INTERMEDIA COMMUNICATIONS INC
424B3, 1998-11-17
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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<PAGE>
 
                                                      RULE NO. 424(b)(3)
PROSPECTUS                                            REGISTRATION NO. 333-33415


                        INTERMEDIA COMMUNICATIONS INC.

6,900,000 DEPOSITARY SHARES EACH REPRESENTING A ONE HUNDREDTH INTEREST IN A
SHARE OF 7% SERIES D JUNIOR CONVERTIBLE PREFERRED STOCK, 69,000 SHARES OF 7%
SERIES D JUNIOR CONVERTIBLE PREFERRED STOCK, 4,465,828 SHARES OF COMMON STOCK
AND COMMON STOCK ISSUABLE AS DIVIDENDS ON THE 7% SERIES D 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 D Junior Convertible Preferred Stock ("Series D Preferred
Stock"), liquidation preference $2,500 per share (equivalent to $25.00 per
Depositary Share; the "Liquidation Preference"), par value $1.00 per share of
Intermedia Communications Inc. (the "Company" or "Intermedia"), (2) the shares
of Series D Preferred Stock and the shares (the "Common Shares") of common
stock, $.01 par value per share, of the Company (the "Common Stock") issuable
upon conversion of the Series D Preferred Stock and/or the Depositary Shares and
(3) the Universal Shares (as defined herein) (the Depositary Shares, Series D
Preferred Stock, Common Shares and Universal Shares are collectively referred to
herein as the "Securities"). 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
D Preferred Stock (the "Dividend Shares"). See "Description of Preferred
Stock--Dividends." The Depositary Shares were originally issued by the Company
in a private placement on July 9, 1997 (the "First Closing") and purchased by
Bear Stearns & Co., Inc. and Salomon Brothers Inc (the "Initial Purchasers")
pursuant to a purchase agreement (the "Purchase Agreement") dated as of July 2,
1997 between the Company and the Initial Purchasers. Subsequently, the Initial
Purchasers exercised the over-allotment option in connection therewith. The
First Closing and the over-allotment exercise are collectively referred to
herein as the "July 9 Equity Offering". The Initial Purchasers, in turn, resold
the Depositary Shares in private sales pursuant to exemptions from registration
under the Securities Act of 1933, as amended.
                                                        (continued on next page)


            PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY MATTERS
             DISCUSSED UNDER THE CAPTION "RISK FACTORS" ON PAGE 3.

                             ---------------------

           THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
       THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
                              EXCHANGE COMMISSION
         PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
             REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

                             ---------------------

         NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.

         THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

                    THE DATE OF THIS PROSPECTUS IS SEPTEMBER 17, 1997.
<PAGE>
 
         This prospectus is also being used in connection with the offering from
time to time by certain holders (the "W&B Holders") of 31,380 shares of Common
Stock (the "Universal Shares") which were acquired by the W&B Holders from the
Company on December 6, 1996 in connection with the acquisition by the Company of
W&B (formerly known as Universal Telecom, Inc. d/b/a Universal Telecom
Technologies ("Universal")) pursuant to an asset acquisition agreement, dated
December 6, 1996 among the Company, Universal, William M. Wunderlich and Ray
Bove (the "Asset Acquisition Agreement"). 27,554 of the Universal Shares are
currently subject to an escrow arrangement.

         Holders of the Depositary Shares are entitled to all proportional
rights and preferences of the Series D Preferred Stock (including dividend,
voting, redemption and liquidation rights). Dividends on the Series D Preferred
Stock accrue at a rate per annum equal to 7% of the Liquidation Preference per
share of Series D Preferred Stock and are payable quarterly, in arrears, on July
15, October 15, January 15 and April 15 of each year, commencing on October 15,
1997. Dividends are payable in cash or at the option of the Company, in shares
of Common Stock, or a combination thereof. The Depositary Shares are
convertible, subject to prior redemption at any time after October 7, 1997, at
the option of the holder thereof into Common Stock at a conversion price of
$38.90 per share, subject to certain adjustments.

         The Series D Preferred Stock and the Depositary Shares are redeemable,
in whole or in part, at the option of the Company at any time on or after July
19, 2000, at the redemption prices set forth herein, plus accumulated and unpaid
dividends and Preferred Stock Liquidated Damages (as defined herein), if any,
thereon to the redemption date. See "Description of Preferred Stock" and
"Description of Depositary Shares." Upon the occurrence of a Preferred Stock
Change of Control (as defined herein), the Company will be required to make an
offer to repurchase all outstanding shares of Series D Preferred Stock at a
price equal to 100% of the Liquidation Preference thereof, plus accumulated and
unpaid dividends and Preferred Stock Liquidated Damages, if any, thereon to the
repurchase date.

         The Series D Preferred Stock ranks (i) senior to all Junior Securities
(as defined herein), including all Common Stock of the Company; (ii) on a parity
with any Parity Securities (as defined herein); and (iii) junior to each class
of Senior Securities (as defined herein), including the Company's outstanding 13
1/2% Series B Redeemable Exchangeable Preferred Stock due 2009 ("Series B
Preferred Stock"), and junior to all indebtedness and other obligations of the
Company and its subsidiaries. As of June 30, 1997, on a pro forma basis after
giving effect to the July 9 Equity Offering and the concurrent private placement
of $649 million principal amount at maturity of 11 1/4% Notes on July 9, 1997
(including the exercise of the over-allotment option in connection therewith)
(the "July 9 Debt Offering", and collectively with the July 9 Equity Offering,
the "July 9 Offerings") and the application of the proceeds therefrom, the
Series D Preferred Stock would have been junior in right of payment to
approximately $985.6 million of liquidation preference of Series B Preferred
Stock and total indebtedness and other obligations of the Company and its
subsidiaries. See "Description of Preferred Stock-Ranking."

         The Securities may be sold from time to time to purchasers directly by
the Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer the Securities through brokers, dealers or agents who may
receive compensation in the form of discounts, concessions or commissions from
the Selling Securityholders and/or the purchasers of the Securities for whom
they may act as agent. The Selling Securityholders and any such brokers, dealers
or agents who participate in the distribution of the Securities may be deemed to
be "underwriters", and any profits on the sale of the Securities by them and any
discounts, commissions or concessions received by any such brokers, dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act. To the extent the Selling Securityholders may be deemed to be
underwriters, the Selling Securityholders may be subject to certain statutory
liabilities of the Securities Act, including, but not limited to, Sections 11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. See "Plan
of Distribution." The Selling Securityholders and any other person participating
in such distribution will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including, without limitation,
Regulation M, which may limit the timing of purchases and sales of any of the
Securities by the Selling Securityholders and any other such person. All of the
foregoing may affect the marketability of the Securities and the ability of any
person or entity to engage in market-making activities with respect to the
Securities.

                                       ii
<PAGE>
 
         The Company will not receive any 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 August 11, 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 $37.75
per share. The Company has not and does not intend to apply for the listing of
the Depositary Shares or the Series D Preferred Stock on any securities exchange
or for quotation through the Nasdaq National Market. The Series D Preferred
Stock and the Depositary Shares are eligible for trading in the National
Association of Securities Dealers' Private Offerings, Resales and Trading
Through Automative Linkages ("PORTAL") Market.

                                      iii
<PAGE>
 
                             AVAILABLE INFORMATION

         The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
and information statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, its Midwest Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and at its Northeast
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Such material can also be inspected at the Web site of the Commission
located at http://www.sec.gov. The Common Stock is listed on the Nasdaq National
Market under the symbol "ICIX". Reports, proxy and information statements, and
other information concerning the Company can also be inspected at the Nasdaq
National Market at 1735 17 Street, N.W., Washington, D.C. 20006-1506.

         Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, each such
statement being qualified in all respects by such reference.

                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
         
         The following documents or information have been filed by the Company
with the Commission and are incorporated herein by reference:
         
         The Company's Annual Report on Form 10-K for the year ended December
         31, 1996. 
         The Company's Annual Report on Form 10-K/A for the year ended December
          1, 1996 filed with the Commission on May 15, 1997.
         The portions of the Proxy Statement for the Annual Meeting of
          Stockholders of the Company held on May 22, 1997 that have been
          incorporated by reference into the Company's Annual Report on Form 10-
          K for the year ended December 31, 1996.
         The Company's Current Report on Form 8-K filed with the Commission on
          February 24, 1997. 
         The Company's Quarterly Report on Form 10-Q for the quarter ended March
          31, 1997.         
         The Company's Current Report on Form 8-K filed with the Commission on
          March 14, 1997.
         The Company's Current Report on Form 8-K filed with the Commission on
          June 5, 1997.         
         The Company's Current Report on Form 8-K filed with the Commission on
          July 9, 1997.
         The Company's Current Report on Form 8-K filed with the Commission on
          July 17, 1997.
         The Company's Current Report on Form 8-K/A filed with the Commission on
          August 4, 1997.
         The Company's Quarterly Report on Form 10-Q for the quarter ended June
          30, 1997.
         The description of the capital stock contained in the Company's
          registration statements on Form 8-A under the Exchange Act, filed
          April 7, 1992, April 28, 1992 and April 30, 1992 (File No. 0-20135).

         All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Prospectus and prior to the termination of the offering covered by this
Prospectus will be deemed incorporated by reference into this Prospectus and to
be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein modifies or supersedes such statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
         
         THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON
TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN OR ORAL
REQUEST OF SUCH PERSON TO INTERMEDIA COMMUNICATIONS, INC., 3625 QUEEN PALM
DRIVE, TAMPA, FLORIDA 33619 (TELEPHONE 813-829-0011), ATTENTION: INVESTOR
RELATIONS, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS) WHICH HAVE BEEN INCORPORATED BY REFERENCE IN THIS
PROSPECTUS.

                                       1
<PAGE>
 
                                 RISK FACTORS

         Prospective investors should consider carefully the following factors
relating to the business of the Company and this offering, in addition to other
information set forth elsewhere in this Prospectus, before purchasing the
Securities offered hereby.

         Restrictions on the Company's Ability to Pay Dividends on the Series D
Preferred Stock. To date, the Company has not paid dividends on its shares of
capital stock. The ability of Intermedia to pay cash dividends on the Series D
Preferred Stock is substantially restricted under various covenants and
conditions contained in the Indenture (the "12 1/2% Notes Indenture") governing
the Company's 12 1/2% Senior Notes due 2006 (the "12 1/2% Notes"), the Indenture
(the "11 1/4% Notes Indenture", and together with the 12 1/2% Notes Indenture,
the "Existing Senior Notes Indentures") governing the Company's 11 1/4% Senior
Discount Notes due 2007 (the "11 1/4% Notes", and together with the 12 1/2%
Notes, the "Existing Senior Notes") and the Certificate of Designation (the
"Series B Certificate of Designation") setting forth the rights of the Series B
Preferred Stock. In addition to the limitations imposed on the payment of
dividends by the Existing Senior Notes Indentures and the Series B Certificate
of Designation, under Delaware law the Company is permitted to pay dividends on
its capital stock, including the Series D Preferred Stock, only out of its
surplus, or in the event that it has no surplus, out of its net profits for the
year in which a dividend is declared or for the immediately preceding fiscal
year. Surplus is defined as the excess of a company's total assets over the sum
of (i) its total liabilities and (ii) the par value of its outstanding capital
stock. At June 30, 1997, the Company had stockholders equity of $44.9 million
and surplus of $44.7 million. The Company historically has had net losses in
each of the last five years and expects to operate at a net loss for the next
several years. These net losses will reduce stockholders' equity and the surplus
of the Company. For the six months ended June 30, 1997, the Company had a net
loss attributable to common stockholders of $70.2 million ($128.5 million on a
pro forma basis after giving effect to the July 9 Offerings (and the application
of proceeds therefrom) and the DIGEX Acquisition (as defined herein)). In order
to pay dividends in cash, the Company must have surplus or net profits equal to
the full amount of the cash dividend at the time such dividend is declared. The
Company cannot predict what the value of its assets or the amount of its
liabilities will be in the future and, accordingly, there can be no assurance
that the Company will be able to pay cash dividends on the Series D Preferred
Stock.

         In the event dividends are paid in shares of Common Stock, the number
of shares of Common Stock to be issued on each dividend payment date will be
determined by dividing the total dividend to be paid on each Depositary Share by
95% of the average of the high and low sales prices of the Common Stock as
reported by the Nasdaq National Market or any national securities exchange upon
which the Common Stock is then listed, for each of the ten consecutive trading
days immediately preceding the fifth business day preceding the record date for
such dividend. If such average is greater than 5.05% higher than the market
value for the Common Stock on the dividend payment date and the holder sells at
such lower price, the holder's actual dividend yield would be lower than the
stated dividend yield on the Series D Preferred Stock. In addition, the holder
is likely to incur commissions and other transaction costs in connection with
the sale of such Common Stock.

         The Certificate of Designation provides that upon (a) the accumulation
of accrued and unpaid dividends on the outstanding Series D Preferred Stock in
an amount equal to six quarterly dividends (whether or not consecutive) and (b)
the failure of the Company to make a Preferred Stock Change of Control Offer or
to repurchase the Series D Preferred Stock tendered in a Preferred Stock Change
of Control, the sole remedy to the holders of the Series D Preferred Stock is
the voting rights arising from a Voting Rights Triggering Event (as defined
herein). See "Description of Preferred Stock-Voting Rights."

         Limited Operations of Certain Services; History of Net Losses. The
Company's business commenced in 1987. Substantially all of the Company's
revenues are derived from local exchange services, enhanced data services, long
distance services, integration services and certain local network services. Many
of these services have only recently been initiated or their availability only
recently expanded in new market areas. The Company is expecting to substantially
increase the size of its operations in the near future. Prospective investors,
therefore, have limited historical

                                       2
<PAGE>
 
financial information about the Company upon which to base an evaluation of the
Company's performance. Given the Company's limited operating history, there is
no assurance that it will be able to compete successfully in the
telecommunications business.

         The development of the Company's business and the expansion of its
networks 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 for the years ended December 31, 1994, 1995 and 1996 and net
losses to holders of Common Stock of $70.3 million for the six months ended June
30, 1997, respectively. The Company anticipates recording a significant net loss
in 1997 that is expected to be substantially greater than the loss in 1996 and
expects net losses to continue for the next several years. In addition, the
Company expects to have negative EBITDA in 1997. There can be no assurance that
Intermedia will achieve or sustain profitability or positive EBITDA in the
future.

         Substantial Indebtedness; Insufficiency of Earnings to Cover Fixed
Charges, Including Dividends on the Series D Preferred Stock. The Company is
highly leveraged. At June 30, 1997, after giving pro forma effect to the July 9
Offerings and the application of the net proceeds of the July 9 Offerings
(including the retirement of the Company's 13 1/2% Notes due 2005 ("13 1/2%
Notes"), the "Retirement"), the Company would have had outstanding approximately
$662.1 million in aggregate principal amount of indebtedness and other
liabilities on a consolidated basis (including trade payables), approximately
$323.5 million of obligations with respect to dividend payments and the
mandatory redemption of the Series B Preferred Stock and $172.5 million of
obligations with respect to the Series D Preferred Stock. The degree to which
the Company is leveraged could have important consequences to holders of the
Series D Preferred Stock, including the following: (i) a substantial portion of
the Company's cash flow from operations will be dedicated to payment of the
principal and interest on its indebtedness, to payment of dividends on and the
redemption of the Series B Preferred Stock and the payment of dividends on the
Series D Preferred Stock, thereby reducing funds available for other purposes;
(ii) the Company's significant degree of leverage could increase its
vulnerability to changes in general economic conditions or increases in
prevailing interest rates; (iii) the Company's ability to obtain additional
financing for working capital, capital expenditures, acquisitions, general
corporate purposes or other purposes could be impaired; and (iv) the Company may
be more leveraged than certain of its competitors, which may be a competitive
disadvantage.

         For the six months ended June 30, 1997, and on a pro forma basis after
giving effect to the July 9 Offerings, and the application of the proceeds
therefrom (including the Retirement), the Company's pro forma earnings would
have been inadequate to cover its pro forma combined fixed charges (including
the Series D Preferred Stock dividend requirements) by $130.0 million. The
Company anticipates that earnings will be insufficient to cover fixed charges
for the next several years. In order for the Company to meet its debt service
obligations, its dividend and redemption obligations with respect to the Series
B Preferred Stock and its dividend obligations with respect to the Series D
Preferred Stock if it elects to pay cash dividends, the Company will need to
substantially improve its operating results. There can be no assurance that the
Company's operating results will be of sufficient magnitude to enable the
Company to meet its debt service obligations, its dividend and redemption
obligations with respect to the Series B Preferred Stock and its dividend
obligations with respect to the Series D Preferred Stock if it elects to pay
cash dividends. In the absence of such operating results, the Company could face
substantial liquidity problems and might be required to raise additional
financing through the issuance of debt or equity securities; however, there can
be no assurance that Intermedia would be successful in raising such financing,
or the terms or timing thereof.

         Class Action by DIGEX Stockholders. On June 5, 1997, the Company
announced that it had agreed to acquire 100% of the outstanding equity of DIGEX,
Incorporated ("DIGEX"; the "DIGEX Acquisition"). The acquisition was consummated
through a tender offer for all of the outstanding shares of DIGEX, which closed
on July 9, 1997, followed by a cash merger effective on July 11, 1997 (the
"Merger").

                                       3
<PAGE>
 
         On June 20, 1997, two purported class action complaints were filed in
the Court of Chancery of the State of Delaware in and for New Castle County
respectively by TAAM Associates, Inc. and David and Chaile Steinberg (the
"Complaints"), purported stockholders of DIGEX, on behalf of all non-affiliated
common stockholders of DIGEX, against Intermedia, DIGEX and the Directors of
DIGEX (the "DIGEX Directors"). The Complaints allege that the DIGEX Directors
violated their fiduciary duties to the public stockholders of DIGEX by agreeing
to vote in favor of the Merger and that Intermedia knowingly aided and abetted
such violation by offering to retain DIGEX management in their present positions
and consenting to stock option grants to certain executive officers of DIGEX.
The Complaints seek a preliminary and permanent injunction enjoining the Merger
and cash damages from the DIGEX Directors. No application was made for a
preliminary injunction prior to the consummation of the Merger.

         These cases are in their very early stages and no assurance can be
given as to their ultimate outcome. Intermedia, after consultation with its
counsel, believes that there are meritorious factual and legal defenses to the
claims in the Complaints. Intermedia intends to defend vigorously the claims in
the Complaints.

         Possible Default Under the 13 1/2% Notes Indenture. In connection with
the July 9 Debt Offering, the Company defeased a portion of the Company's
outstanding 13 1/2% Notes. Such defeasance will not become effective until the
91st day after the deposit with SunTrust Bank, Central Florida, National
Association, as trustee ("SunTrust") of the funds necessary to defease the
covenants in the indenture governing the 13 1/2% Notes (the "13 1/2% Notes
Indenture"). Until such time as the defeasance becomes effective, the issuance
by the Company of the 11 1/4 Notes constitutes an event which could be declared
an Event of Default under the 13 1/2% Notes Indenture 30 days after the receipt
of notice from SunTrust or the holders of 25% of the outstanding principal
amount of the 13 1/2% Notes. If such an Event of Default were declared and the
maturity of the 13 1/2% Notes were accelerated, this would constitute an Event
of Default under the 12 1/2% Notes Indenture and under the Series B Certificate
of Designation. If the 13 1/2% Notes were accelerated, a portion of the funds
deposited with SunTrust could be used to repay the 13 1/2% Notes. If the 12 1/2%
Notes were also accelerated the Company would have available funds to pay the 12
1/2% Notes, but such payment would significantly deplete the funds available for
the Company's capital expansion plan. An Event of Default would not lead to
acceleration of the Series B Preferred Stock. The Company's 13 1/2% Notes are
and will remain classified as current liabilities on the Company's balance sheet
until such time as the Retirement becomes effective.

         Regulatory Approval of the July 9 Offerings. Ten of the states in which
the Company is certificated provide for prior approval of the issuance of debt
and equity securities by the Company. One additional state in which the Company
is certificated provides for prior approval of the issuance of preferred stock
which is convertible into common stock. The requirement for such approvals may
have been pre-empted by the National Securities Market Improvement Act of 1996,
although there is no case law on this point. Because of time constraints, the
Company was not able to obtain such approval from any of the eleven states prior
to consummation of the July 9 Offerings. The Company has filed the required
applications or notifications in each of the states and approval has been
obtained in three of the states. In six of these states, the Company's
intrastate revenues for the first quarter of 1997 were less than $1,000 per
state and in only one state did such revenues exceed $4,000 for the first
quarter. After consultation with counsel, the Company believes the remaining
approvals will be granted and that obtaining such approvals subsequent to the
July 9 Offerings should not result in any material adverse consequences to the
Company, although there can be no assurance that such a consequence will not
result.

         Significant Capital Requirements and Possible Need for Additional
Financing. Expansion of the Company's existing networks and services and the
development of new networks and services require significant capital
expenditures. Intermedia expects to fund its capital requirements through
existing resources including capital raised through the July 9 Offerings, credit
availability and internally generated funds. However, there can be no assurance
that the Company will not require additional financing. If the Company were to
acquire additional financing, it would seek to obtain such financing through the
sale of public or private debt and/or equity securities or through securing a
bank credit facility. There can be no assurance as to the availability of the
terms upon which such financing might be available. Moreover, the 12 1/2% Notes,
the 11 1/4% Notes. the Series B Certificate of Designation and the Certificate
of

                                       4
<PAGE>
 
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.

         A portion of the Company's expansion may occur through acquisitions as
an alternative to direct investments in the assets required to implement the
expansion. No assurance can be given that suitable acquisitions can be
identified, financed and completed on acceptable terms, or that the Company's
future acquisitions, if any, will be successful or will not impair the Company's
ability to service its outstanding obligations.

         Maintenance of Peering Relationships. The Internet is comprised of many
Internet service providers ("ISPs") who operate their own networks and
interconnect with other ISPs at various peering points. The establishment and
maintenance of peering relationships with other ISPs is necessary in order to
exchange traffic with other ISPs without having to pay settlement charges.
Although the Company meets the industry's current standards for peering, there
is no assurance that other national ISPs will maintain peering relationships
with the Company. In addition, there may develop increasing requirements
associated with maintaining peering with the major national ISPs with which the
Company may have to comply. There can be no assurance that the Company will be
able to expand or adapt their network infrastructure to meet the industry's
evolving standards on a timely basis, at a commercially reasonable cost, or at
all.

         Potential Liability of On-Line Service Providers. The law in the United
States relating to the liability of on-line service providers and ISPs for
information carried on, disseminated through or hosted on their systems is
currently unsettled. Several private lawsuits seeking to impose such liability
are currently pending. In one case brought against an ISP, Religious Technology
Center v. Netcom On-Line Communication Services, Inc., the United States
District Court for the Northern District of California ruled in a preliminary
phase that under certain circumstances ISPs could be held liable for copyright
infringement. The case has not reached final judgment. The Telecommunications
Act of 1996 (the "1996 Act") prohibits and imposes criminal penalties and civil
liability for using an interactive computer service to transmit certain types of
information and content, such as indecent or obscene communications. On June 26,
1997, the Supreme Court affirmed the decision of a panel of three federal judges
which granted a preliminary injunction barring enforcement of this portion of
the 1996 Act to the extent that enforcement is based upon allegations other than
obscenity or child pornography as an impermissible restriction on the First
Amendment's right of free speech. In addition, numerous states have adopted or
are currently considering similar types of legislation. The imposition upon ISPs
or Web hosting sites of potential liability for materials carried on or
disseminated through their systems could require the Company to implement
measures to reduce their exposure to such liability, which may require the
expenditure of substantial resources or the discontinuation of certain product
or service offerings. The Company believes that it is currently unsettled
whether the 1996 Act prohibits and imposes liability for any services provided
by the Company should the content or information transmitted be subject to the
statute. The increased attention focused upon liability issues as a result of
these lawsuits, legislation and legislative proposals could affect the growth of
Internet use. Any such liability or asserted liability could have a material
adverse effect on the Company's business, financial condition and results of
operations.

         Dependence upon Network Infrastructure; Risk of System Failure,
Security Risks. The Company's success in marketing its services to business and
government users requires that the Company provide superior reliability,
capacity

                                       5
<PAGE>
 
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.

         Subordination of the Series D Preferred Stock. The Company's
obligations with respect to the Series D Preferred Stock are subordinate and
junior in right of payment to all present and future indebtedness of the Company
and its subsidiaries, including the Existing Senior Notes, to the Series B
Preferred Stock and to all subsequent series of preferred stock of the Company
which by its terms ranks senior to the Series D Preferred Stock. In addition to
the substantial dividend restrictions set forth in the Existing Senior Notes
Indentures, no cash dividend payments may be made with respect to the Series D
Preferred Stock if (i) the obligations with respect to the Existing Senior Notes
or Series B Preferred Stock are not paid when due or (ii) any other event of
default has occurred under the Existing Senior Notes Indentures or Series B
Certificate of Designation, and is continuing or would occur as a consequence of
such payment. As of June 30, 1997, on a pro forma basis after giving effect to
the July 9 Offerings and the application of the net proceeds therefrom, the
Series D Preferred Stock would have been junior in right of payment to $985.6
million of indebtedness and other liabilities and commitments and liquidation
preference of the Company and its subsidiaries. In the event of bankruptcy,
liquidation or reorganization of the Company, the assets of the Company will be
available to pay obligations on the Series D Preferred Stock only after all
Senior Securities and all indebtedness of the Company have been paid, and there
may not be sufficient assets remaining to pay amounts due on any or all of the
Series D Preferred Stock then outstanding. See "Description of Preferred
Stock-Ranking."

         Effect of Substantial Additional Indebtedness on the Company's Ability
to Make Payments on the Series D Preferred Stock. The Existing Senior Notes
Indentures and the Series B Certificate of Designation limit, but do not
prohibit, the incurrence of additional indebtedness by the Company and its
subsidiaries, and the Company may incur substantial additional indebtedness
during the next few years to finance the construction of networks and purchase
of network electronics, including local/long distance voice and data switches.
All additional indebtedness of the Company will rank senior in right of payment
to any payment obligations with respect to the Series D Preferred Stock. The
debt service requirements of any additional indebtedness would make it more
difficult for the Company to pay cash dividends with respect to the Series D
Preferred Stock.

         Risks of Implementation; Need to Obtain Permits and Rights of Way. The
Company is continuing to expand its existing networks. The Company has
identified other expansion opportunities in the eastern half of the United
States and is currently extending the reach of its networks to pursue such
opportunities. There can be no assurance that the Company will be able to expand
its existing networks or construct or acquire new networks as currently planned
on a timely basis. The expansion of the Company's existing networks and its
construction or acquisition of new networks will be dependent, among other
things, on its ability to acquire rights-of-way and any required permits on
satisfactory terms and conditions and on its ability to finance such expansion,
acquisition and construction. In addition, the Company may require pole
attachment agreements with utilities and incumbent local exchange carriers
("ILECs") to operate existing and future networks, and there can be no assurance
that such agreements will be obtained or obtainable on reasonable terms. These
factors and others could adversely affect the expansion of the Company's
customer base on its existing networks and commencement of operations on new
networks. If the Company is not able to expand, acquire or construct its
networks in accordance with its plans, the growth of its business would be
materially adversely affected.

         Competition. In each of its markets, the Company faces significant
competition for the local network services, including local exchange services,
it offers from ILECs, which currently dominate their local telecommunications
markets. ILECs have long-standing relationships with their customers which
relationships may create competitive barriers. Furthermore, ILECs may have the
potential to subsidize competitive service from monopoly service revenues. In
addition, a continuing trend toward business combinations and alliances in the
telecommunications industry may create significant new competitors to the
Company. The Company also faces competition in most markets in which it

                                       6
<PAGE>
 
operates from one or more integrated communications services providers ("ICPs")
and ILECs operating fiber optic networks. In addition, the Company faces
competition in its integration services business from equipment manufacturers,
the RBOCs and other ILECs, long distance carriers and systems integrators, and
in its enhanced data services business (including Internet) from local telephone
companies, long distance carriers, very small aperture terminal ("VSAT")
providers, other ISPs and others. In particular, the market for Internet
services is extremely competitive and there are limited barriers to entry. Many
of the Company's existing and potential competitors have financial, personnel
and other resources significantly greater than those of the Company.

         The Company believes that various legislative initiatives, including
the recently enacted 1996 Act, have removed remaining legislative barriers to
local exchange competition. Nevertheless, in light of the passage of the 1996
Act, regulators are also likely to provide ILECs with increased pricing
flexibility as competition increases. If ILECs are permitted to lower their
rates substantially or engage in excessive volume or term discount pricing
practices for their customers, the net income or cash flow of ICPs and
competitive local exchange carriers ("CLECs"), including the Company, could be
materially adversely affected. In addition, while the Company currently competes
with AT&T, MCI and others in the interexchange services market, the recent
federal legislation permits the regional Bell operating companies ("RBOCs") to
provide interexchange services once certain criteria are met. Once the RBOCs
begin to provide such services, they will be in a position to offer single
source service similar to that being offered by Intermedia. In addition, AT&T
and MCI have entered and other interexchange carriers have announced their
intent to enter into the local exchange services market, which is facilitated by
the 1996 Act's resale and unbundled network element provisions. The Company
cannot predict the number of competitors that will emerge as a result of
existing or new federal and state regulatory or legislative actions. Competition
from the RBOCs with respect to interexchange services or from AT&T, MCI or
others with respect to local exchange services could have a material adverse
effect on the Company's business.

         Regulation. The Company is subject to varying degrees of federal, state
and local regulation. The Company is not currently subject to price cap or rate
of return regulation, nor is it currently required to obtain FCC authorization
for the installation, acquisition or operation of its network facilities.
Further, the FCC issued an order holding that non-dominant carriers, such as the
Company, are required to withdraw interstate tariffs for domestic long distance
service. That order has been stayed by a federal appeals court and it is not
clear at this time whether the detariffing order will be implemented. Until
further action is taken by the court, the Company will continue to maintain
tariffs for these services. In June 1997, the FCC issued another order stating
that non-dominant carriers, such as the Company, could withdraw their tariffs
for interstate access services. While the Company has no immediate plans to
withdraw its tariff, this FCC order allows the Company to do so. The FCC also
requires the Company to file interstate tariffs on an ongoing basis for
international traffic. The Company is generally subject to certification and
tariff or price list filing requirements for intrastate services by state
regulators. Although passage of the 1996 Act should result in increased
opportunities for companies that are competing with the ILECs, no assurance can
be given that changes in current or future regulations adopted by the FCC or
state regulators or other legislative or judicial initiatives relating to the
telecommunications industry would not have a material adverse effect on the
Company. In addition, although the 1996 Act provides incentives to the ILECs
that are subsidiaries of RBOCs to enter the long distance service market by
requiring ILECs to negotiate interconnection agreements with local competitors,
there can be no assurance that these ILECs will negotiate quickly with
competitors such as the Company for the required interconnection of the
competitor's networks with those of the ILECs.

         Potential Diminishing Rate of Growth. During the period from 1994 to
1996, the Company's revenues have grown at a compound annual growth rate of
169%. While the Company expects to continue to grow, as its size increases it is
likely that its rate of growth will diminish.

         Risk of New Service Acceptance by Customers. The Company has recently
introduced a number of services, primarily local exchange services, that the
Company believes are important to its long-term growth. The success of these
services will be dependent upon, among other things, the willingness of
customers to accept the Company as the

                                       7
<PAGE>
 
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.

         Dependence on Business from Interexchange Carriers ("IXCs"). For the
year ended December 31, 1996, approximately 10% of the Company's consolidated
revenues were attributable to access services provided to IXCs. The loss of
access revenues from IXCs in general could have a material adverse effect on the
Company's business.

         In addition, the Company's growth strategy assumes increased revenues
from IXCs from the deployment of local/long distance voice switches on its
networks and the provision of switched access origination and termination
services. There is no assurance that the IXCs will continue to increase their
utilization of the Company's services, or will not reduce or cease their
utilization of the Company's services, which could have a material adverse
effect on the Company.

         Business Combinations; Change of Control. The Company has from time to
time held, and continues to hold, preliminary discussions with (i) potential
strategic investors who have expressed an interest in making an investment in or
acquiring the Company and (ii) potential joint venture partners looking toward
the formation of strategic alliances that would expand the reach of the
Company's networks or services without necessarily requiring an additional
investment in the Company. In addition to providing additional growth capital,
management believes that an alliance with an appropriate strategic investor
would provide operating synergy to, and enhance the competitive positions of,
both Intermedia and the investor within the rapidly consolidating
telecommunications industry. There can be no assurance that agreements for any
of the foregoing will be reached. An investment, business combination or
strategic alliance could constitute a change of control. The Existing Senior
Notes Indentures and the Series B Certificate of Designation provide that a
change of control would require the Company to repay the indebtedness and redeem
the Series B Preferred Stock outstanding under such instruments. A change of
control also requires the Company to offer to redeem the Series D Preferred
Stock. The terms of the Existing Senior Notes and the Series B Certificate of
Designation contain provisions that may prohibit the repurchase of the Series D
Preferred Stock. If a change of control

                                       8
<PAGE>
 
does occur, there is no assurance that the Company would have sufficient funds
to make such repayments and redemption or could obtain any additional debt or
equity financing that could be necessary in order to repay the Existing Senior
Notes and to redeem the Series B Preferred Stock in order to redeem the Series D
Preferred Stock.

         Absence of a Public Market for the Depositary Shares. The Depositary
Shares were issued by the Company in the July 9 Equity Offering. There is
currently no market for the Series D Preferred Stock and the Depositary Shares.
Although in connection with the private placement, the Initial Purchasers
informed the Company that they intend to make a market for the Depositary
Shares, they are not obligated to do so and any such market making activity may
be discontinued at any time without notice. The Company does not intend to apply
for listing of the Depositary Shares or the Series D Preferred Stock on any
securities exchange or on the Nasdaq National Market. Accordingly, there can be
no assurance as to the development or liquidity of any market for the Depositary
Shares. If a market for the Depositary Shares were to develop, the Depositary
Shares may trade at prices that may be higher or lower than their initial
offering price depending upon many factors, including prevailing interest rates,
the Company's operating results and the markets for similar securities.
Historically, the market for securities such as the Depositary Shares has been
subject to disruptions that have caused substantial volatility in the prices of
securities similar to the Depositary Shares. There can be no assurance that, if
a market for the Depositary Shares were to develop, such a market would not be
subject to similar disruptions. The Company does not expect a market for the
Series D Preferred Stock to develop.

         Certain Tax Considerations. For a discussion of certain material
federal income tax considerations which are relevant to the purchase, ownership
and disposition of the Depositary Shares and the Series D Preferred Stock, see
"Certain Federal Income Tax Consequences."

         Anti-Takeover Provisions. The Company's Certificate of Incorporation
and Bylaws, the provisions of the Delaware General Corporation Law (the "DCGL"),
the Existing Senior Notes Indentures, the Series B Certificate of Designation
and the Certificate of Designation (as defined herein) may make it difficult in
some respects to effect a change in control of the Company and replace incumbent
management. In addition, the Company's Board of Directors has adopted a
Stockholder's Rights Plan , pursuant to which rights to acquire a series of
preferred stock, exercisable upon the occurrence of certain events, were
distributed to its stockholders. The existence of these provisions may have a
negative impact on the price of the Common Stock, may discourage third party
bidders from making a bid for the Company, or may reduce any premiums paid to
stockholders for their Common Stock. In addition, the Board has the authority to
fix the rights and preferences of, and to issue shares of, the Company's
preferred stock, which may have the effect of delaying or preventing a change in
control of the Company without action by its stockholders.

         Shares Eligible for Future Sale. Future sales of shares by existing
stockholders under Rule 144 of the Securities Act, or through the exercise of
outstanding registration rights or the issuance of shares of Common Stock upon
the exercise of options or warrants or conversion of convertible securities
could materially adversely affect the market price of shares of Common Stock and
could materially impair the Company's future ability to raise capital through an
offering of equity securities. Substantially all of the Company's outstanding
shares, other than those held by affiliates, are transferable without
restriction under the Securities Act. In addition to the shares registered
hereunder, the Company has filed registration statements covering the offering
of approximately 2,392,463 shares of Common Stock by selling security holders.
In addition, the Company has registered 4,785,000 shares of Common Stock for
issuance upon exercise of options granted to its employees under the Company's
existing stock option plans. At June 30, 1997, options to acquire 769,589 shares
of Common Stock were currently exercisable under the Company's existing stock
option plans. No predictions can be made as to the effect, if any, that market
sales of such shares or the availability of such shares for future sale will
have on the market price of shares of Common Stock prevailing from time to time.

         Forward Looking Statements. The statements contained in this Prospectus
that are not historical facts are "forward-looking statements" (as such term is
defined in the Private Securities Litigation Reform Act of 1995), which can be
identified by the use of forward-looking terminology such as "estimates,"
"projects," "anticipates," "expects," "intends," "believes," or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy that involve risks and uncertainties. Management wishes to caution
the reader that these forward-looking

                                       9
<PAGE>
 
statements are only estimates or predictions. No assurance can be given that
future results will be achieved; actual events or results may differ materially
as a result of risks facing the Company or actual results differing from the
assumptions underlying such statements.


   RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS



<TABLE> 
<CAPTION> 
                                                                            Pro Forma(1)           Six Months       Pro Forma(2)
                                                                            Year Ended               Ended          Six Months
                                       Year Ended December 31,              December 31,            June 30,        Ended June 30,
                           ---------------------------------------------------------------------------------------------------------

                           1992      1993      1994      1995     1996          1996            1996       1997          1997
                           ---------------------------------------------------------------------------------------------------------

<S>                        <C>       <C>       <C>       <C>      <C>       <C>                 <C>        <C>      <C> 
Ratio of earnings to           -         -         -         -        -             -              -         -               -
combined fixed
charges and preferred
stock dividends(3)
</TABLE> 

 (1)     The pro forma operating information gives effect to the acquisitions by
         the Company of EMI Communications, Inc., Universal Telecom Inc., Net
         Solve Incorporated and DIGEX, which occurred effective June 30, 1996,
         December 1, 1996, December 1, 1996 and July 11, 1997, respectively, as
         if they occurred on January 1, 1996. The pro forma operating
         information also gives effect to the March 1997 sale of $300 million of
         preferred stock.

 (2)     The pro forma operating information gives effect to the DIGEX
         Acquisition as if it occurred on January 1, 1997. The pro forma
         operating information also gives effect to the March 1997 sale of $300
         million of preferred stock.

(3)      For purposes of calculating the ratio of earnings to combined fixed
         charges and preferred stock dividends: (i) earnings consist of loss
         before income taxes, plus fixed charges excluding capitalized interest
         and preferred stock dividends and (ii) fixed charges consist of
         interest expended and capitalized, plus amortization of deferred
         financing costs, preferred stock dividends, plus a portion of rent
         expense under operating leases deemed by the Company to represent an
         interest factor plus dividends on the Series B Preferred Stock. For the
         years ended December 31, 1992, 1993, 1994, 1995 and 1996 and the six
         months ended June 30, 1996 and 1997 the Company's earnings were
         insufficient to cover combined fixed charges and preferred stock
         dividends by $622, $2,288, $3,324, $19,931, $59,978, $21,929 and
         $71,832, respectively. For the year ended December 31, 1996 and the six
         months ended June 30, 1997, the Company's pro forma earnings, after
         giving effect to the acquisitions described in Notes (1) and (2) above
         and the July 9 Equity Offering, were insufficient by $161,194 and
         $119,596, respectively, to cover pro forma combined fixed charges and
         preferred stock dividends. For the year ended December 31, 1996 and the
         six months ended June 30, 1997 the Company's pro forma earnings, after
         giving effect to the acquisitions described in Notes (1) and (2) above
         and the July 9 Offerings, were insufficient by $179,606 and $130,084 to
         cover pro forma combined fixed charges and preferred stock dividends.
         See "Risk Factors Substantial Indebtedness; Insufficiency of Earnings
         to Cover Fixed Charges Including Dividend, and the Series D Preferred
         Stock" for a father discussion of factors which may have an impact on
         the Company's ratio of earnings to combined fixed charges and preferred
         stock dividends.

                                       10
<PAGE>
 
                                  THE COMPANY

         Intermedia is a rapidly growing ICP, offering a full suite of local,
long distance and enhanced data telecommunications services to business and
government end user customers, long distance carriers, ISPs, resellers and
wireless communications companies. Founded in 1987, the Company is currently the
third largest (based on annualized telecommunications services revenues) among
providers generally referred to as CLECs after MFS Communications Company, Inc.
and Teleport Communications Group Inc. As of June 30, 1997, the Company had
sales offices in 32 cities throughout the eastern half of the United States and
offered a full product package of telecommunications services in 16 metropolitan
statistical areas. In April 1996, Intermedia became one of the first ICPs in the
United States to provide integrated switched local and long distance service and
as of June 30, 1997 had six local/long distance voice switches in service and
six long distance voice switches in service, three of which the Company plans to
upgrade to local/long distance voice switches by the end of 1997. The Company
provides enhanced data services, including frame relay, asynchronous transfer
mode ("ATM") and Internet access services, primarily to business and government
customers (including over 100 ISPs), in approximately 2,700 cities nationwide,
utilizing 111 Company-owned data switches. Intermedia also serves as a
facilities-based interexchange carrier to approximately 14,700 customers
nationwide. Intermedia continues to increase its customer base and network
density in the eastern half of the United States and is pursuing attractive
opportunities to add additional services and expand into complementary
geographic markets.

         Intermedia was incorporated in the State of Delaware on November 9,
1987, as the successor to a Florida corporation that was founded in 1986. The
Company's principal offices are located at 3625 Queen Palm Drive, Tampa, Florida
33619, and its telephone number is (813) 829-0011.


                                USE OF PROCEEDS

         The Company 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.

                                       11
<PAGE>
 
                         DESCRIPTION OF CAPITAL STOCK

         Intermedia's authorized capital stock consists of 50,000,000 shares of
Common Stock, par value $.01 per share, and 2,000,000 shares of Preferred Stock,
par value $1.00 per share ("Preferred Stock"). As of July 31, 1997, there were
16,669,492 shares of Common Stock, 312,937.5 shares of Series B Preferred Stock
and 69,000 shares of Series D Preferred Stock issued and outstanding. On a
fully-diluted basis, at that date, the Company had outstanding 25,985,122 shares
of Common Stock after giving effect to (a) the exercise of the Public Warrants
(defined below), (b) the exercise of all outstanding options issued pursuant to
the Company's employee stock option plans and (c) conversions of the Depositary
Shares and the Series D Preferred Stock. As of July 31, 1997, the Company has
reserved (i) 4,785,600 shares of Common Stock for issuance pursuant to the
Company's employee stock option plans, (ii) 350,400 shares of Common Stock for
issuance upon exercise of the Public Warrants, (iii) 287,062.5 shares of Series
B Preferred Stock for issuance as dividends on the outstanding shares of Series
B Preferred Stock and (iv) 40,000 shares of Series C Preferred Stock for
issuance in connection with the Stockholder's Rights Plan, (v) 4,434,448 shares
of Common Stock for issuance on conversion of the Series D Preferred Stock and
(vi) 1,200,000 shares of Common Stock for issuance as dividends on the
outstanding shares of Series D Preferred Stock. All outstanding shares of Common
Stock, Series B Preferred Stock and Series D Preferred Stock are fully paid and
non-assessable.

COMMON STOCK

         Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Holders of Common
Stock do not have cumulative rights, so that holders of more than 50% of the
shares of Common Stock are able to elect all of Intermedia's directors eligible
for election in a given year. For a description of the classification of the
Board, see "-Delaware Law and Certain Provisions of Intermedia's Certificate of
Incorporation and Bylaws." Subject to the preferences that may be applicable to
any then outstanding Preferred Stock, holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board out of funds legally available therefor. See "-Dividend Restrictions."
Upon any liquidation, dissolution or winding up, whether voluntary or
involuntary, of Intermedia, holders of Common Stock are entitled to receive pro
rata all assets available for distribution to stockholders after payment or
provision for payment of the debts and other liabilities of Intermedia and the
liquidation preferences of any then outstanding Preferred Stock. There are no
preemptive or other subscription rights, conversion rights, or redemption or
sinking fund provisions with respect to shares of Common Stock. All outstanding
shares of Common Stock are, and all shares of Common Stock to be outstanding
upon exercise of the Public Warrants and conversion of the Depositary Shares or
shares of Series D Preferred Stock will be, fully paid and non-assessable.

PREFERRED STOCK

         The Preferred Stock may be issued at any time or from time to time in
one or more classes or series with such designations, powers, preferences,
rights, qualifications, limitations and restrictions (including dividend,
conversion and voting rights) as may be fixed by the Board, without any further
vote or action by the stockholders. July 31, 1997, the Company had outstanding
312,937.5 shares of Series B Preferred Stock (aggregate liquidation preference
of approximately $312.9 million). Dividends on the Series B Preferred Stock
accumulate at a rate of 13 1/2% of the aggregate liquidation preference thereof
and are payable quarterly, in arrears. Dividends are payable in cash or, at the
Company's option, by the issuance of additional Series B Preferred Stock having
an aggregate liquidation preference equal to the amount of such dividends. The
Series B Preferred Stock is subject to mandatory redemption at a liquidation
preference of $1,000 per share, plus accumulated and unpaid dividends on March
31, 2009. The Series B Preferred Stock will be redeemable at the option of the
Company at any time after March 31, 2002 at rates commencing with 106.75%,
declining to 100% on March 31, 2007. The Series B Certificate of Designation
contains certain covenants that, among other things, limit the ability of the
Company and its subsidiaries to make certain restricted payments, incur
additional indebtedness and issue additional preferred stock, pay dividends or
make other distributions, repurchase equity interests, conduct certain lines of
business or enter into certain mergers and consolidations. In the event of a
change of control of the Company, holders of the Series B Preferred Stock have
the right to require the Company to purchase their shares of Series B Preferred
Stock at a price equal to 101% of the aggregate liquidation preference with

                                       12
<PAGE>
 
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.

         See "Description of Preferred Stock" for a description of the terms of
Series D Preferred Stock.


DELAWARE LAW AND CERTAIN PROVISIONS OF INTERMEDIA'S CERTIFICATE OF INCORPORATION
AND BYLAWS

         General. The Certificate of Incorporation and the Bylaws of Intermedia
contain certain provisions that could make more difficult the acquisition of
Intermedia by means of a tender offer, a proxy contest or otherwise. These
provisions are expected to discourage certain types of coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of Intermedia first to negotiate with Intermedia. Although such
provisions may have the effect of delaying, deferring or preventing a change in
control of Intermedia, the Company believes that the benefits of increased
protection of Intermedia's potential ability to negotiate with the proponent of
an unfriendly or unsolicited proposal to acquire or restructure the Company
outweigh the disadvantages of discouraging such proposals because, among other
things, negotiation of such proposals could result in an improvement of their
terms. The description set forth below is intended as a summary only and is
qualified in its entirety by reference to the Certificate of Incorporation and
Bylaws of Intermedia.

         Board of Directors. Intermedia's Certificate of Incorporation provides
that (i) the Board be divided into three classes of directors, with each class
having a number as nearly equal as possible and with the term of each class
expiring in a different year and (ii) the Board shall consist of not less than
three nor more than seven members, the exact number to be determined from time
to time by the Board. The Board has set the number of directors at four. Subject
to any rights of holders of Preferred Stock, a majority of the Board then in
office will have the sole authority to fill any vacancies on the Board.
Stockholders can remove members of the Board only for cause.

         Stockholder Action and Special Meetings. Intermedia's Certificate of
Incorporation provides that (i) any action required or permitted to be taken by
Intermedia's stockholders must be effected at a duly called annual or special
meeting of Stockholders and may not be effected by any consent in writing and
(ii) the authorized number of directors may be changed only by resolution of the
Board. The Company's Bylaws provide that, subject to any rights of holders of
any series of Preferred Stock, special meetings of stockholders may be called
only by the Chairman of the Board or the President of Intermedia, by a majority
of the Board or by stockholders owning shares representing at least a majority
of the capital stock of Intermedia issued and outstanding and entitled to vote.

         Stockholder's Rights Plan. Intermedia's Board of Directors has adopted
a Stockholder's Rights Plan, pursuant to which rights to acquire a newly created
series of Preferred Stock, exercisable upon the occurrence of certain events,
including the acquisition by a person or group of a specified percentage of the
Common Stock, were distributed to its stockholders.

         Anti-Takeover Statute. Subject to certain exceptions, Section 203 of
the DGCL prohibits a publicly held Delaware corporation, such as Intermedia,
from engaging in any "business combination" with an "interested stockholder" for
a three-year period following the date on which such person became an interested
stockholder, unless (i) prior to such date, the board of directors of the
corporation approved either such business combination or the transaction that
resulted in such person becoming an interested stockholder, (ii) upon
consummation of the transaction

                                       13
<PAGE>
 
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 662/3% of
the outstanding voting stock that is not owned by the interested stockholder. A
"business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is essentially a person who, together with affiliates and
associates, owns (or within the past three years has owned) 15% or more of the
corporation's voting stock. It is anticipated that the provisions of Section 203
of the DGCL may encourage any person interested in acquiring Intermedia to
negotiate in advance with the Board since the stockholder approval requirement
would be avoided if a majority of Intermedia's directors then in office approved
either the business combination or the transaction that resulted in such person
becoming an interested stockholder.

DIVIDEND RESTRICTIONS

         The terms of the Existing Senior Note Indentures restrict the Company's
ability to pay cash dividends on the Series B Preferred Stock. The existing
Senior Note Indentures and the Series B Certificate of Designation restrict
Intermedia's ability to pay cash dividends on the Common Stock and the Series D
Preferred Stock.

TRANSFER AGENT AND REGISTRAR

         The transfer agent and registrar for the Common Stock, Series B
Preferred Stock and Series D Preferred Stock is Continental Stock Transfer &
Trust Company.

OUTSTANDING WARRANTS

         160,000 warrants (the "Public Warrants"), each to purchase 2.19 shares
of Common Stock, at an exercise price of $10.86 per share (subject to
anti-dilution adjustments) were issued as part of a June 1995 private placement.
The Public Warrants are currently exercisable. Unless exercised, the Public
Warrants will expire on June 1, 2000.

RESERVATION OF SHARES

         The Company has authorized and reserved for issuance such number of
Common Shares as will be issuable upon the conversion of all Depositary Shares
(or all shares of the Series D Preferred Stock). Such Common Shares, when
issued, will be duly and validly issued, fully paid and non-assessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.

REGISTRATION RIGHTS.

         In addition to the rights granted under the Preferred Stock
Registration Rights Agreement, dated July 9, 1997, among the Company and the
Initial Purchasers (the "Preferred Stock Registration Rights Agreement"), the
Company is a party to several agreements pursuant to which certain stockholders
have the right, among other matters, to require the Company to register their
shares of Common Stock under the Securities Act under certain circumstances.
These rights cover approximately 3,106,749 shares of Common Stock. Approximately
2,361,083 of such shares of Common Stock are covered by effective registration
statements and 31,380 of such shares are being registered as part of the
Registration Statement of which this prospectus forms a part. See "Description
of Preferred Stock - Registration Rights; Liquidated Damages" for a discussion
of registration rights pertaining to the Common Shares, Depositary Shares and
Series D Preferred Stock.

                                       14
<PAGE>
 
                        DESCRIPTION OF PREFERRED STOCK

GENERAL

         The terms of the Series D Preferred Stock are set forth in the
Certificate of Designation of Voting Power, Designation Preferences and
Relative, Participating, Optional or Other Special Rights and Qualifications,
Limitations and Restrictions (the "Certificate of Designation"). The following
summary of the Series D Preferred Stock, the Certificate of Designation and the
Preferred Stock Registration Rights Agreement is not intended to be complete and
is subject to, and qualified in its entirety by reference to, the Company's
Certificate of Incorporation, the Certificate of Designation and the Preferred
Stock Registration Rights Agreement, including the definitions therein of
certain terms used below. Copies of the form of Certificate of Designation and
Preferred Stock Registration Rights Agreement are available from the Company,
upon request. As used in this Description of Preferred Stock, the term "Company"
refers to Intermedia Communications Inc., excluding its Subsidiaries.

         Certain of the Company's operations are conducted through its
Subsidiaries and, therefore, the Company is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the Series
D Preferred Stock. Any right of the Company to receive assets of any of its
Subsidiaries is effectively subordinated to all indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's Subsidiaries. As of June 30, 1997 on a pro forma basis after
giving effect to the July 9 Offerings and the application of the proceeds
therefrom, the aggregate amount of liquidation preference of Senior Securities
and indebtedness and other obligations of the Company and its Subsidiaries that
would effectively rank senior in right of payment to the obligations of the
Company under the Series D Preferred Stock would have been approximately $985.6
million. See "Risk Factors."

         Pursuant to the Certificate of Designation, 69,000 shares (including
9,000 shares which the Initial Purchasers purchased to cover over-allotments) of
Series D Preferred Stock with the Liquidation Preference were authorized. All of
such shares are issued and outstanding and are fully paid and non-assessable.
The holders of the Series D Preferred Stock have no preemptive rights.

         The transfer agent for the Series D Preferred Stock is Continental
Stock Transfer & Trust Co. unless and until a successor is selected by the
Company (the "Transfer Agent").

RANKING

         The Series D Preferred Stock, with respect to dividend distributions
and distributions upon the liquidation, winding-up and dissolution of the
Company, ranks (i) senior to all classes of common stock of the Company and to
each other class of capital stock or series of preferred stock established after
July 2, 1997 by the Board of Directors, the terms of which do not expressly
provide that it ranks senior to or on a parity with the Series D Preferred Stock
as to dividend distributions and distributions upon the liquidation, winding-up
and dissolution of the Company (collectively referred to with the common stock
of the Company as "Junior Securities"); (ii) on a parity with any additional
shares of Series D Preferred Stock issued by the Company in the future and any
other class of capital stock or series of preferred stock issued by the Company
established after July 2, 1997 by the Board of Directors, the terms of which
expressly provide that such class or series will rank on a parity with the
Series D Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred to
as "Parity Securities"); and (iii) junior to the Series B Preferred Stock
($312.9 million aggregate liquidation preference outstanding at June 30, 1997)
and to each class of capital stock or series of preferred stock issued by the
Company established after July 2, 1997 by the Board of Directors the terms of
which expressly provide that such class or series will rank senior to the Series
D Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up and dissolution of the Company (collectively referred to
as "Senior Securities").

         No dividend whatsoever shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any outstanding share of the Series D
Preferred Stock with respect to any dividend period unless all dividends for

                                       15
<PAGE>
 
all preceding dividend periods have been declared and paid, or declared and a
sufficient sum set apart for the payment of such dividend, upon all outstanding
shares of Senior Securities.

DIVIDENDS

         The holders of shares of the Series D Preferred Stock are entitled to
receive, when, as and if dividends are declared by the Board of Directors out of
funds of the Company legally available therefor, cumulative dividends from July
9, 1997 accruing at the rate per annum of 7% of the Liquidation Preference per
share, payable quarterly in arrears on each July 15, October 15, January 15 and
April 15, commencing on October 15, 1997 (each, a "Dividend Payment Date"). If
any such date is not a Business Day, such payment shall be made on the next
succeeding Business Day, to the holders of record as of the next preceding July
1, October 1, January 1 and April 1 (each, a "Record Date"). Dividends will be
payable (i) in cash, (ii) by delivery of shares of Common Stock to holders
(based upon 95% of the Average Stock Price (as defined below)) or (iii) through
any combination of the foregoing. The Company intends to pay dividends in shares
of Common Stock on each Dividend Payment Date to the extent that it is unable to
pay dividends in cash. If the dividends are paid in shares of Common Stock, the
number of shares of Common Stock to be issued on each Dividend Payment Date will
be determined by dividing the total dividend to be paid on each share of Series
D Preferred Stock by 95% of the average of the high and low sales prices of the
Common Stock as reported by the Nasdaq National Market or any national
securities exchange upon which the Common Stock is then listed, for each of the
ten consecutive trading days immediately preceding the fifth business day
preceding the Record Date (the "Average Stock Price"). The Transfer Agent is
authorized and directed in the Certificate of Designation to aggregate any
fractional shares of Common Stock that are issued as dividends, sell them at the
best available price and distribute the proceeds to the holders in proportion to
their respective interests therein. The Company will pay the expenses of the
Transfer Agent with respect to such sale, including brokerage commissions.
Dividends payable on the Series D Preferred Stock will be computed on the basis
of a 360-day year consisting of twelve 30-day months and will be deemed to
accrue on a daily basis.

         Dividends on the Series D Preferred Stock will accrue whether or not
the Company has earnings or profits, whether or not there are funds legally
available for the payment of such dividends and whether or not dividends are
declared. Dividends will accumulate to the extent they are not paid on the
Dividend Payment Date for the period to which they relate. The Certificate of
Designation provides that the Company will take all actions required or
permitted under the DGCL to permit the payment of dividends on the Series D
Preferred Stock, including, without limitation, through the revaluation of its
assets in accordance with the DGCL, to make or keep funds legally available for
the payment of dividends.

         No dividend whatsoever shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any outstanding share of the Series D
Preferred Stock with respect to any dividend period unless all dividends for all
preceding dividend periods have been declared and paid, or declared and a
sufficient sum set apart for the payment of such dividend, upon all outstanding
shares of Series D Preferred Stock. Unless full cumulative dividends on all
outstanding shares of Series D Preferred Stock for all past dividend periods
shall have been declared and paid, or declared and a sufficient sum for the
payment thereof set apart: (i) no dividend (other than a dividend payable solely
in shares of any Junior Securities) shall be declared or paid upon, or any sum
set apart for the payment of dividends upon, any shares of Junior Securities;
(ii) no other distribution shall be declared or made upon, or any sum set apart
for the payment of any distribution upon, any shares of Junior Securities, other
than a distribution consisting solely of Junior Securities; (iii) no shares of
Junior Securities shall be purchased, redeemed or otherwise acquired or retired
for value (excluding an exchange for shares of other Junior Securities) by the
Company or any of its Subsidiaries; and (iv) no monies shall be paid into or set
apart or made available for a sinking or other like fund for the purchase,
redemption or other acquisition or retirement for value of any shares of Junior
Securities by the Company or any of its Subsidiaries. Holders of the Series D
Preferred Stock will not be entitled to any dividends, whether payable in cash,
property or stock, in excess of the full cumulative dividends as herein
described.

                                       16
<PAGE>
 
         The Existing Notes Indentures contain, and any future credit agreements
or other agreements relating to Indebtedness to which the Company becomes a
party may contain, restrictions on the ability of the Company to pay dividends
on the Series D Preferred Stock.

OPTIONAL REDEMPTION

         The Series D Preferred Stock may not be redeemed at the option of the
Company prior to July 19, 2000. The Series D Preferred Stock may be redeemed for
cash, in whole or in part, at the option of the Company on or after July 19,
2000, at the redemption prices specified below (expressed as percentages of the
Liquidation Preference thereof), in each case, together with accumulated and
unpaid dividends (including an amount in cash equal to a prorated dividend for
any partial dividend period) and Preferred Stock Liquidated Damages, if any, to
the date of redemption, upon not less than 30 nor more than 60 days' prior
written notice, if redeemed during the 12-month period commencing on July 19 of
each of the years set forth below:

         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 D
Preferred Stock, the shares to be redeemed will be determined pro rata or by
lot, as determined by the Company.

CONVERSION RIGHTS

         Each share of Series D Preferred Stock will be convertible at any time
after October 7, 1997, unless previously redeemed, at the option of the holder
thereof into Common Stock of the Company, at a conversion rate equal to the
Liquidation Preference divided by the conversion price then applicable, except
that the right to convert shares of Series D Preferred Stock called for
redemption will terminate at the close of business on the business day preceding
the redemption date and will be lost if not exercised prior to that time, unless
the Company defaults in making the payment due upon redemption.

         The initial conversion price is $38.90 per share. The conversion price
will be subject to adjustment in certain events, including: (i) the payment of
dividends (and other distributions) in Common Stock on any class of capital
stock of the Company other than the payment of dividends in Common Stock on the
Series D Preferred Stock or any other regularly scheduled dividend on any other
preferred stock which does not trigger any anti-dilution provisions in any other
security; (ii) the issuance to all holders of Common Stock of rights, warrants
or options entitling them to subscribe for or purchase Common Stock at less than
the current market price (as calculated pursuant to the Certificate of
Designation); (iii) subdivisions, combinations and reclassifications of Common
Stock; (iv) distributions to all holders of Common Stock of evidences of
indebtedness of the Company, shares of any class of capital stock, cash or other
assets (including securities, but excluding those dividends, rights, warrants,
options and distributions referred to in clauses (i) through (iii) above and
dividends and distributions paid in cash out of the retained earnings of the
Company, unless the sum of all such cash dividends and distributions made and
the amount of cash and the fair market value of other consideration paid in
respect of any repurchases of Common Stock by the Company or any of its
Subsidiaries, in each case within the preceding 12 months in respect of which no
adjustment has been made, exceeds 20% of the product of the then current market
price of the Common Stock times the aggregate number of shares of Common Stock
outstanding on the record date for such dividend or distribution).

                                       17
<PAGE>
 
         No adjustment of the conversion price will be required to be made until
cumulative adjustments amount to 1% or more of the conversion price as last
adjusted. Notwithstanding the foregoing, no adjustment to the conversion price
shall reduce the conversion price below the then applicable par value per share
of the Common Stock. In addition to the foregoing adjustments, the Company will
be permitted to make such reductions in the conversion price as it considers to
be advisable in order that any event treated for federal income tax purposes as
a dividend of stock or stock rights will not be taxable to the holders of the
Common Stock.

         In the case of certain consolidations or mergers to which the Company
is a party or the transfer of substantially all of the assets of the Company,
each share of Series D Preferred Stock then outstanding would become convertible
only into the kind and amount of securities, cash and other property receivable
upon the consolidation, merger or transfer by a holder of the number of shares
of Common Stock into which such share of Series D Preferred Stock might have
been converted immediately prior to such consolidation, merger or transfer
(assuming such holder of Common Stock failed to exercise any rights of election
and received per share the kind and amount receivable per share by a plurality
of non-electing shares).

         The holder of record of a share of Series D Preferred Stock at the
close of business on a record date with respect to the payment of dividends on
the Series D Preferred Stock will be entitled to receive such dividends with
respect to such share of Series D Preferred Stock on the corresponding Dividend
Payment Date, notwithstanding the conversion of such share after such Record
Date and prior to such Dividend Payment Date. A share of Series D Preferred
Stock surrendered for conversion during the period from the close of business on
any Record Date for the payment of dividends to the opening of business of the
corresponding Dividend Payment Date must be accompanied by a payment in cash,
Common Stock or a combination thereof, depending on the method of payment that
the Company has chosen to pay the dividend, in an amount equal to the dividend
payable on such Dividend Payment Date, unless such share of Series D Preferred
Stock has been called for redemption on a redemption date occurring during the
period from the close of business on any Record Date for the payment of
dividends to the close of business on the business day immediately following the
corresponding Dividend Payment Date. The dividend payment with respect to a
share of Series D Preferred Stock called for redemption on a date during the
period from the close of business on any Record Date for the payment of
dividends to the close of business on the business day immediately following the
corresponding Dividend Payment Date will be payable on such Dividend Payment
Date to the record holder of such share on such Record Date, notwithstanding the
conversion of such share after such Record Date and prior to such Dividend
Payment Date. No payment or adjustment will be made upon conversion of shares of
Series D Preferred Stock for accumulated and unpaid dividends or for dividends
with respect to the Common Stock issued upon such conversion.

CHANGE OF CONTROL

         Upon the occurrence of a Preferred Stock Change of Control and subject
to restrictions on repurchase contained in the instruments governing Company's
outstanding indebtedness and the Series B Preferred Stock Certificate of
Designation, the Company will be required to make an offer (a "Preferred Stock
Change of Control Offer") to repurchase all or any part of each holder's Series
D Preferred Stock at an offer price in cash equal to 100% of the aggregate
Liquidation Preference thereof, plus accumulated and unpaid dividends and
Preferred Stock Liquidated Damages, if any, thereon to the date of repurchase.
Within 30 days following a Preferred Stock Change of Control, the Company will
mail a notice to each holder of Series D Preferred Stock describing the
transaction that constitutes the Preferred Stock Change of Control and offering
to repurchase the Series D Preferred Stock pursuant to the procedures required
by the Certificate of Designation and described in such notice; provided that,
prior to complying with the provisions of this covenant, but in any event within
90 days following a Preferred Stock Change of Control, the Company will either
repay all outstanding indebtedness or obtain the requisite consents, if any,
under all agreements governing outstanding indebtedness to permit the repurchase
of the Series D Preferred Stock required by this covenant. The Company will
comply with the requirements of the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Series D Preferred Stock as
a result of a Preferred Stock Change of Control.

                                       18
<PAGE>
 
         A "Preferred Stock Change of Control" will be deemed to have occurred
upon the occurrence of any of the following: (a) the sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, of all or substantially all of the
assets of the Company and its Subsidiaries, taken as a whole, (b) the adoption
of a plan relating to the liquidation or dissolution of the Company, (c) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" or "group" (as such
terms are used in Section 13(d)(3) of the Exchange Act) becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly through one or more intermediaries, of more than
50% of the voting power of the outstanding voting stock of the Company, unless
(i) the closing price per share of Common Stock for any five trading days within
the period of ten consecutive trading days ending immediately after the
announcement of such Preferred Stock Change of Control equals or exceeds 105% of
the conversion price of the Series D Preferred Stock in effect on each such
trading day or (ii) at least 90% of the consideration in the transaction or
transactions constituting a Preferred Stock Change of Control pursuant to clause
(c) consists of shares of Common Stock traded or to be traded immediately
following such Preferred Stock Change of Control on a national securities
exchange or the Nasdaq National Market and, as a result of such transaction or
transactions, the Series D Preferred Stock become convertible solely into such
Common Stock (and any rights attached thereto), or (d) the first day on which
more than a majority of the members of the Board of Directors of the Company are
not Preferred Stock Continuing Directors; provided, however, that a transaction
in which the Company becomes a subsidiary of another entity shall not constitute
a Preferred Stock Change of Control if (i) the stockholders of the Company
immediately prior to such transaction "beneficially own" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly through one or more intermediaries, at least a majority of the voting
power of the outstanding voting stock of the Company immediately following the
consummation of such transaction and (ii) immediately following the consummation
of such transaction, no "person" or "group" (as such terms are defined above),
other than such other entity (but including holders of equity interests of such
other entity), "beneficially owns" (as such term is defined above), directly or
indirectly through one or more intermediaries, more than 50% of the voting power
of the outstanding voting stock of the Company.

         "Preferred Stock Continuing Directors" means, as of any date of
determination, any member of the Board of Directors of the Company who (a) was a
member of the Board of Directors on the date of original issuance of the Series
D Preferred Stock or (b) was nominated for election to the Board of Directors
with the approval of, or whose election was ratified by, at least two-thirds of
the Preferred Stock Continuing Directors who were members of the Board of
Directors at the time of such nomination or election.

         Except as described above with respect to a Preferred Stock Change of
Control, the Certificate of Designation does not contain provisions that permit
the holders of the Series D Preferred Stock to require that the Company
repurchase or redeem the Series D Preferred Stock in the event of a takeover,
recapitalization or similar transaction. In addition, the Company could enter
into certain transactions, including acquisitions, refinancings or other
recapitalization, that could affect the Company's capital structure or the value
of the Series D Preferred Stock or the Common Stock, but that would not
constitute a Preferred Stock Change of Control.

         The Existing Senior Notes or other indebtedness and the Series B
Preferred Stock could restrict the Company's ability to repurchase the Series D
Preferred Stock upon a Preferred Stock Change of Control. In the event a
Preferred Stock Change of Control occurs at a time when the Company is
prohibited from repurchasing the Series D Preferred Stock, the Company could
either (i) repay in full or refinance all such outstanding indebtedness or
Preferred Stock or (ii) obtain the requisite consents, if any, under all
agreements governing outstanding indebtedness or Preferred Stock to permit the
repurchase of Series D Preferred Stock required by this covenant. The Company
must first comply with the covenants in its outstanding indebtedness or take the
actions described in the preceding sentence before it will be required to
repurchase shares of Series D Preferred Stock in the event of a Preferred Stock
Change of Control; provided, that if the Company fails to repurchase shares of
Series D Preferred Stock, the sole remedy to holders of Series D Preferred Stock
will be the voting rights arising from a Voting Rights Triggering Event.
Moreover, the Company will not repurchase or redeem any Series D Preferred Stock
pursuant to this Preferred Stock Change of Control provision prior to the
Company's repurchase of the Series B Preferred Stock pursuant to the change of
control covenants in the Series B Preferred Stock. As a result of the foregoing,
a holder of the Series D Preferred Stock may

                                       19
<PAGE>
 
not be able to compel the Company to purchase the Series D Preferred Stock
unless the Company is able at the time to refinance all such indebtedness and
the Series B Preferred Stock. See "Risk Factors-Business Combinations; Change of
Control."

         The Company will not be required to make a Preferred Stock Change of
Control Offer to the holders of Series D Preferred Stock upon a Preferred Stock
Change of Control if a third party makes the Preferred Stock Change of Control
Offer described above in the manner, at the times and otherwise in compliance
with the requirements set forth in the Certificate of Designation applicable to
a Preferred Stock Change of Control Offer made by the Company and purchases all
shares of Series D Preferred Stock validly tendered and not withdrawn under such
Preferred Stock Change of Control Offer.

VOTING RIGHTS

         Holders of record of shares of the Series D Preferred Stock have no
voting rights, except as required by law and as provided in the Certificate of
Designation. The Certificate of Designation provides that upon (a) the
accumulation of accrued and unpaid dividends on the outstanding Series D
Preferred Stock in an amount equal to six quarterly dividends (whether or not
consecutive) or (b) the failure of the Company to make a Preferred Stock Change
of Control Offer or to repurchase all of the Series D Preferred Stock tendered
in a Preferred Stock Change of Control Offer (each of the events described in
clauses (a) and (b) being referred to herein as a "Voting Rights Triggering
Event"), then the holders of a majority of the outstanding shares of Series D
Preferred Stock will be entitled to elect such number of members to the Board of
Directors of the Company constituting at least 20% of the then existing Board of
Directors before such election (rounded to the nearest whole number), provided,
however, that such number shall be no less than one nor greater than two, and
the number of members of the Company's Board of Directors will be immediately
and automatically increased by one or two, as the case may be. Voting rights
arising as a result of a Voting Rights Triggering Event will continue until such
time as all dividends in arrears on the Series D Preferred Stock are paid in
full and all other Voting Rights Triggering Events have been cured or waived, at
which time the term of office of any such members of the Board of Directors so
elected shall terminate and such directors shall be deemed to have resigned.

         In addition, the Certificate of Designation provides that the Company
will not authorize any class of Senior Securities or any obligation or security
convertible or exchangeable into or evidencing a right to purchase shares of any
class or series of Senior Securities, without the approval of holders of at
least a majority of the shares of Series D Preferred Stock then outstanding,
voting or consenting, as the case may be, as one class. The Certificate of
Designation also provides that the Company may not amend the Certificate of
Designation so as to affect adversely the specified rights, preferences,
privileges or voting rights of holders of shares of the Series D Preferred Stock
or authorize the issuance of any additional shares of Series D Preferred Stock,
without the approval of the holders of at least a majority of the then
outstanding shares of Series D Preferred Stock voting or consenting, as the case
may be, as one class; provided, however, that the Company may not amend the
Preferred Stock Change of Control provisions of the Certificate of Designation
(including the related definitions) without the approval of the holders of at
least 66 2/3% of the then outstanding shares of Series D Preferred Stock voting
or consenting, as the case may be, as one class. The Certificate of Designation
also provides that, except as set forth above with respect to Senior Securities,
(a) the creation, authorization or issuance of any shares of Junior Securities,
Parity Securities or Senior Securities or (b) the increase or decrease in the
amount of authorized capital stock of any class, including any preferred stock,
shall not require the consent of the holders of Series D Preferred Stock and
shall not be deemed to affect adversely the rights, preferences, privileges,
special rights or voting rights of holders of shares of Series D Preferred
Stock. The consent of the holders of Series D Preferred Stock will not be
required for the Company to authorize, create (by way of reclassification or
otherwise) or issue any Parity Securities or any obligation or security
convertible or exchangeable into or evidencing a right to purchase, shares of
any class or series of Parity Securities.

                                       20
<PAGE>
 
MERGER, CONSOLIDATION AND SALE OF ASSETS

         Without the vote or consent of the holders of a majority of the then
outstanding shares of Series D Preferred Stock, the Company may not consolidate
or merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, any person unless (a) the
entity formed by such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (in any such case, the "resulting entity") is a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia; (b) if the Company is not the resulting entity, the
Series D Preferred Stock is converted into or exchanged for and becomes shares
of such resulting entity, having in respect of such resulting entity the same
(or more favorable) powers, preferences and relative, participating, optional or
other special rights thereof that the Series D Preferred Stock had immediately
prior to such transaction; and (c) immediately after giving effect to such
transaction, no Voting Rights Triggering Event has occurred and is continuing.
The resulting entity of such transaction shall thereafter be deemed to be the
"Company" for all purposes of the Certificate of Designation.

LIQUIDATION RIGHTS

         Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company or reduction or decrease in its capital stock
resulting in a distribution of assets to the holders of any class or series of
the Company's capital stock, each holder of shares of the Series D Preferred
Stock will be entitled to payment out of the assets of the Company available for
distribution of an amount equal to the Liquidation Preference per share of
Series D Preferred Stock held by such holder, plus accrued and unpaid dividends
and Preferred Stock Liquidated Damages, if any, to the date fixed for
liquidation, dissolution, winding-up or reduction or decrease in capital stock,
before any distribution is made on any Junior Securities, including, without
limitation, Common Stock. After payment in full of the Liquidation Preference
and all accrued dividends and Preferred Stock Liquidated Damages, if any, to
which holders of Series D Preferred Stock are entitled, such holders will not be
entitled to any further participation in any distribution of assets of the
Company. If, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the amounts payable with respect to the Series D
Preferred Stock and all other Parity Securities are not paid in full, the
holders of the Series D Preferred Stock and the Parity Securities will share
equally and ratably in any distribution of assets of the Company in proportion
to the full liquidation preference and accumulated and unpaid dividends and
Preferred Stock Liquidated Damages, if any, to which each is entitled. However,
neither the voluntary sale, conveyance, exchange or transfer (for cash, shares
of stock, securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of the Company
with or into one or more persons will be deemed to be a voluntary or involuntary
liquidation, dissolution or winding-up of the Company or reduction or decrease
in capital stock, unless such sale, conveyance, exchange or transfer shall be in
connection with a liquidation, dissolution or winding-up of the business of the
Company or reduction or decrease in capital stock.

REPORTS

         The Certificate of Designation provides that the Company will file all
annual and quarterly reports and the information, documents, and other reports
that the Company is required to file with the Commission pursuant to Section
13(a) or 15(d) of the Exchange Act ("SEC Reports") with the Transfer Agent
within 15 days after it files them with the Commission. In the event the Company
is not required or shall cease to be required to file SEC Reports, pursuant to
the Exchange Act, the Company will nevertheless continue to file such reports
with the Commission (unless the Commission will not accept such a filing).
Whether or not required by the Exchange Act to file SEC Reports with the
Commission, so long as any Series D Preferred Stock are outstanding, the Company
will furnish copies of the SEC Reports to the holders of Series D Preferred
Stock at the time the Company is required to make such information available to
the Transfer Agent and to investors who request it in writing. In addition, the
Company has agreed that, for so long as any shares of Series D Preferred Stock
remain outstanding, it will furnish to the holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.

                                       21
<PAGE>
 
REGISTRATION RIGHTS; LIQUIDATED DAMAGES

         Pursuant to the Preferred Stock Registration Rights Agreement, the
Company agreed to file a shelf registration statement (the "Shelf Registration
Statement") covering resales of Preferred Stock Transfer Restricted Securities
(as defined below) by holders thereof (who satisfied certain conditions relating
to the provision of information to the registrant) on or prior to September 7,
1997, and to use its reasonable best efforts to cause such shelf registration
statement to become effective on or prior to 120 days after such date.

         "Preferred Stock Transfer Restricted Securities" for this purpose,
means each Depositary Share, each share of Series D Preferred Stock and each
Common Share until (a) the date on which such security has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (b) the date on which such security is distributed to
the public pursuant to Rule 144 under the Securities Act or may be distributed
to the public pursuant to Rule 144(k) under the Securities Act.

         The Registration Statement of which this Prospectus forms a part
constitutes the Shelf Registration statement. The Company is obligated to use
its best efforts to maintain the effectiveness of the Shelf Registration
Statement for a period ending on the earlier of July 9, 1999 and the date when
all Preferred Stock Transfer Restricted Securities covered by the Shelf
Registration Statement are sold. If the Shelf Registration Statement ceases to
be effective or usable for any period of ten consecutive days or for any 20 days
in any 180-day period in connection with resales of Preferred Stock Transfer
Restricted Securities (provided, that the Company will have the option of
suspending the effectiveness of the Shelf Registration Statement, without
becoming obligated to pay Preferred Stock Liquidated Damages for periods of up
to a total of 60 days in any calendar year if the Board of Directors of the
Company determines that compliance with the disclosure obligations necessary to
maintain the effectiveness of the Shelf Registration Statement at such time
could reasonably be expected to have an adverse effect on the Company or a
pending corporate transaction) (a "Registration Default"), then the Company will
pay to each holder of Preferred Stock Transfer Restricted Securities liquidated
damages ("Preferred Stock Liquidated Damages") at a rate of 0.25% per year of
the Liquidation Preference of the Series D Preferred Stock constituting
Preferred Stock Transfer Restricted Securities, which shall accrue from the date
of the Registration Default until such Registration Default is cured. All
accrued Preferred Stock Liquidated Damages will be paid in shares of Common
Stock valued at the Average Stock Price by the Company on each Dividend Payment
Date specified in the Certificate of Designation. Following the cure of all
Registration Defaults, the accrual of Preferred Stock Liquidated Damages will
cease.

                                       22
<PAGE>
 
                       DESCRIPTION OF DEPOSITARY SHARES

         Each Depositary Share represents a one-hundredth interest in a share of
Series D Preferred Stock deposited under the Deposit Agreement ("Deposit
Agreement"), entered into among Intermedia, Continental Stock Transfer & Trust
Company, as depositary agent ("Continental"), and the holders from time to time
of Depositary Receipts issued thereunder. Subject to the terms of the Deposit
Agreement, each owner of a Depositary Share is entitled proportionately to all
of the rights and preferences of the shares of Series D Preferred Stock
represented thereby (including dividend, voting, redemption and liquidation
rights) contained in the Company's Certificate of Incorporation and the
Certificate of Designation and summarized above under "Description of Series D
Preferred Stock." The Company does not expect that there will be any public
trading market for the Series D Preferred Stock except as represented by the
Depositary Shares.

         The Depositary Shares are evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). The following
description of Depositary Shares does not purport to be complete and is subject
to, and qualified in its entirety by, the provisions of the Deposit Agreement
(which contains the form of Depositary Receipt), a copy of which is available
from the Company, upon request.

ISSUANCE OF DEPOSITARY RECEIPTS

         The Series D Preferred Stock was deposited with Continental immediately
preceding the July 9 Offerings, and Continental in turn executed and delivered
the Depositary Receipts to the Company. The Company delivered the Depositary
Receipts to the Initial Purchasers.

WITHDRAWAL OF SERIES D PREFERRED STOCK

         Upon surrender of the Depositary Receipts at the corporate trust office
of Continental, the owner of the Depositary Shares evidenced thereby is entitled
to delivery at such office of the number of whole shares of Series D Preferred
Stock represented by such Depositary Shares. Owners of Depositary Shares are
entitled to receive only whole shares of Series D Preferred Stock on the basis
of one share of Series D Preferred Stock for each one hundred Depositary Shares.
In no event will fractional shares of Series D Preferred Stock (or cash in lieu
thereof) be distributed by Continental. If the Depositary Receipts delivered by
the holder evidence a number of Depositary Shares in excess of the number of
Depositary Shares representing the number of whole shares of Series D Preferred
Stock to be withdrawn, Continental will deliver to such holder at the same time
a new Depositary Receipt evidencing such excess number of Depositary Shares.

         The Company has not applied and does not intend to apply for the
listing of the Depositary Shares or the Series D Preferred Stock on any
securities exchange or for quotation through the Nasdaq National Market.

CONVERSION AND CALL PROVISION

         Conversion at the Option of Holder. As described under "Description of
Preferred Stock- Conversion Rights," the Series D Preferred Stock may be
converted, in whole or in part, into shares of Common Stock at the option of the
holders of Series D Preferred Stock at any time after October 7, 1997, unless
previously redeemed. The Depositary Shares held by any holder may, at the option
of such holders, be converted in whole or from time to time in part (but only in
lots of 100 Depositary Shares or integral multiples thereof), into shares of
Common Stock upon the same terms and conditions as the Series D Preferred Stock,
except that the number of shares of Common Stock received upon conversion of
each Depositary Share will be equal to the number of shares of Common Stock
received upon conversion of one share of Series D Preferred Stock divided by one
hundred. To effect such an optional conversion, a holder of Depositary Shares
must deliver Depositary Receipts evidencing the Depositary Shares to be
converted, together with a written notice of conversion and a proper assignment
of the Depositary Receipts to the Company or in blank, to Continental or its
agent. A Depositary Share surrendered for conversion during the period from the
close of business on any Record Date for the payment of dividends to the opening
of business of the corresponding Dividend Payment Date must be accompanied by a
payment in cash, Common Stock or a combination thereof, depending on the method
of

                                       23
<PAGE>
 
payment that the Company has chosen to pay the dividend, in an amount equal to
the dividend payable on such Dividend Payment Date, unless such Depositary Share
has been called for redemption on a redemption date occurring during the period
from the close of business on any Record Date for the payment of dividends to
the close of business on the Business Day immediately following the
corresponding Dividend Payment Date. The dividend payment with respect to a
Depositary Share called for redemption on a date during the period from the
close of business on any Record Date for the payment of dividends to the close
of business on the Business Day immediately following the corresponding Dividend
Payment Date will be payable on such Dividend Payment Date to the record holder
of such share on such Record Date, notwithstanding the conversion of such share
after such Record Date and prior to such Dividend Payment Date. Each optional
conversion of Depositary Shares shall be deemed to have been effected
immediately before the close of business on the date on which the foregoing
requirements shall have been satisfied.

         If only a portion of the Depositary Shares evidenced by a Depositary
Receipt is to be converted, a new Depositary Receipt or Receipts will be issued
for any Depositary Shares not converted. No fractional shares of Common Stock
will be issued upon conversion of Depositary Shares, and, if such conversion
would otherwise result in a fractional share of Common Stock being issued, the
number of shares of Common Stock to be issued upon such conversion shall be
rounded up to the nearest whole share.

         After the date fixed for conversion or redemption, the Depositary
Shares so converted or called for redemption will no longer be deemed to be
outstanding and all rights of the holders of such Depositary Shares will cease,
except the holder of such Depositary Shares shall be entitled to receive any
money or other property to which the holders of such Depositary Shares were
entitled upon such conversion or redemption, upon surrender to Continental of
the Depositary Receipt or Receipts evidencing such Depositary Shares.

DIVIDENDS AND OTHER DISTRIBUTIONS

         Continental will distribute all dividends or other distributions in
respect of the Series D Preferred Stock to the record holders of Depositary
Receipts in proportion to the number of Depositary Shares owned by such holders.
See "Description of Preferred Stock - Dividends."

         The amount distributed in any of the foregoing cases will be reduced by
any amount required to be withheld by the Company or Continental on account of
taxes.

RECORD DATE

         Whenever (i) any dividend or other distribution shall become payable,
any distribution shall be made, or any rights, preferences or privileges shall
be offered with respect to the Series D Preferred Stock, or (ii) Continental
shall receive notice of any meeting at which holders of Series D Preferred Stock
are entitled to vote or of which holders of Series D Preferred Stock are
entitled to notice, or of any election on the part of the Company to call for
redemption any Series D Preferred Stock, Continental shall in each such instance
fix a record date (which shall be the same date as the record date for the
Series D Preferred Stock) for the determination of the holders of Depositary
Receipts (x) who shall be entitled to receive such dividend, distribution,
rights, preference or privileges or the net proceeds of the sale thereof, (y)
who shall be entitled to give instructions for the exercise of voting rights at
any such meeting or to receive notice of such meeting, or (z) who shall be
subject to such redemption, subject to the provisions of the Deposit Agreement.

VOTING OF DEPOSITARY SHARES

         Holders of record of Depositary Shares have no voting rights, except as
required by law and as provided in the Certificate of Designation in respect of
the Series D Preferred Stock, as described under "Description of Preferred
Stock- Voting Rights."

                                       24
<PAGE>
 
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT

         The form of Depositary Receipts and any provision of the Deposit
Agreement may at any time be amended by agreement between the Company and
Continental. However, any amendment that imposes any fees, taxes or other
charges payable by holders of Depositary Receipts (other than taxes and other
governmental charges, fees and other expenses payable by such holders as stated
under "Charges of Continental"), or that otherwise prejudices any substantial
existing right of holders of Depositary Receipts, will not take effect as to
outstanding Depositary Receipts until the expiration of 90 days after notice of
such amendment has been mailed to the record holders of outstanding Depositary
Receipts. Every holder of Depositary Receipts at the time any such amendment
becomes effective shall be deemed to consent and agree to such amendment and to
be bound by the Deposit Agreement, as so amended. In no event may any amendment
impair the right of any owner of Depositary Shares, subject to the conditions
specified in the Deposit Amendment, upon surrender of the Depositary Receipts
evidencing such Depositary Shares, to receive Series D Preferred Stock or, upon
conversion of the Series D Preferred Stock represented by the Depositary
Receipts, to receive shares of Common Stock, and in each case any money or other
property represented thereby, except in order to comply with mandatory
provisions of applicable law.

         Whenever so directed by the Company, Continental will terminate the
Deposit Agreement after mailing notice of such termination to the record holders
of all Depositary Receipts then outstanding at least 30 days before the date
fixed in such notice for such termination. Continental may likewise terminate
the Deposit Agreement if at any time 45 days shall have expired after
Continental shall have delivered to the Company a written notice of its election
to resign and a successor depositary shall not have been appointed and accepted
its appointment. If any Depositary Receipts remain outstanding after the date of
termination, Continental thereafter will discontinue the transfer of Depositary
Receipts, will suspend the distribution of dividends to the holders thereof, and
will not give any further notices (other than notice of such termination) or
perform any further acts under the Deposit Agreement except as provided below
and except that Continental will continue (i) to collect dividends on the Series
D Preferred Stock and any other distributions with respect thereto and (ii) to
deliver the Series D Preferred Stock together with such dividends and
distributions and the net proceeds of any sales or rights, preferences,
privileges or other property, without liability for interest thereon, in
exchange for Depositary Receipts surrendered. At any time after the expiration
of two years from the date of termination, Continental may sell the Series D
Preferred Stock then held by it at public or private sale, at such place or
places and upon such terms as it deems proper and may thereafter hold the net
proceeds of any such sale, together with any money and other property then held
by it, without liability for interest thereon, for the pro rata benefit of the
holders of Depositary Receipts which have not been surrendered. The Company does
not intend to terminate the Deposit Agreement or to permit the resignation of
Continental without appointing a successor depositary.

CHARGES OF CONTINENTAL

         The Company will pay all charges of Continental including the
distribution of information to the holders of Depositary Receipts with respect
to matters on which Series D Preferred Stock are entitled to vote, withdrawals
of the Series D Preferred Stock by the holders of Depositary Receipts or
redemption or conversion of the Depositary Receipts, except for taxes (including
transfer taxes, if any) and other governmental charges and such other charges as
are provided in the Deposit Agreement to be at the expense of the holders of
Depositary Receipts or persons depositing Series D Preferred Stock.

GENERAL

         Continental will make available for inspection by holders of Depositary
Receipts at its corporate trust office all reports and communications from the
Company that are delivered to Continental and made generally available to the
holders of the Series D Preferred Stock.

         Neither Continental nor the Company will be liable if it is prevented
or delayed by law or any circumstance beyond its control from or in performing
its obligations under the Deposit Agreement.

                                       25
<PAGE>
 
FORM AND DENOMINATION

         Global Shares; Book-Entry Form. The Depositary Shares have been issued
in the form of one or more global certificates (the "Depositary Share Global
Certificate") which have been deposited with, or on behalf of, the Depositary
and registered in the name of Cede & Co., as nominee of the Depositary (the
"Global Certificate Holder"). Except as set forth below, record ownership of the
Depositary Share Global Certificate may be transferred, in whole or in part,
only to another nominee of the Depositary or to a successor of the Depositary or
its nominee.

         Owners of a beneficial interest in the Depositary Share Global
Certificate may hold their interest in the Depositary Share Global Certificate
directly through the Depositary if such holder is a Participant in the
Depositary or indirectly through organizations that are Participants in the
Depositary. Persons who are not Participants may beneficially own interests in
the Depositary Share Global Certificate held by the Depositary only through
Participants or certain banks, brokers, dealers, trust companies and other
parties that clear though or maintain a custodial relationship with a
Participant, either directly or indirectly. So long as Cede & Co., as the
nominee of the Depositary, is the registered owner of the Depositary Share
Global Certificate, Cede & Co. for all purposes will be considered the sole
holder of the Depositary Share Global Certificate. Owners of beneficial interest
in the Depositary Share Global Certificate will be entitled to have certificates
registered in their names and to receive physical delivery of certificates in
definitive form (the "Definitive Securities").

         Payment of dividends on and any redemption price with respect to the
Depositary Share Global Certificate will be made to the Global Certificate
Holder, as registered owner of the Depositary Share Global Certificate, by wire
transfer of immediately available funds on each Dividend Payment Date or
redemption date, as applicable. Neither the Company nor the Transfer Agent will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the Depositary
Share Global Certificate or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interest.

         The Company has been informed by the Depositary that, with respect to
any payment of dividends on, or the redemption price with respect to, the
Depositary Share Global Certificate, the Depositary's practice is to credit
Participants' accounts on the payment date therefor, with payments in amounts
proportionate to their respective beneficial interests in the Depositary Shares
represented by the Depositary Share Global Certificate as shown on the records
of the Depositary, unless the Depositary has reason to believe that it will not
receive payment on such payment date. Payments by Participants to owners of
beneficial interests in the Depositary Shares represented by the Depositary
Share Global Certificate held through such Participants will be the
responsibility of such Participants, as is now the case with securities held for
the accounts of customers registered in "street name."

         Transfers between Participants will be effected in the ordinary way in
accordance with the Depositary's rules and will be settled in immediately
available funds. The laws of some states require that certain persons take
physical delivery of securities in definitive form. Consequently, the ability to
transfer beneficial interests in the Depositary Share Global Certificate to such
persons may be limited. Because the Depositary can only act on behalf of
Participants, who in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having a beneficial interest in the Depositary
Shares represented by the Depositary Share Global Certificate to pledge such
interest to persons or entities that do not participate in the Depositary
system, or otherwise take actions in respect of such interest, may be affected
by the lack of a physical certificate evidencing such interest.

         Neither the Company nor the Transfer Agent will have responsibility for
the performance of the Depositary or its Participants or Indirect Participants
of their respective obligations under the rules and procedures governing their
operations. The Depositary has advised the Company that it will take any action
permitted to be taken by a holder of Depositary Shares (including, without
limitation, the presentation of Depositary Shares for exchange) only at the
direction of one or more Participants to whose account with the Depositary
interests in the Depositary Share Global Certificate are credited, and only in
respect of the Depositary Shares represented by the Depositary Share Global
Certificate as to which such Participant or Participants has or have given such
direction.

                                       26
<PAGE>
 
         The Depositary has also advised the Company that the Depositary is a
limited purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. The Depositary
was created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes to accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations such as the Initial Purchasers.
Certain of such Participants (or their representatives), together with other
entities, own the Depositary. Indirect access to the Depositary system is
available to others such as banks, brokers, dealers and trust companies that
clear through, or maintain a custodial relationship with, a Participant, either
directly or indirectly.

         Although the Depositary has agreed to the foregoing procedures in order
to facilitate transfers of interests in the Depositary Share Global Certificate
among Participants, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. If the
Depositary is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the Company
will cause the Depositary Shares to be issued in definitive form in exchange for
the Depositary Share Global Certificate.

         Certificated Depositary Shares. Investors in the Depositary Shares may
request that Definitive Securities be issued in exchange for Depositary Shares
represented by the Depositary Share Global Certificate. Furthermore, Definitive
Securities may be issued in exchange for Depositary Shares represented by the
Depositary Share Global Certificate if no successor depositary is appointed by
the Company as set forth above.

         Unless determined otherwise by the Company in accordance with
applicable law, Definitive Securities issued upon transfer or exchange of
beneficial interests in Depositary Shares represented by the Depositary Share
Global Certificate will bear a legend setting forth transfer restrictions under
the Securities Act. Any request for the transfer of Definitive Securities
bearing the legend, or for removal of the legend from Definitive Securities,
must be accompanied by satisfactory evidence, in the form of an opinion of
counsel, that such transfer complies with the Securities Act or that neither the
legend nor the restrictions on transfer set forth therein are required to ensure
compliance with the provisions of the Securities Act, as the case may be.

                                       27
<PAGE>
 
                    CERTAIN FEDERAL INCOME TAX CONSEQUENCES

         The following discussion summarizes the material United States federal
income tax considerations generally applicable to persons acquiring the
Depositary Shares, but does not purport to be a complete analysis of all
potential consequences. The discussion is based upon the Internal Revenue Code
of 1986, as amended (the "Code"), Treasury regulations, Internal Revenue Service
("IRS") rulings and judicial decisions now in effect, all of which are subject
to change at any time by legislative, judicial or administrative action. Any
such changes may be applied retroactively in a manner that could adversely
affect a holder of the Depositary Shares and Common Stock.

         The discussion assumes that the holders of the Depositary Shares and
Common Stock will hold them as "capital assets" within the meaning of Section
1221 of the Code. The discussion is not binding on the IRS or the courts. The
Company has not sought and will not seek any rulings from the IRS with respect
to the positions of the Company discussed herein, and there can be no assurance
that the IRS will not take a different position concerning the tax consequences
of the purchase, ownership or disposition of the Depositary Shares or Common
Stock or that any such position would not be sustained.

         The tax treatment of a holder of the Depositary Shares and Common Stock
may vary depending on such holder's particular situation or status. Certain
holders (including S corporations, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, taxpayers subject to
alternative minimum tax and persons holding Depositary Shares or Common Stock as
part of a straddle, hedging or conversion transaction) may be subject to special
rules not discussed below. The following discussion is limited to the United
States federal income tax consequences relevant to a holder of the Depositary
Shares and Common Stock that is a citizen or resident of the United States, or
any state thereof, or a corporation or other entity created or organized under
the laws of the United States, or any political subdivision thereof, or an
estate or trust the income of which is subject to United States federal income
tax regardless of source or that is otherwise subject to United States federal
income tax on a net income basis in respect of the Depositary Shares and Common
Stock. The following discussion does not consider all aspects of United States
federal income tax that may be relevant to the purchase, ownership and
disposition of the Depositary Shares and Common Stock by a holder in light of
such holder's personal circumstances. In addition, the discussion does not
consider the effect of any applicable foreign, state, local or other tax laws,
or estate or gift tax considerations. PERSONS CONSIDERING THE PURCHASE OF THE
DEPOSITARY SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR
SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL, OR FOREIGN TAXING JURISDICTION.

INTRODUCTION

         Holders of Depositary Shares will be treated for United States federal
income tax purposes as if they were owners of the Series D Preferred Stock
represented by such Depositary Shares. Accordingly, holders of Depositary Shares
will recognize the items of income, gain, loss and deduction that they would
recognize if they directly held the Series D Preferred Stock. References in this
"Certain Federal Income Tax Consequences" section to holders of Series D
Preferred Stock include holders of Depositary Shares, and references to
Depositary Shares include Series D Preferred Stock.

DISTRIBUTIONS ON DEPOSITARY SHARES AND COMMON STOCK

         A distribution on the Depositary Shares, whether paid in cash or in
shares of Common Stock, or a cash distribution on Common Stock will be taxable
to the holder as ordinary dividend income to the extent that the amount of the
distribution (i.e., the amount of cash and/or the fair market value of the
Common Stock on the date of distribution) does not exceed the Company's current
or accumulated earnings and profits allocable to such distribution (as
determined for federal income tax purposes). To the extent that the amount of
the distribution exceeds the Company's current or accumulated earnings and
profits allocable to such distribution, the distribution will be treated as a
return of capital, thus reducing the holder's adjusted tax basis in the
Depositary Shares or Common Stock with respect

                                       28
<PAGE>
 
to which such distribution is made. The amount of any such excess distribution
that exceeds the holder's adjusted tax basis in the Depositary Shares or Common
Stock will be taxed as capital gain and will be long-term capital gain if the
holder's holding period for the Depositary Shares or Common Stock exceeds one
year. (A lower capital gains tax rate will apply if a non-corporate holder's
holding period exceeds 18 months.) A holder's initial tax basis in Common Stock
received as a distribution on the Depositary Shares will equal the fair market
value of the Common Stock on the date of the distribution. The holding period
for the Common Stock will commence on the day following the distribution. There
can be no assurance that the Company will have sufficient earnings and profits
to cause distributions on the Series D Preferred Stock or Common Stock to be
treated as dividends for federal income tax purposes. For purposes of the
remainder of this discussion, the term "dividend" refers to a distribution paid
out of current or accumulated earnings and profits, unless the context indicates
otherwise. Preferred Stock Liquidated Damages should be taxed in the same manner
as dividend distributions, except that it is possible that Preferred Stock
Liquidated Damages might be treated as payment of a fee and hence as ordinary
income with respect to which no dividends-received deduction is available.

         Pursuant to certain amendments to Section 305(c) of the Code, the IRS
has the authority to promulgate regulations that may treat unpaid cumulative
dividends on preferred stock as being constructively paid to the holder in
certain circumstances, such as when there is no intention for dividends to be
paid currently at the time of issuance of the preferred stock. The IRS has not
yet proposed any such regulations.

         Dividends received by corporate holders will generally be eligible for
the 70% dividends-received deduction under Section 243 of the Code. There are,
however, many exceptions and restrictions relating to the availability of the
dividends-received deduction, such as restrictions relating to (i) the holding
period of the stock on which the dividends are received, (ii) debt-financed
portfolio stock, (iii) dividends treated as "extraordinary dividends" for
purposes of Section 1059 of the Code, and (iv) taxpayers that pay alternative
minimum tax. Corporate holders should consult their own tax advisors regarding
the extent, if any, to which such exceptions and restrictions may apply to their
particular factual situations. In addition, new legislation requires corporate
holders to satisfy a separate forty-six day holding period requirement with
respect to each dividend in order to be eligible for the dividends-received
deduction with respect to such dividend. (A two-year transitional rule applies
to stock held on June 8, 1997.)

REDEMPTION PREMIUM

         Under certain circumstances, Section 305(c) of the Code requires that
any excess of the redemption price of preferred stock over its issue price be
treated as constructively distributed on a periodic basis prior to actual
receipt. However, the Company believes that a holder of the Depositary Shares
should not be required to include any redemption premium in income under Section
305(c).

ADJUSTMENT OF CONVERSION PRICE

         Treasury regulations issued under Section 305 of the Code treat certain
adjustments to conversion provisions of stock such as the Series D Preferred
Stock as constructive distributions of stock with respect to preferred stock.
Such constructive distributions of stock would be taxable to holders of
Depositary Shares as described above under the caption "Distributions on
Depositary Shares and Common Stock." In general, any adjustment increasing the
number of shares of Common Stock into which the Depositary Shares can be
converted could constitute a constructive distribution of stock to holders of
Depositary Shares unless made pursuant to a bona fide, reasonable adjustment
formula that has the effect of preventing dilution of the interest of the
holders of Depositary Shares. Any adjustment in the conversion price to
compensate the holders of Depositary Shares for taxable distributions of cash or
property on any of the outstanding Common Stock of the Company may be treated as
a constructive distribution of stock to holders of Depositary Shares. The
Company is unable to predict whether any such adjustment will be made.

                                       29
<PAGE>
 
CONVERSION OF SERIES D PREFERRED STOCK

         No gain or loss will generally be recognized for United States federal
income tax purposes on conversion of the Series D Preferred Stock solely into
Common Stock. However, if the conversion takes place when there is a dividend
arrearage on the Series D Preferred Stock, a portion of the Common Stock
received may be treated as a taxable dividend to the extent of such dividend
arrearage. Except for any Common Stock treated as payment of a dividend, the tax
basis for the Common Stock received upon conversion (including any fractional
share deemed received) will be the tax basis of the Series D Preferred Stock
converted, and the holding period of the Common Stock received upon conversion
(including any fractional share deemed received) will include the holding period
of the Series D Preferred Stock converted into such Common Stock. The receipt of
cash in lieu of a fractional share upon conversion of Series D Preferred Stock
to Common Stock will generally be treated as a sale of such fractional share of
Common Stock in which the holder will recognize taxable gain or loss equal to
the difference between the amount of cash received and the holder's tax basis in
the fractional share redeemed. Such gain or loss will be capital gain or loss
and will be long-term if the holder's holding period for the fractional share
exceeds one year. (A lower capital gains tax rate will apply if a non-corporate
holder's holding period exceeds 18 months.)

CONVERSION OF SERIES D PREFERRED STOCK AFTER DIVIDEND RECORD DATE

         If a holder whose Series D Preferred Stock has not been called for
redemption surrenders such Series D Preferred Stock for conversion into shares
of Common Stock after a dividend record date for the Series D Preferred Stock
but before payment of the dividend, such holder will be required to pay the
Company an amount equal to such dividend upon conversion. The holder will likely
recognize the dividend payment as ordinary dividend income when it is received
and increase the basis of the Common Stock received by the amount paid to the
Company.

REDEMPTION, SALE OR EXCHANGE OF SERIES D PREFERRED STOCK AND SALE OR EXCHANGE OF
COMMON STOCK

         A redemption of shares of Series D Preferred Stock for cash will be a
taxable event.

         A redemption of shares of Series D Preferred Stock for cash will
generally be treated as a sale or exchange if the holder does not own, actually
or constructively within the meaning of Section 318 of the Code, any stock of
the Company other than the Series D Preferred Stock redeemed. If a holder does
own, actually or constructively, other stock of the Company, a redemption of
Series D Preferred Stock may be treated as a dividend to the extent of the
Company's allocable current or accumulated earnings and profits (as determined
for United States federal income tax purposes). Such dividend treatment will not
be applied if the redemption is "not essentially equivalent to a dividend" with
respect to the holder under Section 302(b)(1) of the Code. A distribution to a
holder will be "not essentially equivalent to a dividend" if it results in a
"meaningful reduction" in the holder's stock interest in the Company. For this
purpose, a redemption of Series D Preferred Stock that results in a reduction in
the proportionate interest in the Company (taking into account any actual
ownership of Common Stock and any stock constructively owned) of a holder whose
relative stock interest in the Company is minimal and who exercises no control
over corporate affairs should be regarded as a meaningful reduction in the
holder's stock interest in the Company.

         If a redemption of the Series D Preferred Stock for cash is treated as
a sale or exchange, the redemption will result in capital gain or loss equal to
the difference between the amount of cash received and the holder's adjusted tax
basis in the Series D Preferred Stock redeemed, except to the extent that the
redemption price includes dividends that have been declared by the Board of
Directors of the Company prior to the redemption. Similarly, upon the sale or
exchange of the Series D Preferred Stock or Common Stock (other than in a
redemption, on conversion or pursuant to a tax-free exchange), the difference
between the sum of the amount of cash and the fair market value of other
property received and the holder's adjusted basis in the Series D Preferred
Stock or Common Stock will be capital gain or loss. This gain or loss will be
long-term capital gain or loss if the holder's holding period for the Series D
Preferred Stock or Common Stock exceeds one year. (A lower capital gains tax
rate will apply if a non-corporate holder's holding period exceeds 18 months.)

                                       30
<PAGE>
 
         If a redemption of Series D Preferred Stock is treated as a
distribution that is taxable as a dividend, the amount of the distribution will
be the amount of cash received by the holder. The holder's adjusted tax basis in
the redeemed Series D Preferred Stock will be transferred to any remaining stock
holdings in the Company, subject to reduction or possible gain recognition under
Section 1059 of the Code with respect to the non-taxed portion of such dividend.
If the holder does not retain any actual stock ownership in the Company (having
a stock interest only constructively by attribution), the holder may lose the
benefit of the basis in the Series D Preferred Stock.

BACKUP WITHHOLDING

         A holder of Depositary Shares or Common Stock may be subject to backup
withholding at the rate of 31% with respect to dividends paid on, or the
proceeds of a redemption, sale or exchange of, the Depositary Shares or Common
Stock, unless such holder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates its exemption or (b) provides
a correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. A holder of Depositary Shares or Common Stock who
does not provide the Company with the holder's correct taxpayer identification
number may be subject to penalties imposed by the IRS. Any amount paid as backup
withholding would be creditable against the holder's federal income tax
liability.

                                       31
<PAGE>
 
                          THE SELLING SECURITYHOLDERS

          The following table sets forth, as of September 15, 1997 certain
information regarding the Selling Securityholders' ownership of the Company's
Depositary Shares, Series D Preferred Stock and Common Stock. Unless otherwise
disclosed in the footnotes to the table, no Selling Securityholder has held any
position, office or had any other material relationship with the Company, its
predecessors or affiliates during the past three years. All of the Depositary
Shares and shares of Series D Preferred Stock are registered in the name of
"Cede & Co." on the books of the Company's Transfer Agent. To the knowledge of
the Company, except as disclosed in the table below, the Selling Securityholders
did not own, nor have any rights to acquire, any other Depositary Shares, shares
of Series D Preferred Stock or Common Stock as of the date of this Prospectus.


<TABLE>
<CAPTION>
====================================================================================================================================

                                Common Stock                                        Depositary Shares                               
                                ------------                                        -----------------                               
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Beneficially   
   Name of                                               Beneficially                                                    Owned  
   Selling                                                  Owned                                                     After This 
  Security-     Beneficially Owned Prior     Offered       After This          Beneficially Owned          Offered      Offering   
  holder/(1)/   to This Offering/(2) (3)/   for Sale   Offering/(2)//(3)/   Prior to This Offering/(2)/    for Sale       /(2)/
  -----------   -------------------------   --------   ------------------   ---------------------------    --------   ------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S>             <C>                         <C>        <C>                  <C>                            <C>        <C> 
                                                                            Number of    Percent of                                 
                 Number of  Percent of                                     Depositary   Depositary                                  
                  Shares      Shares                                         Shares       Shares                                    
                  ------      ------                                         ------       ------                                    
- ------------------------------------------------------------------------------------------------------------------------------------
 Kenny              1,980        *            1,980           0                                                                     
 Securities                                                                                                                         
 Corp. (5)                                                                                                                          
- ------------------------------------------------------------------------------------------------------------------------------------
 J. Michael         1,244        *            1,244           0                                                                     
 Short (5)                                                                                                                          
- ------------------------------------------------------------------------------------------------------------------------------------
 Brett B.             344        *              344           0                                                                     
 Branden-                                                                                                                           
 berg (5)                                                                                                                           
- ------------------------------------------------------------------------------------------------------------------------------------
 Scott M.             258        *              258           0                                                                     
 Rich (5)                                                                                                                           
- ------------------------------------------------------------------------------------------------------------------------------------
 Ray Bove          13,501        *           13,501           0                                                                     
 (6)                                                                                                                                
- ------------------------------------------------------------------------------------------------------------------------------------
 William M.        14,053        *           14,053           0                                                                     
 Wunderlich                                                                                                                         
 (6)                                                                                                                                
- ------------------------------------------------------------------------------------------------------------------------------------
 W & B             27,554        *           27,554           0                                                                     
 Liquidation                                                                                                                        
 Corp. (6)                                                                                                                          
- ------------------------------------------------------------------------------------------------------------------------------------
 Donaldson,       322,636      1.935        322,636           0              502,000       7.275           502,000        0     
 Lufkin &       
 Jenrette       
 Securities     
 Corp.           
- ------------------------------------------------------------------------------------------------------------------------------------

<CAPTION> 
=========================================================================
                                Series D Preferred Stock   
                                ------------------------
- -------------------------------------------------------------------------                                   
                                                            Beneficially
   Name of                                                     Owned   
   Selling            Beneficially Owned                     After This
  Security-             Prior to This           Offered       Offering
                                 ----      
  holder/(1)/         Offering/(2)(4)/         for Sale      /(2) (4)/
  -----------         ----------------         --------     -----------         
- -------------------------------------------------------------------------                                   
<S>                   <C>         <C>          <C>          <C>  
                        Number                          
                      of shares    Percent                   
                      of Series      of                     
                          D        Series D              
                      Preferred   Preferred               
                        Stock       Stock                
                        -----       -----
- -------------------------------------------------------------------------
 Kenny                                           
 Securities                                      
 Corp. (5)                                       
- -------------------------------------------------------------------------
 J. Michael                                                                         
 Short (5)                                       
- -------------------------------------------------------------------------
 Brett B.                                        
 Branden-                                        
 berg (5)                                        
- -------------------------------------------------------------------------
 Scott M.                                        
 Rich (5)                                        
- -------------------------------------------------------------------------
 Ray Bove                                        
 (6)                                             
- -------------------------------------------------------------------------
 William M.                                      
 Wunderlich                                      
 (6)                                             
- -------------------------------------------------------------------------
 W & B                                             
 Liquidation                                     
 Corp. (6)                                       
- -------------------------------------------------------------------------
 Donaldson,             5,020       7,275       5,020            0  
 Lufkin &     
 Jenrette     
 Securities   
 Corp.        
- -------------------------------------------------------------------------
</TABLE> 

                                       32
<PAGE>
 
<TABLE>
<CAPTION>
====================================================================================================================================

                                      Common Stock                                         Depositary Shares                  
                                      ------------                                         -----------------                  
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               
   Name of                                                Beneficially                                                Beneficially  
   Selling                                                    Owned                                                      Owned     
   Security-      Beneficially Owned Prior      Offered    After This            Beneficially Owned         Offered    After This   
   holder /(1)/  to This Offering/(2)/ /(3)/    for sale  Offering/(2)//(3)/   Prior to This Offering/(2)/  for Sale   Offering/(2)/
  -----------    --------------------------     --------  -----------------    ---------------------------  --------   -------------
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                Number of    Percent of  
                  Number of   Percent of                                       Depositary    Depositary
                   Shares       Shares                                           Shares        Shares  
                   ------       ------                                           ------        ------  
- ------------------------------------------------------------------------------------------------------------------------------------
<S>              <C>          <C>               <C>       <C>                  <C>           <C>            <C>        <C> 
   Hudson          14,783         *             14,783          0            23,000          *          23,000           0     
   River Trust                                                                                                                 
   Growth                                                                                                                      
   Investors                                                                                                                   
- ------------------------------------------------------------------------------------------------------------------------------- 
   Hudson          18,896         *             18,896          0            29,400          *          29,400           0     
   River Trust                                                                                                                 
   Growth &                                                                                                                    
   Income                                                                                                                      
   Account                                                                                                                     
- ------------------------------------------------------------------------------------------------------------------------------- 
   Equitable       44,090         *             44,090          0            68,600          *          68,600           0     
   Life                                                                                                                        
   Assurance                                                                                                                   
   Separate                                                                                                                    
   Account                                                                                                                     
   Convertible                                                                                                                 
- ------------------------------------------------------------------------------------------------------------------------------- 
   Memphis,        18,382         *             18,382          0            28,600          *          28,600           0     
   Light, Gas                                                                                                                  
   & Water                                                                                                                     
   Retirement                                                                                                                  
   Fund                                                                                                                        
- ------------------------------------------------------------------------------------------------------------------------------- 
   Hotel            6,042         *             6,042           0             9,400          *           9,400           0     
   Union and                                                                                                                   
   Industry of                                                                                                                 
   Hawaii                                                                                                                      
- ------------------------------------------------------------------------------------------------------------------------------- 
   David            1,286         *             1,286           0             2,000          *           2,000           0     
   Lipscomb                                                                                                                    
   University                                                                                                                  
   General                                                                                                                     
   Endowment                                                                                                                   
- ------------------------------------------------------------------------------------------------------------------------------- 
   The Frist        4,756         *             4,756           0             7,400          *           7,400           0     
   Foundation                                                                                                                  
- ------------------------------------------------------------------------------------------------------------------------------- 
   Equitable        3,150         *             3,150           0             4,900          *           4,900           0     
   Life                                                                                      
   Assurance                                                                                 
   Separate                                                                                  
   Account                                                                                   
   Balance                                                                                   
- ------------------------------------------------------------------------------------------------------------------------------- 

<CAPTION>
==============================================================================

                           Series D Preferred Stock
                           ------------------------
- ------------------------------------------------------------------------------

   Name of                                                    Beneficially
   Selling          Beneficially Owned                           Owned
   Security-          Prior to This          Offered           After This
                               ----
   holder /(1)/     Offering /(2)//(4)/      for Sale      Offering /(2)//(4)/
  -------------     -------------------      --------      -------------------
- ------------------------------------------------------------------------------
                     Number
                   of shares   Percent
                   of Series      of
                       D       Series D
                   Preferred  Preferred
                     Stock      Stock
                     -----      -----
- ------------------------------------------------------------------------------
   <S>             <C>        <C>            <C>           <C>        
   Hudson             230         *             230                 0
   River Trust
   Growth
   Investors
- ------------------------------------------------------------------------------
   Hudson             294         *             294                 0
   River Trust
   Growth &
   Income
   Account
- ------------------------------------------------------------------------------
   Equitable          686         *             686                 0
   Life
   Assurance
   Separate
   Account
   Convertible
- ------------------------------------------------------------------------------
   Memphis,           286         *             286                 0
   Light, Gas
   & Water
   Retirement
   Fund
- ------------------------------------------------------------------------------
   Hotel               94         *              94                 0
   Union and
   Industry of
   Hawaii
- ------------------------------------------------------------------------------
   David               20         *              20                 0
   Lipscomb
   University
   General
   Endowment
- ------------------------------------------------------------------------------
   The Frist           74         *              74                 0
   Foundation
- ------------------------------------------------------------------------------
   Equitable           49         *              49                 0
   Life
   Assurance
   Separate
   Account
   Balance
- ------------------------------------------------------------------------------
</TABLE>

                                      33

<PAGE>
 
<TABLE>
<CAPTION>
====================================================================================================================================

                                      Common Stock                                         Depositary Shares
                                      ------------                                         -----------------
- ------------------------------------------------------------------------------------------------------------------------------------

   Name of                                                  Beneficially                                              Beneficially
   Selling                                                    Owned                                                       Owned
   Security-        Beneficially Owned Prior    Offered    After This             Beneficially Owned        Offered    After This
   holder /(1)/  to This Offering/(2)/ /(3)/   for sale  Offering/(2)//(3)/   Prior to This Offering/(2)/  for Sale   Offering/(2)/
  -------------  ---------------------------   --------  ------------------   ---------------------------  --------   -----------
- ------------------------------------------------------------------------------------------------------------------------------------

                                                                            Number of    Percent of
                  Number of   Percent of                                   Depositary    Depositary
                   Shares       Shares                                       Shares        Shares
                   ------       ------                                       ------        ------
- ------------------------------------------------------------------------------------------------------------------------------------
<S>              <C>          <C>              <C>       <C>               <C>           <C>               <C>        <C>   
   Hudson          18,575         *             18,575          0            28,900          *          28,900         0
   River Trust
   Balanced
   Account
- ------------------------------------------------------------------------------------------------------------------------------------
   Bankers         62,905         *             62,905          0            97,875        1.418        97,875         0
   Trust For
   Chrysler
   Corp Emp
   #1 Pension
   Plan DTD
   4/1/89 (7)
- ------------------------------------------------------------------------------------------------------------------------------------
   State Street    33,726         *             33,726          0            52,475          *          52,475         0
   Bank
   Custodian
   For GE
   Pension
   Trust
   Global Inv
   Manager
   SVC
   Convert (7)
- ------------------------------------------------------------------------------------------------------------------------------------
   Franklin &       5,046         *             5,046           0             7,850          *           7,850         0
   Marshall
   College (7)
- ------------------------------------------------------------------------------------------------------------------------------------
   Chase          107,203         *           107,203           0           166,800        2.417       166,800         0
   Manhattan
   NA Trustee
   For IBM
   Corp
   Retirement
   Plan Trust
   DTD
   12/18/45 (7)
- ------------------------------------------------------------------------------------------------------------------------------------
   Millennium      38,562         *            38,562           0                60,000      *          60,000         0
   Trading
   Co., L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
   KA              15,425         *            15,425           0                24,000      *          24,000         0
   Manage-
   ment
   Limited
- ------------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
==============================================================================

                           Series D Preferred Stock
                           ------------------------
- ------------------------------------------------------------------------------

   Name of                                                    Beneficially
   Selling          Beneficially Owned                           Owned
   Security-          Prior to This          Offered           After This
                               ----
   holder /(1)/    Offering /(2)//(4)/       for Sale      Offering /(2)//(4)/
  -------------    -------------------       --------      -------------------
- ------------------------------------------------------------------------------
                     Number
                   of shares   Percent
                   of Series      of
                       D       Series D
                   Preferred  Preferred
                     Stock      Stock
                     -----      -----
- ------------------------------------------------------------------------------
<S>                <C>        <C>            <C>           <C>
   Hudson              289        *              289                  0
   River Trust
   Balanced
   Account
- ------------------------------------------------------------------------------
   Bankers          978.75      1.418         978.75                  0
   Trust For
   Chrysler
   Corp Emp
   #1 Pension
   Plan DTD
   4/1/89 (7)
- ------------------------------------------------------------------------------
   State Street     524.75        *           524.75                  0
   Bank
   Custodian
   For GE
   Pension
   Trust
   Global Inv
   Manager
   SVC
   Convert (7)
- ------------------------------------------------------------------------------
   Franklin &         78.5        *             78.5                  0
   Marshall
   College (7)
- ------------------------------------------------------------------------------
   Chase             1,668      2.417            668                  0
   Manhattan
   NA Trustee
   For IBM
   Corp
   Retirement
   Plan Trust
   DTD
   12/18/45 (7)
- ------------------------------------------------------------------------------
   Millennium          600        *              600                  0
   Trading
   Co., L.P.
- ------------------------------------------------------------------------------
   KA                  240        *              240                  0
   Manage-
   ment
   Limited
- ------------------------------------------------------------------------------
</TABLE>

                                      34

<PAGE>
 
<TABLE> 
<CAPTION> 
================================================================================================================================
                              Common Stock                               Depositary Shares                            
- -------------------------------------------------------=========================================================================
  Name of                                                        Beneficially                                              
  Selling                                                            Owned                                                 
 Security-       Beneficially Owned Prior      Offered             After This           Beneficially Owned Prior      Offered 
 holder/(1)/   to This Offering /(2)/ /(3)/      for Sale     Offering /(2)/ /(3)/       to This Offering /(2)/       for Sale
 -----------   ---------------------------      --------     ---------------------       ----------------------       --------
                                                                                                                      
                                                                                        Number of   Percent of              
               Number of     Percent of                                                 Depositary  Depositary              
                Shares         Shares                                                     Shares      Shares                
               ---------     ----------                                                 ----------  ----------               
- ------------------------------------------------------------------------------------------------------------------------------
<S>            <C>           <C>             <C>          <C>                           <C>            <C>            <C>          
   Oppen-        25,708        *               25,708        0                          40,000         *              40,000    
   heimer                                                                                                                 
   Variable                                                                                                               
   Account                                                                                                                
   Funds for                                                                                                              
   the account                                                                                                            
   of Oppen-                                                                                                              
   heimer                                                                                                                 
   Growth &                                                                                                               
   Income                                                                                                                 
   Fund                                                                                                                   
- ------------------------------------------------------------------------------------------------------------------------------   
   United         1,729        *                1,729        0                           2,690         *               2,690    
   National                                                                                                               
   Life                                                                                                                   
   Insurance                                                                                                              
   (8)                                                                                                                    
- ------------------------------------------------------------------------------------------------------------------------------ 
   Lincoln       63,583        *               63,583        0                          98,930       1.434            98,930   
   National                                                                                                               
   Life                                                                                                                   
   Insurance                                                                                                              
   (8)                                                                                                                    
- ------------------------------------------------------------------------------------------------------------------------------ 
   Weirton       10,865        *               10,865        0                          16,905         *              16,905   
   Trust (8)                                                                                                              
- ------------------------------------------------------------------------------------------------------------------------------ 
   Walker Art     4,162        *                4,162        0                           6,475         *               6,475   
   Center (8)                                                                                                             
- ------------------------------------------------------------------------------------------------------------------------------ 
   High bridge   77,124        *               77,124        0                         120,000       1.739           120,000   
   Capital                                                                                                                
   Corpora-                                                                                                               
   tion                                                                                                                   
- ------------------------------------------------------------------------------------------------------------------------------ 
   KA Trading    23,138        *               23,138        0                          36,000         *              36,000   
   L.P.                                                                                                                   
- ------------------------------------------------------------------------------------------------------------------------------ 
   Design        19,281        *               19,281        0                          30,000         *              30,000   
   Profession-
   als
   Insurance
   Company
- ------------------------------------------------------------------------------------------------------------------------------    

<CAPTION> 

                                             Series D Preferred Stock  
- ---------------=============================================================================
                    Beneficially                                                Beneficially
  Name of              Owned                                                       Owned    
  Selling            After This        Beneficially Owned                        After This 
 Security-            Offering           Prior to This           Offered          Offering  
                                                  ----                                      
 holder/(1)/            /(2)/           Offering/(2)//(4)/       for Sale         /(2)//(4)/ 
 -----------        ------------       -------------------       --------       ------------
                                       Number                                               
                                       of shares  Percent                                   
                                       of Series    of                                      
                                            D     Series D                                  
                                       Preferred  Preferred                                 
                                         Stock      Stock                                   
                                         -----      -----                                   
- --------------------------------------------------------------------------------------------
<S>                 <C>                <C>        <C>            <C>            <C>         
   Oppen-                 0                400         *               400                0 
   heimer                                                                                   
   Variable                                                                                 
   Account                                                                                  
   Funds for                                                                                
   the account                                                                              
   of Oppen-                                                                                
   heimer                                                                                   
   Growth &                                                                                 
   Income                                                                                   
   Fund                                                                                     
- --------------------------------------------------------------------------------------------        
   United                 0               26.9         *              26.9                0 
   National                                                                                 
   Life                                                                                     
   Insurance                                                                                
   (8)                                                                                      
- --------------------------------------------------------------------------------------------  
   Lincoln                0              989.3       1.434           989.3                0 
   National                                                                                 
   Life                                                                                     
   Insurance                                                                                
   (8)                                                                                      
- --------------------------------------------------------------------------------------------
   Weirton                0             169.05         *            169.05                0 
   Trust (8)                                                                                
- --------------------------------------------------------------------------------------------
   Walker Art             0              64.75         *             64.75                0 
   Center (8)                                                                               
- --------------------------------------------------------------------------------------------
   High bridge            0              1,200       1.739           1,200                0 
   Capital                                                                                  
   Corpora-                                                                                 
   tion                                                                                     
- --------------------------------------------------------------------------------------------
   KA Trading             0                360         *               360                0 
   L.P.                                                                                     
- --------------------------------------------------------------------------------------------
   Design                 0                300         *               300                0 
   Profession-                                                                              
    als                                                                                     
   Insurance                                                                                
   Company                                                                                  
- --------------------------------------------------------------------------------------------
</TABLE> 

                                       35
<PAGE>
 
<TABLE> 
<CAPTION> 
====================================================================================================================================
                                    Common Stock                                            Depositary Shares                  
                                    ------------                                            -----------------                  
- ------------------------------------------------------------------------------------------------------------------------------------

                                                                                                                     Beneficially 
Name of                                                     Beneficially                                                Owned 
Selling                                                       Owned                                                   After This   
Security-         Beneficially Owned Prior     Offered      After This          Beneficially Owned         Offered     Offering    
holder(1)        to This Offering/(2)//(3)/    for Sale  Offerring/(2)//(3)/  Prior to This Offering/(2)/  for Sale        (2)
- ---------        -------------------------     --------  ------------------   --------------------------   --------  --------------
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                             Number of    Percent of      
                   Number of   Percent of                                    Depositary   Depository      
                    Shares       Shares                                        Shares       Shares 
                    ------       ------                                        ------       ------
- ------------------------------------------------------------------------------------------------------------------------------------
<S>              <C>           <C>             <C>       <C>                 <C>          <C>              <C>       <C>   
Guaranty            19,281          *          19,281            0             30,000         *          30,000           0  
National                                                                                                                     
Insurance                                                                                                                    
Company                                                                                                                      
- ------------------------------------------------------------------------------------------------------------------------------------
JMG                154,570          *         154,570            0            240,500       3.486       240,500           0  
Convertible                                                                                                                  
Investments                                                                                                                  
L.P.                                                                                                                         
- ------------------------------------------------------------------------------------------------------------------------------------
Triton             148,143          *         148,143            0            230,500       3.341       230,500           0  
Capital                                                                                                                      
Holding                                                                                                                      
LTD                                                                                                                          
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche           124,684          *         124,684            0            210,000       3.043       210,000           0  
Morgan                                                                                                                       
Grenfell                                                                                                                     
Inc.                                                                                                                         
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill             44,989          *          44,989            0             70,000       1.014        70,000           0  
Lynch                                                                                                                        
Pierce                                                                                                                       
Fenner &                                                                                                                     
Smith Inc.                                                                                                                   
- ------------------------------------------------------------------------------------------------------------------------------------
Susque-             60,414          *          60,414            0             94,000       1.362        94,000           0  
hanna                                                                                                                        
Capital                                                                                                                      
Group                                                                                                                        
- ------------------------------------------------------------------------------------------------------------------------------------
Goods &              6,427          *           6,427            0             10,000         *          10,000           0  
Co.                                                                                                                          
- ------------------------------------------------------------------------------------------------------------------------------------
The                 57,843          *          57,843            0             90,000       1.304        90,000           0  
Prudential                                                                                                                   
Series                                                                                                                       
Fund, Inc.                                                                                                                   
High Yield                                                                                                                   
Bond                                                                                                                         
Portfolio                                                                                                                    
(9)                                                                                                                          
- ------------------------------------------------------------------------------------------------------------------------------------
Colonial            16,068          *          16,068            0             25,000         *          25,000           0  
Penn                                                                     
Insurance
Co.   (10)   
- ------------------------------------------------------------------------------------------------------------------------------------

<CAPTION> 
========================================================================
                     Series D Preferred Stock
                     ------------------------     
- ------------------------------------------------------------------------
                                                        Beneficially
Name of                                                   Owned 
Selling              Beneficially                       After This
Security-           Prior to This         Offered         Offering
                             ----    
holder(1)        Offering /(2)//(4)/      for Sale       /(2)//(4)/    
- ---------       -------------------       --------       ---------
- ------------------------------------------------------------------------
                 Number  
               of shares     Percent  
               of Series       of
                   D        Series D
               Preferred    Preferred  
                 Stock        Stock
                 -----        -----
- -------------------------------------------------------------------  
<S>            <C>          <C>           <C>           <C>      
Guaranty           300          *           300           0      
National                                                  
Insurance                                                 
Company                                                   
- -------------------------------------------------------------------  
JMG              2,405        3.486       2,405           0      
Convertible                                               
Investments                                               
L.P.                                                      
- -------------------------------------------------------------------  
Triton           2,305        3.341       2,305           0      
Capital                                                   
Holding                                                   
LTD                                                       
- -------------------------------------------------------------------  
Deutsche         2,100        3.043       2,100           0      
Morgan                                                    
Grenfell                                                  
Inc.                                                      
- -------------------------------------------------------------------  
Merrill            700        1.014         700           0      
Lynch                                                     
Pierce                                                    
Fenner &                                                  
Smith Inc.                                                
- -------------------------------------------------------------------  
Susque-            940        1.362         940           0      
hanna                                                     
Capital                                                   
Group                                                     
- -------------------------------------------------------------------  
Goods &            100          *           100           0      
Co.                                                       
- -------------------------------------------------------------------  
The                900        1.304         900           0      
Prudential                                                
Series                                                    
Fund, Inc.                                                
High Yield                                                
Bond                                                      
Portfolio                                                 
(9)                                                       
- -------------------------------------------------------------------  
Colonial           250          *           250           0       
Penn         
Insurance
Co.   (10)   
- -------------------------------------------------------------------  
</TABLE> 

                                      36
<PAGE>
 
<TABLE> 
<CAPTION> 
=================================================================================================================================
                                         Common Stock                                           Depositary Shares     
                                         ------------                                           -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
   Name of                                                       Beneficially                                               
   Selling                                                          Owned                                 
   Security-       Beneficially Owned Prior      Offered          After This         Beneficially Owned             Offered      
   holder/(1)/     to This Offering/(2)//(3)/    for Sale     offering/(2)//(3)/     Prior to This Offering/(2)/    for Sale
  ------------     --------------------------    --------    -------------------     --------------------------     --------   
                                                                                     Number of    Percent of        
                  Number of   Percent of                                             Depositary   Depositary         
                   Shares      Shares                                                 Shares        Shares          
                   ------      ------                                                 ------        ------               
- --------------------------------------------------------------------------------------------------------------------------------
<S>               <C>         <C>                <C>         <C>                     <C>          <C>               <C>  
   Bank of         16,711        *                16,711            0                  26,000         *              26,000    
   Tokyo-                                                                                                                      
   Mitsubishi                                                                                                                  
   Trust                                                                                                                       
   Convertible                                                                                                                 
   Bond Fund.                                                                                                                  
- ---------------------------------------------------------------------------------------------------------------------------------
   Forest          46,918        *                46,918            0                  73,000      1.058             73,000    
   Fulcrum Fd                                                                                                                  
   Ltd.                                                                                                                        
- ----------------------------------------------------------------------------------------------------------------------------------
   Forest          62,664        *                62,664            0                  97,500      1.413             97,500    
   Fulcrum                                                                                                                     
   Fund LP                                                                                                                     
- ----------------------------------------------------------------------------------------------------------------------------------
   Highmark        19,924        *                19,924            0                  31,000        *               31,000    
   Convertible                                                                                                                 
   Sec. Fund                                                                                                                   
- ----------------------------------------------------------------------------------------------------------------------------------
   J.P.           128,540        *               128,540            0                 200,000      2.899            200,000    
   Morgan  &                                                                                                                   
   Co.                                                                                                                         
   Incorpor-                                                                                                                   
   ated (11)                                                                                                                   
- ---------------------------------------------------------------------------------------------------------------------------------
   High Yield      77,124        *                77,124            0                 120,000      1.739            120,000    
   Portfolio                                                                                                                   
   (12)                                                                                                                        
- ----------------------------------------------------------------------------------------------------------------------------------
   IDS Bond       102,832        *               102,832            0                 160,000     2.319             160,000    
   Fund, Inc.                                                                                                                  
   (12)                                                                                                                        
- ----------------------------------------------------------------------------------------------------------------------------------
   Colonial        16,068        *                16,068            0                  25,000       *                25,000    
   Penn Life                                                                                                                   
   Insurance                                                                                                                   
   Co. (10)                                                                                                                    
- ----------------------------------------------------------------------------------------------------------------------------------
   MFS Series          65        *                    65            0                     100       *                   100     
   Trust I-
   MFS
   Convertible
   Securities
   Fund
- ----------------------------------------------------------------------------------------------------------------------------------

                   
==================================================================================================================================
                                                    Series D Preferred Stock      
                                                    ------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Name of                          Beneficially                                                               Beneficially
Selling                            Owned                  Beneficially Owned                                   Owned
Security-                       After This                    Prior to                   Offered             After This 
holder/(1)/                      Offering                Offering /(2)//(4)/             for Sale             Offering  
                                   /(2)/              
- -----------                    ------------           -------------------------        ------------          -----------
- ----------------------------------------------------------------------------------------------------------------------------------
                                                         Number
                                                       of shares    Percent
                                                       of Series      of
                                                          D         Series D
                                                       Preferred    Preferred
                                                        Stock        Stock
                                                        -----        -----
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>                    <C>           <C>                <C>                  <C>   
   Bank of                           0                  260            *                  260                      0
   Tokyo-         
   Mitsubishi     
   Trust          
   Convertible    
   Bond Fund.     
- ----------------------------------------------------------------------------------------------------------------------------------
   Forest                            0                  730         1.058                 730                      0
   Fulcrum Fd     
   Ltd.           
- ----------------------------------------------------------------------------------------------------------------------------------
   Forest                            0                  975         1.413                 975                      0
   Fulcrum        
   Fund LP        
- ----------------------------------------------------------------------------------------------------------------------------------
   Highmark                          0                  310            *                  310                      0
   Convertible    
   Sec. Fund      
- ----------------------------------------------------------------------------------------------------------------------------------
   J.P.                              0                2,000         2.899               2,000                      0
   Morgan  &      
   Co.            
   Incorpor-      
   ated (11)      
- ----------------------------------------------------------------------------------------------------------------------------------
   High Yield                        0                1,200         1.739               1,200                      0
   Portfolio      
   (12)           
- ----------------------------------------------------------------------------------------------------------------------------------
   IDS Bond                          0                1,600         2.319               1,600                      0
   Fund, Inc.     
   (12)           
- ----------------------------------------------------------------------------------------------------------------------------------
   Colonial                          0                 250             *                  250                      0
   Penn Life      
   Insurance      
   Co. (10)       
- ----------------------------------------------------------------------------------------------------------------------------------
   MFS Series                        0                  1              *                   1                       0
   Trust I-
   MFS
   Convertible
   Securities
   Fund
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE> 

                                       37
<PAGE>
 
<TABLE> 
<CAPTION> 
===================================================================================================================================
                                                                                                                         
                         Common Stock                                        Depositary Shares                           
                         ------------                ------------------------------------------------------------------------------ 
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Beneficially 
   Name of                                                Beneficially                                                      Owned
   Selling                                                   Owned                                                      After This 
   Security-       Beneficially Owned Prior    Offered    After This              Beneficially Owned          Offered    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   Depository                               
                   Shares      Shares                                           Shares        Shares  
                   ------      ------                                           ------        ------  
- -----------------------------------------------------------------------------------------------------------------------------------
   <S>           <C>         <C>               <C>       <C>                   <C>          <C>                           <C>    
   MFS Series      25,644        *          25,644         0                     39,900         *            39,900         0    
   Trust V -                                                                                                                     
   MFS Total                                                                                                                     
   Return                                                                                                                        
   Fund                                                                                                                          
- -----------------------------------------------------------------------------------------------------------------------------------
   Key SBSF         9,641        *           9,641         0                     15,000         *            15,000         0    
   Convertible                                                                                                                   
   Securities                                                                                                                    
   Fund (13)                                                                                                                     
- -----------------------------------------------------------------------------------------------------------------------------------
   Allstate        82,652        *          86,652         0                    128,600       1.864         128,600         0    
   Insurance                                                                                                                     
   Company                                                                                                                       
- -----------------------------------------------------------------------------------------------------------------------------------
   LLT              5,142        *           5,142         0                      8,000         *             8,000         0    
   Limited                                                                                                                       
   (14)                                                                                                                          
- -----------------------------------------------------------------------------------------------------------------------------------
   McMahan         12,912        *          12,912         0                     20,090         *            20,090         0    
   Securities                                                                                                                    
   Co. L.P.                                                                                                                      
- -----------------------------------------------------------------------------------------------------------------------------------
   BT              96,405        *          96,405         0                    150,000       2.174         150,000         0    
   Holdings                                                                                                                      
   (New                                                                                                                          
   York) Inc.                                                                                                                    
- -----------------------------------------------------------------------------------------------------------------------------------
   Strong         128,540        *         128,540         0                    200,000       2.899         200,000         0    
   Total                                                                                                                         
   Return                                                                                                                        
   Fund, Inc.                                                                                                                    
- -----------------------------------------------------------------------------------------------------------------------------------
   General         38,562        *          38,562         0                     60,000         *            60,000         0    
   Motors                                                                                                                        
   Retirement                                                                                                                    
   Program                                                                                                                       
   for Salaried                                                                                                                  
   Employees                                                                                                                     
   High Yield                                                                                                                    
   Account                                                                                                                        
- -----------------------------------------------------------------------------------------------------------------------------------
   UBS            120,185        *         120,185         0                    187,000       2.710         187,000         0    
   Securities                                                                                                             
   LLC (15)                                                                                                               
- -----------------------------------------------------------------------------------------------------------------------------------

<CAPTION> 
=============================================================================================

                                             Series D Preferred Stock
                                             ------------------------
- ---------------------------------------------------------------------------------------------
                                                                     Beneficially
   Name of                                                              Owned
   Selling                 Beneficially Owned                        after this
   Security-                Prior to This           Offered           Offering
   holder /(1)/           Offering /(2)/ /(4)/      for Sale          /(2)/ /(4)/
   ------------           --------------------      --------         ------------
- ---------------------------------------------------------------------------------------------
                            Number
                            of shares   Percent
                            of Series     of
                               D        Series D
                            Preferred   Preferred
                              Stock       Stock
- ---------------------------------------------------------------------------------------------
   <S>                      <C>         <C>        <C>                  <C>     
   MFS Series                 399           *        399                0
   Trust V -   
   MFS Total   
   Return      
   Fund        
- ---------------------------------------------------------------------------------------------
   Key SBSF                   150           *        150                0
   Convertible 
   Securities  
   Fund (13)   
- ---------------------------------------------------------------------------------------------
   Allstate                 1,286         1.864    1,286                0
   Insurance   
   Company     
- ---------------------------------------------------------------------------------------------
   LLT                         80           *         80                0
   Limited     
   (14)        
- ---------------------------------------------------------------------------------------------
   McMahan                    201           *        201                0
   Securities  
   Co. L.P.    
- ---------------------------------------------------------------------------------------------
   BT                       1,500         2.174    1,500                0
   Holdings     
   (New        
   York) Inc.  
- ---------------------------------------------------------------------------------------------
   Strong                   2,000         2.899    2,000                0
   Total       
   Return      
   Fund, Inc.  
- ---------------------------------------------------------------------------------------------
   General                    600           *        600                0
   Motors      
   Retirement  
   Program     
   for Salaried
   Employees   
   High Yield  
   Account     
   ---------------------------------------------------------------------------------------------
   UBS                      1,870         2.710    1,870                0
   Securities
   LLC (15)
- ---------------------------------------------------------------------------------------------
</TABLE> 

                                      38
<PAGE>
 
<TABLE> 
<CAPTION> 
===================================================================================================================================
                              Common Stock                                                Depositary Shares 
                              ------------                                                -----------------
- -----------------------------------------------------------------------------------------------------------------------------------
Name of                                                    Beneficially                                                Beneficially
Selling                                                        Owned                                                      Owned
Security-     Beneficially Owned Prior     Offered         After This           Beneficially Owned Prior    Offered     After This
holder/(1)/  to This Offering /(2)//(3)/   for Sale   Offering /(2)/ /(3)/    to This Offering /(2)/ /(3)/  for Sale  Offering /(2)/
- -----------  --------------------------    --------   -------------------     ---------------------------   --------  -------------
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                               Number of    Percent of
                  Number of     Percent of                                    Depositary   Deposiitary
                   Shares         Shares                                        Shares        Shares
                   ------         ------                                        ------        ------
- -----------------------------------------------------------------------------------------------------------------------------------
<S>          <C>                <C>        <C>        <C>                     <C>          <C>              <C>       <C> 
Eaton              192,810         1.157     192,810            0              300,000         4.348      300,000           0    
Vance
Total
Return
Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Bear               933,137         5.598     933,137            0            1,451,900        21.042    1,451,900           0   
Stearns
Securities
Corp. (16)
- -----------------------------------------------------------------------------------------------------------------------------------
Paces                6,427             *       6,427            0               10,000             *       10,000           0     
Partners
Syndicate
Account
- -----------------------------------------------------------------------------------------------------------------------------------
Robertson           32,135             *      32,135            0               50,000             *       50,000           0     
Stephens
Growth &
Income
Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity           372,766         2.236     372,766            0              580,000         8.406      580,000           0    
Financial
Trust:
Fidelity
Convertible
Securities
Fund (17)
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity            10,605             *      10,605            0               16,500             *       16,500           0     
Contrafund
(11)(17)
- -----------------------------------------------------------------------------------------------------------------------------------
Variable             1,286             *       1,286            0                2,000             *        2,000           0     
Insurance
Products
Fund II:
Contrafund
Portfolio
(17)
- -----------------------------------------------------------------------------------------------------------------------------------
DTI Fund,           12,854             *      12,854            0               20,000             *       20,000           0     
LTD.            
- -----------------------------------------------------------------------------------------------------------------------------------

<CAPTION> 
===========================================================================================
                                                Series D Preferred Stock                                           
                                                ------------------------                                           
- -------------------------------------------------------------------------------------------
                                                                           Beneficially    
                             Beneficially Owned                                Owned       
                               Prior to This                Offered          After This    
                                        ----
                              Offering /(2)//(4)/           for Sale    Offering /(2)//(4)/ 
                         --------------------------         --------    ------------------- 
- -------------------------------------------------------------------------------------------
                            Number                                                         
                          of shares       Percent                                          
                          of Series         of                                             
                              D          Series D                                          
                         Preferred       Preferred                                         
                           Stock           Stock                                            
                           -----           -----
- ------------------------------------------------------------------------------------------- 
<S>                      <C>             <C>                <C>         <C> 
Eaton                       3,000          4.348              3,000                  0  
Vance
Total
Return
Portfolio
- -------------------------------------------------------------------------------------------- 
Bear                       14,519         21.042             14,519                  0  
Stearns
Securities
Corp. (16)
- -------------------------------------------------------------------------------------------- 
Paces                         100              *                100                  0
Partners
Syndicate
Account
- -------------------------------------------------------------------------------------------- 
Robertson                     500              *                500                  0   
Stephens
Growth &
Income
Fund
- -------------------------------------------------------------------------------------------- 
Fidelity                    5,800          8.406              5,800                  0 
Financial
Trust:
Fidelity
Convertible
Securities
Fund (17)
- -------------------------------------------------------------------------------------------- 
Fidelity                      165              *                165                  0 
Contrafund
(11)(17)
- -------------------------------------------------------------------------------------------- 
Variable                      200              *                200                  0 
Insurance
Products
Fund II:
Contrafund
Portfolio
(17)
- -------------------------------------------------------------------------------------------- 
DTI Fund,                     200              *                200                  0 
LTD.            
- -------------------------------------------------------------------------------------------- 
</TABLE> 

                                       39
<PAGE>
 
<TABLE> 
<CAPTION> 
===================================================================================================================================
                                   Common Stock                   Depositary Shares 
                                   ------------                   ----------------- 
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Beneficially
   Name of                                                Benefically                                                     Owned    
   Selling                                                   Owned                                                      After This
   Security-      Beneficially Owned Prior   Offered       After This         Beneficially Owned             Offered       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>   
   Alexandra       133,682          *          133,682            0            208,000         3.014        208,000           0 
   Global
   Investment
   Fund I,
   Ltd. c/o
   Alexandra
   Investment
   Management, 
   Ltd.
- ----------------------------------------------------------------------------------------------------------------------------------- 

   Cole              6,427          *            6,427            0             10,000           *           10,000           0  
   Roesler  
   Trading  
   Group, L.P.      
- -----------------------------------------------------------------------------------------------------------------------------------
   SBC              32,135          *           32,135            0             50,000           *           50,000           0    
   Warburg                                                                                                                         
   Dillon                                                                                                                          
   Read Inc.                                                                                                                       
- -----------------------------------------------------------------------------------------------------------------------------------
   NatWest          66,841          *           66,841            0            104,000         1.507        104,000           0    
   Securities                                                                                                                      
   Limited                                                                                                                         
- -----------------------------------------------------------------------------------------------------------------------------------
   Tribeca          16,068          *           16,068            0             25,000           *           25,000           0    
  Investments,                                                                                                                     
  L.L.C.                                                                                                                           
- -----------------------------------------------------------------------------------------------------------------------------------
   Highbridge      116,651          *          116,651            0            181,500         2.630        181,500           0    
   Internation-                                                                                                                    
   al LDC                                                                                                                          
   (18)                                                                                                                            
- -----------------------------------------------------------------------------------------------------------------------------------
   Goldman,          9,641          *            9,641            0             15,000           *           15,000           0    
   Sachs &                                                                                                                         
   Co.                                                                                                                             
- -----------------------------------------------------------------------------------------------------------------------------------
   Bear             64,270          *           64,270            0            100,000         1.449        100,000           0    
   Stearns &                                                                                                                       
   Co.,                                                                                                                            
   Inc.(16)                                                                                                                        
- -----------------------------------------------------------------------------------------------------------------------------------
   Credit           18,767          *           18,767            0             23,200           *           23,200           0    
   Suisse First                                                                                                                    
   Boston                                                                                                                          
   Corpora-                                                                                                                        
   tion                                                                                                                            
- -----------------------------------------------------------------------------------------------------------------------------------

<CAPTION> 
=============================================================================  
                               Series D Preferred Stock
                               ------------------------
- -----------------------------------------------------------------------------  
                                                                
                                                              Beneficially 
                     Beneficially Owned                            Owned    
                        Prior to This                           After This  
                                 ----          Offered          Offering  
                       Offering/2//4/          for Sale          /2/ /4/
                       --------------          --------       -------------
- -----------------------------------------------------------------------------
                     Number                             
                   of shares      Percent               
                   of Series        of                  
                        D         Series D              
                   Preferred     Preferred              
                      Stock         Stock               
                      -----         -----
- -----------------------------------------------------------------------------
   <S>             <C>           <C>           <C>            <C> 
   Alexandra       2,080         3.014          2,080               0
   Global                                               
   Investment                                           
   Fund I,                                              
   Ltd. c/o                                             
   Alexandra                                            
   Investment                                           
   Management,                                          
   Ltd.                                                 
- -----------------------------------------------------------------------------
   Cole              100           *              100               0
   Roesler                                                       
   Trading                                                       
   Group, L.P.                                            
- ----------------------------------------------------------------------------- 
   SBC               500           *              500               0
   Warburg                                                      
   Dillon                                                       
   Read Inc.                                                    
- ---------------------------------------------------------------------------- 
   NatWest         1,040         1.507          1,040               0
   Securities                                                   
   Limited                                                      
- ---------------------------------------------------------------------------- 
   Tribeca           250           *              250               0
   Investments,                                                
   L.L.C.                                                      
- --------------------------------------------------------------------------- 
   Highbridge      1,815         2.630          1,815               0
   Internation-                                         
   al LDC                                                      
   (18)                                                        
- --------------------------------------------------------------------------- 
   Goldman,          150           *              150               0
   Sachs &                                                      
   Co.                                                          
- ---------------------------------------------------------------------------- 
   Bear            1,000         1.449          1,000               0
   Stearns &                                                   
   Co.,                                                        
   Inc.(16)                                                    
- --------------------------------------------------------------------------- 
   Credit            232           *              232               0
   Suisse First                                         
   Boston                                               
   Corpora-                                             
   tion                                                  
- ---------------------------------------------------------------------------- 
</TABLE> 
                                      40
<PAGE>
 
<TABLE> 
<CAPTION> 
====================================================================================================================================

                                  Common Stock                      Depositary Shares
                                  ------------                      -----------------
- ------------------------------------------------------------------------------------------------------------------------------------

Name of                                                        Benefically
selling                                                           Owned
Security-           Beneficially Owned Prior     Offered        After This                 Beneficially Owned              
holder(1)           to This Offering/(2)//(3)/   for sale  Offering /(2)//(3)/        Prior to This Offering/(2)/
- ---------           -------------------------    --------  ------------------         ---------------------------  
- ------------------------------------------------------------------------------------------------------------------------------------

                                                                                     Number of       Percent of
                    Number of      Percent of                                        Depositary      Depositary
                     Shares         Shares                                            Shares           Shares 
                     ------         ------                                            ------           ------
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>            <C>           <C>       <C>                       <C>             <C>    
   R/2/            11,248              *         11,248          0                   17,500               *      
   Investments
   LDC
- ------------------------------------------------------------------------------------------------------------------------------------
   Q                4,821              *          4,821          0                    7,500               *      
   Investment
   L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
   Lipper         160,675              *        160,675          0                  250,000             3.623    
   Convert-
   ibles, L.P.
   (19)
- ------------------------------------------------------------------------------------------------------------------------------------
   General         38,561              *         38,561          0                   60,000               *      
   Motors
   Domestic
   Group
   Pension
   Trust (20)
- ------------------------------------------------------------------------------------------------------------------------------------
   Sound Shore     54,628              *         54,628          0                   85,000             1.232
   Holdings
   Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
   Salomon         16,067              *         16,067          0                   25,000               *
   Smith
   Barney
- ------------------------------------------------------------------------------------------------------------------------------------
   Mariner         16,067              *         16,067          0                   25,000               *
   LDC
- ------------------------------------------------------------------------------------------------------------------------------------

====================================================================================================================================

<CAPTION> 
====================================================================================================================================

                    Despositary Shares                                        Series D Preferred Stock
                    ------------------                                        ------------------------ 
- ------------------------------------------------------------------------------------------------------------------------------------

                                       Beneficially                                                    Beneficially     
                                         Owned                                                             Owned
                                       After This              Beneficially Owned                        After This
                  Offered              Offering                  Prior to This            Offered         Offering         
                                                                          ----  
                  for Sale               (2)                   Offering/(2)//(4)/         for Sale        /(2)//(4)/        
                  --------             --------                -----------------          --------         --------
- ------------------------------------------------------------------------------------------------------------------------------------

                                                               Number  
                                                               of shares     Percent
                                                               of Series       of 
                                                                 D           Series D
                                                               Perfered      Preferred
                                                                Stock          Stock
                                                                -----          -----
- ------------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                  <C>                     <C>           <C>          <C>          <C>      
   R/2/            17,500                  0                       175          *            175               0
   Investments
   LDC
- ------------------------------------------------------------------------------------------------------------------------------------
   Q                7,500                  0                        75          *             75               0
   Investment
   L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
   Lipper         250,000                  0                     2,500       3.623         2,500               0
   Convert-
   ibles, L.P.
   (19)
- ------------------------------------------------------------------------------------------------------------------------------------
   General         60,000                  0                      600           *            600               0
   Motors
   Domestic
   Group
   Pension
   Trust (20)
- ------------------------------------------------------------------------------------------------------------------------------------
   Sound Shore     85,000                  0                      850        1.232           850               0 
   Holdings
   Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
   Salomon         25,000                  0                      250           *            250               0 
   Smith
   Barney
- ------------------------------------------------------------------------------------------------------------------------------------
   Mariner         25,000                  0                      250           *            250               0 
   LDC
====================================================================================================================================
</TABLE> 

     * Less than one percent. Based on 16,669,492 shares of common stock
     outstanding on July 31, 1997,6,900,000 Depositary Shares outstanding on
     September 15, 1997 and 69,000 shares of Series D Preferred Stock.

     (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 D Preferred Stock. The Depositary Shares and the Series D
          Preferred Stock may not be converted into Common Stock until after
          October 7, 1997.

                                       41
<PAGE>
 
(4)  Assuming the conversion of all Depositary Shares into shares of Series D
     Preferred Stock on the basis of one share of Series D Preferred Stock for
     each one hundred Depositary Shares.

(5)  Selling Securityholder is a W&B Holder. These shares are not subject to an
     escrow arrangement. J. Michael Short, Brett B. Brandenberg and Scott M.
     Rich are all employees of Kenny Securities Corp.

(6)  As of July 8, 1998 these shares are no longer subject to an escrow
     arrangement. Ray Bove and William M. Wunderlich are the sole shareholders
     of W&B Liquidation Corp. Since Ray Bove and William M. Wunderlich control
     W&B Liquidation Corp. all three have been listed as Selling
     Securityholders. However, only 27,554 shares are actually being registered.

(7)  Palisade Capital Management, L.L.C. is the registered investment adviser to
     the Selling Securityholder and as such has shared voting and investment
     power with respect to the Securities owned by the Selling Securityholder.

(8)  Lynch & Mayer, Inc. is the investment adviser to the Selling Securityholder
     and as such has shared investment power with respect to the Securities
     owned by the Selling Securityholder.

(9)  The Prudential Insurance Company of America provides investment advisory
     services to the Selling Securityholder and may be deemed to have shared
     voting and investment power with respect to the Securities owned by the
     Selling Securityholder.

(10) The Palladin Group L.P. by Palladin Capital Management LLC is the
     investment adviser to the Selling Securityholder and as such has shared
     voting and investment power with respect to the Securities owned by the
     Selling Securityholder

(11) The Selling Securityholder currently holds more than one percent of the
     shares of Common Stock of the Company. These shares are not subject to this
     registration statement.

(12) American Express Financial Corporation, a wholly-owned subsidiary of
     American Express Company, provides investment advisory services to the
     Selling Securityholder.

(13) Key Asset Management, Inc. is the agent of the Selling Securityholder as as
     such has shared voting and investment power with respect to the Securities
     owned by the Selling Securityholder.

(14) Forest Investment Management, L.P. is an investment adviser to the Selling
     Securityholder and as such has shared investment power with respect to the
     Securities owned by the Selling Securityholder.

(15) The Selling Securityholder is a market maker with respect to the Common
     Stock of the Company and at any time may hold a short or long position in
     such Common Stock.

(16) Bear Stearns & Co., Inc. provides investment banking services to the
     Company and was one of two initial purchasers in a private placement by the
     Company of the Securities. The Securities held by Bear, Stearns & Co. Inc.
     were acquired from time to time after the initial placement of the
     Securities in its capacity as a broker dealer or market maker. Bear,
     Stearns & Co. Inc. is a registered broker dealer and may be deemed to be an
     underwriter within the meaning of the Securities Act of 1933, as amended,
     with respect to any Securities sold by it hereunder. Additionally, Bear
     Stearns & Co., Inc. has acted as lead manager in connection with the
     initial offering of other securities of the Company and beneficially owns
     shares of the 

                                       42
<PAGE>
 
     Company's 7% Series E Junior Convertible Preferred Stock.

(17) Fidelity Management & Research Company, a wholly-owned subsidiary of FMR
     Corp., provides investment advisory services to the Selling Securityholder.

(18) Highbridge Capital Management, Inc. is the investment adviser to the
     Selling Securityholder and as such has shared voting and investment power
     with respect to the Securities owned by the Selling Securityholder

(19) The Selling Security Holder beneficially owns 150,000 registered shares of
     the Series D Preferred Stock and 350,000 shares of the Company's 7% Series
     E Junior Convertible Preferred Stock.

(20) General Motors Investment Management Corporation ("GMIMCo"), a registered
     investment advisor and a wholly-owned subsidiary of General Motors
     Corporation, provides investment advice and investment management services
     with respect to the assets of certain employee benefit plans of GM and its
     subsidiaries including the Selling Securityholder. In its capacity as
     investment manager to the Selling Securityholder, GMIMCo is authorized to
     vote and dispose of the Securities beneficially owned by the Selling
     Securityholder.

     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 July 9
Equity Offering. The Initial Purchasers, in turn, resold the Depositary Shares
in private sales prusuant to exemption from registration under the Securities
Act of 1933, as amended. W&B Holders acquired the 31,380 shares of Common Stock
constituting the Universal Shares from the Company in connection with the
acquisition by the Company of Universal.


                             PLAN OF DISTRIBUTION

     The Company will not receive any 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 D 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 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 of the Securities Act, including, but not limited to, Sections 11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.

     The Securities offered hereby may be sold 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

                                       43
<PAGE>
 
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 (1) the Preferred Stock Registration Rights Agreement entered
into in connection with the offer and sale of the Depositary Shares by the
Company and (2) section 7.6(c) of the Asset Acquisition Agreement in connection
with the acquisition of the Universal Shares, each of the Company and the
applicable Selling Securityholders will be indemnified by the other against
certain liabilities, including certain liabilities under the Securities Act, or
will be entitled to contribution in connection therewith. The Company has agreed
to pay substantially all of the expenses incidental to the registration,
offering and sale of the Securities to the public other than commissions, fees
and discounts of underwriters, brokers, dealers and agents.



                                 LEGAL MATTERS

      The legality of the securities offered hereby has been passed upon for the
Company by Kronish, Lieb, Weiner & Hellman LLP, 1114 Avenue of the Americas, New
York, New York 10036-7798. Ralph J. Sutcliffe, a partner of Kronish, Lieb,
Weiner & Hellman LLP, beneficially owns 6,745 shares of the Common Stock.


                                    EXPERTS

      The consolidated financial statements and schedule of Intermedia
Communications Inc. appearing in Intermedia Communication Inc.'s Annual Report
(Form 10-K) for the year ended December 31, 1996, have been audited by Ernst &
Young LLP, independent certified public accountants, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given the authority of such firm as
experts in accounting and auditing.

                                       44
<PAGE>
 
      The consolidated financial statements of DIGEX, Incorporated, appearing in
DIGEX, Incorporated's Annual Report (Form 10-KSB) for the year ended December
31, 1996, have been audited by Ernst & Young, LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given the authority of such firm as
experts in accounting and auditing.

                                       45

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