the offering and sale of such Registrable Securities prepared by XXX
or at its direction, or any amendment thereof or supplement thereto, or in any
document incorporated by reference therein, or any omission by XXX or alleged
omission by XXX to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, that XXX
shall not be liable to any Person in any such case to the extent that any such
loss, liability, cost, claim or damage arises out of or relates to any untrue
statement or alleged untrue statement, or any omission, if such statement or
omission shall have been made in reliance upon and in conformity with
information relating to a Selling Holder or another holder of securities
included in such registration statement and furnished to XXX by or on behalf of
such Selling Holder, other holder or underwriter, as the case may be,
specifically for use in the registration statement (or in any preliminary or
final prospectus included therein), offering memorandum or other offering
document, or any amendment thereof or supplement thereto. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of any Selling Holder or any other holder and shall survive the transfer
of such securities. The foregoing indemnity agreement is in addition to any
liability that XXX may otherwise have to each Selling Holder, other holder or
underwriter of the Registrable Securities or any controlling person of the
foregoing and the officers, directors, affiliates, employees and agents of each
of the foregoing;
12
provided, further, that, in the case of an offering with respect to which a
Selling Holder has designated the lead or managing underwriters (or a Selling
Holder is offering Registrable Securities directly, without an underwriter),
this indemnity does not apply to any loss, liability, cost, claim or damage
arising out of or relating to any untrue statement or alleged untrue statement
or omission or alleged omission in any preliminary prospectus or offering
memorandum if a copy of a final prospectus or offering memorandum was not sent
or given by or on behalf of any underwriter (or such Selling Holder or other
holder, as the case may be) to such Person asserting such loss, liability, cost,
claim or damage at or prior to the written confirmation of the sale of the
Registrable Securities as required by the Securities Act and such untrue
statement or omission had been corrected in such final prospectus or offering
memorandum.
(b) In the case of each offering made pursuant to this Agreement, each
Selling Holder, by exercising its registration rights hereunder, agrees to
indemnify and hold harmless, and to cause each underwriter of Registrable
Securities included in such offering (in the same manner and to the same extent
as set forth in Section 2.7(a)) to agree to indemnify and hold harmless as
follows: (i) each Selling Holder agrees to indemnify and hold harmless XXX,
each underwriter who participates in such offering, each other Selling Holder or
other holder with securities included in such offering; and, , (ii) each
underwriter agrees to indemnify and hold harmless XXX, each Selling Holder or
other holder with securities included in such offering. The foregoing
indemnified parties shall include, and each Selling Holder and each underwriter
shall indemnify and hold harmless, each Person, if any, who controls any of the
foregoing within the meaning of the Securities Act and the officers, directors,
affiliates, employees and agents of each of the foregoing, against any and all
losses, liabilities, costs (including reasonable attorneys' fees and
disbursements), claims and damages to which they or any of them may become
subject, under the Securities Act or otherwise, including any amount paid in
settlement of any litigation commenced or threatened, insofar as such losses,
liabilities, costs, claims and damages (or actions or proceedings in respect
thereof, whether or not such indemnified Person is a party thereto) arise out of
or are based upon any untrue statement or alleged untrue statement by such
Selling Holder or underwriter, as the case may be, of a material fact contained
in the registration statement (or in any preliminary or final prospectus
included therein) or in any offering memorandum or other offering document
relating to the offering and sale of such Registrable Securities prepared by
XXX, or at its direction, or any amendment thereof or supplement thereto, or any
omission by such Selling Holder or underwriter, as the case may be, or alleged
omission by such Selling Holder or underwriter, as the case may be, of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that such untrue
statement of a material fact is contained in, or such material fact is omitted
from, information relating to such Selling Holder or underwriter, as the case
may be, and was furnished to XXX by or on behalf of such Selling Holder or
underwriter, as the case may be, specifically for use in such registration
statement (or in any preliminary or final prospectus included therein), offering
memorandum or other offering document. The foregoing indemnity is in addition to
any liability which such Selling Holder or underwriter, as the case may be, may
otherwise have to XXX, or controlling persons or the officers, directors,
affiliates, employees, and agents of each of the foregoing; provided, that, in
the case of an offering made pursuant to the Agreement with respect to which XXX
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has designated the lead or managing underwriters (or XXX is offering securities
directly, without an underwriter), this indemnity does not apply to any loss,
liability, cost, claim, or damage arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission in any
preliminary prospectus or offering memorandum if a copy of a final prospectus or
offering memorandum was not sent or given by or on behalf of any underwriter (or
XXX, as the case may be ) to such Person asserting such loss, liability, cost,
claim or damage at or prior to the written confirmation of the sale of the
Registrable Securities as required by the Securities Act and such untrue
statement or omission had been corrected in such final prospectus or offering
memorandum.
(c) Each party indemnified under paragraph (a) or (b), above, shall,
promptly after receipt of notice of a claim or action against such indemnified
party in respect of which indemnity may be sought hereunder, notify the
indemnifying party in writing of the claim or action; provided, that the failure
to notify the indemnifying party shall not relieve it from any liability that it
may have to an indemnified party on account of the indemnity agreement contained
in paragraph (a) or (b), above, except to the extent that the indemnifying party
was actually prejudiced by such failure, and in no event shall such failure
relieve the indemnifying party from any other liability that it may have to such
indemnified party. If any such claim or action shall be brought against an
indemnified party, and it shall have notified the indemnifying party thereof,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified party and indemnifying parties may exist in respect of
such claim, the indemnifying party shall be entitled to participate therein,
and, to the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel satisfactory to
the indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or action,
the indemnifying party shall not be liable to the indemnified party under this
Section 2.7 for any legal or other expenses of the defense subsequently incurred
by the indemnified party in connection with the defense thereof other than (i)
if a conflict of interest between the indemnifying party and an indemnified
party exists, in which case, the indemnifying party shall pay the costs of one
legal counsel to the indemnified party and (ii) the reasonable costs of
investigation. Any indemnifying party against whom indemnity may be sought under
this Section 2.7 shall not be liable to indemnify an indemnified party if such
indemnified party settles such claim or action without the consent of the
indemnifying party. The indemnifying party may not agree to any settlement of
any such claim or action, other than solely for monetary damages for which the
indemnifying party shall be responsible hereunder, the result of which any
remedy or relief shall be applied to or against the indemnified party, without
the prior written consent of the indemnified party, which consent shall not be
unreasonably withheld. In any action hereunder as to which the indemnifying
party has assumed the defense thereof with counsel satisfactory to the
indemnified party, the indemnified party shall continue to be entitled to
participate in the defense thereof, with counsel of its own choice, but the
indemnifying party shall not be obligated hereunder to reimburse the indemnified
party for the costs thereof.
(d) If the indemnification provided for in this Section 2.7 shall for
any reason be unavailable (other than in accordance with its terms) to an
indemnified party in
14
respect of any loss, liability, cost, claim or damage referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, liability, cost, claim or damage (i) as between XXX and the
Selling Holders on the one hand and the underwriters on the other, in such
proportion as shall be appropriate to reflect the relative benefits received by
XXX and the Selling Holders on the one hand and the underwriters on the other
hand or, if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits but also
the relative fault of XXX and the Selling Holders on the one had and the
underwriters on the other with respect to the statements or omissions which
resulted in such loss, liability, cost, claim or damage as well as any other
relevant equitable considerations; and (ii) as between XXX on the one hand and
each Selling Holder on the other, in such proportion as is appropriate to
reflect the relative fault of XXX and of each Selling Holder in connection with
such statements or omissions as well as any other relevant equitable
considerations. The relative benefits received by XXX and the Selling Holders on
the one hand and the underwriters on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by XXX and the
Selling Holders bear to the total underwriting discounts and commissions
received by the underwriters, in each case as set forth in the table on the
cover page of the prospectus. The relative fault of XXX and the Selling Holders
on the one hand and of the underwriters on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by XXX and the Selling Holders or by the underwriters. The
relative fault of XXX on the one hand and of each Selling Holder on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, but not by reference to any
indemnified party's stock ownership in XXX. The amount paid or payable by an
indemnified party as a result of the loss, cost, claim, damage or liability, or
action in respect thereof, referred to above in this paragraph (d) shall be
deemed to include, for purposes of this paragraph (d), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. XXX and the Selling Holders
agree that it would not be just and equitable if contribution pursuant to this
Section 2.7 were determined by pro rata allocation (even if the underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this paragraph. Notwithstanding any other provision of this Section 2.7,
no Selling Holder shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of such
Selling Holder were offered to the public exceeds the amount of any damages
which such Selling Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. Each Selling
Holder's obligations to contribute pursuant to this Section 2.7 are several in
proportion to the proceeds of the offering received by such Selling Holder bears
to the total proceeds of the offering received by all the Selling Holders and
not joint. No person guilty of fraudulent
15
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) Indemnification and contribution similar to that specified in the
preceding paragraphs of this Section 2.7 (with appropriate modifications) shall
be given by XXX, the Selling Holders and underwriters with respect to any
required registration or other qualification of securities under any state law
or regulation or governmental authority.
(f) The obligations of the parties under this Section 2.7 shall be in
addition to any liability which any party may otherwise have to any other party.
Section 2.8 RULE 144 AND FORM S-3. Commencing 90 days after the Initial
---------------------
Public Offering Date, XXX shall use its best efforts to ensure that the
conditions to the availability of Rule 144 set forth in paragraph (c) thereof
shall be satisfied. Upon the request of any Holder of Registrable Securities,
XXX will deliver to such Holder a written statement as to whether it has
complied with such requirements. XXX further agrees to use its reasonable
efforts to cause all conditions to the availability of Form S-3 (or any
successor form) under the Securities Act for the filing of registration
statements under this Agreement to be met as soon as practicable after the
Initial Public Offering Date. Notwithstanding anything contained in this Section
2.8, XXX may deregister under Section 12 of the Exchange Act, if it then is
permitted to do so pursuant to the Exchange Act and the rules and regulations
thereunder.
Section 2.9 TRANSFER OF REGISTRATION RIGHTS. Any Holder may transfer,
-------------------------------
sell or assign all or any portion of its registration rights under Article II to
any transferee of a number of Registrable Securities owned by such Holder
exceeding three percent (3%) of the outstanding class or series of such
securities at the time of transfer (each transferee that receives such minimum
number of Registrable Securities, a "Transferee"); provided, that each
Transferee of Registrable Securities to which Registrable Securities are
transferred, sold or assigned directly by Citizens or its Affiliates (such
Transferee, a "Citizens Transferee"), together with any Affiliate of such
Citizens Transferee (and any subsequent direct or indirect Transferees of
Registrable Securities from such Citizens Transferee and any of its Affiliates
(other than Citizens or its Affiliates) thereof), shall be entitled to request
the registration of Registrable Securities pursuant to Section 2.1 only once.
Any transfer of registration rights pursuant to this Section 2.9 shall be
effective upon receipt by XXX of (i) written notice from such Holder stating the
name and address of any Transferee and identifying the number of Registrable
Securities with respect to which the rights under this Agreement are being
transferred and the nature of the rights so transferred; and (ii) a written
agreement from such Transferee to be bound by the terms of this Article II and
Article IV of this Agreement as if an original party hereto. The Holders may
exercise their rights hereunder in such priority as they shall agree upon among
themselves.
Section 2.10 HOLDBACK AGREEMENT. If any registration pursuant to this
------------------
Article II shall be in connection with an underwritten public offering of
Registrable
16
Securities, each Selling Holder agrees not to effect any public sale or
distribution, including any sale under rule 144, of any equity security of XXX
(otherwise than through the registered public offering then being made), within
seven (7) days prior to or 180 days (or such lesser period as the lead or
managing underwriters may permit) after the effective date of the registration
statement (or the commencement of the offering to the public of such Registrable
Securities in the case of Rule 415 offerings). XXX hereby also so agrees and
agrees to cause each other holder of equity securities or securities convertible
into or exchangeable or exercisable for such securities (other than in the case
of equity securities, under dividend reinvestment plans or employee stock plans)
purchased from XXX otherwise than in a public offering to so agree.
ARTICLE III
CERTAIN COVENANTS AND AGREEMENTS
--------------------------------
Section 3.1 NO VIOLATIONS.
-------------
(a) Until Citizens beneficially owns less than 40% of the outstanding
Common Stock, XXX covenants and agrees that it will not take any action or enter
into any commitment or agreement which may reasonably be anticipated to result,
with or without notice and with or without lapse of time or otherwise, in a
contravention or event of default by Citizens of: (i) any provisions of
applicable law or regulation, including but not limited to provisions pertaining
to the Internal Revenue Code of 1986, as amended, or the Employee Retirement
Income Security Act of 1974, as amended; (ii) any provision of Citizens'
Articles of Incorporation or By-Laws; (iii) any credit agreement or other
material instrument binding upon Citizens; or (iv) any judgment, order or decree
of any governmental body, agency or court having jurisdiction over Citizens or
any of its Affiliates or any of their respective assets.
(b) XXX and Citizens agree to provide to the other any information and
documentation requested by the other for the purpose of evaluating and ensuring
compliance with Section 3.1(a) hereof.
(c) Notwithstanding the foregoing Sections 3.1(a) and 3.1(b), nothing
in this Agreement is intended to limit or restrict in any way the ability of
Citizens to effect, restrict or limit any action or proposed action of XXX,
including, but not limited to, the incurrence by XXX of indebtedness, based upon
Citizens' internal policies or other factors.
ARTICLE IV
MISCELLANEOUS
-------------
Section 4.1 LIMITATION OF LIABILITY. Neither Citizens nor XXX shall be
-----------------------
liable to the other for any special, indirect, incidental or consequential
damages of the other arising in connection with this Agreement.
17
Section 4.2 AMENDMENTS. This Agreement may not be amended or terminated
----------
orally, but only by a writing duly executed by or on behalf of the parties
hereto. Any such amendment shall be validly and sufficiently authorized for
purposes of this Agreement if it is signed on behalf of Citizens and XXX.
Section 4.3 TERM. This Agreement shall remain in effect until all
----
Registrable Securities held by Holders have been transferred by them to Persons
other than Transferees; provided, that the provisions of Section 2.7 shall
survive any such expiration.
Section 4.4 SEVERABILITY. If any provision of this Agreement or the
------------
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid, illegal or
unenforceable to any extent, the remainder of this Agreement or such provision
of the application of such provision to such party or circumstances, other than
those to which it is so determined to be invalid, illegal or unenforceable,
shall remain in full force and effect to the fullest extent permitted by law and
shall not be affected thereby, unless such a construction would be unreasonable.
Section 4.5 NOTICES. All notices and other communications required or
-------
permitted hereunder shall be in writing, shall be deemed duly given upon actual
receipt, and shall be delivered: (a) in person; (b) by registered or certified
mail, postage prepaid, return receipt requested; or (c) by facsimile or other
generally accepted means of electronic transmission (provided that a copy of any
notice delivered pursuant to this clause (c) shall also be sent pursuant to
clause (b)), addressed as follows:
(a) IF TO XXX:
Electric Lightwave, Inc.
0000 X.X. Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
(b) IF TO CITIZENS:
Citizens Utilities Company.
Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxxx X. XxXxxxxx
Fax: (000) 000-0000
or to such other addresses or telecopy numbers as may be specified by like
notice to the other parties.
Section 4.6 FURTHER ASSURANCES. Citizens and XXX shall execute,
------------------
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such instruments and take such other action as may be necessary or advisable to
carry out their
18
obligations under this Agreement and under any exhibit, document or other
instrument delivered pursuant hereto.
Section 4.7 COUNTERPARTS. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed an original instrument, but all
of which together shall constitute but one and the same agreement.
Section 4.8 GOVERNING LAW. This Agreement and the transactions
-------------
contemplated hereby shall be construed in accordance with, and governed by, the
laws of the State of New York without regard to the conflict of laws provisions
of any jurisdiction.
Section 4.9 ENTIRE AGREEMENT. This Agreement constitutes the entire
----------------
understanding of the parties hereto with respect to the subject matter hereof.
Section 4.10 SUCCESSORS. This Agreement shall be binding upon, and shall
----------
inure to the benefit of, the parties hereto and their respective successors and
assigns. Nothing contained in this Agreement, express or implied, is intended to
confer upon any other person or entity any benefits, rights or remedies.
Section 4.11 SPECIFIC PERFORMANCE. The parties hereto acknowledge and
--------------------
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, it is agreed that they
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof, in addition to any other remedy to which they may be entitled
at law or equity.
19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
CITIZENS UTILITIES COMPANY
By:
---------------------------------
Name:
Title:
ELECTRIC LIGHTWAVE, INC.
By:
---------------------------------
Name:
Title:
20
