<PAGE>
As filed with the Securities and Exchange Commission on ____________, 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 8,000,000 $26.75 (1) $ 214,000,000 $63,130
each representing a
one hundredth
interest in a share
of 7% Series E
Junior Convertible
Preferred Stock
(liquidation
preference $25.00
per share)
- ---------------------------------------------------------------------------------------
7% Series E Junior 80,000 N.A. N.A. (2)
Convertible
Preferred Stock,
liquidation
preference $2,500
per share, $1.00
par value per share
- ---------------------------------------------------------------------------------------
Common Stock, 3,307,425 (3)(4) N.A. N.A. (2)
$.01 par value per
share issuable upon
conversion of the
Depositary Shares
and 7% Series E
Junior Convertible
Preferred Stock
- ---------------------------------------------------------------------------------------
Common Stock, (5) (5) $28,000,000 (5) $ 8,260
$.01 par value
issuable as
dividends on the
7% Series E Junior
Convertible
Preferred Stock
- ---------------------------------------------------------------------------------------
Total: $71,390
- ---------------------------------------------------------------------------------------
</TABLE>
(1) Average of the bid and asked prices on December 17, 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 E Preferred Stock or the Common Stock
issuable upon conversion of the Depositary Shares or shares of the Series E
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 E Preferred Stock are rounded up to the nearest whole share in
connection with the conversion of Depositary Shares or shares of Series E
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 E Preferred Stock become operative.
(5) Pursuant to Rule 457(o), an indeterminate number of shares of Common Stock
are registered hereunder which may be issued by the Company from time to time in
lieu of cash during the two year period commencing on the effective date of this
Registration Statement as dividends on the 7% Series E Junior Convertible
Preferred Stock.
_____________________
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>
PROSPECTUS
INTERMEDIA COMMUNICATIONS INC.
8,000,000 DEPOSITARY SHARES EACH REPRESENTING A ONE HUNDREDTH INTEREST IN A
SHARE OF 7% SERIES E JUNIOR CONVERTIBLE PREFERRED STOCK, 80,000 SHARES OF 7%
SERIES E JUNIOR CONVERTIBLE PREFERRED STOCK, 3,307,425 SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THE DEPOSITARY SHARES AND/OR THE 7% SERIES E
JUNIOR CONVERTIBLE PREFERRED STOCK, AND COMMON STOCK ISSUABLE AS DIVIDENDS ON
THE 7% SERIES E JUNIOR CONVERTIBLE PREFERRED 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 E Junior Convertible Preferred Stock
("Series E 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"), and (2) the shares of Series E 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 E
Preferred Stock and/or the Depositary Shares (the Depositary Shares, Series E
Preferred Stock and Common Shares are collectively referred to herein as the
"Securities"). This Prospectus is also being used in connection with the
issuance by the Company from time to time during the two-year period
commencing on the date of this Prospectus and in accordance with the
Certificate of Designation (as defined herein) of an indeterminate number of
shares of Common Stock issuable by the Company in lieu of cash as dividends
on the Series E Preferred Stock (the "Dividend Shares"). See "Description of
Series E Preferred Stock--Dividends." The Depositary Shares were originally
issued by the Company in a private placement on October 30, 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 October 24, 1997 between the Company and the Initial
Purchasers. Subsequently, the Initial Purchasers exercised the over-
allotment option in connection therewith with respect to 1,000,000 Depositary
Shares. The First Closing and the over-allotment exercise are collectively
referred to herein as the "October 30 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 1.
--------------------
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.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES
IN ANY STATE INWHICH 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 _______, 1997.
<PAGE>
Holders of the Depositary Shares are entitled to all proportional
rights and preferences of the Series E Preferred Stock (including dividend,
voting, redemption and liquidation rights). Dividends on the Series E
Preferred Stock accrue at a rate per annum equal to 7% of the Liquidation
Preference per share of Series E Preferred Stock and are payable quarterly,
in arrears, on January 15, April 15, July 15 and October 15 of each year,
commencing on January 15, 1998. 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 December 29, 1997, at the option of the holder thereof into Common
Stock at a conversion price of $60.47 per share, subject to certain
adjustments.
The Series E 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 October 18, 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
Series E 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 E 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 E 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), including
the Company's outstanding 7% Series D Junior Convertible Preferred Stock (the
"Series D Preferred Stock"); 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 September 30, 1997, on a pro forma
basis after giving effect to the pending acquisition of Shared Technologies
Fairchild Inc. ("Shared Technologies"), the October 30 Equity Offering and
the concurrent private placement of $260.3 million principal amount at
maturity of 8 7/8% Notes on October 30, 1997 (including the exercise of the
over-allotment option in connection therewith) (the "October 30 Debt
Offering", and collectively with the October 30 Equity Offering, the "October
30 Offerings") and the application of the proceeds therefrom, the Series E
Preferred Stock would have been junior in right of payment to approximately
$1.3 billion of liquidation preference of Series B Preferred Stock and total
indebtedness and other obligations of the Company and its subsidiaries ($1.7
billion if the December Offering (as defined herein) is consummated). See
"Description of Series E 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. 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.
The Company will not receive any proceeds from the sale of the
Securities or the issuance of the Dividend Shares 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 December 15, 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 $53 5/16 per share. The Company has not and does not intend to
apply for the listing of the Depositary Shares or the Series E Preferred
Stock on any securities exchange or for quotation through the Nasdaq National
Market. The Series E 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.
<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 17, 1997.
The Company's Current Report on Form 8-K/A filed with the Commission on
August 4, 1997.
The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
October 27, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
November 6, 1997.
The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
November 25, 1997.
The Company's Current Report on Form 8-K/A filed with the Commission on
December 4, 1997.
The Company's Current Report on Form 8-K/A filed with the Commission on
December 16, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
December 18, 1997.
The Company's Current Report on Form 8-K/A filed with the Commission
on December 22, 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).
ii
<PAGE>
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.
iii
<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 and in
the Company's Annual Report on Form 10-K, before purchasing the Securities
offered hereby.
Substantial Indebtedness; Insufficiency of Earnings to Cover Fixed
Charges, Including Dividends on the Series E Preferred Stock. The Company is
highly leveraged. At September 30, 1997, after giving pro forma effect to
the pending acquisition of Shared Technologies, the October 30 Offerings and
the application of the net proceeds of the October 30 Offerings, the Company
would have had outstanding approximately $993.8 million ($1.3 billion if the
December Offering is consummated) in aggregate principal amount of
indebtedness and other liabilities on a consolidated basis (including trade
payables), approximately $312.0 million of obligations with respect to
dividend payments and the mandatory redemption of the Series B Preferred
Stock, $170.1 million of obligations with respect to the Series D Preferred
Stock and $193.7 million of obligations with respect to the Series E
Preferred Stock. The degree to which the Company is leveraged could have
important consequences to holders of the Series E Preferred Stock, 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
and the Series E 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.
The Company's historical earnings have been insufficient to cover
combined fixed charges and dividends on preferred stock by $0.6 million, $2.3
million, $3.3 million, $19.8 million and $60.0 million for each of the years
ended December 31, 1992, 1993, 1994, 1995 and 1996, respectively. In
addition, insufficiencies of $37.6 million and $187.0 million were
experienced in the nine-month periods ended September 30, 1996 and 1997,
respectively. On a pro forma basis, after giving applicable effect to the
DIGEX, EMI, NetSolve and UTT acquisitions, the pending acquisition of Shared
Technologies and the March 1997 offerings, July 1997 Offerings (as defined
herein) and October 30 Offerings, the Company's earnings were insufficient to
cover combined fixed charges and dividends on preferred stock by $238.9
million ($269.6 million if the December Offering is consummated) for the year
ended December 31, 1996 and by $294.8 million ($317.8 million if the December
Offering is consummated) for the nine months ended September 30, 1997. 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 and Series E 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 such debt service, dividend and redemption
obligations. 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.
Restrictions on the Company's Ability to Pay Dividends on the
Series E Preferred Stock. To date, the Company has not paid cash dividends on
its shares of capital stock. The ability of Intermedia to pay cash dividends
on the Series E 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") governing the
Company's 11 1/4% Senior Discount Notes due 2007 (the "11 1/4% Notes"), and
the Indenture (the "8 7/8% Notes Indenture" and together with the 12 1/2
Notes Indenture and the 11 1/4 Notes Indenture, the "Existing Senior Notes
Indentures") governing the Company's 8 7/8% Notes due 2007 (the "8 7/8%
Notes" and together with the 12 1/2% Notes and the 11 1/4% 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
1
<PAGE>
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 E
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 its total liabilities and
the liquidation preference of its preferred stock plus the par value of its
outstanding capital stock. At September 30, 1997, the Company had
stockholders equity of $(90.8) million and surplus of $(90.9) million. The
Company 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
further reduce stockholders' equity and the surplus of the Company. For the
nine months ended September 30, 1997, the Company had a net loss attributable
to common stockholders of $228.3 million ($336.1 million on a pro forma basis
after giving effect to the DIGEX Acquisition (as defined herein), the pending
acquisition of Shared Technologies and the October 30 Offerings and the
application of proceeds therefrom and $359.1 million if the December Offering
is consummated). 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 E 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 E
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 E
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 E Preferred Stock
tendered in a Preferred Stock Change of Control, the sole remedy to the
holders of the Series E Preferred Stock is the voting rights arising from a
Voting Rights Triggering Event (as defined herein). See "Description of
Series E Preferred Stock-Voting Rights."
Subordination of the Series E Preferred Stock. The Company's
obligations with respect to the Series E 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 their terms rank senior to the Series E 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 E 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 September 30, 1997, on a
pro forma basis after giving effect to the October 30 Offerings and the
application of the net proceeds therefrom, the Series E Preferred Stock would
have been junior in right of payment to $1.3 billion 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 E 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 E Preferred Stock then outstanding. The Company has entered into
preliminary discussions with several banks looking toward the establishment
of a $250.0 million senior credit facility. Although there can be no
assurance that such negotiations will be successful, or that the ultimate
amount of the credit line will amount to $250.0 million, the
2
<PAGE>
credit facility would likely be secured by substantially all of the assets of
the Company. See "Description of Series E Preferred Stock-Ranking."
Risks Associated with Acquisitions. The Company intends to use
the net proceeds of the October 30 Offerings and the December Offering, if
consummated, to expand its networks and service offerings through internal
development and acquisitions. The Company has used a portion of such net
proceeds to fund a pending acquisition of Shared Technologies. On December
17, 1997, the Company entered into a definitive agreement for the LDS
Acquisition (as defined herein). Such acquisitions, if made, could divert
the resources and management time of the Company and would require
integration with the Company's existing networks and services. There can be
no assurance that the pending acquisitions of Shared Technologies and LDS (as
defined herein) will be consummated or that any other acquisitions will occur
or that any such acquisitions, including the acquisitions of Shared
Technologies and LDS, if made, would be on terms favorable to the Company or
would be successfully integrated into the Company's operations.
Consistent with its strategy, the Company is currently evaluating,
has made offers with respect to, and is engaged in discussions regarding
various acquisition opportunities. These acquisitions could be funded by cash
(including the proceeds of the October 30 Offerings and the December
Offering, if consummated) and/or the Company's securities. It is possible
that one or more of such possible future acquisitions, if completed, could
adversely affect the Company's funds from operations or cash available for
distribution, in the short term or the long term or both, or increase the
Company's debt, or such an acquisition could be followed by a decline in the
market value of the Company's securities. Under the terms of the purchase
agreement with the Initial Purchasers, the Company is not prohibited from
issuing equity securities in connection with an acquisition during the 90-day
"lock-up" period following the October 30 Offerings.
On November 20, 1997, Intermedia, Moonlight Acquisition Corp., a
wholly-owned subsidiary of Intermedia, and Shared Technologies signed a
definitive merger agreement pursuant to which holders of Shared Technologies'
common stock would receive $15.00 per share in cash upon consummation of the
merger. In connection with the proposed acquisition of Shared Technologies
and in anticipation of Shared Technologies becoming a "Restricted Subsidiary"
within the meaning of the Company's Existing Senior Notes Indentures and the
Series B Certificate of Designation, the Company purchased certain equity
interests and certain notes issued by Shared Technologies. See "Recent
Developments -- Acquisitions." If the proposed acquisition of Shared
Technologies is not consummated before April 22, 1998 and, as a result,
Shared Technologies does not become a Restricted Subsidiary of the Company,
an Event of Default may occur under the terms of each of the Existing Senior
Notes Indentures and the Series B Certificate of Designation unless the
Company disposes of its investment in Shared Technologies without a loss or
holds its investment through an Unrestricted Subsidiary. If such an event of
default occurs, upon receipt of notice from the trustee under any of the
Existing Senior Notes Indentures, or the holders of at least 25% of the
outstanding principal amounts of the 12 1/2% Notes, the 11 1/4% Notes or the
8 7/8% Notes, acceleration of the 12 1/2% Notes, the 11 1/4% Notes or the 8
7/8% Notes, respectively, would result. The occurrence of an Event of Default
would not lead to the acceleration of the Series B Preferred Stock. If all of
the Existing Senior Notes were accelerated, the Company would not have
sufficient funds available to repay the Existing Senior Notes, unless it
could arrange a refinancing of the Existing Senior Notes.
Effect of Substantial Additional Indebtedness on the Company's
Ability to Make Payments on the Series E 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. The Company has contracted to issue the 8 1/2%
Senior Notes and may establish a bank credit facility for up to $250 million.
All additional indebtedness of the Company will rank senior in right of
payment to any payment obligations with respect to the Series E 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 E Preferred Stock.
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Regulatory Approval of the October 30 Offerings. Nine of the states
in which the Company is certificated provide for prior approval or
notification of the issuance of securities by the Company. Because of time
constraints, the Company did not expect to have obtained such approval from
any of the nine states prior to consummation of the October 30 Offerings or
the December Offering. The requirements for these filings may have been pre-
empted by the National Securities Market Improvement Act of 1996, although
there is no case law on this point. The Company filed the necessary
notifications and applications for approval in these states prior to the
October 30 Offerings and has obtained approval in three states and will file
such notifications and applications following the December Offering. After
consultation with counsel, the Company believes the remaining approvals will
be granted and that obtaining such approvals subsequent to the October 30
Offerings and the December Offering should not result in any material adverse
consequences to the Company, although there can be no assurance that such a
consequence will not result.
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 its 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 Telecommunications Act of 1996
(the "1996 Act") prohibits and imposes criminal penalties 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 its systems could require the Company to implement
measures to reduce its 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, 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.
Absence of a Public Market for the Depositary Shares. The Series E
Preferred Stock and the Depositary Shares were issued by the Company in the
October 30 Equity Offering. The Company does not intend to apply for listing
of the Depositary Shares or the Series E Preferred Stock on any securities
exchange or on the Nasdaq National Market. The Initial Purchasers have
informed the Company that they make a market for the Depositary Shares, but
they are not
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obligated to do so and their market making activity may be discontinued at
any time without notice. Accordingly, there can be no assurance as to the
liquidity or continuation of any market for the Depositary Shares. 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 the market for the Depositary Shares would not
be subject to similar disruptions. The Company does not expect a market for
the Series E 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 E 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, the Series D 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. 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.
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 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 require 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
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for the years ended December 31, 1994, 1995 and 1996 and a net loss of $201.2
million for the nine months ended September 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.
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").
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 sought preliminary and
permanent injunctions enjoining the Merger but no applications were made for
such injunctions prior to the consummation of the Merger on July 11, 1997. In
addition, the Complaints seek cash damages from the DIGEX Directors. In
August 1997, a motion to dismiss the Complaints was filed on behalf of
Intermedia, DIGEX and the DIGEX Directors. The action has been dormant since
that time.
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.
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, joint ventures, debt or equity financing (including capital raised
through the October 30 Offerings and the December Offering, if consummated),
credit availability and internally generated funds. Assuming the
consummation of the December Offering, the Company expects that continued
expansion of its business will require raising equity and/or debt by the end
of fiscal 1999. 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 on terms that it will consider acceptable. Moreover, the Existing
Senior Notes Indentures, the Series B Certificate of Designation, the Series
D Certificate of Designation and the Certificate of Designation impose
certain restrictions upon the Company's ability to incur additional
indebtedness or issue additional preferred stock. 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.
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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.
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 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 regional Bell operating
companies ("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 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 at the state or federal level, nor is it
currently required to obtain FCC authorization for the installation,
acquisition or operation of its interstate network facilities. Further, the
FCC issued an order holding that non-dominant carriers, such as the Company,
are required to withdraw interstate
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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 or that such agreements will be favorable.
Potential Diminishing Rate of Growth. During the period from 1994
through 1996, the Company's revenues grew 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 provider of such services. 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.
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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 and the Series E
Preferred Stock. The terms of the Existing Senior Notes Indentures and the
Series B Certificate of Designation contain provisions that may prohibit the
repurchase of the Series E Preferred Stock. If a change of control 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 E Preferred Stock.
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 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.
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RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The Company's historical earnings have been insufficient to cover
combined fixed charges and dividends on preferred stock by $0.6 million, $2.3
million, $3.3 million, $19.8 million and $60.0 million for each of the years
ended December 31, 1992, 1993, 1994, 1995 and 1996, respectively. In
addition, insufficiencies of $37.6 million and $187.0 million were
experienced in the nine-month periods ended September 30, 1996 and 1997,
respectively. On a pro forma basis, after giving effect to the DIGEX, EMI,
NetSolve and UTT acquisitions, the pending acquisition of Shared Technologies
and the March 1997 offerings, July 1997 Offerings and October 30, 1997
Offerings, the Company's earnings were insufficient to cover combined fixed
charges and dividends on preferred stock by $238.9 million ($269.6 million if
the December Offering is consummated) for the year ended December 31, 1996
and by $294.8 million ($317.8 million if the December Offering is
consummated) for the nine months ended September 30, 1997.
See "Risk Factors Substantial Indebtedness; Insufficiency of
Earnings to Cover Fixed Charges Including Dividends on the Series E Preferred
Stock" for a further 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
September 30, 1997, the Company had sales offices in 43 cities throughout the
eastern half of the United States and offered a full product package of
telecommunications services in 19 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 December 16,
1997 had thirteen switches in service. The Company provides enhanced data
services, including frame relay, a synchronous transfer mode ("ATM") and
Internet access services, primarily to business and government customers
(including over 100 ISPs), in approximately 3,800 cities nationwide,
utilizing 130 Company-owned data switches. Intermedia also serves as a
facilities-based interexchange carrier to approximately 15,000 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.
RECENT DEVELOPMENTS
Acquisitions. On December 17, 1997 the Company entered into a
definitive agreement for the acquisition of the Long Distance Savers group of
companies ("LDS") for a purchase price of approximately $151.0 million, of
which $120.0 million is payable in Intermedia common stock and $31.0 million
is payable in cash, in each case, subject to certain adjustments (the "LDS
Acquisition"). Closing of the LDS Acquisition, expected to occur in the
first quarter of 1998, is subject to customary conditions, including
regulatory approvals, and there can be no assurance that the LDS Acquisition
will be consummated.
LDS is a regional interexchange carrier, providing long distance
services and Internet access to more than 45,000 business subscribers and
employs over 100 sales and customer service professional in Louisiana, Texas,
Oklahoma, Mississippi and Florida. LDS had revenues of $101.7 million and
$82.3 million and EBITDA of $15.0 million and $9.9 million for the year ended
December 31, 1996 and the nine months ended September 30, 1997, respectively.
The LDS Acquisition will provide a significant time-to-market advantage in a
region important to Intermedia's expansion plan, while also contributing an
experienced regional management team and established sales platform. Because
LDS's service portfolio and footprint complements Intermedia's, management of
the Company believes that the LDS Acquisition also presents significant
synergy realization opportunities. By joining forces with an established
operating company with a staff of experienced sales, management and technical
personnel, Intermedia expects to expedite its entry into these Southern
markets.
On November 20, 1997, Intermedia, through Moonlight Acquisition
Corp., a wholly-owned subsidiary of Intermedia, entered into a definitive
merger agreement with Shared Technologies. The total deemed purchase price
for Shared Technologies is estimated to be approximately $640 million,
excluding certain transaction expenses and fees relating to certain
agreements. In addition, Intermedia agreed to settle certain litigation. As
part of the agreement, Intermedia was granted irrevocable options, which
together with other common stock of Shared Technologies owned by Intermedia,
gives Intermedia control of over 50% of Shared Technologies common stock on
a fully diluted basis. Intermedia has commenced a tender offer for four
million additional shares of Shared Technologies at $15 per share in cash,
which expires on December 26, 1997.
Shared Technologies is the nation's largest provider of shared
telecommunications services and systems. Through its technical
infrastructure and 800 employees, Shared Technologies acts as a single point
of contact for business
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telecommunications services at more than 465 buildings throughout the United
States and Canada. For the year ended December 31, 1996 and the nine months
ended September 30, 1997, Shared Technologies' revenues were approximately
$157.2 million and $141.8 million, respectively, and its EBITDA for such
periods were approximately $34.9 million and $33.4 million, respectively.
This acquisition is expected to enhance Intermedia's national presence in
telecommunications markets, enabling it to provide a bundled offering of
local, long distance, data, Internet and systems integration services to
Shared Technologies' existing 15,000 business customers. If this acquisition
is consummated, the Company will have approximately 160,000 CLEC access
lines, making it the third largest independent CLEC in the U.S., serving more
than 2,000 buildings.
The merger agreement is expected to be consummated during the first
quarter of 1998. Consummation of the merger agreement is subject to various
customary conditions, including approval by Shared Technologies's
stockholders and receipt of necessary regulatory approvals.
On July 11, 1997, the Company consummated the final step in the
DIGEX Acquisition through the merger of Daylight Acquisition Corp.
("Daylight"), a wholly-owned subsidiary of the Company, with DIGEX. The
aggregate consideration for the DIGEX Acquisition, which was funded with the
Company's then existing cash reserves, was approximately $160 million. DIGEX,
headquartered in suburban Washington, D.C., is a national ISP, which provides
a comprehensive range of industrial strength Internet solutions, including
high speed dedicated business Internet connectivity, Web site management and
private network solutions, primarily to business and government customers.
For the nine months ended September 30, 1997, DIGEX's revenues were
approximately $33.5 million.
The Company is currently evaluating, has made offers with respect
to and is engaged in discussions regarding various acquisition opportunities.
These acquisitions could be funded by cash (including the proceeds of the
October 30 Offerings and the December Offering) and/or the Company's
securities. Except as described in this Registration Statement, Intermedia
is not a party to any agreement for any material acquisition nor can there be
any assurance that any such acquisition will be consummated. Under the terms
of the Purchase Agreement with the Initial Purchasers, the Company is not
prohibited from issuing equity securities, including common stock, in
connection with an acquisition during the 90-day "lock-up" period following
the October 30 Offerings.
Offerings. On December 18, 1997, the Company contracted with the
Initial Purchasers for a private placement (the "December Offering") of
$350.0 million of 8 1/2% Senior Notes due 2008 (the "8 1/2% Senior Notes").
The Initial Purchasers were also granted an over-allotment option with
respect to $50.0 million of 8 1/2% Notes.
On October 30, 1997, the Company completed private placements of
the Depositary Shares and the 8 7/8% Notes. The aggregate gross proceeds from
the October 30 Offerings (including the subsequent exercise of the over-
allotment options with respect to the Depositary Shares and the 8 7/8%
Notes in connection therewith) were $460.3 million.
In July 1997, the Company completed private placements (the "July
1997 Offerings") of 6,900,000 Depositary Shares (including the exercise of
the over-allotment option with respect to such Depositary Shares) (the
"Series D Depositary Shares"), each representing a one-hundredth interest
in a share of Series D Preferred Stock, and $649.0 million principal amount
at maturity of 11/1//4% Notes (including the exercise of the over-allotment
option with respect to such Notes). The aggregate gross proceeds from the
July 1997 Offerings were approximately $547.3 million.
Regulatory Changes. The Telecommunications Act of 1996 (the
"1996 Act") and the issuance by the Federal Communications Commission
("FCC") of rules governing local competition, particularly those requiring
the interconnection of all networks and the exchange of traffic among the
incumbent local exchange carriers ("ILECs") and CLECs, as well as pro-
competitive policies already developed by state regulatory commissions, have
caused fundamental changes in the structure of the local exchange markets. On
July 18, 1997, the U.S. Court of Appeals for the Eighth Circuit issued a
final decision vacating the FCC's pricing and "most favored nation" rules,
as well as certain other of the FCC's interconnection rules. On October 14,
1997, the Eighth Circuit Court issued an order
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clarifying its previous decision. In this order, the Court held that ILECs
have an obligation under the 1996 Act to offer other carriers access to the
ILECs network elements on an unbundled basis, but the ILECs do not have an
obligation to recombine those elements for use by other carriers. The FCC and
other parties have requested the Supreme Court to review these decisions.
These issues also remain subject to scrutiny and oversight by state
regulatory commissions. Although the Company is not able to predict the
impact of these decisions on future efforts to negotiate interconnection
agreements with ILECs, the Company's analysis shows that interconnection
arrangements that have been approved or mandated by state regulatory
commissions have been consistent with the intent of the 1996 Act and the
Company's business plan. These regulatory developments create opportunities
for new entrants offering local exchange services to capture a portion of the
ILECs' nearly 100% market share. Due to the rapid development and continuing
growth of the Company's sales force and its competitive advantages in
providing integrated telecommunications services, the Company believes that
it is well positioned to capitalize on the new market opportunities emerging
in the local exchange market.
On May 16, 1997, the FCC released an order that fundamentally
restructured the "access charges" that ILECs charge to interexchange
carriers and end user customers. The Company believes that the FCC's new
access charge rules do not adversely affect the Company's business plan, and
that they in fact present significant new opportunities for new entrants,
including the Company. Aspects of the access charge order may be changed in
the future. Numerous parties have either filed appeals with federal courts or
asked the FCC to reconsider portions of its new rules.
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USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Securities by the Selling Securityholders or the issuance of the Dividend
Shares by the Company.
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 November 30,
1997, there were 17,315,317 shares of Common Stock, 323,499.1404 shares of
Series B Preferred Stock, 69,000 shares of Series D Preferred Stock and
80,000 shares of Series E Preferred Stock issued and outstanding. On a fully-
diluted basis, at that date, the Company had outstanding 32,643,661 shares of
Common Stock assuming (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, the Series D Preferred Stock and the Series E Preferred Stock. As of
November 30, 1997, the Company has reserved (i) 4,364,410 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) 276,500.8596 shares of Series B Preferred Stock for issuance
as dividends on the outstanding shares of Series B Preferred Stock, (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, (vi) 1,938,728 shares of
Common Stock for issuance as dividends on the outstanding shares of Series D
Preferred Stock, (vii) 3,307,425 shares of Common Stock for issuance on
conversion of the Series E Preferred Stock and (viii) 933,334 shares of
Common Stock for issuance as dividends on the outstanding shares of Series E
Preferred Stock. All outstanding shares of Common Stock, Series B Preferred
Stock, Series D Preferred Stock and Series E 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 or Series E 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. As of November 30, 1997, the
Company had outstanding 323,499.1404 shares of Series B Preferred Stock
(aggregate liquidation preference of approximately $323.5 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
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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 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 would 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.
As of November 30, 1997, the Company had outstanding 69,000 shares
of Series D Preferred Stock (aggregate liquidation preference approximately
$172.5 million). Dividends on the Series D Preferred Stock accumulate at a
rate of 7% of the aggregate liquidation preference thereof and are payable
quarterly, in arrears on each January 15, April 15, July 15 and October 15.
Dividends are payable in cash or, at the Company's option, by the issuance of
shares of Common Stock. The Series D Preferred Stock will be redeemable at
the option of the Company at any time on or after July 19, 2000 at rates
commencing with 104%, declining to 100% on July 19, 2004. The Series D
Preferred Stock is convertible (since October 7, 1997), at the option of the
holder, into Common Stock at a conversion price of $38.90 per share of Common
Stock, subject to certain adjustments.
See "Description of Series E Preferred Stock" for a description of
the terms of Series E 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.
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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 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, the
Series D Preferred Stock and the Series E Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock, Series B
Preferred Stock, Series D Preferred Stock and Series E 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.
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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 and Series E 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 October 30, 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. As a result, upon the effectiveness of this Registration
Statement, substantially all of the Company's outstanding shares, other than
those held by affiliates, will be transferable without restriction under the
Securities Act.
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DESCRIPTION OF SERIES E PREFERRED STOCK
GENERAL
The terms of the Series E 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 E 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
Series E 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 E 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 September 30, 1997 on a pro forma basis
after giving effect to the pending acquisition of Shared Technologies, and
the October 30 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 E Preferred Stock would have been approximately $1.3
billion ($1.7 billion if the December Offering is consummated). See "Risk
Factors."
Pursuant to the Certificate of Designation, 87,500 shares
(including 17,500 shares which the Initial Purchasers had the option to
purchase to cover over-allotments) of Series E Preferred Stock with the
Liquidation Preference were authorized. Eighty thousand of such shares are
issued and outstanding and are fully paid and non-assessable. The Initial
Purchasers did not exercise their option to purchase the remaining 7,500
shares. The holders of the Series E Preferred Stock have no preemptive
rights.
The transfer agent for the Series E Preferred Stock is Continental
Stock Transfer & Trust Co. unless and until a successor is selected by the
Company (the "Transfer Agent").
RANKING
The Series E 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 October 24, 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 E 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 the Series D Preferred Stock, any
additional shares of Series D Preferred Stock or Series E 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 October 24,
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 E 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 ($323.5
million aggregate liquidation preference outstanding at November 30, 1997)
and to each class of capital stock or series of preferred stock issued by the
Company established after October 24, 1997 by the Board of Directors the
terms of which expressly provide that such class or series will rank senior
to the Series E Preferred Stock as to dividend distributions and
distributions upon liquidation, winding-up and dissolution of the Company
(collectively referred to as "Senior Securities").
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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 E 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 Senior Securities.
DIVIDENDS
The holders of shares of the Series E 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 October 30, 1997 accruing at the rate per annum of 7% of the Liquidation
Preference per share, payable quarterly in arrears on each January 15, April
15, July 15 and October 15, commencing on January 15, 1998 (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 January 1, April 1, July 1 and October 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 E 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. In the event the sale by the Transfer Agent of such aggregated
fractional interests would be restricted, the Company and the Transfer Agent
will agree upon other appropriate arrangements for the cash realization of
fractional interests. Dividends payable on the Series E 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 E 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 E 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 E 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 E Preferred Stock. Unless full
cumulative dividends on all outstanding shares of Series E 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
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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 E 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.
The Existing Senior 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 E Preferred Stock.
OPTIONAL REDEMPTION
The Series E Preferred Stock may not be redeemed at the option of
the Company prior to October 18, 2000. The Series E Preferred Stock may be
redeemed for cash, in whole or in part, at the option of the Company on or
after October 18, 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 October 18 of each of the years set forth below:
Year Percentage
---- ----------
2000.........................................................104.00%
2001.........................................................103.00%
2002.........................................................102.00%
2003.........................................................101.00%
2004 and thereafter..........................................100.00%
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 E
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 E Preferred Stock will be convertible at any
time after December 29, 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 E 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 $60.47 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 E 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
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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).
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 E 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 E
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 E Preferred Stock at the
close of business on a record date with respect to the payment of dividends
on the Series E Preferred Stock will be entitled to receive such dividends
with respect to such share of Series E 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 E
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 E 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 E 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 E 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 and subject to the participation of any Parity
Securities, 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 E 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 E Preferred Stock
describing the transaction that constitutes the Preferred Stock Change of
Control and offering to repurchase the Series E 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 E
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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 E Preferred Stock as a result
of a Preferred Stock Change of Control.
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 E 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 E Preferred Stock becomes 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 E 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 E Preferred Stock to require that the
Company repurchase or redeem the Series E 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 E 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
E 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 E 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 E 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 E Preferred Stock in the event of a
Preferred Stock Change of Control; provided, that if the Company fails to
repurchase shares of Series E Preferred Stock, the sole remedy to holders of
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Series E Preferred Stock will be the voting rights arising from a Voting
Rights Triggering Event. Moreover, the Company will not repurchase or redeem
any Series E 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 E Preferred Stock
may not be able to compel the Company to purchase the Series E 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 E 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 E 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 E 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 E
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 E 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 E Preferred Stock voting together with any other subsequently
issued Parity Securities then entitled to voting rights 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 E 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 E
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 E Preferred Stock or authorize the issuance of any
additional shares of Series E Preferred Stock, without the approval of the
holders of at least a majority of the then outstanding shares of Series E
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 E 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 E
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 E Preferred Stock. The consent of the holders
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of Series E 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.
MERGER, CONSOLIDATION AND SALE OF ASSETS
Without the vote or consent of the holders of a majority of the
then outstanding shares of Series E 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 E 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 E 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 E
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 E 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 E 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 E Preferred Stock and all other
Parity Securities are not paid in full, the holders of the Series E 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 E Preferred Stock are
outstanding, the Company will furnish copies of the SEC Reports to the
holders of Series E 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,
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for so long as any shares of Series E 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.
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") with the Commission 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 December 29, 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 E 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 October 30, 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% per year of the Liquidation
Preference of the Series E 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 E 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 E 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 E Preferred Stock." The Company does not expect that
there will be any public trading market for the Series E 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 E Preferred Stock was deposited with Continental
immediately preceding the October 30 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 E 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 E Preferred Stock represented by such Depositary Shares. Owners of
Depositary Shares are entitled to receive only whole shares of Series E
Preferred Stock on the basis of one share of Series E Preferred Stock for
each one hundred Depositary Shares. In no event will fractional shares of
Series E 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 E 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 E 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 Series E Preferred Stock- Conversion Rights," the Series E Preferred Stock
may be converted, in whole or in part, into shares of Common Stock at the
option of the holders of Series E Preferred Stock at any time after December
29, 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 E 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 E 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
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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 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 E Preferred Stock to the record holders of Depositary
Receipts in proportion to the number of Depositary Shares owned by such
holders. See "Description of Series E 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 E Preferred Stock, or
(ii) Continental shall receive notice of any meeting at which holders of
Series E Preferred Stock are entitled to vote or of which holders of Series E
Preferred Stock are entitled to notice, or of any election on the part of the
Company to call for redemption any Series E 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 E 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.
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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 E Preferred Stock, as described under "Description
of Series E Preferred Stock - Voting Rights."
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
Agreement, upon surrender of the Depositary Receipts evidencing such
Depositary Shares, to receive Series E Preferred Stock or, upon conversion of
the Series E 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 E Preferred Stock and any other
distributions with respect thereto and (ii) to deliver the Series E 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 E 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 E Preferred Stock are entitled to vote,
withdrawals of the Series E 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 E
Preferred Stock.
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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 E 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.
FORM AND DENOMINATION
Global Shares; Book-Entry Form. Depositary Shares sold in
offshore transactions in reliance on Regulation S ("Regulation S") under
the Securities Act will initially be represented by one or more global
certificates in definitive, fully registered form (the "Regulation S
Temporary Global Certificate") and will be deposited with the Trustee as
custodian for, and registered in the name of, Cede & Co., as nominee of The
Depository Trust Company (the "Depositary") (such nominee being referred to
herein as the "Global Security Holder"). On or prior to the end of the 40
day restricted period (the "Restricted Period") within the meaning of
Regulation S, beneficial interests in Depositary Shares sold in offshore
transactions in reliance on Regulation S may only be held through the
Regulation S Temporary Global Certificate, held by the Depositary. Upon the
conclusion of the Restricted Period, interests in the Regulation S Temporary
Global Certificate may be transferred for interests in a permanent Regulation
S global certificate (the "Regulation S Global Certificate") or otherwise
as provided below. Shares of Depositary Shares sold in reliance on Rule 144A
or to other Accredited Investors will be evidenced initially by one or more
global certificates (the "Restricted Global Certificate" and, together with
the Regulation S Global Certificate, the "Depositary Share Global
Certificate") which will be 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
29
<PAGE>
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.
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
30
<PAGE>
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 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.
For purposes of this discussion, a "U.S. Holder" means a citizen
or resident of the United States, a corporation, partnership or other entity
created or organized in the United States or under the laws of the United
States or of any political subdivision thereof, an estate whose income is
includible in gross income for United States federal income tax purposes
regardless of its source or a trust, if a U.S. court is able to exercise
primary supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the trust.
A "Non-U.S. Holder" means a holder who is not a U.S. Holder.
INTRODUCTION
Holders of Depositary Shares will be treated for United States
federal income tax purposes as if they were owners of the Series E 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 E
Preferred Stock. References in this "Certain Federal Income Tax Consequences"
section to holders of Series E Preferred Stock include holders of Depositary
Shares, and references to Depositary Shares include Series E Preferred Stock.
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<PAGE>
TAX CONSEQUENCES TO U.S. HOLDERS
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 U.S. 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 to which such distribution is made. The amount of any such excess
distribution that exceeds the U.S. 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 U.S. Holder's holding period for the Depositary
Shares or Common Stock exceeds one year. The most favorable tax rate on
long-term capital gains of non-corporate holders (20%) will not be available
unless the holding period exceeds 18 months. A U.S. 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 E 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.
Dividends received by corporate U.S. 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 U.S. 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.
Recently enacted legislation requires a corporate holder to satisfy a
separate 46 day (91-day, in the case of certain preferred stock dividends)
holding period requirement with respect to each dividend in order to be
eligible for the dividends-received deduction with respect to such dividend.
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 U.S. 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 E
Preferred Stock as constructive distributions of stock with respect to
preferred stock. Such constructive distributions of stock would be taxable to
U.S. 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 U.S. 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
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<PAGE>
the outstanding Common Stock of the Company may be treated as a constructive
distribution of stock to U.S. Holders of Depositary Shares. The Company is
unable to predict whether any such adjustment will be made.
CONVERSION OF SERIES E PREFERRED STOCK
No gain or loss will generally be recognized for United States
federal income tax purposes on conversion of the Series E Preferred Stock
solely into Common Stock. However, if the conversion takes place when there
is a dividend arrearage on the Series E 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 E 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 E Preferred Stock
converted into such Common Stock. The receipt of cash in lieu of a fractional
share upon conversion of Series E Preferred Stock into Common Stock will
generally be treated as a sale of such fractional share of Common Stock in
which the U.S. Holder will recognize taxable gain or loss equal to the
difference between the amount of cash received and the U.S. Holder's adjusted
tax basis in the fractional share redeemed. Such gain or loss will be capital
gain or loss and will be long-term if the U.S. Holder's holding period for
the fractional share exceeds one year. The most favorable tax rate on long-
term capital gains of non-corporate holders (20%) will not be available
unless the holding period exceeds 18 months.
CONVERSION OF SERIES E PREFERRED STOCK AFTER DIVIDEND RECORD DATE
If a holder whose Series E Preferred Stock has not been called for
redemption surrenders such Series E Preferred Stock for conversion into
shares of Common Stock after a dividend record date for the Series E
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.
A U.S. 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 OTHER TAXABLE DISPOSITION OF SERIES E PREFERRED STOCK AND
SALE OR OTHER TAXABLE DISPOSITION OF COMMON STOCK
A redemption of shares of Series E Preferred Stock for cash will be
a taxable event.
A redemption of shares of Series E 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 E Preferred Stock redeemed. If a
holder does own, actually or constructively, other stock of the Company, a
redemption of Series E 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 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 E 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 E 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 E 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 E Preferred Stock or Common Stock
(other than in a redemption, on conversion or pursuant to
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<PAGE>
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 tax basis in the Series E 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 E Preferred Stock or
Common Stock exceeds one year. The most favorable tax rate on long-term
capital gains of individual holders (20%) will not be available unless the
holding period exceeds 18 months.
If a redemption of Series E 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 E 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 E
Preferred Stock.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
DISTRIBUTIONS ON DEPOSITARY SHARES AND COMMON STOCK
Dividends paid to a Non-U.S. Holder of Series E Preferred Stock or
Common Stock that are not effectively connected with the conduct of a trade
or business within the United States by the Non-U.S. Holder will be subject
to United States federal income tax, which generally will be withheld at a
rate of 30% of the gross amount of the dividends unless the rate is reduced
by an applicable income tax treaty. Under the currently applicable Treasury
regulations, dividends paid to an address in a country other than the United
States are subject to withholding (unless the payor has knowledge to the
contrary).
Dividends paid to a Non-U.S. Holder of Series E Preferred Stock or
Common Stock that are effectively connected with a United States trade or
business conducted by such Non-U.S. Holder are taxed at the graduated rates
applicable to United States citizens, resident aliens and domestic
corporations (the "Regular Federal Income Tax"), and are not subject to
withholding tax if the Non-U.S. Holder gives an appropriate statement to the
Company or its paying agent in advance of the dividend payment. In addition
to the Regular Federal Income Tax, effectively connected dividends received
by a Non-U.S. Holder that is a corporation may also be subject to an
additional branch profits tax at a rate of 30% (or such lower rate as may be
specified by an applicable income tax treaty).
REDEMPTION, SALE OR OTHER TAXABLE DISPOSITION OF SERIES E PREFERRED STOCK AND
SALE OR OTHER TAXABLE DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States
federal income tax or withholding on gain recognized upon the sale or other
disposition of Series E Preferred Stock or Common Stock unless: (i) the gain
is effectively connected with the conduct of a trade or business within the
United States by the Non-U.S. Holder (in which case the branch profits tax
also may apply if the Non-U.S. Holder is a corporation); (ii) in the case of
a Non-U.S. Holder who is a non-resident alien individual and holds the Series
E Preferred Stock or Common Stock as a capital asset, such holder is present
in the United States for 183 or more days in the taxable year and certain
other conditions are met; or (iii) the Series E Preferred Stock or Common
Stock constitutes a United States real property interest by reason of the
Company's status as a "United States real property holding corporation"
("USRPHC") for federal income tax purposes at any time within the shorter
of the five-year period preceding such disposition or such Non-U.S. Holder's
holding period for such Series E Preferred Stock or Common Stock. The Company
does not believe that it is or will become a USRPHC for federal income tax
purposes.
If a Non-U.S. Holder falls within clause (i) or (iii) in the
preceding paragraph, the holder will be taxed on the net gain derived from
the sale under the Regular Federal Income Tax, and may be subject to
withholding under certain circumstances (and, with respect to corporate Non-
U.S. Holders, may also be subject to the branch profits tax). If an
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individual Non-U.S. Holder falls under clause (ii) in the preceding
paragraph, the holder generally will be subject to United States federal
income tax at a rate of 30% on the gain derived from the sale.
FEDERAL ESTATE TAXES
An individual Non-U.S. Holder who owns, or is treated as owning,
Series E Preferred Stock or Common Stock at the time of his or her death or
has made certain lifetime transfers of an interest in Series E Preferred
Stock or Common Stock will be required to include the value of such Series E
Preferred Stock or Common Stock in his gross estate for United States federal
estate tax purposes, unless an applicable estate tax treaty provides
otherwise.
NEW WITHHOLDING REGULATIONS
The Treasury Department recently promulgated final regulations
regarding the withholding and information reporting rules applicable to Non-
U.S. Holders (the "New Withholding Regulations"). In general, the New
Withholding Regulations do not significantly alter the substantive
withholding and information reporting requirements but rather unify current
certification procedures and forms and clarify reliance standards. The New
Withholding Regulations are generally effective for payments made after
December 31, 1998, subject to certain transition rules. NON-U.S. HOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE IMPACT, IF ANY, OF
THE NEW WITHHOLDING REGULATIONS.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A U.S. 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 U.S. 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. A Non-U.S. Holder of Depositary Shares or
Common Stock may also be subject to certain information reporting or backup
withholding if certain requisite certification is not received or other
exemptions do not apply. Any amount paid as backup withholding would be
creditable against the holder's federal income tax liability.
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THE SELLING SECURITYHOLDERS
The following table sets forth, as of December 18, 1997 certain
information regarding the Selling Securityholders' ownership of the Company's
Depositary Shares, Series E 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 E 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 E Preferred Stock or Common Stock
as of the date of this Prospectus.
<TABLE>
<CAPTION>
===================================================================================================================================
Common Stock Depositary Shares
------------ ---------------------------------------------------
- ------------------------- --------------------------------------------------- ---------------------------------------------------
Beneficially Beneficially
Name of Selling Owned Owned After
Security- Beneficially Owned Prior Offered After This Beneficially Owned Offered This Offering
holder(1) to This Offering(2)(3) for Sale Offering(2)(3) Prior to This Offering(2) for Sale (2)
--------- ---------------------- -------- -------------- ---------------------------- -------- -------------
------------------------ -------- -------------- ---------------------------- -------- -------------
Number of Percent of
Number of Percent of Depositary Depositary
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Aim High Yield 239,789 1.3848 239,789 0 580,000 7.2500 580,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Allstate Insurance Company 49,612 * 49,612 0 120,000 1.5000 120,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
American Travellers Life 5,458 * 5,458 0 13,200 * 13,200 0
Insurance Co. -
Convertible
- ------------------------------------------------------------------------------------------------------------------------------------
Bank of America Pension 49,612 * 49,612 0 120,000 1.5000 120,000 0
Plan
- ------------------------------------------------------------------------------------------------------------------------------------
Bankers Life and Casualty 10,688 * 10,688 0 25,850 * 25,850 0
Insurance Co. -
Convertible
- ------------------------------------------------------------------------------------------------------------------------------------
Bear Stearns Securities 90,004 * 90,004 0 217,700 2.7213 217,700 0
Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Beneficial Standard Life 13,189 * 13,189 0 31,900 * 31,900 0
Insurance Co. -
Convertible
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
================================================================================
Series E Preferred Stock
------------------------
- ------------------------- ---------------------------------------------------
Beneficially
Owned After
Name of Selling Beneficially Owned This
Security- Prior to This Offered Offering
holder(1) Offering(2)(4) for Sale (2)(4)
--------- -------------- -------- ---------
------------------------ -------- --------------
Number
of shares Percent
of Series of
E Series E
Preferred Preferred
Stock Stock
----- -----
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
Aim High Yield 5,800 7.2500 5,800 0
- ------------------------------------------------------------------------------
Allstate Insurance Company 1,200 1.5000 1,200 0
- ------------------------------------------------------------------------------
American Travellers Life 132 * 132 0
Insurance Co. -
Convertible
- ------------------------------------------------------------------------------
Bank of America Pension 1,200 1.5000 1,200 0
Plan
- ------------------------------------------------------------------------------
Bankers Life and Casualty 259 * 259 0
Insurance Co. -
Convertible
- ------------------------------------------------------------------------------
Bear Stearns Securities 2,177 2.7213 2,177 0
Corp.
- ------------------------------------------------------------------------------
Beneficial Standard Life 319 * 319 0
Insurance Co. -
Convertible
- ------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Common Stock Depositary Shares
------------ ---------------------------------------------------
- ------------------------- --------------------------------------------------- ---------------------------------------------------
Beneficially Beneficially
Name of Selling Owned Owned After
Security- Beneficially Owned Prior Offered After This Beneficially Owned Offered This Offering
holder(1) to This Offering(2)(3) for Sale Offering(2)(3) Prior to This Offering(2) for Sale (2)
--------- ---------------------- -------- -------------- ---------------------------- -------- -------------
------------------------ -------- -------------- ---------------------------- -------- -------------
Number of Percent of
Number of Percent of Depositary Depositary
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
BNP Arbitrage SNC 41,343 * 41,343 0 100,00 1.2500 100,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Capitol American Life 5,458 * 5,458 0 13,200 * 13,200 0
Insurance Co. -
Convertible
- ------------------------------------------------------------------------------------------------------------------------------------
Chase Securities, Inc. 45,478 * 45,478 0 110,000 1.3750 110,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Chrysler Corporation 43,038 * 43,038 0 104,100 1.3013 104,100 0
Master Retirement Trust
- ------------------------------------------------------------------------------------------------------------------------------------
CNA Income Shares, Inc. 16,538 * 16,538 0 40,000 * 40,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Combined Insurance Company 10,502 * 10,502 0 25,400 * 25,400 0
of America
- ------------------------------------------------------------------------------------------------------------------------------------
Conseco Fund Group - Asset 4,962 * 4,962 0 12,000 * 12,000 0
Allocation
- ------------------------------------------------------------------------------------------------------------------------------------
Conseco Series Trust 11,576 * 11,576 0 28,000 * 28,000 0
-Asset Allocation
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware PERS 8,269 * 8,269 0 20,000 * 20,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
DeMoss Foundation 2,068 * 2,068 0 5,000 * 5,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Donaldson, Lufkin & 102,324 * 102,324 0 247,500 3.0938 247,500 0
Jenrette Sec. Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
================================================================================
Series E Preferred Stock
------------------------
- ------------------------- ---------------------------------------------------
Beneficially
Owned After
Name of Selling Beneficially Owned This
Security- Prior to This Offered Offering
holder(1) Offering(2)(4) for Sale (2)(4)
--------- -------------- -------- ---------
------------------------ -------- --------------
Number
of shares Percent
of Series of
E Series E
Preferred Preferred
Stock Stock
----- -----
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
BNP Arbitrage SNC 1,000 1.2500 1,000 0
- ------------------------------------------------------------------------------
Capitol American Life 132 * 132 0
Insurance Co. -
Convertible
- ------------------------------------------------------------------------------
Chase Securities, Inc. 1,100 1.3750 1,100 0
- ------------------------------------------------------------------------------
Chrysler Corporation 1,041 1.3013 1,401 0
Master Retirement Trust
- ------------------------------------------------------------------------------
CNA Income Shares, Inc. 400 * 400 0
- ------------------------------------------------------------------------------
Combined Insurance Company 254 * 254 0
of America
- ------------------------------------------------------------------------------
Conseco Fund Group - Asset 120 * 120 0
Allocation
- ------------------------------------------------------------------------------
Conseco Series Trust 280 * 280 0
-Asset Allocation
- ------------------------------------------------------------------------------
Delaware PERS 200 * 200 0
- ------------------------------------------------------------------------------
DeMoss Foundation 50 * 50 0
- ------------------------------------------------------------------------------
Donaldson, Lufkin & 2,475 3.0938 2,475 0
Jenrette Sec. Corp.
- ------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Common Stock Depositary Shares
------------ ---------------------------------------------------
- ------------------------- --------------------------------------------------- ---------------------------------------------------
Beneficially Beneficially
Name of Selling Owned Owned After
Security- Beneficially Owned Prior Offered After This Beneficially Owned Offered This Offering
holder(1) to This Offering(2)(3) for Sale Offering(2)(3) Prior to This Offering(2) for Sale (2)
--------- ---------------------- -------- -------------- ---------------------------- -------- -------------
------------------------ -------- -------------- ---------------------------- -------- -------------
Number of Percent of
Number of Percent of Depositary Depositary
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Eaton Vance High Income
Portfolio 76,485 * 76,485 0 185,000 2.3125 185,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Eaton Vance Income Fund of 18,605 * 18,605 0 45,000 * 45,000 0
Boston
- ------------------------------------------------------------------------------------------------------------------------------------
Enterprise Accum Trust HY 3,101 * 3,101 0 7,500 * 7,500 0
- ------------------------------------------------------------------------------------------------------------------------------------
Enterprise High Yield Bd. 3,101 * 3,101 0 7,500 * 7,500 0
- ------------------------------------------------------------------------------------------------------------------------------------
Forehooks & Co. 20,672 * 20,672 0 50,000 * 50,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Convertible 621 * 621 0 1,500 * 1,500 0
Opportunity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Fulcrum Fd LP 5,127 * 5,127 0 12,400 * 12,400 0
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Global Convert B2 621 * 621 0 1,500 * 1,500 0
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Global Convert Fund 290 * 290 0 700 * 700 0
B-3
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Global Convert Fund 5,292 * 5,292 0 12,800 * 12,800 0
Ser A-5
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Global Convert Fund 827 * 827 0 2,000 * 2,000 0
Ser B-5
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Performance Fund 703 * 703 0 1,700 * 1,700 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
================================================================================
Series E Preferred Stock
------------------------
- ------------------------- ---------------------------------------------------
Beneficially
Owned After
Name of Selling Beneficially Owned This
Security- Prior to This Offered Offering
holder(1) Offering(2)(4) for Sale (2)(4)
--------- -------------- -------- ---------
------------------------ -------- --------------
Number
of shares Percent
of Series of
E Series E
Preferred Preferred
Stock Stock
----- -----
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
Eaton Vance High Income
Portfolio 1,850 2.3125 1,850 0
- ------------------------------------------------------------------------------
Eaton Vance Income Fund of 450 * 450 0
Boston
- ------------------------------------------------------------------------------
Enterprise Accum Trust HY 75 * 75 0
- ------------------------------------------------------------------------------
Enterprise High Yield Bd. 75 * 75 0
- ------------------------------------------------------------------------------
Forehooks & Co. 500 * 500 0
- ------------------------------------------------------------------------------
Forest Convertible 15 * 15 0
Opportunity Fund
- ------------------------------------------------------------------------------
Forest Fulcrum Fd LP 124 * 124 0
- ------------------------------------------------------------------------------
Forest Global Convert B2 15 * 15 0
- ------------------------------------------------------------------------------
Forest Global Convert Fund 7 * 7 0
B-3
- ------------------------------------------------------------------------------
Forest Global Convert Fund 128 * 128 0
Ser A-5
- ------------------------------------------------------------------------------
Forest Global Convert Fund 20 * 20 0
Ser B-5
- ------------------------------------------------------------------------------
Forest Performance Fund 17 * 17 0
- ------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Common Stock Depositary Shares
------------ ---------------------------------------------------
- ------------------------- --------------------------------------------------- ---------------------------------------------------
Beneficially Beneficially
Name of Selling Owned Owned After
Security- Beneficially Owned Prior Offered After This Beneficially Owned Offered This Offering
holder(1) to This Offering(2)(3) for Sale Offering(2)(3) Prior to This Offering(2) for Sale (2)
--------- ---------------------- -------- -------------- ---------------------------- -------- -------------
------------------------ -------- -------------- ---------------------------- -------- -------------
Number of Percent of
Number of Percent of Depositary Depositary
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Performance
Greyhound 827 * 827 0 2,000 * 2,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Global Convert B-1 703 * 703 0 1,700 * 1,700 0
- ------------------------------------------------------------------------------------------------------------------------------------
Forum Capital Markets LLC 3,101 * 3,101 0 7,500 * 7,500 0
- ------------------------------------------------------------------------------------------------------------------------------------
Fox Family Foundation 497 * 497 0 1,200 * 1,200 0
10/10/87 c/o Forest
Investment Management Co.
- ------------------------------------------------------------------------------------------------------------------------------------
Fox Family Portfolio 1,654 * 1,654 0 4,000 * 4,000 0
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
General Motors Employees 16,538 * 16,538 0 40,000 * 40,000 0
Domestic Group Pension
Trust
- ------------------------------------------------------------------------------------------------------------------------------------
Golden Rule Insurance HY 4,135 * 4,135 0 10,000 * 10,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Great American Reserve 10,688 * 10,688 0 25,850 * 25,850 0
Insurance Co. -
Convertible
- ------------------------------------------------------------------------------------------------------------------------------------
ICI American Holdings 3,308 * 3,308 0 8,000 * 8,000 0
Pension Trust
- ------------------------------------------------------------------------------------------------------------------------------------
JMG Convertible 41,343 * 41,343 0 100,000 1.2500 100,000 0
Investments L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
================================================================================
Series E Preferred Stock
------------------------
- ------------------------- ---------------------------------------------------
Beneficially
Owned After
Name of Selling Beneficially Owned This
Security- Prior to This Offered Offering
holder(1) Offering(2)(4) for Sale (2)(4)
--------- -------------- -------- ---------
------------------------ -------- --------------
Number
of shares Percent
of Series of
E Series E
Preferred Preferred
Stock Stock
----- -----
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
Forest Performance
Greyhound 20 * 20 0
- ------------------------------------------------------------------------------
Forest Global Convert B-1 17 * 17 0
- ------------------------------------------------------------------------------
Forum Capital Markets LLC 75 * 75 0
- ------------------------------------------------------------------------------
Fox Family Foundation 12 * 12 0
10/10/87 c/o Forest
Investment Management Co.
- ------------------------------------------------------------------------------
Fox Family Portfolio 40 * 40 0
Partnership
- ------------------------------------------------------------------------------
General Motors Employees 400 * 400 0
Domestic Group Pension
Trust
- ------------------------------------------------------------------------------
Golden Rule Insurance HY 100 * 100 0
- ------------------------------------------------------------------------------
Great American Reserve 259 * 259 0
Insurance Co. -
Convertible
- ------------------------------------------------------------------------------
ICI American Holdings 80 * 80 0
Pension Trust
- ------------------------------------------------------------------------------
JMG Convertible 1,000 1.2500 1,000 0
Investments L.P.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Common Stock Depositary Shares
------------ ---------------------------------------------------
- ------------------------- --------------------------------------------------- ---------------------------------------------------
Beneficially Beneficially
Name of Selling Owned Owned After
Security- Beneficially Owned Prior Offered After This Beneficially Owned Offered This Offering
holder(1) to This Offering(2)(3) for Sale Offering(2)(3) Prior to This Offering(2) for Sale (2)
--------- ---------------------- -------- -------------- ---------------------------- -------- -------------
------------------------ -------- -------------- ---------------------------- -------- -------------
Number of Percent of
Number of Percent of Depositary Depositary
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. Morgan & Co, Inc. 285,266 1.6475 285,266 0 690,000 8.6250 690,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
KA Management Ltd. 45,478 * 45,478 0 110,000 1.3750 110,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
KA Trading L.P. 45,478 * 45,478 0 110,000 1.3750 110,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Landing & Co. 20,672 * 20,672 0 50,000 * 50,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
LB Series Fund, Inc. -High 20,672 * 20,672 0 50,000 * 50,000 0
Yield Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Lincoln National 8,779 * 8,779 0 21,235 * 21,235 0
Convertible Securities
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
LLT Limited 414 * 414 0 1,000 * 1,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Lutheran Brother High 12,403 * 12,403 0 30,000 * 30,000 0
Yield Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Millennium Trading L.P. 53,746 * 53,746 0 130,000 1.6250 130,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Nalco Chemical Retirement 1,654 * 1,654 0 4,000 * 4,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Northstar Balance Sheet 16,538 * 16,538 0 40,000 * 40,000 0
Opportunities
- ------------------------------------------------------------------------------------------------------------------------------------
The Northwestern Mutual 33,075 * 33,075 0 80,000 1.0000 80,000 0
Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
================================================================================
Series E Preferred Stock
------------------------
- ------------------------- ---------------------------------------------------
Beneficially
Owned After
Name of Selling Beneficially Owned This
Security- Prior to This Offered Offering
holder(1) Offering(2)(4) for Sale (2)(4)
--------- -------------- -------- ---------
------------------------ -------- --------------
Number
of shares Percent
of Series of
E Series E
Preferred Preferred
Stock Stock
----- -----
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
J.P. Morgan & Co, Inc. 6,900 8.6250 6,900 0
- ------------------------------------------------------------------------------
KA Management Ltd. 1,100 1.3750 1,100 0
- ------------------------------------------------------------------------------
KA Trading L.P. 1,100 1.3750 1,100 0
- ------------------------------------------------------------------------------
Landing & Co. 500 * 500 0
- ------------------------------------------------------------------------------
LB Series Fund, Inc. -High 500 * 500 0
Yield Portfolio
- ------------------------------------------------------------------------------
Lincoln National 213 * 213 0
Convertible Securities
Fund
- ------------------------------------------------------------------------------
LLT Limited 10 * 10 0
- ------------------------------------------------------------------------------
Lutheran Brother High 300 * 300 0
Yield Fund
- ------------------------------------------------------------------------------
Millennium Trading L.P. 1,300 1.6250 1,300 0
- ------------------------------------------------------------------------------
Nalco Chemical Retirement 40 * 40 0
- ------------------------------------------------------------------------------
Northstar Balance Sheet 400 * 400 0
Opportunities
- ------------------------------------------------------------------------------
The Northwestern Mutual 800 1.0000 800 0
Life Insurance Company
- ------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Common Stock Depositary Shares
------------ ---------------------------------------------------
- ------------------------- --------------------------------------------------- ---------------------------------------------------
Beneficially Beneficially
Name of Selling Owned Owned After
Security- Beneficially Owned Prior Offered After This Beneficially Owned Offered This Offering
holder(1) to This Offering(2)(3) for Sale Offering(2)(3) Prior to This Offering(2) for Sale (2)
--------- ---------------------- -------- -------------- ---------------------------- -------- -------------
------------------------ -------- -------------- ---------------------------- -------- -------------
Number of Percent of
Number of Percent of Depositary Depositary
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OCM Convertible Trust 62,842 * 62,842 0 152,000 1.9000 152,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Pacific Life Insurance 43,410 * 43,410 0 105,000 1.3125 105,000 0
Company
- ------------------------------------------------------------------------------------------------------------------------------------
SBC Warburg Dillon Read 19,432 * 19,432 0 47,000 * 47,000 0
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Swiss Bank Corporation 12,403 * 12,403 0 30,000 * 30,000 0
London Branch
- ------------------------------------------------------------------------------------------------------------------------------------
State Employees' 15,297 * 15,297 0 37,000 * 37,000 0
Retirement Fund of the
State of Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
State of Connecticut 56,847 * 56,847 0 137,500 1.7188 137,500 0
Combined Investment Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Surfboard & Co. 24,806 * 24,806 0 60,000 * 60,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Susquehanna Capital Group 31,834 * 31,834 0 77,000 * 77,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Triton Capital Investments 49,612 * 49,612 0 120,000 1.5000 120,000 0
Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
The United Bank of Kuwait 82,686 * 82,686 0 200,000 2.5000 200,000 0
PLC
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
================================================================================
Series E Preferred Stock
------------------------
- ------------------------- ---------------------------------------------------
Beneficially
Owned After
Name of Selling Beneficially Owned This
Security- Prior to This Offered Offering
holder(1) Offering(2)(4) for Sale (2)(4)
--------- -------------- -------- ---------
------------------------ -------- --------------
Number
of shares Percent
of Series of
E Series E
Preferred Preferred
Stock Stock
----- -----
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
OCM Convertible Trust 1,520 1.9000 1,520 0
- ------------------------------------------------------------------------------
Pacific Life Insurance 1,050 1.3125 1,050 0
Company
- ------------------------------------------------------------------------------
SBC Warburg Dillon Read 470 * 470 0
Inc.
- ------------------------------------------------------------------------------
Swiss Bank Corporation 300 * 300 0
London Branch
- ------------------------------------------------------------------------------
State Employees' 370 * 370 0
Retirement Fund of the
State of Delaware
- ------------------------------------------------------------------------------
State of Connecticut 1,375 1.7188 1,375 0
Combined Investment Funds
- ------------------------------------------------------------------------------
Surfboard & Co. 600 * 600 0
- ------------------------------------------------------------------------------
Susquehanna Capital Group 770 * 770 0
- ------------------------------------------------------------------------------
Triton Capital Investments 1,200 1.5000 1,200 0
Ltd.
- ------------------------------------------------------------------------------
The United Bank of Kuwait 2,000 2.5000 2,000 0
PLC
- ------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Common Stock Depositary Shares
------------ ---------------------------------------------------
- ------------------------- --------------------------------------------------- ---------------------------------------------------
Beneficially Beneficially
Name of Selling Owned Owned After
Security- Beneficially Owned Prior Offered After This Beneficially Owned Offered This Offering
holder(1) to This Offering(2)(3) for Sale Offering(2)(3) Prior to This Offering(2) for Sale (2)
--------- ---------------------- -------- -------------- ---------------------------- -------- -------------
------------------------ -------- -------------- ---------------------------- -------- -------------
Number of Percent of
Number of Percent of Depositary Depositary
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
United National Insurance 614 * 614 0 1,485 * 1,485 0
- ------------------------------------------------------------------------------------------------------------------------------------
Vanguard Convertible 38,780 * 38,780 0 93,800 1.1725 93,800 0
Securities Fund, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Walker Art Center 1,499 * 1,499 0 3,625 * 3,625 0
- ------------------------------------------------------------------------------------------------------------------------------------
Weirton Trust 3,734 * 3,734 0 9,370 * 9,370 0
- ------------------------------------------------------------------------------------------------------------------------------------
Wm. M. Keck Jr. Foundation 4,135 * 4,135 0 10,000 * 10,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Zeneca Holdings Pension 3,308 * 3,308 0 8,000 * 8,000 0
Trust
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
================================================================================
Series E Preferred Stock
------------------------
- ------------------------- ---------------------------------------------------
Beneficially
Owned After
Name of Selling Beneficially Owned This
Security- Prior to This Offered Offering
holder(1) Offering(2)(4) for Sale (2)(4)
--------- -------------- -------- ---------
------------------------ -------- --------------
Number
of shares Percent
of Series of
E Series E
Preferred Preferred
Stock Stock
----- -----
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
United National Insurance 15 * 15 0
- ------------------------------------------------------------------------------
Vanguard Convertible 938 1.1725 938 0
Securities Fund, Inc.
- ------------------------------------------------------------------------------
Walker Art Center 37 * 37 0
- ------------------------------------------------------------------------------
Weirton Trust 94 * 94 0
- ------------------------------------------------------------------------------
Wm. M. Keck Jr. Foundation 100 * 100 0
- ------------------------------------------------------------------------------
Zeneca Holdings Pension 80 * 80 0
Trust
- ------------------------------------------------------------------------------
</TABLE>
* Less than one percent. Based on 17,315,317 shares of common stock
outstanding on November 30, 1997, 8,000,000 Depositary Shares outstanding
on December 18, 1997 and 80,000 shares of Series E Preferred Stock
outstanding on December 18, 1997.
(1)The names of additional Selling Securityholders may be provided
subsequent hereto pursuant to Section 424(c) of the Securities Act of 1933,
as amended.
(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
E Preferred Stock. The Depositary Shares and the Series E Preferred Stock
may not be converted into Common Stock until after December 29, 1997.
43
<PAGE>
(4) Assuming the conversion of all Depositary Shares into shares of Series
E Preferred Stock on the basis of one share of Series E Preferred
Stock for each one hundred Depositary Shares.
The Common Stock and Depositary Shares owned by the Selling
Securityholders and the Dividend Shares issuable by the Company 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 October 30 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.
44
<PAGE>
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of the
Securities or the issuance of the Dividend Shares offered hereby. The
Dividend Shares may be issued by the Company in lieu of cash from time to
time to holders of record of the Series E Preferred Stock, all in
accordance with the Certificate of Designation, during the two year period
commencing on the date of this Prospectus. See "Description of Series E
Preferred Stock--Dividends." 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 under 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 by the Selling Securityholders
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.
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.
Pursuant to the Preferred Stock Registration Rights Agreement entered
into in connection with the offer and sale of the Depositary Shares by the
Company, 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
45
<PAGE>
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 5,745 shares of the
Common Stock and owns a warrant to purchase 100,000 shares of Common Stock
at an exercise price of $41.50 per share.
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 upon
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
upon the authority of such firm as experts in accounting and auditing.
The December 31, 1996 audited financial statements of Shared
Technologies Fairchild Inc. incorporated by reference in this Prospectus
and elsewhere in the Registration Statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
The consolidated financial statements and schedule of Shared
Technologies Fairchild Inc. and subsidiaries at December 31, 1995 and for
each of the two years in the period ended December 31, 1995 incorporated by
reference in this Prospectus have been audited by Rothstein, Kass &
Company, P.C., independent certified public accountants, as indicated in
their report, which includes an explanatory paragraph relating to the
changing of the method of accounting for its investment in one of its
subsidiaries, with respect thereto, and are incorporated by reference
herein in reliance upon the authority of said firm as experts in accounting
and auditing.
46
<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...............................$ 71,390.00
Legal fees and expenses.....................................................$ 25,000.00
Accountant's fees and expenses payable to Ernst & Young LLP.................$ 15,000.00
Accountant's fees and expenses payable to Arthur Andersen LLP...............$ 3,000.00
Accountant's fees and expenses payable to Rothstein, Kass & Company, P.C....$ 2,100.00
Miscellaneous...............................................................$ 8,510.00
- --------------------------------------------------------------------------------------------
Total.......................................................................$ 125,000.00
==========
- -------------------------------------------------------------------------------------------
</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.
<PAGE>
ITEM 16. Exhibits and Financial Data Schedules.
(a) Exhibits
1.1 -- Purchase Agreement, dated as of October 24, 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 -- Agreement and Plan of Merger, dated as of November 20, 1997, by
and among the Company, Moonlight Acquisition Corp. and Shared
Technologies Fairchild Inc. Exhibit 99(c)(1) to the Company's
Schedule 14D-1 and Schedule 13D filed with the Commission on
November 26, 1997 is incorporated herein by reference.
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
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 -- Indenture, dated as of October 30, 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 November 6, 1997 is incorporated herein by
reference.
4.5 -- Preferred Stock Registration Rights Agreement, dated as of
October 30, 1997, among the Company and the Initial Purchasers.
4.6 -- Certificate of Designation of Voting Power, Designation
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations and Restrictions
of 7% Series E Junior Convertible Preferred Stock of the Company,
filed with the Secretary of State of the State of Delaware on
October 29, 1997. Exhibit 4.2 to the Company's Current Report on
Form 8-K filed with the Commission on November 6, 1997 is
incorporated herein by reference.
4.7 -- Deposit Agreement, dated as of October 30, 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 November 6, 1997 is incorporated herein by
reference.
<PAGE>
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.
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.
23.4 -- Consent of Arthur Andersen LLP
23.5 -- Consent of Rothstein, Kass & Company, P.C.
24.1 -- Power of Attorney is set forth on the signature page of this
Registration Statement.
- ---------------
* 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.
<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.
<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
22nd day of December, 1997.
INTERMEDIA COMMUNICATIONS INC.
By: /s/ Robert M. Manning
-----------------------------------------
Robert M. Manning,
Chief Financial Officer and Senior Vice
President
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
--------- ----- ----
Principal Executive Officers:
<S> <C> <C>
Chairman of the Board, December 22, 1997
/s/ David C. Ruberg President and Chief
- ---------------------------------------------- Executive Officer
David C. Ruberg
Principal Financial and Accounting Officers:
Chief Financial Officer December 22, 1997
/s/ Robert M. Manning and
- ---------------------------------------------- Senior Vice President
Robert M. Manning
/s/ Jeanne M. Walters Controller and Chief December 22, 1997
- ---------------------------------------------- Accounting Officer
Jeanne M. Walters
Other Directors:
/s/ John C. Baker Director December 22, 1997
- ----------------------------------------------
John C. Baker
/s/ George F. Knapp Director December 22, 1997
- ----------------------------------------------
George F. Knapp
/s/ Philip A. Campbell Director December 22, 1997
- ----------------------------------------------
Philip A. Campbell
</TABLE>
<PAGE>
EXHIBIT INDEX
Number Exhibit Page
------ ------- ----
1.1 -- Purchase Agreement, dated as of October 24, 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 -- Agreement and Plan of Merger, dated as of November 20, 1997, by
and among the Company, Moonlight Acquisition Corp. and Shared
Technologies Fairchild Inc. Exhibit 99(c)(1) to the Company's
Schedule 14D-1 and Schedule 13D filed with the Commission on
November 26, 1997 is incorporated herein by reference.
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
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 -- Indenture, dated as of October 30, 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 November 6, 1997 is incorporated herein by
reference.
4.5 -- Preferred Stock Registration Rights Agreement, dated as of
October 30, 1997, among the Company and the Initial Purchasers.
4.6 -- Certificate of Designation of Voting Power, Designation
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations and Restrictions
of 7% Series E Junior Convertible Preferred Stock of the Company,
filed with the Secretary of State of the State of Delaware on
October 29, 1997. Exhibit 4.2 to the Company's Current Report on
Form 8-K filed with the Commission on November 6, 1997 is
incorporated herein by reference.
4.7 -- Deposit Agreement, dated as of October 30, 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 November 6, 1997 is incorporated herein by
reference.
<PAGE>
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.
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.
23.4 -- Consent of Arthur Andersen LLP
23.5 -- Consent of Rothstein, Kass & Company, P.C.
24.1 -- Power of Attorney is set forth on the signature page of this
Registration Statement.
- ---------------
* To be filed by Amendment.
<PAGE>
Exhibit 1.1
- --------------------------------------------------------------------------------
INTERMEDIA COMMUNICATIONS INC.
7,000,000 Depositary Shares Each Representing a One-Hundredth Interest in a
Share of 7% Series E Junior Convertible Preferred Stock
Depositary Share Purchase Agreement
October 24, 1997
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
- --------------------------------------------------------------------------------
<PAGE>
INTERMEDIA COMMUNICATIONS INC.
7,000,000 Depositary Shares Each Representing a One-Hundredth Interest in a
Share of 7% Series E Junior Convertible Preferred Stock
DEPOSITORY SHARE PURCHASE AGREEMENT
-----------------------------------
October 24, 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") 7,000,000 Depositary Shares (the
------------------
"Depositary Shares"), each representing a one-hundredth interest in a share of
-----------------
its 7% Series E Junior Convertible Preferred Stock, par value $1.00 per share
(the "Series E Preferred Stock"). The Series E 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 E 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 7,000,000 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 1,750,000 Depositary Shares (the "Additional
----------
Shares", and together with the Firm Shares, the "Company Shares"). The Firm
- ------ --------------
Shares, the Additional Shares, and the Series E 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 D 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, the Series E Preferred Stock, the Company Shares (and
all securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
<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) TO THE COMPANY, (2) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (3) TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (4) PURSUANT TO OFFERS AND SALES TO NON-
U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (5) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT (AN "IAI") THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE) OR (6) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT (AND BASED ON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO 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 October 22, 1997 (including
the information in the Exhibits included in the exhibit volume delivered
therewith, the "Preliminary Offering Memorandum"), and a final offering
-------------------------------
memorandum, dated October 24, 1997 (including the information in the Exhibits
attached thereto, the "Offering Memorandum"), relating to the Company and the
-------------------
Series E Preferred Stock (and the related Depositary Shares) and the issuance of
the Senior Notes due 2007.
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 (i) to persons whom any of the Initial Purchasers
reasonably believe to be "qualified institutional buyers," as defined in Rule
144A under the Act
2
<PAGE>
("QIBs"), (ii) 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") and
-------------------
(iii) pursuant to offers and sales that occur outside the United States within
the meaning of Regulation S under Securities Act. The QIBs, Accredited Investors
and the purchasers pursuant to Regulation S are referred to herein as the
"Eligible Purchasers." The Initial Purchasers will offer the Series E Preferred
-------------------
Stock (and the related Depositary Shares) to such Eligible Purchasers initially
at a price of $2,500.00 (and $25.00 for the related Depositary Shares) per
share. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Series E 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") to be dated the Closing Date (as defined), for so long as
- ----------------
such Series E 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, (i) 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 E Preferred Stock and the related
Depositary Shares, and (ii) a registration statement (the "Common Registration
-------------------
Statement") relating to the sale by certain holders of Common Stock of the
- ---------
Company received in connection with conversion of the Series E Preferred Stock,
and to use its best efforts to cause the Shelf Registration Statement and the
Common 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 $24.25 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 of $24.25, 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 1,750,000 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.
3
<PAGE>
(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 October 30, 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 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 E 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.
4
<PAGE>
(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
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 reasonable fees and disbursements of
5
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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.
(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.
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(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.
(q) Not to engage in any directed selling efforts with respect
to the Company Shares within the meaning of Regulation S, and that the Company
and each person acting on behalf of the Company has complied and will comply
with the offering restrictions requirement of Regulation S.
(r) During the period of 90 days from the date of the Offering
Memorandum, the Company will not offer, sell, contract to sell, grant any option
to purchase, establish a put equivalent position (as defined in Rule 16a-1(h)
under the Exchange Act), pledge or otherwise dispose of, directly or indirectly,
any shares of Common Stock of the Company, or any securities that are
substantially similar to the Common Stock, including, but limited to any
securities that are convertible into or exercisable or exchangeable for, or that
represent the right to receive, Common Stock or any substantially similar
securities or publicly disclose the intention to make any such offer, sale,
pledge or disposal, without the prior written consent of Bear, Stearns & Co.
Inc. except (i) for private sales so long as the purchaser thereof enters into a
corresponding lockup agreement with Bear, Stearns & Co. Inc. for the then
unexpired portion of the 90-day period, (ii) for grants of employee stock
options, restricted stock and other incentive awards in the ordinary course of
business, issuances of Common Stock pursuant to the exercise of such options or
awards or the exercise of any other employee stock options outstanding on the
date hereof, (iii) issuances in connection with the acquisition by the Company
or any of its subsidiaries of Telecommunications Related Assets or a
Telecommunications Business and (iv) dividends on securities outstanding on the
Issue Date in accordance with the terms thereof or issuances in connection with
the exercise of any convertible securities, warrants or option securities
existing on the Issue Date or that are required to be issued pursuant to any
agreement in existence on the Issue Date.
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
7
<PAGE>
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 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 E 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 June 30, 1997 on a combined basis, after giving effect to the
issuance and sale of the Series E Preferred Stock (and the related Depositary
Shares) pursuant hereto, and to the offering of the Senior Notes due 2007 being
issued concurrently herewith and the events stated therein, 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, 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.
(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,
8
<PAGE>
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 E 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 E Preferred Stock (and the related
Depositary Shares) will not be subject to any preemptive or similar rights. The
Series E 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.
(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
9
<PAGE>
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 E 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 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.
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<PAGE>
(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 E 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 E Preferred Stock (and the related Depositary Shares)
or prevents or suspends the sale of the Series E 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 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
11
<PAGE>
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 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
12
<PAGE>
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., 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 E 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.
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(xxvi) No registration under the Act of the Series E Preferred
Stock (and the related Depositary Shares) is required for the sale of the Series
E 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 E Preferred Stock (and the related Depositary
Shares) in the Exempt Resales are Eligible Purchasers and (ii) the accuracy of
the Initial Purchasers' representations regarding the absence of general
solicitation in connection with the sale of Series E 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 E 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.
(xxvii) Set forth on Exhibit A hereto is a list of each employee
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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 E 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 or the Series D Junior Convertible Preferred Stock.
(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
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(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 E 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 E 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 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.
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<PAGE>
(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.
(xxxv) None of the Company, its Subsidiaries or any of its or
their affiliates or any person acting on its or their behalf has engaged or will
engage in any directed selling efforts within the meaning of Regulation S with
respect to the Company Shares, and the Company, its Subsidiaries and its or
their affiliates and all persons acting on its or their behalf have complied
with and will comply with the offering restrictions requirements of Regulation S
in connection with the offering of the Company Shares outside the United States.
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, to Accredited Investors in a private placement exempt
from the registration requirements of the Act and pursuant to offers and sales
that occur outside the United States in reliance upon the exemption from the
registration requirements of the Act provided by Regulation S.
(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.
(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) QIBs 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, (2) Accredited Investors who
make the representations contained in, and execute and return to one of the
Initial Purchasers, a certificate in the form
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<PAGE>
of Annex B attached to the Offering Memorandum and (3) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act and (B) that such Eligible Purchasers acknowledge and
agree that such Company Shares will not have been registered under the Act and
may be resold, pledged or otherwise transferred only (i) to the Company, (ii)
pursuant to a registration statement which has been declared effective under the
Securities Act, (iii) to a person it reasonably believes is a QIB in a
transaction meeting the requirements of Rule 144A under the Securities Act, (iv)
pursuant to offers and sales to non-U.S. persons that occur outside the United
States in a transaction meeting the requirements of Rule 904 of Regulation S
under the Securities Act, (v) to an institutional "accredited investor" (as
defined in Rule 501(a) (1), (2), (3) or (7) of Regulation D under the Securities
Act (an "IAI") that, prior to such transfer, furnishes to the trustee a signed
letter containing certain representations and agreements relating to the
transfer of the Securities (the form of which letter can be obtained from the
Trustee) or (vi) pursuant to any other available exemption from the registration
requirements of the Securities Act (and based on an opinion of counsel if the
Company so requests), subject in each of the foregoing cases to the applicable
state securities laws of any State of the United States or any other applicable
jurisdiction 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. Accordingly, each of the Initial
Purchasers agrees that neither it, its affiliates nor any persons acting on its
behalf has engaged or will engage in any directed selling efforts within the
meaning of Rule 902 of Regulation S with respect to the Company Shares, and it,
its affiliates and all persons acting on its or their behalf have complied and
will comply with the offering restrictions requirements of Regulation S.
(v) Each of the Initial Purchasers represents and agrees that
the Company Shares offered and sold in reliance on Regulation S have been and
will be offered and sold only in offshore transactions and that such securities
have been and will be represented upon issuance by a global security that may be
exchanged for definitive securities only upon certification of beneficial
ownership of the securities by a non-U.S. person or a U.S. person who purchases
such securities in a transaction that was exempt from the registration
requirements of the Securities Act.
(vi) 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.
Terms used in this Section 5 that have meanings assigned to them in
Regulation S are used herein as so defined.
6. Indemnification.
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(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
17
<PAGE>
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 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
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the Offering Memorandum. This indemnity agreement will be in addition to any
liability which any Initial Purchaser may otherwise have, including, under this
Agreement.
(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 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
19
<PAGE>
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, 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
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<PAGE>
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 regular
dividends paid in respect of the Series B Preferred Stock or Series D 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.
(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 B hereto.
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(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 C hereto.
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(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.
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(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.
(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 E 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.
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9. Initial Purchasers' Information. The Company and the Initial
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Purchasers severally acknowledge that the statements with respect to the
offering of the Series E Preferred Stock (and the related Depositary Shares) set
forth in the last paragraph of the cover page and the third, eighth, eleventh
and twelfth 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 shall survive delivery of and
payment for the Series E 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
23
<PAGE>
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.
(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 E 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 E 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.
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.
24
<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:/s/ Robert A. Ruh
-------------------------
Name: Robert A. Ruh
Title: Senior Vice President
Accepted and agreed to as of
the date first above written:
BEAR, STEARNS & CO. INC.
By:/s/ Stephen Parish
----------------------------
Name: Stephen Parish
Title: Senior Managing Director
SALOMON BROTHERS INC
By:/s/ Peter Westley
----------------------------
Name: Peter Westley
Title: Vice President
25
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Firm Shares
Initial Purchaser to be Purchased
- ----------------- ---------------
<S> <C>
Bear, Stearns & Co. Inc. .............................................3,500,000
Salomon Brothers Inc. ................................................3,500,000
-------------
Total 7,000,000
</TABLE>
Sched-I
<PAGE>
EXHIBIT A
List of Employee Pension and Benefit Plans
of Intermedia Communications Inc.
and its Subsidiaries
1. Intermedia Communications Inc. 401(k) Profit Sharing Plan
A-1
<PAGE>
EXHIBIT B
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.
B-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 E 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 E Preferred Stock (and the related Depositary Shares) will
not be subject to any preemptive or similar rights.
9. The Offering Memorandum contains a fair summary of each of the Series
E Preferred Stock, the Certificate of Designation, the Company Shares, the
Deposit Agreement and the Registration Rights Agreement.
10. No registration under the Act of the Series E 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 Eligible Purchasers (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.
11. 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 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.
B-2
<PAGE>
12. 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 E 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. 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.
13. 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.
14. Except as set forth in this Agreement, the Registration Rights
Agreement or the Registration Rights Agreement in respect of the Senior 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
B-3
<PAGE>
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.
15. 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.
16. 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 E 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.
17. The statements under the captions "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.
18. 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 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
B-4
<PAGE>
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).
B-5
<PAGE>
EXHIBIT C
[Form of Opinion of Kelley Drye & Warren LLP]
C-1
<PAGE>
[Kelley Drye & Warren LLP Letterhead]
October 30, 1997
Bear, Stearns & Co. Inc.
Salomon Brothers Inc
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, N.Y. 10167
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 8(g) of the Purchase
Agreements dated October 24, 1997 (the "Agreements"), between Intermedia
Communications Inc. (the "Company") and Bear, Stearns & Co. Inc., and Salomon
Brothers Inc (together, the "Initial Purchasers"), relating to the sale by the
Company of (i) 7,000,000 depositary shares (the "Depositary Shares")
representing a one-hundredth interest in a share of the Company's 7% Series E
Junior Convertible Preferred Stock (the "Series E Preferred Stock"), and (ii)
$250,000,000 aggregate principal amount at maturity of 8 7/8% Senior Discount
Notes due 2007 (the "Notes").
This firm has acted as special telecommunications counsel for the Company
and our representation has been limited to federal and state telecommunications
regulatory matters, and this opinion is accordingly limited to such matters.
We express no opinion as to the laws of any jurisdiction or agency except
the Telecommunications Laws of the Federal Communications Commission (the "FCC")
and State Telecommunications Agencies of those states in which the Company is
providing intrastate service. For purposes of this opinion, the term "State
Telecommunications Agencies" means "state commissions" as defined in Section 3
of the Communications Act of 1934, as amended. The term "Telecommunications
Laws" means the statutes governing the FCC and State Telecommunications Agencies
and the rules and regulations promulgated by them.
To the extent this opinion concerns state Telecommunications Laws, you are
advised that the attorneys in our Firm are not admitted to practice in all of
the states covered by this opinion and, for the purpose of this opinion, we
should not be considered to be experts in the Telecommunications Laws of any
such states. However, in connection with the previous opinion provided to you
<PAGE>
Bear, Stearns & Co.
Salomon Brothers Inc
October 30, 1997
Page 2
dated July 9, 1997, concerning a similar transaction by the Company, we
conducted a review of statutes and regulations relating to state
Telecommunications Laws which we deemed relevant and as they appear in standard
compilations and, in some cases, had direct communications with the staff of
State Telecommunications Agencies. To the best of our knowledge, nothing has
occurred subsequent to this earlier review and those conversations which would
change our understanding of these State Telecommunications Laws with respect to
any matter we deem relevant to this opinion. Our opinion as to state
Telecommunications Laws is based solely upon that earlier review and those
conversations, as supplemented by us in connection with states in which the
Company commenced intrastate service subsequent to July 9, 1997.
In rendering this opinion, we have examined and relied upon relevant
documents in our files, certificates and other information in the publicly
available files and records of the FCC and State Telecommunications Agencies and
appropriate portions of the Offering Memorandum for the Notes and Depositary
Shares (the "Offering Memorandum") prepared in connection with this transaction.
With your permission, as to all matters of fact concerning the Company and its
operations (including factual conclusions and characterizations), we have relied
entirely upon the relevant statements contained in the Offering Memorandum,
including the exhibits thereto, and in the certificate of David C. Ruberg,
President and CEO, dated October 29, 1997, attached hereto. We have assumed,
without independent inquiry, the accuracy of the representations in the
certificate and have made no independent review of the operations or the
business of the Company for the purpose of rendering this opinion.
We have assumed the genuineness of all signatures, the conformity to the
originals of all documents reviewed by us as copies, the authenticity and
completeness of all original documents reviewed by us in original or copy form
and the legal competence of each individual executing any document.
<PAGE>
Bear, Stearns & Co.
Salomon Brothers Inc
October 30, 1997
Page 3
When an opinion set forth below is given to the best of our knowledge or
with another similar qualification, the relevant knowledge is limited to the
actual knowledge of the individual attorneys currently in the firm who have
devoted substantive legal attention to representation of the Company as its
telecommunications counsel and we have undertaken no independent inquiry or
investigation in rendering this opinion.
In reliance upon the foregoing and subject to the qualifications and
limitations set forth herein, we are of the opinion that:
All of the licenses, permits and authorizations required by the FCC for the
provision of telecommunications services by the Company, as we understand those
services to be provided currently based on the attached certificate, have been
issued to and are validly held by the Company and its subsidiaries and are in
full force and effect. All of the licenses, permits and authorizations required
by the State Telecommunications Agencies for the provision of telecommunications
services by the Company, as we understand those services to be provided
currently based on the attached certificate, have been issued to and, to the
best of our knowledge, are validly held by the Company and its subsidiaries,
where the failure to obtain or hold such license, permit or authority would have
a material adverse effect, as defined in the attached certificate, on the
Company and the subsidiaries, taken as a whole. All such licenses, permits and
authorizations are in full force and effect.
Neither the Company nor its subsidiaries is the subject of any proceeding
(including a rulemaking proceeding), pending complaint or investigation, or, to
the best of our knowledge, any threatened complaint or investigation, before the
FCC, or, to the best of our knowledge after oral inquiry made in connection with
our opinion to you of July 9, 1997, and supplemented currently as indicated
above, of any proceeding (including a rulemaking proceeding), pending complaint
or investigation, or any threatened complaint or investigation, before State
Telecommunications Agencies based, in each case, on any alleged violation of
Telecommunications Laws by the Company or any subsidiary in connection with
their provision of or failure to provide telecommunications services of a
character required to be disclosed in the Offering Memoranda which is not
disclosed in the Offering Memoranda.
<PAGE>
Bear, Stearns & Co.
Salomon Brothers Inc
October 30, 1997
Page 4
The statements in the Offering Memoranda under the headings of "The Company
- - Recent Developments - Regulatory Changes," "Risk Factors - Regulatory Approval
of the Offering" regarding the Telecommunications Laws of the FCC or any State
Telecommunications Agencies fairly and accurately summarize the matters therein
described.
Except as discussed below, the Company and its subsidiaries have the
consents, approvals, authorizations, licenses, certificates, permits, or orders
of the FCC or any State Telecommunications Agency, if any is required, for the
consummation of the transactions contemplated in the Offering Memoranda, except
where the failure to obtain the consents, approvals, authorizations, licenses,
certificates, permits or orders would not have a Material Adverse Effect, as
defined in the attached certificate, on the Company and its subsidiaries, taken
as a whole.
In ten states where the Company holds certificates to provide intrastate
toll service and, in some cases, local exchange service, the applicable statute
or regulations provide for prior notification and/or approval for the issuance
of debt or equity securities by certificate holders. In some of these states,
approval has been obtained for the issuance of Depositary Shares in an amount
sufficient to cover the proposed transaction. However, additional approval will
be required from those states for the issuance of the Notes. Due to time
constraints, the Company will not have received all such approvals prior to the
consummation of the proposed transaction. Based on our firm's experience in
similar situations involving intrastate interexchange services, we believe that
it is unlikely that these states would take any action against the Company for
issuing the Depositary Shares and the related Series E Preferred Stock or the
Notes prior to approval which would have a Material Adverse Effect, as defined
in the attached certificate, on the Company and its subsidiaries, taken as a
whole.
Except as discussed above, neither the execution and delivery of the
Purchase Agreements nor the sale of the securities contemplated thereby will
conflict with or result in a violation of any order or regulation of the FCC or
any State Telecommunications Agency applicable to the Company or its
subsidiaries, except where the conflict with or the violation of which would not
have a
<PAGE>
Bear, Stearns & Co.
Salomon Brothers Inc
October 30, 1997
Page 5
Material Adverse Effect, as defined in the attached certificate, on the
Company and its subsidiaries, taken as a whole.
The opinions stated above are limited to the matters set forth herein. No
opinion may be inferred or implied beyond the matters expressly stated in this
opinion letter, and the opinions stated above must be read in conjunction with
the assumptions, exceptions and qualifications set forth in this opinion letter.
We assume no obligation to advise you of changes of fact or law, whether or not
deemed material which may be brought to our attention after the date hereof.
This opinion is being delivered for your use in connection with the
transactions contemplated by the Offering Memoranda pursuant to the Agreements
and may not be referred to or used for any other purpose or relied upon or
delivered to any other person without our prior written consent.
Very truly yours,
Kelley Drye & Warren LLP
<PAGE>
EXHIBIT D
Subsidiaries of Intermedia Communications Inc.
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FiberNet North Carolina, Inc
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
DIGEX, Incorporated
D-1
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Exhibit 4.5
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REGISTRATION RIGHTS AGREEMENT
Depositary Shares Representing a One-Hundredth Interest in a Share of
7% Series E Junior Convertible Preferred Stock
Dated as of October 30, 1997
by and among
INTERMEDIA COMMUNICATIONS INC.,
BEAR, STEARNS & CO. INC.
and
SALOMON BROTHERS INC
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This Registration Rights Agreement (this "Agreement") is made and
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entered into as of October 30, 1997 by and among Intermedia Communications Inc.,
a Delaware corporation (the "Company"), and Bear, Stearns & Co. Inc., and
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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
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the Company's 7% Series E Junior Convertible Preferred Stock (the "Series E
--------
Preferred Stock") pursuant to the Purchase Agreement (as defined below).
- ---------------
This Agreement is made pursuant to the Depositary Share Purchase
Agreement in respect to the Series E Preferred Stock, dated October 24, 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
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of New York, on which banks are authorized to close.
Certificate of Designation: The Certificate of Designation pursuant to
--------------------------
which the Depositary Shares, Series E Preferred Stock, and Common Stock 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.
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Commission: The Securities and Exchange Commission.
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Common Dividend Filing Deadline: As defined in Section 4 hereof.
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Common Dividend Registration Statement: As defined in Section 4 hereof.
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Common Stock: The common stock of the Company to be issued upon
------------
conversion of the Series E Preferred Stock or to be issued as dividends in
respect of the Series E Preferred Stock.
Common Stock Dividends: Common Stock to be issued as dividends in
----------------------
respect of the Series E Preferred Stock.
Definitive Securities: As defined in the Deposit Agreement.
----------------------
Deposit Agreement: The Deposit Agreement dated the date hereof between
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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.
------------
Global Certificate Holder: As defined in the Deposit Agreement.
-------------------------
Holders: As defined in Section 2 hereof.
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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 October 24,
-------------------
1997, relating to the Company, the Depositary Shares, and the Series E Preferred
Stock.
Person: An individual, partnership, corporation, trust, unincorporated
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organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at the
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time such 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.
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Registration Statement: The Shelf Registration Statement and Common
----------------------
Dividend Registration Statement.
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 E Preferred Stock.
Transfer Restricted Securities: Each Depositary Share, each share of
------------------------------
Series E Preferred Stock, and each share of Common Stock until the earliest to
occur of (i) the date on which such Depositary Share, share of Series E
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 Common Dividend Registration Statement, (ii) the date
on which such Depositary Share, share of Series E 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 or (iii) in the case of Common Stock Dividends, the
date the Common Stock Dividends are issued by the Company pursuant to an
effective Common Stock Registration Statement.
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 Transfer Restricted Securities are registered
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in such Person's name.
SECTION 3. [INTENTIONALLY OMITTED].
SECTION 4. REGISTRATION
(a) Shelf Registration. The Company shall:
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(x) cause to be filed on or prior to 60 days after the
consummation of the offering of Series E 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
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(except Common Stock Dividends) 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 (except Common Stock
Dividends) 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 Shelf Suspension").
--------------------------
(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 A 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.
(c) Registration of Common Dividends. The Company shall:
--------------------------------
(x) cause to be filed on or prior to 60 days after the
consummation of the offering of Series E Preferred Stock (and the related
Depositary Shares) (the "Common Dividend Filing Deadline"), a registration
-------------------------------
statement (the "Common Dividend Registration Statement"), relating to the
--------------------------------------
issuance of dividends on the Series E Preferred Stock to the extent that such
dividends are paid in Common Stock; and
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(y) use its reasonable best efforts to cause such Common
Stock Dividend Registration Statement to become effective on or prior to 120
days after the Common Dividend Filing Deadline.
The Company shall use its best efforts to keep the Common Dividend
Registration Statement discussed in this Section 4(c) 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 on each dividend
payment date of the Series E Preferred Stock 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 Series E Preferred
Stock is no longer Transfer Restricted Securities; 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 Common Dividend 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 Dividend Suspension," and together with a Permitted Shelf Suspension,
-----------------------------
a "Permitted Suspension").
--------------------
If for any reason the Common Dividend Registration Statement is not
filed or is not declared effective (including by reason of any position,
determination, rule or regulation of the Commission or the Staff of the
Commission not permitting such Common Dividend Registration Statement), the
Company shall file the Common Dividend Registration Statement as a registration
statement to permit resales of the Common Stock issued as dividends on the
Series E Preferred Stock and to keep such registration statement effective for
the equivalent periods.
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
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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 (except Common Stock Dividends) 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 $2,500 Liquidation Preference of Series E 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 Interest 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(b) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in 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.
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(b) General Provisions. In connection with the 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 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
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
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
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 Registration Statement as may be necessary to keep the 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 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 Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof set forth
in such 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 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 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 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 Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of
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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
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 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, if requested, to each selling Holder
named in the Registration Statement or Prospectus and each of the underwriters)
in connection with such sale, if any, before filing with the Commission, copies
of the Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial filing of
such Registration Statement), substantially in the form to be filed, 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 Registration
Statement or Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated by reference)
to which the selling Holders of the Transfer Restricted Securities covered by
such 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 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 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 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 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 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, 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 E Preferred Stock (and the related Depositary Shares) covered thereby,
or by the underwriters, if any;
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(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 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 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 Registration Statement contemplated by this Agreement, and
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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 Registration Statement:
(1) a certificate, dated the date of effectiveness of the
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;
(2) an opinion, dated the date of effectiveness of the
Registration Statement of counsel for the Company, covering (i) due
authorization and enforceability of the Depositary Shares, Series E
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 Registration Statement, at the time
such 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 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 Registration Statement contemplated by this Agreement or
the related Prospectus; and
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(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 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 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;
(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 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
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
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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 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 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 Registration Statement to become effective and
approved by such governmental agencies or authorities as may be 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 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 Registration Statement (as such term is defined in
paragraph (c) of Rule 158 under the Act);
(xx) [Intentionally Omitted];
(xxi) [Intentionally Omitted];
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(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 E 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.
(c) 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 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 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 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
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 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 E 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 E Preferred Stock, or Common Stock on a national exchange or automated
quotation system if required hereunder; and (vi) all fees and
12
<PAGE>
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 Registration Statement required by this
Agreement, the Company will reimburse the Initial Purchasers and the Holders of
Transfer Restricted Securities being registered pursuant to the 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 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 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 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 E Preferred Stock or Common Stock 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
13
<PAGE>
Holder sold Depositary Shares, Series E 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 Registration Statement and the
Prospectus, as amended or supplemented, and (x) the Company shall have
previously and timely furnished sufficient copies of the Registration Statement
or Prospectus, as so amended or supplemented, to such Holder in accordance with
this Agreement and (y) the 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
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 E 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
14
<PAGE>
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 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 E Preferred Stock (and
the related Depositary Shares), and any such Holder from its sale of Depositary
Shares, Series E 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
E 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 E 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
15
<PAGE>
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 E Preferred Stock, or
Common Stock, as the case may be, exceeds the sum of (A) the amount paid by such
Holder for such Depositary Shares, Series E 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 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.
16
<PAGE>
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."
------------
17
<PAGE>
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 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.
18
<PAGE>
(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:
19
<PAGE>
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.
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.
20
<PAGE>
(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
21
<PAGE>
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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INTERMEDIA COMMUNICATIONS INC.
By: /s/ Robert M. Manning
----------------------------------------
Name: Robert M. Manning
Title: Senior Vice President and Chief
Financial Officer
BEAR, STEARNS & CO. INC.
By: /s/ Stephen M. Parish
---------------------------------
Name: Stephen M. Parish
Title: Senior Managing Director
SALOMON BROTHERS INC
By: /s/ Peter Westley
---------------------------------
Name: Peter Westley
Title: Vice President
22
<PAGE>
EXHIBIT 12.1
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Intermedia Communications Inc.
<TABLE>
<CAPTION>
Pro forma(1) Pro forma(1)
Year Nine months ended Nine months
Years ended December 31, Ended September 30, Ended
------------------------------------------------- December 31, ------------------ September 30,
1992 1993 1994 1995 1996 1996 1996 1997 1997
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loss before extraordinary items (235) (2,074) (3,067) (19,157) (57,198) (164,332) (35,642) (157,385) (239,159)
Income tax benefit - - - (97) - 783 - - 214
--------------------------------------------------------------------------------------------------
Loss before income taxes (235) (2,074) (3,067) (19,254) (57,198) (163,549) (35,642) (157,385) (238,945)
===================================================================================================
Fixed charges:
Interest expensed 1,031 844 1,219 13,355 35,213 94,668 24,179 39,895 81,327
Capitalized interest 120 213 257 677 2,780 2,780 1,940 2,528 2,528
Amortization of deferred
financing costs (3) 67 78 69 412 1,252 - - - -
Estimated interest factor on
operating leases (4) 275 313 200 428 1,598 3,940 897 2,422 3,742
Dividends on redeemable
preferred stock 267 - - - - 71,851 - 27,118 53,135
--------------------------------------------------------------------------------------------------
Total fixed charges 1,760 1,448 1,745 14,872 40,843 173,239 27,016 71,963 140,732
==================================================================================================
Earnings:
Loss before income tax (235) (2,074) (3,067) (19,157) (57,198) (164,332) (35,642) (157,385) (239,159)
Fixed charges excluding
capitalized interest and
preferred stock dividends 1,373 1,235 1,488 14,195 38,063 98,608 25,076 42,317 85,069
--------------------------------------------------------------------------------------------------
Total earnings 1,138 (839) (1,579) (4,962) (19,135) (65,724) (10,566) (115,068) (154,090)
==================================================================================================
Ratio of earnings to fixed
charges and preferred stock
dividends 0.65 (0.58) (0.90) (0.33) (0.47) (0.38) (0.39) (1.60) (1.09)
==================================================================================================
Insufficiency of earnings to
cover fixed charges and
preferred stock dividends 622 2,287 3,324 19,834 59,978 238,963 37,582 187,031 294,822
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Pro Forma as Adjusted(2)
--------------------------------------
Year Nine Months
Ended Ended
December 31, September 30,
1996 1997
--------------------------------------
<S> <C> <C>
Loss before extraordinary items (194,967) (262,136)
Income tax benefit 783 214
--------------------------------------
Loss before income taxes (194,184) (261,922)
======================================
Fixed charges:
Interest expensed 125,303 104,304
Capitalized interest 2,780 2,528
Amortization of deferred
financing costs (3) - -
Estimated interest factor on
operating leases (4) 3,940 3,742
Dividends on redeemable
preferred stock 71,851 53,135
--------------------------------------
Total fixed charges 203,874 163,709
======================================
Earnings:
Loss before income tax (194,967) (262,136)
Fixed charges excluding
capitalized interest and
preferred stock dividends 129,243 108,046
--------------------------------------
Total earnings (65,724) (154,090)
======================================
Ratio of earnings to fixed
charges and preferred stock
dividends (0.32) (0.94)
======================================
Insufficiency of earnings to
cover fixed charges and
preferred stock dividends 269,598 317,799
======================================
(1) Gives effect to the pending acquisition of Shared Technologies, the October 1997 Offerings and the application of the net
proceeds therefrom.
(2) Gives effect to the December 1997 Offering and the application of the net proceeds therefrom.
(3) Deferred financing costs are included in interest expense for proforma amounts and the 9 months ended September 30, 1997 and
1996.
(4) Estimated interest factor on operating leases represents an estimated 1/3 of total operating lease expense for the period.
</TABLE>
<PAGE>
EXHIBIT 23.2
Consent of Independent Certified Public Accountants
We consent to the reference to our firm under the captions "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Intermedia
Communications Inc. for the registration of 8,000,000 Depositary Shares (each
representing a one-hundredth interest in a share of 7% Series E Junior
Convertible Preferred Stock), 80,000 shares of 7% Series E Junior Convertible
Preferred Stock, 3,307,425 shares of Common Stock issuable upon conversion of
the 7% Series E Junior Convertible Preferred Stock and Common Stock issuable as
dividends on the 7% Series E 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
December 19, 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 8,000,000 Depositary Shares (each
representing a one-hundredth interest in a share of 7% Series E Junior
Convertible Preferred Stock), 80,000 shares of 7% Series E Junior Convertible
Preferred Stock, 3,307,425 shares of Common Stock issuable upon conversion of
the 7% Series E Junior Convertible Preferred Stock and Common Stock issuable as
dividends on the 7% Series E 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
December 19, 1997
<PAGE>
Exhibit 23.4
Consent of Independent Certified Public Accountants
As independent public accountants, we hereby consent to the incorporation
by reference in this Form S-3 Registration Statement of our report dated
March 7, 1997 incorporated by reference in the Shared Technologies
Fairchild Inc. Form 10-K for the year ended December 31, 1996 and to all
references to our Firm included in this Form S-3 Registration Statement.
/s/ Arthur Andersen LLP
Washington, D.C.
December 16, 1997
<PAGE>
Exhibit 23.5
Consent of Independent Certified Public Accountants
We consent to the incorporation by reference in this Registration Statement
on Form S-3 of Intermedia Communications Inc. for the registration of
8,000,000 Depositary Shares (each representing a one-hundredth interest in
a share of 7% Series E Junior Convertible Preferred Stock), 80,000 shares
of 7% Series E Junior Convertible Preferred Stock, 3,307,425 shares of
Common Stock issuable upon conversion of the 7% Series E Junior Convertible
Preferred Stock and Common Stock issuable as dividends on the 7% Series E
Junior Convertible Preferred Stock, of our report, which contains an
explanatory paragraph relating to the changing of the method of accounting
for Shared Technologies Fairchild Inc.'s investment in one of its
subsidiaries, dated March 1, 1996, on our audits of the consolidated
financial statements and financial statement schedule of Shared
Technologies Fairchild Inc. as of December 31, 1995 and for the years ended
December 31, 1995 and 1994. We also consent to the reference to our firm
under the caption "Experts".
/s/ Rothstein, Kass & Company, P.C.
Roseland, New Jersey
December 16, 1997