<PAGE>
As filed with the Securities and Exchange Commission on August 12, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
INTERMEDIA COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
_____________________
Delaware 59-29-13586
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3625 Queen Palm Drive
Tampa, Florida 33619
(813) 829-0011
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
_____________________
David C. Ruberg, Chairman of the Board,
President and Chief Executive Officer
Intermedia Communications, Inc.
3625 Queen Palm Drive
Tampa, Florida 33619
(813) 829-0011
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_____________________
Copy to:
Ralph J. Sutcliffe, Esq.
Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036-7798
_____________________
Approximate date of commencement of proposed sale to public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend on interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<PAGE>
_____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================
Title of Securities Amount to be Price Aggregate Amount of
to be Registered Registered Per Share Price Registration Fee
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depositary Shares 6,900,000 $28.25(1) $194,925,000 $59,068.18
each representing a
one hundredth
interest in a share
of 7% Series D
Junior Convertible
Preferred Stock
(liquidation
preference $25.00
per share)
- ----------------------------------------------------------------------------------------------------
7% Series D 69,000 N.A. N.A. (2)
Junior Convertible
Preferred Stock,
liquidation
preference $2,500
per share, $1.00
par value per share
====================================================================================================
Common Stock, 4,434,448(3)(4) N.A. N.A. (2)
$.01 par value per
share issuable upon
conversion of the
Depositary Shares
and 7% Series D
Junior Convertible
Preferred Stock
====================================================================================================
Common Stock, 31,380 $38.5625(1) $1,210,091.25 $ 366.70
$.01 par value per
share
====================================================================================================
</TABLE>
(1) Average of the bid and asked prices on August 8, 1997, pursuant to Rule
457(c).
(2) Pursuant to Rule 457(i), a registration fee is not required in connection
with the registration of the Series D Preferred Stock or the Common Stock
issuable upon conversion of the Depositary Shares or shares of the Series D
Preferred Stock.
(3) An indeterminate number of additional shares of Common Stock are registered
hereunder which may be issued in the event that fractional shares of
Depositary Shares or Series D Preferred Stock are rounded up to the nearest
whole share in connection with the conversion of Depositary Shares or shares
of Series D Preferred Stock.
(4) Pursuant to Rule 416, an indeterminate number of additional shares of Common
Stock are registered hereunder which may be issued in the event that
applicable antidilution provisions with respect to conversion of the
Depositary Shares and Series D Preferred Stock become operative.
_____________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE OR DATES AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 12, 1997
INTERMEDIA COMMUNICATIONS INC.
6,900,000 DEPOSITARY SHARES EACH REPRESENTING A ONE HUNDREDTH INTEREST IN A
SHARE OF 7% SERIES D JUNIOR CONVERTIBLE PREFERRED STOCK, 69,000 SHARES OF 7%
SERIES D JUNIOR CONVERTIBLE PREFERRED STOCK AND 4,465,828 SHARES OF COMMON STOCK
_______________
This Prospectus is being used in connection with the offering from
time to time by certain holders (the "Selling Securityholders") of (1)
depositary shares (the "Depositary Shares") each representing a one hundredth
interest in a share of 7% Series D Junior Convertible Preferred Stock ("Series D
Preferred Stock"), liquidation preference $2,500 per share (equivalent to $25.00
per Depositary Share; the "Liquidation Preference"), par value $1.00 per share
of Intermedia Communications Inc. (the "Company" or "Intermedia"), (2) the
shares of Series D Preferred Stock and the shares (the "Common Shares") of
common stock, $.01 par value per share, of the Company (the "Common Stock")
issuable upon conversion of the Series D Preferred Stock and/or the Depositary
Shares and (3) the Universal Shares (as defined herein) (the Depositary Shares,
Series D Preferred Stock, Common Shares and Universal Shares are collectively
referred to herein as the "Securities"). The Depositary Shares were originally
issued by the Company in a private placement on July 9, 1997 (the "First
Closing") and purchased by Bear Stearns & Co., Inc. and Salomon Brothers Inc
(the "Initial Purchasers") pursuant to a purchase agreement (the "Purchase
Agreement") dated as of July 2, 1997 between the Company and the Initial
Purchasers. Subsequently, the Initial Purchasers exercised the over-allotment
option in connection therewith. The First Closing and the over-allotment
exercise are collectively referred to herein as the "July 9 Equity Offering".
The Initial Purchasers, in turn, resold the Depositary Shares in private sales
pursuant to exemptions from registration under the Securities Act of 1933, as
amended.
(continued on next page)
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY MATTERS
DISCUSSED UNDER THE CAPTION "RISK FACTORS" ON PAGE 3.
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE 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.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THE DATE OF THIS PROSPECTUS IS AUGUST , 1997.
<PAGE>
This prospectus is also being used in connection with the offering
from time to time by certain holders (the "W&B Holders") of 31,380 shares of
Common Stock (the "Universal Shares") which were acquired by the W&B Holders
from the Company on December 6, 1996 in connection with the acquisition by the
Company of W&B (formerly known as Universal Telecom, Inc. d/b/a Universal
Telecom Technologies ("Universal")) pursuant to an asset acquisition agreement,
dated December 6, 1996 among the Company, Universal, William M. Wunderlich and
Ray Bove (the "Asset Acquisition Agreement"). 27,554 of the Universal Shares are
currently subject to an escrow arrangement.
Holders of the Depositary Shares are entitled to all proportional
rights and preferences of the Series D Preferred Stock (including dividend,
voting, redemption and liquidation rights). Dividends on the Series D Preferred
Stock accrue at a rate per annum equal to 7% of the Liquidation Preference per
share of Series D Preferred Stock and are payable quarterly, in arrears, on July
15, October 15, January 15 and April 15 of each year, commencing on October 15,
1997. Dividends are payable in cash or at the option of the Company, in shares
of Common Stock, or a combination thereof. The Depositary Shares are
convertible, subject to prior redemption at any time after October 7, 1997, at
the option of the holder thereof into Common Stock at a conversion price of
$38.90 per share, subject to certain adjustments.
The Series D Preferred Stock and the Depositary Shares are redeemable,
in whole or in part, at the option of the Company at any time on or after July
19, 2000, at the redemption prices set forth herein, plus accumulated and unpaid
dividends and Preferred Stock Liquidated Damages (as defined herein), if any,
thereon to the redemption date. See "Description of Preferred Stock" and
"Description of Depositary Shares." Upon the occurrence of a Preferred Stock
Change of Control (as defined herein), the Company will be required to make an
offer to repurchase all outstanding shares of Series D Preferred Stock at a
price equal to 100% of the Liquidation Preference thereof, plus accumulated and
unpaid dividends and Preferred Stock Liquidated Damages, if any, thereon to the
repurchase date.
The Series D Preferred Stock ranks (i) senior to all Junior Securities
(as defined herein), including all Common Stock of the Company; (ii) on a parity
with any Parity Securities (as defined herein); and (iii) junior to each class
of Senior Securities (as defined herein), including the Company's outstanding 13
1/2% Series B Redeemable Exchangeable Preferred Stock due 2009 ("Series B
Preferred Stock"), and junior to all indebtedness and other obligations of the
Company and its subsidiaries. As of June 30, 1997, on a pro forma basis after
giving effect to the July 9 Equity Offering and the concurrent private placement
of $649 million principal amount at maturity of 11 1/4% Notes on July 9, 1997
(including the exercise of the over-allotment option in connection therewith)
(the "July 9 Debt Offering", and collectively with the July 9 Equity Offering,
the "July 9 Offerings") and the application of the proceeds therefrom, the
Series D Preferred Stock would have been junior in right of payment to
approximately $985.6 million of liquidation preference of Series B Preferred
Stock and total indebtedness and other obligations of the Company and its
subsidiaries. See "Description of Preferred Stock-Ranking."
The Securities may be sold from time to time to purchasers directly by
the Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer the Securities through brokers, dealers or agents who may
receive compensation in the form of discounts, concessions or commissions from
the Selling Securityholders and/or the purchasers of the Securities for whom
they may act as agent. The Selling Securityholders and any such brokers, dealers
or agents who participate in the distribution of the Securities may be deemed to
be "underwriters", and any profits on the sale of the Securities by them and any
discounts, commissions or concessions received by any such brokers, dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act. To the extent the Selling Securityholders may be deemed to be
underwriters, the Selling Securityholders may be subject to certain statutory
liabilities of the Securities Act, including, but not limited to, Sections 11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. See "Plan
of Distribution." The Selling Securityholders and any other person participating
in such distribution will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including, without limitation;
Regulation M, which may limit the timing of purchases and sales of any of the
Securities by the Selling Securityholders and any other such person.
Furthermore, under Regulation M under the Exchange Act, any person engaged in
the distribution of the Securities may not simultaneously engage in market-
making activities with respect to the particular Securities being distributed
for a period of nine business days prior to the commencement of such
distribution. All of the foregoing may affect the marketability of the
Securities and the ability of any person or entity to engage in market-making
activities with respect to the Securities.
ii
<PAGE>
The Company will not receive any of the proceeds of the sale of the
Securities offered hereby. The Company has agreed to pay substantially all of
the expenses incidental to the registration, offering and sale of the Securities
to the public other than commissions, fees and discounts of underwriters,
brokers, dealers and agents.
On August 8, 1997, the closing price for the Common Stock as quoted on
the National Association of Securities Dealers, Inc. Automated Quotation System
National Market ("Nasdaq National Market"), under the symbol "ICIX", was $38.25
per share. The Company has not and does not intend to apply for the listing of
the Depositary Shares or the Series D Preferred Stock on any securities exchange
or for quotation through the Nasdaq National Market. The Series D Preferred
Stock and the Depositary Shares are eligible for trading in the National
Association of Securities Dealers' Private Offerings, Resales and Trading
Through Automative Linkages ("PORTAL") Market.
iii
<PAGE>
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. Such material can also be inspected at the Web site of the Commission
located at http://www.sec.gov. 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, 1996.
The Company's Annual Report on Form 10-K/A for the year ended December
31, 1996 filed with the Commission on May 15, 1997.
The portions of the Proxy Statement for the Annual Meeting of
Stockholders of the Company held on May 22, 1997 that have been
incorporated by reference into the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
The Company's Current Report on Form 8-K filed with the Commission on
February 24, 1997.
The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
March 14, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
June 5, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
July 9, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
July 17, 1997.
The Company's Current Report on Form 8-K/A filed with the Commission
on August 4, 1997.
The description of the 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, INC., 3625 QUEEN PALM
DRIVE, TAMPA, FLORIDA 33619 (TELEPHONE 813-829-0011), ATTENTION: INVESTOR
RELATIONS, 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.
2
<PAGE>
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 the
Securities offered hereby.
Restrictions on the Company's Ability to Pay Dividends on the Series D
Preferred Stock. To date, the Company has not paid dividends on its shares of
capital stock. The ability of Intermedia to pay cash dividends on the Series D
Preferred Stock is substantially restricted under various covenants and
conditions contained in the Indenture (the "12 1/2% Notes Indenture") governing
the Company's 12 1/2% Senior Notes due 2006 (the "12 1/2% Notes"), the Indenture
(the "11 1/4% Notes Indenture", and together with the 12 1/2% Notes Indenture,
the "Existing Senior Notes Indentures") governing the Company's 11 1/4% Senior
Discount Notes due 2007 (the "11 1/4% Notes", and together with the 12 1/2%
Notes, the "Existing Senior Notes") and the Certificate of Designation (the
"Series B Certificate of Designation") setting forth the rights of the Series B
Preferred Stock. In addition to the limitations imposed on the payment of
dividends by the Existing Senior Notes Indentures and the Series B Certificate
of Designation, under Delaware law the Company is permitted to pay dividends on
its capital stock, including the Series D Preferred Stock, only out of its
surplus, or in the event that it has no surplus, out of its net profits for the
year in which a dividend is declared or for the immediately preceding fiscal
year. Surplus is defined as the excess of a company's total assets over the sum
of (i) its total liabilities and (ii) the par value of its outstanding capital
stock. At June 30, 1997, the Company had stockholders equity of $44.9 million
and surplus of $44.7 million. The Company historically has had net losses in
each of the last five years and expects to operate at a net loss for the next
several years. These net losses will reduce stockholders' equity and the surplus
of the Company. For the six months ended June 30, 1997, the Company had a net
loss attributable to common stockholders of $70.2 million ($128.5 million on a
pro forma basis after giving effect to the July 9 Offerings (and the application
of proceeds therefrom) and the DIGEX Acquisition (as defined herein)). In order
to pay dividends in cash, the Company must have surplus or net profits equal to
the full amount of the cash dividend at the time such dividend is declared. The
Company cannot predict what the value of its assets or the amount of its
liabilities will be in the future and, accordingly, there can be no assurance
that the Company will be able to pay cash dividends on the Series D Preferred
Stock.
In the event dividends are paid in shares of Common Stock, the number
of shares of Common Stock to be issued on each dividend payment date will be
determined by dividing the total dividend to be paid on each Depositary Share by
95% of the average of the high and low sales prices of the Common Stock as
reported by the Nasdaq National Market or any national securities exchange upon
which the Common Stock is then listed, for each of the ten consecutive trading
days immediately preceding the fifth business day preceding the record date for
such dividend. If such average is greater than 5.05% higher than the market
value for the Common Stock on the dividend payment date and the holder sells at
such lower price, the holder's actual dividend yield would be lower than the
stated dividend yield on the Series D Preferred Stock. In addition, the holder
is likely to incur commissions and other transaction costs in connection with
the sale of such Common Stock.
The Certificate of Designation provides that upon (a) the accumulation
of accrued and unpaid dividends on the outstanding Series D Preferred Stock in
an amount equal to six quarterly dividends (whether or not consecutive) and (b)
the failure of the Company to make a Preferred Stock Change of Control Offer or
to repurchase the Series D Preferred Stock tendered in a Preferred Stock Change
of Control, the sole remedy to the holders of the Series D Preferred Stock is
the voting rights arising from a Voting Rights Triggering Event (as defined
herein). See "Description of Preferred Stock-Voting Rights."
Limited Operations of Certain Services; History of Net Losses. The
Company's business commenced in 1987. Substantially all of the Company's
revenues are derived from local exchange services, enhanced data services, long
distance services, integration services and certain local network services. Many
of these services have only recently been initiated or their availability only
recently expanded in new market areas. The Company is expecting to substantially
increase the size of its operations in the near future. Prospective investors,
therefore, have limited historical
3
<PAGE>
financial information about the Company upon which to base an evaluation of the
Company's performance. 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 expansion of its
networks requires significant capital, operational and administrative
expenditures, a substantial portion of which are incurred before the realization
of revenues. These capital expenditures will result in negative cash flow until
an adequate customer base is established. Although its revenues have increased
in each of the last three years, Intermedia has incurred significant increases
in expenses associated with the installation of local/long distance voice
switches and expansion of its fiber optic networks, services and customer base.
Intermedia reported net losses of approximately $3.1 million, $20.7 million,
$57.2 million for the years ended December 31, 1994, 1995 and 1996 and net
losses to holders of Common Stock of $70.3 million for the six months ended June
30, 1997, respectively. The Company anticipates recording a significant net loss
in 1997 that is expected to be substantially greater than the loss in 1996 and
expects net losses to continue for the next several years. In addition, the
Company expects to have negative EBITDA in 1997. There can be no assurance that
Intermedia will achieve or sustain profitability or positive EBITDA in the
future.
Substantial Indebtedness; Insufficiency of Earnings to Cover Fixed
Charges, Including Dividends on the Series D Preferred Stock. The Company is
highly leveraged. At June 30, 1997, after giving pro forma effect to the July 9
Offerings and the application of the net proceeds of the July 9 Offerings
(including the retirement of the Company's 13 1/2% Notes due 2005 ("13 1/2%
Notes"), the "Retirement"), the Company would have had outstanding approximately
$662.1 million in aggregate principal amount of indebtedness and other
liabilities on a consolidated basis (including trade payables), approximately
$323.5 million of obligations with respect to dividend payments and the
mandatory redemption of the Series B Preferred Stock and $172.5 million of
obligations with respect to the Series D Preferred Stock. The degree to which
the Company is leveraged could have important consequences to holders of the
Series D Preferred Stock, in the event of a change in control, including the
following: (i) a substantial portion of the Company's cash flow from operations
will be dedicated to payment of the principal and interest on its indebtedness,
to payment of dividends on and the redemption of the Series B Preferred Stock
and the payment of dividends on the Series D Preferred Stock, thereby reducing
funds available for other purposes; (ii) the Company's significant degree of
leverage could increase its vulnerability to changes in general economic
conditions or increases in prevailing interest rates; (iii) the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes could
be impaired; and (iv) the Company may be more leveraged than certain of its
competitors, which may be a competitive disadvantage.
For the six months ended June 30, 1997, and on a pro forma basis after
giving effect to the July 9 Offerings, and the application of the proceeds
therefrom (including the Retirement), the Company's pro forma earnings would
have been inadequate to cover its pro forma combined fixed charges (including
the Series D Preferred Stock dividend requirements) by $130.0 million. The
Company anticipates that earnings will be insufficient to cover fixed charges
for the next several years. In order for the Company to meet its debt service
obligations, its dividend and redemption obligations with respect to the Series
B Preferred Stock and its dividend obligations with respect to the Series D
Preferred Stock, the Company will need to substantially improve its operating
results. There can be no assurance that the Company's operating results will be
of sufficient magnitude to enable the Company to meet its debt service
obligations, its dividend and redemption obligations with respect to the Series
B Preferred Stock and its dividend obligations with respect to the Series D
Preferred Stock. In the absence of such operating results, the Company could
face substantial liquidity problems and might be required to raise additional
financing through the issuance of debt or equity securities; however, there can
be no assurance that Intermedia would be successful in raising such financing,
or the terms or timing thereof.
Class Action by DIGEX Stockholders. On June 5, 1997, the Company
announced that it had agreed to acquire 100% of the outstanding equity of DIGEX,
Incorporated ("DIGEX"; the "DIGEX Acquisition"). The acquisition was consummated
through a tender offer for all of the outstanding shares of DIGEX, which closed
on July 9, 1997, followed by a cash merger effective on July 11, 1997 (the
"Merger").
4
<PAGE>
On June 20, 1997, two purported class action complaints were filed in
the Court of Chancery of the State of Delaware in and for New Castle County
respectively by TAAM Associates, Inc. and David and Chaile Steinberg (the
"Complaints"), purported stockholders of DIGEX, on behalf of all non-affiliated
common stockholders of DIGEX, against Intermedia, DIGEX and the Directors of
DIGEX (the "DIGEX Directors"). The Complaints allege that the DIGEX Directors
violated their fiduciary duties to the public stockholders of DIGEX by agreeing
to vote in favor of the Merger and that Intermedia knowingly aided and abetted
such violation by offering to retain DIGEX management in their present positions
and consenting to stock option grants to certain executive officers of DIGEX.
The Complaints seek a preliminary and permanent injunction enjoining the Merger
and cash damages from the DIGEX Directors. No application was made for a
preliminary injunction prior to the consummation of the Merger.
These cases are in their very early stages and no assurance can be
given as to their ultimate outcome. Intermedia, after consultation with its
counsel, believes that there are meritorious factual and legal defenses to the
claims in the Complaints. Intermedia intends to defend vigorously the claims in
the Complaints.
Possible Default Under the 13 1/2% Notes Indenture. In connection with
the July 9 Debt Offering, the Company defeased a portion of the Company's
outstanding 13 1/2% Notes. Such defeasance will not become effective until the
91st day after the deposit with SunTrust Bank, Central Florida, National
Association, as trustee ("SunTrust") of the funds necessary to defease the
covenants in the indenture governing the 13 1/2% Notes (the "13 1/2% Notes
Indenture"). Until such time as the defeasance becomes effective, the issuance
by the Company of the 11 1/4 Notes constitutes an event which could be declared
an Event of Default under the 13 1/2% Notes Indenture 30 days after the receipt
of notice from SunTrust or the holders of 25% of the outstanding principal
amount of the 13 1/2% Notes. If such an Event of Default were declared and the
maturity of the 13 1/2% Notes were accelerated, this would constitute an Event
of Default under the 12 1/2% Notes Indenture and under the Series B Certificate
of Designation. If the 13 1/2% Notes were accelerated, a portion of the funds
deposited with SunTrust could be used to repay the 13 1/2% Notes. If the 12 1/2%
Notes were also accelerated the Company would have available funds to pay the 12
1/2% Notes, but such payment would significantly deplete the funds available for
the Company's capital expansion plan. An Event of Default would not lead to
acceleration of the Series B Preferred Stock. The Company's 13 1/2% Notes are
and will remain classified as current liabilities on the Company's balance sheet
until such time as the Retirement becomes effective.
Regulatory Approval of the July 9 Offerings. Ten of the states in
which the Company is certificated provide for prior approval of the issuance of
debt and equity securities by the Company. One additional state in which the
Company is certificated provides for prior approval of the issuance of preferred
stock which is convertible into common stock. The requirement for such approvals
may have been pre-empted by the National Securities Market Improvement Act of
1996, although there is no case law on this point. Because of time constraints,
the Company was not able to obtain such approval from any of the eleven states
prior to consummation of the July 9 Offerings. The Company has filed the
required applications or notifications in each of the states and approval has
been obtained in three of the states. In six of these states, the Company's
intrastate revenues for the first quarter of 1997 were less than $1,000 per
state and in only one state did such revenues exceed $4,000 for the first
quarter. After consultation with counsel, the Company believes the remaining
approvals will be granted and that obtaining such approvals subsequent to the
July 9 Offerings should not result in any material adverse consequences to the
Company, although there can be no assurance that such a consequence will not
result.
Significant Capital Requirements and Need for Additional Financing.
Expansion of the Company's existing networks and services and the development of
new networks and services require significant capital expenditures. Intermedia
expects to fund its capital requirements through existing resources including
capital raised through the July 9 Offerings, joint ventures, debt or equity
financing, and internally generated funds. The Company expects that to continue
to expand its business will require raising substantial additional equity and/or
debt capital in the year 2000. Depending on market conditions, the Company may
determine to raise additional capital before such time. There can be no
assurance, however, that Intermedia will be successful in raising sufficient
debt or equity capital on terms that it will
5
<PAGE>
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, government regulation and capital
costs. Failure to generate sufficient funds may require Intermedia 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.
A portion of the Company's expansion may occur through acquisitions as
an alternative to direct investments in the assets required to implement the
expansion. No assurance can be given that suitable acquisitions can be
identified, financed and completed on acceptable terms, or that the Company's
future acquisitions, if any, will be successful or will not impair the Company's
ability to service its outstanding obligations.
Maintenance of Peering Relationships. The Internet is comprised of
many Internet service providers ("ISPs") who operate their own networks and
interconnect with other ISPs at various peering points. The establishment and
maintenance of peering relationships with other ISPs is necessary in order to
exchange traffic with other ISPs without having to pay settlement charges.
Although the Company meets the industry's current standards for peering, there
is no assurance that other national ISPs will maintain peering relationships
with the Company. In addition, there may develop increasing requirements
associated with maintaining peering with the major national ISPs with which the
Company may have to comply. There can be no assurance that the Company will be
able to expand or adapt their network infrastructure to meet the industry's
evolving standards on a timely basis, at a commercially reasonable cost, or at
all.
Potential Liability of On-Line Service Providers. The law in the
United States relating to the liability of on-line service providers and ISPs
for information carried on, disseminated through or hosted on their systems is
currently unsettled. Several private lawsuits seeking to impose such liability
are currently pending. In one case brought against an ISP, Religious Technology
Center v. Netcom On-Line Communication Services, Inc., the United States
District Court for the Northern District of California ruled in a preliminary
phase that under certain circumstances ISPs could be held liable for copyright
infringement. The case has not reached final judgment. The Telecommunications
Act of 1996 (the "1996 Act") prohibits and imposes criminal penalties and civil
liability for using an interactive computer service to transmit certain types of
information and content, such as indecent or obscene communications. On June 26,
1997, the Supreme Court affirmed the decision of a panel of three federal judges
which granted a preliminary injunction barring enforcement of this portion of
the 1996 Act to the extent that enforcement is based upon allegations other than
obscenity or child pornography as an impermissible restriction on the First
Amendment's right of free speech. In addition, numerous states have adopted or
are currently considering similar types of legislation. The imposition upon ISPs
or Web hosting sites of potential liability for materials carried on or
disseminated through their systems could require the Company to implement
measures to reduce their exposure to such liability, which may require the
expenditure of substantial resources or the discontinuation of certain product
or service offerings. The Company believes that it is currently unsettled
whether the 1996 Act prohibits and imposes liability for any services provided
by the Company should the content or information transmitted be subject to the
statute. The increased attention focused upon liability issues as a result of
these lawsuits, legislation and legislative proposals could affect the growth of
Internet use. Any such liability or asserted liability could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Dependence upon Network Infrastructure; Risk of System Failure,
Security Risks. The Company's success in marketing its services to business and
government users requires that the Company provide superior reliability,
capacity and security via its network infrastructure. The Company's networks are
subject to physical damage, power loss,
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capacity limitations, software defects, breaches of security (by computer virus,
break-ins or otherwise) and other factors, certain of which have caused, and
will continue to cause, interruptions in service or reduced capacity for the
Company's customers. Similarly, the Company's ISP business relies on the
availability of its network infrastructure for the provision of Internet
connectivity. Interruptions in service, capacity limitations or security
breaches could have a material adverse effect on the Company's business,
financial condition and results of operations.
Subordination of the Series D Preferred Stock. The Company's
obligations with respect to the Series D Preferred Stock are subordinate and
junior in right of payment to all present and future indebtedness of the Company
and its subsidiaries, including the Existing Senior Notes, to the Series B
Preferred Stock and to all subsequent series of preferred stock of the Company
which by its terms ranks senior to the Series D Preferred Stock. In addition to
the substantial dividend restrictions set forth in the Existing Senior Notes
Indentures, no cash dividend payments may be made with respect to the Series D
Preferred Stock if (i) the obligations with respect to the Existing Senior Notes
or Series B Preferred Stock are not paid when due or (ii) any other event of
default has occurred under the Existing Senior Notes Indentures or Series B
Certificate of Designation, and is continuing or would occur as a consequence of
such payment. As of June 30, 1997, on a pro forma basis after giving effect to
the July 9 Offerings and the application of the net proceeds therefrom, the
Series D Preferred Stock would have been junior in right of payment to $985.6
million of indebtedness and other liabilities and commitments and liquidation
preference of the Company and its subsidiaries. In the event of bankruptcy,
liquidation or reorganization of the Company, the assets of the Company will be
available to pay obligations on the Series D Preferred Stock only after all
Senior Securities and all indebtedness of the Company have been paid, and there
may not be sufficient assets remaining to pay amounts due on any or all of the
Series D Preferred Stock then outstanding. See "Description of Preferred Stock-
Ranking."
Effect of Substantial Additional Indebtedness on the Company's Ability
to Make Payments on the Series D Preferred Stock. The Existing Senior Notes
Indentures and the Series B Certificate of Designation limit, but do not
prohibit, the incurrence of additional indebtedness by the Company and its
subsidiaries, and the Company may incur substantial additional indebtedness
during the next few years to finance the construction of networks and purchase
of network electronics, including local/long distance voice and data switches.
All additional indebtedness of the Company will rank senior in right of payment
to any payment obligations with respect to the Series D Preferred Stock. The
debt service requirements of any additional indebtedness would make it more
difficult for the Company to pay cash dividends with respect to the Series D
Preferred Stock.
Risks of Implementation; Need to Obtain Permits and Rights of Way. The
Company is continuing to expand its existing networks. The Company has
identified other expansion opportunities in the eastern half of the United
States 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. In addition, the Company may require pole
attachment agreements with utilities and incumbent local exchange carriers
("ILECs") to operate existing and future networks, and there can be no assurance
that such agreements will be obtained or obtainable on reasonable terms. These
factors 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 local network services, including local exchange services,
it offers from ILECs, which currently dominate their local telecommunications
markets. ILECs have long-standing relationships with their customers which
relationships may create competitive barriers. Furthermore, ILECs may have the
potential to subsidize competitive service from monopoly service revenues. In
addition, 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
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<PAGE>
operates from one or more integrated communications services providers ("ICPs")
and ILECs operating fiber optic networks. In addition, the Company faces
competition in its integration services business from equipment manufacturers,
the RBOCs and other ILECs, long distance carriers and systems integrators, and
in its enhanced data services business (including Internet) from local telephone
companies, long distance carriers, very small aperture terminal ("VSAT")
providers, other ISPs and others. In particular, the market for Internet
services is extremely competitive and there are limited barriers to entry. 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, including
the recently enacted 1996 Act, have removed remaining legislative barriers to
local exchange competition. Nevertheless, in light of the passage of the 1996
Act, regulators are also likely to provide ILECs with increased pricing
flexibility as competition increases. If ILECs are permitted to lower their
rates substantially or engage in excessive volume or term discount pricing
practices for their customers, the net income or cash flow of ICPs and
competitive local exchange carriers ("CLECs"), including the Company, could be
materially adversely affected. In addition, while the Company currently competes
with AT&T, MCI and others in the interexchange services market, the recent
federal legislation permits the regional Bell operating companies ("RBOCs") to
provide interexchange services once certain criteria are met. Once the RBOCs
begin to provide such services, they will be in a position to offer single
source service similar to that being offered by Intermedia. In addition, AT&T
and MCI have entered and other interexchange carriers have announced their
intent to enter into the local exchange services market, which is facilitated by
the 1996 Act's resale and unbundled network element provisions. The Company
cannot predict the number of competitors that will emerge as a result of
existing or new federal and state regulatory or legislative actions. Competition
from the RBOCs with respect to interexchange services or from AT&T, MCI or
others with respect to local exchange services could have a material adverse
effect on the Company's business.
Regulation. The Company is subject to varying degrees of federal,
state and local regulation. The Company is not currently subject to price cap or
rate of return regulation, nor is it currently required to obtain FCC
authorization for the installation, acquisition or operation of its network
facilities. Further, the FCC issued an order holding that non-dominant carriers,
such as the Company, are required to withdraw interstate tariffs for domestic
long distance service. That order has been stayed by a federal appeals court and
it is not clear at this time whether the detariffing order will be implemented.
Until further action is taken by the court, the Company will continue to
maintain tariffs for these services. In June 1997, the FCC issued another order
stating that non-dominant carriers, such as the Company, could withdraw their
tariffs for interstate access services. While the Company has no immediate plans
to withdraw its tariff, this FCC order allows the Company to do so. The FCC also
requires the Company to file interstate tariffs on an ongoing basis for
international traffic. The Company is generally subject to certification and
tariff or price list filing requirements for intrastate services by state
regulators. Although passage of the 1996 Act should result in increased
opportunities for companies that are competing with the ILECs, no assurance can
be given that changes in current or future regulations adopted by the FCC or
state regulators or other legislative or judicial initiatives relating to the
telecommunications industry would not have a material adverse effect on the
Company. In addition, although the 1996 Act provides incentives to the ILECs
that are subsidiaries of RBOCs to enter the long distance service market by
requiring ILECs to negotiate interconnection agreements with local competitors,
there can be no assurance that these ILECs will negotiate quickly with
competitors such as the Company for the required interconnection of the
competitor's networks with those of the ILECs.
Potential Diminishing Rate of Growth. During the period from 1994 to
1996, the Company's revenues have grown at a compound annual growth rate of
169%. While the Company expects to continue to grow, as its size increases it is
likely that its rate of growth will diminish.
Risk of New Service Acceptance by Customers. The Company has recently
introduced a number of services, primarily local exchange 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
customers to accept the Company as the
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provider of such 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 Intermedia
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
Intermedia 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 key executives, other than David C. Ruberg, President, Chief
Executive Officer and Chairman of the Board, is a party to a long-term
employment agreement with the Company.
Risk of Cancellation or Non-Renewal of Network Agreements, Licenses
and Permits. The Company has lease and/or purchase agreements for rights-of-way,
utility pole attachments, conduit and dark fiber for its fiber optic networks.
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. In addition, the Company has certain licenses and
permits from local government authorities. The 1996 Act requires that local
government authorities treat telecommunications carriers in a competitively
neutral, non-discriminatory manner, and that most utilities, including most
ILECs and electric companies, afford alternative carriers access to their poles,
conduits and rights-of-way at reasonable rates on non-discriminatory terms and
conditions. There can be no assurance that the Company will be able to maintain
its existing franchises, permits and rights or to obtain and maintain the other
franchises, permits and rights needed to implement its strategy on acceptable
terms.
Dependence on Business from Interexchange Carriers ("IXCs"). For the
year ended December 31, 1996, approximately 10% of the Company's consolidated
revenues were attributable to access services provided to IXCs. The loss of
access revenues from IXCs in general could have a material adverse effect on the
Company's business.
In addition, the Company's growth strategy assumes increased revenues
from IXCs from the deployment of local/long distance voice switches on its
networks and the provision of switched access origination and termination
services. There is no assurance that the IXCs will continue to increase their
utilization of the Company's services, or will not reduce or cease their
utilization of the Company's services, which could have a material adverse
effect on the Company.
Business Combinations; Change of Control. The Company has from time to
time held, and continues to hold, preliminary discussions with (i) potential
strategic investors who have expressed an interest in making an investment in or
acquiring the Company and (ii) potential joint venture partners looking toward
the formation of strategic alliances that would expand the reach of the
Company's networks or services without necessarily requiring an additional
investment in the Company. In addition to providing additional growth capital,
management believes that an alliance with an appropriate strategic investor
would provide operating synergy to, and enhance the competitive positions of,
both Intermedia and the investor within the rapidly consolidating
telecommunications industry. There can be no assurance that agreements for any
of the foregoing will be reached. An investment, business combination or
strategic alliance could constitute a change of control. The Existing Senior
Notes Indentures and the Series B Certificate of Designation provide that a
change of control would require the Company to repay the indebtedness and redeem
the Series B Preferred Stock outstanding under such instruments. A change of
control also requires the Company to offer to redeem the Series D Preferred
Stock. The terms of the Existing Senior Notes and the Series B Certificate of
Designation contain provisions that may prohibit the repurchase of the Series D
Preferred Stock. If a change of control
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<PAGE>
does occur, there is no assurance that the Company would have sufficient funds
to make such repayments and redemption or could obtain any additional debt or
equity financing that could be necessary in order to repay the Existing Senior
Notes and to redeem the Series B Preferred Stock in order to redeem the Series D
Preferred Stock.
Absence of a Public Market for the Depositary Shares. The Depositary
Shares were issued by the Company in the July 9 Equity Offering. There is
currently no market for the Series D Preferred Stock and the Depositary Shares.
Although in connection with the private placement, the Initial Purchasers
informed the Company that they intend to make a market for the Depositary
Shares, they are not obligated to do so and any such market may be discontinued
at any time without notice. The Company does not intend to apply for listing of
the Depositary Shares or the Series D Preferred Stock on any securities exchange
or on the Nasdaq National Market. Accordingly, there can be no assurance as to
the development or liquidity of any market for the Depositary Shares. If a
market for the Depositary Shares were to develop, the Depositary Shares may
trade at prices that may be higher or lower than their initial offering price
depending upon many factors, including prevailing interest rates, the Company's
operating results and the markets for similar securities. Historically, the
market for securities such as the Depositary Shares has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the Depositary Shares. There can be no assurance that, if a market
for the Depositary Shares were to develop, such a market would not be subject to
similar disruptions. The Company does not expect a market for the Series D
Preferred Stock to develop.
Certain Tax Considerations. For a discussion of certain material
federal income tax considerations which are relevant to the purchase, ownership
and disposition of the Depositary Shares and the Series D Preferred Stock, see
"Certain Federal Income Tax Consequences."
Anti-Takeover Provisions. The Company's Certificate of Incorporation
and Bylaws, the provisions of the Delaware General Corporation Law (the "DCGL"),
the Existing Senior Notes Indentures, the Series B Certificate of Designation
and the Certificate of Designation (as defined herein) may make it difficult in
some respects to effect a change in control of the Company and replace incumbent
management. In addition, the Company's Board of Directors has adopted a
Stockholder's Rights Plan , pursuant to which rights to acquire a series of
preferred stock, exercisable upon the occurrence of certain events, were
distributed to its stockholders. 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 to 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.
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 or conversion of convertible securities
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. In addition to the shares registered
hereunder, the Company has filed registration statements covering the offering
of approximately 2,392,463 shares of Common Stock by selling security holders.
In addition, the Company has registered 4,785,000 shares of Common Stock for
issuance upon exercise of options granted to its employees under the Company's
existing stock option plans. At June 30, 1997, options to acquire 769,589 shares
of Common Stock were currently exercisable under the Company's existing stock
option plans. 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.
Forward Looking Statements. The statements contained in this
Prospectus that are not historical facts are "forward-looking statements" (as
such term is defined in the Private Securities Litigation Reform Act of 1995),
which can be identified by the use of forward-looking terminology such as
"estimates," "projects," "anticipates," "expects," "intends," "believes," or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. Management wishes
to caution the reader that these forward-looking
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statements are only estimates or predictions. No assurance can be given that
future results will be achieved; actual events or results may differ materially
as a result of risks facing the Company or actual results differing from the
assumptions underlying such statements.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Pro Forma(1) Pro Forma(2)
Year Ended Six Months Six Months
Year Ended December 31, December 31, Ended June 30, Ended June 30,
- ---------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1996 1996 1997 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to - - - - - - - - -
combined fixed charges
and preferred stock
dividends(3)
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The pro forma operating information gives effect to the acquisitions by the
Company of EMI Communications, Inc., Universal Telecom Inc., Net Solve
Incorporated and DIGEX, which occurred effective June 30, 1996, December 1,
1996, December 1, 1996 and July 11, 1997, respectively, as if they occurred
on January 1, 1996. The pro forma operating information also gives effect
to the March 1997 sale of $300 million of preferred stock.
(2) The pro forma operating information gives effect to the DIGEX Acquisition
as if it occurred on January 1, 1997. The pro forma operating information
also gives effect to the March 1997 sale of $300 million of preferred
stock.
(3) For purposes of calculating the ratio of earnings to combined fixed charges
and preferred stock dividends: (i) earnings consist of loss before income
taxes, plus fixed charges excluding capitalized interest and preferred
stock dividends and (ii) fixed charges consist of interest expended and
capitalized, plus amortization of deferred financing costs, preferred stock
dividends, plus a portion of rent expense under operating leases deemed by
the Company to represent an interest factor plus dividends on the Series B
Preferred Stock. For the years ended December 31, 1992, 1993, 1994, 1995
and 1996 and the six months ended June 30, 1996 and 1997 the Company's
earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $622, $2,288, $3,324, $19,931, $59,978, $21,929 and
$71,832, respectively. For the year ended December 31, 1996 and the six
months ended June 30, 1997, the Company's pro forma earnings, after giving
effect to the acquisitions described in Notes (1) and (2) above and the
July 9 Equity Offering, were insufficient by $161,194 and $119,596,
respectively, to cover pro forma combined fixed charges and preferred stock
dividends. For the year ended December 31, 1996 and the six months ended
June 30, 1997 the Company's pro forma earnings, after giving effect to the
acquisitions described in Notes (1) and (2) above and the July 9 Offerings,
were insufficient by $184,437 and $130,084 to cover pro forma combined
fixed charges and preferred stock dividends. See "Risk Factors Substantial
Indebtedness; Insufficiency of Earnings to Cover Fixed Charges Including
Dividend, and the Series D Preferred Stock" for a father discussion of
factors which may have an impact on the Company's ratio of earnings to
combined fixed charges and preferred stock dividends.
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THE COMPANY
Intermedia is a rapidly growing ICP, offering a full suite of local,
long distance and enhanced data telecommunications services to business and
government end user customers, long distance carriers, ISPs, resellers and
wireless communications companies. Founded in 1987, the Company is currently the
third largest (based on annualized telecommunications services revenues) among
providers generally referred to as CLECs after MFS Communications Company, Inc.
and Teleport Communications Group Inc. As of June 30, 1997, the Company had
sales offices in 32 cities throughout the eastern half of the United States and
offered a full product package of telecommunications services in 16 metropolitan
statistical areas. In April 1996, Intermedia became one of the first ICPs in the
United States to provide integrated switched local and long distance service and
as of June 30, 1997 had six local/long distance voice switches in service and
six long distance voice switches in service, three of which the Company plans to
upgrade to local/long distance voice switches by the end of 1997. The Company
provides enhanced data services, including frame relay, asynchronous transfer
mode ("ATM") and Internet access services, primarily to business and government
customers (including over 100 ISPs), in approximately 2,700 cities nationwide,
utilizing 111 Company-owned data switches. Intermedia also serves as a
facilities-based interexchange carrier to approximately 14,700 customers
nationwide. Intermedia continues to increase its customer base and network
density in the eastern half of the United States and is pursuing attractive
opportunities to add additional services and expand into complementary
geographic markets.
Intermedia was incorporated in the State of Delaware on November 9,
1987, as the successor to a Florida corporation that was founded in 1986. The
Company's principal offices are located at 3625 Queen Palm Drive, Tampa, Florida
33619, and its telephone number is (813) 829-0011.
USE OF PROCEEDS
The Company is not selling any of the Securities and will not receive
any of the proceeds from the sale of the Securities by the Selling
Securityholders.
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DESCRIPTION OF CAPITAL STOCK
Intermedia's authorized capital stock consists of 50,000,000 shares of
Common Stock, par value $.01 per share, and 2,000,000 shares of Preferred Stock,
par value $1.00 per share ("Preferred Stock"). As of July 31, 1997, there were
16,669,492 shares of Common Stock, 312,937.5 shares of Series B Preferred Stock
and 69,000 shares of Series D Preferred Stock issued and outstanding. On a
fully-diluted basis, at that date, the Company had outstanding 25,985,122 shares
of Common Stock after giving effect to (a) the exercise of the Public Warrants
(defined below), (b) the exercise of all outstanding options issued pursuant to
the Company's employee stock option plans and (c) conversions of the Depositary
Shares and the Series D Preferred Stock. As of July 31, 1997, the Company has
reserved (i) 4,785,600 shares of Common Stock for issuance pursuant to the
Company's employee stock option plans, (ii) 350,400 shares of Common Stock for
issuance upon exercise of the Public Warrants, (iii) 287,062.5 shares of Series
B Preferred Stock for issuance as dividends on the outstanding shares of Series
B Preferred Stock and (iv) 40,000 shares of Series C Preferred Stock for
issuance in connection with the Stockholder's Rights Plan, (v) 4,434,448 shares
of Common Stock for issuance on conversion of the Series D Preferred Stock and
(vi) 1,200,000 shares of Common Stock for issuance as dividends on the
outstanding shares of Series D Preferred Stock. All outstanding shares of Common
Stock, Series B Preferred Stock and Series D Preferred Stock are fully paid and
non-assessable.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of the stockholders. Holders of
Common Stock do not have cumulative rights, so that holders of more than 50% of
the shares of Common Stock are able to elect all of Intermedia's directors
eligible for election in a given year. For a description of the classification
of the Board, see "-Delaware Law and Certain Provisions of Intermedia's
Certificate of Incorporation and Bylaws." Subject to the preferences that may be
applicable to any then outstanding Preferred Stock, holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board out of funds legally available therefor. See "-Dividend
Restrictions." Upon any liquidation, dissolution or winding up, whether
voluntary or involuntary, of Intermedia, holders of Common Stock are entitled to
receive pro rata all assets available for distribution to stockholders after
payment or provision for payment of the debts and other liabilities of
Intermedia and the liquidation preferences of any then outstanding Preferred
Stock. There are no preemptive or other subscription rights, conversion rights,
or redemption or sinking fund provisions with respect to shares of Common Stock.
All outstanding shares of Common Stock are, and all shares of Common Stock to be
outstanding upon exercise of the Public Warrants and conversion of the
Depositary Shares or shares of Series D Preferred Stock will be, fully paid and
non-assessable.
PREFERRED STOCK
The Preferred Stock may be issued at any time or from time to time in
one or more classes or series with such designations, powers, preferences,
rights, qualifications, limitations and restrictions (including dividend,
conversion and voting rights) as may be fixed by the Board, without any further
vote or action by the stockholders. July 31, 1997, the Company had outstanding
312,937.5 shares of Series B Preferred Stock (aggregate liquidation preference
of approximately $312.9 million). Dividends on the Series B Preferred Stock
accumulate at a rate of 13 1/2% of the aggregate liquidation preference thereof
and are payable quarterly, in arrears. Dividends are payable in cash or, at the
Company's option, by the issuance of additional Series B Preferred Stock having
an aggregate liquidation preference equal to the amount of such dividends. The
Series B Preferred Stock is subject to mandatory redemption at a liquidation
preference of $1,000 per share, plus accumulated and unpaid dividends on March
31, 2009. The Series B Preferred Stock will be redeemable at the option of the
Company at any time after March 31, 2002 at rates commencing with 106.75%,
declining to 100% on March 31, 2007. The Series B Certificate of Designation
contains certain covenants that, among other things, limit the ability of the
Company and its subsidiaries to make certain restricted payments, incur
additional indebtedness and issue additional preferred stock, pay dividends or
make other distributions, repurchase equity interests, conduct certain lines of
business or enter into certain mergers and consolidations. In the event of a
change of control of the Company, holders of the Series B Preferred Stock have
the right to require the Company to purchase their shares of Series B Preferred
Stock at a price equal to 101% of the aggregate liquidation preference with
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respect thereto, plus accumulated and unpaid dividends, if any, to the date of
purchase. This description is intended as a summary and is qualified in its
entirety by reference to the Series B Certificate of Designation.
The Company may, at its option, exchange some or all of the Series B
Preferred Stock for the Company's 13 1/2% Senior Subordinated Debentures, due
2009 (the "Exchange Debentures"). The Exchange Debentures mature on March 31,
2009. Interest on the Exchange Debentures would be payable semi-annually, and
could be paid in the form of additional Exchange Debentures at the Company's
option. Exchange Debentures would be redeemable by the Company at any time after
March 31, 2002 at rates commencing with 106.75%, declining to 100% on March 31,
2007. The Exchange Debentures contain covenants similar to those contained in
the Indenture.
See "Description of Preferred Stock" for a description of the terms of
Series D Preferred Stock.
DELAWARE LAW AND CERTAIN PROVISIONS OF INTERMEDIA'S CERTIFICATE OF INCORPORATION
AND BYLAWS
General. The Certificate of Incorporation and the Bylaws of Intermedia
contain certain provisions that could make more difficult the acquisition of
Intermedia by means of a tender offer, a proxy contest or otherwise. These
provisions are expected to discourage certain types of coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of Intermedia first to negotiate with Intermedia. Although such
provisions may have the effect of delaying, deferring or preventing a change in
control of Intermedia, the Company believes that the benefits of increased
protection of Intermedia's potential ability to negotiate with the proponent of
an unfriendly or unsolicited proposal to acquire or restructure the Company
outweigh the disadvantages of discouraging such proposals because, among other
things, negotiation of such proposals could result in an improvement of their
terms. The description set forth below is intended as a summary only and is
qualified in its entirety by reference to the Certificate of Incorporation and
Bylaws of Intermedia.
Board of Directors. Intermedia's Certificate of Incorporation provides
that (i) the Board be divided into three classes of directors, with each class
having a number as nearly equal as possible and with the term of each class
expiring in a different year and (ii) the Board shall consist of not less than
three nor more than seven members, the exact number to be determined from time
to time by the Board. The Board has set the number of directors at four. Subject
to any rights of holders of Preferred Stock, a majority of the Board then in
office will have the sole authority to fill any vacancies on the Board.
Stockholders can remove members of the Board only for cause.
Stockholder Action and Special Meetings. Intermedia's Certificate of
Incorporation provides that (i) any action required or permitted to be taken by
Intermedia's stockholders must be effected at a duly called annual or special
meeting of Stockholders and may not be effected by any consent in writing and
(ii) the authorized number of directors may be changed only by resolution of the
Board. The Company's Bylaws provide that, subject to any rights of holders of
any series of Preferred Stock, special meetings of stockholders may be called
only by the Chairman of the Board or the President of Intermedia, by a majority
of the Board or by stockholders owning shares representing at least a majority
of the capital stock of Intermedia issued and outstanding and entitled to vote.
Stockholder's Rights Plan. Intermedia's Board of Directors has adopted
a Stockholder's Rights Plan, pursuant to which rights to acquire a newly created
series of Preferred Stock, exercisable upon the occurrence of certain events,
including the acquisition by a person or group of a specified percentage of the
Common Stock, were distributed to its stockholders.
Anti-Takeover Statute. Subject to certain exceptions, Section 203 of
the DGCL prohibits a publicly held Delaware corporation, such as Intermedia,
from engaging in any "business combination" with an "interested stockholder" for
a three-year period following the date on which such person became an interested
stockholder, unless (i) prior to such date, the board of directors of the
corporation approved either such business combination or the transaction that
resulted in such person becoming an interested stockholder, (ii) upon
consummation of the transaction
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that resulted in such person becoming an interested stockholder, such person
owned at least 85% of the voting stock of the corporation outstanding
immediately prior to such transaction (excluding certain shares) or (iii) on or
subsequent to such date, such business combination is approved by the board of
directors of the corporation and by the affirmative vote of at least 66-2/3% of
the outstanding voting stock that is not owned by the interested stockholder. A
"business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is essentially a person who, together with affiliates and
associates, owns (or within the past three years has owned) 15% or more of the
corporation's voting stock. It is anticipated that the provisions of Section 203
of the DGCL may encourage any person interested in acquiring Intermedia to
negotiate in advance with the Board since the stockholder approval requirement
would be avoided if a majority of Intermedia's directors then in office approved
either the business combination or the transaction that resulted in such person
becoming an interested stockholder.
DIVIDEND RESTRICTIONS
The terms of the Existing Senior Note Indentures restrict the
Company's ability to pay cash dividends on the Series B Preferred Stock. The
existing Senior Note Indentures and the Series B Certificate of Designation
restrict Intermedia's ability to pay cash dividends on the Common Stock and the
Series D Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock, Series B
Preferred Stock and Series D Preferred Stock is Continental Stock Transfer &
Trust Company.
OUTSTANDING WARRANTS
160,000 warrants (the "Public Warrants"), each to purchase 2.19 shares
of Common Stock, at an exercise price of $10.86 per share (subject to anti-
dilution adjustments) were issued as part of a June 1995 private placement. The
Public Warrants are currently exercisable. Unless exercised, the Public Warrants
will expire on June 1, 2000.
RESERVATION OF SHARES
The Company has authorized and reserved for issuance such number of
Common Shares as will be issuable upon the conversion of all Depositary Shares
(or all shares of the Series D Preferred Stock). Such Common Shares, when
issued, will be duly and validly issued, fully paid and non-assessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.
REGISTRATION RIGHTS.
In addition to the rights granted under the Preferred Stock
Registration Rights Agreement, dated July 9, 1997, among the Company and the
Initial Purchasers (the "Preferred Stock Registration Rights Agreement"), the
Company is a party to several agreements pursuant to which certain stockholders
have the right, among other matters, to require the Company to register their
shares of Common Stock under the Securities Act under certain circumstances.
These rights cover approximately 3,106,749 shares of Common Stock. Approximately
2,361,083 of such shares of Common Stock are covered by effective registration
statements and 31,380 of such shares are being registered as part of the
Registration Statement of which this prospectus forms a part. See "Description
of Preferred Stock - Registration Rights; Liquidated Damages" for a discussion
of registration rights pertaining to the Common Shares, Depositary Shares and
Series D Preferred Stock.
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DESCRIPTION OF PREFERRED STOCK
GENERAL
The terms of the Series D Preferred Stock are set forth in the
Certificate of Designation of Voting Power, Designation Preferences and
Relative, Participating, Optional or Other Special Rights and Qualifications,
Limitations and Restrictions (the "Certificate of Designation"). The following
summary of the Series D Preferred Stock, the Certificate of Designation and the
Preferred Stock Registration Rights Agreement is not intended to be complete and
is subject to, and qualified in its entirety by reference to, the Company's
Certificate of Incorporation, the Certificate of Designation and the Preferred
Stock Registration Rights Agreement, including the definitions therein of
certain terms used below. Copies of the form of Certificate of Designation and
Preferred Stock Registration Rights Agreement are available from the Company,
upon request. As used in this Description of Preferred Stock, the term "Company"
refers to Intermedia Communications Inc., excluding its Subsidiaries.
Certain of the Company's operations are conducted through its
Subsidiaries and, therefore, the Company is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the Series
D Preferred Stock. Any right of the Company to receive assets of any of its
Subsidiaries is effectively subordinated to all indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's Subsidiaries. As of June 30, 1997 on a pro forma basis after
giving effect to the July 9 Offerings and the application of the proceeds
therefrom, the aggregate amount of liquidation preference of Senior Securities
and indebtedness and other obligations of the Company and its Subsidiaries that
would effectively rank senior in right of payment to the obligations of the
Company under the Series D Preferred Stock would have been approximately $985.6
million. See "Risk Factors."
Pursuant to the Certificate of Designation, 69,000 shares (including
9,000 shares which the Initial Purchasers purchased to cover over-allotments) of
Series D Preferred Stock with the Liquidation Preference were authorized. All of
such shares are issued and outstanding and are fully paid and non-assessable.
The holders of the Series D Preferred Stock have no preemptive rights.
The transfer agent for the Series D Preferred Stock is Continental
Stock Transfer & Trust Co. unless and until a successor is selected by the
Company (the "Transfer Agent").
RANKING
The Series D Preferred Stock, with respect to dividend distributions
and distributions upon the liquidation, winding-up and dissolution of the
Company, ranks (i) senior to all classes of common stock of the Company and to
each other class of capital stock or series of preferred stock established after
July 2, 1997 by the Board of Directors, the terms of which do not expressly
provide that it ranks senior to or on a parity with the Series D Preferred Stock
as to dividend distributions and distributions upon the liquidation, winding-up
and dissolution of the Company (collectively referred to with the common stock
of the Company as "Junior Securities"); (ii) on a parity with any additional
shares of Series D Preferred Stock issued by the Company in the future and any
other class of capital stock or series of preferred stock issued by the Company
established after July 2, 1997 by the Board of Directors, the terms of which
expressly provide that such class or series will rank on a parity with the
Series D Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred to
as "Parity Securities"); and (iii) junior to the Series B Preferred Stock
($312.9 million aggregate liquidation preference outstanding at June 30, 1997)
and to each class of capital stock or series of preferred stock issued by the
Company established after July 2, 1997 by the Board of Directors the terms of
which expressly provide that such class or series will rank senior to the Series
D Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up and dissolution of the Company (collectively referred to
as "Senior Securities").
No dividend whatsoever shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any outstanding share of the Series D
Preferred Stock with respect to any dividend period unless all dividends for
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all preceding dividend periods have been declared and paid, or declared and a
sufficient sum set apart for the payment of such dividend, upon all outstanding
shares of Senior Securities.
DIVIDENDS
The holders of shares of the Series D Preferred Stock are entitled to
receive, when, as and if dividends are declared by the Board of Directors out of
funds of the Company legally available therefor, cumulative dividends from July
9, 1997 accruing at the rate per annum of 7% of the Liquidation Preference per
share, payable quarterly in arrears on each July 15, October 15, January 15 and
April 15, commencing on October 15, 1997 (each, a "Dividend Payment Date"). If
any such date is not a Business Day, such payment shall be made on the next
succeeding Business Day, to the holders of record as of the next preceding July
1, October 1, January 1 and April 1 (each, a "Record Date"). Dividends will be
payable (i) in cash, (ii) by delivery of shares of Common Stock to holders
(based upon 95% of the Average Stock Price (as defined below)) or (iii) through
any combination of the foregoing. The Company intends to pay dividends in shares
of Common Stock on each Dividend Payment Date to the extent that it is unable to
pay dividends in cash. If the dividends are paid in shares of Common Stock, the
number of shares of Common Stock to be issued on each Dividend Payment Date will
be determined by dividing the total dividend to be paid on each share of Series
D Preferred Stock by 95% of the average of the high and low sales prices of the
Common Stock as reported by the Nasdaq National Market or any national
securities exchange upon which the Common Stock is then listed, for each of the
ten consecutive trading days immediately preceding the fifth business day
preceding the Record Date (the "Average Stock Price"). The Transfer Agent is
authorized and directed in the Certificate of Designation to aggregate any
fractional shares of Common Stock that are issued as dividends, sell them at the
best available price and distribute the proceeds to the holders in proportion to
their respective interests therein. The Company will pay the expenses of the
Transfer Agent with respect to such sale, including brokerage commissions.
Dividends payable on the Series D Preferred Stock will be computed on the basis
of a 360-day year consisting of twelve 30-day months and will be deemed to
accrue on a daily basis.
Dividends on the Series D Preferred Stock will accrue whether or not
the Company has earnings or profits, whether or not there are funds legally
available for the payment of such dividends and whether or not dividends are
declared. Dividends will accumulate to the extent they are not paid on the
Dividend Payment Date for the period to which they relate. The Certificate of
Designation provides that the Company will take all actions required or
permitted under the DGCL to permit the payment of dividends on the Series D
Preferred Stock, including, without limitation, through the revaluation of its
assets in accordance with the DGCL, to make or keep funds legally available for
the payment of dividends.
No dividend whatsoever shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any outstanding share of the Series D
Preferred Stock with respect to any dividend period unless all dividends for all
preceding dividend periods have been declared and paid, or declared and a
sufficient sum set apart for the payment of such dividend, upon all outstanding
shares of Series D Preferred Stock. Unless full cumulative dividends on all
outstanding shares of Series D Preferred Stock for all past dividend periods
shall have been declared and paid, or declared and a sufficient sum for the
payment thereof set apart: (i) no dividend (other than a dividend payable solely
in shares of any Junior Securities) shall be declared or paid upon, or any sum
set apart for the payment of dividends upon, any shares of Junior Securities;
(ii) no other distribution shall be declared or made upon, or any sum set apart
for the payment of any distribution upon, any shares of Junior Securities, other
than a distribution consisting solely of Junior Securities; (iii) no shares of
Junior Securities shall be purchased, redeemed or otherwise acquired or retired
for value (excluding an exchange for shares of other Junior Securities) by the
Company or any of its Subsidiaries; and (iv) no monies shall be paid into or set
apart or made available for a sinking or other like fund for the purchase,
redemption or other acquisition or retirement for value of any shares of Junior
Securities by the Company or any of its Subsidiaries. Holders of the Series D
Preferred Stock will not be entitled to any dividends, whether payable in cash,
property or stock, in excess of the full cumulative dividends as herein
described.
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The Existing Notes Indentures contain, and any future credit
agreements or other agreements relating to Indebtedness to which the Company
becomes a party may contain, restrictions on the ability of the Company to pay
dividends on the Series D Preferred Stock.
OPTIONAL REDEMPTION
The Series D Preferred Stock may not be redeemed at the option of the
Company prior to July 19, 2000. The Series D Preferred Stock may be redeemed for
cash, in whole or in part, at the option of the Company on or after July 19,
2000, at the redemption prices specified below (expressed as percentages of the
Liquidation Preference thereof), in each case, together with accumulated and
unpaid dividends (including an amount in cash equal to a prorated dividend for
any partial dividend period) and Preferred Stock Liquidated Damages, if any, to
the date of redemption, upon not less than 30 nor more than 60 days' prior
written notice, if redeemed during the 12-month period commencing on July 19 of
each of the years set forth below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000..................................... 104.00%
2001..................................... 103.00%
2002..................................... 102.00%
2003..................................... 101.00%
2004 and thereafter...................... 100.00%
</TABLE>
No optional redemption may be authorized or made unless, prior to
giving the applicable redemption notice, all accumulated and unpaid dividends
for periods ended prior to the date of such redemption notice shall have been
paid in cash or Common Stock. In the event of partial redemptions of Series D
Preferred Stock, the shares to be redeemed will be determined pro rata or by
lot, as determined by the Company.
CONVERSION RIGHTS
Each share of Series D Preferred Stock will be convertible at any time
after October 7, 1997, unless previously redeemed, at the option of the holder
thereof into Common Stock of the Company, at a conversion rate equal to the
Liquidation Preference divided by the conversion price then applicable, except
that the right to convert shares of Series D Preferred Stock called for
redemption will terminate at the close of business on the business day preceding
the redemption date and will be lost if not exercised prior to that time, unless
the Company defaults in making the payment due upon redemption.
The initial conversion price is $38.90 per share. The conversion price
will be subject to adjustment in certain events, including: (i) the payment of
dividends (and other distributions) in Common Stock on any class of capital
stock of the Company other than the payment of dividends in Common Stock on the
Series D Preferred Stock or any other regularly scheduled dividend on any other
preferred stock which does not trigger any anti-dilution provisions in any other
security; (ii) the issuance to all holders of Common Stock of rights, warrants
or options entitling them to subscribe for or purchase Common Stock at less than
the current market price (as calculated pursuant to the Certificate of
Designation); (iii) subdivisions, combinations and reclassifications of Common
Stock; (iv) distributions to all holders of Common Stock of evidences of
indebtedness of the Company, shares of any class of capital stock, cash or other
assets (including securities, but excluding those dividends, rights, warrants,
options and distributions referred to in clauses (i) through (iii) above and
dividends and distributions paid in cash out of the retained earnings of the
Company, unless the sum of all such cash dividends and distributions made and
the amount of cash and the fair market value of other consideration paid in
respect of any repurchases of Common Stock by the Company or any of its
Subsidiaries, in each case within the preceding 12 months in respect of which no
adjustment has been made, exceeds 20% of the product of the then current market
price of the Common Stock times the aggregate number of shares of Common Stock
outstanding on the record date for such dividend or distribution).
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No adjustment of the conversion price will be required to be made
until cumulative adjustments amount to 1% or more of the conversion price as
last adjusted. Notwithstanding the foregoing, no adjustment to the conversion
price shall reduce the conversion price below the then applicable par value per
share of the Common Stock. In addition to the foregoing adjustments, the Company
will be permitted to make such reductions in the conversion price as it
considers to be advisable in order that any event treated for federal income tax
purposes as a dividend of stock or stock rights will not be taxable to the
holders of the Common Stock.
In the case of certain consolidations or mergers to which the Company
is a party or the transfer of substantially all of the assets of the Company,
each share of Series D Preferred Stock then outstanding would become convertible
only into the kind and amount of securities, cash and other property receivable
upon the consolidation, merger or transfer by a holder of the number of shares
of Common Stock into which such share of Series D Preferred Stock might have
been converted immediately prior to such consolidation, merger or transfer
(assuming such holder of Common Stock failed to exercise any rights of election
and received per share the kind and amount receivable per share by a plurality
of non-electing shares).
The holder of record of a share of Series D Preferred Stock at the
close of business on a record date with respect to the payment of dividends on
the Series D Preferred Stock will be entitled to receive such dividends with
respect to such share of Series D Preferred Stock on the corresponding Dividend
Payment Date, notwithstanding the conversion of such share after such Record
Date and prior to such Dividend Payment Date. A share of Series D Preferred
Stock surrendered for conversion during the period from the close of business on
any Record Date for the payment of dividends to the opening of business of the
corresponding Dividend Payment Date must be accompanied by a payment in cash,
Common Stock or a combination thereof, depending on the method of payment that
the Company has chosen to pay the dividend, in an amount equal to the dividend
payable on such Dividend Payment Date, unless such share of Series D Preferred
Stock has been called for redemption on a redemption date occurring during the
period from the close of business on any Record Date for the payment of
dividends to the close of business on the business day immediately following the
corresponding Dividend Payment Date. The dividend payment with respect to a
share of Series D Preferred Stock called for redemption on a date during the
period from the close of business on any Record Date for the payment of
dividends to the close of business on the business day immediately following the
corresponding Dividend Payment Date will be payable on such Dividend Payment
Date to the record holder of such share on such Record Date, notwithstanding the
conversion of such share after such Record Date and prior to such Dividend
Payment Date. No payment or adjustment will be made upon conversion of shares of
Series D Preferred Stock for accumulated and unpaid dividends or for dividends
with respect to the Common Stock issued upon such conversion.
CHANGE OF CONTROL
Upon the occurrence of a Preferred Stock Change of Control and subject
to restrictions on repurchase contained in the instruments governing Company's
outstanding indebtedness and the Series B Preferred Stock Certificate of
Designation, the Company will be required to make an offer (a "Preferred Stock
Change of Control Offer") to repurchase all or any part of each holder's Series
D Preferred Stock at an offer price in cash equal to 100% of the aggregate
Liquidation Preference thereof, plus accumulated and unpaid dividends and
Preferred Stock Liquidated Damages, if any, thereon to the date of repurchase.
Within 30 days following a Preferred Stock Change of Control, the Company will
mail a notice to each holder of Series D Preferred Stock describing the
transaction that constitutes the Preferred Stock Change of Control and offering
to repurchase the Series D Preferred Stock pursuant to the procedures required
by the Certificate of Designation and described in such notice; provided that,
prior to complying with the provisions of this covenant, but in any event within
90 days following a Preferred Stock Change of Control, the Company will either
repay all outstanding indebtedness or obtain the requisite consents, if any,
under all agreements governing outstanding indebtedness to permit the repurchase
of the Series D Preferred Stock required by this covenant. The Company will
comply with the requirements of the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Series D Preferred Stock as
a result of a Preferred Stock Change of Control.
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A "Preferred Stock Change of Control" will be deemed to have occurred
upon the occurrence of any of the following: (a) the sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, of all or substantially all of the
assets of the Company and its Subsidiaries, taken as a whole, (b) the adoption
of a plan relating to the liquidation or dissolution of the Company, (c) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" or "group" (as such
terms are used in Section 13(d)(3) of the Exchange Act) becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly through one or more intermediaries, of more than
50% of the voting power of the outstanding voting stock of the Company, unless
(i) the closing price per share of Common Stock for any five trading days within
the period of ten consecutive trading days ending immediately after the
announcement of such Preferred Stock Change of Control equals or exceeds 105% of
the conversion price of the Series D Preferred Stock in effect on each such
trading day or (ii) at least 90% of the consideration in the transaction or
transactions constituting a Preferred Stock Change of Control pursuant to clause
(c) consists of shares of Common Stock traded or to be traded immediately
following such Preferred Stock Change of Control on a national securities
exchange or the Nasdaq National Market and, as a result of such transaction or
transactions, the Series D Preferred Stock become convertible solely into such
Common Stock (and any rights attached thereto), or (d) the first day on which
more than a majority of the members of the Board of Directors of the Company are
not Preferred Stock Continuing Directors; provided, however, that a transaction
in which the Company becomes a subsidiary of another entity shall not constitute
a Preferred Stock Change of Control if (i) the stockholders of the Company
immediately prior to such transaction "beneficially own" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly through one or more intermediaries, at least a majority of the voting
power of the outstanding voting stock of the Company immediately following the
consummation of such transaction and (ii) immediately following the consummation
of such transaction, no "person" or "group" (as such terms are defined above),
other than such other entity (but including holders of equity interests of such
other entity), "beneficially owns" (as such term is defined above), directly or
indirectly through one or more intermediaries, more than 50% of the voting power
of the outstanding voting stock of the Company.
"Preferred Stock Continuing Directors" means, as of any date of
determination, any member of the Board of Directors of the Company who (a) was a
member of the Board of Directors on the date of original issuance of the Series
D Preferred Stock or (b) was nominated for election to the Board of Directors
with the approval of, or whose election was ratified by, at least two-thirds of
the Preferred Stock Continuing Directors who were members of the Board of
Directors at the time of such nomination or election.
Except as described above with respect to a Preferred Stock Change of
Control, the Certificate of Designation does not contain provisions that permit
the holders of the Series D Preferred Stock to require that the Company
repurchase or redeem the Series D Preferred Stock in the event of a takeover,
recapitalization or similar transaction. In addition, the Company could enter
into certain transactions, including acquisitions, refinancings or other
recapitalization, that could affect the Company's capital structure or the value
of the Series D Preferred Stock or the Common Stock, but that would not
constitute a Preferred Stock Change of Control.
The Existing Senior Notes or other indebtedness and the Series B
Preferred Stock could restrict the Company's ability to repurchase the Series D
Preferred Stock upon a Preferred Stock Change of Control. In the event a
Preferred Stock Change of Control occurs at a time when the Company is
prohibited from repurchasing the Series D Preferred Stock, the Company could
either (i) repay in full or refinance all such outstanding indebtedness or
Preferred Stock or (ii) obtain the requisite consents, if any, under all
agreements governing outstanding indebtedness or Preferred Stock to permit the
repurchase of Series D Preferred Stock required by this covenant. The Company
must first comply with the covenants in its outstanding indebtedness or take the
actions described in the preceding sentence before it will be required to
repurchase shares of Series D Preferred Stock in the event of a Preferred Stock
Change of Control; provided, that if the Company fails to repurchase shares of
Series D Preferred Stock, the sole remedy to holders of Series D Preferred Stock
will be the voting rights arising from a Voting Rights Triggering Event.
Moreover, the Company will not repurchase or redeem any Series D Preferred Stock
pursuant to this Preferred Stock Change of Control provision prior to the
Company's repurchase of the Series B Preferred Stock pursuant to the change of
control covenants in the Series B Preferred Stock. As a result of the foregoing,
a holder of the Series D Preferred Stock may
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<PAGE>
not be able to compel the Company to purchase the Series D Preferred Stock
unless the Company is able at the time to refinance all such indebtedness and
the Series B Preferred Stock. See "Risk Factors-Business Combinations; Change of
Control."
The Company will not be required to make a Preferred Stock Change of
Control Offer to the holders of Series D Preferred Stock upon a Preferred Stock
Change of Control if a third party makes the Preferred Stock Change of Control
Offer described above in the manner, at the times and otherwise in compliance
with the requirements set forth in the Certificate of Designation applicable to
a Preferred Stock Change of Control Offer made by the Company and purchases all
shares of Series D Preferred Stock validly tendered and not withdrawn under such
Preferred Stock Change of Control Offer.
VOTING RIGHTS
Holders of record of shares of the Series D Preferred Stock have no
voting rights, except as required by law and as provided in the Certificate of
Designation. The Certificate of Designation provides that upon (a) the
accumulation of accrued and unpaid dividends on the outstanding Series D
Preferred Stock in an amount equal to six quarterly dividends (whether or not
consecutive) or (b) the failure of the Company to make a Preferred Stock Change
of Control Offer or to repurchase all of the Series D Preferred Stock tendered
in a Preferred Stock Change of Control Offer (each of the events described in
clauses (a) and (b) being referred to herein as a "Voting Rights Triggering
Event"), then the holders of a majority of the outstanding shares of Series D
Preferred Stock will be entitled to elect such number of members to the Board of
Directors of the Company constituting at least 20% of the then existing Board of
Directors before such election (rounded to the nearest whole number), provided,
however, that such number shall be no less than one nor greater than two, and
the number of members of the Company's Board of Directors will be immediately
and automatically increased by one or two, as the case may be. Voting rights
arising as a result of a Voting Rights Triggering Event will continue until such
time as all dividends in arrears on the Series D Preferred Stock are paid in
full and all other Voting Rights Triggering Events have been cured or waived, at
which time the term of office of any such members of the Board of Directors so
elected shall terminate and such directors shall be deemed to have resigned.
In addition, the Certificate of Designation provides that the Company
will not authorize any class of Senior Securities or any obligation or security
convertible or exchangeable into or evidencing a right to purchase shares of any
class or series of Senior Securities, without the approval of holders of at
least a majority of the shares of Series D Preferred Stock then outstanding,
voting or consenting, as the case may be, as one class. The Certificate of
Designation also provides that the Company may not amend the Certificate of
Designation so as to affect adversely the specified rights, preferences,
privileges or voting rights of holders of shares of the Series D Preferred Stock
or authorize the issuance of any additional shares of Series D Preferred Stock,
without the approval of the holders of at least a majority of the then
outstanding shares of Series D Preferred Stock voting or consenting, as the case
may be, as one class; provided, however, that the Company may not amend the
Preferred Stock Change of Control provisions of the Certificate of Designation
(including the related definitions) without the approval of the holders of at
least 66 2/3% of the then outstanding shares of Series D Preferred Stock voting
or consenting, as the case may be, as one class. The Certificate of Designation
also provides that, except as set forth above with respect to Senior Securities,
(a) the creation, authorization or issuance of any shares of Junior Securities,
Parity Securities or Senior Securities or (b) the increase or decrease in the
amount of authorized capital stock of any class, including any preferred stock,
shall not require the consent of the holders of Series D Preferred Stock and
shall not be deemed to affect adversely the rights, preferences, privileges,
special rights or voting rights of holders of shares of Series D Preferred
Stock. The consent of the holders of Series D Preferred Stock will not be
required for the Company to authorize, create (by way of reclassification or
otherwise) or issue any Parity Securities or any obligation or security
convertible or exchangeable into or evidencing a right to purchase, shares of
any class or series of Parity Securities.
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MERGER, CONSOLIDATION AND SALE OF ASSETS
Without the vote or consent of the holders of a majority of the
then outstanding shares of Series D Preferred Stock, the Company may not
consolidate or merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its assets to, any
person unless (a) the entity formed by such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (in any such case, the
"resulting entity") is a corporation organized and existing under the laws of
the United States or any State thereof or the District of Columbia; (b) if
the Company is not the resulting entity, the Series D Preferred Stock is
converted into or exchanged for and becomes shares of such resulting entity,
having in respect of such resulting entity the same (or more favorable)
powers, preferences and relative, participating, optional or other special
rights thereof that the Series D Preferred Stock had immediately prior to
such transaction; and (c) immediately after giving effect to such
transaction, no Voting Rights Triggering Event has occurred and is
continuing. The resulting entity of such transaction shall thereafter be
deemed to be the "Company" for all purposes of the Certificate of
Designation.
LIQUIDATION RIGHTS
Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company or reduction or decrease in its capital stock
resulting in a distribution of assets to the holders of any class or series
of the Company's capital stock, each holder of shares of the Series D
Preferred Stock will be entitled to payment out of the assets of the Company
available for distribution of an amount equal to the Liquidation Preference
per share of Series D Preferred Stock held by such holder, plus accrued and
unpaid dividends and Preferred Stock Liquidated Damages, if any, to the date
fixed for liquidation, dissolution, winding-up or reduction or decrease in
capital stock, before any distribution is made on any Junior Securities,
including, without limitation, Common Stock. After payment in full of the
Liquidation Preference and all accrued dividends and Preferred Stock
Liquidated Damages, if any, to which holders of Series D Preferred Stock are
entitled, such holders will not be entitled to any further participation in
any distribution of assets of the Company. If, upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, the
amounts payable with respect to the Series D Preferred Stock and all other
Parity Securities are not paid in full, the holders of the Series D Preferred
Stock and the Parity Securities will share equally and ratably in any
distribution of assets of the Company in proportion to the full liquidation
preference and accumulated and unpaid dividends and Preferred Stock
Liquidated Damages, if any, to which each is entitled. However, neither the
voluntary sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of the
Company with or into one or more persons will be deemed to be a voluntary or
involuntary liquidation, dissolution or winding-up of the Company or
reduction or decrease in capital stock, unless such sale, conveyance,
exchange or transfer shall be in connection with a liquidation, dissolution
or winding-up of the business of the Company or reduction or decrease in
capital stock.
REPORTS
The Certificate of Designation provides that the Company will file
all annual and quarterly reports and the information, documents, and other
reports that the Company is required to file with the Commission pursuant to
Section 13(a) or 15(d) of the Exchange Act ("SEC Reports") with the Transfer
Agent within 15 days after it files them with the Commission. In the event
the Company is not required or shall cease to be required to file SEC
Reports, pursuant to the Exchange Act, the Company will nevertheless continue
to file such reports with the Commission (unless the Commission will not
accept such a filing). Whether or not required by the Exchange Act to file
SEC Reports with the Commission, so long as any Series D Preferred Stock are
outstanding, the Company will furnish copies of the SEC Reports to the
holders of Series D Preferred Stock at the time the Company is required to
make such information available to the Transfer Agent and to investors who
request it in writing. In addition, the Company has agreed that, for so long
as any shares of Series D Preferred Stock remain outstanding, it will furnish
to the holders and to securities analysts and prospective investors, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
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REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the Preferred Stock Registration Rights Agreement, the
Company agreed to file a shelf registration statement (the "Shelf
Registration Statement") covering resales of Preferred Stock Transfer
Restricted Securities (as defined below) by holders thereof (who satisfied
certain conditions relating to the provision of information to the
registrant) on or prior to September 7, 1997, and to use its reasonable best
efforts to cause such shelf registration statement to become effective on or
prior to 120 days after such date.
"Preferred Stock Transfer Restricted Securities" for this purpose,
means each Depositary Share, each share of Series D Preferred Stock and each
Common Share until (a) the date on which such security has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement or (b) the date on which such security is
distributed to the public pursuant to Rule 144 under the Securities Act or
may be distributed to the public pursuant to Rule 144(k) under the Securities
Act.
The Registration Statement of which this Prospectus forms a part
constitutes the Shelf Registration statement. The Company is obligated to use
its best efforts to maintain the effectiveness of the Shelf Registration
Statement for a period ending on the earlier of July 9, 1999 and the date
when all Preferred Stock Transfer Restricted Securities covered by the Shelf
Registration Statement are sold. If the Shelf Registration Statement ceases
to be effective or usable for any period of ten consecutive days or for any
20 days in any 180-day period in connection with resales of Preferred Stock
Transfer Restricted Securities (provided, that the Company will have the
option of suspending the effectiveness of the Shelf Registration Statement,
without becoming obligated to pay Preferred Stock Liquidated Damages for
periods of up to a total of 60 days in any calendar year if the Board of
Directors of the Company determines that compliance with the disclosure
obligations necessary to maintain the effectiveness of the Shelf Registration
Statement at such time could reasonably be expected to have an adverse effect
on the Company or a pending corporate transaction) (a "Registration
Default"), then the Company will pay to each holder of Preferred Stock
Transfer Restricted Securities liquidated damages ("Preferred Stock
Liquidated Damages") at a rate of 0.25% of the Liquidation Preference of the
Series D Preferred Stock constituting Preferred Stock Transfer Restricted
Securities, which shall accrue from the date of the Registration Default
until such Registration Default is cured. All accrued Preferred Stock
Liquidated Damages will be paid in shares of Common Stock valued at the
Average Stock Price by the Company on each Dividend Payment Date specified in
the Certificate of Designation. Following the cure of all Registration
Defaults, the accrual of Preferred Stock Liquidated Damages will cease.
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DESCRIPTION OF DEPOSITARY SHARES
Each Depositary Share represents a one-hundredth interest in a
share of Series D Preferred Stock deposited under the Deposit Agreement
("Deposit Agreement"), entered into among Intermedia, Continental Stock
Transfer & Trust Company, as depositary agent ("Continental"), and the
holders from time to time of Depositary Receipts issued thereunder. Subject
to the terms of the Deposit Agreement, each owner of a Depositary Share is
entitled proportionately to all of the rights and preferences of the shares
of Series D Preferred Stock represented thereby (including dividend, voting,
redemption and liquidation rights) contained in the Company's Certificate of
Incorporation and the Certificate of Designation and summarized above under
"Description of Series D Preferred Stock." The Company does not expect that
there will be any public trading market for the Series D Preferred Stock
except as represented by the Depositary Shares.
The Depositary Shares are evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). The following
description of Depositary Shares does not purport to be complete and is
subject to, and qualified in its entirety by, the provisions of the Deposit
Agreement (which contains the form of Depositary Receipt), a copy of which is
available from the Company, upon request.
ISSUANCE OF DEPOSITARY RECEIPTS
The Series D Preferred Stock was deposited with Continental
immediately preceding the July 9 Offerings, and Continental in turn executed
and delivered the Depositary Receipts to the Company. The Company delivered
the Depositary Receipts to the Initial Purchasers.
WITHDRAWAL OF SERIES D PREFERRED STOCK
Upon surrender of the Depositary Receipts at the corporate trust
office of Continental, the owner of the Depositary Shares evidenced thereby
is entitled to delivery at such office of the number of whole shares of
Series D Preferred Stock represented by such Depositary Shares. Owners of
Depositary Shares are entitled to receive only whole shares of Series D
Preferred Stock on the basis of one share of Series D Preferred Stock for
each one hundred Depositary Shares. In no event will fractional shares of
Series D Preferred Stock (or cash in lieu thereof) be distributed by
Continental. If the Depositary Receipts delivered by the holder evidence a
number of Depositary Shares in excess of the number of Depositary Shares
representing the number of whole shares of Series D Preferred Stock to be
withdrawn, Continental will deliver to such holder at the same time a new
Depositary Receipt evidencing such excess number of Depositary Shares.
The Company has not applied and does not intend to apply for the
listing of the Depositary Shares or the Series D Preferred Stock on any
securities exchange or for quotation through the Nasdaq National Market.
CONVERSION AND CALL PROVISION
Conversion at the Option of Holder. As described under "Description
of Preferred Stock- Conversion Rights," the Series D Preferred Stock may be
converted, in whole or in part, into shares of Common Stock at the option of
the holders of Series D Preferred Stock at any time after October 7, 1997,
unless previously redeemed. The Depositary Shares held by any holder may, at
the option of such holders, be converted in whole or from time to time in
part (but only in lots of 100 Depositary Shares or integral multiples
thereof), into shares of Common Stock upon the same terms and conditions as
the Series D Preferred Stock, except that the number of shares of Common
Stock received upon conversion of each Depositary Share will be equal to the
number of shares of Common Stock received upon conversion of one share of
Series D Preferred Stock divided by one hundred. To effect such an optional
conversion, a holder of Depositary Shares must deliver Depositary Receipts
evidencing the Depositary Shares to be converted, together with a written
notice of conversion and a proper assignment of the Depositary Receipts to
the Company or in blank, to Continental or its agent. A Depositary Share
surrendered for conversion during the period from the close of business on
any Record Date for the payment of dividends to the opening of business of
the corresponding Dividend Payment Date must be accompanied by a payment in
cash, Common Stock or a combination thereof, depending on the method of
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payment that the Company has chosen to pay the dividend, in an amount equal
to the dividend payable on such Dividend Payment Date, unless such Depositary
Share has been called for redemption on a redemption date occurring during
the period from the close of business on any Record Date for the payment of
dividends to the close of business on the Business Day immediately following
the corresponding Dividend Payment Date. The dividend payment with respect to
a Depositary Share called for redemption on a date during the period from the
close of business on any Record Date for the payment of dividends to the
close of business on the Business Day immediately following the corresponding
Dividend Payment Date will be payable on such Dividend Payment Date to the
record holder of such share on such Record Date, notwithstanding the
conversion of such share after such Record Date and prior to such Dividend
Payment Date. Each optional conversion of Depositary Shares shall be deemed
to have been effected immediately before the close of business on the date on
which the foregoing requirements shall have been satisfied.
If only a portion of the Depositary Shares evidenced by a
Depositary Receipt is to be converted, a new Depositary Receipt or Receipts
will be issued for any Depositary Shares not converted. No fractional shares
of Common Stock will be issued upon conversion of Depositary Shares, and, if
such conversion would otherwise result in a fractional share of Common Stock
being issued, the number of shares of Common Stock to be issued upon such
conversion shall be rounded up to the nearest whole share.
After the date fixed for conversion or redemption, the Depositary
Shares so converted or called for redemption will no longer be deemed to be
outstanding and all rights of the holders of such Depositary Shares will
cease, except the holder of such Depositary Shares shall be entitled to
receive any money or other property to which the holders of such Depositary
Shares were entitled upon such conversion or redemption, upon surrender to
Continental of the Depositary Receipt or Receipts evidencing such Depositary
Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
Continental will distribute all dividends or other distributions in
respect of the Series D Preferred Stock to the record holders of Depositary
Receipts in proportion to the number of Depositary Shares owned by such
holders. See "Description of Preferred Stock - Dividends."
The amount distributed in any of the foregoing cases will be
reduced by any amount required to be withheld by the Company or Continental
on account of taxes.
RECORD DATE
Whenever (i) any dividend or other distribution shall become
payable, any distribution shall be made, or any rights, preferences or
privileges shall be offered with respect to the Series D Preferred Stock, or
(ii) Continental shall receive notice of any meeting at which holders of
Series D Preferred Stock are entitled to vote or of which holders of Series D
Preferred Stock are entitled to notice, or of any election on the part of the
Company to call for redemption any Series D Preferred Stock, Continental
shall in each such instance fix a record date (which shall be the same date
as the record date for the Series D Preferred Stock) for the determination of
the holders of Depositary Receipts (x) who shall be entitled to receive such
dividend, distribution, rights, preference or privileges or the net proceeds
of the sale thereof, (y) who shall be entitled to give instructions for the
exercise of voting rights at any such meeting or to receive notice of such
meeting, or (z) who shall be subject to such redemption, subject to the
provisions of the Deposit Agreement.
VOTING OF DEPOSITARY SHARES
Holders of record of Depositary Shares have no voting rights,
except as required by law and as provided in the Certificate of Designation
in respect of the Series D Preferred Stock, as described under "Description
of Preferred Stock - Voting Rights."
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AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of Depositary Receipts and any provision of the Deposit
Agreement may at any time be amended by agreement between the Company and
Continental. However, any amendment that imposes any fees, taxes or other
charges payable by holders of Depositary Receipts (other than taxes and other
governmental charges, fees and other expenses payable by such holders as
stated under "Charges of Continental"), or that otherwise prejudices any
substantial existing right of holders of Depositary Receipts, will not take
effect as to outstanding Depositary Receipts until the expiration of 90 days
after notice of such amendment has been mailed to the record holders of
outstanding Depositary Receipts. Every holder of Depositary Receipts at the
time any such amendment becomes effective shall be deemed to consent and
agree to such amendment and to be bound by the Deposit Agreement, as so
amended. In no event may any amendment impair the right of any owner of
Depositary Shares, subject to the conditions specified in the Deposit
Amendment, upon surrender of the Depositary Receipts evidencing such
Depositary Shares, to receive Series D Preferred Stock or, upon conversion of
the Series D Preferred Stock represented by the Depositary Receipts, to
receive shares of Common Stock, and in each case any money or other property
represented thereby, except in order to comply with mandatory provisions of
applicable law.
Whenever so directed by the Company, Continental will terminate the
Deposit Agreement after mailing notice of such termination to the record
holders of all Depositary Receipts then outstanding at least 30 days before
the date fixed in such notice for such termination. Continental may likewise
terminate the Deposit Agreement if at any time 45 days shall have expired
after Continental shall have delivered to the Company a written notice of its
election to resign and a successor depositary shall not have been appointed
and accepted its appointment. If any Depositary Receipts remain outstanding
after the date of termination, Continental thereafter will discontinue the
transfer of Depositary Receipts, will suspend the distribution of dividends
to the holders thereof, and will not give any further notices (other than
notice of such termination) or perform any further acts under the Deposit
Agreement except as provided below and except that Continental will continue
(i) to collect dividends on the Series D Preferred Stock and any other
distributions with respect thereto and (ii) to deliver the Series D Preferred
Stock together with such dividends and distributions and the net proceeds of
any sales or rights, preferences, privileges or other property, without
liability for interest thereon, in exchange for Depositary Receipts
surrendered. At any time after the expiration of two years from the date of
termination, Continental may sell the Series D Preferred Stock then held by
it at public or private sale, at such place or places and upon such terms as
it deems proper and may thereafter hold the net proceeds of any such sale,
together with any money and other property then held by it, without liability
for interest thereon, for the pro rata benefit of the holders of Depositary
Receipts which have not been surrendered. The Company does not intend to
terminate the Deposit Agreement or to permit the resignation of Continental
without appointing a successor depositary.
CHARGES OF CONTINENTAL
The Company will pay all charges of Continental including the
distribution of information to the holders of Depositary Receipts with
respect to matters on which Series D Preferred Stock are entitled to vote,
withdrawals of the Series D Preferred Stock by the holders of Depositary
Receipts or redemption or conversion of the Depositary Receipts, except for
taxes (including transfer taxes, if any) and other governmental charges and
such other charges as are provided in the Deposit Agreement to be at the
expense of the holders of Depositary Receipts or persons depositing Series D
Preferred Stock.
GENERAL
Continental will make available for inspection by holders of
Depositary Receipts at its corporate trust office all reports and
communications from the Company that are delivered to Continental and made
generally available to the holders of the Series D Preferred Stock.
Neither Continental nor the Company will be liable if it is
prevented or delayed by law or any circumstance beyond its control from or in
performing its obligations under the Deposit Agreement.
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FORM AND DENOMINATION
Global Shares; Book-Entry Form. The Depositary Shares have been
issued in the form of one or more global certificates (the "Depositary Share
Global Certificate") which have been deposited with, or on behalf of, the
Depositary and registered in the name of Cede & Co., as nominee of the
Depositary (the "Global Certificate Holder"). Except as set forth below,
record ownership of the Depositary Share Global Certificate may be
transferred, in whole or in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
Owners of a beneficial interest in the Depositary Share Global
Certificate may hold their interest in the Depositary Share Global
Certificate directly through the Depositary if such holder is a Participant
in the Depositary or indirectly through organizations that are Participants
in the Depositary. Persons who are not Participants may beneficially own
interests in the Depositary Share Global Certificate held by the Depositary
only through Participants or certain banks, brokers, dealers, trust companies
and other parties that clear though or maintain a custodial relationship with
a Participant, either directly or indirectly. So long as Cede & Co., as the
nominee of the Depositary, is the registered owner of the Depositary Share
Global Certificate, Cede & Co. for all purposes will be considered the sole
holder of the Depositary Share Global Certificate. Owners of beneficial
interest in the Depositary Share Global Certificate will be entitled to have
certificates registered in their names and to receive physical delivery of
certificates in definitive form (the "Definitive Securities").
Payment of dividends on and any redemption price with respect to
the Depositary Share Global Certificate will be made to the Global
Certificate Holder, as registered owner of the Depositary Share Global
Certificate, by wire transfer of immediately available funds on each Dividend
Payment Date or redemption date, as applicable. Neither the Company nor the
Transfer Agent will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in the Depositary Share Global Certificate or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
The Company has been informed by the Depositary that, with respect
to any payment of dividends on, or the redemption price with respect to, the
Depositary Share Global Certificate, the Depositary's practice is to credit
Participants' accounts on the payment date therefor, with payments in amounts
proportionate to their respective beneficial interests in the Depositary
Shares represented by the Depositary Share Global Certificate as shown on the
records of the Depositary, unless the Depositary has reason to believe that
it will not receive payment on such payment date. Payments by Participants to
owners of beneficial interests in the Depositary Shares represented by the
Depositary Share Global Certificate held through such Participants will be
the responsibility of such Participants, as is now the case with securities
held for the accounts of customers registered in "street name."
Transfers between Participants will be effected in the ordinary way
in accordance with the Depositary's rules and will be settled in immediately
available funds. The laws of some states require that certain persons take
physical delivery of securities in definitive form. Consequently, the ability
to transfer beneficial interests in the Depositary Share Global Certificate
to such persons may be limited. Because the Depositary can only act on behalf
of Participants, who in turn act on behalf of Indirect Participants and
certain banks, the ability of a person having a beneficial interest in the
Depositary Shares represented by the Depositary Share Global Certificate to
pledge such interest to persons or entities that do not participate in the
Depositary system, or otherwise take actions in respect of such interest, may
be affected by the lack of a physical certificate evidencing such interest.
Neither the Company nor the Transfer Agent will have responsibility
for the performance of the Depositary or its Participants or Indirect
Participants of their respective obligations under the rules and procedures
governing their operations. The Depositary has advised the Company that it
will take any action permitted to be taken by a holder of Depositary Shares
(including, without limitation, the presentation of Depositary Shares for
exchange) only at the direction of one or more Participants to whose account
with the Depositary interests in the Depositary Share Global Certificate are
credited, and only in respect of the Depositary Shares represented by the
Depositary Share Global Certificate as to which such Participant or
Participants has or have given such direction.
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The Depositary has also advised the Company that the Depositary is
a limited purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. The Depositary
was created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants
through electronic book-entry changes to accounts of its Participants,
thereby eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers, banks, trust companies
and clearing corporations and may include certain other organizations such as
the Initial Purchasers. Certain of such Participants (or their
representatives), together with other entities, own the Depositary. Indirect
access to the Depositary system is available to others such as banks,
brokers, dealers and trust companies that clear through, or maintain a
custodial relationship with, a Participant, either directly or indirectly.
Although the Depositary has agreed to the foregoing procedures in
order to facilitate transfers of interests in the Depositary Share Global
Certificate among Participants, it is under no obligation to perform or
continue to perform such procedures, and such procedures may be discontinued
at any time. If the Depositary is at any time unwilling or unable to continue
as depositary and a successor depositary is not appointed by the Company
within 90 days, the Company will cause the Depositary Shares to be issued in
definitive form in exchange for the Depositary Share Global Certificate.
Certificated Depositary Shares. Investors in the Depositary Shares
may request that Definitive Securities be issued in exchange for Depositary
Shares represented by the Depositary Share Global Certificate. Furthermore,
Definitive Securities may be issued in exchange for Depositary Shares
represented by the Depositary Share Global Certificate if no successor
depositary is appointed by the Company as set forth above.
Unless determined otherwise by the Company in accordance with
applicable law, Definitive Securities issued upon transfer or exchange of
beneficial interests in Depositary Shares represented by the Depositary Share
Global Certificate will bear a legend setting forth transfer restrictions
under the Securities Act. Any request for the transfer of Definitive
Securities bearing the legend, or for removal of the legend from Definitive
Securities, must be accompanied by satisfactory evidence, in the form of an
opinion of counsel, that such transfer complies with the Securities Act or
that neither the legend nor the restrictions on transfer set forth therein
are required to ensure compliance with the provisions of the Securities Act,
as the case may be.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States
federal income tax considerations generally applicable to persons acquiring
the Depositary Shares, but does not purport to be a complete analysis of all
potential consequences. The discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury regulations, Internal Revenue
Service ("IRS") rulings and judicial decisions now in effect, all of which
are subject to change at any time by legislative, judicial or administrative
action. Any such changes may be applied retroactively in a manner that could
adversely affect a holder of the Depositary Shares and Common Stock.
The discussion assumes that the holders of the Depositary Shares
and Common Stock will hold them as "capital assets" within the meaning of
Section 1221 of the Code. The discussion is not binding on the IRS or the
courts. The Company has not sought and will not seek any rulings from the IRS
with respect to the positions of the Company discussed herein, and there can
be no assurance that the IRS will not take a different position concerning
the tax consequences of the purchase, ownership or disposition of the
Depositary Shares or Common Stock or that any such position would not be
sustained.
The tax treatment of a holder of the Depositary Shares and Common
Stock may vary depending on such holder's particular situation or status.
Certain holders (including S corporations, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, taxpayers subject to
alternative minimum tax and persons holding Depositary Shares or Common Stock
as part of a straddle, hedging or conversion transaction) may be subject to
special rules not discussed below. The following discussion is limited to the
United States federal income tax consequences relevant to a holder of the
Depositary Shares and Common Stock that is a citizen or resident of the
United States, or any state thereof, or a corporation or other entity created
or organized under the laws of the United States, or any political
subdivision thereof, or an estate or trust the income of which is subject to
United States federal income tax regardless of source or that is otherwise
subject to United States federal income tax on a net income basis in respect
of the Depositary Shares and Common Stock. The following discussion does not
consider all aspects of United States federal income tax that may be relevant
to the purchase, ownership and disposition of the Depositary Shares and
Common Stock by a holder in light of such holder's personal circumstances. In
addition, the discussion does not consider the effect of any applicable
foreign, state, local or other tax laws, or estate or gift tax
considerations. PERSONS CONSIDERING THE PURCHASE OF THE DEPOSITARY SHARES
SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE
UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL
AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, OR
FOREIGN TAXING JURISDICTION.
INTRODUCTION
Holders of Depositary Shares will be treated for United States
federal income tax purposes as if they were owners of the Series D Preferred
Stock represented by such Depositary Shares. Accordingly, holders of
Depositary Shares will recognize the items of income, gain, loss and
deduction that they would recognize if they directly held the Series D
Preferred Stock. References in this "Certain Federal Income Tax Consequences"
section to holders of Series D Preferred Stock include holders of Depositary
Shares, and references to Depositary Shares include Series D Preferred Stock.
DISTRIBUTIONS ON DEPOSITARY SHARES AND COMMON STOCK
A distribution on the Depositary Shares, whether paid in cash or in
shares of Common Stock, or a cash distribution on Common Stock will be
taxable to the holder as ordinary dividend income to the extent that the
amount of the distribution (i.e., the amount of cash and/or the fair market
value of the Common Stock on the date of distribution) does not exceed the
Company's current or accumulated earnings and profits allocable to such
distribution (as determined for federal income tax purposes). To the extent
that the amount of the distribution exceeds the Company's current or
accumulated earnings and profits allocable to such distribution, the
distribution will be treated as a return of capital, thus reducing the
holder's adjusted tax basis in the Depositary Shares or Common Stock with
respect
29
<PAGE>
to which such distribution is made. The amount of any such excess
distribution that exceeds the holder's adjusted tax basis in the Depositary
Shares or Common Stock will be taxed as capital gain and will be long-term
capital gain if the holder's holding period for the Depositary Shares or
Common Stock exceeds one year. (A lower capital gains tax rate will apply if
a non-corporate holder's holding period exceeds 18 months.) A holder's
initial tax basis in Common Stock received as a distribution on the
Depositary Shares will equal the fair market value of the Common Stock on the
date of the distribution. The holding period for the Common Stock will
commence on the day following the distribution. There can be no assurance
that the Company will have sufficient earnings and profits to cause
distributions on the Series D Preferred Stock or Common Stock to be treated
as dividends for federal income tax purposes. For purposes of the remainder
of this discussion, the term "dividend" refers to a distribution paid out of
current or accumulated earnings and profits, unless the context indicates
otherwise. Preferred Stock Liquidated Damages should be taxed in the same
manner as dividend distributions, except that it is possible that Preferred
Stock Liquidated Damages might be treated as payment of a fee and hence as
ordinary income with respect to which no dividends-received deduction is
available.
Pursuant to certain amendments to Section 305(c) of the Code, the
IRS has the authority to promulgate regulations that may treat unpaid
cumulative dividends on preferred stock as being constructively paid to the
holder in certain circumstances, such as when there is no intention for
dividends to be paid currently at the time of issuance of the preferred
stock. The IRS has not yet proposed any such regulations.
Dividends received by corporate holders will generally be eligible
for the 70% dividends-received deduction under Section 243 of the Code. There
are, however, many exceptions and restrictions relating to the availability
of the dividends-received deduction, such as restrictions relating to (i) the
holding period of the stock on which the dividends are received, (ii) debt-
financed portfolio stock, (iii) dividends treated as "extraordinary
dividends" for purposes of Section 1059 of the Code, and (iv) taxpayers that
pay alternative minimum tax. Corporate holders should consult their own tax
advisors regarding the extent, if any, to which such exceptions and
restrictions may apply to their particular factual situations. In addition,
new legislation requires corporate holders to satisfy a separate forty-six
day holding period requirement with respect to each dividend in order to be
eligible for the dividends-received deduction with respect to such dividend.
(A two-year transitional rule applies to stock held on June 8, 1997.)
REDEMPTION PREMIUM
Under certain circumstances, Section 305(c) of the Code requires
that any excess of the redemption price of preferred stock over its issue
price be treated as constructively distributed on a periodic basis prior to
actual receipt. However, the Company believes that a holder of the Depositary
Shares should not be required to include any redemption premium in income
under Section 305(c).
ADJUSTMENT OF CONVERSION PRICE
Treasury regulations issued under Section 305 of the Code treat
certain adjustments to conversion provisions of stock such as the Series D
Preferred Stock as constructive distributions of stock with respect to
preferred stock. Such constructive distributions of stock would be taxable to
holders of Depositary Shares as described above under the caption
"Distributions on Depositary Shares and Common Stock." In general, any
adjustment increasing the number of shares of Common Stock into which the
Depositary Shares can be converted could constitute a constructive
distribution of stock to holders of Depositary Shares unless made pursuant to
a bona fide, reasonable adjustment formula that has the effect of preventing
dilution of the interest of the holders of Depositary Shares. Any adjustment
in the conversion price to compensate the holders of Depositary Shares for
taxable distributions of cash or property on any of the outstanding Common
Stock of the Company may be treated as a constructive distribution of stock
to holders of Depositary Shares. The Company is unable to predict whether any
such adjustment will be made.
30
<PAGE>
CONVERSION OF SERIES D PREFERRED STOCK
No gain or loss will generally be recognized for United States
federal income tax purposes on conversion of the Series D Preferred Stock
solely into Common Stock. However, if the conversion takes place when there
is a dividend arrearage on the Series D Preferred Stock, a portion of the
Common Stock received may be treated as a taxable dividend to the extent of
such dividend arrearage. Except for any Common Stock treated as payment of a
dividend, the tax basis for the Common Stock received upon conversion
(including any fractional share deemed received) will be the tax basis of the
Series D Preferred Stock converted, and the holding period of the Common
Stock received upon conversion (including any fractional share deemed
received) will include the holding period of the Series D Preferred Stock
converted into such Common Stock. The receipt of cash in lieu of a fractional
share upon conversion of Series D Preferred Stock to Common Stock will
generally be treated as a sale of such fractional share of Common Stock in
which the holder will recognize taxable gain or loss equal to the difference
between the amount of cash received and the holder's tax basis in the
fractional share redeemed. Such gain or loss will be capital gain or loss and
will be long-term if the holder's holding period for the fractional share
exceeds one year. (A lower capital gains tax rate will apply if a non-
corporate holder's holding period exceeds 18 months.)
CONVERSION OF SERIES D PREFERRED STOCK AFTER DIVIDEND RECORD DATE
If a holder whose Series D Preferred Stock has not been called for
redemption surrenders such Series D Preferred Stock for conversion into
shares of Common Stock after a dividend record date for the Series D
Preferred Stock but before payment of the dividend, such holder will be
required to pay the Company an amount equal to such dividend upon conversion.
The holder will likely recognize the dividend payment as ordinary dividend
income when it is received and increase the basis of the Common Stock
received by the amount paid to the Company.
REDEMPTION, SALE OR EXCHANGE OF SERIES D PREFERRED STOCK AND SALE OR EXCHANGE
OF COMMON STOCK
A redemption of shares of Series D Preferred Stock for cash will be
a taxable event.
A redemption of shares of Series D Preferred Stock for cash will
generally be treated as a sale or exchange if the holder does not own,
actually or constructively within the meaning of Section 318 of the Code, any
stock of the Company other than the Series D Preferred Stock redeemed. If a
holder does own, actually or constructively, other stock of the Company, a
redemption of Series D Preferred Stock may be treated as a dividend to the
extent of the Company's allocable current or accumulated earnings and profits
(as determined for United States federal income tax purposes). Such dividend
treatment will not be applied if the redemption is "not essentially
equivalent to a dividend" with respect to the holder under Section 302(b)(1)
of the Code. A distribution to a holder will be "not essentially equivalent
to a dividend" if it results in a "meaningful reduction" in the holder's
stock interest in the Company. For this purpose, a redemption of Series D
Preferred Stock that results in a reduction in the proportionate interest in
the Company (taking into account any actual ownership of Common Stock and any
stock constructively owned) of a holder whose relative stock interest in the
Company is minimal and who exercises no control over corporate affairs should
be regarded as a meaningful reduction in the holder's stock interest in the
Company.
If a redemption of the Series D Preferred Stock for cash is treated
as a sale or exchange, the redemption will result in capital gain or loss
equal to the difference between the amount of cash received and the holder's
adjusted tax basis in the Series D Preferred Stock redeemed, except to the
extent that the redemption price includes dividends that have been declared
by the Board of Directors of the Company prior to the redemption. Similarly,
upon the sale or exchange of the Series D Preferred Stock or Common Stock
(other than in a redemption, on conversion or pursuant to a tax-free
exchange), the difference between the sum of the amount of cash and the fair
market value of other property received and the holder's adjusted basis in
the Series D Preferred Stock or Common Stock will be capital gain or loss.
This gain or loss will be long-term capital gain or loss if the holder's
holding period for the Series D Preferred Stock or Common Stock exceeds one
year. (A lower capital gains tax rate will apply if a non-corporate holder's
holding period exceeds 18 months.)
31
<PAGE>
If a redemption of Series D Preferred Stock is treated as a
distribution that is taxable as a dividend, the amount of the distribution
will be the amount of cash received by the holder. The holder's adjusted tax
basis in the redeemed Series D Preferred Stock will be transferred to any
remaining stock holdings in the Company, subject to reduction or possible
gain recognition under Section 1059 of the Code with respect to the non-taxed
portion of such dividend. If the holder does not retain any actual stock
ownership in the Company (having a stock interest only constructively by
attribution), the holder may lose the benefit of the basis in the Series D
Preferred Stock.
BACKUP WITHHOLDING
A holder of Depositary Shares or Common Stock may be subject to
backup withholding at the rate of 31% with respect to dividends paid on, or
the proceeds of a redemption, sale or exchange of, the Depositary Shares or
Common Stock, unless such holder (a) is a corporation or comes within certain
other exempt categories and, when required, demonstrates its exemption or (b)
provides a correct taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. A holder of Depositary Shares
or Common Stock who does not provide the Company with the holder's correct
taxpayer identification number may be subject to penalties imposed by the
IRS. Any amount paid as backup withholding would be creditable against the
holder's federal income tax liability.
32
<PAGE>
THE SELLING SECURITYHOLDERS
The following table sets forth, as of August 12, 1997 certain
information regarding the Selling Securityholders' ownership of the Company's
Depositary Shares, Series D Preferred Stock and Common Stock. Unless
otherwise disclosed in the footnotes to the table, no Selling Securityholder
has held any position, office or had any other material relationship with the
Company, its predecessors or affiliates during the past three years. All of
the Depositary Shares and shares of Series D Preferred Stock are registered
in the name of "Cede & Co." on the books of the Company's Transfer Agent. To
the knowledge of the Company, except as disclosed in the table below, the
Selling Securityholders did not own, nor have any rights to acquire, any
other Depositary Shares, shares of Series D Preferred Stock or Common Stock
as of the date of this Prospectus.
<TABLE>
<CAPTION>
============================================================================
COMMON STOCK
------------
- ----------------------------------------------------------------------------
NAME OF BENEFICIALLY
SELLING OWNED
SECURITY BENEFICIALLY OWNED PRIOR OFFERED AFTER THIS
HOLDER/1/ TO THIS OFFERING/2//3/ FOR SALE OFFERING/2//3/
- --------- ---------------------- -------- --------------
- ----------------------------------------------------------------------------
NUMBER OF PERCENT OF
SHARES SHARES
------ ------
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KENNY 1,980 * 1,980 0
SECURITIES
CORP./5/
- ---------------------------------------------------------------------------
J. MICHAEL 1,244 * 1,244 0
SHORT/5/
- ---------------------------------------------------------------------------
BRETT B. 344 * 344 0
BRANDENBERG/5/
- ---------------------------------------------------------------------------
SCOTT M. 258 * 258 0
RICH/5/
- ---------------------------------------------------------------------------
RAY 13,501 * 13,501 0
BOVE/6/
- ---------------------------------------------------------------------------
WILLIAM M. 14,053 * 14,053 0
WUNDERLICH/6/
- ---------------------------------------------------------------------------
W&B 27,554 * 27,554 0
LIQUIDATION
CORP./6/
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================
DEPOSITARY SHARES
-----------------
- ----------------------------------------------------------------------------
BENEFICIALLY
BENEFICIALLY OWNED OFFERED OWNED AFTER
PRIOR TO THIS OFFERING/2/ FOR SALE THIS OFFERING/2/
------------------------- -------- ----------------
- ----------------------------------------------------------------------------
NUMBER OF PERCENT OF
DEPOSITARY DEPOSITARY
SHARES SHARES
------ ------
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
0
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
============================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================
SERIES D PREFERRED STOCK
------------------------
- ----------------------------------------------------------------------------
BENEFICIALLY
BENEFICIALLY OWNED OFFERED OWNED AFTER
PRIOR TO THIS OFFERING/2//4/ FOR SALE THIS OFFERING/2//4/
---------------------------- -------- -------------------
- ----------------------------------------------------------------------------
NUMBER PERCENT
OF SHARES OF
OF SERIES D SERIES D
PREFERRED PREFERRED
STOCK STOCK
----- -----
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
=============================================================================
</TABLE>
* Less than one percent. Based on 16,669,429 shares of common stock
outstanding on July 31, 1997.
(1) The names of additional Selling Securityholders will be provided in an
amendment to this registration statement.
(2) 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 securities beneficially owned.
(3) Assuming the conversion of all Depositary Shares and/or shares of Series D
Preferred Stock. The Depositary Shares and the Series D Preferred Stock
may not be converted into Common Stock until after October 7, 1997.
(4) Assuming the conversion of all Depositary Shares into shares of Series D
Preferred Stock or the basis of one share of Series D Preferred Stock for
each one hundred Depositary Shares.
(5) Selling Securityholder is a W&B Holder. These Shares are not subject to an
escrow arrangement. J. Michael Short, Brett B. Brandenberg and Scott M.
Rich are all employees of Kenny Securities Corp.
(6) These shares are subject to an escrow arrangement and will not be available
for sale until such arrangement terminates. Ray Bove and William M.
Wunderlich are the sole shareholders of W&B Liquidation Corp. Since Ray
Bove and William M. Wunderlich control W&B Liquidation Corp. all three have
been listed as Selling Securityholders. However, only 27,554 shares are
actually being registered.
33
<PAGE>
The Common Stock and Depositary Shares owned by the Selling
Securityholders represent all of the securities covered by the Registration
Statement. The Depositary Shares were originally issued by the Company and
purchased by the Initial Purchasers in the July 9 Equity Offering. The
Initial Purchasers, in turn, resold the Depositary Shares in private sales
pursuant to exemption from registration under the Securities Act of 1933, as
amended. W&B Holders acquired the 31,380 shares of Common Stock constituting
the Universal Shares from the Company in connection with the acquisition by
the Company of Universal.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds of the sale of the
Securities offered hereby. The Securities may be sold from time to time to
purchasers directly by the Selling Securityholders. Alternatively, the
Selling Securityholders may from time to time offer the Securities through
brokers, dealers or agents who may receive compensation in the form of
discounts, concessions or commissions from the Selling Securityholders and/or
the purchasers of the Securities for whom they may act as agent. The Selling
Securityholders and any such brokers, dealers or agents who participate in
the distribution of the Securities may be deemed to be "underwriters", and
any profits on the sale of the Securities by them and any discounts,
commissions or concessions received by any such brokers, dealers or agents
might be deemed to be underwriting discounts and commissions under the
Securities Act. To the extent the Selling Securityholders may be deemed to be
underwriters, the Selling Securityholders may be subject to certain statutory
liabilities of the Securities Act, including, but not limited to, Sections
11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.
The Securities offered hereby may be sold from time to time in one or
more transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated
prices. The Securities may be sold by one or more of the following methods,
without limitation: (a) a block trade in which the broker or dealer so
engaged will attempt to sell the Securities as agent but may position and
resell a portion of the block as principal to facilitate the transaction: (b)
purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus; (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; (d) an
exchange distribution in accordance with the rules of such exchange; (e)
face-to-face transactions between sellers and purchasers without a broker-
dealer; (f) through the writing of options; and (g) other. At any time a
particular offer of the Securities is made, a revised Prospectus or
Prospectus Supplement, if required, will be distributed which will set forth
the aggregate amount and type of Securities being offered and the terms of
the offering, including the name or names of any underwriters, dealers or
agents, any discounts, commissions and other items constituting compensation
from the Selling Securityholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers. Such Prospectus
Supplement and, if necessary, a post-effective amendment to the Registration
Statement of which this Prospectus is a part, will be filed with the
Commission to reflect the disclosure of additional information with respect
to the distribution of the Securities. In addition, the Securities covered by
this Prospectus may be sold in private transactions or under Rule 144 rather
than pursuant to this Prospectus.
To the best knowledge of the Company, there are currently no plans,
arrangements or understandings between any Selling Securityholders and any
broker, dealer, agent or underwriter regarding the sale of the Securities by
the Selling Securityholders. There is no assurance that any Selling
Securityholder will sell any or all of the Securities offered by it hereunder
or that any such Selling Securityholder will not transfer, devise or gift
such Securities by other means not described herein.
The Selling Securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation;
Regulation M, which may limit the timing of purchases and sales of any of the
Securities by the Selling Securityholders and any other such person.
Furthermore, under Regulation M under the Exchange Act, any person engaged in
the distribution of the Securities may not simultaneously engage in market-
making activities with respect to the particular Securities being distributed
for a period of nine business days prior to the commencement of such
distribution. All of the foregoing may
34
<PAGE>
affect the marketability of the Securities and the ability of any person or
entity to engage in market-making activities with respect to the Securities.
Pursuant to (1) the Preferred Stock Registration Rights Agreement
entered into in connection with the offer and sale of the Depositary Shares
by the Company and (2) section 7.6(c) of the Asset Acquisition Agreement in
connection with the acquisition of the Universal Shares, each of the Company
and the applicable Selling Securityholders will be indemnified by the other
against certain liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith.
The Company has agreed to pay substantially all of the expenses incidental to
the registration, offering and sale of the Securities to the public other
than commissions, fees and discounts of underwriters, brokers, dealers and
agents.
LEGAL MATTERS
The legality of the securities offered hereby has been 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 6,745 shares of the
Common Stock.
EXPERTS
The consolidated financial statements and schedule of Intermedia
Communications Inc. appearing in Intermedia Communication Inc.'s Annual
Report (Form 10-K) for the year ended December 31, 1996, have been audited by
Ernst & Young LLP, independent certified public accountants, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements and schedule are incorporated herein
by reference in reliance upon such report given the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of DIGEX, Incorporated, appearing
in DIGEX, Incorporated's Annual Report (Form 10-KSB) for the year ended
December 31, 1996, have been audited by Ernst & Young, LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given the
authority of such firm as experts in accounting and auditing.
35
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
The following statement sets forth the expenses payable in connection
with this Registration Statement (estimated except for the registration fee),
all of which will be borne by the Company:
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee.... $59,434.88
Legal fees and expenses.......................... $12,000.00
Accountant's fees and expenses................... $10,000.00
Miscellaneous.................................... $10,565.12
Total............................................ $92,000.00
==========
</TABLE>
ITEM 15. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation provides that the Company
will to the fullest extent permitted by the DGCL indemnify all persons whom
it may indemnify pursuant thereto. The Company's By-laws contain a similar
provision requiring indemnification of the Company's directors and officers
to the fullest extent authorized by the DGCL. The DGCL permits a corporation
to indemnify its directors and officers (among others) against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by them in connection with any action, suit
or proceeding brought (or threatened to be brought) by third parties, if such
directors or officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe their conduct was unlawful. In a derivative action, i.e.,
----
one by or in the right of the corporation, indemnification may be made for
expenses (including attorneys' fees) actually and reasonably incurred by
directors and officers in connection with the defense or settlement of such
action if they had acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged liable to the
Company unless and only to the extent that the Court of Chancery or the court
in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses. The DGCL further provides that, to the extent
any director or officer has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in this paragraph, or
in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith. In addition, the
Company's Certificate of Incorporation contains a provision limiting the
personal liability of the Company's directors for monetary damages for
certain breaches of their fiduciary duty. The Company has indemnification
insurance under which directors and officers are insured against certain
liability that may occur in their capacity as such.
II-1
<PAGE>
ITEM 16. Exhibits and Financial Data Schedules.
(a) Exhibits
<TABLE>
<S> <C>
1.1 --Purchase Agreement, dated as of July 2, 1997, among the Company and
the Initial Purchasers.
2.1 --Agreement and Plan of Merger, dated as of June 4, 1997, among the
Company, Daylight Acquisition Corp. and DIGEX, Incorporated. Exhibit
99(c)(1) to the Company's Schedule 14D-1 filed with the Commission on
June 11, 1997 is incorporated herein by reference.
2.2* --Asset Acquisition Agreement, dated as of December 6, 1996, among
Universal Telecom, Inc. d/b/a Universal Telecom Technologies, the
Company, William M. Wunderlich and Ray Bove.
4.1 --Indenture, dated as of June 2, 1995, between the Company and
SunBank National Association, as trustee. Exhibit 4.1 to the
Company's Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on June 20, 1995 (No. 33-93622) is
incorporated herein by reference.
4.1(a)--Amended and Restated Indenture, dated as of April 26, 1996,
governing the Company's 13 1/2% Series B Senior Notes due 2005,
between the Company and SunTrust Bank, Central Florida, National
Association, as trustee. Exhibit 4.1 to the Company's Current Report
on Form 8-K filed with the Commission on April 29, 1996 is
incorporated herein by reference.
4.2 --Indenture, dated as of May 14, 1996, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.1 to Amendment No. 1 to the Company's Registration
Statement on Form S-3 (Commission File No. 33-34738) filed with the
Commission on April 18, 1996 is incorporated herein by reference.
4.3 --Indenture, dated as of July 9, 1997, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.1 to the Company's Current Report on Form 8-K filed with
the Commission on July 17, 1997 is incorporated herein by reference.
4.4 --Preferred Stock Registration Rights Agreement, dated as of July 9,
1997, among the Company and the Initial Purchasers.
4.5 --Certificate of Designation of Voting Power, Designation
Preferences and Relative, Participating, Optional and Other Special
Rights and Qualifications, Limitations and Restrictions of 7% Series
D Junior Convertible Preferred Stock of the Company, filed with the
Secretary of State of the State of Delaware on July 8, 1997. Exhibit
4.2 to the Company's Current Report on Form 8-K filed with the
Commission on July 17, 1997 is incorporated herein by reference.
4.6 --Deposit Agreement, dated as of July 9, 1997, between the Company
and Continental Stock Transfer & Trust Company. Exhibit 4.3 to the
Company's Current Report on Form 8-K filed with the Commission on
July 17, 1997 is incorporated herein by reference.
5.1* --Opinion of Kronish, Lieb, Weiner & Hellman LLP.
8.1* --Opinion of Kronish, Lieb, Weiner & Hellman LLP re: Tax matters is
contained in their opinion filed as Exhibit 5.1 to this Registration
Statement.
12.1 --Statement Re: Computation of Ratios.
12.2 --Statement Re: Computation of Ratios.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
23.1* --Consent of Kronish, Lieb, Weiner & Hellman LLP is contained in their
opinion filed as Exhibit 5.1 to this Registration Statement.
23.2 --Consent of Ernst & Young LLP.
23.3 --Consent of Ernst & Young LLP.
24.1 --Power of Attorney is set forth on the signature page of this
Registration Statement.
</TABLE>
-----------
*To be filed by amendment.
(b) Financial Data Schedules
Financial Data Schedules are not required to be filed since all financial
statements have been previously included in filings with the Commission.
II-3
<PAGE>
ITEM 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (i) and (ii) above do not apply if the
-------- -------
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Exchange Act (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Tampa, State of Florida, on this
___ day of August, 1997.
INTERMEDIA COMMUNICATIONS, INC.
By:__________________________________
David C. Ruberg,
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below authorizes David C. Ruberg and Robert M. Manning, or either of them, as
attorney-in-fact to sign and file in each capacity stated below, all
amendments and post-effective amendments to this Registration Statement.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Principal Executive Officers:
Chairman of the Board, August , 1997
_____________________________________ President and Chief
David C. Ruberg Executive Officer
Principal Financial and Accounting Officers:
Chief Financial Officer August , 1997
_____________________________________________ and Senior Vice President
Robert M. Manning
Controller and Chief August , 1997
_____________________________________________ Accounting Officer
Jeanne M. Walters
Other Directors:
Director August , 1997
_____________________________________________
John C. Baker
Director August , 1997
_____________________________________________
George F. Knapp
Director August , 1997
_____________________________________________
Philip A. Campbell
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Tampa, State of Florida, on this
___ day of August, 1997.
INTERMEDIA COMMUNICATIONS OF
FLORIDA, INC.
By: /s/David C. Ruberg
---------------------------------------
David C. Ruberg,
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below authorizes David C. Ruberg and Robert M. Manning, or either of them, as
attorney-in-fact to sign and file in each capacity stated below, all
amendments and post-effective amendments to this Registration Statement.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Principal Executive Officers:
/s/ David C. Ruberg Chairman of the Board, August , 1997
_____________________________________ President and Chief
David C. Ruberg Executive Officer
Principal Financial and Accounting Officers:
/s/ Robert M. Manning Chief Financial Officer August , 1997
_____________________________________________ and Senior Vice President
Robert M. Manning
/s/ Jeanne M. Walters Controller and Chief August , 1997
_____________________________________________ Accounting Officer
Jeanne M. Walters
Other Directors:
/s/ John C. Baker Director August , 1997
- ---------------------------------------------
John C. Baker
/s/ George F. Knapp Director August , 1997
_____________________________________________
George F. Knapp
/s/ Philip A. Campbell Director August , 1997
_____________________________________________
Philip A. Campbell
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Exhibit Page
------ ------- ----
<S> <C> <C>
1.1 --Purchase Agreement, dated as of July 2, 1997, among the Company and
the Initial Purchasers.
2.1 --Agreement and Plan of Merger, dated as of June 4, 1997, among the
Company, Daylight Acquisition Corp. and DIGEX, Incorporated. Exhibit
99(c)(1) to the Company's Schedule 14D-1 filed with the Commission on
June 11, 1997 is incorporated herein by reference.
2.2* --Asset Acquisition Agreement, dated as of December 6, 1996, among
Universal Telecom, Inc. d/b/a Universal Telecom Technologies, the
Company, William M. Wunderlich and Ray Bove.
4.1 --Indenture, dated as of June 2, 1995, between the Company and
SunBank National Association, as trustee. Exhibit 4.1 to the
Company's Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on June 20, 1995 (No. 33-93622) is
incorporated herein by reference.
4.1(a)--Amended and Restated Indenture, dated as of April 26, 1996,
governing the Company's 13 1/2% Series B Senior Notes due 2005,
between the Company and SunTrust Bank, Central Florida, National
Association, as trustee. Exhibit 4.1 to the Company's Current Report
on Form 8-K filed with the Commission on April 29, 1996 is
incorporated herein by reference.
4.2 --Indenture, dated as of May 14, 1996, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.1 to Amendment No. 1 to the Company's Registration
Statement on Form S-3 (Commission File No. 33-34738) filed with the
Commission on April 18, 1996 is incorporated herein by reference.
4.3 --Indenture, dated as of July 9, 1997, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.1 to the Company's Current Report on Form 8-K filed with
the Commission on July 17, 1997 is incorporated herein by reference.
4.4 --Preferred Stock Registration Rights Agreement, dated as of July 9,
1997, among the Company and the Initial Purchasers.
4.5 --Certificate of Designation of Voting Power, Designation
Preferences and Relative, Participating, Optional and Other Special
Rights and Qualifications, Limitations and Restrictions of 7% Series
D Junior Convertible Preferred Stock of the Company, filed with the
Secretary of State of the State of Delaware on July 8, 1997. Exhibit
4.2 to the Company's Current Report on Form 8-K filed with the
Commission on July 17, 1997 is incorporated herein by reference.
4.6 --Deposit Agreement, dated as of July 9, 1997, between the Company
and Continental Stock Transfer & Trust Company. Exhibit 4.3 to the
Company's Current Report on Form 8-K filed with the Commission on
July 17, 1997 is incorporated herein by reference.
5.1* --Opinion of Kronish, Lieb, Weiner & Hellman LLP.
8.1* --Opinion of Kronish, Lieb, Weiner & Hellman LLP re: Tax matters is
contained in their opinion filed as Exhibit 5.1 to this Registration
Statement.
12.1 --Statement Re: Computation of Ratios.
12.2 --Statement Re: Computation of Ratios.
23.1* --Consent of Kronish, Lieb, Weiner & Hellman LLP is contained in their
opinion filed as Exhibit 5.1 to this Registration Statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Exhibit Page
------ ------- ----
<S> <C> <C>
23.2 --Consent of Ernst & Young LLP.
23.3 --Consent of Ernst & Young LLP.
24.1 --Power of Attorney is set forth on the signature page of this
Registration Statement.
</TABLE>
-----------
*To be filed by amendment.
<PAGE>
EXHIBIT 1.1
_______________________________________________________________________________
INTERMEDIA COMMUNICATIONS INC.
6,000,000 Depositary Shares Each Representing a One-Hundredth Interest in a
Share of 7% Series D Junior Convertible Preferred Stock
Purchase Agreement
July 2, 1997
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
_______________________________________________________________________________
<PAGE>
INTERMEDIA COMMUNICATIONS INC.
6,000,000 Depositary Shares Each Representing a One-Hundredth Interest in a
Share of 7% Series D Junior Convertible Preferred Stock
PURCHASE AGREEMENT
------------------
July 2, 1997
New York, New York
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies & Gentlemen:
Intermedia Communications Inc., a Delaware corporation (the "Company"),
-------
proposes to issue and sell to Bear, Stearns & Co. Inc. and Salomon Brothers Inc
(together, the "Initial Purchasers") 6,000,000 Depositary Shares (the
------------------
"Depositary Shares"), each representing a one-hundredth interest in a share of
-----------------
its 7% Series D Junior Convertible Preferred Stock, par value $1.00 per share
(the "Series D Preferred Stock"). The Series D Preferred Stock and the related
------------------------
Depositary Shares are to be authorized and issued pursuant to the provisions of
a Certificate of Designation of Voting Power, Designation Preferences and
Relative, Participating, Optional or Other Special Rights and Qualifications,
Limitations and Restrictions (the "Certificate of Designation") to be filed with
--------------------------
the Secretary of State of the State of Delaware. Continental Stock Transfer &
Trust Company will be transfer agent and registrar for the Series D Preferred
Stock and will act as the "Depositary" for the Depositary Shares.
----------
1. Issuance of Securities. The Company proposes to, upon the terms and
----------------------
subject to the conditions set forth herein, issue and sell to the Initial
Purchasers 6,000,000 Depositary Shares (the "Firm Shares"). The Company also
-----------
proposes to sell to the Initial Purchasers, upon the terms and conditions set
forth herein, up to an additional 900,000 Depositary Shares (the "Additional
----------
Shares", and together with the Firm Shares, the "Company Shares"). The Firm
- ------ --------------
Shares, the Additional Shares, and the Series D Preferred Stock are collectively
referred to herein as the "Securities."
----------
For purposes of this Purchase Agreement (this "Agreement"), the term
---------
"Subsidiaries" shall mean the entities listed on Exhibit E hereto. Capitalized
------------
terms used but not otherwise defined herein shall have the meanings given to
such terms in the Certificate of Designation. Upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act (as defined herein), the Series D Preferred Stock, the
Company Shares (and all securities issued in exchange therefor, in substitution
thereof or upon conversion thereof) shall bear the following legend:
1
<PAGE>
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, OR (c) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
2. Offering. The Company Shares will be offered and sold to the Initial
--------
Purchasers pursuant to an exemption from the registration requirements under the
Securities Act of 1933, as amended (the "Act"). The Company has prepared a
---
preliminary offering memorandum, dated June 25, 1997 (the "Preliminary Offering
--------------------
Memorandum"), and a final offering memorandum, dated July 2, 1997 (the "Offering
- ---------- --------
Memorandum"), relating to the Company and the Series D Preferred Stock (and the
- ----------
related Depositary Shares).
The Initial Purchasers have advised the Company that the Initial
Purchasers will make offers of sale (the "Exempt Resales") of the Company
--------------
Shares, on the terms set forth in the Offering Memorandum, as amended or
supplemented, solely to persons whom any of the Initial Purchasers reasonably
believe to be "qualified institutional buyers," as defined in Rule 144A under
the Act ("QIBs"), and to a limited number of persons who have represented to the
----
Company that they are institutional "Accredited Investors" referred to in Rule
501(a)(1), (2), (3) or (7) under the Act (each, an "Accredited Investor"). The
-------------------
QIBs and the Accredited Investors are referred to herein as the "Eligible
--------
Purchasers." The Initial Purchasers will offer the Series D Preferred Stock (and
- ----------
the related Depositary Shares) to such QIBs and Accredited Investors initially
at a price of $2500.00 (and $25.00 for the related Depositary Shares) per share.
Such price may be changed at any time without notice.
2
<PAGE>
Holders (including subsequent transferees) of the Series D Preferred
Stock (and the related Depositary Shares) will have the registration rights set
forth in the registration rights agreement relating thereto (the "Registration
------------
Rights Agreement") in substantially the form of Exhibit A hereto, to be dated
- ---------------- ---------
the Closing Date (as defined), for so long as such Series D Preferred Stock (and
the related Depositary Shares) constitute "Transfer Restricted Securities" (as
defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, the Company will agree to file with the Securities and
Exchange Commission (the "Commission"), under the circumstances set forth
----------
therein, a shelf registration statement pursuant to Rule 415 under the Act (the
"Shelf Registration Statement") relating to the resale by certain holders of the
----------------------------
Series D Preferred Stock and the related Depositary Shares, and to the sale by
certain holders of Common Stock of the Company received in connection with
conversion of the Series D Preferred Stock, and to use its best efforts to cause
the Shelf Registration Statement to be declared effective. This Agreement, the
Certificate of Designation, the Securities, and the Registration Rights
Agreement are hereinafter sometimes referred to collectively as the "Operative
---------
Documents."
- ---------
3. Purchase, Sale and Delivery. (a) On the basis of the
---------------------------
representations, warranties and covenants contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell to
each Initial Purchaser, and each Initial Purchaser agrees severally and not
jointly to purchase from the Company, the number of Firm Shares set forth
opposite its name on Schedule I hereto. The purchase price for the Firm Shares
shall be $25.00 per share.
The Company also agrees, subject to all the terms and conditions set
forth herein, to sell to the Initial Purchasers, and, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, the Initial Purchasers
shall have the right to purchase from the Company, solely for the purpose of
covering over-allotments in connection with sales of the Firm Shares, at the
purchase price per Depository Share, pursuant to an option (the "over-allotment
--------------
option") which may be exercised at any time and from time to time prior to 10:00
- ------
p.m., New York City time, on the 30th day after the date of the Offering
Memorandum (or, if such 30th day shall be a Saturday or Sunday or a holiday, on
the next business day thereafter when the New York Stock Exchange is open for
trading), up to an aggregate of 900,000 Additional Shares. Upon any exercise of
the over-allotment option, each Initial Purchaser, severally and not jointly,
agrees to purchase from the Company the number of Additional Shares (subject to
such adjustments as the Initial Purchasers may determine in order to avoid
fractional Depository Shares) that bears the same proportion to the aggregate
number of Additional Shares to be purchased by the Initial Purchasers as the
number of Firm Shares set forth opposite the name of such Initial Purchaser on
Schedule I hereto bears to the aggregate number of Firm Shares.
(b) Delivery of, and payment of the purchase price for, the
Firm Shares shall be made, against payment of the purchase price, at the offices
of Latham & Watkins, 885 Third Avenue, New York, NY 10022, or such other
location as may be mutually acceptable. Such delivery and payment shall be made
at 9:00 A.M. New York time, on July 9, 1997, or at such other time as shall be
agreed upon by the Initial Purchasers and the Company. The time and date of such
delivery and payment of the Firm Shares are herein called the "Closing Date."
------------
(c) Delivery of, and payment of the purchase price for any
Additional Shares to be purchased by the Initial Purchasers shall be made at the
offices of Latham & Watkins, 885 Third
3
<PAGE>
Avenue, New York, NY 10022, or such other location as may be mutually
acceptable, at such time and on such date (the "Option Closing Date"), which may
-------------------
be the same as the Closing Date but shall in no event be earlier than the
Closing Date nor later than ten business days after the giving of the notice
hereinafter referred to, as shall be specified in a written notice from Bear,
Stearns & Co, Inc., on behalf of the Initial Purchasers to purchase a number,
specified in such notice, of Additional Shares.
(d) The Firm Shares and any Additional Shares to be purchased
hereunder shall initially be issued in the form of one or more Global Securities
(the "Global Securities"), registered in the name of Cede & Co., as nominee of
-----------------
the Depository Trust Company ("DTC"), having a liquidation preference
---
corresponding to the aggregate liquidation preference of the Firm Shares and the
Additional Shares, as the case may be. The Global Securities shall be delivered
by the Company to the Initial Purchasers (or as the Initial Purchasers direct)
in each case with any transfer taxes payable upon initial issuance thereof duly
paid by the Company against payment of the purchase price by wire transfer of
immediately available funds to the order of the Company. The Global Securities
shall be made available to the Initial Purchasers for inspection not later than
9:30 a.m., New York City time, on the business day immediately preceding the
Closing Date.
4. Agreements of the Company. The Company covenants and agrees
--------------------------
with each of the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing, (i) of the
issuance by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any of the Company Shares for
offering or sale in any jurisdiction, or the initiation of any proceeding for
such purpose by any state securities commission or other regulatory authority
and (ii) of the happening of any event that, in the reasonable opinion of either
counsel to the Company or counsel to the Initial Purchasers, makes any statement
of a material fact made in the Preliminary Offering Memorandum or the Offering
Memorandum untrue or that requires the making of any additions to or changes in
the Preliminary Offering Memorandum or the Offering Memorandum in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. The Company shall use its best efforts to prevent the
issuance of any stop order or order suspending the qualification or exemption of
any of the Series D Preferred Stock (and the related Depositary Shares) under
any state securities or Blue Sky laws and, if at any time any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption of any of the Company Shares, under any state
securities or Blue Sky laws, the Company shall use its best efforts to obtain
the withdrawal or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company, without charge, as many
copies of the Preliminary Offering Memorandum and the Offering Memorandum, and
any amendments or supplements thereto, as the Initial Purchasers may reasonably
request. The Company consents to the use of the Preliminary Offering Memorandum
4
<PAGE>
and the Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchasers in connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering
Memorandum or the Offering Memorandum prior to the Closing Date unless the
Initial Purchasers shall previously have been advised thereof and shall not have
objected thereto within a reasonable time after being furnished a copy thereof.
The Company shall promptly prepare, upon the Initial Purchasers' request, any
amendment or supplement to the Preliminary Offering Memorandum or the Offering
Memorandum that may be necessary or advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any
Exempt Resale, any event shall occur as a result of which, in the judgment of
the Company or in the reasonable opinion of either counsel to the Company or
counsel to the Initial Purchasers, it becomes necessary or advisable to amend or
supplement the Preliminary Offering Memorandum or Offering Memorandum in order
to make the statements therein, in the light of the circumstances when such
Offering Memorandum is delivered to an Eligible Purchaser which is a prospective
purchaser, not misleading, or if it is necessary or advisable to amend or
supplement the Preliminary Offering Memorandum or Offering Memorandum to comply
with applicable law, (i) to notify the Initial Purchasers and (ii) forthwith to
prepare an appropriate amendment or supplement to such Offering Memorandum so
that the statements therein as so amended or supplemented will not, in the light
of the circumstances when it is so delivered, be misleading, or so that such
Offering Memorandum will comply with applicable law.
(e) To cooperate with the Initial Purchasers and counsel to
the Initial Purchasers in connection with the qualification or registration of
the Company Shares under the securities or Blue Sky laws of such jurisdictions
as the Initial Purchasers may reasonably request and to continue such
qualification in effect so long as required for the Exempt Resales; provided,
however, that the Company shall not be required in connection therewith to
register or qualify as a foreign corporation where it is not now so qualified or
to take any action that would subject it to service of process in suits or
taxation, in each case, other than as to matters and transactions relating to
the Preliminary Offering Memorandum, the Offering Memorandum or Exempt Resales,
in any jurisdiction where it is not now so subject.
(f) Whether or not the transactions contemplated hereby are
consummated or this Agreement becomes effective or is terminated, to pay all
costs, expenses, fees and taxes incident to the performance of the obligations
of the Company hereunder, including in connection with: (i) the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum and the
Offering Memorandum (including, without limitation, financial statements) and
all amendments and supplements thereto required pursuant hereto, (ii) the
preparation (including, without limitation, duplication costs) and delivery of
all preliminary and final Blue Sky memoranda prepared and delivered in
connection herewith and with the Exempt Resales, (iii) the issuance, transfer
and delivery by the Company of the Securities to the Initial Purchasers, (iv)
the qualification or registration of the Securities for offer and sale under the
securities or Blue Sky laws of the several states (including, without
limitation, the
5
<PAGE>
reasonable fees and disbursements of counsel to the Initial Purchasers relating
thereto), (v) furnishing such copies of the Preliminary Offering Memorandum and
the Offering Memorandum, and all amendments and supplements thereto, as may be
requested for use in connection with Exempt Resales, (vi) the preparation of
certificates for the Securities (including, without limitation, printing and
engraving thereof), (vii) the fees, disbursements and expenses of the Company's
counsel and accountants, (viii) all expenses and listing fees in connection with
the application for quotation of the Company Shares in the National Association
of Securities Dealers, Inc. ("NASD") Automated Quotation System - PORTAL
----
("PORTAL"), (ix) all fees and expenses (including fees and expenses of counsel
------
to the Company) of the Company in connection with the approval of the Securities
by DTC for "book-entry" transfer, (x) rating the Securities by rating agencies,
(xi) the reasonable fees and expenses of the Transfer Agent and its counsel in
connection with the Certificate of Designation, (xii) the performance by the
Company of its other obligations under this Agreement and the other Operative
Documents and (xiii) "roadshow" travel and other expenses incurred in connection
with the marketing and sale of the Securities (other than out-of-pocket expenses
incurred by the Initial Purchasers for travel, meals and lodgings).
(g) To use the proceeds from the sale of the Company Shares in
the manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) To do and perform all things required to be done and
performed under this Agreement by it prior to or after the Closing Date and to
satisfy all conditions precedent on its part to the delivery of the Company
Shares.
(i) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Company Shares, in a manner that would
require the registration under the Act of the sale to the Initial Purchasers or
Eligible Purchasers of the Company Shares, or to take any other action that
would result in the Exempt Resales not being exempt from registration under the
Act.
(j) For so long as any of the Securities remain outstanding
and during any period in which the Company is not subject to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
------------
available to any holder of the Company Shares, in connection with any sale
thereof and any prospective purchaser of such Company Shares from such holder,
the information required by Rule 144A(d)(4) under the Act.
(k) To comply with all of its agreements set forth in the
Registration Rights Agreement and all agreements set forth in the representation
letters of the Company to DTC relating to the approval of the Company Shares, by
DTC for "book-entry" transfer.
6
<PAGE>
(l) To use its best efforts to effect the inclusion of the
Company Shares, in PORTAL and to obtain approval of the Company Shares, by DTC
for "book-entry" transfer.
(m) During a period of five years following the Closing Date,
to deliver without charge to each of the Initial Purchasers, as they may
reasonably request, promptly upon their becoming available, copies of (i) all
reports or other publicly available information that the Company shall mail or
otherwise make available to its stockholders and (ii) all reports, financial
statements and proxy or information statements filed by the Company with the
Commission or any national securities exchange and such other publicly available
information concerning the Company or its Subsidiaries, including without
limitation, press releases.
(n) Prior to the Closing Date, to furnish to each of the
Initial Purchasers, as soon as they have been publicly disclosed by the Company,
a copy of any consolidated financial statements and any unaudited interim
financial statements of the Company for any period subsequent to the period
covered by the financial statements appearing in the Offering Memorandum.
(o) Neither the Company nor any of its Subsidiaries will take,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Company
Shares. Except as permitted by the Act, the Company will not distribute any
preliminary offering memorandum, offering memorandum or other offering material
in connection with the offering and sale of the Company Shares.
(p) To comply with the agreements in the Certificate of
Designation, the Indenture, the Registration Rights Agreement and any other
Operative Document.
5. Representations and Warranties. (a) The Company represents
--------------------------------
and warrants to each of the Initial Purchasers that:
(i) The Preliminary Offering Memorandum and the Offering
Memorandum have been prepared in connection with the Exempt Resales. The
Preliminary Offering Memorandum and the Offering Memorandum do not, and any
supplement or amendment to them will not, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties contained
in this paragraph shall not apply to statements in or omissions from the
Preliminary Offering Memorandum and the Offering Memorandum (or any supplement
or amendment thereto) made in reliance upon and in conformity with information
relating to the Initial Purchasers furnished to the Company in writing by the
Initial Purchasers expressly for use
7
<PAGE>
therein. No stop order preventing the use of the Preliminary Offering Memorandum
or the Offering Memorandum, or any amendment or supplement thereto, or any order
asserting that any of the transactions contemplated by this Agreement are
subject to the registration requirements of the Act, has been issued.
(ii) When the Company Shares, are issued and delivered
pursuant to this Agreement, neither the Series D Preferred Stock nor the Company
Shares will be of the same class (within the meaning of Rule 144A under the Act)
as securities of the Company that are listed on a national securities exchange
registered under Section 6 of the Exchange Act, or that are quoted in a United
States automated inter-dealer quotation system.
(iii) The Company and each of its Subsidiaries (A) has been
duly organized, is validly existing as a corporation in good standing under the
laws of its respective jurisdiction of incorporation, (B) has all requisite
corporate power and authority to carry on its business as it is currently being
conducted and as described in the Offering Memorandum and to own, lease and
operate its properties, and (C) is duly qualified and in good standing as a
foreign corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires such
qualification except, with respect to this clause (C), where the failure to be
so qualified or in good standing does not and could not reasonably be expected
to (x) individually or in the aggregate, result in a material adverse effect on
the properties, business, results of operations, condition (financial or
otherwise), affairs or prospects of the Company and the Subsidiaries, taken as a
whole, (y) interfere with or adversely affect the issuance or marketability of
the Securities pursuant hereto or (z) in any manner draw into question the
validity of this Agreement or any other Operative Document or the transactions
described in the Offering Memorandum under the caption "Use of Proceeds" (any of
the events set forth in clauses (x), (y) or (z), a "Material Adverse Effect").
-----------------------
(iv) All of the outstanding shares of capital stock of the
Company have been duly authorized, validly issued, and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights. At March 31, 1997 on a combined basis, after giving effect to the
issuance and sale of the Series D Preferred Stock (and the related Depositary
Shares) pursuant hereto, and to the offering of 11 1/4% Senior Discount Notes
due 2007 being issued concurrently herewith and the retirement of the 13 1/2%
Senior Notes due 2005 (the "13 1/2% Notes"), the Company had an authorized and
outstanding consolidated capitalization as set forth in the Offering Memorandum
under the caption "Capitalization."
(v) Except as set forth in the Offering Memorandum and on
Exhibit E attached hereto, there are not currently, and will not be as a result
- ---------
of the Offering, any outstanding subscriptions, rights, warrants, calls,
commitments of sale or options to acquire, or instruments convertible into or
exchangeable for, any capital stock or other equity interest of the Company or
any Subsidiary.
8
<PAGE>
(vi) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the other Operative Documents, and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the corporate
power and authority to issue, sell and deliver the Securities as provided herein
and therein.
(vii) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is the legal, valid and binding
agreement of the Company, enforceable against it in accordance with its terms,
except insofar as indemnification and contribution provisions may be limited by
applicable law or equitable principles and subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of equity.
(viii) The shares of Series D Preferred Stock (and the related
Depositary Shares) have been duly and validly authorized for issuance and sale
to the Initial Purchasers by the Company pursuant to this Agreement and, when
issued, delivered and paid for in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable and entitled to the
rights, privileges and preferences set forth in the Certificate of Designation,
and the issuance of such shares of Series D Preferred Stock (and the related
Depositary Shares) will not be subject to any preemptive or similar rights. The
Series D Preferred Stock (and the related Depositary Shares) will conform in all
material respects with the description thereof in the Offering Memorandum.
(ix) The Certificate of Designation has been duly authorized
by all necessary corporate and any necessary stockholder action and, on the
Closing Date will have been duly executed by the Company and filed with the
Secretary of State of the State of Delaware and will conform in all material
respects to the description thereof in the Offering Memorandum.
(x) Each of the Registration Rights Agreement and the Deposit
Agreement has been duly and validly authorized by the Company and, when duly
executed and delivered by the Company, will be the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity and limitations on the validity or
enforceability of provisions relating to rights of indemnity and contribution
set forth therein. The Offering Memorandum contains a fair summary of the terms
of the Registration Rights Agreement and the Deposit Agreement.
9
<PAGE>
(xi) None of the Company or any Subsidiary is and, after
giving effect to the Offering, will not be (A) in violation of its charter or
bylaws, (B) in default in the performance of any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to which it
is a party or by which it is bound or to which any of its properties is subject,
or (C) in violation of any local, state or Federal law, statute, ordinance,
rule, regulation, requirement, judgment or court decree (including, without
limitation, the Communications Act and the rules and regulations of the FCC and
environmental laws, statutes, ordinances, rules, regulations, judgments or court
decrees) applicable to the Company or any Subsidiary or any of their assets or
properties (whether owned or leased) other than, in the case of clauses (B) and
(C), any default or violation that (1) could not reasonably be expected to have
a Material Adverse Effect or (2) which was disclosed in the Offering Memorandum.
To the best knowledge of the Company, there exists no condition that, with
notice, the passage of time or otherwise, would constitute a default under any
such document or instrument that could reasonably be expected to result in a
Material Adverse Effect, except as disclosed in the Offering Memorandum.
(xii) None of (A) the execution, delivery or performance by
the Company of this Agreement and the other Operative Documents, (B) the
issuance and sale of the Series D Preferred Stock (and the related Depositary
Shares), (C) the performance by the Company of its obligations under this
Agreement and the other Operative Documents and (D) the consummation of the
transactions contemplated by this Agreement and the other Operative Documents
violate, conflict with or constitute a breach of any of the terms or provisions
of, or a default under (or an event that with notice or the lapse of time, or
both, would constitute a default), or require consent under, or result in the
imposition of a lien or encumbrance on any properties of the Company or any
Subsidiary, or an acceleration of any indebtedness of the Company or any
Subsidiary pursuant to, (i) the charter or bylaws of the Company or any
Subsidiary, (ii) any bond, debenture, note, indenture, mortgage, deed of trust
or other agreement or instrument to which the Company or any Subsidiary is a
party or by which any of them or their property is or may be bound, (iii) any
statute, rule or regulation applicable to the Company or any Subsidiary or any
of their respective assets or properties or (iv) any judgment, order or decree
of any court or governmental agency or authority having jurisdiction over the
Company or the Subsidiaries or any of their assets or properties, except in the
case of clauses (ii), (iii) and (iv) for such violations conflicts, breaches,
defaults, consents, impositions of liens or accelerations that (1) would not
singly, or in the aggregate, have a Material Adverse Effect or (2) were
disclosed in the Offering Memorandum. Other than as described in the Offering
Memorandum, no consent, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, (A) any court or
governmental agency, body or administrative agency (including, without
limitation, the FCC) or (B) any other person is required for (1) the execution,
delivery and performance by the Company of this Agreement and the other
Operative Documents, or (2) the issuance and sale of the Securities and the
transactions contemplated hereby and thereby, except (x) such as have been
obtained and made (or, in the case of the Registration Rights Agreement, will be
obtained and made) under the Act, the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act") and state securities or Blue Sky laws and
-------------------
regulations or such as may be required by the NASD or (y) where the failure to
obtain any such consent, approval, authorization or order of, or filing
10
<PAGE>
registration, qualification, license or permit would not reasonably be expected
to result in a Material Adverse Effect.
(xiii) There is (i) no action, suit or proceeding before or by
any court, arbitrator or governmental agency, body or official, domestic or
foreign, now pending or, to the best knowledge of the Company or any Subsidiary,
threatened or contemplated to which the Company or any of the Subsidiaries is or
may be a party or to which the business or property of the Company or any
Subsidiary is subject, (ii) no statute, rule, regulation or order that has been
enacted, adopted or issued by any governmental agency or that has been proposed
by any governmental body or (iii) no injunction, restraining order or order of
any nature by a federal or state court or foreign court of competent
jurisdiction to which the Company or any Subsidiary is or may be subject or to
which the business, assets, or property of the Company or any Subsidiary are or
may be subject, that, in the case of clauses (i), (ii) and (iii) above, (x) is
required to be disclosed in the Preliminary Offering Memorandum and the Offering
Memorandum and that is not so disclosed, or (y) could reasonably be expected to
individually or in the aggregate, result in a Material Adverse Effect.
(xiv) No action has been taken and no statute, rule,
regulation or order has been enacted, adopted or issued by any governmental
agency that prevents the issuance of the Series D Preferred (and the related
Depositary Shares) or prevents or suspends the use of the Offering Memorandum;
no injunction, restraining order or order of any nature by a federal or state
court of competent jurisdiction has been issued that prevents the issuance of
the Series D Preferred Stock (and the related Depositary Shares) or prevents or
suspends the sale of the Series D Preferred Stock (and the related Depositary
Shares) in any jurisdiction referred to in Section 4(e) hereof; and every
request of any securities authority or agency of any jurisdiction for additional
information has been complied with in all material respects.
(xv) Except as set forth in the Offering Memorandum, there is
(i) no significant unfair labor practice complaint pending against the Company
or any Subsidiary nor, to the best knowledge of the Company, threatened against
any of them, before the National Labor Relations Board, any state or local labor
relations board or any foreign labor relations board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against the Company or any
Subsidiary or, to the best knowledge of the Company, threatened against any of
them, (ii) no significant strike, labor dispute, slowdown or stoppage pending
against the Company or any Subsidiary nor, to the best knowledge of the Company,
threatened against the Company or any Subsidiary and (iii) to the best knowledge
of the Company, no union representation question existing with respect to the
employees of the Company or any Subsidiary that, in the case of clauses (i),
(ii) or (iii), could reasonably be expected to result in a Material Adverse
Effect. To the best knowledge of the Company, no collective bargaining
organizing activities are taking place with respect to the Company and the
Subsidiaries that could reasonably be expected to result in a Material Adverse
Effect. None of the Company or any Subsidiary has violated (A) any federal,
state or local law or foreign law relating to discrimination in hiring,
promotion or pay
11
<PAGE>
of employees (except as set forth in the Offering Memorandum), (B) any
applicable wage or hour laws or (C) any provision of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or the rules and regulations
-----
thereunder, which in the case of clause (A), (B) or (C) above could reasonably
be expected to result in a Material Adverse Effect.
(xvi) None of the Company or any Subsidiary has violated any
environmental, safety or similar law or regulation applicable to it or its
business or property relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), lacks any permit, license or other approval
------------------
required of it under applicable Environmental Laws or is violating any term or
condition of such permit, license or approval which could reasonably be expected
to, either individually or in the aggregate, have a Material Adverse Effect.
(xvii) Each of the Company and the Subsidiaries has (i) good
and marketable title to all of the properties and assets described in the
Offering Memorandum as owned by it, free and clear of all liens, charges,
encumbrances and restrictions, (ii) peaceful and undisturbed possession under
all material leases to which any of them is a party as lessee, (iii) all
licenses, certificates, permits, authorizations, approvals, franchises and other
rights from, and has made all declarations and filings with, all federal, state
and local authorities (including, without limitation, the FCC), all
self-regulatory authorities and all courts and other tribunals (each an
"Authorization") necessary to engage in the business conducted by any of them in
-------------
the manner described in the Offering Memorandum and (iv) no reason to believe
that any governmental body or agency is considering limiting, suspending or
revoking any such Authorization, except with respect to clauses (i) through (iv)
as described in the Offering Memorandum or as could not reasonably be expected
to result in a Material Adverse Effect. Except where the failure to be in full
force and effect would not have a Material Adverse Effect, all such
Authorizations are valid and in full force and effect and each of the Company
and the Subsidiaries is in compliance in all material respects with the terms
and conditions of all such Authorizations and with the rules and regulations of
the regulatory authorities having jurisdiction with respect thereto. Except as
could not reasonably be expected to result in a Material Adverse Effect, all
material leases to which the Company and the Subsidiaries is a party are valid
and binding and no default by the Company or any Subsidiary has occurred and is
continuing thereunder and, to the best knowledge of the Company and the
Subsidiaries no material defaults by the landlord are existing under any such
lease.
(xviii) Except as could not reasonably be expected to result
in a Material Adverse Effect, each of the Company and the Subsidiaries owns,
possesses or has the right to employ all patents, patent rights, licenses
(including all FCC, state, local or other jurisdictional regulatory licenses),
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, software, systems
or procedures), trademarks, service marks and trade names, inventions, computer
programs, technical data and information (collectively, the "Intellectual
------------
Property") presently employed by it or its Subsidiaries in connection with the
- --------
businesses now operated by it or which are
12
<PAGE>
proposed to be operated by it or its Subsidiaries free and clear of and without
violating any right, claimed right, charge, encumbrance, pledge, security
interest, restriction or lien of any kind of any other person and none of the
Company or any Subsidiary has received any notice of infringement of or conflict
with asserted rights of others with respect to any of the foregoing. The use of
the Intellectual Property in connection with the business and operations of the
Company and the Subsidiaries does not infringe on the rights of any person,
except as could not reasonably be expected to have a Material Adverse Effect.
(xix) None of the Company or any Subsidiary, or to the best
knowledge of the Company, any of their respective officers, directors, partners,
employees, agents or affiliates or any other person acting on behalf of the
Company or any Subsidiary has, directly or indirectly, given or agreed to give
any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, official or employee of any
governmental agency (domestic or foreign), instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is or may be in a position to help or
hinder the business of the Company or any Subsidiary (or assist the Company or
any Subsidiary in connection with any actual or proposed transaction) which (i)
might subject the Company or any Subsidiary, or any other individual or entity
to any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (ii) if not given in the past, might have had
a material adverse effect on the assets, business or operations of the Company
or any Subsidiary or (iii) if not continued in the future, might have a Material
Adverse Effect.
(xx) All material tax returns required to be filed by the
Company and each of the Subsidiaries in all jurisdictions have been so filed.
All taxes, including withholding taxes, penalties and interest, assessments,
fees and other charges due or claimed to be due from such entities or that are
due and payable have been paid, other than those being contested in good faith
and for which adequate reserves have been provided or those currently payable
without penalty or interest. To the knowledge of the Company, there are no
material proposed additional tax assessments against the Company, the assets or
property of the Company or any Subsidiary.
(xxi) None of the Company or any Subsidiary is (i) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or (ii) a
"holding company" or a "subsidiary company" or an "affiliate" of a holding
company within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(xxii) Except as disclosed in the Offering Memorandum, and
except with respect to the holders of certain shares of Common Stock issued
pursuant to an Asset Acquisition Agreement dated as of December 6, 1996 among
Universal Telecom, Inc.,
13
<PAGE>
Intermedia Communications, Inc. and certain individuals, there are no holders of
securities of the Company or the Subsidiaries who, by reason of the execution by
the Company of this Agreement or any other Operative Document to which it is a
party or the consummation by the Company of the transactions contemplated hereby
and thereby, have the right to request or demand that the Company or any of the
Subsidiaries register under the Act or analogous foreign laws and regulations
securities held by them.
(xxiii) Each of the Company and the Subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect thereto.
(xxiv) Each of the Company and the Subsidiaries maintains
insurance covering its properties, operations, personnel and businesses. Such
insurance insures against such losses and risks as are adequate in accordance
with customary industry practice to protect the Company and the Subsidiaries and
their respective businesses. None of the Company or any Subsidiary has received
notice from any insurer or agent of such insurer that substantial capital
improvements or other expenditures will have to be made in order to continue
such insurance. All such insurance is outstanding and duly in force on the date
hereof, subject only to changes made in the ordinary course of business,
consistent with past practice, which do not, singly or in the aggregate,
materially alter the coverage thereunder or the risks covered thereby.
(xxv) None of the Company or any Subsidiary has (i) taken,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Securities
or (ii) since the date of the Preliminary Offering Memorandum (A) sold, bid for,
purchased or paid any person (other than the Initial Purchasers) any
compensation for soliciting purchases of the Series D Preferred Stock (and the
related Depositary Shares) or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.
(xxvi) No registration under the Act of the Series D Preferred
Stock (and the related Depositary Shares) is required for the sale of the Series
D Preferred Stock (and the related Depositary Shares) to the Initial Purchasers
as contemplated hereby or for the Exempt Resales assuming (i) that the
purchasers who buy the Series D Preferred Stock (and the related Depositary
Shares) in the Exempt Resales are either QIBs or Accredited Investors and (ii)
the accuracy of the Initial Purchasers' representations regarding the absence of
general solicitation
14
<PAGE>
in connection with the sale of Series D Preferred Stock (and the related
Depositary Shares) to the Initial Purchasers and the Exempt Resales contained
herein. No form of general solicitation or general advertising was used by the
Company or any of its representatives (other than the Initial Purchasers, as to
which the Company makes no representation or warranty) in connection with the
offer and sale of any of the Series D Preferred Stock (and the related
Depositary Shares) or in connection with Exempt Resales, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Except for the 13 1/2% Series A Redeemable
Exchangeable Preferred Stock due 2009 and the 13 1/2% Series B Redeemable
Exchangeable Preferred Stock due 2009 (the "Series B Preferred Stock"), no
securities of the same class as the Series D Preferred Stock (and the related
Depositary Shares) have been issued and sold by the Company within the six-month
period immediately prior to the date hereof.
(xxvii) Set forth on Exhibit B hereto is a list of each
---------
employee pension or benefit plan with respect to which the Company or any
corporation considered an affiliate of the Company within the meaning of Section
407(d)(7) of ERISA is a party in interest or disqualified person. The execution
and delivery of this Agreement, the other Operative Documents and the sale of
the Series D Preferred Stock (and the related Depositary Shares) to be purchased
by the Eligible Purchasers will not involve any prohibited transaction within
the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code
of 1986. The representation made by the Company in the preceding sentence is
made in reliance upon and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by the Eligible Purchasers as
set forth in the Offering Memorandum under the caption "Notice to Investors."
(xxviii) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, and each amendment or supplement thereto,
as of its date, contains the information specified in, and meets the
requirements of, Rule 144A(d)(4) under the Act.
(xxix) Subsequent to the respective dates as of which
information is given in the Offering Memorandum and up to the Closing Date,
except as set forth in the Offering Memorandum, (i) none of the Company or any
Subsidiary has incurred any liabilities or obligations, direct or contingent,
which are material, individually or in the aggregate, to the Company and the
Subsidiaries taken as a whole, nor entered into any transaction not in the
ordinary course of business, (ii) there has not been, singly or in the
aggregate, any change or development, which could reasonably be expected to
result in a Material Adverse Effect and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock, except for dividends paid in respect of the Series B
Preferred Stock.
15
<PAGE>
(xxx) None of the Company or any Subsidiary or any agent
thereof acting on behalf of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the Securities
to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the
Board of Governors of the Federal Reserve System or analogous foreign laws and
regulations.
(xxxi) To the best knowledge of the Company, the accountants
who have certified or will certify the financial statements included or to be
included as part of the Offering Memorandum are independent accountants. The
consolidated historical financial statements, together with related schedules
and notes, set forth in the Offering Memorandum comply as to form in all
material respects with the requirements applicable to registration statements on
Form S-1 under the Act and present fairly in all material respects the financial
position and results of operations of the Company and the Subsidiaries at the
respective dates and for the respective periods indicated. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods presented. The
pro forma financial statements included in the Offering Memorandum have been
prepared on a basis consistent with such historical statements, except for the
pro forma adjustments specified therein, and give effect to assumptions made on
a reasonable basis and present fairly in all material respects the historical
and proposed transactions contemplated by this Agreement and the other Operative
Documents; and such pro forma financial statements comply as to form in all
material respects with the requirements applicable to pro forma financial
statements included in registration statements on Form S-1 under the Act. The
other financial and statistical information and data included in the Offering
Memorandum, historical and pro forma, are accurately presented in all material
respects and prepared on a basis consistent with the financial statements,
historical and pro forma, included in the Offering Memorandum and the books and
records of the Company and the Subsidiaries, as applicable.
(xxxii) The Company does not intend to, nor does it believe
that it will, incur debts beyond its ability to pay such debts as they mature.
The present fair saleable value of the assets of the Company on a consolidated
basis exceeds the amount that will be required to be paid on or in respect of
the existing debts and other liabilities (including contingent liabilities) of
the Company on a consolidated basis as they become absolute and matured. The
assets of the Company on a consolidated basis do not constitute unreasonably
small capital to carry out the business of the Company and the Subsidiaries,
taken as a whole, as conducted or as proposed to be conducted. Upon the issuance
of the Series D Preferred Stock (and the related Depositary Shares), the present
fair saleable value of the assets of the Company on a consolidated basis will
exceed the amount that will be required to be paid on or in respect of the
existing debts and other liabilities (including contingent liabilities) of the
Company on a consolidated basis as they become absolute and matured. Upon the
issuance of the Series D Preferred Stock (and the related Depositary Shares),
the assets of the Company on a consolidated basis will not constitute
unreasonably small capital to carry out its businesses as
16
<PAGE>
now conducted, including the capital needs of the Company on a consolidated
basis, taking into account the projected capital requirements and capital
availability.
(xxxiii) Except pursuant to this Agreement, there are no
contracts, agreements or understandings between the Company and any other person
that would give rise to a valid claim against the Company or either of the
Initial Purchasers for a brokerage commission, finder's fee or like payment in
connection with the issuance, purchase and sale of the Securities.
(xxxiv) Each certificate signed by any officer of the Company
and delivered to the Initial Purchasers or counsel for the Initial Purchasers
shall be deemed to be a representation and warranty by the Company to the
Initial Purchasers as to the matters covered thereby.
The Company acknowledges that each of the Initial Purchasers
and, for purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 8 hereof, counsel to the Company and counsel to the Initial
Purchasers, will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
(b) Each of the Initial Purchasers, severally and not jointly,
represents, warrants and covenants to the Company and agrees that:
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Company Shares.
(ii) Such Initial Purchaser (A) is not acquiring the Company
Shares with a view to any distribution thereof that would violate the Act or the
securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Company Shares only to
QIBs in reliance on the exemption from the registration requirements of the Act
provided by Rule 144A and to Accredited Investors in a private placement exempt
from the registration requirements of the Act.
(iii) No form of general solicitation or general advertising
has been or will be used by either of the Initial Purchasers or any of their
representatives in connection with the offer and sale of any of the Company
Shares, including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
17
<PAGE>
(iv) Each of the Initial Purchasers agrees that, in connection
with the Exempt Resales, it will solicit offers to buy the Company Shares, only
from, and will offer to sell the Company Shares, only to, Eligible Purchasers.
The Initial Purchasers further agree (A) that they will offer to sell the
Company Shares, only to, and will solicit offers to buy the Company Shares, only
from (1) QIB's who in purchasing such Company Shares will be deemed to have
represented and agreed that they are purchasing the Company Shares, for their
own accounts or accounts with respect to which they exercise sole investment
discretion and that they or such accounts are QIBs and (2) Accredited Investors
who make the representations contained in, and execute and return to one of the
Initial Purchasers, a certificate in the form of Annex B attached to the
-------
Offering Memorandum and (B) that, in the case of such Eligible Purchasers,
acknowledges and agrees that such Company Shares, will not have been registered
under the Act and may be resold, pledged or otherwise transferred only (x)(I) to
a person who the seller reasonably believes is a QIB in a transaction meeting
the requirements of Rule 144A, (II) in a transaction meeting the requirements of
Rule 144 under the Act, or (III) in accordance with another exemption from the
registration requirements of the Act (and based upon an opinion of counsel if
the Company so requests), (y) to the Company, (z) pursuant to an effective
registration statement under the Act and, in each case, in accordance with any
applicable securities laws of any state of the United States and (C) that the
holder will, and each subsequent holder is required to, notify any purchaser of
the security evidenced thereby of the resale restrictions set forth in (B)
above.
(v) Each of the Initial Purchasers understands that the
Company and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Section 8 hereof, counsel to the Company and counsel to
the Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
6. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless (i) each
of the Initial Purchasers, (ii) each person, if any, who controls any of the
Initial Purchasers within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act and (iii) the respective officers, directors, partners,
employees, representatives and agents of any of the Initial Purchasers or any
controlling person to the fullest extent lawful, from and against any and all
losses, liabilities, claims, damages and expenses whatsoever (including but not
limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any investigation or litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), joint or several, to which they or
any of them may become subject under the Act, the Exchange Act or otherwise,
insofar as such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Offering
Memorandum or the Offering Memorandum, or in any supplement thereto or amendment
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated
18
<PAGE>
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent, but only to
the extent, that (i) any such loss, liability, claim, damage or expense arises
out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of the Initial
Purchasers expressly for use therein and (ii) the foregoing indemnity with
respect to any untrue statement contained in or omitted from a preliminary
offering memorandum shall not inure to the benefit of any Initial Purchaser (or
any person controlling such Initial Purchaser), from whom the person asserting
any such loss, liability, claim, damage or expense purchased any of the Company
Shares, which are the subject thereof if it is finally judicially determined
that such loss, liability, claim, damage or expense resulted solely from the
fact that the Initial Purchaser sold the Company Shares, to a person to whom
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the Offering Memorandum, as amended or supplemented, and (x) the
Company shall have previously and timely furnished sufficient copies of the
Offering Memorandum, as so amended or supplemented, to such Initial Purchaser in
accordance with this Agreement and (y) the Offering Memorandum, as so amended or
supplemented, would have corrected such untrue statement or omission of a
material fact. This indemnity agreement will be in addition to any liability
which the Company may otherwise have, including, under this Agreement.
(b) Each Initial Purchaser, severally and not jointly, agrees
to indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any losses, liabilities, claims, damages and expenses
whatsoever (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending against
any investigation or litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Initial Purchaser expressly for use therein;
provided, however, that in no case shall any Initial Purchaser be liable or
responsible for any amount in excess of the discounts and commissions received
by such Initial Purchaser, as set forth on the cover page of the Offering
Memorandum. This indemnity agreement will be in addition to any liability which
any Initial Purchaser may otherwise have, including, under this Agreement.
19
<PAGE>
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by one of the indemnifying
parties in connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to take charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying party or parties shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties), in
any of which events such fees and expenses of counsel shall be borne by the
indemnifying parties; provided, however, that the indemnifying party under
subsection (a) or (b) above, shall only be liable for the legal expenses of one
counsel (in addition to any local counsel) for all indemnified parties in each
jurisdiction in which any claim or action is brought. Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall not be
liable for any settlement of any claim or action effected without its written
consent; provided, however, that such consent was not unreasonably withheld.
7. Contribution. In order to provide for contribution in circumstances
------------
in which the indemnification provided for in Section 6 is for any reason held to
be unavailable from the Company or is insufficient to hold harmless a party
indemnified thereunder, the Company and the Initial Purchasers shall contribute
to the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company, any contribution received by the Company from persons,
other than the Initial Purchasers, who may also be liable for contribution,
including persons who control the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act) to which the Company and one or
more of the Initial Purchasers may be subject, in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Initial Purchasers from the offering of the Company Shares, or, if such
allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice as
provided in Section 6, in
20
<PAGE>
such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Initial
Purchasers in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Initial Purchasers shall be deemed to be in the same proportion as (x) the total
proceeds from the offering of Company Shares, (net of discounts but before
deducting expenses) received by the Company and (y) the discounts received by
the Initial Purchasers, respectively, in each case as set forth in the table on
the cover page of the Offering Memorandum. The relative fault of the Company and
of the Initial Purchasers 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 the Company or the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to above.
Notwithstanding the provisions of this Section 7, (i) in no case shall any of
the Initial Purchasers be required to contribute any amount in excess of the
amount by which the discount applicable to the Company Shares, purchased by such
Initial Purchaser pursuant to this Agreement exceeds the amount of any damages
which such Initial Purchaser has otherwise been required to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 7, (A)
each person, if any, who controls any of the Initial Purchasers within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (B)
the respective officers, directors, partners, employees, representatives and
agents of any of the Initial Purchasers or any controlling person shall have the
same rights to contribution as such Initial Purchaser, and each person, if any,
who controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of this Section 7. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section 7, notify such party or parties from whom contribution may be
sought, but the failure to so notify such party or parties shall not relieve the
party or parties from whom contribution may be sought from any obligation it or
they may have under this Section 7 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its prior
written consent; provided, however, that such written consent was not
unreasonably withheld.
8. Conditions of Initial Purchasers' Obligations. The several
---------------------------------------------
obligations of the Initial Purchasers to purchase and pay for the Firm Shares
and the Additional Shares, as provided herein, shall be subject to the
satisfaction of the following conditions, except that with respect to the
Additional Shares, references to the Closing Date shall mean the Option Closing
Date:
(a) All of the representations and warranties of the Company
contained in this Agreement shall be true and correct on the date hereof and on
the Closing Date with the same force and effect as if made on and as of the date
hereof and the Closing Date,
21
<PAGE>
respectively. The Company shall have performed or complied in all material
respects with all of the agreements herein contained and required to be
performed or complied with by it at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers not later than 10:00 a.m., New York City
time, on the day following the date of this Agreement or at such later date and
time as to which the Initial Purchasers may agree, and no stop order suspending
the qualification or exemption from qualification of the Company Shares in any
jurisdiction referred to in Section 4(e) shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending or
threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date prevent the issuance of
the Company Shares; no action, suit or proceeding shall have been commenced and
be pending against or affecting or, to the best knowledge of the Company,
threatened against, the Company or the Subsidiaries before any court or
arbitrator or any governmental body, agency or official that (1) could
reasonably be expected to result in a Material Adverse Effect or (2) has not
been disclosed in the Offering Memorandum; and no stop order shall have been
issued preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or which could reasonably be expected to have a Material
Adverse Effect.
(d) Since the dates as of which information is given in the
Offering Memorandum and except as contemplated by the Offering Memorandum, (i)
there shall not have been any material adverse change, or any development that
is reasonably likely to result in a material adverse change, in the capital
stock or the long-term debt, or material increase in the short-term debt, of the
Company and the Subsidiaries from that set forth in the Offering Memorandum,
(ii) no dividend or distribution of any kind shall have been declared, paid or
made by the Company or any Subsidiary (other than any dividends or distributions
paid to the Company) on any class of its capital stock, except for dividends
paid in respect of the Series B Preferred Stock and (iii) neither the Company
nor any Subsidiary shall have incurred any liabilities or obligations, direct or
contingent, that are material, individually or in the aggregate, to the Company
and the Subsidiaries, taken as a whole, and that are required to be disclosed on
a balance sheet or notes thereto in accordance with generally accepted
accounting principles and are not disclosed on the latest balance sheet or notes
thereto included in the Offering Memorandum. Since the date hereof and since the
dates as of which information is given in the Offering Memorandum, there shall
not have occurred any material adverse change, or any development which may
reasonably be expected to involve a material adverse change, in the properties,
business, results of operations, condition (financial or otherwise), affairs or
prospects of the Company and the Subsidiaries taken as a whole.
22
<PAGE>
(e) The Initial Purchasers shall have received a certificate,
dated the Closing Date, signed on behalf of the Company by (i) David C. Ruberg,
Chairman of the Board, President and Chief Executive Officer and (ii) Robert M.
Manning, Senior Vice President and Chief Financial Officer, in form and
substance reasonably satisfactory to the Initial Purchasers, confirming, as of
the Closing Date, the matters set forth in paragraphs (a), (b), (c) and (d) of
this Section 8 and that, as of the Closing Date, the obligations of the Company
to be performed hereunder on or prior thereto have been duly performed in all
material respects.
(f) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, in form and substance satisfactory to
the Initial Purchasers and counsel to the Initial Purchasers, of Kronish, Lieb,
counsel for the Company, to the effect set forth in Exhibit C hereto.
---------
(g) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, in form and substance satisfactory to
the Initial Purchasers and counsel to the Initial Purchasers, of Kelley Drye &
Warren LLP, special regulatory counsel to the Company, to the effect set forth
in Exhibit D hereto.
---------
(h) The Initial Purchasers shall have received an opinion,
dated the Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers, of Latham & Watkins, counsel to the Initial Purchasers,
covering such matters as are customarily covered in such opinions.
(i) At the time this Agreement is executed and at the Closing
Date the Initial Purchasers shall have received from Ernst & Young LLP,
independent public accountants for the Company, dated as of the date of this
Agreement and as of the Closing Date, customary comfort letters addressed to the
Initial Purchasers and in form and substance satisfactory to the Initial
Purchasers and counsel to the Initial Purchasers with respect to the financial
statements and certain financial information of the Company contained in the
Offering Memorandum.
(j) Latham & Watkins shall have been furnished with such
documents, in addition to those set forth above, as they may reasonably require
for the purpose of enabling them to review or pass upon the matters referred to
in this Section 8 and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations, warranties
or conditions herein contained.
23
<PAGE>
(k) Prior to the Closing Date, the Company and the
Subsidiaries shall have furnished to the Initial Purchasers such further
information, certificates and documents as the Initial Purchasers may reasonably
request.
(l) The Company shall have authorized, executed and filed the
Certificate of Designation in accordance with Delaware law and each of the
Initial Purchasers shall have received an original, duly executed by the
Company.
(m) The Company shall have entered into each of the
Registration Rights Agreement and the Deposit Agreement and the Initial
Purchasers shall have received counterparts, conformed as executed, thereof.
(n) The Company shall have deposited the Series D Preferred
Stock with the Depositary.
(o) At or prior to the Closing Date, all FCC or state
approvals required in connection with the Offering shall have been obtained or
applications for such approvals submitted or prepared for submission promptly
following the Closing Date and the Company shall have delivered to the Initial
Purchasers evidence satisfactory to the Initial Purchasers that such FCC or
state approvals have been obtained or applications thereof have been made or
prepared for submission promptly following the Closing Date.
All opinions, certificates, letters and other documents
required by this Section 8 to be delivered by the Company will be in compliance
with the provisions hereof only if they are reasonably satisfactory in form and
substance to the Initial Purchasers. The Company will furnish the Initial
Purchasers with such conformed copies of such opinions, certificates, letters
and other documents as it shall reasonably request.
9. Initial Purchasers' Information. The Company and the Initial
-------------------------------
Purchasers severally acknowledge that the statements with respect to the
offering of the Series D Preferred Stock (and the related Depositary Shares) set
forth in the last paragraph of the cover page and the third, fourth, sixth and
seventh paragraphs under the caption "Plan of Distribution" in such Offering
Memorandum constitute the only information furnished in writing by the Initial
Purchasers expressly for use in the Offering Memorandum.
10. Survival of Representations and Agreements. All representations and
------------------------------------------
warranties, covenants and agreements of the Initial Purchasers and the Company
contained in this Agreement, including the agreements contained in Sections 4(f)
and 11(d), the indemnity agreements contained in Section 6 and the contribution
agreements contained in Section 7, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Initial
Purchasers or any controlling person thereof or by or on behalf of the Company
or any controlling person thereof, and
24
<PAGE>
shall survive delivery of and payment for the Series D Preferred Stock (and the
related Depositary Shares) to and by the Initial Purchasers. The representations
contained in Section 5 and the agreements contained in Sections 4(f), 6, 7 and
11(d) shall survive the termination of this Agreement, including any termination
pursuant to Section 11.
11. Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective upon execution and
delivery of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate
this Agreement at any time prior to the Closing Date by notice to the Company
from the Initial Purchasers, without liability (other than with respect to
Sections 6 and 7) on the Initial Purchasers' part to the Company if, on or prior
to such date, (i) the Company shall have failed, refused or been unable to
perform in any material respect any agreement on its part to be performed
hereunder, (ii) any other condition to the obligations of the Initial Purchasers
hereunder as provided in Section 8 is not fulfilled when and as required in any
material respect, (iii) in the reasonable judgment of the Initial Purchasers any
material adverse change shall have occurred since the respective dates as of
which information is given in the Offering Memorandum in the condition
(financial or otherwise), business, properties, assets, liabilities, prospects,
net worth, results of operations or cash flows of the Company and the
Subsidiaries taken as a whole, other than as set forth in the Offering
Memorandum, or (iv)(A) any domestic or international event or act or occurrence
has materially disrupted, or in the opinion of the Initial Purchasers will in
the immediate future materially disrupt, the market for the Company's securities
or for securities in general; or (B) trading in securities generally on the New
York or American Stock Exchanges shall have been suspended or materially
limited, or minimum or maximum prices for trading shall have been established,
or maximum ranges for prices for securities shall have been required, on such
exchange, or by such exchange or other regulatory body or governmental authority
having jurisdiction; or (C) a banking moratorium shall have been declared by
Federal or state authorities, or a moratorium in foreign exchange trading by
major international banks or persons shall have been declared; or (D) there is
an outbreak or escalation of armed hostilities involving the United States on or
after the date hereof, or if there has been a declaration by the United States
of a national emergency or war, the effect of which shall be, in the Initial
Purchasers' judgment, to make it inadvisable or impracticable to proceed with
the offering or delivery of the Company Shares on the terms and in the manner
contemplated in the Offering Memorandum; or (E) there shall have been such a
material adverse change in general economic, political or financial conditions
or if the effect of international conditions on the financial markets in the
United States shall be such as, in the Initial Purchasers' judgment, makes it
inadvisable or impracticable to proceed with the delivery of the Company Shares
as contemplated hereby.
25
<PAGE>
(c) Any notice of termination pursuant to this Section 11
shall be by telephone, telex, telephonic facsimile, or telegraph, confirmed in
writing by letter.
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to any of clauses (iii) or (iv)
of Section 11(b), in which case each party will be responsible for its own
expenses), or if the sale of the Series D Preferred Stock (and the related
Depositary Shares) provided for herein is not consummated because any condition
to the obligations of the Initial Purchasers set forth herein is not satisfied
or because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or comply with any provision hereof, the Company
will, subject to demand by the Initial Purchasers, reimburse the Initial
Purchasers for all out-of-pocket expenses (including the reasonable fees and
expenses of Initial Purchasers' counsel), incurred by the Initial Purchasers in
connection herewith.
12. Notice. All communications hereunder, except as may be
------
otherwise specifically provided herein, shall be in writing and, if sent to the
Initial Purchasers shall be mailed, delivered, or telexed, telegraphed or
telecopied and confirmed in writing to Bear, Stearns & Co. Inc. and Salomon
Brothers Inc, c/o Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York
10167, Attention: Corporate Finance Department, telecopy number: (212) 272-3092;
and if sent to the Company, shall be mailed, delivered or telexed, telegraphed
or telecopied and confirmed in writing to Intermedia Communications Inc., 3625
Queen Palm Drive, Tampa, Florida 33619, Attention: Robert M. Manning, Chief
Financial Officer, telecopy number: (813) 744-2470, with a copy to Kronish,
Lieb, Weiner & Hellman LLP, 1114 Avenue of the Americas, 46th Floor, New York,
New York 10036, Attention: Ralph J. Sutcliffe, telecopy number (212) 997-3527;
provided, however, that any notice pursuant to Section 7 shall be mailed,
delivered or telexed, telegraphed or telecopied and confirmed in writing.
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, the Initial Purchasers and the Company and the
controlling persons and agents referred to in Sections 6 and 7, and their
respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained. The
term "successors and assigns" shall not include a purchaser, in its capacity as
such, of Series D Preferred Stock (and the related Depositary Shares) from the
Initial Purchasers.
14. Construction. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
------------
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK. TIME IS OF
THE ESSENCE IN THIS AGREEMENT.
26
<PAGE>
15. Captions. The captions included in this Agreement are included
--------
solely for convenience of reference and are not to be considered a part of this
Agreement.
16. Counterparts. This Agreement may be executed in various
------------
counterparts which together shall constitute one and the same instrument.
[Signature page to follow]
27
<PAGE>
If the foregoing correctly sets forth the understanding among the
Initial Purchasers and the Company, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement between us.
Very truly yours,
INTERMEDIA COMMUNICATIONS INC.
By:____________________________________
Name:
Title:
Accepted and agreed to as of
the date first above written:
By: BEAR, STEARNS & CO. INC.
By:_____________________________
Name:
Title:
By: SALOMON BROTHERS INC
By:_____________________________
Name:
Title:
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Firm Shares
Initial Purchaser to be Purchased
- ----------------- ---------------
<S> <C>
Bear, Stearns & Co. Inc. ........................................ 3,000,000
Salomon Brothers Inc ............................................ 3,000,000
=========
Total 6,000,000
</TABLE>
Sched I-1
<PAGE>
EXHIBIT A
[Form of Registration Rights Agreement. See Exhibit 4.4 to this
Registration Statement.]
A-1
<PAGE>
EXHIBIT B
List of Employee Pension and Benefit Plans
of Intermedia Communications Inc.
and its Subsidiaries
1. Intermedia Communications Inc. 401(k) Profit Sharing Plan
B-1
<PAGE>
EXHIBIT C
[Form of Opinion of Kronish, Lieb, Weiner & Hellman LLP]
1. Each of the Company and the Subsidiaries is duly organized
and validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, and has all requisite corporate power and
authority to carry on its business as it is being conducted and as described in
the Offering Memorandum and to own, lease and operate its properties, and is
duly qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not, singly or in the aggregate, have a
Material Adverse Effect. All of the issued and outstanding shares of capital
stock of, or other ownership interests in, each Subsidiary have been duly
authorized and validly issued, are fully paid and non-assessable and were not
issued in violation of or subject to any preemptive or similar rights under the
Delaware General Corporation Law or known to such counsel, after reasonable
inquiry, and, except as set forth in the Offering Memorandum or on Schedule A
hereto, are owned by the Company of record, and to the knowledge of such
counsel, after reasonable inquiry, beneficially, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or other restriction on transferability or voting.
2. All of the outstanding shares of capital stock of the
Company have been duly authorized, validly issued, and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights. The authorized, issued and outstanding capital stock of the Company
conforms in all respects to the description thereof set forth in the Offering
Memorandum. Except as set forth in the Offering Memorandum or on Schedule A
hereto, there are no outstanding subscriptions, rights, warrants, calls,
commitments of sale or options to acquire, or instruments convertible into or
exercisable or exchangeable for, any capital stock or other equity interest in
the Company or any of its Subsidiaries known to such counsel after reasonable
inquiry.
3. When the Company Shares, are issued and delivered pursuant
to this Agreement, no Company Shares will be of the same class (within the
meaning of Rule 144A under the Act) as securities of the Company that are listed
on a national securities exchange registered under Section 6 of the Exchange Act
or that are quoted in a United States automated inter-dealer quotation system.
4. The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement, the
Certificate of Designation, the Deposit Agreement, the Registration Rights
Agreement and the other Operative Documents, as applicable, and to consummate
the transactions contemplated thereby, including, without limitation, the
corporate power and authority to issue, sell and deliver the Securities as
provided herein and therein.
5. This Agreement has been duly and validly authorized,
executed and delivered by the Company and, assuming due execution by the other
parties thereto, is the legally valid and binding agreement of the Company.
C-1
<PAGE>
6. The Certificate of Designation has been duly authorized by
all necessary corporate and stockholder action, executed by the Company and
filed with the Secretary of State of the State of Delaware.
7. Each of the Deposit Agreement and the Registration Rights
Agreement has been duly and validly authorized, executed and delivered by the
Company and, assuming due execution by the other parties thereto, is the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that we express no opinion as to the validity
or enforceability of rights of indemnity or contribution, or both and except as
such enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
8. The Series D Preferred Stock (and the related Depositary
Shares) have been duly and validly authorized for issuance and sale to the
Initial Purchasers by the Company pursuant to this Agreement and, when issued,
delivered and paid for in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable and entitled to the rights,
privileges and preferences set forth in the Certificate of Designation, and the
issuance of such shares of Series D Preferred Stock (and the related Depositary
Shares) will not be subject to any preemptive or similar rights.
9. Intentionally Omitted.
10. The Offering Memorandum contains a fair summary of each of
the Series D Preferred Stock, the Certificate of Designation, the Company
Shares,, the Deposit Agreement and the Registration Rights Agreement.
11. No registration under the Act of the Series D Preferred
Stock (and the related Depositary Shares) is required for the sale of the
Company Shares, to the Initial Purchasers as contemplated by this Agreement or
for the Exempt Resales assuming (i) that the Initial Purchasers are Qualified
Institutional Buyers, as defined in Rule 144A under the Act ("QIB"), (ii) that
the purchasers who buy the Company Shares, in the Exempt Resales are either QIBs
or Accredited Investors, (iii) the accuracy of the Initial Purchasers' and the
Company's representations regarding the absence of general solicitation in
connection with the sale of Company Shares, to the Initial Purchasers and the
Exempt Resales contained in this Agreement, (iv) the accuracy of the Company's
representations in Sections 5(a)(ii), (xxv),(xxvi) last sentence only and
(xxviii) of this Agreement and (v) with respect to Accredited Investors, the
accuracy of the representations made by each Accredited Investor as set forth in
the letters of representation executed by such Accredited Investor in the form
of Annex B to the Offering Memorandum.
12. The Offering Memorandum, as of its date (except for the
financial statements, including the notes thereto, and supporting schedules and
other financial, statistical and accounting data included therein or omitted
therefrom, as to which no opinion need be expressed), and each amendment
C-2
<PAGE>
or supplement thereto, as of its date, contains all the information specified
in, and meets the requirements of, Rule 144A(d)(4) under the Act.
13. None of (A) the execution, delivery or performance by the
Company of this Agreement and the other Operative Documents, (B) the issuance
and sale of the Series D Preferred Stock (and the related Depositary Shares),
(C) the performance by the Company of its obligations under this Agreement and
the other Operative Documents and (D) the consummation of the transactions
contemplated by this Agreement and the other Operative Documents violates,
conflicts with or constitutes a breach of any of the terms or provisions of, or
a default under (or an event that with notice or the lapse of time, or both,
would constitute a default), or require consent under, or result in the
imposition of a lien or encumbrance on any properties of the Company or any
Subsidiary, or an acceleration of any indebtedness of the Company or any
Subsidiary pursuant to, (i) the charter or bylaws of the Company or any
Subsidiary, (ii) any bond, debenture, note, indenture, mortgage, deed of trust
or other agreement or instrument to which the Company or any Subsidiary is a
party or by which any of them or their property is or may be bound identified to
such counsel by the Company as material (assuming all of such agreements are
governed by New York law), (iii) any local, state, federal or administrative
statute, rule or regulation applicable to the Company or any Subsidiary or any
of their assets or properties (except such counsel shall express no opinion as
to the matters addressed in the opinion of Kelley Drye & Warren LLP), or (iv)
any judgment, order or decree of any court or governmental agency or authority
having jurisdiction over the Company or any Subsidiary or any of their assets or
properties known to such counsel, except in the case of clauses (ii), (iii) and
(iv) for such violations, conflicts, breaches, defaults, consents, impositions
of liens or accelerations that (x) would not, singly or in the aggregate, have a
Material Adverse Effect or (y) are disclosed in the Offering Memorandum.
Assuming compliance with applicable state securities and Blue Sky laws, as to
which such counsel need express no opinion, and except for the filing of a
registration statement under the Act and qualification of the Indenture under
the Trust Indenture Act of 1939, as amended, in connection with the Registration
Rights Agreement, no consent, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, any court or
governmental agency, body or administrative agency is required for (1) the
execution, delivery and performance by the Company of this Agreement and the
other Operative Documents, (2) the issuance and sale of the Securities or (3)
consummation by the Company and the Subsidiaries of the transactions described
in the Offering Memorandum under the caption "Use of Proceeds," except (i) such
as have been obtained and made or have been disclosed in the Offering
Memorandum, (ii) where the failure to obtain such consents or waivers would not,
singly or in the aggregate, have a Material Adverse Effect and (iii) such
counsel shall express no opinion as to the matters addressed in the opinion of
Kelley Drye & Warren LLP. Except with respect to the retirement of the 13 1/2
Notes as described in the Offering Memorandum, to such counsel's knowledge,
after reasonable inquiry, no consents or waivers from any other person are
required for the execution, delivery and performance by the Company of this
Agreement and the other Operative Documents for the issuance and sale of the
Securities, other than such consents and waivers as have been obtained.
14. None of the Company or the Subsidiaries is (i) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or (ii) a
"holding company" or a "subsidiary company" or an "affiliate" of a holding
company within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
C-3
<PAGE>
15. Except as set forth in this Agreement or in the
Registration Rights Agreement (and if the Concurrent Offering is consummated,
the Registration Rights Agreement in respect of the 11 1/4 1/4% Senior Discount
Notes due 2007), and except with respect to the holders of certain shares of
Common Stock issued pursuant to an Asset Acquisition Agreement dated as of
December 6, 1996 among Universal Telecom, Inc., Intermedia Communications, Inc.
and certain individuals, to such counsel's knowledge, after reasonable inquiry,
there are no holders of any securities of the Company who, by reason of the
execution by the Company of this Agreement or any other Operative Document to
which it is a party or the consummation by the Company of the transactions
contemplated thereby, have the right to request or demand that the Company
register under the Act securities held by them.
16. None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Securities, the application of the
proceeds from the issuance and sale of the Securities and the consummation of
the transactions contemplated thereby as set forth in the Offering Memorandum,
will violate Regulations G, T, U or X promulgated by the Board of Governors of
the Federal Reserve System.
17. To the knowledge of such counsel, no search of court
records having been made, there is (i) no action, suit, investigation or
proceeding before or by any court, arbitrator or governmental agency, body or
official, domestic or foreign, now pending, or threatened or contemplated to
which any of the Company or any Subsidiary is or may be a party or to which the
business or property of the Company or any Subsidiary is or may be subject, (ii)
no statute, rule, regulation or order that has been enacted, adopted or issued
by any governmental agency or that has been proposed by any governmental body,
or (iii) no injunction, restraining order or order of any nature by a federal or
state court of competent jurisdiction to which any of the Company or any
Subsidiary is or may be subject or to which the business, assets or property of
the Company or any of the Subsidiaries are or may be subject has been issued
that, in the case of clauses (i), (ii) and (iii) above, (x) is required to be
disclosed in the Preliminary Offering Memorandum and the Offering Memorandum and
that is not so disclosed, (y) could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect, except as disclosed
in the Offering Memorandum or (z) might interfere with, adversely affect or in
any manner question the validity of the issuance and sale of the Series D
Preferred Stock (and the related Depositary Shares) or any of the other
transactions contemplated by this Agreement or any of the other Operative
Documents, except that such counsel shall express no opinion as to the matters
addressed in the opinion of Kelley Drye & Warren LLP.
18. The statements under the caption "Description of Preferred
Stock" and "Description of the Depositary Shares" in the Offering Memorandum,
insofar as such statements constitute a summary of documents referred to therein
present a fair summary thereof. The terms of the Certificate of Designation
conform to the descriptions thereof contained in the Offering Memorandum.
19. The statements contained in the Offering Memorandum under
the caption "Certain Federal Income Tax Consequences" are a fair and accurate
summary of the matters discussed therein.
We have participated in conferences with officers and other
representatives of the Company, representatives of the independent certified
public accountants of the Company and the Initial Purchasers
C-4
<PAGE>
and their representatives at which the contents of the Preliminary Offering
Memorandum and the Offering Memorandum and related matters were discussed and,
although we have not undertaken to investigate or verify independently, and do
not assume any responsibility for, the accuracy, completeness or fairness of the
statements contained in the Preliminary Offering Memorandum or the Offering
Memorandum (except as indicated above), on the basis of the foregoing, no facts
have come to our attention which led us to believe that the Preliminary Offering
Memorandum or the Offering Memorandum, as of its date or the Closing Date,
contained an untrue statement of a material fact or omitted to state any fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(except we express no opinion as to financial statements and related notes, the
financial statement schedules and other financial and statistical data included
therein).
C-5
<PAGE>
EXHIBIT E
Subsidiaries of Intermedia Communications Inc.
- ---------------------------------------------
Daylight Acquisition Corp.
FiberNet North Carolina, Inc.1/
FiberNet Huntsville, Inc.
FiberNet St. Louis, Inc.
FiberNet Telecommunications Cincinnati, Inc.
Phone One, Inc.
FiberNet USA, Inc.
EMI Telecommunications Inc.
Eastern Message Communications Inc.
Intermedia Licensing Company
- -----------------------------
1. AT&T Credit Corporation own warrants to purchase 10% of the outstanding
capital stock of FiberNet North Carolina, Inc.
E-1
<PAGE>
EXHIBIT 4.4
[FORM OF REGISTRATION RIGHTS AGREEMENT]
================================================================================
REGISTRATION RIGHTS AGREEMENT
Depositary Shares Representing a One-Hundredth Interest in a Share of
7% Series D Junior Convertible Preferred Stock
Dated as of July 9, 1997
by and among
INTERMEDIA COMMUNICATIONS INC.,
BEAR, STEARNS & CO. INC.
and
SALOMON BROTHERS INC
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
---------
entered into as of July 9, 1997 by and among Intermedia Communications Inc., a
Delaware corporation (the "Company"), and Bear, Stearns & Co. Inc., and Salomon
-------
Brothers Inc (each an "Initial Purchaser" and together, the "Initial
----------------- -------
Purchasers"), each of whom have agreed to purchase Depositary Shares (the
"Depositary Shares"), each representing a one-hundredth interest in a share of
- ------------------
the Company's 7% Series D Junior Convertible Preferred Stock (the "Series D
--------
Preferred Stock") pursuant to the Purchase Agreement (as defined below).
- ---------------
This Agreement is made pursuant to the Purchase Agreement in respect
to the Series D Preferred Stock, dated July 2, 1997 (the "Purchase Agreement"),
------------------
by and among the Company and the Initial Purchasers. In order to induce the
Initial Purchasers to purchase the Depositary Shares, the Company has agreed to
provide the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Initial
Purchasers set forth in Section 8 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
---
Average Stock Price: The average of the high and low sales prices of the
-------------------
Common Stock (as defined herein) as reported by the Nasdaq National Market or
any national securities exchange upon which the Common Stock is then listed, for
each of the ten consecutive trading days immediately preceding the [twentieth
calendar day] preceding the Dividend Payment Date.
Business Day: Any day except a Saturday, Sunday or other day in the City
-------------
of New York, on which banks are authorized to close.
Certificate of Designation: The Certificate of Designation pursuant to
--------------------------
which the Depositary Shares, Series D Preferred Stock, and Common Stock issuable
upon conversion are to be issued, as such Certificate of Designation is amended
or supplemented from time to time in accordance with the terms thereof.
Closing Date: The date hereof.
------------
Commission: The Securities and Exchange Commission.
----------
Common Stock: The common stock of the Company to be issued upon conversion
------------
of the Series D Preferred Stock. For the avoidance of doubt, Common Stock does
not refer to common stock of the Company to be issued as dividends in respect of
the Series D Preferred Stock.
Damages Payment Date: Each Dividend Payment Date.
--------------------
<PAGE>
Definitive Securities: As defined in the Deposit Agreement.
----------------------
Deposit Agreement: The Deposit Agreement dated the date hereof between the
-----------------
Company and Continental Stock Transfer & Trust Company.
Dividend Payment Date: As defined in the Certificate of Designation.
---------------------
Effectiveness Target Date: As defined in Section 5.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exempt Resales: The transactions in which the Initial Purchasers propose to
--------------
sell the Depositary Shares to certain "qualified institutional buyers," as such
------------------------------
term is defined in Rule 144A under the Act, and to certain institutional
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) and
- ---------------------
(7) of Regulation D under the Act.
Global Certificate Holder: As defined in the Deposit Agreement.
-------------------------
Holders: As defined in Section 2 hereof.
-------
Liquidated Damages: As defined in Section 5 hereof.
------------------
Liquidation Preference: As defined in the Certificate of Designation.
----------------------
NASD: National Association of Securities Dealers, Inc.
----
Offering Memorandum: The final offering memorandum, dated July 2,
-------------------
1997, relating to the Company, the Depositary Shares, and the Series D Preferred
Stock.
Person: An individual, partnership, corporation, trust, unincorporated
------
organization, or a government or agency or political subdivision thereof.
Preliminary Offering Memorandum: The preliminary offering memorandum, dated
-------------------------------
June 25, 1997, relating to the Company, the Depositary Shares, and the Series D
Preferred Stock.
Prospectus: The prospectus included in a Shelf Registration Statement at
----------
the time such Shelf Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Registration Default: As defined in Section 5 hereof.
--------------------
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
Shelf Filing Deadline: As defined in Section 4 hereof.
---------------------
Shelf Registration Statement: As defined in Section 4 hereof.
-----------------------------
Transfer Agent: The transfer agent with respect to the Depositary Shares,
--------------
and the Series D Preferred Stock.
2
<PAGE>
Transfer Restricted Securities: Each Depositary Share, each share of Series
------------------------------
D Preferred Stock, and each share of Common Stock issuable upon conversion of
the Series D Preferred Stock until the earliest to occur of (i) the date on
which such Depositary Share, share of Series D Preferred Stock, or share of
Common Stock, as the case may be, is effectively registered under the Act and
disposed of in accordance with the Shelf Registration Statement or (ii) the date
on which such Depositary Share, share of Series D Preferred Stock, or share of
Common Stock, as the case may be, is distributed to the public pursuant to Rule
144 under the Act or may be distributed to the public pursuant to Rule 144(k)
under the Securities Act.
Underwritten Registration or Underwritten Offering: A registration in which
------------------------- ---------------------
securities of the Company are sold to an underwriter for re-offering to the
public.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
------
SECTION 3. [INTENTIONALLY OMITTED].
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. The Company shall:
------------------
(x) cause to be filed on or prior to 60 days after the
consummation of the offering of Series D Preferred Stock (and the related
Depositary Shares) (the "Shelf Filing Deadline"), a shelf registration
---------------------
statement pursuant to Rule 415 under the Act (the "Shelf Registration
------------------
Statement"), relating to resales of all Transfer Restricted Securities the
---------
Holders of which shall have provided the information required pursuant to
Section 4(b) hereof, and
(y) use its reasonable best efforts to cause such Shelf
Registration Statement to become effective on or prior to 120 days after
the Shelf Filing Deadline.
The Company shall use its best efforts to keep the Shelf Registration Statement
discussed in this Section 4(a) continuously effective, supplemented and amended
as required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Transfer Restricted
Securities by the Holders thereof entitled to the benefit of this Section 4(a),
and to ensure that it conforms with the requirements of this Agreement, the Act
and the policies, rules and regulations of the Commission as announced from time
to time, for a period expiring on the earlier to occur of: (i) the date when all
Transfer Restricted Securities have been sold; and (ii) 730 days from the date
of the Closing Date, provided, that the Company will have the option of
suspending the effectiveness of the Shelf Registration Statement for periods of
up to an aggregate of 60 days in any calendar year if the Board of Directors of
the Company determines that compliance with the disclosure obligations necessary
to maintain the effectiveness of the Shelf Registration Statement at such time
could reasonably be expected to have a material adverse effect on the Company or
a pending corporate transaction of the Company (a "Permitted Suspension").
--------------------
3
<PAGE>
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in the Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 Business Days after receipt of a request
therefor, such information specified in item 507 of Regulation S-K under the Act
for use in connection with the Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein, including the information set forth in
the questionnaire included as Annex C to the Offering Memorandum. No Holder of
Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant
to Section 5 hereof unless and until such Holder shall have provided all such
information required to be provided by such Holder for inclusion therein. Each
Holder as to which the Shelf Registration Statement is being effected agrees to
furnish promptly to the Company, for so long as the Shelf Registration Statement
is effective, all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) the Company fails to file the Shelf Registration Statement with
the Commission on or prior to the Shelf Filing Deadline, (ii) the Shelf
Registration Statement has not been declared effective by the Commission on or
prior to the 120th day after the Shelf Filing Deadline (the "Effectiveness
-------------
Target Date"), whether or not the Company has breached any obligation to use its
- -----------
best efforts to cause the Shelf Registration Statement to be declared effective,
or (iii) the Shelf Registration Statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of Transfer
Restricted Securities for any period of ten consecutive days or for any 20 days
in any 180-day period without being succeeded within the time period provided
for herein by a post effective amendment to such Shelf Registration Statement
that cures such failure and that is itself declared effective within ten
Business Days of the filing thereof, provided, that such effectiveness was not
suspended in connection with a Permitted Suspension (a "Registration Default"),
--------------------
then commencing on the day following the date on which such Registration Default
occurs, the Company agrees to pay to each Holder of Transfer Restricted
Securities affected by such Registration Default, liquidated damages
("Liquidated Damages") at a rate of $0.25 per $2500 Liquidation Preference of
- --------------------
Series D Preferred Stock (or $.0025 per $25.00 Liquidation Preference of
Depositary Shares) constituting Transfer Restricted Securities held by such
Holder until such Registration Default is cured. All accrued Liquidated Damages
will be paid in shares of Common Stock valued at the Average Stock Price by the
Company on each Dividend Payment Date.
All accrued Liquidated Damages shall be paid to the Global Certificate
Holder by wire transfer of immediately available funds or by federal funds check
and to Holders of Definitive Securities by mailing checks to their registered
addresses by the Company on each Damages Payment Date. All obligations of the
Company set forth in the preceding paragraph that are outstanding with respect
to any Transfer Restricted Security at the time such security ceases to be a
Transfer Restricted Security shall survive until such time as all such
obligations with respect to such security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in
4
<PAGE>
accordance with the intended method or methods of distribution thereof (as
indicated in the information furnished to the Company pursuant to Section 4(b)
hereof), and pursuant thereto the Company will prepare and file with the
Commission a Shelf Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(b) General Provisions. In connection with the Shelf Registration
------------------
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Transfer Restricted Securities, the Company shall:
(i) use its best efforts to keep such Shelf Registration
Statement continuously effective, subject to a Permitted Suspension, and
provide all requisite financial statements for the period specified in
Section 4 of this Agreement. Upon the occurrence of any event that would
cause any such Shelf Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or emission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company shall file promptly an
appropriate amendment to such Shelf Registration Statement (1) in the case
of clause (A), correcting any such misstatement or omission, and (2) in the
case of either clause (A) or (B), use its best efforts to cause such
amendment to be declared effective and such Shelf Registration Statement
and the related Prospectus to become usable for their intended purpose(s)
as soon as practicable thereafter;
(ii) except in the event of a Permitted Suspension, prepare and
file with the Commission such amendments and post-effective amendments to
the Shelf Registration Statement as may be necessary to keep the Shelf
Registration Statement effective for the applicable period set forth in
Section 4 hereof, or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Shelf Registration Statement
have been sold, cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule
424 under the Act, and to comply fully with Rules 424 and 430A, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Shelf Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Shelf Registration Statement or
supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, confirm such advice in writing,
(A) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the Shelf Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the Shelf
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the Shelf
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Shelf Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes
in the Shelf Registration Statement in order to make the statements therein
not misleading, or that requires the making of any
5
<PAGE>
additions to or changes in the Prospectus in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Shelf Registration Statement, or any
state securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company shall use its best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time;
(iv) make available to each selling Holder named in the Shelf
Registration Statement or Prospectus and each of the underwriters) in
connection with such sale, if any, before filing with the Commission,
copies of the Shelf Registration Statement or any Prospectus included
therein or any amendments or supplements to any such Shelf Registration
Statement or Prospectus (including all documents incorporated by reference
after the initial filing of such Shelf Registration Statement), which
documents will be subject to the review and comment of such Holders and
underwriters) in connection with such sale, if any, for a period of at
least five Business Days, and the Company will not file any such Shelf
Registration Statement or Prospectus or any amendment or supplement to any
such Shelf Registration Statement or Prospectus (including all such
documents incorporated by reference) to which the selling Holders of the
Transfer Restricted Securities covered by such Shelf Registration Statement
or the underwriters) in connection with such sale, if any, shall reasonably
object within five Business Days after the receipt thereof. A selling
Holder or underwriter, if any, shall be deemed to have reasonably objected
to such filing if such Shelf Registration Statement, amendment, Prospectus
or supplement, as applicable, as proposed to be filed, contains a material
misstatement or omission or fails to comply with the applicable
requirements of the Act;
(v) promptly upon the filing of any document that is to be
incorporated by reference into a Shelf Registration Statement or
Prospectus, make available copies of such document to the selling Holders
and to the underwriters in connection with such sale, if any, make the
Company's representatives available for discussion of such document and
other customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriters, if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Shelf Registration Statement and any attorney or accountant
retained by such selling Holders or any of such underwriters, all financial
and other records, pertinent corporate documents and properties of the
Company and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with such Shelf Registration Statement
or any post-effective amendment thereto subsequent to the filing thereof
and prior to its effectiveness; provided that any person to whom
information is provided under this clause (vi) agrees in writing to
maintain the confidentiality of such information to the extent such
information is not in the public domain;
(vii) if requested by any selling Holders or the underwriters in
connection with such sale, if any, promptly include in the Shelf
Registration Statement or Prospectus, pursuant to a supplement or post-
effective amendment if necessary, such information as such selling Holders
and underwriters, if any, may reasonably request to have included therein,
6
<PAGE>
including, without limitation, information relating to the "Plan of
-------
Distribution" of the Transfer Restricted Securities, information with
------------
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriters, the purchase price being paid therefor and any
other terms of the offering of the Transfer Restricted Securities to be
sold in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Shelf Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate
Liquidation Preference of Series D Preferred Stock (and the related
Depositary Shares) covered thereby, or by the underwriters, if any;
(ix) furnish to each selling Holder and each of the underwriters,
if any, in connection with such sale, if any, without charge, at least one
copy of the Shelf Registration Statement, as first filed with the
Commission, and of each amendment thereto, and make available all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(x) deliver to each selling Holder and each of the underwriters,
if any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company hereby consents to the use of
the Prospectus and any amendment or supplement thereto by each of the
selling Holders and each of the underwriters, if any, in connection with
the offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(xi) enter into such agreements (including, unless not required
pursuant to Section 10 hereof, an underwriting agreement) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to the Shelf Registration
Statement contemplated by this Agreement as may be reasonably requested by
any Holder of Transfer Restricted Securities or underwriter in connection
with any sale or resale pursuant to the Shelf Registration Statement
contemplated by this Agreement, and in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration
is an Underwritten Registration, the Company shall:
(A) furnish to each selling Holder and each underwriter, if any, upon
the effectiveness of the Shelf Registration Statement:
(1) a certificate, dated the date of effectiveness of the Shelf
Registration Statement signed by (x) the President or any Vice
President and (y) a principal financial or accounting officer of the
Company, confirming with respect to the Prospectus or any purchase or
underwriting agreement and the Transfer Restricted Securities, as of
the date thereof, the matters set forth in paragraphs (a), (b), (c)
and (d) of Section 8 of the Purchase Agreement and such other matters
as the Holders and/or underwriters may reasonably request;
7
<PAGE>
(2) an opinion, dated the date of effectiveness of the Shelf
Registration Statement of counsel for the Company, covering (i) due
authorization and enforceability of the Depositary Shares, Series D
Preferred Stock, and Common Stock, (ii) a statement to the effect that
such counsel has participated in conferences with officers and other
representatives of the Company and representatives of the independent
public accountants for the Company and have considered the matters
required to be stated therein and the statements contained therein,
although such counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such counsel
advises that, on the basis of the foregoing (relying as to materiality
to a large extent upon facts provided to such counsel by officers and
other representatives of the Company and without independent check or
verification), no facts came to such counsel's attention that caused
such counsel to believe that the Shelf Registration Statement, at the
time such Shelf Registration Statement or any post-effective amendment
thereto became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that
the Prospectus contained in such Shelf Registration Statement as of
its date contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading and (iii) such other matters of the type customarily
covered in opinions of counsel for an issuer in connection with
similar securities offerings, as may reasonably be requested by such
parties. Without limiting the foregoing, such counsel may state
further that such counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or fairness of the
financial statements, notes and schedules and other financial,
statistical and accounting data included in the Shelf Registration
Statement contemplated by this Agreement or the related Prospectus;
and
(3) if the registration is a registration in which securities of
the Company are sold to an underwriter for reoffering to the public,
obtain a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement, addressed to the
Board of Directors of the Company or any underwriter from the
Company's independent accountants, in the customary form and covering
matters of the type customarily covered in comfort letters to boards
of directors in underwritten offerings;
(B) set forth in full or incorporated by reference in the underwriting
agreement, if any, in connection with any sale or resale pursuant to the
Shelf Registration Statement the indemnification provisions and procedures
of Section 8 hereof with respect to all parties to be indemnified pursuant
to said Section; and
(C) deliver such other documents and certificates as may be reasonably
requested by such parties to evidence compliance with clause (A) above and
with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company pursuant to this clause (xi),
if any.
The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder, and if at any time
the representations and warranties of the Company contemplated in (A)(1) above
cease to be true and correct, the Company shall so advise the underwriter(s), if
any, and selling Holders promptly and if requested by such Persons, shall
confirm such advice in writing;
8
<PAGE>
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriters, if any,
and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or
Blue Sky laws of such Jurisdictions as the selling Holders or
underwriters), if any, may request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the Shelf Registration
Statement; provided, however, that the Company shall not be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Shelf Registration Statement, in any Jurisdiction where it
is not now so subject;
(xiii) [Intentionally Omitted];
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders and the
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold and not
bearing any restrictive legends; and to register such Transfer Restricted
Securities in such denominations and such names as the Holders or the
underwriters), if any, may request at least two Business Days prior to such
sale of Transfer Restricted Securities;
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Shelf Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may
be necessary to enable the seller or sellers thereof or the underwriters,
if any, to consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause (xii) above;
(xvi) if any fact or event contemplated by Section 6(b)(iii)(D)
above shall exist or have occurred, except in the event of a Permitted
Suspension prepare a supplement or post-effective amendment to the Shelf
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of Transfer Restricted Securities,
the Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Shelf Registration
Statement covering such Transfer Restricted Securities and provide the
Transfer Agent or the Trustee, as the case may be, with printed
certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with the Depository Trust Company;
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter") that is
---------------------------------
required to be retained in accordance with the rules and regulations of the
NASD, and use its best efforts to cause such Shelf Registration Statement
to become effective and approved by such governmental agencies or
authorities as may be
9
<PAGE>
necessary to enable the Holders selling Transfer Restricted Securities to
consummate the disposition of such Transfer Restricted Securities;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to the Shelf Registration
Statement, as soon as practicable, a consolidated earnings statement
meeting the requirements of Rule 158 (which need not be audited) covering a
twelve-month period beginning after the effective date of the Shelf
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xx) [Intentionally Omitted];
(xxi) [Intentionally Omitted];
(xxii) cause all Transfer Restricted Securities covered by the
Shelf Registration Statement to be listed on each securities exchange on
which similar securities issued by the Company are then listed if requested
by the Holders of a majority in aggregate Liquidation Preference of Series
D Preferred Stock (and the related Depositary Shares) or the managing
underwriters, if any; and
(xxiii) provide promptly to each Holder upon written request
each document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
-----------------------
Transfer Restricted Security that, upon receipt of any notice from the Company
of the existence of any fact of the kind described in Section 6(b)(iii)(D)
hereof, such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the Shelf Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(b)(xvi) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and has
------
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event the Company shall give any such notice,
the time period regarding the effectiveness of such Shelf Registration Statement
set forth in Section 4 hereof, shall be extended by the number of days during
the period from and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) hereof to and including the date when each selling Holder
covered by such Shelf Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof
or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether the
Shelf Registration Statement becomes effective, including without limitation:
(i) all registration and filing fees and expenses (including filings made with
the NASD, including, if applicable, the fees and expenses (excluding
underwriting discounts or commissions, of any "qualified independent
underwriter" and its counsel, as
10
<PAGE>
may be required by the rules and regulations of the NASD)); (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
Depositary Shares, Series D Preferred Stock and Common Stock and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company and, in accordance with Section 7(b)
below, the Holders of Transfer Restricted Securities; (v) all application and
filing fees in connection with listing the Depositary Shares, Series D Preferred
Stock, or Common Stock on a national exchange or automated quotation system if
required hereunder; and (vi) all fees and disbursements of independent certified
public accountants of the Company (including the expenses of any special audit
and comfort letters required by or incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with the Shelf Registration Statement required by this
Agreement, the Company will reimburse the Initial Purchaser and the Holders of
Transfer Restricted Securities being registered pursuant to the Shelf
Registration Statement for the reasonable fees and disbursements of not more
than one counsel, or such other counsel as may be chosen by the Holders of a
majority in number of shares or principal amount, as the case may be, of the
Transfer Restricted Securities for whose benefit the Shelf Registration
Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each Holder,
(ii) each person, if any, who controls a Holder within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act and (iii) the respective
officers, directors, partners, employees, representatives and agents of any
Holder or any controlling person to the fullest extent lawful, from and against
any and all losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
investigation or litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become or are subject under the Act,
the Exchange Act or otherwise, insofar as such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Shelf Registration Statement or the Prospectus, or in any
supplement thereto or amendment thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent, but only to
the extent, that (i) any such loss, liability, claim, damage or expense arises
out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
expressly for use therein and (ii) the foregoing indemnity with respect to any
untrue statement contained in or omitted from a Shelf Registration Statement or
the Prospectus shall not inure to the benefit of any Holder (or any person
controlling such Holder), from whom the person asserting any such loss,
liability, claim, damage or expense purchased (or received upon conversion), any
of the Depositary Shares, Series D Preferred Stock or Common Stock which are the
subject thereof if it is finally judicially determined
11
<PAGE>
that such loss, liability, claim, damage or expense resulted solely from the
fact that the Holder sold Depositary Shares, Series D Preferred Stock or Common
Stock, to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the Shelf Registration Statement
and the Prospectus, as amended or supplemented, and (x) the Company shall have
previously and timely furnished sufficient copies of the Shelf Registration
Statement or Prospectus, as so amended or Supplemented, to such Holder in
accordance with this Agreement and (y) the Shelf Registration Statement or
Prospectus, as so amended or supplemented, would have corrected such untrue
statement or omission of a material fact. This indemnity agreement will be in
addition to any liability which the Company may otherwise have, including, under
this Agreement.
(b) Each Holder, severally and not jointly, agrees to indemnify and
hold harmless the Company and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against any losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
investigation or litigation, commenced or threatened, or any claim whatsoever
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Shelf Registration Statement or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that any such loss, liability, claim, damage or expense arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
expressly for use therein. This indemnity will be in addition to any liability
which a Holder may otherwise have, including under this Agreement. In no event,
however, shall the liability of any selling Holder thereunder be greater in
amount than the dollar amount of the proceeds received by such Holder upon its
sale of the Depositary Shares, Series D Preferred Stock, or Common Stock giving
rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action, (ii) the indemnifying parties
shall not have employed counsel to take charge of the defense of such action
within a reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to one or all of
12
<PAGE>
the indemnifying parties (in which case the indemnifying party or parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
counsel shall be borne by the indemnifying parties; provided, however, that the
indemnifying party under subsection (a) or (b) above, shall only be liable for
the legal expenses of one counsel (in addition to any local counsel) for all
indemnified parties in each Jurisdiction in which any claim or action is
brought. Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or action
effected without its prior written consent, provided, however, that such consent
was not unreasonably withheld.
(d) In order to provide for contribution in circumstances in which the
indemnification provided for in this Section 8 is for any reason held to be
unavailable from the Company or is insufficient to hold harmless a party
indemnified thereunder, the Company and each Holder shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company, any contribution received by the Company from persons,
other than the Holders, who may also be liable for contribution, including
persons who control the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act) to which the Company and any Holder may be
subject, in such proportion as is appropriate to reflect the relative benefits
received by the Company from the offering of the Series D Preferred Stock (and
the related Depositary Shares), and any such Holder from its sale of Depositary
Shares, Series D Preferred Stock, or Common Stock, or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in this Section 8,
in such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Holders in
connection with the statements or emissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and any
Holder shall be deemed to be in the same proportion as (x) the total proceeds
from the offering (net of discounts but before deducting expenses) of the Series
D Preferred Stock (and the related Depositary Shares) received by the Company
and (y) the total proceeds received by such Holder upon its sale of Depositary
Shares, Series D Preferred Stock, or Common Stock which would otherwise give
rise to the indemnification obligation. The relative fault of the Company and
of the Holders 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 the
Company or the Holders and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and each Holder agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) no Holder shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of its Depositary Shares, Series D Preferred Stock, or
Common Stock, exceeds the sum of (A) the amount paid by such Holder for such
Depositary Shares, Series D Preferred Stock, or Common Stock, plus (B) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission and (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section II (f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, (A) each person, if any, who controls a Holder within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (B)
the respective officers, directors, partners, employees, representatives and
13
<PAGE>
agents of a Holder or any controlling person shall have the same rights to
contribution as such Holder, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
shall have the same rights to contribution as the Company, subject in each case
to clauses (i) and (ii) of this Section 8(d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section 8,
notify such party or parties from whom contribution may be sought, but the
failure to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have under this Section 8 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its prior
written consent; provided, however, that such written consent was not
unreasonably withheld.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available, upon
request of any Holder of Transfer Restricted Securities, to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
The Holders of Transfer Restricted Securities may elect to sell their
Transfer Restricted Securities pursuant to one or more Underwritten
Registrations; provided, however, that in no event shall any Holder commence any
such Underwritten Registration if a period of less than 180 days has elapsed
since the consummation of the most recent Underwritten Registration hereunder;
and provided further, that in no event shall the Holders effect more than three
such Underwritten Registrations hereunder. No Holder may participate in any
Underwritten Registration hereunder unless such Holder (a) agrees to sell such
Holder's Transfer Restricted Securities on the basis provided in customary
underwriting arrangements entered into in connection therewith and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
In any Underwritten Offering, the investment banker or investment
bankers and manager or managers that will administer the offering will be
selected by the Holders of a majority in aggregate Liquidation Preference or
aggregate principal amount of the Transfer Restricted Securities included in
such offering, provided, that such investment bankers and managers must be
reasonably satisfactory to the Company. Such investment bankers and managers
are referred to herein as the "underwriters."
------------
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise
--------
all rights provided herein, in the Certificate of Designation, the Purchase
Agreement or granted by law, including recovery of liquidated or other damages,
will be entitled to specific performance of its rights under this
14
<PAGE>
Agreement. The Company agrees that monetary damages (including the Liquidated
Damages contemplated hereby) would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or after the
--------------------------
date of this Agreement enter into any agreement with respect to its securities
that conflicts with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof, except where a waiver with respect
thereto has been obtained prior to the date of effectiveness of any registration
statement required under this Agreement.
(c) [Intentionally Omitted].
(d) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the outstanding Liquidation
Preference or principal amount of Transfer Restricted Securities.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(f) if to a Holder, at the address set forth on the records of the
Transfer Agent with a copy to the Transfer Agent; and
if to the Company:
Intermedia Communications Inc.
3625 Queen Palm Drive
Tampa, Florida 33619
Telecopier No.: (813) 829-2470
Attention: Chief Financial Officer
With a copy to:
Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas, 46th Floor
New York, New York 10036
Telecopier No.: (212) 997-3527
Attention: Ralph J. Sutcliffe
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
15
<PAGE>
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Transfer Agent at
the address specified in the Certificate of Designation.
(g) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities directly from such Holder.
(h) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(k) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) Entire Agreement. This Agreement together with the other
----------------
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understanding between the parties with respect to such
subject matter.
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
INTERMEDIA COMMUNICATIONS INC.
By: ____________________________________
Name: David C. Ruberg
Title: Chairman of the Board, President and Chief
Executive Officer
BEAR, STEARNS & CO. INC.
By: BEAR, STEARNS & CO. INC.
_____________________________
Name:
Title:
SALOMON BROTHERS INC
By: SALOMON BROTHERS INC
_____________________________
Name:
Title:
17
<PAGE>
EXHIBIT 12.1
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Intermedia Communications
<TABLE>
<CAPTION>
PRO FORMA
YEAR SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------- DECEMBER 31, ----------------
1992 1993 1994 1995 1996 1996(3) 1996 1997
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loss before extraordinary items (235) (2,074) (3,067) (19,157) (57,198) (102,008) (21,137) (57,053)
Income tax benefit 0 0 (97) 0 0
---------------------------------------------------------------------------
Loss before income taxes (235) (2,074) (3,067) (19,254) (57,198) (102,008) (21,137) (57,053)
===========================================================================
Fixed charges:
Interest expensed 1,031 844 1,219 13,355 35,213 36,779 13,405 22,206
Capitalized interest 120 213 257 677 2,780 2,780 792 1,556
Amortization of deferred financing costs 67 78 69 412 1,252 1,252 406 770
Estimated interest factor on operating leases 275 313 200 428 1,598 1,909 558 1,510
Dividends on redeemable preferred stock(1) 267 -- -- -- 44,330 -- 13,223
---------------------------------------------------------------------------
Total fixed charges 1,760 1,448 1,745 14,872 40,843 87,050 15,161 39,265
===========================================================================
Earnings:
Loss before income tax (235) (2,074) (3,067) (19,157) (57,198) (102,008) (21,137) (57,053)
Fixed charges excluding capitalized interest 1,373 1,235 1,488 14,195 38,063 39,940 14,369 24,486
---------------------------------------------------------------------------
Total earnings 1,138 (839) (1,579) (4,962) (19,135) (62,068) (6,768) (32,567)
---------------------------------------------------------------------------
Ratio of earnings to fixed charges 0.65 (0.58) (0.90) (0.33) (0.47) (0.71) (0.45) (0.83)
===========================================================================
Insufficiency of earnings to cover fixed charge 622 2,287 3,324 19,834 59,978 149,118 21,929 71,832
===========================================================================
<CAPTION>
PRO FORMA AS ADJUSTED
------------------------------------------------
PREFERRED STOCK(4) NOTES(5)
PRO FORMA ------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS
ENDED ENDED ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1997(3) 1996 1997 1996 1997
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loss before extraordinary items (89,837) (102,008) (89,837) (124,251) (100,325)
Income tax benefit
--------------------------------------------------------------
Loss before income taxes (89,837) (102,008) (89,837) (124,251) (100,325)
==============================================================
Fixed charges:
Interest expensed 22,990 36,779 22,990 58,528 33,271
Capitalized interest 1,556 2,780 1,556 2,780 1,556
Amortization of deferred financing costs 770 1,252 770 1,666 997
Estimated interest factor on operating leases 1,510 1,909 1,510 1,909 1,510
Dividends on redeemable preferred stock(1) 22,165 56,406 28,203 44,330 22,165
--------------------------------------------------------------
Total fixed charges 48,991 99,126 55,029 109,213 59,479
==============================================================
Earnings:
Loss before income tax (89,837) (102,008) (89,837) (124,251) (100,325)
Fixed charges excluding capitalized interest 25,270 39,940 25,270 62,103 35,758
--------------------------------------------------------------
Total earnings (64,567) (62,068) (64,567) (62,148) (64,567)
--------------------------------------------------------------
Ratio of earnings to fixed charges (1.32) (0.63) (1.17) (0.57) (1.09)
==============================================================
Insufficiency of earnings to cover fixed charge 113,558 161,194 119,596 171,361 124,046
==============================================================
<CAPTION>
PREFERRED STOCK
AND NOTES(6)
------------------------
YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Loss before extraordinary items (124,251) (100,325)
Income tax benefit
-------------------------
Loss before income taxes (124,251) (100,325)
=========================
Fixed charges:
Interest expensed 58,528 33,271
Capitalized interest 2,780 1,556
Amortization of deferred financing costs 1,666 977
Estimated interest factor on operating leases 1,909 1,510
Dividends on redeemable preferred stock(1) 56,406 28,203
------------------------
Total fixed charges 121,289 65,517
========================
Earnings:
Loss before income tax (124,251) (100,325)
Fixed charges excluding capitalized interest 62,103 35,758
------------------------
Total earnings (62,148) (64,567)
------------------------
Ratio of earnings to fixed charges (0.51) (0.99)
========================
Insufficiency of earnings to cover fixed charge 183,437 130,084
========================
</TABLE>
(1) Dividends on preferred stock are not grossed up for the income tax effect
because the Company has not recorded income tax expense for any of the
periods presented.
(2) This column includes the historical information for the Company as well as
pro forma adjustments to reflect the acquisitions of EMI Communications,
Inc., Net Solve Incorporated, Universal Telecom, Inc. and DIGEX as if they
had occurred on January 1, 1996.
(3) This column includes the historical information for the Company as well as
pro forma adjustments to reflect the acquisition of DIGEX as if it had
occurred on January 1, 1997.
(4) These columns include the pro forma information described in Notes (3) and
(4) and the effects of the Company issuing $172,500 of preferred stock
with dividends at the rate of 7% at the beginning of the respective
periods.
(5) These columns include the pro forma information described in Notes (3) and
(4) and the effects of the Company issuing $374,785 of notes bearing
11-1/4% interest and defeasing the 13-1/2% Notes at the beginning of the
respective periods. These columns do not reflect the extraordinary loss on
early extinguishment of debt of $46,054.
(6) These columns include the pro forma information described in Notes (3) and
(4) and the effects of the Company (i) issuing $172,500 of preferred stock
with dividends at the rate of 7%, (ii) issuing $374,785 of notes bearing
interest at 11-1/4%, and (iii) defeasing the 13-1/2% Notes at the
beginning of the respective periods. These columns do not reflect the
extraordinary loss on early extinguishment of debt of $46,054.
<PAGE>
EXHIBIT 12.2
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Intermedia Communications
<TABLE>
<CAPTION>
PRO FORMA
YEAR QUARTER ENDED
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- DECEMBER 31, ----------------
1992 1993 1994 1995 1996 1996(3) 1996 1997
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loss before extraordinary items (235) (2,074) (3,067) (19,157) (57,198) (102,008) (8,893) (27,404)
Income tax benefit 0 0 (97) 0 0
---------------------------------------------------------------------------
Loss before income taxes (235) (2,074) (3,067) (19,254) (57,198) (102,008) (8,893) (27,404)
===========================================================================
Fixed charges:
Interest expensed 1,031 844 1,219 13,355 35,213 36,779 5,382 11,089
Capitalized interest 120 213 257 677 2,780 2,780 396 778
Amortization of deferred financing costs 67 78 69 412 1,252 1,252 203 385
Estimated interest factor on operating leases 275 313 200 428 1,598 1,909 279 755
Dividends on redeemable preferred stock(1) 267 -- -- -- 40,500 -- 3,375
---------------------------------------------------------------------------
Total fixed charges 1,760 1,448 1,745 14,872 40,843 83,220 6,260 16,382
===========================================================================
Earnings:
Loss before income tax (235) (2,074) (3,067) (19,157) (57,198) (102,008) (8,893) (27,404)
Fixed charges excluding capitalized interest 1,373 1,235 1,488 14,195 38,063 39,940 5,864 12,229
---------------------------------------------------------------------------
Total earnings 1,138 (839) (1,579) (4,962) (19,135) (62,068) (3,029) (15,175)
---------------------------------------------------------------------------
Ratio of earnings to fixed charges 0.65 (0.58) (0.90) (0.33) (0.47) (0.75) (0.48) (0.93)
===========================================================================
Insufficiency of earnings to cover fixed charge 622 2,287 3,324 19,834 59,978 145,288 9,289 31,557
===========================================================================
<CAPTION>
PRO FORMA AS ADJUSTED
------------------------------------------------
PREFERRED STOCK(4) NOTES(5)
PRO FORMA ------------------------------------------------
QUARTER YEAR QUARTER YEAR QUARTER
ENDED ENDED ENDED ENDED ENDED
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31,
1997(3) 1996 1997 1996 1997
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loss before extraordinary items (43,067) (102,008) (43,067) (124,251) (48,312)
Income tax benefit
--------------------------------------------------------------
Loss before income taxes (43,067) (102,008) (43,067) (124,251) (48,312)
==============================================================
Fixed charges:
Interest expensed 11,435 36,779 11,435 58,528 16,576
Capitalized interest 778 2,780 778 2,780 778
Amortization of deferred financing costs 385 1,252 385 1,666 489
Estimated interest factor on operating leases 834 1,909 834 1,909 834
Dividends on redeemable preferred stock(1) 10,125 52,575 13,144 40,500 10,125
--------------------------------------------------------------
Total fixed charges 23,557 95,295 26,576 105,383 28,802
==============================================================
Earnings:
Loss before income tax (43,067) (102,008) (43,067) (124,251) (48,312)
Fixed charges excluding capitalized interest 12,654 39,940 12,654 62,103 17,899
--------------------------------------------------------------
Total earnings (30,413) (62,068) (30,413) (62,148) (30,413)
--------------------------------------------------------------
Ratio of earnings to fixed charges (1.29) (0.65) (1.14) (0.59) (1.06)
==============================================================
Insufficiency of earnings to cover fixed charge 53,970 157,363 56,989 167,531 59,215
==============================================================
<CAPTION>
PREFERRED STOCK
AND NOTES(6)
------------------------
YEAR QUARTER
ENDED ENDED
DECEMBER 31, MARCH 31,
1996 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Loss before extraordinary items (124,251) (48,312)
Income tax benefit
-------------------------
Loss before income taxes (124,251) (48,312)
=========================
Fixed charges:
Interest expensed 58,528 16,576
Capitalized interest 2,780 778
Amortization of deferred financing costs 1,666 489
Estimated interest factor on operating leases 1,909 834
Dividends on redeemable preferred stock(1) 52,575 13,144
-------------------------
Total fixed charges 117,458 31,821
=========================
Earnings:
Loss before income tax (124,251) (48,312)
Fixed charges excluding capitalized interest 62,103 17,899
-------------------------
Total earnings (62,148) (30,413)
-------------------------
Ratio of earnings to fixed charges (0.53) (0.96)
=========================
Insufficiency of earnings to cover fixed charge 179,606 62,234
=========================
</TABLE>
YTD QTR
Proforma Historical 40,500 /4= 10,125
172,500 * 7% 12,075 /4= 3,019
------- -------
52,575 13,144
(1) Dividends on preferred stock are not grossed up for the income tax effect
because the Company has not recorded income tax expense for any of the
periods presented.
(2) This column includes the historical information for the Company as well as
pro forma adjustments to reflect the acquisitions of EMI Communications,
Inc., Net Solve Incorporated, Universal Telecom, Inc. and DIGEX as if they
had occurred on January 1, 1996.
(3) This column includes the historical information for the Company as well as
pro forma adjustments to reflect the acquisition of DIGEX as if it had
occurred on January 1, 1997.
(4) These columns include the pro forma information described in Notes (3) and
(4) and the effects of the Company issuing $172,500 of preferred stock
with dividends at the rate of 7% at the beginning of the respective
periods.
(5) These columns include the pro forma information described in Notes (3) and
(4) and the effects of the Company issuing $374,785 of notes bearing
11-1/4% interest and defeasing the 13-1/2% Notes at the beginning of the
respective periods. These columns do not reflect the extraordinary loss on
early extinguishment of debt of $46,054.
(6) These columns include the pro forma information described in Notes (3) and
(4) and the effects of the Company (i) issuing $172,500 of preferred stock
with dividends at the rate of 7%, (ii) issuing $374,785 of notes bearing
interest at 11-1/4%, and (iii) defeasing the 13-1/2% Notes at the
beginning of the respective periods. These columns do not reflect the
extraordinary loss on early extinguishment of debt of $46,054.
<PAGE>
Exhibit 23.2
Consent of Independent Certified Public Accountants
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of Intermedia
Communications Inc. for the registration of 6,900,000 Depositary Shares (each
representing a one-hundredth interest in a share of 7% Series D Junior
Convertible Preferred Stock), 69,000 shares of 7% Series D Junior Convertible
Preferred Stock and 4,465,828 shares of Common Stock, of which 4,434,448 are
issuable upon conversion of the 7% Series D Junior Convertible Preferred
Stock, and to the incorporation by reference therein of our report dated
February 10, 1997, except for Note 13, as to which the date is March 7, 1997,
with respect to the consolidated financial statements and schedule of
Intermedia Communications Inc. included in its Annual Report (Form 10-K) for
the year ended December 31, 1996, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Tampa, Florida
August 7, 1997
<PAGE>
Exhibit 23.3
Consent of Independent Certified Public Accountants
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of Intermedia
Communications Inc. for the registration of 6,900,000 Depositary Shares (each
representing a one-hundredth interest in a share of 7% Series D Junior
Convertible Preferred Stock), 69,000 shares of 7% Series D Junior Convertible
Preferred Stock and 4,465,828 shares of Common Stock, of which 4,434,448 are
issuable upon conversion of the 7% Series D Junior Convertible Preferred
Stock, and to the incorporation by reference therein of our report dated
February 24, 1997, with respect to the consolidated financial statements of
DIGEX, Incorporated included in its Annual Report (Form 10-KSB) for the year
ended December 31, 1996, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Baltimore, Maryland
August 1, 1997
