EXHIBIT 10.9
FORM OF INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "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 $.01 per share, of XXX.
B. XXX 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, XXX will cease to be a wholly owned
subsidiary of Citizens.
D. In connection with the Offering, XXX 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 XXX 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:
ARTICLE I
DEFINITIONS
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Section 1.01 DEFINITIONS. As used in this Agreement, in addition to the
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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 XXX.
"CITIZENS EMPLOYEES" means all employees or former employees of any of the
Citizens Companies other than the current or former XXX 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 XXX.
"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).
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"INDEMNITEE" shall have the meaning ascribed to it in Section 5(a).
"XXX" shall have the meaning ascribed to it in the Preamble.
"XXX EMPLOYEES" means all employees or former employees of XXX other than
any person who as of the Closing is an employee of any of the Citizens
Companies.
"XXX 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 XXX.
"XXX 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 XXX.
"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 XXX 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 XXX 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 Xxxxxx Brothers Inc., Xxxxxxx Lynch,
Pierce, Xxxxxx & Xxxxx Incorporated, Xxxxxx Xxxxxxx & Co. Incorporated and
Deutsche Xxxxxx Xxxxxxxx Inc. (as representatives of the several U.S.
underwriters), Citizens and XXX dated November, __, 1997, and that certain
International Underwriting Agreement between and among Xxxxxx Brothers
International (Europe), Xxxxxxx Xxxxx International, Xxxxxx Xxxxxxx & Co.
International Limited and Xxxxxx Xxxxxxxx & Co. Limited, Citizens and XXX dated
November __, 1997.
Section 1.02 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
INDEMNIFICATION BY XXX
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Section 2.01 INDEMNIFICATION BY XXX. XXX shall indemnify, defend and
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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 XXX) 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 XXX Liabilities; (b) any XXX
Securities Liabilities; or (c) any misrepresentation or material breach by XXX
of any covenant of XXX or any failure by XXX to satisfy any condition required
to be satisfied by XXX or any liability of XXX for taxes arising prior to the
Offering determined to be owing by XXX 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 XXX 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
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Section 3.01 INDEMNIFICATION BY CITIZENS. Citizens shall indemnify,
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defend and hold harmless XXX 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 XXX 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 XXX.
ARTICLE IV
GUARANTEE.
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Section 4.01 GUARANTEE. XXX shall indemnify, defend and hold harmless
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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. XXX 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 XXX 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
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Section 5.01 THIRD-PARTY CLAIMS. (a) If any person entitled to
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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 party
(a "Third-Party Claim") against such Indemnitee, the Indemnitee shall promptly
provide written notice thereof
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(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).
(d) In the event that a Third-Party Claim involves a proceeding as to
which both Citizens and XXX 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
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Section 6.01 CONTRIBUTION. If the indemnification provided for in this
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Agreement with respect to XXX 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 XXX shall contribute to
any Indemnifiable Losses relating to, resulting from or arising out of the XXX
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,
among other things, whether the conduct or information giving rise to the
Indemnifiable Losses is attributable to Citizens or XXX 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
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1933 Act) shall be entitled to contribution from any person who is not guilty of
fraudulent misrepresentation.
ARTICLE VII
COOPERATION
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Section 7.01 COOPERATION. So long as any books, records and files
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retained after the Closing Date by Citizens (or any of the other Citizens
Companies), on the one hand, or XXX 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 XXX 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 XXX 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 XXX 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.
ARTICLE VIII
EFFECTIVENESS
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Section 8.01 EFFECTIVENESS. This Agreement shall become effective at
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Closing.
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ARTICLE IX
SUCCESSORS AND ASSIGNS
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Section 9.01 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
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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
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Section 10.01 NO THIRD-PARTY BENEFICIARIES. Except for the persons
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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
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Section 11.01 ENTIRE AGREEMENT. This Agreement constitutes the entire
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agreement among the parties with respect to the subject matter hereof.
ARTICLE XII
AMENDMENT
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Section 12.01 AMENDMENT. This Agreement may not be amended except by an
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instrument signed by the parties hereto.
ARTICLE XIII
WAIVERS
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Section 13.01 WAIVERS.
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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.
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ARTICLE XIV
SEVERABILITY
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Section 14.01 SEVERABILITY. If any provision of this Agreement is
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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
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Section 15.01 HEADINGS. Section headings in this Agreement are included
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herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
ARTICLE XVI
NOTICES
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Section 16.01 NOTICES. All notices given in connection with this
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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):
IF TO CITIZENS:
Citizens Utilities Company
High Ridge Park
P. O. Xxx 0000
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxxx X. XxXxxxxx
Fax No.: (000) 000-0000
IF TO XXX:
Electric Lightwave Inc.
0000 X.X. Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
Fax No.: (000) 000-0000
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ARTICLE XVII
GOVERNING LAW
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Section 17.01 GOVERNING LAW. This Agreement shall be governed by and
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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
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Section 18.01 COUNTERPARTS. This Agreement may be executed in
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counterparts, each of which shall be an original, but all of which together
shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Indemnification
Agreement as of the date first above written.
. ELECTRIC LIGHTWAVE INC.
By ___________________________
Name:
Title:
CITIZENS UTILITIES COMPANY
By ___________________________
Name:
Title:
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