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File Pursuant To Rule 424(b)(3)
Registration No. 33-94702
PROSPECTUS
683,583 SHARES
INTERMEDIA COMMUNICATIONS OF FLORIDA, INC.
Common Stock
($.01 par value per share)
_______________
This Prospectus is being used in connection with the offering from
time to time by James F. Geiger, Mark A. Masi, Joseph A. Tortoretti and
Petrocelli Industries, Inc. (collectively, the "Selling Stockholders") of
shares (the "Shares") of common stock, $.01 par value per share (the
"Common Stock"), of Intermedia Communications of Florida, Inc., a Delaware
corporation (the "Company" or "ICI"). The Selling Stockholders acquired
683,583 Shares from the Company on July 17, 1995 as a portion of the
consideration for the acquisition by ICI of FiberNet USA, Inc. ("FiberNet
USA") and FiberNet Telecommunications Cincinnati, Inc. ("FiberNet
Cincinnati") (collectively, the "Acquisition"). The Shares may be offered
by the Selling Stockholders in transactions in the over-the-counter-market
at prices obtainable at the time of sale or in privately negotiated
transactions at prices determined by negotiation. The Selling Stockholders
may effect such transactions by selling the Shares to or through securities
broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders
and/or the purchasers of the Shares for whom such broker-dealers may act as
agent or to whom they sell as principal, or both (which compensation as to
a particular broker-dealer might be in excess of customary commissions).
Additionally, agents, brokers or dealers, including, without limitation,
Bear Stearns Securities Corp., may acquire Shares or interests therein as a
pledgee and may, from time to time, effect distributions of the Shares or
interests in such capacity. See "The Selling Stockholders" and "Plan of
Distribution." The Selling Stockholders and the brokers and dealers through
whom sales of the Shares are made may be deemed "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"),
and any profits realized by them on the sale of the Shares may be
considered to be underwriting compensation.
The Company is not selling any of the Shares and will not receive any
of the proceeds from the sale of the Shares being sold by the Selling
Stockholders. The cost of registering the Shares is being borne by the
Company.
On August 16, 1995, the closing price for the Common Stock as quoted
on the National Association of Securities Dealers, Inc. Automated
Quotations System National Market ("Nasdaq National Market") was $15.625
per share.
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY MATTERS
DISCUSSED UNDER THE CAPTION "RISK FACTORS."
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________________
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
THE DATE OF THIS PROSPECTUS IS AUGUST 21, 1995.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy and information statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, its Midwest
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and at its Northeast Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Common Stock
is listed on the Nasdaq National Market under the symbol "ICIX". Reports,
proxy and information statements, and other information concerning the
Company can also be inspected at the Nasdaq National Market at 1735 17
Street, N.W., Washington, D.C. 20006-1506.
Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and reference is
made to the copy of such contract or other document filed as an exhibit to
the Registration Statement of which this Prospectus forms a part, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or information have been filed by the Company
with the Commission and are incorporated herein by reference:
The Company's Annual Report on Form 10-K for the year ended December
31, 1994.
The portions of the Proxy Statement for the Annual Meeting of
Stockholders of the Company held on May 26, 1995 that have been
incorporated by reference into the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
The Company's Current Report on Form 8-K/A filed with the Commission
on January 27, 1995.
The Company's Current Report on Form 8-K filed with the Commission on
February 3, 1995.
The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
The Company's Current Report on Form 8-K filed with the Commission on
June 20, 1995.
The Company's Current Report on Form 8-K filed with the Commission on
July 19, 1995.
The Company's Current Report on Form 8-K/A filed with the Commission
on August 2, 1995.
The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1995.
The description of capital stock contained in the Company's
registration statements on Form 8-A under the Exchange Act, filed
April 7, 1992, April 28, 1992 and April 30, 1992 (File No. 0-20135).
All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the offering
covered by this Prospectus will be deemed incorporated by reference into
this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein modifies or
supersedes such statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON
TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN OR
ORAL REQUEST OF SUCH PERSON TO INTERMEDIA COMMUNICATIONS OF FLORIDA, INC.,
9280 BAY PLAZA BOULEVARD, SUITE 720, TAMPA, FLORIDA 33619 (TELEPHONE 813-
621-0011), ATTENTION: RONALD L. TOLLIVER, SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS) WHICH HAVE BEEN INCORPORATED BY
REFERENCE IN THIS PROSPECTUS.
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RISK FACTORS
Prospective investors should consider carefully the following factors
relating to the business of the Company and this offering, in addition to
other information set forth elsewhere in this Prospectus, before purchasing
Shares in this offering.
Limited Operations; History of Net Losses. The Company's business
commenced in 1987 and substantially all of the Company's revenues are
derived from traditional competitive access provider ("CAP") services,
enhanced data services, integration services and long distance services
(through its recent acquisition of Phone One, Inc. ("Phone One")). The
Company is expecting to substantially grow the size of its operations and
number of service offerings in the near future. Prospective investors,
therefore, have limited historical financial information about the Company
upon which to base an evaluation of the Company's performance and an
investment in the Common Stock. Given the Company's limited operating
history, there is no assurance that it will be able to compete successfully
in the telecommunications business.
The development of the Company's business and the installation and
expansion of its networks require significant expenditures, a substantial
portion of which are incurred before the realization of revenues. Together
with the associated early operating expenses, these capital expenditures
result in negative cash flow until an adequate customer base is
established. ICI reported net losses of approximately $0.2 million, $2.1
million and $3.1 million for the years ended December 31, 1992, 1993 and
1994, respectively. Although its revenues have increased in each of the
last three years, ICI has incurred significant increases in expenses
associated with the development and expansion of its fiber optic networks,
services and customer base. There can be no assurance that ICI will achieve
or sustain profitability in the future.
Uncertainty of Future Regulation. The Company is subject to federal
regulation by the Federal Communications Commission ("FCC") and local
regulation by the Florida Public Service Commission, the Public Utilities
Commission of Ohio and the Missouri Public Service Commission, and
legislation was recently passed in North Carolina which will subject the
Company to state regulation by the North Carolina Utilities Commission in
1996. The Company may also be subject to regulation by the public service
commissions of other southeastern states into which the Company is
expanding. In addition, many of these regulations may be subject to
judicial review, the result of which ICI is unable to predict. The FCC has
determined that non-dominant carriers, such as the Company, are required to
file interstate tariffs on an ongoing basis. Challenges to these tariffs by
third parties may cause the Company to incur significant legal and
administrative expenses. In addition, to the extent the Company provides
intrastate services, it is generally subject to certification and/or tariff
filing requirements by state regulators, which vary on a state-by-state
basis. Although the trend in federal and state regulations appears to favor
increased competition, no assurance can be given that changes in current or
future regulations adopted by the FCC or state regulatory bodies or
legislative initiatives would not have a material adverse effect on the
Company. Furthermore, the Company is currently prohibited from providing
switched local services in its markets and there can be no assurance if, or
when, any future regulatory changes would permit the Company to provide
such services.
Risks of Implementation. The Company is continuing to expand its CAP
networks in each of the Orlando, Tampa, St. Petersburg, Miami, West Palm
Beach and Jacksonville, Florida metropolitan areas and the FiberNet
networks in Cincinnati, Ohio and Raleigh-Durham, North Carolina. In
addition, FiberNet has networks under development in St. Louis, Missouri
and Huntsville, Alabama. The Company has identified other expansion
opportunities in Florida and other parts of the Southeast and is currently
extending the reach of its networks to pursue such opportunities. There can
be no assurance that the Company will be able to expand its existing
networks or construct or acquire new networks as currently planned on a
timely basis. The expansion of the Company's existing networks and its
construction or acquisition of new networks will be dependent, among other
things, on its ability to acquire rights-of-way and any required permits on
satisfactory terms and conditions and on its ability to finance such
expansion, acquisition and construction. These factors
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and others could adversely affect the expansion of the Company's customer
base on its existing networks and commencement of operations on new
networks. If the Company is not able to expand, acquire or construct its
networks in accordance with its plans, the growth of its business would be
materially adversely affected.
Competition. In each of its markets, the Company faces significant
competition for the telecommunications services it offers from local
exchange carriers ("LECs"), which currently dominate their local
telecommunications markets. A continuing trend toward business combinations
and alliances in the telecommunications industry may create significant new
competitors to the Company. The Company also faces competition in most
markets in which it operates from one or more CAPs operating fiber optic
networks. In addition, the Company faces competition in its network systems
integration business from equipment manufacturers, the regional Bell
operating companies ("RBOCs") and other LECs, long distance carriers and
systems integrators, and in its enhanced data services business from local
telephone companies, long distance carriers and others. Many of the
Company's existing and potential competitors have financial, personnel and
other resources significantly greater than those of the Company.
The Company believes that various legislative initiatives as well as a
recent series of transactions and proposed transactions between telephone
companies and cable companies increase the likelihood that the remaining
barriers to total local exchange competition will be removed. The
introduction of such competition, however, also increases the possibility
that the RBOCs will be authorized to provide interexchange services. If the
RBOCs are permitted to provide such services, they will be in a position to
offer single source service similar to that being offered by ICI. This
result may also occur from the passage of federal legislation which would
permit the RBOCs to provide interexchange services under certain
circumstances. The Company cannot predict the number of competitors that
will emerge as a result of any new federal and state regulations.
Dependence on Key Customers. During 1993, two long distance carriers
each accounted for more than 10% of the Company's revenues, and together
accounted for approximately 30% of the Company's revenues. During 1994, one
long distance carrier, MCI Communications Corporation ("MCI"), accounted
for approximately 11% of the Company's revenues (including both the
revenues for providing service used by the long distance carrier itself and
revenues obtained from the long distance carrier for connections to its
business customers), and was the only customer accounting for more than 10%
of the Company's revenue during such period. The loss of MCI as a customer
could have a material adverse effect on the Company's business.
Significant Capital Requirements. Expansion of the Company's existing
networks and services and the development of new networks and services
require significant capital expenditures. ICI expects to fund additional
capital requirements through existing resources, internally generated
funds, joint ventures and debt or equity financing as appropriate. There
can be no assurance, however, that ICI will be successful in producing
sufficient cash flow or raising sufficient debt or equity capital on terms
that it will consider acceptable. In addition, the Company's future capital
requirements will depend upon a number of factors, including marketing
expenses, staffing levels and customer growth, as well as other factors
that are not within the Company's control, such as competitive conditions,
governmental regulation and capital costs. Failure to generate sufficient
funds may require ICI to delay or abandon some of its future expansion or
expenditures, which would have a material adverse effect on its growth and
its ability to compete in the telecommunications industry.
Expansion Risk. The Company is experiencing a period of rapid
expansion which management expects will increase in the near future. This
growth has increased the operating complexity of the Company, as well as
the level of responsibility for both existing and new management personnel.
The Company's ability to manage its expansion effectively will require it
to continue to implement and improve its operational and financial systems
and to expand, train and manage its employee base. The Company's inability
to effectively manage its expansion could have a material adverse effect on
its business.
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Risk of New Service Acceptance. The Company offers a number of
services that the Company believes are important to its long-term growth.
The success of these services will be dependent upon, among other things,
the willingness of business customers to accept new telecommunications
technology. No assurance can be given that such acceptance will occur; the
lack of such acceptance could have a material adverse effect on the
Company.
Rapid Technological Changes. The telecommunications industry is
subject to rapid and significant changes in technology. While ICI believes
that, for the foreseeable future, these changes will neither materially
affect the continued use of its fiber optic networks nor materially hinder
its ability to acquire necessary technologies, the effect on the business
of ICI, of technological changes such as changes relating to emerging
wireline and wireless transmission technologies, including software
protocols, cannot be predicted.
Dependence on Key Personnel. The Company's business is managed by a
small number of key management and operating personnel, the loss of certain
of whom could have a material adverse impact on the Company's business. The
Company believes that its future success will depend in large part on its
continued ability to attract and retain highly skilled and qualified
personnel. None of the Company's executives, other than David C. Ruberg,
President, Chief Executive Officer and Chairman of the Board, and Timothy
Tuck and certain other executives of Phone One, is a party to an employment
agreement with the Company.
Risk of Cancellation or Non-Renewal of Network Agreements. The Company
has lease and/or purchase agreements for rights-of-way, utility pole
attachments, conduit and dark fiber for its fiber optic networks in the
Orlando, Tampa, St. Petersburg, Miami, West Palm Beach and Jacksonville,
Florida metropolitan areas and FiberNet has similar agreements for its
fiber optic networks in the Cincinnati, Ohio and Raleigh-Durham, North
Carolina metropolitan areas as well as the FiberNet networks under
development in St. Louis, Missouri and Huntsville, Alabama. Although the
Company does not believe that any of these agreements will be cancelled in
the near future, cancellation or non-renewal of certain of such agreements
could materially adversely affect the Company's business in the affected
metropolitan area.
Anti-Takeover Provisions. The Company's Certificate of Incorporation
and Bylaws, the provisions of the Delaware General Corporation Law and a
certain debt instrument that the Company has entered into may make it
difficult in some respects to effect a change in control of the Company and
replace incumbent management. The existence of these provisions may have a
negative impact on the price of the Common Stock, may discourage third
party bidders from making a bid for the Company, or may reduce any premiums
paid to stockholders for their Common Stock. In addition, the Board has the
authority to fix the rights and preferences of and issue shares of the
Company's Preferred Stock, which may have the effect of delaying or
preventing a change in control of the Company without action by its
stockholders.
Lack of Dividend History. The Company has never declared or paid any
cash dividends on its Common Stock and does not expect to declare any such
dividends in the foreseeable future. Payment of any future dividends will
depend upon earnings and capital requirements of the Company, the Company's
debt facilities and other factors the Board of Directors considers
appropriate. ICI intends to retain its earnings, if any, to finance the
development and expansion of its business, and therefore does not
anticipate paying any dividends in the foreseeable future. In addition, the
terms of an existing indenture prohibits the payment of dividends.
Shares Eligible for Future Sale. Future sales of shares by existing
stockholders under Rule 144 of the Securities Act, or through the exercise
of outstanding registration rights or the issuance of shares of Common
Stock upon the exercise of options or warrants could materially adversely
affect the market price of shares of Common Stock and could materially
impair the Company's future ability to raise capital through an offering of
equity securities. Substantially all of the Company's outstanding shares,
other than those held by affiliates, are transferable without restriction
under the Securities Act. The Company has registered 1,046,000 shares of
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Common Stock for issuance upon exercise of options granted to its employees
under the Company's 1992 Stock Plan. Options to acquire 272,452 shares of
Common Stock were currently exercisable under the 1992 Stock Plan at July
14, 1995. No predictions can be made as to the effect, if any, that market
sales of such shares or the availability of such shares for future sale
will have on the market price of shares of Common Stock prevailing from
time to time.
6
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THE COMPANY
The Company is a leading provider of competitive access
telecommunications services to business and governmental customers that
have a presence in the southeastern United States. Founded in 1987, the
Company was among the first CAPs in the United States. CAPs are
telecommunications companies that offer customers an alternative to the
local telephone company for certain services. Initially, the Company's
services were generally limited to such traditional CAP services as high
capacity interconnection between (i) points of presence ("POPs") of a long
distance carrier ("IXC"), (ii) the POPs of different IXCs, (iii) large
customers and their selected IXCs and (iv) different locations of
particular customers. Building upon the Company's reputation for delivering
reliable, high quality telecommunications services, it has expanded beyond
traditional CAP services to provide enhanced data, long distance and other
value added services.
Since its inception, the Company has constructed and operated fully
digital, fiber optic networks in Florida's leading business and
metropolitan areas and through its acquisition of FiberNet USA and FiberNet
Cincinnati is constructing and operating such networks in other
southeastern states. The Company has expanded the reach of its networks for
provision of enhanced date services to 402 cities nationwide as of March
31, 1995. As a result of the Company's deployment of advanced broadband
fiber networks, it offers traditional and enhanced voice, data and video
services, many of which cannot be carried over traditional analog, copper
networks without significant degradation. Thus, the Company's networks
offer a high quality alternative to local telephone companies where such
companies are dependent upon copper based facilities.
In December 1994, the Company acquired Phone One, an interexchange
carrier that provides (i) domestic and international telecommunications
services to commercial and residential customers, (ii) termination services
for other long distance carriers and (iii) long distance and other
telecommunications services for resellers of Phone One's services to
commercial or other customers. Phone One transmits long distance telephone
calls through its network over digital transmission lines that are leased
from facilities-based carriers.
FiberNet USA and FiberNet Cincinnati, recently acquired subsidiaries
of the Company, are fiber-based CAPs. FiberNet USA, through its operating
subsidiaries, has a fiber optic network in Raleigh-Durham, North Carolina
and fiber optic networks under development in St. Louis, Missouri and
Huntsville, Alabama. Due to state regulations, FiberNet USA's subsidiaries
will be limited to operating as interstate carriers in North Carolina and
Alabama providing access to and between IXCs and between customers and
their IXCs. A legislative initiative was recently passed in North Carolina
which will permit FiberNet USA to provide intrastate services under the
jurisdiction of the North Carolina Utilities Commission beginning in July
1996. FiberNet Cincinnati currently has a fiber optic network in
Cincinnati, Ohio constructed within the conduit system of MCI Metro Access
Transmission Services, Inc.
The Company's principal executive offices are located at 9280 Bay
Plaza Boulevard, Suite 720, Tampa, Florida 33619, and its telephone number
at that address is (813) 621-0011.
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THE SELLING STOCKHOLDERS
Pursuant to an Agreement and Plan of Merger, dated as of February 15,
1995 (the "Merger Agreement"), among the Company, the Selling Stockholders,
FAC Acquisition, Inc., CAC Acquisition, Inc. and Santo Petrocelli, on July
17, 1995, the Company issued an aggregate of 683,583 Shares to the Selling
Stockholders as part of the consideration paid for the Acquisition.
The following table sets forth, as of the date of the Acquisition,
certain information regarding the Selling Stockholders' ownership of the
Shares.
<TABLE>
<CAPTION>
=================================================================================================================
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING/1/ AFTER OFFERING/1/
-----------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF NUMBER OF
NAME OF SELLING STOCKHOLDER SHARES PERCENT SHARES OFFERED SHARES PERCENT
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Petrocelli Industries, Inc. 483,269 4.67% 483,269 0 0.00%
------------------------------------------------------------------------------------------------------------------
Joseph A. Tortoretti 84,753 0.82% 84,753 0 0.00%
------------------------------------------------------------------------------------------------------------------
James F. Geiger/2/ 63,530/3/ 0.61% 61,030 2,500 0.02%
------------------------------------------------------------------------------------------------------------------
Mark A. Masi/4/ 56,781/5/ 0.55% 54,531 2,250 0.02%
==================================================================================================================
</TABLE>
The 683,583 Shares owned by the Selling Stockholders represent all of
the Shares covered by the Registration Statement of which this Prospectus
is a part (the "Registration Statement"). Except as disclosed in the
footnotes to the above table, to the knowledge of the Company the Selling
Stockholders did not own, nor have any rights to acquire, any other shares
of Common Stock as of the date of this Prospectus. The 683,583 Shares had
an aggregate market value of $8,630,235 on July 14, 1995 (based on the
$12.625 per share closing price of the Common Stock on that date). Except
as disclosed in the footnotes to the above table, no Selling
___________________________________
/1/ Under the rules of the Commission, a person is deemed to be the
beneficial owner of a security if such person has or shares the power
to vote or direct the voting of such security or the power to dispose
or direct the disposition of such security. A person is also deemed to
be a beneficial owner of any securities if that person has the right
to acquire beneficial ownership within 60 days. Accordingly, more than
one person may be deemed to be a beneficial owner of the same
securities. Unless otherwise indicated by footnote, the named
individuals have sole voting and investment power with respect to the
shares of Common Stock beneficially owned.
/2/ James F. Geiger is the Vice President of Alternate Channel Sales of
the Company and the President of FiberNet USA and FiberNet Cincinnati,
both wholly owned subsidiaries of the Company.
/3/ Includes options to purchase 2,500 shares of Common Stock exercisable
within 60 days of the date hereof. Excludes options to purchase 47,500
shares of Common Stock that are not exercisable within 60 days of the
date hereof.
/4/ Mark A. Masi is the Vice President, Operations and Customer Service of
the Company and the Executive Vice President and Chief Financial
Officer of FiberNet USA and FiberNet Cincinnati, both wholly owned
subsidiaries of the Company.
/5/ Includes options to purchase 2,250 shares of Common Stock that are
exercisable within 60 days of the date hereof. Excludes options to
purchase 42,750 shares of Common Stock that are not exercisable within
60 days of the date hereof.
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Stockholder has held any position, office or had any other material
relationship with the Company, its predecessors or affiliates during the
past three years.
A total of 83,333 of the Shares (the "Holdback Shares") are being held
by an escrow agent (the "Escrow Agent") as security for certain
indemnification obligations of the Selling Stockholders pursuant to the
Merger Agreement. Unless on or before March 31, 1996, the Company gives
notice to the Selling Stockholders asserting a claim for indemnification
pursuant to the Merger Agreement, then on April 1, 1996, the Company is
required to instruct the Escrow Agent to deliver the Holdback Shares to the
representative of the Selling Stockholders for distribution to the Selling
Stockholders. If on or before such date, the Company asserts such a claim
and, within ten days thereafter, the Selling Stockholders do not object to
such claim, then the Company is entitled to effect indemnification for any
damages it sustained pursuant to such claim (to the extent the Holdback
Shares are sufficient therefor) by cancelling that number of Holdback
Shares having a value equal to the amount of such damages (determined by
dividing the amount of damages by $12.00). If the Selling Stockholders
object to the Company's claim for indemnification and the parties do not
agree as to the amount of the damages for which the Company is entitled to
indemnification pursuant to the Merger Agreement, then the dispute is to be
determined by binding arbitration. Promptly following the resolution of any
such dispute (whether by arbitration or agreement between the parties), the
Company is entitled to effect indemnification for such damages (to the
extent the Holdback Shares are sufficient therefor) by cancelling that
number of Holdback Shares determined in accordance with the formula
described above. The Selling Stockholders may substitute cash (or cash
equivalents reasonably acceptable to the Company) for the Holdback Shares
at any time by delivering to the Escrow Agent an amount of money equal to
the product of the number of Holdback Shares held by the Escrow Agent at
such time by $12.00.
Pursuant to the Merger Agreement, the Company is required to file a
registration statement covering the Shares and to use its reasonable
efforts to keep such registration statement continuously effective for a
period of three years following the date on which it is declared effective
(or, except as otherwise provided in the Merger Agreement, to immediately
file a new registration statement in the event such effectiveness lapses at
any time during such three-year period). The Company has filed the
Registration Statement in accordance with the Merger Agreement, and if
necessary, the Company is required to file and to use its reasonable
efforts to have declared effective as soon as practicable following filing
additional registration statements or amendments as necessary to maintain
such effectiveness for the three-year period.
The Shares were acquired by the Selling Stockholders pursuant to an
exemption from the registration requirements of the Securities Act pursuant
to Section 4(2) thereof. Pursuant to the Merger Agreement, the Selling
Stockholders have agreed that they will not sell or transfer more than
1/24th of the Shares during each of the 24 months following the date of the
Merger Agreement (calculated on a cumulative basis). However, this
restriction will not prohibit (i) a person or entity to which the Shares
are pledged from selling such Shares after a default in the obligations
secured by such pledge or (ii) a Selling Stockholder from selling such
Shares upon the announcement by the Company of a change in Control of the
Company (as defined in the Merger Agreement), whereupon the foregoing
restriction on the sale or transfer of the Shares will immediately lapse.
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PLAN OF DISTRIBUTION
The Shares may be offered by the Selling Stockholders in transactions
in the over-the-counter market at prices obtainable at the time of sale or
in privately negotiated transactions at prices determined by negotiation.
The Selling Stockholders may effect such transactions by selling the Shares
to or through securities broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions
from the Selling Stockholders and/or the purchasers of the Shares for whom
such broker-dealers may act as agent or to whom they sell as principal, or
both (which compensation as to a particular broker-dealer might be in
excess of customary commissions). Additionally, agents, brokers or dealers,
including, without limitation, Bear Stearns Securities Corp., may acquire
Shares or interests therein as a pledgee and may, from time to time, effect
distributions of the Shares or interests in such capacity.
The Selling Stockholders and any broker-dealers who act in connection
with the sale of the Shares hereunder may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, and any
commissions received by them and profit on any resale of the Shares as
principal might be deemed to be underwriting discounts and commissions
under the Securities Act.
LEGAL MATTERS
The legality of the Shares of Common Stock offered hereby will be
passed upon for the Company by Kronish, Lieb, Weiner & Hellman LLP, 1114
Avenue of the Americas, New York, New York 10036-7798. Ralph J. Sutcliffe,
a partner of Kronish, Lieb, Weiner & Hellman LLP, beneficially owns 10,745
shares of the Common Stock.
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