<PAGE>
As filed with the Securities and Exchange Commission on September 4, 1998
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
INTERMEDIA COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
_____________________
DELAWARE 59-29-13586
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3625 Queen Palm Drive
Tampa, Florida 33619
(813) 829-0011
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
_____________________
David C. Ruberg, Chairman of the Board,
President and Chief Executive Officer
Intermedia Communications Inc.
3625 Queen Palm Drive
Tampa, Florida 33619
(813) 829-0011
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_____________________
Copy to:
Ralph J. Sutcliffe, Esq.
Kronish Lieb Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036-7798
_____________________
Approximate date of commencement of proposed sale to public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend on interest reinvestment plans, please check the following
box.[_]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.[_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.[_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.[_]
_____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Securities Amount to be Price Aggregate Amount of
to be Registered Registered Per Share Price Registration Fee
<S> <C> <C> <C> <C>
Depositary Shares 8,000,000 $20.00(1) $160,000,000.00 $47,200
each representing a
one hundredth
interest in a share
of 7% Series F
Junior Convertible
Preferred Stock
(liquidation
preference $25.00
per share)
7% Series F Junior 80,000 N.A. N.A. (2)
Convertible
Preferred Stock,
liquidation
preference $2,500
per share, $1.00
par value per share
Common Stock, 4,753,417 (3)(4) N.A. (2)
$.01 par value per
share issuable upon
conversion of the
Depositary Shares
and 7% Series F
Junior Convertible
Preferred Stock
Common Stock, (5) (5) $ 28,622,222 (5) $ 8,444
$.01 par value
issuable as
dividends on the
7% Series F Junior
Convertible
Preferred Stock
==========================================================================================
Total: $55,644
==========================================================================================
</TABLE>
(1) Average of the bid and asked prices on September 2, 1998, pursuant to Rule
457(c).
(2) Pursuant to Rule 457(i), a registration fee is not required in connection
with the registration of the Series F Preferred Stock or the Common Stock
issuable upon conversion of the Depositary Shares or shares of the Series F
Preferred Stock.
(3) An indeterminate number of additional shares of Common Stock are registered
hereunder which may be issued in the event that fractional shares of Depositary
Shares or Series F Preferred Stock are rounded up to the nearest whole share in
connection with the conversion of Depositary Shares or shares of Series F
Preferred Stock.
(4) Pursuant to Rule 416, an indeterminate number of additional shares of Common
Stock are registered hereunder which may be issued in the event that applicable
antidilution provisions with respect to conversion of the Depositary Shares and
Series F Preferred Stock become operative.
(5) Pursuant to Rule 457(o), an indeterminate number of shares of Common Stock
are registered hereunder which may be issued by the Company from time to time in
lieu of cash during the two year period commencing on the effective date of this
Registration Statement as dividends on the 7% Series F Junior Convertible
Preferred Stock.
_____________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 4, 1998
PRELIMINARY PROSPECTUS
INTERMEDIA COMMUNICATIONS INC.
8,000,000 DEPOSITARY SHARES EACH REPRESENTING A ONE HUNDREDTH INTEREST IN A
SHARE OF 7% SERIES F JUNIOR CONVERTIBLE PREFERRED STOCK, 80,000 SHARES OF 7%
SERIES F JUNIOR CONVERTIBLE PREFERRED STOCK, 4,753,417 SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THE DEPOSITARY SHARES AND/OR THE 7% SERIES F JUNIOR
CONVERTIBLE PREFERRED STOCK, AND COMMON STOCK ISSUABLE AS DIVIDENDS ON THE 7%
SERIES F 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 F Junior Convertible Preferred Stock ("Series F 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 F
Preferred Stock and (3) 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 F Preferred Stock and/or the Depositary Shares (the
Depositary Shares, Series F Preferred Stock and Common Shares are collectively
referred to herein as the "Securities"). This Prospectus is also being used in
connection with the issuance by the Company from time to time during the two-
year period commencing on the date of this Prospectus and in accordance with the
Certificate of Designation (as hereinafter defined) of an indeterminate number
of shares of Common Stock issuable by the Company in lieu of cash as dividends
on the Series F Preferred Stock (the "Dividend Shares"). See "Description of
Series F Preferred Stock--Dividends." The Depositary Shares were originally
issued by the Company in a private placement on August 18, 1998 (the "Offering")
and purchased by Bear Stearns & Co., Inc., Smith Barney Inc., Merrill Lynch &
Co. and Warburg Dillon Read LLC (the "Initial Purchasers") pursuant to a
purchase agreement (the "Purchase Agreement") dated as of August 12, 1998
between the Company and the Initial Purchasers. 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 (the "Securities
Act").
(continued on next page)
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY MATTERS
DISCUSSED UNDER THE CAPTION "RISK FACTORS" ON PAGE 1.
_____________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY 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. IF ANY INFORMATION IS GIVEN OR ANY REPRESENTATION IS MADE BY A
DEALER, SALESMAN OR ANY OTHER PERSON, 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.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE DATE OF THIS PROSPECTUS IS ____________, 1998.
<PAGE>
Holders of the Depositary Shares are entitled to all proportional rights
and preferences of the Series F Preferred Stock (including dividend, voting,
redemption and liquidation rights). Dividends on the Series F Preferred Stock
accrue at a rate per annum equal to 7% of the Liquidation Preference per share
of Series F Preferred Stock and are payable quarterly, in arrears, on January
15, April 15, July 15 and October 15 of each year, commencing on October 15,
1998. Dividends are payable in cash or at the option of the Company, in shares
of Common Stock, or a combination thereof. The Depositary Shares are
convertible, subject to prior redemption, at any time after November 16, 1998,
at the option of the holder thereof into Common Stock at a conversion price of
$42.075 per share, subject to certain adjustments.
The Series F Preferred Stock and the Depositary Shares are redeemable, in
whole or in part, at the option of the Company at any time on or after October
17, 2001, at the redemption prices set forth herein, plus accumulated and unpaid
dividends and Liquidated Damages (as hereinafter defined), if any, thereon to
the redemption date. See "Description of Series F Preferred Stock" and
"Description of Depositary Shares." Upon the occurrence of a Change of Control
(as hereinafter defined), the Company will be required to make an offer to
repurchase all outstanding shares of Series F Preferred Stock at a price equal
to 100% of the Liquidation Preference thereof, plus accumulated and unpaid
dividends and Liquidated Damages, if any, thereon to the repurchase date.
The Series F Preferred Stock ranks (i) senior to all Junior Securities (as
hereinafter defined), including all Common Stock of the Company; (ii) on a
parity with any Parity Securities (as hereinafter defined), including the
Company's 7% Series D Junior Convertible Preferred Stock (the "Series D
Preferred Stock") and the Company's 7% Series E Junior Convertible Preferred
Stock (the "Series E Preferred Stock"); and (iii) junior to each class of Senior
Securities (as hereinafter defined), including the Company's 13 1/2% Series B
Redeemable Exchangeable Preferred Stock due 2009 (the "Series B Preferred
Stock"), and junior to all indebtedness and other obligations of the Company and
its subsidiaries. As of June 30, 1998, on a pro forma basis after giving effect
to the Offering and the application of the proceeds therefrom, the Series F
Preferred Stock would have been junior in right of payment to approximately $2.8
billion of liquidation preference of Series B Preferred Stock and total
indebtedness and other obligations of the Company and its subsidiaries. See
"Description of Series F 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 and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including, but not limited to, Sections 11, 12 and
17 of the Securities Act and Rule 10b-5 under the Exchange Act. See "Plan of
Distribution." The Selling Securityholders and any other person participating
in such distribution will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including, without limitation,
Regulation M, which may limit the timing of purchases and sales of any of the
Securities by the Selling Securityholders and any other such person. All of the
foregoing may affect the marketability of the Securities and the ability of any
person or entity to engage in market-making activities with respect to the
Securities.
The Company will not receive any proceeds from the sale of the Securities
or the issuance of the Dividend Shares offered hereby. The Company has agreed
to pay substantially all of the expenses incidental to the registration,
offering and sale of the Securities to the public other than commissions, fees
and discounts of underwriters, brokers, dealers and agents.
On September 3, 1998, the closing price for the Common Stock as quoted on
the National Association of Securities Dealers, Inc. Automated Quotation
National Market ("Nasdaq National Market") System, under the symbol "ICIX", was
$25 7/8 per share. The Company has not and does not intend to apply for the
listing of the Depositary Shares or the Series F Preferred Stock on any
securities exchange or for quotation through the Nasdaq National Market.
ii
<PAGE>
The Series F 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.
Intermedia's principal offices are located at 3625 Queen Palm Drive,
Tampa, Florida 33619 and its telephone number is (813) 829-0011.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy and information
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,
1997.
The portions of the Proxy Statement for the Annual Meeting of Stockholders
of the Company held on May 20, 1998 that have been incorporated by
reference into the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
The Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998.
The Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.
The Company's Current Report on Form 8-K filed with the Commission on
September 3, 1998.
The Company's Current Report on Form 8-K filed with the Commission on
August 21, 1998.
The Company's Current Report on Form 8-K filed with the Commission on
August 4, 1998.
The Company's Current Report on Form 8-K/A filed with the Commission on
June 11, 1998.
The Company's Current Report on Form 8-K filed with the Commission on May
29, 1998.
The Company's Current Report on Form 8-K filed with the Commission on May
20, 1998.
The Company's Current Report on Form 8-K/A filed with the Commission on May
13, 1998.
The Company's Current Report on Form 8-K filed with the Commission on May
1, 1998.
The Company's Current Report on Form 8-K filed with the Commission on April
30, 1998.
The Company's Current Report on Form 8-K filed with the Commission on April
6, 1998.
The Company's Current Report on Form 8-K/A filed with the Commission on
March 30, 1998.
The Company's Current Report on Form 8-K filed with the Commission on March
18, 1998.
The Company's Current Report on Form 8-K filed with the Commission on
February 12, 1998.
The Company's Current Report on Form 8-K filed with the Commission on
January 21, 1998.
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).
In addition, the following information that has been filed with the
Commission is incorporated herein by reference:
iii
<PAGE>
The consolidated financial statements of DIGEX, Incorporated ("DIGEX")
appearing in DIGEX's Annual Report on Form 10-KSB for the year ended
December 31, 1996.
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,
INCLUDING ANY BENEFICIAL OWNER, 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................................... V
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE................................................................ V
RISK FACTORS................................................................ 1
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS... 12
THE COMPANY................................................................. 13
USE OF PROCEEDS............................................................. 17
DESCRIPTION OF CAPITAL STOCK................................................ 17
DESCRIPTION OF SERIES F PREFERRED STOCK..................................... 21
DESCRIPTION OF DEPOSITARY SHARES............................................ 29
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................................... 35
SELLING SECURITYHOLDERS..................................................... 40
PLAN OF DISTRIBUTION........................................................ 42
INDEMNIFICATION FOR SECURITIES ACT LIABILITY................................ 43
LEGAL MATTERS............................................................... 43
EXPERTS..................................................................... 43
</TABLE>
iv
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors relating
to the business of the Company and this offering, in addition to other
information set forth elsewhere in this Prospectus and in the Company's Annual
Report on Form 10-K, before purchasing the Securities offered hereby.
Limited Operations of Certain Services; History of Net Losses. The Company's
business commenced in 1986. Substantially all of the Company's revenues are
derived from local exchange services, enhanced data services, long distance
services, integration services and certain local network services. Many of these
services have only recently been initiated or their availability only recently
expanded in new market areas. The Company is expecting to substantially increase
the size of its operations in the near future. Prospective investors, therefore,
have limited historical financial information about the Company upon which to
base an evaluation of the Company's performance. Given the Company's limited
operating history, there is no assurance that it will be able to compete
successfully in the telecommunications business.
The development of the Company's business and the expansion of its networks
require significant capital, operational and administrative expenditures, a
substantial portion of which are incurred before the realization of revenues.
These capital expenditures will result in negative cash flow until an adequate
customer base is established. Although its revenues have increased in each of
the last three years, Intermedia has incurred significant increases in expenses
associated with the installation of local/long distance voice switches and
expansion of its fiber optic networks, services and customer base. Intermedia
reported net losses attributable to common stockholders of approximately $20.7
million, $57.2 million and $284.9 million for the years ended December 31, 1995,
1996 and 1997, respectively, and a net loss attributable to common stockholders
of $344.3 million for the six months ended June 30, 1998. The Company expects
net losses to continue for the next several years. In addition, the Company had
negative EBITDA in 1997 and positive EBITDA in the first half of 1998 of $(49.8)
million and $0.2 million, respectively. EBITDA consists of earnings (loss)
before interest expense, interest and other income, income tax (provision)
benefit, depreciation, amortization and charges for in-process research and
development and business restructuring, integration and other charges associated
with the Company's restructuring program. There can be no assurance that
Intermedia will achieve or sustain profitability and/or positive EBITDA in the
future.
Substantial Indebtedness; Insufficiency of Earnings to Cover Fixed Charges.
The Company is highly leveraged. At June 30, 1998, after giving pro forma effect
to the Offering, the Company would have had outstanding approximately $2.5
billion in aggregate principal amount of indebtedness and other liabilities on a
consolidated basis (including trade payables), approximately $357.4 million of
obligations with respect to dividend payments and the mandatory redemption of
the Series B Preferred Stock and $172.5 million, $200.0 million and $200.0
million of obligations with respect to the Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock, respectively. The degree to which
the Company is leveraged could have important consequences to holders of the
Series F 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, Series E Preferred Stock and Series F 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.
Commencing on November 15, 2001, semi-annual cash interest payments of $20.7
million will be due on the 12 1/2% Senior Discount Notes due 2006 (the "12 1/2%
Notes") and commencing on January 15, 2003, semi-annual cash interest payments
of $36.5 million will be due on the 11 1/4% Senior Discount Notes due 2007 (the
"11 1/4% Notes"). Because the Company currently has a net cash flow deficit from
its operating and investing activities, its ability to make such cash interest
payments and to repay its obligations on the 12 1/2% Notes, the 11 1/4% Notes,
the 8 7/8% Senior
1
<PAGE>
Notes due 2007 (the "8 7/8% Notes"), the 8 1/2% Senior Notes due 2008 (the "8
1/2% Notes") and the 8.60% Senior Notes due 2008 (the "8.60% Notes" and
collectively, with the 12 1/2% Notes, the 11 1/4% Notes, the 8 7/8% Notes and
the 8 1/2% Notes, the "Existing Senior Notes") at maturity will depend on the
Company developing one or more sources of cash flow prior to the dates on which
such cash payment obligations arise. Alternatively, the Company may seek to
refinance all or a portion of the Existing Senior Notes. There can be no
assurance, however, that the Company will be able to refinance such indebtedness
or develop additional sources of cash flow.
The Company's historical earnings have been insufficient to cover combined
fixed charges and dividends on preferred stock by $2.3 million, $3.3 million,
$19.9 million, $60.0 million and $245.7 million for each of the years ended
December 31, 1993, 1994, 1995, 1996 and 1997, respectively. In addition,
insufficiencies of $71.8 million and $348.0 million were experienced in the six
month periods ended June 30, 1997 and June 30, 1998, respectively. Combined
fixed charges and dividends include interest and dividends whether paid or
accrued. On a pro forma basis, after giving applicable effect to the
acquisitions of Shared Technologies Fairchild Inc. ("Shared"), National
Telecommunications of Florida, Inc. and NTC, Inc. (collectively, "National") and
the affiliated entities known as the Long Distance Savers group of companies
(collectively, "LDS"), each of the Company's 1997 debt and equity offerings, the
private placement of $500 million principal amount of 8.60% Notes in May 1998
(the "1998 Notes Offering") and the Offering as if they had been consummated at
the beginning of the year, the Company's earnings were insufficient to cover
combined fixed charges and dividends on preferred stock by $489.5 million for
the year ended December 31, 1997 and $364.1 million for the six month period
ended June 30, 1998. 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, Series E Preferred Stock and Series F
Preferred Stock, the Company will need to substantially improve its operating
results. There can be no assurance that the Company's operating results will be
of sufficient magnitude to enable the Company to meet such debt service,
dividend and redemption obligations. In the absence of such operating results,
the Company could face substantial liquidity problems and may be required to
raise additional financing through the issuance of debt or equity securities;
however, there can be no assurance that Intermedia would be successful in
raising such financing, or the terms or timing thereof.
Restrictions on the Company's Ability to Pay Dividends on the Series F
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 F
Preferred Stock is substantially restricted under various covenants and
conditions contained in the indentures governing the Existing Senior Notes (the
"Existing Senior Notes Indentures") and the Certificate of Designation setting
forth the rights of the Series B Preferred Stock (the "Series B Certificate of
Designation"). 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 F Preferred Stock, only out of its
surplus, or in the event that it has no surplus, out of its net profits for the
year in which a dividend is declared or for the immediately preceding fiscal
year. Surplus is defined as the excess of a company's total assets over the sum
of its total liabilities and Series B Preferred Stock plus the par value of its
outstanding capital stock. At June 30, 1998, the Company had stockholders'
deficiency of $239.8 million and surplus of $126.9 million. The Company has had
net losses in each of the last five years and expects to operate at a net loss
for the next several years. These net losses will reduce stockholders' equity
and the surplus of the Company. For the six months ended June 30, 1998, the
Company had a net loss attributable to common stockholders of $344.3 million
($335.4 million on a pro forma basis). 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 F 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
2
<PAGE>
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 F 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 setting forth the rights of the Series F
Preferred Stock (the "Certificate of Designation") provides that upon the
accumulation of accrued and unpaid dividends on the outstanding Series F
Preferred Stock in an amount equal to six quarterly dividends (whether or not
consecutive), the sole remedy to the holders of the Series F Preferred Stock
will be the voting rights arising from a Voting Rights Triggering Event (as
hereinafter defined). See "Description of Series F Preferred Stock--Voting
Rights."
Subordination of the Series F Preferred Stock. The Company's obligations
with respect to the Series F Preferred Stock are subordinate and junior in right
of payment to all present and future indebtedness of the Company and its
subsidiaries, including the Existing Senior Notes, to the Series B Preferred
Stock and to all subsequent series of preferred stock of the Company which by
their terms rank senior to the Series F 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 F
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, 1998, on a pro forma basis after giving effect to
the Offering, the Series F Preferred Stock would have been junior in right of
payment to $2.8 billion liquidation preference of the Series B Preferred Stock
and total indebtedness and other obligations 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 F Preferred Stock only after all Senior Securities (as hereinafter
defined) 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 F
Preferred Stock then outstanding. See "Description of Preferred Stock--Ranking."
Significant Capital Requirements and Need for Additional Financing.
Expansion of the Company's existing networks and services and the development of
new networks and services require significant capital expenditures. The Company
expects to fund its capital requirements through existing resources, joint
ventures, debt or equity financing, credit availability and internally generated
funds. The Company expects that continued expansion of its business will require
raising equity and/or debt by the end of fiscal 1999. Depending on market
conditions, the Company may determine to raise additional capital before such
time. There can be no assurance, however, that the Company will be successful in
raising sufficient debt or equity on terms that it will consider acceptable.
Moreover, the Existing Senior Notes Indentures, the Series B Certificate of
Designation, the Certificate of Designation setting forth the rights of the
Series D Preferred Stock (the "Series D Certificate of Designation"), the
Certificate of Designation setting forth the rights of the Series E Preferred
Stock (the "Series E Certificate of Designation" and collectively with the
Series B Certificate of Designation, the Series D Certificate of Designation and
the Certificate of Designation, the "Certificates of Designation") and the
Certificate of Designation impose certain restrictions upon the Company's
ability to incur additional indebtedness or issue additional preferred stock. In
addition, the Company's future capital requirements will depend upon a number of
factors, including marketing expenses, staffing levels and customer growth, as
well as other factors that are not within the Company's control, such as
competitive conditions, government regulation and capital costs. Failure to
generate sufficient funds may require the Company 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.
Effect of Substantial Additional Indebtedness on the Company's Ability to Make
Payments on the Series F 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
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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 F 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 F Preferred
Stock.
Risks Associated with Acquisitions. In March and April 1998, the Company
completed its acquisitions of Shared, LDS and National. The Company's
acquisitions of Shared, LDS and National could divert the resources and
management time of the Company and will require integration with the Company's
existing networks and services. There can be no assurance that Shared, LDS and
National will be successfully integrated into the Company's operations and will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
Consistent with its strategy, the Company is currently evaluating and often
engages in discussions regarding various acquisition opportunities. These
acquisitions could be funded by cash on hand and/or the Company's securities. It
is possible that one or more of such possible future acquisitions, if completed,
could adversely affect the Company's funds from operations or cash available for
distribution, in the short term, in the long term or both, or increase the
Company's debt, or such an acquisition could be followed by a decline in the
market value of the Company's securities. Under the terms of the purchase
agreement with the Initial Purchasers, the Company is not prohibited from
issuing equity securities in connection with an acquisition during the 90-day
"lock-up" period following the Offering.
Failure to Obtain Third Party Consents in Connection with an Acquisition or
Merger. The Company has consummated a number of acquisitions over the past two
years, including the acquisitions of Shared, LDS and National. In connection
therewith, the Company may not have obtained or, as in the case of the
acquisition of Shared, may have elected not to seek, and in connection with
future acquisitions may elect not to seek, all required consents from third
parties with respect to acquired contracts. If an acquired contract required the
consent of a third party and such consent was not obtained, the third party
could assert a breach of the contract. The Company believes that the failure to
obtain any such third party consents should not result in any material adverse
consequences to the Company, although there can be no assurance that such a
consequence will not result.
Year 2000 Risk. The Company has implemented a Year 2000 date conversion
program to ensure that its computer systems and applications will function
properly beyond 1999. The Company believes that it has allocated adequate
resources for this purpose and expects its Year 2000 date conversion program to
be successfully completed on a timely basis. There can, however, be no assurance
that this will be the case. The Company does not expect to incur significant
expenditures to address this issue. The ability of third parties with whom the
Company transacts business or companies that Intermedia may acquire to
adequately address their Year 2000 issues is outside of the Company's control.
There can be no assurance that the failure of the Company or such third parties
to adequately address their respective Year 2000 issues will not have a material
adverse effect on the Company's business, financial condition, cash flows and
results of operations.
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 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 relationships with the major national ISPs with which the
Company may have to comply. There can be no assurance that the Company will be
able to expand or adapt its network infrastructure to meet the industry's
evolving standards on a timely basis, at a commercially reasonable cost, or at
all.
Potential Liability of On-Line Service Providers. The law in the United
States relating to the liability of on-line service providers and ISPs for
information carried on, disseminated through or hosted on their systems is
currently unsettled. Several private lawsuits seeking to impose such liability
are currently pending. In one case brought against an ISP, Religious Technology
Center v. Netcom On-Line Communication Services, Inc., the United States
District Court for
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the Northern District of California ruled in a preliminary phase that, under
certain circumstances, ISPs could be held liable for copyright infringement. The
Telecommunications Act of 1996 (the "1996 Act") prohibits and imposes criminal
penalties for using an interactive computer service to transmit certain types of
information and content, such as indecent or obscene communications. On June 26,
1997, the Supreme Court affirmed the decision of a panel of three federal judges
which granted a preliminary injunction barring enforcement of this portion of
the 1996 Act to the extent 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 its exposure to such liability, which could require the
expenditure of substantial resources or the discontinuation of certain product
or service offerings. The Company believes that it is currently unsettled
whether the 1996 Act prohibits and imposes liability for any services provided
by the Company should the content or information transmitted be subject to the
statute. The increased attention focused upon liability issues as a result of
these lawsuits, legislation and legislative proposals could affect the growth of
Internet use. Any such liability or asserted liability could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Dependence upon Network Infrastructure; Risk of System Failure; Security
Risks. The Company's success in marketing its services to business and
government users requires that the Company provide superior reliability,
capacity and security via its network infrastructure. The Company's networks are
subject to physical damage, power loss, capacity limitations, software defects,
breaches of security (by computer virus, break-ins or otherwise) and other
factors, certain of which have caused, and will continue to cause, interruptions
in service or reduced capacity for the Company's customers. Similarly, the
Company's ISP business relies on the availability of its network infrastructure
for the provision of Internet connectivity. Interruptions in service, capacity
limitations or security breaches could have a material adverse effect on the
Company's business, financial condition and results of operations.
Expansion Risk. The Company is experiencing a period of rapid expansion
which management expects will continue 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.
In addition, expansion through acquisitions will require the Company to
integrate the acquired personnel, assets and businesses with the Company's
existing business. In 1998, the Company initiated a restructuring program to
consolidate and integrate its businesses, resulting in a charge of $36.9 million
in the second quarter of 1998. This program is expected to continue through the
end of 1999. No assurance can be given that all of the anticipated benefits from
the restructuring program will be realized or that the program will not be more
expensive or take longer than anticipated.
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 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 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 on
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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 longstanding 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 or larger competitors for
the Company. The proposed mergers of WorldCom, Inc. ("WorldCom") and MCI
Communications Corporation ("MCI") and of AT&T, Inc. ("AT&T") and Teleport
Communications Group, Inc. ("Teleport") are examples of this trend. The Company
also faces competition in most markets in which it operates from one or more
integrated communications providers ("ICPs") and ILECs operating fiber optic
networks. In addition, the Company faces competition in its integration services
business from equipment manufacturers, the regional Bell operating companies
("RBOCs") and other ILECs, long distance carriers and systems integrators, and
in its enhanced data services business (including Internet) from local telephone
companies, long distance carriers, very small aperture terminal 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 1996
Act, have removed many of the 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 1996 Act permits the RBOCs to
provide interexchange services once certain criteria are met. Once the RBOCs
begin to provide such services, they will be in a position to offer single
source service similar to that being offered by the Company. Recently, a Federal
District Court in Texas found unconstitutional certain provisions of the 1996
Act restricting the RBOCs from offering long distance service in their operating
regions until they could demonstrate that their networks have been made
available to competitive providers of local exchange services in those regions.
This decision has been stayed pending appeal. If that decision is permitted to
stand, it could result in RBOCs providing interexchange service in their
operating regions sooner than previously expected. In addition, AT&T and MCI
have entered, and other interexchange carriers ("IXCs") have announced their
intent to enter, the local exchange services market, which is facilitated by the
1996 Act's resale and unbundled network element provisions. The Company cannot
predict the number of competitors that will emerge as a result of existing or
new federal and state regulatory or legislative actions. Competition from the
RBOCs with respect to interexchange services or from AT&T, MCI or others with
respect to local exchange services could have a material adverse effect on the
Company's business.
Regulation. The Company is subject to varying degrees of federal, state and
local regulation. The Company is not currently subject to price cap or rate of
return regulation at the state or federal level, nor is it currently required to
obtain Federal Communication Commission ("FCC") authorization for the
installation, acquisition or operation of its interstate network facilities.
Further, the FCC issued an order holding that non-dominant carriers, such as
Intermedia, 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 Intermedia, 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 does
require the Company to obtain authority to provide service between the United
States and foreign points and to file tariffs on an ongoing basis for
international service.
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On May 16, 1997, the FCC released an order that fundamentally restructured the
"access charges" that ILECs charge to interexchange carriers and end user
customers. The Company believes that the FCC's new access charge rules do not
adversely affect the Company's business plan, and that they in fact present
significant new opportunities for new entrants, including the Company. Aspects
of the access charge order may be changed in the future. Numerous parties have
either filed appeals with federal courts or asked the FCC to reconsider portions
of its new rules.
The Company is generally subject to certification or registration and tariff
or price list filing requirements for intrastate services by state regulators.
The 1996 Act and the issuance by the FCC of rules governing local competition,
particularly those requiring the interconnection of all networks and the
exchange of traffic among the ILECs and CLECs, as well as pro-competitive
policies already developed by state regulatory commissions, have caused
fundamental changes in the structure of the markets for local exchange services.
On July 18, 1997, the United States Court of Appeals for the Eighth Circuit
issued a decision vacating the FCC's pricing and "most favored" nation rules,
as well as certain other of the FCC's interconnection rules. On October 14,
1997, the Eighth Circuit issued an order clarifying its previous decision. In
this order, the Court held that ILECs have an obligation under the 1996 Act to
offer other carriers access to the ILECs' network elements on an unbundled
basis, but the ILECs do not have an obligation to recombine those elements for
use by other carriers. The FCC's and other parties' petitions to the Supreme
Court requesting review of these decisions have been granted. Most recently, on
January 22, 1998, the Eighth Circuit reiterated that the FCC is bound by the
pricing policies of the state regulatory commissions regarding interconnection,
unbundled access, resale and transport and termination of local
telecommunications traffic and rebuffed what it perceived as an attempt by the
FCC to condition the RBOCs' provision of in-region long distance service on
compliance with federal pricing policies regarding these items. Even though
these decisions restrict the role of the FCC in pricing and other issues
(pending review by the Supreme Court), these issues remain subject to scrutiny
and oversight by state regulatory commissions.
Two RBOCs, US West Communications ("US West") and Ameritech Communications
International, Inc. ("Ameritech"), have entered into "teaming agreements" with
an IXC, Qwest Communications International, Inc. ("Qwest"), whereby the RBOCs
would solicit customers for Qwest's long distance service and handle billing of
those customers in exchange for a fee. These agreements would permit the RBOCs
to offer their customers a package of local and long distance services in
competition with the Company's offerings even though the RBOCs are not
themselves providing the long distance component. Certain IXCs consider these
agreements to be an attempt to evade the 1996 Act's restrictions on RBOC's
offering in-region long distance services and have requested the FCC to block
the proposed arrangement and also have initiated litigation in federal courts,
all of which are pending. On June 4, 1998, a federal court issued a preliminary
injunction barring further performance of the US West agreement but another
federal court subsequently refused to similarly enjoin performance under the
Ameritech agreement. Both courts, at the request of the FCC, have referred the
question of the legality of the agreements under the 1996 Act to the FCC, which
ordered Ameritech to stop marketing Qwest's service pending its review. The
Company is unable to predict the FCC's ultimate determination of whether these
agreements comply with the 1996 Act or the nature of any policies the FCC may
adopt generally relating to the agreements between RBOCs and other carriers.
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.
The Company believes it is entitled to receive reciprocal compensation from
ILECs for the transport and termination of Internet traffic as local traffic
pursuant to various interconnection agreements. Some ILECs have not paid and/or
have disputed these charges, arguing the ISP traffic is not local traffic as
defined by the various agreements. Both state and federal regulators currently
are considering the proper jurisdictional classification of local calls placed
to an ISP, and whether ISP calling triggers an obligation to pay reciprocal
compensation. There can be no assurance that these issues will be resolved by
the FCC or all of the states or that any such resolution will be favorable to
the Company, although all of the states addressing the question to date have
ruled that Internet traffic is local traffic. A portion of the
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Company's receivables are related to such reciprocal compensation. As the
Company's ISP traffic grows, these amounts are expected to increase.
The regulatory status of telephone service over the Internet is presently
uncertain. The Company is unable to predict what regulations may be adopted in
the future or to what extent existing laws and regulations may be found by state
and federal authorities to be applicable to such services or the impact such new
or existing laws and regulations may have on the business of the Company.
Although specific statutes and regulations addressing this service have not been
adopted at this time, the extent to which current laws and regulations at the
state and federal levels will be interpreted to include such Internet telephone
services has not been determined. The FCC has recently indicated, for example,
that voice telecommunications carried over the Internet between two telephone
sets using the public switched network may be subject to payment of access
charges and Universal Service funding obligations, while voice
telecommunications using computers rather than telephone sets may not be subject
to such obligations. There can be no assurance that new laws or regulations
relating to these services or a determination that existing laws are applicable
to them will not have a material adverse effect on the Company's business.
Potential Diminishing Rate of Growth. During the period from 1994 through
1997, the Company's revenues grew at a compound annual growth rate of 158.8%
(including the effect of acquisitions). While the Company expects to continue to
grow, as its size increases, it is likely that its rate of growth will diminish.
Risk of New Service Acceptance by Customers. The Company has recently
introduced a number of services, primarily local exchange services, that the
Company believes are important to its long-term growth. The success of these
services will be dependent upon, among other things, the willingness of
customers to accept the Company as the provider of such services. No assurance
can be given that such acceptance will occur; the lack of such acceptance could
have a material adverse effect on the Company.
Rapid Technological Changes. The telecommunications industry is subject to
rapid and significant changes in technology. While the Company 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 the Company 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, financial
condition and results of operations. 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 are
party to a long-term employment agreement with the Company.
Risk of Termination, Cancellation or Non-Renewal of Interexchange Agreements,
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 canceled 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. In March 1998, Intermedia signed a
definitive agreement with the Williams Telecommunications Group ("Williams")
granting Intermedia a 20 year indefeasible right of use ("IRU") to purchase
nationwide transmission capacity on Williams' fiber optic network. The IRU
between the Company and Williams may
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be terminated by Williams after a payment default by the Company and, in the
event of a bankruptcy of Williams, the IRU may be rejected by Williams in a
bankruptcy proceeding.
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 the Company 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 provide that a change of control would require the Company to
repay the indebtedness outstanding under such instruments. A change of control
also requires the Company to offer to redeem its outstanding series of preferred
stock, including the Series F Preferred Stock. The terms of the Existing Senior
Notes Indentures and the Series B Certificate of Designation contain provisions
that may prohibit the repurchase of the Series F Preferred Stock. If a change
of control does occur, there is no assurance that the Company would have
sufficient funds, or could obtain any additional debt or equity financing
necessary, to make such repayments and redemptions.
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 (the
"DIGEX Acquisition"). The DIGEX Acquisition was consummated through a tender
offer for all of the outstanding shares of DIGEX, which closed on July 9, 1997,
followed by a cash merger effective on July 11, 1997 (the "Merger").
On June 20, 1997, two purported class action complaints were filed in the
Court of Chancery of the State of Delaware in and for New Castle County
respectively by TAAM Associates, Inc. and David and Chaile Steinberg (the
"Complaints"), purported stockholders of DIGEX, on behalf of all non-affiliated
common stockholders of DIGEX, against Intermedia, DIGEX and the directors of
DIGEX (the "DIGEX Directors"). The Complaints allege that the DIGEX Directors
violated their fiduciary duties to the public stockholders of DIGEX by agreeing
to vote in favor of the Merger and that Intermedia knowingly aided and abetted
such violation by offering to retain DIGEX management in their present positions
and consenting to stock option grants to certain executive officers of DIGEX.
The Complaints sought preliminary and permanent injunctions enjoining the Merger
but no applications were made for such injunctions prior to consummation of the
Merger on July 11, 1997. In addition, the Complaints seek cash damages from the
DIGEX Directors. In August 1997, a motion to dismiss the Complaints was filed on
behalf of Intermedia, DIGEX and the DIGEX Directors. The action has been dormant
since that time.
These cases are in their very early stages and no assurance can be given as to
their ultimate outcome. Intermedia, after consultation with its counsel,
believes that there are meritorious factual and legal defenses to the claims in
the Complaints. Intermedia intends to defend vigorously the claims in the
Complaints.
Absence of a Public Market for the Depositary Shares. The Depositary Shares
and Series F Preferred Stock are new issues of securities for which there is
currently no public market. The Company does not intend to apply for listing of
the Depositary Shares or the Series F Preferred Stock on any securities exchange
or on the Nasdaq National Market. Although the Initial Purchasers have informed
the Company that they currently intend to make a market in the Depositary
Shares, they are not obligated to do so and any such market-making may be
discontinued at any time without notice. In addition, any market-making
activities with respect to the Depositary Shares may be limited during the
pendency of the Shelf Registration Statement. 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 respective
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
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substantial volatility in the prices of similar securities. 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 F 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, the Series F Preferred Stock and the
Common Shares, see "Certain Federal Income Tax Consequences."
Anti-Takeover Provisions. The Company's Restated Certificate of Incorporation,
as amended (the "Certificate of Incorporation") and Bylaws, the provisions of
the Delaware General Corporation Law (the "DCGL"), the Existing Senior Notes
Indentures and the Certificates of Designation may make it difficult in some
respects to effect a change in control of the Company and replace incumbent
management. In addition, the Company's Board of Directors has adopted a
Stockholder's Rights Plan, pursuant to which rights to acquire a series of
preferred stock, exercisable upon the occurrence of certain events, were
distributed to its stockholders. The existence of these provisions may have a
negative impact on the price of the Common Stock, may discourage third party
bidders from making a bid for the Company, or may reduce any premiums paid to
stockholders for their Common Stock. In addition, the Board has the authority to
fix the rights and preferences of, and to issue shares of, the Company's
preferred stock, which may have the effect of delaying or preventing a change in
control of the Company without action by its stockholders.
Shares Eligible for Future Sale. Future sales of shares by existing
stockholders under Rule 144 of the Securities Act, or through the exercise of
outstanding registration rights or the issuance of shares of Common Stock upon
the exercise of options or warrants or conversion of convertible securities
could materially adversely affect the market price of shares of Common Stock and
could materially impair the Company's future ability to raise capital through an
offering of equity securities. Substantially all of the Company's outstanding
shares, other than those held by affiliates, are transferable without
restriction under the Securities Act. No predictions can be made as to the
effect, if any, that market sales of such shares or the availability of such
shares for future sale will have on the market price of shares of Common Stock
prevailing from time to time.
Forward-Looking Statements. The statements contained in this Prospectus that
are not historical facts are "forward-looking statements" (as such term is
defined in the Private Securities Litigation Reform Act of 1995), which can be
identified by the use of forward-looking terminology such as "estimates,"
"projects," "anticipates," "expects," "intends," "believes" or the
negative thereof or other variations thereon or comparable terminology or by
discussions of strategy that involve risks and uncertainties. Management wishes
to caution the reader that these forward-looking statements, such as
Intermedia's plans to expand its existing networks or to build and acquire
networks in new areas, the market opportunity presented by larger metropolitan
areas, its anticipation of installation of switches or the provision of local
exchange services and revenues from designated markets during 1998 and
statements regarding development of Intermedia's businesses, the estimate of
market sizes and addressable markets for Intermedia's services and products,
Intermedia's anticipated capital expenditures, regulatory reform and other
statements contained in this Prospectus regarding matters that are not
historical facts, are only estimates and 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 Intermedia or actual events differing
from the assumptions underlying such statements. Such risks and assumptions
include, but are not limited to, Intermedia's ability to successfully market its
services to current and new customers; generate customer demand for its services
in the particular markets where it plans to market services; access markets;
identify, finance and complete suitable acquisitions, design and construct fiber
optic networks; install cable and facilities, including switching electronics,
and obtain rights-of-way, building access rights and any required governmental
authorizations, franchises and permits, all in a timely manner, at reasonable
costs and on satisfactory terms and conditions, as well as regulatory,
legislative and judicial developments that could cause actual results to vary
materially from the future results indicated, expressed or implied, in such
forward-looking statements.
Moreover, Intermedia presents certain data contained herein on an annualized
basis, based on quarterly or monthly data, because Intermedia believes that such
annualized data is a standard method to present certain data in the
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telecommunications industry. However, actual annual results could differ
materially from annualized data because annualized data does not account for
factors such as seasonality, growth or decline. Consequently, readers should not
place undue reliance on the annualized data.
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RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The Company's historical earnings have been insufficient to cover combined
fixed charges and dividends on preferred stock by $2.3 million, $3.3 million,
$19.9 million, $60.0 million and $245.7 million for each of the years ended
December 31, 1993, 1994, 1995, 1996 and 1997, respectively. In addition,
insufficiencies of $71.8 million and $348.0 million were experienced in the six
month periods ended June 30, 1997 and 1998, respectively. Combined fixed charges
and dividends include interest and dividends whether paid or accrued. On a pro
forma basis, after giving applicable effect to the acquisitions of Shared,
National and LDS, each of the Company's 1997 debt and equity offerings, the 1998
Notes Offering and the Offering as if they had been consummated at the beginning
of the year, the Company's earnings were insufficient to cover combined fixed
charges and dividends on preferred stock by $489.5 million for the year ended
December 31, 1997 and $364.1 million for the six month period ended June 30,
1998.
See "Risk Factors--Substantial Indebtedness; Insufficiency of Earnings to
Cover Fixed Charges" for a further discussion of factors which may have an
impact on the Company's ratio of earnings to combined fixed charges and
preferred stock dividends.
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THE COMPANY
Intermedia is a rapidly growing ICP delivering local, long distance and
enhanced data services (including Internet-related services) to business and
government customers. Intermedia is the largest domestic independent company
among the CLECs (based upon annualized telecommunications services revenues and
assuming the closing of the announced transaction between AT&T and Teleport) and
is also the largest provider of shared tenant telecommunications services in the
United States. As a tier-one ISP and the fourth largest (based on number of
nodes) frame relay provider in the United States, Intermedia is also a leading
provider of enhanced data services to business and government customers.
Intermedia provides services to its customers throughout the United States and
in selected international markets through a combination of owned and leased
network facilities. As an ICP with over 10 years experience focusing on business
and government customers, Intermedia believes it is positioned to take advantage
of technical, regulatory and market dynamics which currently promote demand for
a fully integrated set of communications services.
Intermedia serves approximately 92,800 business customers and has over 610
quota carrying sales personnel operating in 92 cities. The Company's annualized
second quarter 1998 revenues were $760.9 million. Intermedia's reported revenues
have grown from $14.3 million in 1994 to $247.9 million in 1997, representing a
compound annual growth rate of 158.8%.
Through a combination of acquisitions, leased infrastructure, expansion of
existing network and asset purchases, Intermedia continues to increase its
customer base and network density. Additionally, the Company continues to pursue
attractive opportunities to complement and support its existing network
infrastructure and service offerings and to expand into new geographic markets.
Intermedia's network infrastructure includes over 280,000 access line
equivalents ("ALEs") in service, 21 voice switches, 153 data switches, 27,123
frame relay nodes, 553 network to network interfaces ("NNIs"), including NNIs
with BellSouth Telecommunications Inc., US West, Sprint Corporation ("Sprint"),
GTE Corporation, Bell Atlantic Corp. and Southern New England Telecommunications
Corp, and approximately 39,400 miles of nationwide long distance fiber
facilities. This infrastructure is capable of delivering local, long distance
and enhanced data services (including frame relay, asynchronous transfer mode
("ATM") and Internet services) and enabled Intermedia to address $34 billion
of a $222 billion national market opportunity by the end of 1997. The Company
believes that at the end of 1998, its addressable market will be over $90
billion. Management believes that continuing expansion will enable Intermedia to
(i) increase the size of its addressable market to reach a significant number of
new potential customers, (ii) achieve economies of scale in network operations
and sales and marketing and (iii) more effectively serve customers having a
presence in multiple metropolitan areas.
In order to capitalize on the significant increase in the Company's
addressable market, Intermedia has rapidly expanded, and intends to continue to
expand, its direct sales and support team consisting of highly skilled
engineering and sales professionals. The sales and support team has complete
product knowledge and technical, integration and program or project management
skills. This team approach promotes a close working relationship between
Intermedia and the customers' telecommunications, information services and user
constituencies. Intermedia believes such relationships enable it to sell more of
its services and maintain longer relationships with its customers. Intermedia
believes that the continued deployment of its skilled end user engineering
support and sales teams will allow Intermedia to establish service in new
markets and gain a stronger competitive position in existing markets. By
focusing first on establishing customer relationships in both new and existing
markets, Intermedia believes it can subsequently deploy capital efficiently in
response to customer demand.
Intermedia expects to realize economies of scale on its intercity network: (i)
through the continued deployment of local/long distance voice switches to serve
its rapidly growing customer base, and (ii) by combining long distance voice
traffic between switches with intercity enhanced data and Internet traffic. In
addition, Intermedia plans to introduce a new class of voice products which
utilize data protocols to deliver voice traffic over Intermedia's packet/cell
switched network which efficiently combines multiple data and voice protocols
over a single network fabric ("Packet/Cell Switched Network"). These services
will provide a competitive service offering to customers seeking a more cost
efficient and flexible alternative
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to voice services provided over traditional circuit switched telecommunications
networks. Intermedia believes that Packet/Cell Switched Networks, such as its
own, will displace a significant portion of the national telecommunications
market that is currently served over traditional circuit switched networks.
Intermedia believes this new service offering, when implemented, will accelerate
its penetration of the traditional voice services market and provide improved
returns on its network investment.
Enhanced data services, such as those provided over Intermedia's ATM and frame
relay network, include specialized communications services for customers needing
to transport various forms of digital data among multiple locations. An
important category of Intermedia's enhanced data services are its Internet
services--both access to the Internet and various Web hosting and Web site
management services. These Internet services are regularly delivered over
Intermedia's ATM and frame relay network. According to industry sources, the
frame relay services market is projected to grow from $1.3 billion in 1996 to
$2.7 billion in 1999 and Internet Web site management services are estimated to
grow from $450 million in 1997 to $7 billion in 2002. There can be no assurance
that such market growth will be realized or that the assumptions underlying such
projections are reliable. While Intermedia has historically concentrated its
enhanced data sales in the eastern half of the United States, Intermedia is
currently the fourth largest national provider of frame relay networking
services (based on number of nodes) after AT&T, MCI combined with WorldCom and
Sprint. To satisfy its customers' desire for end-to-end enhanced data services
(both networking and Internet services) from a single provider, Intermedia has
deployed its network and made interconnection arrangements with other providers
to offer national and international service.
Intermedia's mission is to become the premier provider of communications
services to business and government customers. Intermedia believes that its
target customers have sophisticated communications services requirements,
including the need for reliable network infrastructure, high quality, solutions-
oriented and responsive customer service and continuous focus on service
enhancements and new service development. Intermedia believes it has multiple
advantages over its competitors in serving its targeted customer base as a
result of the Company's: (i) specialized sales and service approach employing
engineering and sales professionals who design and implement integrated, cost-
effective telecommunications solutions; (ii) expertise in developing and
operating a highly reliable, advanced digital fiber optic network offering
substantial transmission capacity for the provision of a full suite of "all
distance" communications services; (iii) emphasis on providing solutions-
oriented and responsive customer service; (iv) network platform capable of
servicing customers throughout the United States and in selected international
markets; (v) network development plan designed to assure an efficient evolution
from a voice-oriented, circuit switched network to a Packet/Cell Switched
Network; (vi) ongoing development and integration of new telecommunications
technologies into its services, especially those technologies that allow the
increasing integration of voice and data applications onto a single Packet/Cell
Switched Network; (vii) ability to deliver local, long-distance and enhanced
data services over a network controlled from end-to-end by Intermedia; and
(viii) long-term contracts with building owners where the Company acts as a
shared tenant telecommunications services provider.
Over the past few years, a portion of Intermedia's growth has been
accomplished through acquisitions and other strategic ventures or selling
relationships. Intermedia continues to examine various acquisitions and other
strategic relationship proposals to accelerate its rate of growth. In addition
to financial considerations, Intermedia assesses each acquisition opportunity to
determine if it provides: (i) an established customer base to whom Intermedia
can cross-sell its other services, (ii) a greater network density in region or
provides needed network connectivity out of region, (iii) accelerated time to
market in a pre-defined target market, (iv) products and services that are
complementary to Intermedia's existing portfolio and (v) skilled staff,
particularly in sales and sales support. While management does not believe that
acquisitions are necessary to achieve Intermedia's strategic goals or to satisfy
its business plan, strategic alliances with or acquisitions of appropriate
companies may accelerate achievement of certain goals by creating financial and
operating synergies, and by providing for more rapid expansion of Intermedia's
network and services. Intermedia is currently evaluating various acquisitions
and strategic relationship opportunities. No assurance can be given that any
potential acquisition or strategic relationship will be consummated.
Intermedia was incorporated in the state of Delaware on November 9, 1987, as
the successor to a Florida corporation that was founded in 1986. Intermedia's
principal offices are located at 3625 Queen Palm Drive, Tampa, Florida 33619 and
its telephone number is (813) 829-0011.
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RECENT DEVELOPMENTS
US West and Ameritech Agreements. In January 1998, Intermedia entered into a
frame relay services agreement with US West. In May 1998, Intermedia entered
into a similar frame relay services agreement with Ameritech. Pursuant to these
agreements both US West and Ameritech will utilize Intermedia as its preferred
data provider for the provisioning of frame relay networking and Internet
services for all interLATA connections, both inside and outside US West's and
Ameritech's respective regions. The Company believes these agreements will bring
additional traffic onto Intermedia's network and will create cross-selling
opportunities in US West's 14 state territory (where Intermedia currently has no
selling activity) and in Ameritech's five state territory (where Intermedia
intends to substantially expand its selling activities). Intermedia has
undertaken discussions with other ILECs, including other RBOCs, with the intent
of establishing similar agreements, although there is no assurance that such
additional agreements will be consummated.
1998 Acquisitions. In March 1998, Intermedia consummated the acquisition of
Shared. The total purchase price for Shared was approximately $770.5 million,
including certain transaction expenses and fees relating to certain agreements.
Shared is the nation's largest provider of shared telecommunications services
and systems. Through its technical infrastructure and 852 employees, Shared acts
as a single point of contact for business telecommunications services at
approximately 545 Class A office buildings throughout the United States and
Canada, and provides turnkey PBX and key system implementation and operation in
other buildings throughout the United States. Shared's revenues for the year
ended December 31, 1997 were approximately $181.8 million. This acquisition is
expected to enhance Intermedia's national presence in the telecommunications
market, enabling it to provide an integrated offering of local, long distance,
data and systems integration services to Shared's existing customer base of
approximately 12,900 customers.
Also in March 1998, Intermedia consummated the acquisition of LDS for
approximately $170.1 million including approximately $137.2 million in
Intermedia's Common Stock and $32.9 million in cash, of which $15.0 million was
used to retire LDS's long-term debt. LDS is an established regional
interexchange carrier, providing long distance services and Internet access to
more than 48,000 business customers and employing approximately 99 quota
carrying sales professionals in Louisiana, Texas, Oklahoma, Mississippi and
Florida. LDS's revenues for the year ended December 31, 1997 were approximately
$122.3 million. The acquisition of LDS provides a significant time-to-market
advantage in a region important to Intermedia's expansion, while also
contributing an experienced regional management team and established sales
organization. Because LDS's service portfolio and footprint complement those of
Intermedia, the Company believes that the acquisition of LDS also presents
significant synergy realization opportunities. By joining forces with an
established operating company having a staff of experienced sales, management
and technical personnel, Intermedia expects to consolidate its position in the
southern markets served by LDS.
In April 1998, Intermedia consummated the acquisition of National. The total
purchase price for National was approximately $153.1 million, consisting of
approximately $88.7 million of Intermedia's Common Stock and $64.4 million in
cash, including debt repayment of $2.8 million. National is an emerging switch-
based CLEC and an established interexchange carrier providing local exchange and
long distance voice services to approximately 9,200 business customers
concentrated in Florida's major metropolitan markets. National had revenues of
approximately $65.2 million for the year ended December 31, 1997. Intermedia
believes that the acquisition of National will help build critical mass in the
State of Florida, one of the top five telecommunications usage states in the
country, and provide an experienced team of sales professionals.
On April 29, 1998, the Company announced that it had committed resources to
plan and implement the integration of acquired businesses. During the second
quarter of 1998 the Company developed and began implementation of a
restructuring program (the "Program"), which was designed to streamline and
refocus the Company's operations and transform Intermedia's five separate
operating companies into one ICP. The significant activities included in the
Program include (i) consolidation, rationalization and integration of network
facilities, collocations, network management and network facility procurement;
(ii) consolidation and integration of the sales forces of the Company and its
recent acquisitions, including the integration of the Company's products and
services and the elimination of redundant headcount and related costs; (iii)
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centralization of accounting and financial functions, including the elimination
of redundant headcount and related costs; (iv) development and integration of
information systems, including the integration of multiple billing systems, and
the introduction and deployment of automated sales force and workflow management
tools; (v) consolidation of office space and the elimination of unnecessary
legal entities; and (vi) exiting non-strategic businesses including the
elimination of redundant headcount and related costs. The Company recorded a
restructuring charge during the second quarter of approximately $36.9 million,
and expensed other business integration and restructuring costs associated with
the Program that were incurred in the second quarter of approximately $15.7
million, both of which were excluded from the calculation of EBITDA (as
described herein). Management anticipates that all activities included in the
Program will be completed by the end of 1999 and the Company anticipates
incurring additional related business integration and restructuring costs
through the end of that period. These costs will also be excluded from the
calculation of EBITDA.
Williams Agreement. In March 1998, Intermedia signed a definitive
agreement with Williams to purchase nationwide transmission capacity on
Williams' fiber optic network. The 20 year IRU provides Intermedia with high
capacity transport for its integrated voice and data services, connecting major
markets throughout the continental United States. The agreement had the
immediate effect of reducing Intermedia's unit cost for digital, intercity
transmission capacity. Initial implementation of the agreement provides for the
connection of approximately 50 cities over the next 12 months, with additional
cities to follow. The capacity provided by Williams will become part of
Intermedia's nationwide network of self-healing rings, over which the Company
will deliver its integrated voice and data services.
Stock Split. On June 15, 1998, the Company effected a 2 for 1 split (the
"Stock Split") of its Common Stock through a stock dividend paid to
stockholders of record on June 1, 1998.
1998 Notes Offering. In May 1998, the Company completed the 1998 Notes
Offering. The aggregate net proceeds from the 1998 Notes Offering was
approximately $488.9 million.
In July 1998, the Company commenced an exchange offer in connection with
the 8.60% Notes. Pursuant to the exchange offer, $500 million principal amount
at maturity of the 8.60% Notes were exchanged for a series of notes registered
under the Securities Act, with terms substantially identical to those of the
8.60% Notes issued in the 1998 Notes Offering.
Conversions. During July and August 1998, the Company exchanged (a)
approximately 2.0 million shares of Common Stock for approximately 1.5 million
depositary shares, each representing a one-hundredth interest in one share of
Series D Preferred Stock, and (b) approximately 1.4 million shares of Common
Stock for approximately 1.5 million depositary shares, each representing a one-
hundredth interest in one share of Series E Preferred Stock, pursuant to
exchange agreements with certain holders of such depositary shares.
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USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Securities
by the Selling Securityholders or the issuance of the Dividend Shares by the
Company.
DESCRIPTION OF CAPITAL STOCK
Intermedia's authorized capital stock consists of 150,000,000 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 August 31, 1998, there were
48,198,385 shares of Common Stock, 357,371 shares of Series B Preferred Stock,
54,129 shares of Series D Preferred Stock, 64,892 shares of Series E Preferred
Stock and 80,000 shares of Series F Preferred Stock issued and outstanding. On a
fully-diluted basis, at that date, the Company had outstanding 77,017,848 shares
of Common Stock after giving effect to (a) the exercise of the Warrants (as
hereinafter defined), (b) the exercise of all outstanding options issued
pursuant to the Company's employee stock option plans, (c) conversion of the
Series D Preferred Stock, (d) conversion of the Series E Preferred Stock and (e)
conversion of the Series F Preferred Stock. As of August 31, 1998, the Company
has reserved (i) 10,870,637 shares of Common Stock for issuance pursuant to the
Company's employee stock option plans, (ii) 872,330 shares of Common Stock for
issuance upon exercise of the Warrants, (iii) 6,957,468 shares of Common Stock
for issuance upon conversion of the Series D Preferred Stock, (iv) 5,365,611
shares of Common Stock for issuance upon the conversion of the Series E
Preferred Stock, (v) 4,753,417 shares of Common Stock for issuance upon the
conversion of the Series F Preferred Stock, (vi) 242,629 shares of Series B
Preferred Stock for issuance as dividends on the outstanding shares of Series B
Preferred Stock and (vii) 40,000 shares of Series C Preferred Stock for issuance
in connection with the Company's stockholder's rights plan. All outstanding
shares of Common Stock, Series B Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Series F 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 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 of 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 Warrants and as dividends on or upon the conversion of the
Series D Preferred Stock, the Series E Preferred Stock and the Series F
Preferred Stock will be, fully paid and non-assessable. See also "--Reservation
of Shares."
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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.
Series B Preferred Stock. As of August 31, 1998, the Company had
outstanding 357,371 shares of Series B Preferred Stock (aggregate liquidation
preference of $357.4 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
respect thereto, plus accumulated and unpaid dividends, if any, to the date of
purchase. This description is intended as a summary and is qualified in its
entirety by reference to the Series B Certificate of Designation.
The Company may, at its option, exchange some or all of the Series B
Preferred Stock for the Company's 13 1/2% Senior Subordinated Debentures, due
2009 (the "Exchange Debentures"). The Exchange Debentures mature on March 31,
2009. Interest on the Exchange Debentures would be payable semi-annually, and
could be paid in the form of additional Exchange Debentures at the Company's
option. Exchange Debentures would be redeemable by the Company at any time after
March 31, 2002 at rates commencing with 106.75%, declining to 100% on March 31,
2007. The Exchange Debentures contain covenants similar to those contained in
the Existing Senior Notes Indentures.
Series D Preferred Stock. As of August 31, 1998, the Company had
outstanding 54,129 shares of Series D Preferred Stock, with a liquidation
preference of $2,500 per share. Dividends on the Series D Preferred Stock
accumulate at the rate of 7% of the liquidation preference per share, and are
payable quarterly, in arrears. Dividends are payable in cash, or at the option
of the Company, in shares of Common Stock. The Series D Preferred Stock may not
be redeemed at the option of the Company prior to July 19, 2000, but may be
redeemed for cash, in whole or in part, at the option of the Company on or after
such date at rates commencing with 104%, declining to 100% on July 19, 2004. In
the event of change of control of the Company, holders of Series D Preferred
Stock have the right to require the Company to purchase their shares of Series D
Preferred Stock at 100% of the aggregate liquidation preference with respect
thereto, plus accumulated and unpaid dividends, if any, to the date of purchase.
This description is intended as a summary and is qualified in its entirety by
reference to the Series D Certificate of Designation.
Series E Preferred Stock. As of August 31, 1998, the Company had
outstanding 64,892 shares of Series E Preferred Stock, with a liquidation
preference of $2,500 per share. Dividends on the Series E Preferred Stock
accumulate at the rate of 7% of the liquidation preference per share, and are
payable quarterly, in arrears. Dividends are payable in cash, or at the option
of the Company, in shares of Common Stock. The Series E Preferred Stock may not
be redeemed at the option of the Company prior to October 18, 2000, but may be
redeemed for cash, in whole or in part, at the option of the Company on or after
such date at rates commencing with 104%, declining to 100% on October 18, 2004.
In the event of change of control of the Company, holders of Series E Preferred
Stock have the right to require the Company to purchase their shares of Series E
Preferred Stock at 100% of the aggregate liquidation preference with respect
thereto, plus accumulated and unpaid dividends, if any, to the date of purchase.
This description is intended as a summary and is qualified in its entirety by
reference to the Series E Certificate of Designation.
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See "Description of Series F Preferred Stock" for a description of the
terms of Series F 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 that resulted in such person becoming an
interested stockholder, such person owned at least 85% of the voting stock of
the corporation outstanding immediately prior to such transaction (excluding
certain shares) or (iii) on or subsequent to such date, such business
combination is approved by the board of directors of the corporation and by the
affirmative vote of at least 66% 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.
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DIVIDEND RESTRICTIONS
The terms of the Existing Senior Note Indentures restrict the Company's
ability to pay cash dividends on the Series B Preferred Stock. The Existing
Senior Note Indentures and the Series B Certificate of Designation restrict
Intermedia's ability to pay cash dividends on the Common Stock, the Series D
Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock, Series B Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock and the Series F
Preferred Stock is Continental Stock Transfer & Trust Company.
OUTSTANDING WARRANTS
153,500 warrants (the "Public Warrants"), each to purchase 4.38 shares of
Common Stock, at an exercise price of $5.43 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. An additional warrant (the "1997 Warrant" and together
with the Public Warrants, the "Warrants") to purchase 200,000 shares of Common
Stock, at an exercise price of $20.75 per share, was issued pursuant to an
Agreement and Warrant Certificate dated as of November 20, 1997, and is
currently exercisable.
RESERVATION OF SHARES
The Company has authorized and reserved for issuance such number of shares
of Common Stock as will be issuable upon the conversion of all its depositary
shares including the Depositary Shares (or all shares of the Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock) and the exercise
of the Warrants and all outstanding options issued pursuant to the Company's
stock option plans. 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 Registration Rights Agreement,
dated August 18, 1998, among the Company and the Initial Purchasers (the
"Registration Rights Agreement"), the Company is a party to several agreements
pursuant to which certain stockholders have the right, among other matters, to
require the Company to register their shares of Common Stock under the
Securities Act under certain circumstances. As a result, upon the effectiveness
of this Registration Statement, substantially all of the Company's outstanding
shares, other than those held by affiliates, will be transferable without
restriction under the Securities Act.
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DESCRIPTION OF SERIES F PREFERRED STOCK
GENERAL
The terms of the Series F 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 F Preferred Stock, the Certificate of Designation and the
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 Registration Rights
Agreement, including the definitions therein of certain terms used below. Copies
of the form of Certificate of Designation and Registration Rights Agreement are
available from the Company, upon request. As used in this Description of Series
F Preferred Stock, the term "Company" refers to Intermedia Communications Inc.,
excluding its subsidiaries (the "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 F 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, 1998 on a pro forma basis after giving effect to
the Offering and the application of the proceeds therefrom, the aggregate amount
of liquidation preference of Senior Securities (as hereinafter defined) 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 F Preferred Stock would have been approximately $2.8
billion. See "Risk Factors--Subordination of the Series F Preferred Stock."
Pursuant to the Certificate of Designation, 92,000 shares (including 12,000
shares which the Initial Purchasers had the option to purchase to cover over-
allotments) of Series F Preferred Stock with the Liquidation Preference were
authorized. Eighty thousand of such shares are issued and outstanding and are
fully paid and non-assessable. The Initial Purchasers did not exercise their
option to purchase the remaining 12,000 shares. The holders of the Series F
Preferred Stock have no preemptive rights.
The transfer agent for the Series F Preferred Stock is Continental Stock
Transfer & Trust Co. unless and until a successor is selected by the Company
(the "Transfer Agent").
RANKING
The Series F 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 September
3, 1998 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 F Preferred Stock as to
dividend distributions and distributions upon the liquidation, winding-up and
dissolution of the Company (collectively referred to with the common stock of
the Company as "Junior Securities"); (ii) on a parity with the Series D
Preferred Stock and Series E Preferred Stock, any additional shares of Series D
Preferred Stock, Series E Preferred Stock or Series F 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 September 3, 1998 by
the Board of Directors, the terms of which expressly provide that such class or
series will rank on a parity with the Series F 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 ($357.4 million aggregate liquidation
preference outstanding at August 31, 1998) and to each class of capital stock or
series of preferred stock issued by the Company established after September 3,
1998 by the Board of Directors the terms of which expressly provide that such
class or series will rank senior to the Series F Preferred Stock as to dividend
distributions and distributions upon liquidation, winding-up and dissolution of
the Company (collectively referred to as "Senior Securities").
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No dividend whatsoever shall be declared or paid upon, or any sum set apart
for the payment of dividends upon, any outstanding share of the Series F
Preferred Stock with respect to any dividend period unless all dividends for all
preceding dividend periods have been declared and paid, or declared and a
sufficient sum set apart for the payment of such dividend, upon all outstanding
shares of Senior Securities.
DIVIDENDS
The holders of shares of the Series F 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
August 18, 1998 accruing at the rate per annum of 7% of the Liquidation
Preference per share, payable quarterly in arrears on each January 15, April 15,
July 15 and October 15, commencing on October 15, 1998 (each, a "Dividend
Payment Date"). If any such date is not a business day, such payment shall be
made on the next succeeding business day, to the holders of record as of the
next preceding January 1, April 1, July 1 and October 1 (each, a "Record Date").
Dividends will be payable (i) in cash, (ii) by delivery of shares of Common
Stock to holders (based upon 95% of the Average Stock Price (as hereinafter
defined)) 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 F Preferred Stock by 95% of the average of the
high and low sales prices of the Common Stock as reported by the Nasdaq National
Market or any national securities exchange upon which the Common Stock is then
listed, for each of the ten consecutive trading days immediately preceding the
fifth business day preceding the Record Date (the "Average Stock Price"). The
Transfer Agent is authorized and directed in the Certificate of Designation to
aggregate any fractional shares of Common Stock that are issued as dividends,
sell them at the best available price and distribute the proceeds to the holders
in proportion to their respective interests therein. The Company will pay the
expenses of the Transfer Agent with respect to such sale, including brokerage
commissions. In the event the sale by the Transfer Agent of such aggregated
fractional interests would be restricted, the Company and the Transfer Agent
will agree upon other appropriate arrangements for the cash realization of
fractional interests. Dividends payable on the Series F 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. At the option of the Company,
whenever dividends are to be paid by delivery of shares of Common Stock, such
delivery shall be deemed to be made pursuant to the terms of a dividend
reinvestment plan for the Series F Preferred Stock in which each holder of
Series F Preferred Stock shall be a participant.
Dividends on the Series F 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 F
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 F
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 F Preferred Stock. Unless full cumulative dividends on all
outstanding shares of Series F 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
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by the Company or any of its Subsidiaries. Holders of the Series F Preferred
Stock will not be entitled to any dividends, whether payable in cash, property
or stock, in excess of the full cumulative dividends as herein described.
The Existing Senior Notes Indentures and the Series B Certificate of
Designation 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 F
Preferred Stock.
OPTIONAL REDEMPTION
The Series F Preferred Stock may not be redeemed at the option of the
Company prior to October 17, 2001. The Series F Preferred Stock may be redeemed
for cash, in whole or in part, at the option of the Company on or after October
17, 2001, 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 Liquidated Damages, if any, to the date of
redemption, upon not less than 30 nor more than 60 days' prior written notice,
if redeemed during the 12-month period commencing on October 17 of each of the
years set forth below:
Year Percentage
---- ----------
2001...................................................... 104.00%
2002...................................................... 103.00%
2003...................................................... 102.00%
2004...................................................... 101.00%
2005 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 F 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 F Preferred Stock will be convertible at any time
after November 16, 1998, 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 F 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 $42.075 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 F 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
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months in respect of which no adjustment has been made, exceeds 20% of the
product of the then current market price of the Common Stock times the aggregate
number of shares of Common Stock outstanding on the record date for such
dividend or distribution).
No adjustment of the conversion price will be required to be made until
cumulative adjustments amount to 1% or more of the conversion price as last
adjusted. Notwithstanding the foregoing, no adjustment to the conversion price
shall reduce the conversion price below the then applicable par value per share
of the Common Stock. In addition to the foregoing adjustments, the Company will
be permitted to make such reductions in the conversion price as it considers to
be advisable in order that any event treated for federal income tax purposes as
a dividend of stock or stock rights will not be taxable to the holders of the
Common Stock.
In the case of certain consolidations or mergers to which the Company is a
party or the transfer of substantially all of the assets of the Company, each
share of Series F 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 F 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 F Preferred Stock at the close of
business on a record date with respect to the payment of dividends on the Series
F Preferred Stock will be entitled to receive such dividends with respect to
such share of Series F 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 F 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 F 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 F 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 F 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 Change of Control and subject to restrictions on
repurchase contained in the instruments governing the Company's outstanding
indebtedness and the Series B Preferred Stock Certificate of Designation and
subject to the participation of any Parity Securities, the Company will be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part of each holder's Series F Preferred Stock at an offer price in cash equal
to 100% of the aggregate Liquidation Preference thereof, plus accumulated and
unpaid dividends and Liquidated Damages, if any, thereon to the date of
repurchase. Within 30 days following a Change of Control, the Company will mail
a notice to each holder of Series F Preferred Stock describing the transaction
that constitutes the Change of Control and offering to repurchase the Series F
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
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 F Preferred
Stock required by this covenant. The Company will comply with the requirements
of the Exchange Act and any other securities laws and
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regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Series F Preferred Stock as a result of a
Change of Control.
A "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
Change of Control equals or exceeds 105% of the conversion price of the Series F
Preferred Stock in effect on each such trading day or (ii) at least 90% of the
consideration in the transaction or transactions constituting a Change of
Control pursuant to clause (c) consists of shares of Common Stock traded or to
be traded immediately following such Change of Control on a national securities
exchange or the Nasdaq National Market and, as a result of such transaction or
transactions, the Series F Preferred Stock becomes convertible solely into such
Common Stock (and any rights attached thereto), or (d) the first day on which
more than a majority of the members of the Board of Directors of the Company are
not Continuing Directors; provided, however, that a transaction in which the
Company becomes a subsidiary of another entity shall not constitute a 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 hereinafter defined), 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.
"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 F 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 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 Change of Control, the
Certificate of Designation does not contain provisions that permit the holders
of the Series F Preferred Stock to require that the Company repurchase or redeem
the Series F 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 recapitalizations,
that could affect the Company's capital structure or the value of the Series F
Preferred Stock or the Common Stock, but that would not constitute a 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 F Preferred
Stock upon a Change of Control. In the event a Change of Control occurs at a
time when the Company is prohibited from repurchasing the Series F Preferred
Stock, the Company could either (i) repay in full or refinance all such
outstanding indebtedness or Series B Preferred Stock or (ii) obtain the
requisite consents, if any, under all agreements governing outstanding
indebtedness or Series B Preferred Stock to permit the repurchase of Series F
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
F Preferred Stock in the event of a Change of Control; provided, that if the
Company fails to repurchase shares of Series F Preferred Stock, the sole remedy
to holders of Series F Preferred Stock will be the voting rights arising from a
Voting Rights Triggering Event (as hereinafter defined). See "--Voting Rights."
Moreover, the Company will not repurchase or redeem any Series F Preferred Stock
pursuant to this 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
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of the Series F Preferred Stock may not be able to compel the Company to
purchase the Series F 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 Change of Control Offer to the
holders of Series F Preferred Stock upon a Change of Control if a third party
makes the 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 Change of Control Offer made by the Company and
purchases all shares of Series F Preferred Stock validly tendered and not
withdrawn under such Change of Control Offer.
VOTING RIGHTS
Holders of record of shares of the Series F 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 F
Preferred Stock in an amount equal to six quarterly dividends (whether or not
consecutive) or (b) the failure of the Company to make a Change of Control Offer
or to repurchase all of the Series F Preferred Stock tendered in a 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 F Preferred Stock voting together
with any other subsequently issued Parity Securities then entitled to voting
rights will be entitled to elect such number of members to the Board of
Directors of the Company constituting at least 20% of the then existing Board of
Directors before such election (rounded to the nearest whole number), provided,
however, that such number shall be no less than one nor greater than two, and
the number of members of the Company's Board of Directors will be immediately
and automatically increased by one or two, as the case may be. Voting rights
arising as a result of a Voting Rights Triggering Event will continue until such
time as all dividends in arrears on the Series F 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 F 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 F Preferred Stock
or authorize the issuance of any additional shares of Series F Preferred Stock,
without the approval of the holders of at least a majority of the then
outstanding shares of Series F Preferred Stock voting or consenting, as the case
may be, as one class; provided, however, that the Company may not amend the
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 F 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 F 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 F Preferred Stock. The consent
of the holders of Series F Preferred Stock will not be required for the Company
to authorize, create (by way of reclassification or otherwise) or issue any
Junior Securities or Parity Securities or any obligation or security convertible
or exchangeable into or evidencing a right to purchase, shares of any class or
series of Junior Securities or Parity Securities.
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MERGER, CONSOLIDATION AND SALE OF ASSETS
Without the vote or consent of the holders of a majority of the then
outstanding shares of Series F 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 F 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 F 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 F 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 F Preferred
Stock held by such holder, plus accrued and unpaid dividends and 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 Liquidated
Damages, if any, to which holders of Series F 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 F Preferred Stock and all other Parity Securities are not paid in
full, the holders of the Series F 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 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 shares of Series F Preferred Stock are outstanding,
the Company will furnish copies of the SEC Reports to the holders of Series F
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 F
Preferred Stock remain outstanding, it will furnish to the holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
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REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the Registration Rights Agreement, the Company agreed to file a
shelf registration statement (the "Shelf Registration Statement") with the
Commission covering resales of Transfer Restricted Securities (as hereinafter
defined) by holders thereof (who satisfied certain conditions relating to the
provision of information to the registrant) on or prior to October 17, 1998, and
to use its reasonable best efforts to cause such Shelf Registration Statement to
become effective on or prior to December 16, 1998.
"Transfer Restricted Securities" for this purpose, means each Depositary
Share, each share of Series F 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 August 18, 2000 and the date
when all Transfer Restricted Securities covered by the Shelf Registration
Statement are sold and the Company will use its reasonable best efforts to
register under the Securities Act the issuance by the Company of Common Stock as
dividends on the Series F Preferred Stock. If the Company is unable to effect
such registration, the Company shall file a shelf registration statement to
enable resales of any Common Stock issued as dividends on the Series F Preferred
Stock that are then restricted stock under the Securities Act. If (i) 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 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 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) or (ii) the Company is unable to pay a dividend in Common
Stock that is freely transferable without restriction under the Securities Act
without delivery of a prospectus (such Common Stock, "Unrestricted Stock") (each
such event referred to in clauses (i) and (ii), a "Registration Default"), then
the Company will pay to each holder of Transfer Restricted Securities or each
holder of Series F Preferred Stock that does not receive a Common Stock dividend
in Unrestricted Stock, as the case may be, liquidated damages ("Liquidated
Damages") at a rate of 0.25% of the Liquidation Preference of the Series F
Preferred Stock constituting Transfer Restricted Securities or 0.25% of the
total dividend payment that was not made in either cash or Unrestricted Stock,
as applicable, which shall accrue from the date of the Registration Default
until such Registration Default is cured or such dividend payment is paid in
cash or Unrestricted Stock or any Common Stock paid as a dividend by the Company
becomes Unrestricted Stock. All accrued Liquidated Damages will be paid in
shares of Common Stock valued at the Average Stock Price by the Company on each
Dividend Payment Date specified in the Certificate of Designation. Following the
cure of all Registration Defaults, the accrual of Liquidated Damages will cease.
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DESCRIPTION OF DEPOSITARY SHARES
Each Depositary Share represents a one-hundredth interest in a share of
Series F 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 (as hereinafter defined) 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 F
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
F Preferred Stock." The Company does not expect that there will be any public
trading market for the Series F 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 F Preferred Stock was deposited with Continental immediately
preceding the Offering, 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 F 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 F Preferred
Stock represented by such Depositary Shares. Owners of Depositary Shares are
entitled to receive only whole shares of Series F Preferred Stock on the basis
of one share of Series F Preferred Stock for each one hundred Depositary Shares.
In no event will fractional shares of Series F 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 F 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 F Preferred Stock on any securities exchange
or for quotation through the Nasdaq National Market.
CONVERSION AND CALL PROVISION
Redemption. As described under "Description of Series F Preferred Stock--
Redemption," the Series F Preferred Stock may be redeemed for cash, in whole or
in part, at the option of the Company on or after October 17, 2001, at the
specified redemption prices specified, together with accumulated and unpaid
dividends (including an amount in cash equal to a prorated dividend for any
partial dividend period) and Liquidated Damages, if any, to the date of
redemption, upon not less than 30 nor more than 60 days' prior written notice.
In the event of partial redemptions of Series F Preferred Stock, the shares to
be redeemed will be determined pro rata or by lot, as determined by the Company.
Whenever the Company shall elect to redeem shares of Series F Preferred
Stock pursuant to the terms of the Series F Preferred Stock, it shall (unless
otherwise agreed in writing with Continental) give Continental not less than 60
days' notice of the date of such proposed redemption of Series F Preferred Stock
and of the number of shares held by Continental to be so redeemed. On the date
of such redemption, provided that the Company shall then have deposited with
Continental the amount of cash necessary to effect such redemption, Continental
shall redeem the number of Depositary Shares representing such Series F
Preferred Stock. Continental shall mail notice of such redemption and the
proposed simultaneous
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redemption of the number of Depositary Shares representing the Series F
Preferred Stock to be redeemed, by first class postage prepaid, not less than 30
and not more than 60 days prior to the date fixed for redemption of such Series
F Preferred Stock and Depositary Shares (the "Redemption Date"), to the holders
of record on the record date for such redemption of the Depositary Receipts
evidencing the Depositary Shares to be so redeemed. Each such notice shall state
the record date for the purposes of such redemption; the Redemption Date; the
number of Depositary Shares to be redeemed and, if less than all of the
Depositary Shares held by any such holder are to be redeemed, the number of such
Depositary Shares held by such holder to be so redeemed; the amount of cash to
be received by such holder; the place or places where Depositary Receipts
evidencing Depositary Shares are to be surrendered for cash; and that dividends
in respect of the Series F Preferred Stock represented by the Depositary Shares
to be redeemed will cease to accrue at the close of business on such Redemption
Date. In case less than all the outstanding Depositary Shares are to be
redeemed, the Depositary Shares to be so redeemed shall be selected by lot or
pro rata (as nearly as may be) or in any other equitable manner determined by
Continental to be consistent with the method determined by the Board of
Directors with respect to the Series F Preferred Stock.
From and after the Redemption Date, all dividends in respect of the shares
of Series F Preferred Stock so called for redemption shall cease to accrue, the
Depositary Shares being so redeemed shall be deemed no longer to be outstanding,
all rights of the holders of Depositary Receipts evidencing such Depositary
Shares shall cease and terminate and, upon surrender in accordance with said
notice of the Depositary Receipts evidencing any such Depositary Shares
(properly endorsed or assigned for transfer, if Continental shall so require),
such Depositary Shares shall be redeemed by Continental for the consideration
therefor specified in said notice, plus all money and other property, if any,
represented by such Depositary Shares, including all amounts, if any, paid by
the Company in respect of dividends which on the Redemption Date have accrued on
the shares of Series F Preferred Stock to be so redeemed and have not
theretofore been paid. If less than all of the Depositary Shares evidenced by
any Depositary Receipt are called for redemption, Continental will deliver to
the holder of such Depositary Receipt upon its surrender to Continental,
together with the redemption payment, a new Depositary Receipt evidencing the
Depositary Shares evidenced by such prior Depositary Receipt and not called for
redemption.
Conversion at the Option of Holder. As described under "Description of
Series F Preferred Stock- Conversion Rights," the Series F Preferred Stock may
be converted, in whole or in part, into shares of Common Stock at the option of
the holders of Series F Preferred Stock at any time after November 16, 1998,
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 F
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 F 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 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.
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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 F Preferred Stock to the record holders of Depositary Receipts in
proportion to the number of Depositary Shares owned by such holders. See
"Description of Series F 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 F Preferred Stock, or (ii) Continental shall
receive notice of any meeting at which holders of Series F Preferred Stock are
entitled to vote or of which holders of Series F Preferred Stock are entitled to
notice, or of any election on the part of the Company to call for redemption any
Series F 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 F Preferred
Stock) for the determination of the holders of Depositary Receipts (x) who shall
be entitled to receive such dividend, distribution, rights, preference or
privileges or the net proceeds of the sale thereof, (y) who shall be entitled to
give instructions for the exercise of voting rights at any such meeting or to
receive notice of such meeting, or (z) who shall be subject to such redemption,
subject to the provisions of the Deposit Agreement.
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VOTING OF DEPOSITARY SHARES
Holders of record of Depositary Shares have no voting rights, except as
required by law and as provided in the Certificate of Designation in respect of
the Series F Preferred Stock, as described under "Description of Series F
Preferred Stock--Voting Rights."
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of Depositary Receipts and any provision of the Deposit Agreement may
at any time be amended by agreement between the Company and Continental.
However, any amendment that imposes any fees, taxes or other charges payable by
holders of Depositary Receipts (other than taxes and other governmental charges,
fees and other expenses payable by such holders as stated under "Charges of
Continental"), or that otherwise prejudices any substantial existing right of
holders of Depositary Receipts, will not take effect as to outstanding
Depositary Receipts until the expiration of 90 days after notice of such
amendment has been mailed to the record holders of outstanding Depositary
Receipts. Every holder of Depositary Receipts at the time any such amendment
becomes effective shall be deemed to consent and agree to such amendment and to
be bound by the Deposit Agreement, as so amended. In no event may any amendment
impair the right of any owner of Depositary Shares, subject to the conditions
specified in the Deposit Agreement, upon surrender of the Depositary Receipts
evidencing such Depositary Shares, to receive Series F Preferred Stock or, upon
conversion of the Series F 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 F
Preferred Stock and any other distributions with respect thereto and (ii) to
deliver the Series F 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 F
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 F Preferred Stock are entitled to vote, withdrawals of the Series F
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 F Preferred Stock.
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GENERAL
Continental will make available for inspection by holders of Depositary
Receipts at its corporate trust office all reports and communications from the
Company that are delivered to Continental and made generally available to the
holders of the Series F Preferred Stock.
Neither Continental nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control from or in performing its
obligations under the Deposit Agreement.
FORM AND DENOMINATION
Global Shares; Book-Entry Form. Shares of Depositary Shares sold in reliance
on Rule 144A under the Securities Act or to other Accredited Investors pursuant
to the Securities Act and the rules and regulations thereunder will be evidenced
initially by one or more global certificates (the "Depositary Share Global
Certificate") which will be deposited with, or on behalf of, The Depository
Trust Company (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
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participate in the Depositary system, or otherwise take actions in respect of
such interest, may be affected by the lack of a physical certificate evidencing
such interest.
Neither the Company nor the Transfer Agent will have responsibility for the
performance of the Depositary or its participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations. The Depositary has advised the Company that it will take any action
permitted to be taken by a holder of Depositary Shares (including, without
limitation, the presentation of Depositary Shares for exchange) only at the
direction of one or more participants to whose account with the Depositary
interests in the Depositary Share Global Certificate are credited, and only in
respect of the Depositary Shares represented by the Depositary Share Global
Certificate as to which such participant or participants has or have given such
direction.
The Depositary has also advised the Company that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. The Depositary
was created to hold securities for its participants and to facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes to accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations such as the Initial Purchasers.
Certain of such participants (or their representatives), together with other
entities, own the Depositary. Indirect access to the Depositary system is
available to others such as banks, brokers, dealers and trust companies that
clear through, or maintain a custodial relationship with, a participant, either
directly or indirectly.
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Depositary Share Global Certificate
among participants, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. If the
Depositary is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the Company
will cause the Depositary Shares to be issued in definitive form in exchange for
the Depositary Share Global Certificate.
Certificated Depositary Shares. Investors in the Depositary Shares may request
that Definitive Securities be issued in exchange for Depositary Shares
represented by the Depositary Share Global Certificate. Furthermore, Definitive
Securities may be issued in exchange for Depositary Shares represented by the
Depositary Share Global Certificate if no successor depositary is appointed by
the Company as set forth above.
Unless determined otherwise by the Company in accordance with applicable law,
Definitive Securities issued upon transfer or exchange of beneficial interests
in Depositary Shares represented by the Depositary Share Global Certificate will
bear a legend setting forth transfer restrictions under the Securities Act.
Any request for the transfer of Definitive Securities bearing the legend, or for
removal of the legend from Definitive Securities, must be accompanied by
satisfactory evidence, in the form of an opinion of counsel, that such transfer
complies with the Securities Act or that neither the legend nor the restrictions
on transfer set forth therein are required to ensure compliance with the
provisions of the Securities Act, as the case may be.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States federal income
tax considerations generally applicable to persons acquiring the Depositary
Shares, but does not purport to be a complete analysis of all potential
consequences. The discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations, Internal Revenue Service ("IRS")
rulings and judicial decisions now in effect, all of which are subject to change
at any time by legislative, judicial or administrative action. Any such changes
may be applied retroactively in a manner that could adversely affect a holder of
the Depositary Shares or Common Stock.
The discussion assumes that the holders of Depositary Shares or Common Stock
will hold them as "capital assets" within the meaning of Section 1221 of the
Code. The discussion is not binding on the IRS or the courts. The Company has
not sought and will not seek any rulings from the IRS with respect to the
positions of the Company discussed herein, and there can be no assurance that
the IRS will not take a different position concerning the tax consequences of
the purchase, ownership or disposition of the Depositary Shares or Common Stock
or that any such position would not be sustained.
The tax treatment of a holder of the Depositary Shares and Common Stock may
vary depending on such holder's particular situation or status. Certain holders
(including S corporations, insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, taxpayers subject to alternative minimum
tax and persons holding Depositary Shares or Common Stock as part of a straddle,
hedging or conversion transaction) may be subject to special rules not discussed
below. The following discussion does not consider all aspects of United States
federal income tax that may be relevant to the purchase, ownership and
disposition of the Depositary Shares and Common Stock by a holder in light of
such holder's personal circumstances. In addition, the discussion does not
consider the effect of any applicable foreign, state, local or other tax laws,
or estate or gift tax considerations. PERSONS CONSIDERING THE PURCHASE OF
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 THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION.
For purposes of this discussion, a "U.S. Holder" means a citizen or resident
of the United States, a corporation, partnership or other entity created or
organized in the United States or under the laws of the United States or of any
political subdivision thereof, an estate whose income is includible in gross
income for United States federal income tax purposes regardless of its source or
a trust, if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust. A "Non-U.S. Holder" means a
holder who is not a U.S. Holder.
INTRODUCTION
Holders of Depositary Shares will be treated for United States federal income
tax purposes as if they were owners of the Series F 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 F Preferred Stock. References in this
"Certain Federal Income Tax Consequences" section to holders of Series F
Preferred Stock include holders of Depositary Shares, and references to
Depositary Shares include Series F Preferred Stock.
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TAX CONSEQUENCES TO U.S. HOLDERS
DISTRIBUTIONS ON DEPOSITARY SHARES AND COMMON STOCK
A distribution on the Depositary Shares, whether paid in cash or in shares of
Common Stock, or a cash distribution on Common Stock will be taxable to the U.S.
Holder as ordinary dividend income to the extent that the amount of the
distribution (i.e., the amount of cash and/or the fair market value of the
Common Stock on the date of distribution) does not exceed the Company's current
or accumulated earnings and profits allocable to such distribution (as
determined for federal income tax purposes). To the extent that the amount of
the distribution exceeds the Company's current or accumulated earnings and
profits allocable to such distribution, the distribution will be treated as a
return of capital, thus reducing the holder's adjusted tax basis in the
Depositary Shares or Common Stock with respect to which such distribution is
made. The amount of any such excess distribution that exceeds the U.S. Holder's
adjusted tax basis in the Depositary Shares or Common Stock will be taxed as
capital gain and will be long-term capital gain if the U.S. Holder's holding
period for the Depositary Shares or Common Stock exceeds one year. A U.S.
Holder's initial tax basis in Common Stock received as a distribution on the
Depositary Shares will equal the fair market value of the Common Stock on the
date of the distribution. The holding period for the Common Stock will commence
on the day following the distribution. There can be no assurance that the
Company will have sufficient earnings and profits to cause distributions on the
Series F 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. Liquidated Damages should
be taxed in the same manner as dividend distributions, except that it is
possible that Liquidated Damages might be treated as payment of a fee and hence
as ordinary income with respect to which no dividends-received deduction is
available.
Dividends received by corporate U.S. Holders will generally be eligible for
the 70% dividends-received deduction under Section 243 of the Code. There are,
however, many exceptions and restrictions relating to the availability of the
dividends-received deduction, such as restrictions relating to (i) the holding
period of the stock on which the dividends are received, (ii) debt-financed
portfolio stock, (iii) dividends treated as "extraordinary dividends" for
purposes of Section 1059 of the Code, and (iv) taxpayers that pay alternative
minimum tax. Corporate U.S. Holders should consult their own tax advisors
regarding the extent, if any, to which such exceptions and restrictions may
apply to their particular factual situations. A corporate holder must generally
satisfy a separate 46 day (91-day, in the case of certain preferred stock
dividends) holding period requirement with respect to each dividend in order to
be eligible for the dividends-received deduction with respect to such dividend.
REDEMPTION PREMIUM
Under certain circumstances, Section 305(c) of the Code requires that any
excess of the redemption price of preferred stock over its issue price be
treated as constructively distributed on a periodic basis prior to actual
receipt. However, the Company believes that a U.S. Holder of the Depositary
Shares should not be required to include any redemption premium in income under
Section 305(c).
ADJUSTMENT OF CONVERSION PRICE
Treasury regulations issued under Section 305 of the Code treat certain
adjustments to conversion provisions of stock such as the Series F Preferred
Stock as constructive distributions of stock with respect to preferred stock.
Such constructive distributions of stock would be taxable to U.S. Holders of
Depositary Shares as described above under the caption "Distributions on
Depositary Shares and Common Stock." In general, any adjustment increasing the
number of shares of Common Stock into which the Depositary Shares can be
converted could constitute a constructive distribution of stock to U.S. Holders
of Depositary Shares unless made pursuant to a bona fide, reasonable adjustment
formula that has the effect of preventing dilution of the interest of the
holders of Depositary Shares. Any adjustment in the conversion price to
compensate the holders of Depositary Shares for taxable distributions of cash or
property on any of the outstanding Common
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Stock of the Company may be treated as a constructive distribution of stock to
U.S. Holders of Depositary Shares. The Company is unable to predict whether any
such adjustment will be made.
CONVERSION OF SERIES F PREFERRED STOCK
No gain or loss will generally be recognized for United States federal income
tax purposes on conversion of the Series F Preferred Stock solely into Common
Stock. However, if the conversion takes place when there is a dividend arrearage
on the Series F 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 F 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
F Preferred Stock converted to such Common Stock. The receipt of cash in lieu of
a fractional share upon conversion of Series F Preferred Stock into Common Stock
will generally be treated as a sale of such fractional share of Common Stock in
which the U.S. Holder will recognize taxable gain or loss equal to the
difference between the amount of cash received and the U.S. Holder's adjusted
tax basis in the fractional share redeemed. Such gain or loss will be capital
gain or loss and will be long-term if the U.S. Holder's holding period for the
fractional share exceeds one year.
CONVERSION OF SERIES F PREFERRED STOCK AFTER DIVIDEND RECORD DATE
If a holder whose Series F Preferred Stock has not been called for redemption
surrenders such Series F Preferred Stock for conversion into shares of Common
Stock after a dividend record date for the Series F Preferred Stock but before
payment of the dividend, such holder will be required to pay the Company an
amount equal to such dividend upon conversion. A U.S. Holder will likely
recognize the dividend payment as ordinary dividend income when it is received
and increase the basis of the Common Stock received by the amount paid to the
Company.
REDEMPTION, SALE OR OTHER TAXABLE DISPOSITION OF SERIES F PREFERRED STOCK AND
SALE OR OTHER TAXABLE DISPOSITION OF COMMON STOCK
A redemption of shares of Series F Preferred Stock for cash will be a taxable
event.
A redemption of shares of Series F 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 F Preferred Stock redeemed. If a holder does own,
actually or constructively, other stock of the Company, a redemption of Series F
Preferred Stock may be treated as a dividend to the extent of the Company's
allocable current or accumulated earnings and profits (as determined for federal
income tax purposes). Such dividend treatment will not be applied if the
redemption is "not essentially equivalent to a dividend" with respect to the
holder under Section 302(b)(1) of the Code. A distribution to a holder will be
"not essentially equivalent to a dividend" if it results in a "meaningful
reduction" in the holder's stock interest in the Company. For this purpose, a
redemption of Series F 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 F 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 F 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
other taxable disposition of the Series F 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
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<PAGE>
the holder's adjusted tax basis in the Series F 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 F Preferred Stock or
Common Stock exceeds one year.
If a redemption of Series F 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 F 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 F Preferred Stock.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
DISTRIBUTIONS ON DEPOSITARY SHARES AND COMMON STOCK
Dividends paid to a Non-U.S. Holder of Series F Preferred Stock or Common
Stock that are not effectively connected with the conduct of a trade or business
within the United States by the Non-U.S. Holder will be subject to United States
federal income tax, which generally will be withheld at a rate of 30% of the
gross amount of the dividends unless the rate is reduced by an applicable income
tax treaty. Under the currently applicable Treasury regulations, dividends paid
to an address in a country other than the United States are subject to
withholding (unless the payor has knowledge to the contrary).
Dividends paid to a Non-U.S. Holder of Series F Preferred Stock or Common
Stock that are effectively connected with a United States trade or business
conducted by such Non-U.S. Holder are taxed at the graduated rates applicable to
United States citizens, resident aliens and domestic corporations (the "Regular
Federal Income Tax"), and are not subject to withholding tax if the Non-U.S.
Holder gives an appropriate statement to the Company or its paying agent in
advance of the dividend payment. In addition to the Regular Federal Income Tax,
effectively connected dividends received by a Non-U.S. Holder that is a
corporation may also be subject to an additional branch profits tax at a rate of
30% (or such lower rate as may be specified by an applicable income tax treaty).
REDEMPTION, SALE OR OTHER TAXABLE DISPOSITION OF SERIES F PREFERRED STOCK AND
SALE OR OTHER TAXABLE DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income tax or withholding on gain recognized upon the sale or other disposition
of Series F Preferred Stock or Common Stock unless: (i) the gain is effectively
connected with the conduct of a trade or business within the United States by
the Non-U.S. Holder (in which case the branch profits tax also may apply if the
Non-U.S. Holder is a corporation); (ii) in the case of a Non-U.S. Holder who is
a non-resident alien individual and holds the Series F Preferred Stock or Common
Stock as a capital asset, such holder is present in the United States for 183 or
more days in the taxable year and certain other conditions are met; or (iii) the
Series F Preferred Stock or Common Stock constitutes a United States real
property interest by reason of the Company's status as a "United States real
property holding corporation" ("USRPHC") for federal income tax purposes at
any time within the shorter of the five-year period preceding such disposition
or such Non-U.S. Holder's holding period for such Series F Preferred Stock or
Common Stock. The Company does not believe that it is or will become a USRPHC
for federal income tax purposes.
If a Non-U.S. Holder falls within clause (i) or (iii) in the preceding
paragraph, the holder will be taxed on the net gain derived from the sale under
the Regular Federal Income Tax, and may be subject to withholding under certain
circumstances (and, with respect to corporate Non-U.S. Holders, may also be
subject to the branch profits tax). If an
38
<PAGE>
individual Non-U.S. Holder falls under clause (ii) in the preceding paragraph,
the holder generally will be subject to United States federal income tax at a
rate of 30% on the gain derived from the sale.
FEDERAL ESTATE TAXES
An individual Non-U.S. Holder who owns, or is treated as owning, Series F
Preferred Stock or Common Stock at the time of his or her death or has made
certain lifetime transfers of an interest in Series F Preferred Stock or Common
Stock will be required to include the value of such Series F Preferred Stock or
Common Stock in his gross estate for United States federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.
NEW WITHHOLDING REGULATIONS
The Treasury Department recently promulgated final regulations regarding the
withholding and information reporting rules applicable to Non-U.S. Holders (the
"New Withholding Regulations"). In general, the New Withholding Regulations do
not significantly alter the substantive withholding and information reporting
requirements but rather unify current certification procedures and forms and
clarify reliance standards. The New Withholding Regulations are generally
effective for payments made after December 31, 1999, subject to certain
transition rules. NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE IMPACT, IF ANY, OF THE NEW WITHHOLDING REGULATIONS.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company will, where required, report to the holders of the Depositary
Shares and Common Stock and to the Internal Revenue Service the amount of any
dividends paid on the Depositary Shares and Common Stock in each calendar year
and the amounts of tax withheld, if any, with respect to such payments.
A U.S. Holder of Depositary Shares or Common Stock may be subject to backup
withholding at the rate of 31% with respect to dividends paid on, or the
proceeds of a redemption, sale or exchange of, the Depositary Shares or Common
Stock, unless such holder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates its exemption or (b) provides
a correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. A U.S. Holder of Depositary Shares or Common Stock
who does not provide the Company with the holder's correct taxpayer
identification number may be subject to penalties imposed by the IRS. A Non-
U.S. Holder of Depositary Shares or Common Stock may also be subject to certain
information reporting or backup withholding if certain requisite certification
is not received or other exemptions do not apply. Any amount paid as backup
withholding would be creditable against the holder's federal income tax
liability.
39
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth, as of [September__], 1998 certain information
regarding the Selling Securityholders' ownership of the Company's Depositary
Shares, Series F 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 F 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 F
Preferred Stock or Common Stock as of the date of this Prospectus.
<TABLE>
<CAPTION>
====================================================================================================================================
Common Stock Depositary Shares
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Beneficially Beneficially
Name of Selling Owned owned After
Security- Beneficially Owned Prior Offered After This Beneficially Owned Offered This Offering
holder(1) to This Offering/(2)(3)/ for Sale Offering/(2)(3)/ Prior to This Offering/(2)/ for sale /(2)/
- --------------- ------------------------ -------- --------------- -------------------------- -------- --------------
Number of Percent of
Number of Percent of Depositary Depositary
Shares Shares Shares Shares
------ ------ ------ ------
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
<CAPTION>
=======================================================================
Series F Preferred Stock
=======================================================================
Beneficially
Owned After
Name of Selling Beneficially Owned This
Security- Prior to This Offered Offering
holder(1) Offering /(2)(4)/ for sale /(2)(4)/
- --------------- ------------------ -------- ------------
<S> <C> <C> <C>
Number
of Shares Percent
of Series of
F Series F
Preferred Preferred
Stock Stock
----- -----
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Common Stock Depositary Shares
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Beneficially Beneficially
Name of Selling Owned owned After
Security- Beneficially Owned Prior Offered After This Beneficially Owned Offered This Offering
holder(1) to This Offering/(2)(3)/ for Sale Offering/(2)(3)/ Prior to This Offering/(2)/ for sale /(2)/
- --------------- ------------------------ -------- --------------- -------------------------- -------- --------------
Number of Percent of
Number of Percent of Depositary Depositary
Shares Shares Shares Shares
------ ------ ------ ------
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
====================================================================================================================================
<CAPTION>
=======================================================================
Series F Preferred Stock
=======================================================================
Beneficially
Owned After
Beneficially Owned This
Prior to This Offered Offering
Offering /(2)(4)/ for sale /(2)(4)/
- --------------------- -------- ------------
<S> <C> <C>
Number
of Shares Percent of
of Series
F Series F
Preferred Preferred
Stock Stock
----- -----
_______________________________________________________________________
_______________________________________________________________________
=======================================================================
</TABLE>
* Less than one percent. Based on [ ] shares of common stock outstanding on
September [ ], 1998, 8,000,000 Despositary Shares outing on September [ ], 1998
and 80,000 shares of Series F Preferred Stock outstanding on September [ ],
1998.
(1) The names of additional Selling Securityholders may be provided subsequent
hereto Pursuant to Section 424(c) of the Securities Act.
(2) Under the rules of the Commission, a person is deemed to be 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 beneficial
owner of any securities if that person has the right to aquire beneficial
ownership within 60 days. Accordingly, more than one person may be deemed
to be 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 F
Preferred Stock. The Depositary Shares and the Series F Preferred Stock may
not be converted into Common Stock until November 17, 1998.
(4) Assuming the conversion of all Depositary Shares into shares of Series F
Preferred Stock on the basis of one share of Series F Preferred Stock for
each one hundred Depositary Shares.
The Common Stock, Depositary Shares and the Series F Preferred Stock
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 Offering. The Initial Purchasers, in turn, resold the
Depositary Shares in private sales pursuant to exemption from registration under
the Securities Act.
41
<PAGE>
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of the Securities or
the issuance of the Dividend Shares offered hereby. The Dividend Shares may be
issued by the Company in lieu of cash from time to time to holders of record of
the Series F Preferred Stock, all in accordance with the Certificate of
Designation, during the two year period commencing on the date of this
Prospectus. See "Description of Series F 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 amounts to be negotiated immediately prior to the sale in the
form of discounts, concessions or commissions from the Selling Securityholders
and/or the purchasers of the Securities for whom they may act as agent. The
Selling Securityholders and any such brokers, dealers or agents who participate
in the distribution of the Securities may be deemed to be "underwriters", and
any profits on the sale of the Securities by them and any discounts, commissions
or concessions received by any such brokers, dealers or agents might be deemed
to be underwriting discounts and commissions under the Securities Act. To the
extent the Selling Securityholders may be deemed to be underwriters, the Selling
Securityholders may be subject to certain statutory liabilities under the
Securities Act and the Exchange Act, including, but not limited to, Sections 11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.
The Securities offered hereby may be sold by the Selling Securityholders from
time to time in one or more transactions at fixed prices, at prevailing market
prices at the time of sale, at varying prices determined at the time of sale or
at negotiated prices. The Securities may be sold by one or more of the following
methods, without limitation: (a) a block trade in which the broker or dealer so
engaged will attempt to sell the Securities as agent but may position and resell
a portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; (d) an exchange
distribution in accordance with the rules of such exchange; (e) face-to-face
transactions between sellers and purchasers without a broker-dealer; (f) through
the writing of options; and (g) other. At any time a particular offer of the
Securities is made, a revised Prospectus or Prospectus Supplement, if required,
will be distributed which will set forth the aggregate amount and type of
Securities being offered and the terms of the offering, including the name or
names of any underwriters, dealers or agents, any discounts, commissions and
other items constituting compensation from the Selling Securityholders and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
Such Prospectus Supplement and, if necessary, a post-effective amendment to the
Registration Statement of which this Prospectus is a part, will be filed with
the Commission to reflect the disclosure of additional information with respect
to the distribution of the Securities. In addition, the Securities covered by
this Prospectus may be sold in private transactions or under Rule 144 under the
Securities Act rather than pursuant to this Prospectus.
To the best knowledge of the Company, there are currently no plans,
arrangements or understandings between any Selling Securityholders and any
broker, dealer, agent or underwriter regarding the sale of the Securities by the
Selling Securityholders. There is no assurance that any Selling Securityholder
will sell any or all of the Securities offered by it hereunder or that any such
Selling Securityholder will not transfer, devise or gift such Securities by
other means not described herein.
The Selling Securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M, which may limit the timing of purchases and sales of any of the Securities by
the Selling Securityholders and any other such person. All of the foregoing may
affect the marketability of the Securities and the ability of any person or
entity to engage in market-making activities with respect to the Securities.
Pursuant to the Registration Rights Agreement entered into in connection with
the offer and sale of the Depositary Shares by the Company, each of the Company
and the applicable Selling Securityholders will be indemnified by the other
against certain liabilities, including certain liabilities under the Securities
Act, or will be
42
<PAGE>
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.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Intermedia's Certificate of Incorporation provides that Intermedia will to the
fullest extent permitted by the DGCL indemnify all persons whom it may indemnify
pursuant thereto. Intermedia's Bylaws contain a similar provision requiring
indemnification of Intermedia's directors and officers to the fullest extent
authorized by the DGCL. The DGCL permits a corporation to indemnify its
directors and officers (among others) against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by them in connection with any action, suit or proceeding brought (or
threatened to be brought) by third parties, if such directors or officers acted
in good faith and in a manner they reasonably believed to be in or not opposed
to the best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
----
corporation, indemnification may be made for expenses (including attorneys'
fees) actually and reasonably incurred by directors and officers in connection
with the defense or settlement of such action if they had acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged liable to Intermedia unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses. The DGCL further provides that, to the extent any
director or officer has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in this paragraph, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith. In addition, Intermedia's Certificate of Incorporation
contains a provision limiting the personal liability of Intermedia's directors
for monetary damages for certain breaches of their fiduciary duty. Intermedia
has indemnification insurance under which directors and officers are insured
against certain liability that may occur in their capacity as such.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Intermedia
pursuant to the foregoing provisions, Intermedia has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
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 11,490 shares of the Common Stock and owns the
1997 Warrant which permits its holder to purchase 200,000 shares of Common Stock
at an exercise price of $20.75 per share.
EXPERTS
The consolidated financial statements and schedule of the Company and Shared
appearing in the Company's Annual Report (Form 10-K) for the year ended December
31, 1997, have been audited by Ernst & Young LLP, independent certified public
accountants, as set forth in their report thereon included therein and
incorporated herein
43
<PAGE>
by reference. Such consolidated financial statements and schedule are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of DIGEX appearing in DIGEX's Annual
Report (Form 10-KSB) for the year ended December 31, 1996, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The December 31, 1996 audited financial statements of Shared incorporated by
reference in this Prospectus and in the Registration Statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
The consolidated statements of operations, stockholders' equity and cash flows
of Shared and subsidiaries for the year ended December 31, 1995 incorporated by
reference in this Prospectus have been audited by Rothstein, Kass & Company,
P.C., independent certified public accountants, as indicated in their report,
which includes an explanatory paragraph relating to the changing of the method
of accounting for its investment in one of its subsidiaries, with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in accounting and auditing.
44
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
The following statement sets forth the expenses payable in connection with
this Registration Statement (estimated except for the registration fee), all of
which will be borne by the Company:
Securities and Exchange Commission filing fee................ $ 55,644.00
Legal fees and expenses...................................... $ 50,000.00
Accountant's fees and expenses............................... $ 15,000.00
Miscellaneous................................................ $ 4,356.00
------------
Total........................................................ $ 125,000.00
ITEM 15. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation provides that the Company will
to the fullest extent permitted by the DGCL indemnify all persons whom it may
indemnify pursuant thereto. The Company's By-laws contain a similar provision
requiring indemnification of the Company's directors and officers to the fullest
extent authorized by the DGCL. The DGCL permits a corporation to indemnify its
directors and officers (among others) against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by them in connection with any action, suit or proceeding brought (or
threatened to be brought) by third parties, if such directors or officers acted
in good faith and in a manner they reasonably believed to be in or not opposed
to the best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
----
corporation, indemnification may be made for expenses (including attorneys'
fees) actually and reasonably incurred by directors and officers in connection
with the defense or settlement of such action if they had acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged liable to the Company unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses. The DGCL further provides that, to the extent any
director or officer has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in this paragraph, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith. In addition, the Company's Certificate of Incorporation
contains a provision limiting the personal liability of the Company's directors
for monetary damages for certain breaches of their fiduciary duty. The Company
has indemnification insurance under which directors and officers are insured
against certain liability that may occur in their capacity as such.
<PAGE>
ITEM 16. Exhibits and Financial Data Schedules.
(a) Exhibits
1.1 -- Purchase Agreement, dated as of August 12, 1998, among the Company
and the Initial Purchasers.
2.1 -- Agreement and Plan of Merger, dated as of June 4, 1997, among the
Company, Daylight Acquisition Corp. and DIGEX. Exhibit 99(c)(1) to
the Company's Schedule 14D-1 filed with the Commission on June 11,
1997 is incorporated herein by reference.
2.2 -- Agreement and Plan of Merger, dated as of November 20, 1997, among
the Company, Moonlight Acquisition Corp. and Shared Technologies
Fairchild, Inc. Exhibit 99(c)(1) to the Company's Schedule 14D-1 and
Schedule 13D filed with the Commission on November 26, 1997 is
incorporated herein by reference.
2.3 -- Acquisition Agreement, dated as of December 17, 1997, among the
Company and the holders of interests in the Long Distance Savers
companies. Exhibit 2.3 to Amendment No. 1 to the Company's
Registration Statement on Form S-3 filed with the Commission on
January 14, 1998 (No. 333-42999) is incorporated herein by
reference.
2.4 -- Agreement and Plan of Merger, dated as of February 11, 1998, among
the Company, Sumter One Acquisition, Inc., Sumter Two Acquisition,
Inc., National Telecommunications of Florida, Inc., NTC, Inc. and
the stockholders of National Exhibit 2.4 to the Company's
Registration Statement on Form S-3 filed with the Commission on
February 13, 1998 (No. 333-46369) is incorporated herein by
reference.
4.1 -- Indenture, dated as of June 2, 1995, between the Company and SunBank
National Association, as trustee. Exhibit 4.1 to the Company's
Registration Statement on Form S-4 filed with the Commission on June
20, 1995 (No. 33-93622) is incorporated herein by reference.
4.1(a) -- Amended and Restated Indenture, dated as of April 26, 1996,
governing the Company's 13% Series B Senior Notes due 2005, between
the Company and SunTrust Bank, Central Florida, National
Association, as trustee, Exhibit 4.1 to the Company's Current Report
on Form 8-K filed with the Commission on April 29, 1996 is
incorporated herein by reference.
4.2 -- Indenture, dated as of May 14, 1996, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.1 to Amendment No. 1 to the Company's Registration
Statement on Form S-3 (Commission File No. 33-34738) filed with the
Commission on April 18, 1996 is incorporated herein by reference.
4.3 -- Indenture, dated as of July 9, 1997, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.1 to the Company's Current Report on Form 8-K filed with
the Commission on July 17, 1997 is incorporated herein by reference.
4.4 -- Indenture, dated as of October 30, 1997, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.1 to the Company's Current Report on Form 8-K filed with
the Commission on November 6, 1997 is incorporated herein by
reference.
4.5 -- Indenture, dated as of December 23, 1997, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.5 to the Company's Registration Statement on
<PAGE>
Form S-4 filed with the Commission on February 11, 1998 (No. 333-
44875) is incorporated herein by reference.
4.6 -- Indenture, dated as of May 27, 1998, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.6 to the Company's Registration Statement on Form S-4
filed with the Commission on June 16, 1998 (No. 333-56939) is
incorporated herein by reference.
4.7 -- Registration Rights Agreement, dated as of August 18, 1998, among
the Company and the Initial Purchasers.
4.8 -- Certificate of Designation of Voting Power, Designation Preferences
and Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions of 7% Series F Junior
Convertible Preferred Stock of the Company, filed with the Secretary
of State of the State of Delaware on August 17, 1998.
4.9 -- Deposit Agreement, dated as of August 18, 1998, between the Company
and Continental Stock Transfer & Trust Company.
5.1* -- Opinion of Kronish Lieb Weiner & Hellman LLP.
8.1* -- Opinion of Kronish Lieb Weiner & Hellman LLP re: Tax matters is
contained in their opinion filed as Exhibit 5.1 to this Registration
Statement.
12.1 -- Statement Re: Computation of Ratios.
23.1* -- Consent of Kronish Lieb Weiner & Hellman LLP is contained in their
opinion filed as Exhibit 5.1 to this Registration Statement.
23.2 -- Consent of Ernst & Young LLP.
23.3 -- Consent of Ernst & Young LLP.
23.4 -- Consent of Ernst & Young LLP.
23.5 -- Consent of Arthur Andersen LLP
23.6 -- Consent of Rothstein, Kass & Company, P.C.
24.1 -- Power of Attorney is set forth on the signature page of this
Registration Statement.
_________________
* To be filed by Amendment.
(b) Financial Data Schedules
(b) Financial Data Schedules
Financial Data Schedules are not required to be filed since all financial
statements have been previously included in filings with the Commission.
<PAGE>
ITEM 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (i) and (ii) above do not apply if the
- -------- -------
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tampa, State of Florida, on this 4th day of
September, 1998.
INTERMEDIA COMMUNICATIONS INC.
By: /s/ Robert M. Manning
------------------------------------------
Robert M. Manning,
Chief Financial Officer and, Secretary
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below authorizes David C. Ruberg and Robert M. Manning, or either of them, as
attorney-in-fact to sign and file in each capacity stated below, all amendments
and post-effective amendments to this Registration Statement.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Principal Executive Officers:
Chairman of the Board, September 4, 1998
/s/ David C. Ruberg President and Chief
---------------------------------
David C. Ruberg Executive Officer
Principal Financial and Accounting Officers:
Chief Financial Officer and September 4, 1998
/s/ Robert M. Manning Senior Vice President
---------------------------------
Robert M. Manning
/s/ Jeanne M. Walters Controller and Chief September 4, 1998
---------------------------------
Jeanne M. Walters Accounting Officer
Other Directors:
/s/ John C. Baker Director September 4, 1998
---------------------------------
John C. Baker
/s/ George F. Knapp Director September 4, 1998
---------------------------------
George F. Knapp
/s/ Philip A. Campbell Director September 4, 1998
---------------------------------
Philip A. Campbell
</TABLE>
<PAGE>
EXHIBIT INDEX
Number Exhibits Page
- ------ -------- ----
1.1 -- Purchase Agreement, dated as of August 12, 1998, among the
Company and the Initial Purchasers.
2.1 -- Agreement and Plan of Merger, dated as of June 4, 1997, among
the Company, Daylight Acquisition Corp. and DIGEX. Exhibit
99(c)(1) to the Company's Schedule 14D-1 filed with the
Commission on June 11, 1997 is incorporated herein by reference.
2.2 -- Agreement and Plan of Merger, dated as of November 20, 1997,
among the Company, Moonlight Acquisition Corp. and Shared
Technologies Fairchild, Inc. Exhibit 99(c)(1) to the Company's
Schedule 14D-1 and Schedule 13D filed with the Commission on
November 26, 1997 is inco rporated herein by reference.
2.3 -- Acquisition Agreement, dated as of December 17, 1997, among the
Company and the holders of interests in the Long Distance Savers
companies. Exhibit 2.3 to Amendment No. 1 to the Company's
Registration Statement on Form S-3 filed with the Commission on
January 14, 1998 (No. 333-42999) is incorporated herein by
reference.
2.4 -- Agreement and Plan of Merger, dated as of February 11, 1998,
among the Company, Sumter One Acquisition, Inc., Sumter Two
Acquisition, Inc., National Telecommunications of Florida, Inc.,
NTC, Inc. and the stockholders of National Exhibit 2.4 to the
Company's Registration Statement on Form S-3 filed with the
Commission on February 13, 1998 (No. 333-46369) is incorporated
herein by reference.
4.1 -- Indenture, dated as of June 2, 1995, between the Company and
SunBank National Association, as trustee. Exhibit 4.1 to the
Company's Registration Statement on Form S-4 filed with the
Commission on June 20, 1995 (No. 33-93622) is incorporated herein
by reference.
4.1(a) -- Amended and Restated Indenture, dated as of April 26, 1996,
governing the Company's 13% Series B Senior Notes due 2005,
between the Company and SunTrust Bank, Central Florida, National
Association, as trustee, Exhibit 4.1 to the Company's Current
Report on Form 8-K filed with the Commission on April 29, 1996 is
incorporated herein by reference.
4.2 -- Indenture, dated as of May 14, 1996, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.1 to Amendment No. 1 to the Company's Registration
Statement on Form S-3 (Commission File No. 33-34738) filed with
the Commission on April 18, 1996 is incorporated herein by
reference.
4.3 -- Indenture, dated as of July 9, 1997, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.1 to the Company's Current Report on Form 8-K filed
with the Commission on July 17, 1997 is incorporated herein by
reference.
4.4 -- Indenture, dated as of October 30, 1997, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.1 to the Company's Current Report on Form 8-K filed
with the Commission on November 6, 1997 is incorporated herein by
reference.
4.5 -- Indenture, dated as of December 23, 1997, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.5 to the Company's Registration Statement on Form S-4
<PAGE>
filed with the Commission on February 11, 1998 (No. 333-44875) is
incorporated herein by reference.
4.6 -- Indenture, dated as of May 27, 1998, between the Company and
SunTrust Bank, Central Florida, National Association, as trustee.
Exhibit 4.6 to the Company's Registration Statement on Form S-4
filed with the Commission on June 16, 1998 (No. 333-56939) is
incorporated herein by reference.
4.7 -- Registration Rights Agreement, dated as of August 18, 1998, among
the Company and the Initial Purchasers.
4.8 -- Optional and Other Special Rights and Qualifications, Limitations
and Restrictions of 7% Series F Junior Convertible Preferred Stock
of the Company, filed with the Secretary of State of the State of
Delaware on August 17, 1998.
4.9 -- Deposit Agreement, dated as of Transfer & Trust Company. August 18,
1998, between the Company and Continental Stock Transfer & Trust
Company
5.1* -- Opinion of Kronish Lieb Weiner & Hellman LLP.
8.1* -- Opinion of Kronish Lieb Weiner & Hellman LLP re: Tax matters is
contained in their opinion filed as Exhibit 5.1 to this Registration
Statement.
12.1 -- Statement Re: Computation of Ratios.
23.1* -- Consent of Kronish Lieb Weiner & Hellman LLP is contained in their
opinion filed as Exhibit 5.1 to this Registration Statement.
23.2 -- Consent of Ernst & Young LLP.
23.3 -- Consent of Ernst & Young LLP.
23.4 -- Consent of Ernst & Young LLP.
23.5 -- Consent of Arthur Andersen LLP
23.6 -- Consent of Rothstein, Kass & Company, P.C.
24.1 -- Power of Attorney is set forth on the signature page of this
Registration Statement.
- ---------------
* To be filed by Amendment.
<PAGE>
EXHIBIT 1.1
EXECUTION COPY
- --------------------------------------------------------------------------------
INTERMEDIA COMMUNICATIONS INC.
8,000,000 Depositary Shares Each Representing a One-Hundredth Interest in a
Share of 7% Series F Junior Convertible Preferred Stock
Depositary Share Purchase Agreement
August 12, 1998
BEAR, STEARNS & CO. INC.
SMITH BARNEY INC.
MERRILL LYNCH & CO.
WARBURG DILLON READ LLC
- --------------------------------------------------------------------------------
<PAGE>
INTERMEDIA COMMUNICATIONS INC.
8,000,000 Depositary Shares Each Representing a One-Hundredth Interest in a
Share of 7% Series F Junior Convertible Preferred Stock
DEPOSITARY SHARE PURCHASE AGREEMENT
-----------------------------------
August 12, 1998
New York, New York
BEAR, STEARNS & CO. INC.
SMITH BARNEY INC.
MERRILL LYNCH & CO.
WARBURG DILLON READ LLC
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies & Gentlemen:
Intermedia Communications Inc., a Delaware corporation (the "Company"),
-------
proposes to issue and sell to Bear, Stearns & Co. Inc., Smith Barney Inc.,
Merrill Lynch & Co. and Warburg Dillon Read LLC (together, the "Initial
-------
Purchasers") 8,000,000 Depositary Shares (the "Depositary Shares"), each
- ---------- -----------------
representing a one-hundredth interest in a share of its 7% Series F Junior
Convertible Preferred Stock, par value $1.00 per share (the "Series F Preferred
---------
Stock"). The Series F Preferred Stock and the related Depositary Shares are to
- -----
be authorized and issued pursuant to the provisions of a Certificate of
Designation of Voting Power, Designation Preferences and Relative,
Participating, Optional or Other Special Rights and Qualifications, Limitations
and Restrictions (the "Certificate of Designation") to be filed with the
--------------------------
Secretary of State of the State of Delaware. Continental Stock Transfer & Trust
Company will be transfer agent and registrar for the Series F Preferred Stock
and will act as the "Depositary" for the Depositary Shares.
----------
1. Issuance of Securities. The Company proposes to, upon the terms and
----------------------
subject to the conditions set forth herein, issue and sell to the Initial
Purchasers 8,000,000 Depositary Shares (the "Firm Shares"). The Company also
-----------
proposes to sell to the Initial Purchasers, upon the terms and conditions set
forth herein, up to an additional 1,200,000 Depositary Shares (the "Additional
----------
Shares", and together with the Firm Shares, the "Company Shares"). The Firm
- ------ --------------
Shares, the Additional Shares, and the Series F Preferred Stock are collectively
referred to herein as the "Securities."
For purposes of this Purchase Agreement (this "Agreement"), the term
---------
"Subsidiaries" shall mean the entities listed on Exhibit D hereto. Capitalized
------------
terms used but not otherwise defined herein shall have the meanings given to
such terms in the Certificate of Designation. Upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act, the Series F Preferred Stock and the Company Shares
(and all securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
<PAGE>
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (3) TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (4)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN
"IAI") THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE) OR (5) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT (AND BASED ON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT IN EACH OF THE
FOREGOING CASES TO APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE."
2. Offering. The Company Shares, will be offered and sold to the
--------
Initial Purchasers pursuant to an exemption from the registration requirements
under the Securities Act of 1933, as amended (the "Act"). The Company has
---
prepared a preliminary offering memorandum, dated August 4, 1998 (the
"Preliminary Offering Memorandum"), and a final offering memorandum, dated
-------------------------------
August 12, 1998 (the "Offering Memorandum"), relating to the Company and the
-------------------
Series F Preferred Stock (and the related Depositary Shares).
The Initial Purchasers have advised the Company that the Initial
Purchasers will make offers of sale (the "Exempt Resales") of the Company
--------------
Shares, on the terms set forth in the Offering Memorandum, as amended or
supplemented, solely (i) to persons whom any of the Initial Purchasers
reasonably believe to be "qualified institutional buyers," as defined in Rule
144A under the Act ("QIBs") and (ii) to a limited number of persons who have
---
represented to the Company that they are institutional "Accredited Investors"
--------------------
referred to in Rule 501(a)(1), (2), (3) or (7) under the Act (each, an
"Accredited Investor"). The QIBs and Accredited Investors are referred to herein
as the "Eligible Purchasers." The Initial Purchasers will offer the Series F
-------------------
Preferred Stock (and the related Depositary Shares) to such Eligible Purchasers
initially at a price of $2,500.00 (and $25.00 for the related Depositary Shares)
per share. Such price may be changed at any time
2
<PAGE>
without notice.
Holders (including subsequent transferees) of the Series F Preferred
Stock (and the related Depositary Shares) will have the registration rights set
forth in the registration rights agreement relating thereto (the "Registration
------------
Rights Agreement") to be dated the Closing Date (as defined), for so long as
- ----------------
such Series F Preferred Stock (and the related Depositary Shares) constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Securities and Exchange Commission (the "Commission"),
----------
under the circumstances set forth therein, (i) a shelf registration statement
pursuant to Rule 415 under the Act (the "Shelf Registration Statement") relating
----------------------------
to the resale by certain holders of the Series F Preferred Stock and the related
Depositary Shares, and (ii) a registration statement (the "Common Registration
-------------------
Statement") relating to the sale by certain holders of Common Stock of the
- ---------
Company received in connection with conversion of the Series F Preferred Stock
and dividends on the Series F Preferred Stock paid as Common Stock, and to use
its best efforts to cause the Shelf Registration Statement and the Common
Registration Statement to be declared effective. This Agreement, the Certificate
of Designation, the Securities, and the Registration Rights Agreement are
hereinafter sometimes referred to collectively as the "Operative Documents."
-------------------
3. Purchase, Sale and Delivery.
---------------------------
(a) On the basis of the representations, warranties and
covenants contained in this Agreement, and subject to its terms and conditions,
the Company agrees to issue and sell to each Initial Purchaser, and each Initial
Purchaser agrees severally and not jointly to purchase from the Company, the
number of Firm Shares set forth opposite its name on Schedule I hereto. The
purchase price for the Firm Shares, shall be $24.25 per share.
The Company also agrees, subject to all the terms and conditions set
forth herein, to sell to the Initial Purchasers, and, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, the Initial Purchasers
shall have the right to purchase from the Company, solely for the purpose of
covering over-allotments in connection with sales of the Firm Shares, at the
purchase price per Depositary Share of $24.25, pursuant to an option (the
"over-allotment option") which may be exercised at any time and from time to
time prior to 10:00 p.m., New York City time, on the 30th day after the date of
the Offering Memorandum (or, if such 30th day shall be a Saturday or Sunday or a
holiday, on the next business day thereafter when the New York Stock Exchange is
open for trading), up to an aggregate of 1,200,000 Additional Shares. Upon any
exercise of the over-allotment option, each Initial Purchaser, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments as the Initial Purchasers may determine in order to
avoid fractional Depositary Shares) that bears the same proportion to the
aggregate number of Additional Shares to be purchased by the Initial Purchasers
as the number of Firm Shares set forth opposite the name of such Initial
Purchaser on Schedule I hereto bears to the aggregate number of Firm Shares.
(b) Delivery of, and payment of the purchase price for, the
Firm Shares shall be made, against payment of the purchase price, at the offices
of Latham & Watkins, 885 Third Avenue, New York, NY 10022, or such other
location as may be mutually acceptable. Such delivery and payment shall be made
at 9:00 A.M. New York time, on August 18, 1998 or at such other time as shall be
agreed upon by the Initial Purchasers and the Company. The time and date of such
delivery and payment of the Firm Shares are herein called the "Closing Date."
------------
3
<PAGE>
(c) Delivery of, and payment of the purchase price for any
Additional Shares to be purchased by the Initial Purchasers shall be made at the
offices of Latham & Watkins, 885 Third Avenue, New York, NY 10022, or such other
location as may be mutually acceptable, at such time and on such date (the
"Option Closing Date"), which may be the same as the Closing Date but shall in
-------------------
no event be earlier than the Closing Date nor later than ten business days after
the giving of the notice hereinafter referred to, as shall be specified in a
written notice from Bear, Stearns & Co. Inc., on behalf of the Initial
Purchasers to purchase a number, specified in such notice, of Additional Shares.
(d) The Firm Shares and any Additional Shares to be purchased
hereunder shall initially be issued in the form of one or more Global Securities
(the "Global Securities"), registered in the name of Cede & Co., as nominee of
-----------------
the Depositary Trust Company ("DTC"), having a liquidation preference
corresponding to the aggregate liquidation preference of the Firm Shares and the
Additional Shares, as the case may be. The Global Securities shall be delivered
by the Company to the Initial Purchasers (or as the Initial Purchasers direct)
in each case with any transfer taxes payable upon initial issuance thereof duly
paid by the Company against payment of the purchase price by wire transfer of
immediately available funds to the order of the Company. The Global Securities
shall be made available to the Initial Purchasers for inspection not later than
9:30 a.m., New York City time, on the business day immediately preceding the
Closing Date.
4. Agreements of the Company. The Company covenants and agrees
-------------------------
with each of the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing, (i) of the
issuance by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any of the Company Shares for
offering or sale in any jurisdiction, or the initiation of any proceeding for
such purpose by any state securities commission or other regulatory authority
and (ii) of the happening of any event that, in the reasonable opinion of either
counsel to the Company or counsel to the Initial Purchasers, makes any statement
of a material fact made in the Preliminary Offering Memorandum or the Offering
Memorandum untrue or that requires the making of any additions to or changes in
the Preliminary Offering Memorandum or the Offering Memorandum in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. The Company shall use its best efforts to prevent the
issuance of any stop order or order suspending the qualification or exemption of
any of the Series F Preferred Stock (and the related Depositary Shares) under
any state securities or Blue Sky laws and, if at any time any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption of any of the Company Shares, under any state
securities or Blue Sky laws, the Company shall use its best efforts to obtain
the withdrawal or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company, without charge, as many
copies of the Preliminary Offering Memorandum and the Offering Memorandum, and
any amendments or supplements thereto, as the Initial Purchasers may reasonably
request. The Company consents to the use of the Preliminary Offering Memorandum
and the Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchasers in connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering
Memorandum or the Offering Memorandum prior to the Closing Date unless the
Initial Purchasers shall previously have been
4
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advised thereof and shall not have objected thereto within a reasonable time
after being furnished a copy thereof. The Company shall promptly prepare, upon
the Initial Purchasers' request, any amendment or supplement to the Preliminary
Offering Memorandum or the Offering Memorandum that may be necessary or
advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any
Exempt Resale, any event shall occur as a result of which, in the judgment of
the Company or in the reasonable opinion of either counsel to the Company or
counsel to the Initial Purchasers, it becomes necessary or advisable to amend or
supplement the Preliminary Offering Memorandum or Offering Memorandum in order
to make the statements therein, in the light of the circumstances when such
Offering Memorandum is delivered to an Eligible Purchaser which is a prospective
purchaser, not misleading, or if it is necessary or advisable to amend or
supplement the Preliminary Offering Memorandum or Offering Memorandum to comply
with applicable law, (i) to notify the Initial Purchasers and (ii) forthwith to
prepare an appropriate amendment or supplement to such Offering Memorandum so
that the statements therein as so amended or supplemented will not, in the light
of the circumstances when it is so delivered, be misleading, or so that such
Offering Memorandum will comply with applicable law.
(e) To cooperate with the Initial Purchasers and counsel to
the Initial Purchasers in connection with the qualification or registration of
the Company Shares under the securities or Blue Sky laws of such jurisdictions
as the Initial Purchasers may reasonably request and to continue such
qualification in effect so long as required for the Exempt Resales; provided,
however, that the Company shall not be required in connection therewith to
register or qualify as a foreign corporation where it is not now so qualified or
to take any action that would subject it to service of process in suits or
taxation, in each case, other than as to matters and transactions relating to
the Preliminary Offering Memorandum, the Offering Memorandum or Exempt Resales,
in any jurisdiction where it is not now so subject.
(f) Whether or not the transactions contemplated hereby are
consummated or this Agreement becomes effective or is terminated, to pay all
costs, expenses, fees and taxes incident to the performance of the obligations
of the Company hereunder, including in connection with: (i) the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum and the
Offering Memorandum (including, without limitation, financial statements) and
all amendments and supplements thereto required pursuant hereto, (ii) the
preparation (including, without limitation, duplication costs) and delivery of
all preliminary and final Blue Sky memoranda prepared and delivered in
connection herewith and with the Exempt Resales, (iii) the issuance, transfer
and delivery by the Company of the Securities to the Initial Purchasers, (iv)
the qualification or registration of the Securities for offer and sale under the
securities or Blue Sky laws of the several states (including, without
limitation, the reasonable fees and disbursements of counsel to the Initial
Purchasers relating thereto), (v) furnishing such copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and all amendments and
supplements thereto, as may be requested for use in connection with Exempt
Resales, (vi) the preparation of certificates for the Securities (including,
without limitation, printing and engraving thereof), (vii) the fees,
disbursements and expenses of the Company's counsel and accountants, (viii) all
expenses and listing fees in connection with the application for quotation of
the Company Shares in the National Association of Securities Dealers, Inc.
("NASD") Automated Quotation System - PORTAL ("PORTAL"), (ix) all fees and
---- ------
expenses (including fees and expenses of counsel to the Company) of the Company
in connection with the approval of the Securities by DTC for "book-entry"
transfer, (x) rating the Securities by rating agencies, (xi) the reasonable fees
and expenses of the Transfer Agent and its counsel in connection with the
Certificate of Designation, (xii) the performance by the Company of its other
obligations under this Agreement and the other Operative Documents and (xiii)
"roadshow" travel
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<PAGE>
and other expenses incurred in connection with the marketing and sale of the
Securities (other than out-of-pocket expenses incurred by the Initial Purchasers
for travel, meals and lodgings).
(g) To use the proceeds from the sale of the Company Shares in
the manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) To do and perform all things required to be done and
performed under this Agreement by it prior to or after the Closing Date and to
satisfy all conditions precedent on its part to the delivery of the Company
Shares.
(i) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Company Shares, in a manner that would
require the registration under the Act of the sale to the Initial Purchasers or
Eligible Purchasers of the Company Shares, or to take any other action that
would result in the Exempt Resales not being exempt from registration under the
Act.
(j) For so long as any of the Securities remain outstanding
and during any period in which the Company is not subject to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
------------
available to any holder of the Company Shares, in connection with any sale
thereof and any prospective purchaser of such Company Shares from such holder,
the information required by Rule 144A(d)(4) under the Act.
(k) To comply with all of its agreements set forth in the
Registration Rights Agreement and all agreements set forth in the representation
letters of the Company to DTC relating to the approval of the Company Shares, by
DTC for "book-entry" transfer.
(l) To use its best efforts to effect the inclusion of the
Company Shares, in PORTAL and to obtain approval of the Company Shares, by DTC
for "book-entry" transfer.
(m) During a period of five years following the Closing Date,
to deliver without charge to each of the Initial Purchasers, as they may
reasonably request, promptly upon their becoming available, copies of (i) all
reports or other publicly available information that the Company shall mail or
otherwise make available to its stockholders and (ii) all reports, financial
statements and proxy or information statements filed by the Company with the
Commission or any national securities exchange and such other publicly available
information concerning the Company or its Subsidiaries, including without
limitation, press releases.
(n) Prior to the Closing Date, to furnish to each of the
Initial Purchasers, as soon as they have been publicly disclosed by the Company,
a copy of any consolidated financial statements and any unaudited interim
financial statements of the Company for any period subsequent to the period
covered by the financial statements appearing in the Offering Memorandum.
(o) Neither the Company nor any of its Subsidiaries will take,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Company
Shares. Except as permitted by the Act, the Company will not distribute any
preliminary offering memorandum, offering memorandum or other offering material
in connection with the offering and sale of the Company Shares.
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(p) To comply with the agreements in the Certificate of
Designation, the Registration Rights Agreement and any other Operative Document.
(q) During the period of 90 days from the date of the Offering
Memorandum, the Company will not offer, sell, contract to sell, grant any option
to purchase, establish a put equivalent position (as defined in Rule 16a-1(h)
under the Exchange Act), pledge or otherwise dispose of, directly or indirectly,
any shares of Common Stock of the Company, or any securities that are
substantially similar to the Common Stock, including, but not limited to any
securities that are convertible into or exercisable or exchangeable for, or that
represent the right to receive, Common Stock or any substantially similar
securities or publicly disclose the intention to make any such offer, sale,
pledge or disposal, without the prior written consent of Bear, Stearns & Co.
Inc. except (i) for private sales so long as the purchaser thereof enters into a
corresponding lockup agreement with Bear, Stearns & Co. Inc. for the then
unexpired portion of the 90-day period, (ii) for grants of employee stock
options, restricted stock and other incentive awards in the ordinary course of
business, issuances of Common Stock pursuant to the exercise of such options or
awards or the exercise of any other employee stock options outstanding on the
date hereof, (iii) issuances in connection with the acquisition by the Company
or any of its subsidiaries of Telecommunications Related Assets or a
Telecommunications Business and (iv) dividends on securities outstanding on the
Issue Date in accordance with the terms thereof or issuances in connection with
the exercise of any convertible securities, warrants or option securities
existing on the Issue Date or that are required to be issued pursuant to any
agreement in existence on the Issue Date.
5. Representations and Warranties. (a) The Company represents and
------------------------------
warrants to each of the Initial Purchasers that:
(i) The Preliminary Offering Memorandum and the Offering
Memorandum have been prepared in connection with the Exempt Resales. The
Preliminary Offering Memorandum and the Offering Memorandum do not, and any
supplement or amendment to them will not, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties contained
in this paragraph shall not apply to statements in or omissions from the
Preliminary Offering Memorandum and the Offering Memorandum (or any supplement
or amendment thereto) made in reliance upon and in conformity with information
relating to the Initial Purchasers furnished to the Company in writing by the
Initial Purchasers expressly for use therein. No stop order preventing the use
of the Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued.
(ii) When the Company Shares are issued and delivered pursuant
to this Agreement, neither the Series F Preferred Stock nor the Company Shares
will be of the same class (within the meaning of Rule 144A under the Act) as
securities of the Company that are listed on a national securities exchange
registered under Section 6 of the Exchange Act, or that are quoted in a United
States automated inter-dealer quotation system.
(iii) The Company and each of its Subsidiaries (A) has been
duly organized, is validly existing as a corporation in good standing under the
laws of its respective jurisdiction of incorporation, (B) has all requisite
corporate power and authority to carry on its business as it is currently being
conducted and as described in the Offering Memorandum and to own, lease and
operate its properties, and (C) is duly qualified and in good standing as a
foreign corporation authorized to do
7
<PAGE>
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification except, with
respect to this clause (C), where the failure to be so qualified or in good
standing does not and could not reasonably be expected to (x) individually or in
the aggregate, result in a material adverse effect on the properties, business,
results of operations, condition (financial or otherwise), affairs or prospects
of the Company and the Subsidiaries, taken as a whole, (y) interfere with or
adversely affect the issuance or marketability of the Securities pursuant hereto
or (z) in any manner draw into question the validity of this Agreement or any
other Operative Document or the transactions described in the Offering
Memorandum under the caption "Use of Proceeds" (any of the events set forth in
clauses (x), (y) or (z), a "Material Adverse Effect"). The Company has no direct
-----------------------
or indirect subsidiaries as of the Closing Date other than the Subsidiaries.
(iv) All of the outstanding shares of capital stock of the
Company have been duly authorized, validly issued, and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights. All of the outstanding capital stock of the Subsidiaries is owned by the
Company, free and clear of any security interest, claim, lien, limitation on
voting rights or encumbrance. At June 30, 1998 on a combined basis, after giving
effect to the issuance and sale of the Series F Preferred Stock (and the related
Depositary Shares) pursuant hereto and to the events stated therein, the Company
had an authorized and outstanding consolidated capitalization as set forth in
the Offering Memorandum under the caption "Capitalization."
(v) Except as set forth in the Offering Memorandum, there are
not currently, and will not be as a result of the Offering, any outstanding
subscriptions, rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exchangeable for, any capital stock
or other equity interest of the Company or any Subsidiary.
(vi) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the other Operative Documents, and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the corporate
power and authority to issue, sell and deliver the Securities as provided herein
and therein.
(vii) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is the legal, valid and binding
agreement of the Company, enforceable against it in accordance with its terms,
except insofar as indemnification and contribution provisions may be limited by
applicable law or equitable principles and subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of equity.
(viii) The shares of Series F Preferred Stock (and the related
Depositary Shares) have been duly and validly authorized for issuance and sale
to the Initial Purchasers by the Company pursuant to this Agreement and, when
issued, delivered and paid for in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable and entitled to the
rights, privileges and preferences set forth in the Certificate of Designation,
and the issuance of such shares of Series F Preferred Stock (and the related
Depositary Shares) will not be subject to any preemptive or similar rights. The
Series F Preferred Stock (and the related Depositary Shares) will conform in all
material respects with the description thereof in the Offering Memorandum.
(ix) The Certificate of Designation has been duly authorized
by all necessary corporate and any necessary stockholder action and, on the
Closing Date will have been duly executed by
8
<PAGE>
the Company and filed with the Secretary of State of the State of Delaware and
will conform in all material respects to the description thereof in the Offering
Memorandum.
(x) Each of the Registration Rights Agreement and the Deposit
Agreement has been duly and validly authorized by the Company and, when duly
executed and delivered by the Company, will be the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity and limitations on the validity or
enforceability of provisions relating to rights of indemnity and contribution
set forth therein. The Offering Memorandum contains a fair summary of the terms
of the Registration Rights Agreement and the Deposit Agreement.
(xi) None of the Company or any Subsidiary is and, after
giving effect to the Offering, will not be (A) in violation of its charter or
bylaws, (B) in default in the performance of any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to which it
is a party or by which it is bound or to which any of its properties is subject,
or (C) in violation of any local, state or Federal law, statute, ordinance,
rule, regulation, requirement, judgment or court decree (including, without
limitation, the Communications Act and the rules and regulations of the FCC and
environmental laws, statutes, ordinances, rules, regulations, judgments or court
decrees) applicable to the Company or any Subsidiary or any of their assets or
properties (whether owned or leased) other than, in the case of clauses (B) and
(C), any default or violation that (1) could not reasonably be expected to have
a Material Adverse Effect or (2) which is disclosed in the Offering Memorandum.
There exists no condition that, with notice, the passage of time or otherwise,
would constitute a default under any such document or instrument, except as
disclosed in the Offering Memorandum.
(xii) None of (A) the execution, delivery or performance by
the Company of this Agreement and the other Operative Documents, (B) the
issuance and sale of the Series F Preferred Stock (and the related Depositary
Shares), (C) the performance by the Company of its obligations under this
Agreement and the other Operative Documents and (D) the consummation of the
transactions contemplated by this Agreement and the other Operative Documents
violate, conflict with or constitute a breach of any of the terms or provisions
of, or a default under (or an event that with notice or the lapse of time, or
both, would constitute a default), or require consent under, or result in the
imposition of a lien or encumbrance on any properties of the Company or any
Subsidiary, or an acceleration of any indebtedness of the Company or any
Subsidiary pursuant to, (i) the charter or bylaws of the Company or any
Subsidiary, (ii) any bond, debenture, note, indenture, mortgage, deed of trust
or other agreement or instrument to which the Company or any Subsidiary is a
party or by which any of them or their property is or may be bound, (iii) any
statute, rule or regulation applicable to the Company or any Subsidiary or any
of their respective assets or properties or (iv) any judgment, order or decree
of any court or governmental agency or authority having jurisdiction over the
Company or the Subsidiaries or any of their assets or properties, except in the
case of clauses (ii), (iii) and (iv) for such violations conflicts, breaches,
defaults, consents, impositions of liens or accelerations that (1) would not
singly, or in the aggregate, have a Material Adverse Effect or (2) are disclosed
in the Offering Memorandum. Other than as described in the Offering Memorandum,
no consent, approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, (A) any court or governmental
agency, body or administrative agency (including, without limitation, the FCC)
or (B) any other person is required for (1) the execution, delivery and
performance by the Company of this Agreement and the other Operative Documents,
or (2) the issuance and sale of the Securities and the transactions contemplated
hereby and thereby, except (x) such as have been obtained and made (or, in the
case of the Registration Rights
9
<PAGE>
Agreement, will be obtained and made) under the Act and state securities or Blue
Sky laws and regulations or such as may be required by the NASD or (y) where the
failure to obtain any such consent, approval, authorization or order of, or
filing registration, qualification, license or permit would not reasonably be
expected to result in a Material Adverse Effect.
(xiii) There is (i) no action, suit or proceeding before or by
any court, arbitrator or governmental agency, body or official, domestic or
foreign, now pending or, to the best knowledge of the Company or any Subsidiary,
threatened or contemplated to which the Company or any of the Subsidiaries is or
may be a party or to which the business or property of the Company or any
Subsidiary is subject, (ii) no statute, rule, regulation or order that has been
enacted, adopted or issued by any governmental agency or that has been proposed
by any governmental body or (iii) no injunction, restraining order or order of
any nature by a federal or state court or foreign court of competent
jurisdiction to which the Company or any Subsidiary is or may be subject or to
which the business, assets, or property of the Company or any Subsidiary are or
may be subject, that, in the case of clauses (i), (ii) and (iii) above, (x) is
required to be disclosed in the Preliminary Offering Memorandum and the Offering
Memorandum and that is not so disclosed, or (y) could reasonably be expected to
individually or in the aggregate, result in a Material Adverse Effect.
(xiv) No action has been taken and no statute, rule,
regulation or order has been enacted, adopted or issued by any governmental
agency that prevents the issuance of the Series F Preferred (and the related
Depositary Shares) or prevents or suspends the use of the Offering Memorandum;
no injunction, restraining order or order of any nature by a federal or state
court of competent jurisdiction has been issued that prevents the issuance of
the Series F Preferred Stock (and the related Depositary Shares) or prevents or
suspends the sale of the Series F Preferred Stock (and the related Depositary
Shares) in any jurisdiction referred to in Section 4(e) hereof; and every
request of any securities authority or agency of any jurisdiction for additional
information has been complied with in all material respects.
(xv) Except as set forth in the Offering Memorandum, there
is (i) no significant unfair labor practice complaint pending against the
Company or any Subsidiary nor, to the best knowledge of the Company, threatened
against any of them, before the National Labor Relations Board, any state or
local labor relations board or any foreign labor relations board, and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against the Company or
any Subsidiary or, to the best knowledge of the Company, threatened against any
of them, (ii) no significant strike, labor dispute, slowdown or stoppage pending
against the Company or any Subsidiary nor, to the best knowledge of the Company,
threatened against the Company or any Subsidiary and (iii) to the best knowledge
of the Company, no union representation question existing with respect to the
employees of the Company or any Subsidiary that, in the case of clauses (i),
(ii) or (iii), could reasonably be expected to result in a Material Adverse
Effect. To the best knowledge of the Company, no collective bargaining
organizing activities are taking place with respect to the Company or the
Subsidiaries. None of the Company or any Subsidiary has violated (A) any
federal, state or local law or foreign law relating to discrimination in hiring,
promotion or pay of employees (except as set forth in the Offering Memorandum),
(B) any applicable wage or hour laws or (C) any provision of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules and
regulations thereunder, which in the case of clause (A), (B) or (C) above could
reasonably be expected to result in a Material Adverse Effect.
(xvi) None of the Company or any Subsidiary has violated any
environmental, safety
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or similar law or regulation applicable to it or its business or property
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), lacks any permit, license or other approval required of
------------------
it under applicable Environmental Laws or is violating any term or condition of
such permit, license or approval which could reasonably be expected to, either
individually or in the aggregate, have a Material Adverse Effect.
(xvii) Each of the Company and the Subsidiaries has (i) good
and marketable title to all of the properties and assets described in the
Offering Memorandum as owned by it, free and clear of all liens, charges,
encumbrances and restrictions, except such as are described in the Offering
Memorandum or as would not have a Material Adverse Effect, (ii) peaceful and
undisturbed possession under all material leases to which any of them is a party
as lessee, (iii) all licenses, certificates, permits, authorizations, approvals,
franchises and other rights from, and has made all declarations and filings
with, all federal, state and local authorities (including, without limitation,
the FCC), all self-regulatory authorities and all courts and other tribunals
(each an "Authorization") necessary to engage in the business conducted by any
-------------
of them in the manner described in the Offering Memorandum, except as described
in the Offering Memorandum or where failure to hold such Authorizations would
not, individually or in the aggregate, have a Material Adverse Effect and (iv)
no reason to believe that any governmental body or agency is considering
limiting, suspending or revoking any such Authorization. Except where the
failure to be in full force and effect would not have a Material Adverse Effect,
all such Authorizations are valid and in full force and effect and each of the
Company and the Subsidiaries is in compliance in all material respects with the
terms and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities having jurisdiction with respect
thereto. Except as could not reasonably be expected to result in a Material
Adverse Effect, all material leases to which the Company and the Subsidiaries is
a party are valid and binding and no default by the Company or any Subsidiary
has occurred and is continuing thereunder and, to the best knowledge of the
Company and the Subsidiaries, no material defaults by the landlord are existing
under any such lease.
(xviii) Except as could not reasonably be expected to result
in a Material Adverse Effect, each of the Company and the Subsidiaries owns,
possesses or has the right to employ all patents, patent rights, licenses
(including all FCC, state, local or other jurisdictional regulatory licenses),
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, software, systems
or procedures), trademarks, service marks and trade names, inventions, computer
programs, technical data and information (collectively, the "Intellectual
------------
Property") presently employed by it or its Subsidiaries in connection with the
- --------
businesses now operated by it or which are proposed to be operated by it or its
Subsidiaries free and clear of and without violating any right, claimed right,
charge, encumbrance, pledge, security interest, restriction or lien of any kind
of any other person and none of the Company or any Subsidiary has received any
notice of infringement of or conflict with asserted rights of others with
respect to any of the foregoing. The use of the Intellectual Property in
connection with the business and operations of the Company and the Subsidiaries
does not infringe on the rights of any person, except as could not reasonably be
expected to have a Material Adverse Effect.
(xix) None of the Company or any Subsidiary, or to the best
knowledge of the Company, any of their respective officers, directors, partners,
employees, agents or affiliates or any other person acting on behalf of the
Company or any Subsidiary has, directly or indirectly, given or agreed to give
any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, official or employee of any
governmental agency (domestic or foreign), instrumentality of any government
11
<PAGE>
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is or may be in a position to help or
hinder the business of the Company or any Subsidiary (or assist the Company or
any Subsidiary in connection with any actual or proposed transaction) which (i)
might subject the Company or any Subsidiary, or any other individual or entity
to any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (ii) if not given in the past, might have had
a material adverse effect on the assets, business or operations of the Company
or any Subsidiary or (iii) if not continued in the future, might have a Material
Adverse Effect.
(xx) All material tax returns required to be filed by the
Company and each of the Subsidiaries in all jurisdictions have been so filed.
All taxes, including withholding taxes, penalties and interest, assessments,
fees and other charges due or claimed to be due from such entities or that are
due and payable have been paid, other than those being contested in good faith
and for which adequate reserves have been provided or those currently payable
without penalty or interest. To the knowledge of the Company, there are no
material proposed additional tax assessments against the Company, the assets or
property of the Company or any Subsidiary.
(xxi) None of the Company or any Subsidiary is (i) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or (ii) a
"holding company" or a "subsidiary company" or an "affiliate" of a holding
company within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(xxii) Except as disclosed in the Offering Memorandum, there
are no holders of securities of the Company or the Subsidiaries who, by reason
of the execution by the Company of this Agreement or any other Operative
Document to which it is a party or the consummation by the Company of the
transactions contemplated hereby and thereby, have the right to request or
demand that the Company or any of the Subsidiaries register under the Act or
analogous foreign laws and regulations securities held by them.
(xxiii) Each of the Company and the Subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect thereto.
(xxiv) Each of the Company and the Subsidiaries maintains
insurance covering its properties, operations, personnel and businesses. Such
insurance insures against such losses and risks as are adequate in accordance
with customary industry practice to protect the Company and the Subsidiaries and
their respective businesses. None of the Company or any Subsidiary has received
notice from any insurer or agent of such insurer that substantial capital
improvements or other expenditures will have to be made in order to continue
such insurance. All such insurance is outstanding and duly in force on the date
hereof, subject only to changes made in the ordinary course of business,
consistent with past practice, which do not, singly or in the aggregate,
materially alter the coverage thereunder or the risks covered thereby.
(xxv) None of the Company or any Subsidiary has (i) taken,
directly or indirectly, any
12
<PAGE>
action designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or (ii) since the date of the
Preliminary Offering Memorandum (A) sold, bid for, purchased or paid any person
(other than the Initial Purchasers) any compensation for soliciting purchases of
the Series F Preferred Stock (and the related Depositary Shares) or (B) paid or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company.
(xxvi) No registration under the Act of the Series F Preferred
Stock (and the related Depositary Shares) is required for the sale of the Series
F Preferred Stock (and the related Depositary Shares) to the Initial Purchasers
as contemplated hereby or for the Exempt Resales assuming (i) that the
purchasers who buy the Series F Preferred Stock (and the related Depositary
Shares) in the Exempt Resales are Eligible Purchasers and (ii) the accuracy of
the Initial Purchasers' representations regarding the absence of general
solicitation in connection with the sale of Series F Preferred Stock (and the
related Depositary Shares) to the Initial Purchasers and the Exempt Resales
contained herein. No form of general solicitation or general advertising was
used by the Company or any of its representatives (other than the Initial
Purchasers, as to which the Company makes no representation or warranty) in
connection with the offer and sale of any of the Series F Preferred Stock (and
the related Depositary Shares) or in connection with Exempt Resales, including,
but not limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(xxvii) Set forth on Exhibit A hereto is a list of each
employee pension or benefit plan with respect to which the Company or any
corporation considered an affiliate of the Company within the meaning of Section
407(d)(7) of ERISA is a party in interest or disqualified person. The execution
and delivery of this Agreement, the other Operative Documents and the sale of
the Series F Preferred Stock (and the related Depositary Shares) to be purchased
by the Eligible Purchasers will not involve any prohibited transaction within
the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code
of 1986. The representation made by the Company in the preceding sentence is
made in reliance upon and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by the Eligible Purchasers as
set forth in the Offering Memorandum under the caption "Notice to Investors."
(xxviii) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, and each amendment or supplement thereto,
as of its date, contains the information specified in, and meets the
requirements of, Rule 144A(d)(4) under the Act.
(xxix) Subsequent to the respective dates as of which
information is given in the Offering Memorandum and up to the Closing Date,
except as set forth in the Offering Memorandum, (i) none of the Company or any
Subsidiary has incurred any liabilities or obligations, direct or contingent,
which are material, individually or in the aggregate, to the Company and the
Subsidiaries taken as a whole, nor entered into any transaction not in the
ordinary course of business, (ii) none of the Company or any Subsidiary has
incurred any liabilities or obligations, direct or contingent, which will be
material to the Company and the Subsidiaries taken as a whole, (iii) there has
not been, singly or in the aggregate, any change or development, which could
reasonably be expected to result in a Material Adverse Effect and (iv) there has
been no dividend or distribution of any kind declared, paid or made by the
Company or any of its Subsidiaries on any class of its capital stock, except for
dividends paid in respect of the Series B Preferred Stock, the Series D Junior
Convertible Preferred Stock or the Series E Junior Convertible Preferred Stock
(collectively, the "Preferred Stock").
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(xxx) None of the Company or any Subsidiary or any agent
thereof acting on behalf of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the Securities
to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the
Board of Governors of the Federal Reserve System or analogous foreign laws and
regulations.
(xxxi) To the best knowledge of the Company, the accountants
who have certified or will certify the financial statements included or to be
included as part of the Offering Memorandum are independent accountants. The
consolidated historical financial statements, together with related schedules
and notes, set forth in the Offering Memorandum comply as to form in all
material respects with the requirements applicable to registration statements on
Form S-1 under the Act and present fairly in all material respects the financial
position and results of operations of the Company and the Subsidiaries at the
respective dates and for the respective periods indicated. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods presented. The
pro forma financial statements included in the Offering Memorandum have been
prepared on a basis consistent with such historical statements, except for the
pro forma adjustments specified therein, and give effect to assumptions made on
a reasonable basis and present fairly in all material respects the historical
and proposed transactions contemplated by this Agreement and the other Operative
Documents; and such pro forma financial statements comply as to form in all
material respects with the requirements applicable to pro forma financial
statements included in registration statements on Form S-1 under the Act. The
other financial and statistical information and data included in the Offering
Memorandum, historical and pro forma, are accurately presented in all material
respects and prepared on a basis consistent with the financial statements,
historical and pro forma, included in the Offering Memorandum and the books and
records of the Company and the Subsidiaries, as applicable.
(xxxii) The Company does not intend to, nor does it believe
that it will, incur debts beyond its ability to pay such debts as they mature.
The present fair saleable value of the assets of the Company on a consolidated
basis exceeds the amount that will be required to be paid on or in respect of
the existing debts and other liabilities (including contingent liabilities) of
the Company on a consolidated basis as they become absolute and matured. The
assets of the Company on a consolidated basis do not constitute unreasonably
small capital to carry out the business of the Company and the Subsidiaries,
taken as a whole, as conducted or as proposed to be conducted. Upon the issuance
of the Series F Preferred Stock (and the related Depositary Shares), the present
fair saleable value of the assets of the Company on a consolidated basis will
exceed the amount that will be required to be paid on or in respect of the
existing debts and other liabilities (including contingent liabilities) of the
Company on a consolidated basis as they become absolute and matured. Upon the
issuance of the Series F Preferred Stock (and the related Depositary Shares),
the assets of the Company on a consolidated basis will not constitute
unreasonably small capital to carry out its businesses as now conducted,
including the capital needs of the Company on a consolidated basis, taking into
account the projected capital requirements and capital availability.
(xxxiii) Except pursuant to this Agreement, there are no
contracts, agreements or understandings between the Company and its Subsidiaries
and any other person that would give rise to a valid claim against the Company
or either of the Initial Purchasers for a brokerage commission, finder's fee or
like payment in connection with the issuance, purchase and sale of the
Securities.
(xxxiv) Each certificate signed by any officer of the Company
and delivered to the Initial
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<PAGE>
Purchasers or counsel for the Initial Purchasers shall be deemed to be a
representation and warranty by the Company to the Initial Purchasers as to the
matters covered thereby.
(xxxv) Each of the Company and its Subsidiaries have
implemented Year 2000 compliance programs designed to ensure that each
respective company's computer systems and applications will function properly
beyond 1999. The Company believes that adequate resources have been allocated
for this purpose and expects the Company's and its Subsidiaries' Year 2000 date
conversion program to be completed on a timely basis.
The Company acknowledges that each of the Initial Purchasers
and, for purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 8 hereof, counsel to the Company and counsel to the Initial
Purchasers, will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
(b) Each of the Initial Purchasers, severally and not jointly,
represents, warrants and covenants to the Company and agrees that:
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Company Shares.
(ii) Such Initial Purchaser (A) is not acquiring the Company
Shares with a view to any distribution thereof that would violate the Act or the
securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Company Shares only to
QIBs in reliance on the exemption from the registration requirements of the Act
provided by Rule 144A and to Accredited Investors in a private placement exempt
from the registration requirements of the Act.
(iii) No form of general solicitation or general advertising
has been or will be used by either of the Initial Purchasers or any of their
representatives in connection with the offer and sale of any of the Company
Shares, including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
(iv) Each of the Initial Purchasers agrees that, in
connection with the Exempt Resales, it will solicit offers to buy the Company
Shares, only from, and will offer to sell the Company Shares, only to, Eligible
Purchasers. The Initial Purchasers further agree (A) that they will offer to
sell the Company Shares, only to, and will solicit offers to buy the Company
Shares, only from (1) QIBs who in purchasing such Company Shares will be deemed
to have represented and agreed that they are purchasing the Company Shares, for
their own accounts or accounts with respect to which they exercise sole
investment discretion and that they or such accounts are QIBs and (2) Accredited
Investors who make the representations contained in, and execute and return to
one of the Initial Purchasers, a certificate in the form of Annex C attached to
-------
the Offering Memorandum and (B) that such Eligible Purchasers shall acknowledge
and agree that such Company Shares will not have been registered under the Act
and may be resold, pledged or otherwise transferred only (i) to the Company,
(ii) pursuant to a registration statement which has been declared effective
under the Securities Act, (iii) to a person it reasonably believes is a QIB in a
transaction meeting the requirements of Rule 144A under the Securities Act, (iv)
to an institutional "accredited investor" (as defined in Rule 501(a) (1), (2),
(3) or (7) of Regulation D under the Securities Act that, prior to such
transfer, furnishes to the trustee a signed letter
15
<PAGE>
containing certain representations and agreements relating to the transfer of
the Securities (the form of which letter can be obtained from the Trustee) or
(v) pursuant to any other available exemption from the registration requirements
of the Securities Act (and based on an opinion of counsel if the Company so
requests), subject in each of the foregoing cases to the applicable state
securities laws of any State of the United States or any other applicable
jurisdiction and (C) that the holder will, and each subsequent holder is
required to, notify any purchaser of the security evidenced thereby of the
resale restrictions set forth in (B) above.
(v) Each of the Initial Purchasers understands that the
Company and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Section 8 hereof, counsel to the Company and counsel to
the Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
6. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless (i) each
of the Initial Purchasers, (ii) each person, if any, who controls any of the
Initial Purchasers within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act and (iii) the respective officers, directors, partners,
employees, representatives and agents of any of the Initial Purchasers or any
controlling person to the fullest extent lawful, from and against any and all
losses, liabilities, claims, damages and expenses whatsoever (including but not
limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any investigation or litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), joint or several, to which they or
any of them may become subject under the Act, the Exchange Act or otherwise,
insofar as such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Offering
Memorandum or the Offering Memorandum, or in any supplement thereto or amendment
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company will not be liable in
any such case to the extent, but only to the extent, that (i) any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Initial Purchasers expressly for
use therein and (ii) the foregoing indemnity with respect to any untrue
statement contained in or omitted from a preliminary offering memorandum shall
not inure to the benefit of any Initial Purchaser (or any person controlling
such Initial Purchaser), from whom the person asserting any such loss,
liability, claim, damage or expense purchased any of the Company Shares, which
are the subject thereof if it is finally judicially determined that such loss,
liability, claim, damage or expense resulted solely from the fact that the
Initial Purchaser sold the Company Shares, to a person to whom there was not
sent or given, at or prior to the written confirmation of such sale, a copy of
the Offering Memorandum, as amended or supplemented, and (x) the Company shall
have previously and timely furnished sufficient copies of the Offering
Memorandum, as so amended or supplemented, to such Initial Purchaser in
accordance with this Agreement and (y) the Offering Memorandum, as so amended or
supplemented, would have corrected such untrue statement or omission of a
material fact. This indemnity agreement will be in addition to any liability
which the Company may otherwise have, including, under this Agreement.
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<PAGE>
(b) Each Initial Purchaser, severally and not jointly, agrees
to indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any losses, liabilities, claims, damages and expenses
whatsoever (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending against
any investigation or litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Initial Purchaser expressly for use therein;
provided, however, that in no case shall any Initial Purchaser be liable or
responsible for any amount in excess of the discounts and commissions received
by such Initial Purchaser, as set forth on the cover page of the Offering
Memorandum. This indemnity agreement will be in addition to any liability which
any Initial Purchaser may otherwise have, including, under this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by one of the indemnifying
parties in connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to take charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying party or parties shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties), in
any of which events such fees and expenses of counsel shall be borne by the
indemnifying parties; provided, however, that the indemnifying party under
subsection (a) or (b) above, shall only be liable for the legal expenses of one
counsel (in addition to any local counsel) for all indemnified parties in each
jurisdiction in which any claim or action is brought. Anything in this
subsection to the contrary notwithstanding, an indemnifying
17
<PAGE>
party shall not be liable for any settlement of any claim or action effected
without its prior written consent; provided, however, that such consent was not
unreasonably withheld.
7. Contribution. In order to provide for contribution in circumstances
------------
in which the indemnification provided for in Section 6 is for any reason held to
be unavailable from the Company or is insufficient to hold harmless a party
indemnified thereunder, the Company and the Initial Purchasers shall contribute
to the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company, any contribution received by the Company from persons,
other than the Initial Purchasers, who may also be liable for contribution,
including persons who control the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act) to which the Company and one or
more of the Initial Purchasers may be subject, in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Initial Purchasers from the offering of the Company Shares, or, if such
allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice as
provided in Section 6, in such proportion as is appropriate to reflect not only
the relative benefits referred to above but also the relative fault of the
Company and the Initial Purchasers in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Initial Purchasers shall be deemed to
be in the same proportion as (x) the total proceeds from the offering of Company
Shares, (net of discounts but before deducting expenses) received by the Company
and (y) the discounts received by the Initial Purchasers, respectively, in each
case as set forth in the table on the cover page of the Offering Memorandum. The
relative fault of the Company and of the Initial Purchasers shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Initial
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 7, (i) in no case shall any of the Initial Purchasers be required
to contribute any amount in excess of the amount by which the discount
applicable to the Company Shares, purchased by such Initial Purchaser pursuant
to this Agreement exceeds the amount of any damages which such Initial Purchaser
has otherwise been required to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, (A) each person,
if any, who controls any of the Initial Purchasers within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and (B) the
respective officers, directors, partners, employees, representatives and agents
of any of the Initial Purchasers or any controlling person shall have the same
rights to contribution as such Initial Purchaser, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act shall have the same rights to contribution as
the Company, subject in each case to clauses (i) and (ii) of this Section 7. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section 7, notify such party or
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<PAGE>
parties from whom contribution may be sought, but the failure to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this Section 7 or
otherwise. No party shall be liable for contribution with respect to any action
or claim settled without its prior written consent; provided, however, that such
written consent was not unreasonably withheld.
8. Conditions of Initial Purchasers' Obligations. The several
---------------------------------------------
obligations of the Initial Purchasers to purchase and pay for the Firm Shares
and the Additional Shares, as provided herein, shall be subject to the
satisfaction of the following conditions, except that with respect to the
Additional Shares, references to the Closing Date shall mean the Option Closing
Date:
(a) All of the representations and warranties of the Company
contained in this Agreement shall be true and correct on the date hereof and on
the Closing Date with the same force and effect as if made on and as of the date
hereof and the Closing Date, respectively. The Company shall have performed or
complied in all material respects with all of the agreements herein contained
and required to be performed or complied with by it at or prior to the Closing
Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers not later than 10:00 a.m., New York City
time, on the day following the date of this Agreement or at such later date and
time as to which the Initial Purchasers may agree, and no stop order suspending
the qualification or exemption from qualification of the Company Shares in any
jurisdiction referred to in Section 4(e) shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending or
threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date prevent the issuance of
the Company Shares; no action, suit or proceeding shall have been commenced and
be pending against or affecting or, to the best knowledge of the Company,
threatened against, the Company or the Subsidiaries before any court or
arbitrator or any governmental body, agency or official that (1) could
reasonably be expected to result in a Material Adverse Effect or (2) has not
been disclosed in the Offering Memorandum; and no stop order shall have been
issued preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or which could reasonably be expected to have a Material
Adverse Effect.
(d) Since the dates as of which information is given in the
Offering Memorandum and except as contemplated by the Offering Memorandum,
(i) there shall not have been any material adverse change, or any development
that is reasonably likely to result in a material adverse change, in the capital
stock or the long-term debt, or material increase in the short-term debt, of the
Company and the Subsidiaries from that set forth in the Offering Memorandum,
(ii) no dividend or distribution of any kind shall have been declared, paid or
made by the Company or any Subsidiary (other than any dividends or distributions
paid to the Company) on any class of its capital stock, except for regular
dividends paid in respect of the Preferred Stock and (iii) neither the Company
nor any Subsidiary shall have incurred any liabilities or obligations, direct or
contingent, that are material, individually or in the aggregate, to the Company
and the Subsidiaries, taken as a whole, and that are required to be disclosed on
a balance sheet or notes thereto in accordance with generally accepted
accounting principles and are not disclosed on the latest balance sheet or notes
thereto included in the Offering Memorandum. Since the date hereof and since the
dates as of which information is given in the Offering Memorandum, there shall
not have occurred any Material Adverse Effect.
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(e) The Initial Purchasers shall have received a certificate,
dated the Closing Date, signed on behalf of the Company by (i) David C. Ruberg,
Chairman of the Board, President and Chief Executive Officer and (ii) Robert M.
Manning, Senior Vice President and Chief Financial Officer, in form and
substance reasonably satisfactory to the Initial Purchasers, confirming, as of
the Closing Date, the matters set forth in paragraphs (a), (b), (c) and (d) of
this Section 8 and that, as of the Closing Date, the obligations of the Company
to be performed hereunder on or prior thereto have been duly performed in all
material respects.
(f) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, in form and substance satisfactory to
the Initial Purchasers and counsel to the Initial Purchasers, of Kronish Lieb
Weiner & Hellman LLP, counsel for the Company, to the effect set forth in
Exhibit B hereto.
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(g) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, in form and substance satisfactory to
the Initial Purchasers and counsel to the Initial Purchasers, of Kelley Drye &
Warren LLP, special regulatory counsel to the Company, to the effect set forth
in Exhibit C hereto.
---------
(h) The Initial Purchasers shall have received an opinion, dated
the Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, of Latham & Watkins, counsel to the Initial Purchasers, covering
such matters as are customarily covered in such opinions.
(i) At the time this Agreement is executed and at the Closing Date
the Initial Purchasers shall have received from Ernst & Young LLP, independent
public accountants for the Company and its Subsidiaries, dated as of the date of
this Agreement and as of the Closing Date, customary comfort letters addressed
to the Initial Purchasers and in form and substance satisfactory to the Initial
Purchasers and counsel to the Initial Purchasers with respect to the financial
statements and certain financial information of the Company and its Subsidiaries
contained in the Offering Memorandum.
(j) Latham & Watkins shall have been furnished with such
documents, in addition to those set forth above, as they may reasonably require
for the purpose of enabling them to review or pass upon the matters referred to
in this Section 8 and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations, warranties
or conditions herein contained.
(k) Prior to the Closing Date, the Company and the Subsidiaries
shall have furnished to the Initial Purchasers such further information,
certificates and documents as the Initial Purchasers may reasonably request.
(l) The Company shall have authorized, executed and filed the
Certificate of Designation in accordance with Delaware law and each of the
Initial Purchasers shall have received an original, duly executed by the
Company.
(m) The Company shall have entered into each of the Registration
Rights Agreement and the Deposit Agreement and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof.
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<PAGE>
(n) The Company shall have deposited the Series F Preferred
Stock with the Depositary.
(o) At or prior to the Closing Date, all FCC or state approvals
required in connection with the Offering shall have been obtained or
applications for such approvals submitted or prepared for submission promptly
following the Closing Date and the Company shall have delivered to the Initial
Purchasers evidence satisfactory to the Initial Purchasers that such FCC or
state approvals have been obtained or applications thereof have been made or
prepared for submission promptly following the Closing Date.
All opinions, certificates, letters and other documents required by this
Section 8 to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to the Initial Purchasers. The Company will furnish the Initial Purchasers with
such conformed copies of such opinions, certificates, letters and other
documents as it shall reasonably request.
9. Initial Purchasers' Information. The Company and the Initial
-------------------------------
Purchasers severally acknowledge that the statements with respect to the
offering of the Series F Preferred Stock (and the related Depositary Shares) set
forth in the last paragraph of the cover page and the third, eighth, eleventh
and twelfth paragraphs under the caption "Plan of Distribution" in such Offering
Memorandum constitute the only information furnished in writing by the Initial
Purchasers expressly for use in the Offering Memorandum.
10. Survival of Representations and Agreements. All representations and
------------------------------------------
warranties, covenants and agreements of the Initial Purchasers and the Company
contained in this Agreement, including the agreements contained in Sections 4(f)
and 11(d), the indemnity agreements contained in Section 6 and the contribution
agreements contained in Section 7, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Initial
Purchasers or any controlling person thereof or by or on behalf of the Company
or any controlling person thereof, and shall survive delivery of and payment for
the Series F Preferred Stock (and the related Depositary Shares) to and by the
Initial Purchasers. The representations contained in Section 5 and the
agreements contained in Sections 4(f), 6, 7 and 11(d) shall survive the
termination of this Agreement, including any termination pursuant to Section 11.
11. Effective Date of Agreement; Termination.
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(a) This Agreement shall become effective upon execution and
delivery of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate this
Agreement at any time prior to the Closing Date by notice to the Company from
the Initial Purchasers, without liability (other than with respect to Sections 6
and 7) on the Initial Purchasers' part to the Company if, on or prior to such
date, (i) the Company shall have failed, refused or been unable to perform in
any material respect any agreement on its part to be performed hereunder,
(ii) any other condition to the obligations of the Initial Purchasers hereunder
as provided in Section 8 is not fulfilled when and as required in any material
respect, (iii) in the reasonable judgment of the Initial Purchasers any material
adverse change shall have occurred since the respective dates as of which
information is given in the Offering Memorandum in the condition (financial or
otherwise), business, properties, assets, liabilities, prospects, net worth,
results of operations or cash flows of the Company and the Subsidiaries taken as
a whole, other than as set forth in
21
<PAGE>
the Offering Memorandum, or (iv)(A) any domestic or international event or act
or occurrence has materially disrupted, or in the opinion of the Initial
Purchasers will in the immediate future materially disrupt, the market for the
Company's securities or for securities in general; or (B) trading in securities
generally on the New York or American Stock Exchanges shall have been suspended
or materially limited, or minimum or maximum prices for trading shall have been
established, or maximum ranges for prices for securities shall have been
required, on such exchange, or by such exchange or other regulatory body or
governmental authority having jurisdiction; or (C) a banking moratorium shall
have been declared by Federal or state authorities, or a moratorium in foreign
exchange trading by major international banks or persons shall have been
declared; or (D) there is an outbreak or escalation of armed hostilities
involving the United States on or after the date hereof, or if there has been a
declaration by the United States of a national emergency or war, the effect of
which shall be, in the Initial Purchasers' judgment, to make it inadvisable or
impracticable to proceed with the offering or delivery of the Company Shares on
the terms and in the manner contemplated in the Offering Memorandum; or
(E) there shall have been such a material adverse change in general economic,
political or financial conditions or if the effect of international conditions
on the financial markets in the United States shall be such as, in the Initial
Purchasers' judgment, makes it inadvisable or impracticable to proceed with the
delivery of the Company Shares as contemplated hereby.
(c) Any notice of termination pursuant to this Section 11 shall be
by telephone, telex, telephonic facsimile, or telegraph, confirmed in writing by
letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to any of clauses (iii) or (iv) of
Section 11(b), in which case each party will be responsible for its own
expenses), or if the sale of the Series F Preferred Stock (and the related
Depositary Shares) provided for herein is not consummated because any condition
to the obligations of the Initial Purchasers set forth herein is not satisfied
or because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or comply with any provision hereof, the Company
will, subject to demand by the Initial Purchasers, reimburse the Initial
Purchasers for all out-of-pocket expenses (including the reasonable fees and
expenses of Initial Purchasers' counsel), incurred by the Initial Purchasers in
connection herewith.
12. Notice. All communications hereunder, except as may be otherwise
------
specifically provided herein, shall be in writing and, if sent to the Initial
Purchasers shall be mailed, delivered, or telexed, telegraphed or telecopied and
confirmed in writing to the Initial Purchasers, c/o Bear, Stearns & Co. Inc.,
245 Park Avenue, New York, New York 10167, Attention: Corporate Finance
Department, telecopy number: (212) 272-3092; and if sent to the Company, shall
be mailed, delivered or telexed, telegraphed or telecopied and confirmed in
writing to Intermedia Communications Inc., 3625 Queen Palm Drive, Tampa, Florida
33619, Attention: Robert M. Manning, Chief Financial Officer, telecopy number:
(813) 744-2470, with a copy to Kronish, Lieb, Weiner & Hellman LLP, 1114 Avenue
of the Americas, 46th Floor, New York, New York 10036, Attention: Ralph J.
Sutcliffe, telecopy number (212) 997-3527; provided, however, that any notice
pursuant to Section 7 shall be mailed, delivered or telexed, telegraphed or
telecopied and confirmed in writing.
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, the Initial Purchasers and the Company and the
controlling persons and agents referred to in Sections 6 and 7, and their
respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained. The
term "successors and assigns" shall not include a purchaser, in its
22
<PAGE>
capacity as such, of Series F Preferred Stock (and the related Depositary
Shares) from the Initial Purchasers.
14. Construction. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
------------
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK. TIME IS OF
THE ESSENCE IN THIS AGREEMENT.
15. Captions. The captions included in this Agreement are included solely
--------
for convenience of reference and are not to be considered a part of this
Agreement.
16. Counterparts. This Agreement may be executed in various counterparts
------------
which together shall constitute one and the same instrument.
[Signature Page Follows]
23
<PAGE>
If the foregoing correctly sets forth the understanding among the
Initial Purchasers and the Company, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement between us.
Very truly yours,
INTERMEDIA COMMUNICATIONS INC.
By:
----------------------------------
Name:
Title:
Accepted and agreed to as of
the date first above written:
BEAR, STEARNS & CO. INC.
By:
-----------------------------
Name:
Title:
SMITH BARNEY INC.
By:
-----------------------------
Name:
Title:
MERRILL LYNCH & CO.
By:
-----------------------------
Name:
Title:
WARBURG DILLON READ LLC
By:
-----------------------------
Name:
Title:
24
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Firm Shares
Initial Purchaser to be Purchased
- ----------------- ---------------
<S> <C>
Bear, Stearns & Co. Inc. ....................................................4,400,000
Smith Barney Inc. ...........................................................1,600,000
Merrill Lynch Pierce Fenner and Smith Incorporated ..........................1,600,000
Warburg Dillon Read LLC .......................................................400,000
Total 8,000,000
</TABLE>
Sched-I
<PAGE>
EXHIBIT A
List of Employee Pension and Benefit Plans
of Intermedia Communications Inc.
and its Subsidiaries
1. Intermedia Communications Inc. 401(k) Profit Sharing Plan.
A-1
<PAGE>
EXHIBIT B
Form of Opinion of Kronish Lieb Weiner & Hellman LLP
1. Each of the Company and the Company's material subsidiaries set
forth on Schedule A (the "Subsidiaries") is duly organized and validly existing
------------
as a corporation in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority to carry on
its business as it is being conducted and as described in the Offering
Memorandum and to own, lease and operate its properties, and is duly qualified
and in good standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or leasing of
property requires such qualification, except where the failure to be so
qualified would not, singly or in the aggregate, have a Material Adverse Effect.
2. All of the outstanding shares of capital stock of the Company have
been duly authorized, validly issued, and are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights under the
Delaware General Corporation Law. The authorized, issued and outstanding capital
stock of the Company conforms in all respects to the description thereof set
forth in the Offering Memorandum.
3. To such counsel's knowledge, after reasonable inquiry, all of the
issued and outstanding capital stock of the Company's Subsidiaries have been
duly authorized and validly issued, are fully paid and non-assessable and were
not issued in violation of or subject to any preemptive or similar rights under
the Delaware General Corporation Law or known to us, after reasonable inquiry,
and, is owned by the Company of record, free and clear of any security interest,
claim, lien, limitation on voting rights or encumbrance. Except as set forth on
Schedule A hereto, there are not, to our knowledge, currently, and will not be
following the Offering, any outstanding subscriptions, rights, warrants, calls,
commitments of sale or options to acquire (other than options issued pursuant to
the Company's stock option plans, the 160,000 warrants each to purchase 2.19
shares of Common Stock, the 7% Series D Junior Convertible Preferred Stock and
the 7% Series E Junior Convertible Preferred Stock, and noting that at present
rights trade with the Common Stock), or instruments convertible into or
exchangeable for, any capital stock or other equity interest of the Company or
any Subsidiary.
4. When the Company Shares are issued and delivered pursuant to this
Agreement, no Company Shares will be of the same class (within the meaning of
Rule 144A under the Act) as securities of the Company that are listed on a
national securities exchange registered under Section 6 of the Exchange Act or
that are quoted in a United States automated inter-dealer quotation system.
5. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Certificate of Designation, the Deposit Agreement, the Registration Rights
Agreement and the other Operative Documents, as applicable, and to consummate
the transactions contemplated thereby, including, without limitation, the
corporate power and authority to issue, sell and deliver the Securities as
provided herein and therein.
B-1
<PAGE>
6. This Agreement has been duly and validly authorized, executed and
delivered by the Company and, assuming due execution by the other parties
thereto, is the legally valid and binding agreement of the Company.
7. The Certificate of Designation has been duly authorized by all
necessary corporate and stockholder action, executed by the Company and filed
with the Secretary of State of the State of Delaware.
8. Each of the Deposit Agreement and the Registration Rights Agreement
has been duly and validly authorized, executed and delivered by the Company and,
assuming due execution by the other parties thereto, is the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except that we express no opinion as to the validity or
enforceability of rights of indemnity or contribution, or both and except as
such enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
9. The Series F Preferred Stock (and the related Depositary Shares) have
been duly and validly authorized for issuance and sale to the Initial Purchasers
by the Company pursuant to this Agreement and, when issued, delivered and paid
for in accordance with the terms of this Agreement, will be validly issued,
fully paid and non-assessable and entitled to the rights, privileges and
preferences set forth in the Certificate of Designation, and the issuance of
such shares of Series F Preferred Stock (and the related Depositary Shares) will
not be subject to any preemptive or similar rights.
10. The Offering Memorandum contains a fair summary of each of the Series
F Preferred Stock, the Certificate of Designation, the Company Shares, the
Deposit Agreement and the Registration Rights Agreement.
11. No registration under the Act of the Series F Preferred Stock (and
the related Depositary Shares) is required for the sale of the Company Shares,
to the Initial Purchasers as contemplated by this Agreement or for the Exempt
Resales assuming (i) that the Initial Purchasers are Qualified Institutional
Buyers, as defined in Rule 144A under the Act ("QIB"), (ii) that the purchasers
---
who buy the Company Shares, in the Exempt Resales are Eligible Purchasers,
(iii) the accuracy of the Initial Purchasers' and the Company's representations
regarding the absence of general solicitation in connection with the sale of
Company Shares, to the Initial Purchasers and the Exempt Resales contained in
this Agreement, (iv) the accuracy of the Company's representations in
Sections 5(a)(ii), (xxv), (xxvi) (last sentence only) and (xxviii) of this
Agreement and (v) with respect to Accredited Investors, the accuracy of the
representations made by each Accredited Investor as set forth in the letters of
representation executed by such Accredited Investor in the form of Annex C to
-------
the Offering Memorandum.
12. The Offering Memorandum, as of its date (except for the financial
statements, including the notes thereto, and supporting schedules and other
financial, statistical and accounting data included therein or omitted
therefrom, as to which no opinion need be expressed), and each amendment or
B-2
<PAGE>
supplement thereto, as of its date, contains all the information specified in,
and meets the requirements of, Rule 144A(d)(4) under the Act.
13. None of (A) the execution, delivery or performance by the Company of
this Agreement and the other Operative Documents, (B) the issuance and sale of
the Series F Preferred Stock (and the related Depositary Shares), (C) the
performance by the Company of its obligations under this Agreement and the other
Operative Documents and (D) the consummation of the transactions contemplated by
this Agreement and the other Operative Documents violates, conflicts with or
constitutes a breach of any of the terms or provisions of, or a default under
(or an event that with notice or the lapse of time, or both, would constitute a
default), or require consent under, or result in the imposition of a lien or
encumbrance on any properties of the Company or any Subsidiary, or an
acceleration of any indebtedness of the Company or any Subsidiary pursuant to,
(i) the charter or bylaws of the Company or any Subsidiary, (ii) any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any Subsidiary is a party or by which any of
them or their property is or may be bound identified to such counsel by the
Company as material (assuming all of such agreements are governed by New York
law), (iii) any local, state, federal or administrative statute, rule or
regulation applicable to the Company or any Subsidiary or any of their assets or
properties (except such counsel shall express no opinion as to the matters
addressed in the opinion of Kelley, Drye & Warren LLP), or (iv) any judgment,
order or decree of any court or governmental agency or authority having
jurisdiction over the Company or any Subsidiary or any of their assets or
properties known to such counsel, except in the case of clauses (ii), (iii) and
(iv) for such violations, conflicts, breaches, defaults, consents, impositions
of liens or accelerations that (x) would not, singly or in the aggregate, have a
Material Adverse Effect or (y) are disclosed in the Offering Memorandum.
Assuming compliance with applicable state securities and Blue Sky laws, as to
which such counsel need express no opinion, and except for the filing of a
registration statement under the Act in connection with the Registration Rights
Agreement, no consent, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, any court or
governmental agency, body or administrative agency is required for (1) the
execution, delivery and performance by the Company of this Agreement and the
other Operative Documents, (2) the issuance and sale of the Securities or (3)
consummation by the Company and the Subsidiaries of the transactions described
in the Offering Memorandum under the caption "Use of Proceeds," except (i) such
as have been obtained and made or have been disclosed in the Offering
Memorandum, (ii) where the failure to obtain such consents or waivers would not,
singly or in the aggregate, have a Material Adverse Effect and (iii) such
counsel shall express no opinion as to the matters addressed by the opinion of
Kelley, Drye & Warren LLP. To the best of such counsel's knowledge, after
reasonable inquiry, no consents or waivers from any other person are required
for the execution, delivery and performance by the Company of this Agreement and
the other Operative Documents for the issuance and sale of the Securities, other
than such consents and waivers as have been obtained or are being applied for.
14. None of the Company or the Subsidiaries is (i) an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or (ii) a "holding company"
or a "subsidiary company" or an "affiliate" of a holding company within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
B-3
<PAGE>
15. Except as set forth in this Agreement or the Registration Rights
Agreement, to such counsel's knowledge, after reasonable inquiry, there are no
holders of any securities of the Company who, by reason of the execution by the
Company of this Agreement or any other Operative Document to which it is a party
or the consummation by the Company of the transactions contemplated thereby,
have the right to request or demand that the Company register under the Act
securities held by them.
16. None of the execution, delivery and performance of this Agreement,
the issuance and sale of the Securities, the application of the proceeds from
the issuance and sale of the Securities and the consummation of the transactions
contemplated thereby as set forth in the Offering Memorandum, will violate
Regulations G, T, U or X promulgated by the Board of Governors of the Federal
Reserve System.
17. To the knowledge of such counsel, after reasonable inquiry, no search
of courts having been made, there is (i) no action, suit, investigation or
proceeding before or by any court, arbitrator or governmental agency, body or
official, domestic or foreign, now pending, or threatened or contemplated to
which any of the Company or any Subsidiary is or may be a party or to which the
business or property of the Company or any Subsidiary is or may be subject, (ii)
no statute, rule, regulation or order that has been enacted, adopted or issued
by any governmental agency or that has been proposed by any governmental body,
or (iii) no injunction, restraining order or order of any nature by a federal or
state court of competent jurisdiction to which any of the Company or any
Subsidiary is or may be subject has been issued that, in the case of clauses
(i), (ii) and (iii) above, (x) is required to be disclosed in the Preliminary
Offering Memorandum and the Offering Memorandum and that is not so disclosed,
(y) could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect, except as disclosed in the Offering
Memorandum or (z) might interfere with, adversely affect or in any manner
question the validity of the issuance and sale of the Series F Preferred Stock
(and the related Depositary Shares) or any of the other transactions
contemplated by this Agreement or any of the other Operative Documents, except
that such counsel shall express no opinion as to the matters addressed in the
opinion of Kelley, Drye & Warren LLP.
18. The statements under the captions "Description of Preferred Stock"
and "Description of the Depositary Shares" in the Offering Memorandum, insofar
as such statements constitute a summary of documents referred to therein present
a fair summary thereof. The terms of the Certificate of Designation conform to
the descriptions thereof contained in the Offering Memorandum.
We have participated in conferences with officers and other representatives
of the Company, representatives of the independent certified public accountants
of the Company and the Initial Purchasers and their representatives at which the
contents of the Preliminary Offering Memorandum and the Offering Memorandum and
related matters were discussed and, although we have not undertaken to
investigate or verify independently, and do not assume any responsibility for,
the accuracy, completeness or fairness of the statements contained in the
Preliminary Offering Memorandum or the Offering Memorandum (except as indicated
above), on the basis of the foregoing, no facts have come to our attention which
led us to believe that the Preliminary Offering Memorandum or the Offering
Memorandum, as of its date or the Closing Date, contained an untrue statement of
a material fact or omitted to state any fact required to be
B-4
<PAGE>
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except as to financial
statements and related notes, the financial statement schedules and other
financial and statistical data included therein).
B-5
<PAGE>
EXHIBIT C
Form of Opinion of Kelley Drye & Warren LLP
C-1
<PAGE>
EXHIBIT D
Subsidiaries of Intermedia Communications Inc.
- ----------------------------------------------
Intermedia Communications Inc., a Virginia corporation
EMI Telecommunications Inc.
Eastern Message Communications Inc.
Intermedia Licensing Company
Intermedia Capital Inc.
DIGEX Incorporated
Shared Technologies Fairchild, Inc.
Shared Technologies Fairchild Telecom, Inc.
Shared Technologies Fairchild Communications Corp.
Access Network Services, Inc.
STF Canada Inc.
Access Virginia, Inc.
Long Distance Savers, Inc. (Florida)
Long Distance Savers, Inc. (Louisiana)
LDS-Natchez, Inc.
Long Distance Savers - Longview, Inc.
Netwave Systems, Inc.
LDS - Oklahoma City, Inc.
Long Distance Savers of the Metroplex, Inc.
LDS Communications, Inc.
LDS - Ventures, Inc.
LDS I - America, Inc. (Delaware)
LDS I - America, Inc. (Louisiana)
Express Communications, Inc.
National Telecommunications of Florida, Inc.
NTC, Inc.
LDS of Tulsa (Limited Partnership)
<PAGE>
EXHIBIT 4.7
EXECUTION COPY
================================================================================
REGISTRATION RIGHTS AGREEMENT
Depositary Shares Representing a One-Hundredth Interest in a Share of
7% Series F Junior Convertible Preferred Stock
Dated as of August 18, 1998
by and among
INTERMEDIA COMMUNICATIONS INC.,
BEAR, STEARNS & CO. INC.
SMITH BARNEY INC.
MERRILL LYNCH & CO.
and
WARBURG DILLON READ LLC
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
---------
entered into as of August 18, 1998 by and among Intermedia Communications Inc.,
a Delaware corporation (the "Company"), and Bear, Stearns & Co. Inc., Smith
-------
Barney Inc., Merrill Lynch & Co. and Warburg Dillon Read LLC (each an "Initial
-------
Purchaser" and together, the "Initial Purchasers"), each of whom have agreed to
- --------- ------------------
purchase Depositary Shares (the "Depositary Shares"), each representing a one-
-----------------
hundredth interest in a share of the Company's 7% Series F Junior Convertible
Preferred Stock (the "Series F Preferred Stock") pursuant to the Purchase
------------------------
Agreement (as defined below).
This Agreement is made pursuant to the Depositary Share Purchase
Agreement in respect to the Series F Preferred Stock, dated August 12, 1998 (the
"Purchase Agreement"), by and among the Company and the Initial Purchasers. In
------------------
order to induce the Initial Purchasers to purchase the Depositary Shares, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers set forth in Section 8 of the Purchase
Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
Act: The Securities Act of 1933, as amended.
---
Average Stock Price: The average of the high and low sales prices of the
-------------------
Common Stock (as defined herein) as reported by the Nasdaq National Market or
any national securities exchange upon which the Common Stock is then listed, for
each of the ten consecutive trading days immediately preceding the twentieth
calendar day preceding the Dividend Payment Date.
Business Day: Any day except a Saturday, Sunday or other day in the City
-------------
of New York, on which banks are authorized to close.
Certificate of Designation: The Certificate of Designation pursuant to
--------------------------
which the Depositary Shares, Series F Preferred Stock, and Common Stock are to
be issued, as such Certificate of Designation is amended or supplemented from
time to time in accordance with the terms thereof.
Closing Date: The date hereof.
------------
Commission: The Securities and Exchange Commission.
----------
Common Dividend Filing Deadline: As defined in Section 4 hereof.
-------------------------------
Common Dividend Registration Statement: As defined in Section 4 hereof.
--------------------------------------
Common Stock: The common stock of the Company to be issued upon conversion
------------
of the Series F Preferred Stock or to be issued as dividends in respect of the
Series F Preferred Stock.
Common Stock Dividends: Common Stock to be issued as dividends in respect
----------------------
of the Series F Preferred Stock.
<PAGE>
Definitive Securities: As defined in the Deposit Agreement.
----------------------
Deposit Agreement: The Deposit Agreement dated the date hereof between the
-----------------
Company and Continental Stock Transfer & Trust Company.
Dividend Payment Date: As defined in the Certificate of Designation.
---------------------
Effectiveness Target Date: As defined in Section 5.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Global Certificate Holder: As defined in the Deposit Agreement.
-------------------------
Holders: As defined in Section 2 hereof.
-------
Liquidated Damages: As defined in Section 5 hereof.
------------------
Liquidation Preference: As defined in the Certificate of Designation.
----------------------
NASD: National Association of Securities Dealers, Inc.
----
Offering Memorandum: The final offering memorandum, dated August 12, 1998,
-------------------
relating to the Company, the Depositary Shares, and the Series F Preferred
Stock.
Person: An individual, partnership, corporation, trust, unincorporated
------
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at the
----------
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: The Shelf Registration Statement and Common
----------------------
Dividend Registration Statement.
Shelf Filing Deadline: As defined in Section 4 hereof.
---------------------
Shelf Registration Statement: As defined in Section 4 hereof.
-----------------------------
Transfer Agent: The transfer agent with respect to the Depositary Shares
--------------
and the Series F Preferred Stock.
Transfer Restricted Securities: Each Depositary Share, each share of Series
------------------------------
F Preferred Stock, and each share of Common Stock until the earliest to occur of
(i) the date on which such Depositary Share, share of Series F Preferred Stock,
or share of Common Stock, as the case may be, is effectively registered under
the Act and disposed of in accordance with the Shelf Registration Statement or
Common Dividend Registration Statement, (ii) the date on which such Depositary
Share, share of Series F Preferred Stock, or share of Common Stock, as the case
may be, is distributed to the public pursuant to Rule 144 under the Act
2
<PAGE>
or may be distributed to the public pursuant to Rule 144(k) under the Securities
Act or (iii) in the case of Common Stock Dividends, the date the Common Stock
Dividends are issued by the Company pursuant to an effective Common Stock
Registration Statement.
Underwritten Registration or Underwritten Offering: A registration in which
------------------------- ---------------------
securities of the Company are sold to an underwriter for re-offering to the
public.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Transfer Restricted Securities are registered
------
in such Person's name.
SECTION 3. [INTENTIONALLY OMITTED].
SECTION 4. REGISTRATION
(a) Shelf Registration. The Company shall:
------------------
(x) cause to be filed on or prior to 60 days after the
consummation of the offering of Series F Preferred Stock (and the related
Depositary Shares) (the "Shelf Filing Deadline"), a shelf registration
---------------------
statement pursuant to Rule 415 under the Act (the "Shelf Registration
------------------
Statement"), relating to resales of all Transfer Restricted Securities
---------
(except Common Stock Dividends) the Holders of which shall have provided
the information required pursuant to Section 4(b) hereof, and
(y) use its reasonable best efforts to cause such Shelf
Registration Statement to become effective on or prior to 120 days after
the Shelf Filing Deadline.
The Company shall use its best efforts to keep the Shelf
Registration Statement discussed in this Section 4(a) continuously effective,
supplemented and amended as required by the provisions of Sections 6(b) and (c)
hereof to the extent necessary to ensure that it is available for resales of
Transfer Restricted Securities by the Holders thereof entitled to the benefit of
this Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period expiring on the earlier to occur of:
(i) the date when all Transfer Restricted Securities (except Common Stock
Dividends) have been sold; and (ii) 730 days from the date of the Closing Date,
provided, that the Company will have the option of suspending the effectiveness
of the Shelf Registration Statement for periods of up to an aggregate of 60 days
in any calendar year if the Board of Directors of the Company determines that
compliance with the disclosure obligations necessary to maintain the
effectiveness of the Shelf Registration Statement at such time could reasonably
be expected to have a material adverse effect on the Company or a pending
corporate transaction of the Company (a "Permitted Shelf Suspension").
--------------------------
(b) Provision by Holders of Certain Information in Connection with
--------------------------------------------------------------
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
- --------------------------------
may include any of its Transfer Restricted Securities in the Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 Business Days after receipt of a request
therefor, such information specified in item 507 of Regulation S-K under the Act
for use in connection with the Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein, including the information
3
<PAGE>
set forth in the questionnaire included as Annex A to the Offering Memorandum.
No Holder of Transfer Restricted Securities shall be entitled to Liquidated
Damages pursuant to Section 5 hereof unless and until such Holder shall have
provided all such information required to be provided by such Holder for
inclusion therein. Each Holder as to which the Shelf Registration Statement is
being effected agrees to furnish promptly to the Company, for so long as the
Shelf Registration Statement is effective, all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
(c) Registration of Common Dividends. The Company shall:
--------------------------------
(x) cause to be filed on or prior to 60 days after the
consummation of the offering of Series F Preferred Stock (and the related
Depositary Shares) (the "Common Dividend Filing Deadline"), a registration
-------------------------------
statement (the "Common Dividend Registration Statement"), relating to the
--------------------------------------
issuance of dividends on the Series F Preferred Stock to the extent that
such dividends are paid in Common Stock; and
(y) use its reasonable best efforts to cause such Common Stock
Dividend Registration Statement to become effective on or prior to 120 days
after the Common Dividend Filing Deadline.
The Company shall use its best efforts to keep the Common Dividend
Registration Statement discussed in this Section 4(c) continuously effective,
supplemented and amended as required by the provisions of Sections 6(b) and (c)
hereof to the extent necessary to ensure that it is available on each dividend
payment date of the Series F Preferred Stock and to ensure that it conforms with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period
expiring on the earlier to occur of: (i) the date when all Series F Preferred
Stock is no longer Transfer Restricted Securities; and (ii) 730 days from the
date of the Closing Date, provided, that the Company will have the option of
suspending the effectiveness of the Common Dividend Registration Statement for
periods of up to an aggregate of 60 days in any calendar year if the Board of
Directors of the Company determines that compliance with the disclosure
obligations necessary to maintain the effectiveness of the Shelf Registration
Statement at such time could reasonably be expected to have a material adverse
effect on the Company or a pending corporate transaction of the Company (a
"Permitted Dividend Suspension," and together with a Permitted Shelf Suspension,
- ------------------------------
a "Permitted Suspension").
--------------------
If for any reason the Common Dividend Registration Statement is not
filed or is not declared effective (including by reason of any position,
determination, rule or regulation of the Commission or the Staff of the
Commission not permitting such Common Dividend Registration Statement), the
Company shall file the Common Dividend Registration Statement as a registration
statement to permit resales of the Common Stock issued as dividends on the
Series F Preferred Stock and to keep such registration statement effective for
the equivalent periods.
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SECTION 5. LIQUIDATED DAMAGES
If (i) the Company fails to file the Shelf Registration Statement
with the Commission on or prior to the Shelf Filing Deadline, (ii) the Shelf
Registration Statement has not been declared effective by the Commission on or
prior to the 120th day after the Shelf Filing Deadline (the "Effectiveness
-------------
Target Date"), whether or not the Company has breached any obligation to use its
- -----------
best efforts to cause the Shelf Registration Statement to be declared effective,
(iii) the Shelf Registration Statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of Transfer
Restricted Securities (except Common Stock Dividends) for any period of ten
consecutive days or for any 20 days in any 180-day period without being
succeeded within the time period provided for herein by a post effective
amendment to such Shelf Registration Statement that cures such failure and that
is itself declared effective within ten Business Days of the filing thereof,
provided, that, for purposes of this subsection (iii) only, such effectiveness
was not suspended in connection with a Permitted Suspension, or (iv) the Company
is unable to pay a dividend on the Series F Preferred Stock in Common Stock that
is freely transferable without restriction under the Act without delivery of a
prospectus (such Common Stock, "Unrestricted Stock") (each such event referred
------------------
to in clauses (i) through (iv), a "Registration Default"), then commencing on
--------------------
the day following the date on which such Registration Default occurs, the
Company agrees to pay to each Holder of Transfer Restricted Securities affected
by such Registration Default, liquidated damages ("Liquidated Damages") at a
------------------
rate of $0.25 per $2,500 Liquidation Preference of Series F Preferred Stock (or
$.0025 per $25.00 Liquidation Preference of Depositary Shares) constituting
Transfer Restricted Securities held by such Holder until such Registration
Default is cured or 0.25% of the total dividend payment that was not made in
either cash or Unrestricted Stock, as applicable, which shall accrue from the
date of the Registration Default until such Registration Default is cured or
such dividend payment is paid in cash or Unrestricted Stock or any Common Stock
paid as a dividend by the Company becomes Unrestricted Stock. All accrued
Liquidated Damages will be paid in shares of Common Stock valued at the Average
Stock Price by the Company on each Dividend Payment Date.
All accrued Liquidated Damages shall be paid to the Global
Certificate Holder by wire transfer of immediately available funds or by federal
funds check and to Holders of Definitive Securities by mailing checks to their
registered addresses by the Company on each Interest Payment Date. All
obligations of the Company set forth in the preceding paragraph that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company shall comply with all the provisions of
Section 6(b) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a Shelf
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof.
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(b) General Provisions. In connection with the Registration Statement and
------------------
any related Prospectus required by this Agreement to permit the sale or resale
of Transfer Restricted Securities, the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective, subject to a Permitted Suspension, and provide all
requisite financial statements for the period specified in Section 4 of
this Agreement. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or emission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Registration Statement (1) in the case of clause (A), correcting any such
misstatement or omission, and (2) in the case of either clause (A) or (B),
use its best efforts to cause such amendment to be declared effective and
such Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter;
(ii) except in the event of a Permitted Suspension, prepare and file
with the Commission such amendments and post-effective amendments to the
Registration Statement as may be necessary to keep the Registration
Statement effective for the applicable period set forth in Section 4
hereof, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been
sold, cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act, and to comply fully with Rules 424 and 430A, as applicable, under
the Act in a timely manner; and comply with the provisions of the Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended
method or methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders promptly
and, if requested by such Persons, confirm such advice in writing, (A) when
the Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to the Registration Statement or any post-
effective amendment thereto, when the same has become effective, (B) of any
request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or
of the suspension by any state securities commission of the qualification
of the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Shelf Registration Statement
in order to make the statements therein not misleading, or that requires
the making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading. If at any time the Commission shall issue
any stop order suspending the effectiveness of the Registration Statement,
or any state securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from qualification
of the Transfer Restricted Securities under state
6
<PAGE>
securities or Blue Sky laws, the Company shall use its best efforts to obtain
the withdrawal or lifting of such order at the earliest possible time;
(iv) make available, if requested, to each selling Holder named in
the Registration Statement or Prospectus and each of the underwriters) in
connection with such sale, if any, before filing with the Commission, copies of
the Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus (including all
documents incorporated by reference after the initial filing of such
Registration Statement), substantially in the form to be filed, which documents
will be subject to the review and comment of such Holders and underwriters, in
connection with such sale, if any, for a period of at least five Business Days,
and the Company will not file any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) to which the selling
Holders of the Transfer Restricted Securities covered by such Registration
Statement or the underwriters, in connection with such sale, if any, shall
reasonably object within five Business Days after the receipt thereof. A selling
Holder or underwriter, if any, shall be deemed to have reasonably objected to
such filing if such Registration Statement, amendment, Prospectus or supplement,
as applicable, as proposed to be filed, contains a material misstatement or
omission or fails to comply with the applicable requirements of the Act;
(v) promptly upon the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, make
available copies of such document to the selling Holders and to the underwriters
in connection with such sale, if any, make the Company's representatives
available for discussion of such document and other customary due diligence
matters, and include such information in such document prior to the filing
thereof as such selling Holders or underwriters, if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant to
such Registration Statement and any attorney or accountant retained by such
selling Holders or any of such underwriters, all financial and other records,
pertinent corporate documents and properties of the Company and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in connection
with such Registration Statement or any post-effective amendment thereto
subsequent to the filing thereof and prior to its effectiveness; provided that
any person to whom information is provided under this clause (vi) agrees in
writing to maintain the confidentiality of such information to the extent such
information is not in the public domain;
(vii) if requested by any selling Holders or the underwriters in
connection with such sale, if any, promptly include in the Registration
Statement or Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders and underwriters, if any,
may reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer Restricted
--------------------
Securities, information with respect to the principal amount of Transfer
Restricted Securities being sold to such underwriters, the purchase price being
paid therefor and any other terms of the offering of the Transfer Restricted
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable after
the Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
7
<PAGE>
(viii) cause the Transfer Restricted Securities covered by the
Shelf Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate
Liquidation Preference of Series F Preferred Stock (and the related
Depositary Shares) covered thereby, or by the underwriters, if any;
(ix) furnish to each selling Holder and each of the underwriters,
if any, in connection with such sale, if any, without charge, at least one
copy of the Registration Statement, as first filed with the Commission, and
of each amendment thereto, and make available all documents incorporated by
reference therein and all exhibits (including exhibits incorporated therein
by reference);
(x) deliver to each selling Holder and each of the underwriters,
if any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company hereby consents to the use of
the Prospectus and any amendment or supplement thereto by each of the
selling Holders and each of the underwriters, if any, in connection with
the offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(xi) enter into such agreements (including, unless not required
pursuant to Section 10 hereof, an underwriting agreement) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to the Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder
of Transfer Restricted Securities or underwriter in connection with any
sale or resale pursuant to the Registration Statement contemplated by this
Agreement, and in such connection, whether or not an underwriting agreement
is entered into and whether or not the registration is an Underwritten
Registration, the Company shall:
(A) furnish to each selling Holder and each underwriter, if any, upon the
effectiveness of the Registration Statement:
(1) a certificate, dated the date of effectiveness of the
Registration Statement signed by (x) the President or any Vice President
and (y) a principal financial or accounting officer of the Company,
confirming with respect to the Prospectus or any purchase or underwriting
agreement and the Transfer Restricted Securities, as of the date thereof,
the matters set forth in paragraphs (a), (b), (c) and (d) of Section 8 of
the Purchase Agreement and such other matters as the Holders and/or
underwriters may reasonably request;
(2) an opinion, dated the date of effectiveness of the
Registration Statement of counsel for the Company, covering (i) due
authorization and enforceability of the Depositary Shares, Series F
Preferred Stock, and Common Stock, (ii) a statement to the effect that
such counsel has participated in conferences with officers and other
representatives of the Company and representatives of the independent
public accountants for the Company and have considered the matters
required to be stated therein and the statements contained therein,
although such counsel has not independently verified the
8
<PAGE>
accuracy, completeness or fairness of such statements; and that such
counsel advises that, on the basis of the foregoing (relying as to
materiality to a large extent upon facts provided to such counsel by
officers and other representatives of the Company and without independent
check or verification), no facts came to such counsel's attention that
caused such counsel to believe that the Registration Statement, at the
time such Registration Statement or any post-effective amendment thereto
became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus contained in such Registration Statement as of its date
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading and
(iii) such other matters of the type customarily covered in opinions of
counsel for an issuer in connection with similar securities offerings, as
may reasonably be requested by such parties. Without limiting the
foregoing, such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the accuracy,
completeness or fairness of the financial statements, notes and schedules
and other financial, statistical and accounting data included in the
Registration Statement contemplated by this Agreement or the related
Prospectus; and
(3) if the registration is a registration in which securities of
the Company are sold to an underwriter for reoffering to the public,
obtain a customary comfort letter, dated as of the date of effectiveness
of the Registration Statement, addressed to the Board of Directors of the
Company or any underwriter from the Company's independent accountants, in
the customary form and covering matters of the type customarily covered
in comfort letters to boards of directors in underwritten offerings;
(B) set forth in full or incorporated by reference in the underwriting
agreement, if any, in connection with any sale or resale pursuant to the
Registration Statement the indemnification provisions and procedures of
Section 8 hereof with respect to all parties to be indemnified pursuant to
said Section; and
(C) deliver such other documents and certificates as may be reasonably
requested by such parties to evidence compliance with clause (A) above and
with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company pursuant to this clause (xi), if
any.
The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder, and if at any time
the representations and warranties of the Company contemplated in (A)(1) above
cease to be true and correct, the Company shall so advise the underwriter(s), if
any, and selling Holders promptly and if requested by such Persons, shall
confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriters, if any,
and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or
Blue Sky laws of such jurisdictions as the selling Holders or
underwriters), if any, may request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the Registration Statement;
provided, however, that the Company shall not be required to register or
qualify as a foreign corporation
9
<PAGE>
where it is not now so qualified or to take any action that would subject
it to the service of process in suits or to taxation, other than as to
matters and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) [Intentionally Omitted];
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders and the
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold and not
bearing any restrictive legends; and to register such Transfer Restricted
Securities in such denominations and such names as the Holders or the
underwriters), if any, may request at least two Business Days prior to such
sale of Transfer Restricted Securities;
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriters, if
any, to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xii) above;
(xvi) if any fact or event contemplated by Section 6(b)(iii)(D)
above shall exist or have occurred, except in the event of a Permitted
Suspension prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of Transfer Restricted Securities,
the Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Shelf Registration
Statement covering such Transfer Restricted Securities and provide the
Transfer Agent or the Trustee, as the case may be, with printed
certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with the Depository Trust Company;
(xviii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
---------------------------------
required to be retained in accordance with the rules and regulations of the
NASD, and use its best efforts to cause such Registration Statement to
become effective and approved by such governmental agencies or authorities
as may be necessary to enable the Holders selling Transfer Restricted
Securities to consummate the disposition of such Transfer Restricted
Securities;
(xix) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders with regard to the Registration Statement, as soon as
practicable, a consolidated earnings statement meeting the requirements of
Rule 158 (which need not be audited) covering a twelve-month period
beginning after the effective date of the Registration Statement (as such
term is defined in paragraph (c) of Rule 158 under the Act);
10
<PAGE>
(xx) [Intentionally Omitted];
(xxi) [Intentionally Omitted];
(xxii) cause all Transfer Restricted Securities covered by the
Shelf Registration Statement to be listed on each securities exchange on
which similar securities issued by the Company are then listed if requested
by the Holders of a majority in aggregate Liquidation Preference of Series
F Preferred Stock (and the related Depositary Shares) or the managing
underwriters, if any; and
(xxiii) provide promptly to each Holder upon written request each
document filed with the Commission pursuant to the requirements of Section
13 or Section 15(d) of the Exchange Act.
(c) Restrictions on Holders. Each Holder agrees by acquisition of a
-----------------------
Transfer Restricted Security that, upon receipt of any notice from the Company
of the existence of any fact of the kind described in Section 6(b)(iii)(D)
hereof, such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 6(b)(xvi) hereof, or until it is advised in writing (the "Advice") by
------
the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event the Company shall give any such notice,
the time period regarding the effectiveness of such Registration Statement set
forth in Section 4 hereof, shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) hereof to and including the date when each selling Holder
covered by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or
shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether the
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made with the NASD,
including, if applicable, the fees and expenses (excluding underwriting
discounts or commissions, of any "qualified independent underwriter" and its
counsel, as may be required by the rules and regulations of the NASD)); (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Depositary Shares, Series F Preferred Stock and Common Stock and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company and, in accordance with
Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all
application and filing fees in connection with listing the Depositary Shares,
Series F Preferred Stock, or Common Stock on a national exchange or automated
quotation system if required hereunder; and (vi) all fees and disbursements of
independent certified public accountants of the Company (including the expenses
of any special audit and comfort letters required by or incident to such
performance).
11
<PAGE>
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
(b) In connection with the Registration Statement required by this
Agreement, the Company will reimburse the Initial Purchasers and the Holders of
Transfer Restricted Securities being registered pursuant to the Registration
Statement for the reasonable fees and disbursements of not more than one
counsel, or such other counsel as may be chosen by the Holders of a majority in
number of shares or principal amount, as the case may be, of the Transfer
Restricted Securities for whose benefit the Registration Statement is being
prepared.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each
Holder, (ii) each person, if any, who controls a Holder within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person to the fullest extent lawful, from and
against any and all losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
investigation or litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become or are subject under the Act,
the Exchange Act or otherwise, insofar as such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus, or in any supplement
thereto or amendment thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the Company
will not be liable in any such case to the extent, but only to the extent, that
(i) any such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder expressly
for use therein and (ii) the foregoing indemnity with respect to any untrue
statement contained in or omitted from a Registration Statement or the
Prospectus shall not inure to the benefit of any Holder (or any person
controlling such Holder), from whom the person asserting any such loss,
liability, claim, damage or expense purchased (or received upon conversion), any
of the Depositary Shares, Series F Preferred Stock or Common Stock which are the
subject thereof if it is finally judicially determined that such loss,
liability, claim, damage or expense resulted solely from the fact that the
Holder sold Depositary Shares, Series F Preferred Stock or Common Stock, to a
person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Registration Statement and the
Prospectus, as amended or supplemented, and (x) the Company shall have
previously and timely furnished sufficient copies of the Registration Statement
or Prospectus, as so amended or supplemented, to such Holder in accordance with
this Agreement and (y) the Registration Statement or Prospectus, as so amended
or supplemented, would have corrected such untrue statement or omission of a
material fact. This indemnity agreement will be in addition to any liability
which the Company may otherwise have, including, under this Agreement.
(b) Each Holder, severally and not jointly, agrees to indemnify and
hold harmless the Company and each person, if any, who controls the Company
within the meaning of Section 15 of the Act
12
<PAGE>
or Section 20(a) of the Exchange Act, against any losses, liabilities, claims,
damages and expenses whatsoever (including but not limited to attorneys' fees
and any and all expenses whatsoever incurred in investigating, preparing or
defending against any investigation or litigation, commenced or threatened, or
any claim whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus, or in
any amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Holder expressly for use therein. This indemnity will be in addition to any
liability which a Holder may otherwise have, including under this Agreement. In
no event, however, shall the liability of any selling Holder thereunder be
greater in amount than the dollar amount of the proceeds received by such Holder
upon its sale of the Depositary Shares, Series F Preferred Stock, or Common
Stock giving rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action, (ii) the indemnifying parties
shall not have employed counsel to take charge of the defense of such action
within a reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to one or all of the indemnifying parties (in which case the
indemnifying party or parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses of counsel shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under subsection (a) or
(b) above, shall only be liable for the legal expenses of one counsel (in
addition to any local counsel) for all indemnified parties in each jurisdiction
in which any claim or action is brought. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its prior written consent,
provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for contribution in circumstances in which
the indemnification provided for in this Section 8 is for any reason held to be
unavailable from the Company or is insufficient
13
<PAGE>
to hold harmless a party indemnified thereunder, the Company and each Holder
shall contribute to the aggregate losses, claims, damages, liabilities and
expenses of the nature contemplated by such indemnification provision (including
any investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company, any contribution received by
the Company from persons, other than the Holders, who may also be liable for
contribution, including persons who control the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act) to which the Company
and any Holder may be subject, in such proportion as is appropriate to reflect
the relative benefits received by the Company from the offering of the Series F
Preferred Stock (and the related Depositary Shares), and any such Holder from
its sale of Depositary Shares, Series F Preferred Stock, or Common Stock, or, if
such allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice as
provided in this Section 8, in such proportion as is appropriate to reflect not
only the relative benefits referred to above but also the relative fault of the
Company and the Holders in connection with the statements or emissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and any Holder shall be deemed to be in the same proportion as (x)
the total proceeds from the offering (net of discounts but before deducting
expenses) of the Series F Preferred Stock (and the related Depositary Shares)
received by the Company and (y) the total proceeds received by such Holder upon
its sale of Depositary Shares, Series F Preferred Stock, or Common Stock which
would otherwise give rise to the indemnification obligation. The relative fault
of the Company and of the Holders shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Holders and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and each Holder agree that it would not
be just and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to above. Notwithstanding the
provisions of this Section 8, (i) no Holder shall be required to contribute, in
the aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of its Depositary Shares, Series F
Preferred Stock, or Common Stock, as the case may be, exceeds the sum of (A) the
amount paid by such Holder for such Depositary Shares, Series F Preferred Stock,
or Common Stock, plus (B) the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section II (f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, (A) each person,
if any, who controls a Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and (B) the respective officers, directors,
partners, employees, representatives and agents of a Holder or any controlling
person shall have the same rights to contribution as such Holder, and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 8(d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this Section 8, notify such party or parties from whom
contribution may be sought, but the failure to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 8 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its prior written consent; provided, however, that such written consent
was not unreasonably withheld.
14
<PAGE>
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available, upon
request of any Holder of Transfer Restricted Securities, to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
The Holders of Transfer Restricted Securities may elect to sell
their Transfer Restricted Securities pursuant to one or more Underwritten
Registrations; provided, however, that in no event shall any Holder commence any
such Underwritten Registration if a period of less than 180 days has elapsed
since the consummation of the most recent Underwritten Registration hereunder;
and provided further, that in no event shall the Holders effect more than three
such Underwritten Registrations hereunder. No Holder may participate in any
Underwritten Registration hereunder unless such Holder (a) agrees to sell such
Holder's Transfer Restricted Securities on the basis provided in customary
underwriting arrangements entered into in connection therewith and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
In any Underwritten Offering, the investment banker or investment
bankers and manager or managers that will administer the offering will be
selected by the Holders of a majority in aggregate Liquidation Preference or
aggregate principal amount of the Transfer Restricted Securities included in
such offering, provided, that such investment bankers and managers must be
reasonably satisfactory to the Company. Such investment bankers and managers are
referred to herein as the "underwriters."
------------
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to
--------
exercise all rights provided herein, in the Certificate of Designation, the
Purchase Agreement or granted by law, including recovery of liquidated or other
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages (including the Liquidated
Damages contemplated hereby) would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or after
--------------------------
the date of this Agreement enter into any agreement with respect to its
securities that conflicts with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof, except where a waiver with
respect thereto has been obtained prior to the date of effectiveness of any
registration statement required under this Agreement.
15
<PAGE>
(c) [Intentionally Omitted].
(d) Amendments and Waivers. The provisions of this Agreement may
----------------------
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company has
obtained the written consent of Holders of a majority of the outstanding
Liquidation Preference or principal amount of Transfer Restricted Securities.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(f) if to a Holder, at the address set forth on the records of the
Transfer Agent with a copy to the Transfer Agent; and
if to the Company:
Intermedia Communications Inc.
3625 Queen Palm Drive
Tampa, Florida 33619
Telecopier No.: (813) 829-2470
Attention: Chief Financial Officer
With a copy to:
Kronish Lieb Weiner & Hellman LLP
1114 Avenue of the Americas, 46th Floor
New York, New York 10036
Telecopier No.: (212) 997-3527
Attention: Ralph J. Sutcliffe
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Transfer Agent at
the address specified in the Certificate of Designation.
(g) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities directly from such Holder.
16
<PAGE>
(h) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
(k) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(l) Entire Agreement. This Agreement together with the other
----------------
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understanding between the parties with respect to such
subject matter.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
INTERMEDIA COMMUNICATIONS INC.
By:
------------------------------------
Name:
Title:
BEAR, STEARNS & CO. INC.
By:
-----------------------------
Name:
Title:
SMITH BARNEY INC.
By:
-----------------------------
Name:
Title:
MERRILL LYNCH & CO.
By:
-----------------------------
Name:
Title:
WARBURG DILLON READ LLC
By:
-----------------------------
Name:
Title:
<PAGE>
Exhibit 4.8
CERTIFICATE OF DESIGNATION OF VOTING POWER,
DESIGNATION PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS
AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS
OF
7% SERIES F JUNIOR CONVERTIBLE PREFERRED STOCK
OF
INTERMEDIA COMMUNICATIONS INC.
-----------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-----------------------
Intermedia Communications Inc., a Delaware corporation (the
"Company"), certifies that pursuant to the authority contained in ARTICLE FOURTH
of its Restated Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware (the "DGCL"), the Board of
Directors of the Company at a special meeting duly called and held on August 3,
1998, duly approved and adopted the following resolution which resolution
remains in full force and effect on the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of
Directors by the Certificate of Incorporation, the Board of Directors does
hereby designate, create, authorize and provide for the issue of a series of
preferred stock having a par value of $1.00 per share, with a liquidation
preference of $2,500 per share (the "Liquidation Preference") which shall be
designated as Series F Junior Convertible Preferred Stock (the "Preferred
Stock") consisting of 92,000 shares (which shares of preferred stock were
authorized to be issued by the Company by resolution of the Board of Directors
of the Company dated as of March 17, 1997, and by resolution of the stockholders
of the Company dated as of May 22, 1997), having the following voting powers,
preferences and relative, participating, optional and other special rights, and
qualifications, limitations and restrictions thereof as follows:
1. Ranking. The Preferred Stock shall rank, with respect to dividend
-------
distributions and distributions upon the liquidation, winding-up and dissolution
of the Company, (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
August 12, 1998 by the Board of Directors, the terms of which do not expressly
provide that it ranks senior to or on a parity with the 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 Series D Preferred
Stock and Series E Preferred Stock, any additional shares of Series D Preferred
Stock, Series E Preferred Stock or 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 August 12, 1998 by the Board of Directors, the
<PAGE>
terms of which expressly provide that such class or series will rank on a parity
with the 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 and to
each class of capital stock or series of preferred stock issued by the Company
established after August 12, 1998 by the Board of Directors the terms of which
expressly provide that such class or series will rank senior to the 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 Preferred Stock
with respect to any dividend period unless all dividends for all preceding
dividend periods have been declared and paid, or declared and a sufficient sum
set apart for the payment of such dividend, upon all outstanding shares of
Senior Securities.
2. Dividends.
---------
(i) The holders of shares of the Preferred Stock shall be 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 the
Preferred Stock Issue Date accruing at the rate per annum of 7% of the
Liquidation Preference per share, payable quarterly in arrears on each January
15, April 15, July 15 and October 15, commencing on October 15, 1998 (each a
"Dividend Payment Date"). If any such date is not a Business Day, such payment
shall be made on the next succeeding Business Day, to the holders of record as
of the next preceding January 1, April 1, July 1 and October 1 (each, a "Record
Date"). Dividends will be payable, at the option of the Company, (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. 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 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 hereby authorized and
directed 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
shall pay the expenses of the Transfer Agent with respect to such sale,
including brokerage commissions. In the event the sale by the Transfer Agent of
such aggregated fractional interests would be restricted, the Company and the
Transfer Agent will agree upon other appropriate arrangements for the cash
realization of the fractional interests. Dividends payable on the 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. At the option of the
Company, whenever dividends are to be paid by delivery of shares of Common
Stock, such delivery shall be deemed to be made pursuant to the terms of a
dividend reinvestment plan for the Preferred Stock in which each holder of the
Preferred Stock shall be a participant.
(ii) Dividends on the Preferred Stock shall 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 Company shall
take all actions required or permitted under the DGCL to permit the payment of
dividends on the 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.
2
<PAGE>
(iii) 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 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
Preferred Stock. Unless full cumulative dividends on all outstanding shares of
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, then: (a) 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; (b) 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; (c) 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 (d) 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 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.
(iv) When dividends are declared by the Board of Directors, the Company
shall issue a press release at least 15 Business Days prior to the Record Date
setting forth (a) the method of payment for such dividends (cash, Common Stock
or a combination thereof) and (b) the pricing period used to determine the
Average Stock Price.
3. Conversion.
----------
(i) A holder of shares of Preferred Stock may convert such shares into
Common Stock at any time after November 16, 1998, unless previously redeemed.
For the purposes of conversion, each share of Preferred Stock shall be valued at
the Liquidation Preference, which shall be divided by the Conversion Price in
effect on the Conversion Date to determine the number of shares issuable upon
conversion, except that the right to convert shares of Preferred Stock called
for redemption shall terminate at the close of business on the Business Day
preceding the Redemption Date and shall be lost if not exercised prior to that
time, unless the Company shall default in payment of the Applicable Redemption
Price. Immediately following such conversion, the rights of the holders of
converted Preferred Stock shall cease and the persons entitled to receive the
Common Stock upon the conversion of Preferred Stock shall be treated for all
purposes as having become the owners of such Common Stock.
(ii) To convert Preferred Stock, a holder must (A) surrender the
certificate or certificates evidencing the shares of Preferred Stock to be
converted, duly endorsed in a form satisfactory to the Company, at the office of
the Company or transfer agent for the Preferred Stock, (B) notify the Company at
such office that he elects to convert Preferred Stock and the number of shares
he wishes to convert, (C) state in writing the name or names in which he wishes
the certificate or certificates for shares of Common Stock to be issued, and (D)
pay any transfer or similar tax if required. In the event that a holder fails to
notify the Company of the number of shares of Preferred Stock which he wishes to
convert, he shall be deemed to have elected to convert all shares represented by
the certificate or certificates surrendered for conversion. The date on which
the holder satisfies all those requirements is the "Conversion Date." As soon as
practical, the Company shall deliver a certificate for the number of full shares
of Common Stock issuable upon the conversion, and a new certificate representing
the unconverted portion, if any, of the shares of Preferred Stock represented by
the certificate or certificates surrendered for conversion. The
3
<PAGE>
person in whose name the Common Stock certificate is registered shall be treated
as the stockholder of record on and after the Conversion Date. No payment or
adjustment will be made for accrued and unpaid dividends on converted shares of
Preferred Stock or for dividends on any Common Stock issued upon such
conversion. The A share of 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,
in an amount equal to the dividend payable on such Dividend Payment Date, unless
such share of 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 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, and the holder converting such share of Preferred
Stock need not include a payment of such dividend amount upon surrender of such
share of Preferred Stock for conversion. If a holder of Preferred Stock converts
more than one share at a time, the number of full shares of Common Stock
issuable upon conversion shall be based on the total liquidation preference of
all shares of Preferred Stock converted. If the last day on which Preferred
Stock may be converted is not a Business Day, Preferred Stock may be surrendered
for conversion on the next succeeding Business Day.
(iii) The Company shall not issue any fractional shares of Common Stock
upon conversion of Preferred Stock. Instead the Company shall round the results
of a conversion up to the nearest full share of Common Stock.
(iv) If a holder converts shares of Preferred Stock, the Company shall pay
any documentary, stamp or similar issue or transfer tax due on the issue of
shares of Common Stock upon the conversion. However, the holder shall pay any
such tax that is due because the shares are issued in a name other than the
holder's name.
(v) The Company has reserved and shall continue to reserve out of its
authorized but unissued Common Stock or its Common Stock held in treasury enough
shares of Common Stock to permit the conversion of the Preferred Stock in full.
All shares of Common Stock that may be issued upon conversion of Preferred Stock
shall be fully paid and nonassessable. The Company shall endeavor to comply with
all securities laws regulating the offer and delivery of shares of Common Stock
upon conversion of Preferred Stock and shall endeavor to list such shares on
each national securities exchange or automated quotation system on which the
Common Stock is listed.
(vi) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common Stock other
than the payment of dividends in Common Stock on the 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, the Conversion Price
in effect at the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Conversion Price by a fraction
the numerator of which shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator of which shall be the sum of such number of shares and the total
number shares constituting such dividend or other distribution, such reduction
to become effective immediately after the opening of business on the day
following the date fixed for such
4
<PAGE>
determination of the holders entitled to such dividends and distributions. For
the purposes of this paragraph 3(vi), the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of the
Company. The Company will not pay any dividend or make any distribution on
shares of Common Stock held in the treasury of the Company.
(vii) In case the Company shall issue rights, options or warrants to all
holders of its Common Stock entitling them to subscribe for, purchase or acquire
shares of Common Stock at a price per share less than the current market price
per share (determined as provided in paragraph 3(xi) below) of the Common Stock
on the date fixed for the determination of stockholders entitled to receive such
rights, options or warrants, the Conversion Price in effect at the opening of
business on the day following the date fixed for such determination shall be
reduced by multiplying such Conversion Price by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of
Common Stock which the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription, purchase or acquisition
would purchase at such current market price and the denominator of which shall
be the number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares of Common Stock
so offered for subscription, purchase or acquisition, such reduction to become
effective immediately after the opening of business on the day following the
date fixed for such determination of the holders entitled to such rights,
options or warrants. However, upon the expiration of any right, option or
warrant to purchase Common Stock, the issuance of which resulted in an
adjustment in the Conversion Price pursuant to this paragraph 3(vii), if any
such right, option or warrant shall expire and shall not have been exercised,
the Conversion Price shall be recomputed immediately upon such expiration and
effective immediately upon such expiration shall be increased to the price it
would have been (but reflecting any other adjustments to the Conversion Price
made pursuant to the provisions of this paragraph 3 after the issuance of such
rights, options or warrants) had the adjustment of the Conversion Price made
upon the issuance of such rights, options or warrants been made on the basis of
offering for subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights, options or warrants. No
further adjustment shall be made upon exercise of any right, option or warrant
if any adjustment shall have been made upon the issuance of such security. For
the purposes of this paragraph 3(vii), the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of the
Company. The Company will not issue any rights, options or warrants in respect
of shares of Common Stock held in the treasury of the Company.
(viii) In case the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be reduced, and, conversely, in case the
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be increased to equal the product of the Conversion Price in
effect on such date and a fraction the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such subdivision or
combination, as the case may be, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such subdivision
or combination, as the case may be. Such reduction or increase, as the case may
be, shall become effective immediately after the opening of business on the day
following the day upon which such subdivision or combination becomes effective.
(ix) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock (A) evidences of its indebtedness or (B) shares
of any class of capital stock, cash or other
5
<PAGE>
assets (including securities, but excluding (x) any rights, options or warrants
referred to in paragraph 3(vii) above, (y) any dividend or distribution referred
to in paragraph 3(vi) or 3(viii) above, and (z) cash dividends paid from the
Company's retained earnings), unless the sum of (1) all such cash dividends and
distributions made within the preceding 12 months in respect of which no
adjustment has been made and (2) any 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 within the preceding 12 months in respect of which no
adjustment has been made, exceeds 20% of the Company's market capitalization
(being the product of the then current market price per share (determined as
provided in paragraph 3(xi) below) of the Common Stock times the aggregate
number of shares of Common Stock then outstanding on the record date for such
distribution), then in each case, the Conversion Price in effect at the opening
of business on the day following the date fixed for the determination of holders
of Common Stock entitled to receive such distribution shall be adjusted by
multiplying such Conversion Price by a fraction of which the numerator shall be
the current market price per share (determined as provided in paragraph 3(xi)
below) of the Common Stock on such date of determination (or, if earlier, on the
date on which the Common Stock goes "ex-dividend" in respect of such
distribution) less the then fair market value as determined by the Board of
Directors (whose determination shall be conclusive and shall be described in a
statement filed with the Transfer Agent) of the portion of the capital stock,
cash or other assets or evidences of indebtedness so distributed (and for which
an adjustment to the Conversion Price has not previously been made pursuant to
the terms of this paragraph 3) applicable to one share of Common Stock, and the
denominator shall be such current market price per share of the Common Stock,
such adjustment to become effective immediately after the opening of business on
the day following such date of determination of the holders entitled to such
distribution. The following transactions shall be excluded from the foregoing
clauses (1) and (2): (I) repurchases of Common Stock issued under the Company's
stock incentive programs; and (II) dividends or distributions payable-in-kind in
additional shares of, or warrants, rights, calls or options exercisable for or
convertible into additional shares of Junior Securities.
(x) The reclassification or change of Common Stock into securities,
including securities other than Common Stock, (other than any reclassification
upon a consolidation or merger to which paragraph 3(xviii) below shall apply)
shall be deemed to involve (A) a distribution of such securities other than
Common Stock to all holders of Common Stock (and the effective date of such
reclassification shall be deemed to be "the date fixed for the determination of
holders of Common Stock entitled to receive such distribution" within the
meaning of paragraph 3(ix) above), and (B) a subdivision or combination, as the
case may be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective,"
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph 3(viii) above).
(xi) For the purpose of any computation under paragraph 3(vii) or 3(ix)
above, the current market price per share of Common Stock on any day shall be
deemed to be the average of the Closing Prices of the Common Stock for the 20
consecutive Trading Days selected by the Board of Directors commencing no more
than 30 Trading Days before and ending no later than the day before the day in
question; provided that, in the case of paragraph 3(ix), if the period between
the date of the public announcement of the dividend or distribution and the date
for the determination of holders of Common Stock entitled to receive such
dividend or distribution (or, if earlier, the date on which the Common Stock
goes "ex-dividend" in respect of such dividend or distribution) shall be less
than 20 Trading Days, the period shall be such lesser number of Trading Days
but, in any event, not less than five Trading Days.
6
<PAGE>
(xii) No adjustment in the Conversion Price need be made until all
cumulative adjustments amount to 1% or more of the Conversion Price as last
adjusted. Any adjustments that are not made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this paragraph
3 shall be made to the nearest 1/10,000th of a cent or to the nearest 1/10,000th
of a share, as the case may be.
(xiii) For purposes of this paragraph 3, "Common Stock" includes any stock
of any class of the Company which has no preference in respect of dividends or
of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company and which is not subject to redemption
by the Company. However, subject to the provisions of paragraph 3(xviii) below,
shares issuable on conversion of shares of Preferred Stock shall include only
shares of the class designated as Common Stock of the Company on the Preferred
Stock Issue Date or shares of any class or classes resulting from any
reclassification thereof and which have no preferences in respect of dividends
or amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company and which are not subject to redemption
by the Company; provided that, if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.
(xiv) No adjustment in the Conversion Price shall reduce the Conversion
Price below the then par value of the Common Stock. No adjustment in the
Conversion Price need be made under paragraphs 3(vi), 3(vii) and 3(ix) above if
the Company issues or distributes to each holder of Preferred Stock the shares
of Common Stock, evidences of indebtedness, assets, rights, options or warrants
referred to in those paragraphs which each holder would have been entitled to
receive had Preferred Stock been converted into Common Stock prior to the
happening of such event or the record date with respect thereto.
(xv) Whenever the Conversion Price is adjusted, the Company shall
promptly mail to holders of Preferred Stock, first class, postage prepaid, a
notice of the adjustment. The Company shall file with the transfer agent for the
Preferred Stock, if any, a certificate from the Company's independent public
accountants briefly stating the facts requiring the adjustment and the manner of
computing it. Subject to paragraph 3(xvi) below, the certificate shall be
conclusive evidence that the adjustment is correct.
(xvi) The Company from time to time may reduce the Conversion Price if it
considers such reductions 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 Common Stock by any amount, but in no event may the
Conversion Price be less than the par value of a share of Common Stock. Whenever
the Conversion Price is reduced, the Company shall mail to holders of Preferred
Stock a notice of the reduction. The Company shall mail, first class, postage
prepaid, the notice at least 15 days before the date the reduced Conversion
Price takes effect. The notice shall state the reduced Conversion Price and the
period it will be in effect. A reduction of the Conversion Price does not change
or adjust the Conversion Price otherwise in effect for purposes of paragraphs
3(vi), 3(vii), 3(viii) and 3(ix) above.
(xvii) If:
(A) the Company takes any action which would require an
adjustment in the Conversion Price pursuant to paragraph 3(vii), 3(ix) or 3(x)
above;
7
<PAGE>
(B) the Company consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation, and stockholders of the
Company must approve the transaction; or
(C) there is a dissolution or liquidation of the Company;
the Company shall mail to holders of the Preferred Stock, first class, postage
prepaid, a notice stating the proposed record or effective date, as the case may
be. The Company shall mail the notice at least 10 days before such date.
However, failure to mail the notice or any defect in it shall not affect the
validity of any transaction referred to in clause (A), (B) or (C) of this
paragraph 3(xvii).
(xviii) In the case of any consolidation of the Company or the merger of
the Company with or into any other entity or the sale or transfer of all or
substantially all the assets of the Company pursuant to which the Company's
Common Stock is converted into other securities, cash or assets, upon
consummation of such transaction, each share of Preferred Stock shall
automatically become convertible into the kind and amount of securities, cash or
other assets receivable upon the consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock into which such share of
Preferred Stock might have been converted immediately prior to such
consolidation, merger, transfer or sale (assuming such holder of Common Stock
failed to exercise any rights of election and received per share the kind and
amount of consideration receivable per share by a plurality of non-electing
shares). Appropriate adjustment (as determined by the Board of Directors of the
Company) shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of Preferred
Stock, to the end that the provisions set forth herein (including provisions
with respect to changes in and other adjustment of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other securities or property thereafter deliverable upon the
conversion of Preferred Stock. If this paragraph 3(xviii) applies, paragraphs
3(vi), 3(viii) and 3(x) do not apply.
(xix) In any case in which this paragraph 3 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Company may elect to defer until after the occurrence of such event
the issuance to the holder of any shares of Preferred Stock converted after such
record date and before the occurrence of such event of the additional shares of
Common Stock issuable upon such conversion over and above the shares issuable on
the basis of the Conversion Price in effect immediately prior to adjustment;
provided, however, that if such event shall not have occurred and authorization
of such event shall be rescinded by the Company, the Conversion Price shall be
recomputed immediately upon such recision to the price that would have been in
effect had such event not been authorized, provided that such recision is
permitted by and effective under applicable laws.
4. 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 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
Preferred Stock held by such holder, plus accrued and unpaid dividends and
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 of
the Company. After payment in full of the Liquidation Preference and all accrued
dividends and Liquidated Damages, if any, to which holders of 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 Preferred Stock and all other Parity Securities are not paid in
full,
8
<PAGE>
the holders of the 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 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.
5. Optional Redemption.
-------------------
(i) The Preferred Stock may not be redeemed at the option of the Company
prior to October 17, 2001. The Preferred Stock may be redeemed for cash, in
whole or in part, at the option of the Company on or after October 17, 2001, 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 Liquidated Damages, if any, to the date of
redemption (the "Applicable Redemption Price"), upon not less than 30 nor more
than 60 days' prior written notice, if redeemed during the 12-month period
commencing on October 17 of each of the years set forth below:
<TABLE>
<CAPTION>
Year Percentage
--------------------------------------------- ---------------
<S> <C>
2001........................................ 104.00%
2002........................................ 103.00%
2003........................................ 102.00%
2004........................................ 101.00%
2005 and thereafter......................... 100.00%
</TABLE>
No optional redemption pursuant to this paragraph 5(i) shall 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, Common Stock or a combination
thereof.
(ii) In case of redemption of less than all of the shares of Preferred
Stock at the time outstanding, the shares to be redeemed shall be selected pro
rata or by lot as determined by the Company in its sole discretion.
(iii) Notice of any redemption shall be sent by or on behalf of the Company
not less than 30 nor more than 60 days prior to the date specified for
redemption in such notice (the "Redemption Date"), by first class mail, postage
prepaid, to all holders of record of the Preferred Stock at their last addresses
as they shall appear on the books of the Company; provided, however, that no
failure to give such notice or any defect therein or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares of
Preferred Stock except as to the holder to whom the Company has failed to give
notice or except as to the holder to whom notice was defective. In addition to
any information required by law or by the applicable rules of any exchange upon
which Preferred Stock may be listed or admitted to trading, such notice shall
state: (i) that such redemption is being made pursuant to the optional
redemption provisions hereof; (ii) the Redemption Date; (iii) the Applicable
Redemption Price; (iv) the number of shares of Preferred Stock to be redeemed
and, if less than all shares held by such holder are to be redeemed, the number
of such shares to be redeemed; (v) the place or places where certificates for
such
9
<PAGE>
shares are to be surrendered for payment of the Applicable Redemption Price,
including any procedures applicable to redemptions to be accomplished through
book-entry transfers; and (vi) that dividends on the shares to be redeemed will
cease to accumulate on the Redemption Date. Upon the mailing of any such notice
of redemption, the Company shall become obligated to redeem at the time of
redemption specified thereon all shares called for redemption.
(iv) If notice has been mailed in accordance with Section 5(iii) above and
provided that on or before the Redemption Date specified in such notice, all
funds necessary for such redemption shall have been set aside by the Company,
separate and apart from its other funds in trust for the pro rata benefit of the
holders of the shares so called for redemption, so as to be, and to continue to
be available therefor, then, from and after the Redemption Date, dividends on
the shares of the Preferred Stock so called for redemption shall cease to
accumulate, and said shares shall no longer be deemed to be outstanding and
shall not have the status of shares of Preferred Stock, and all rights of the
holders thereof as stockholders of the Company (except the right to receive from
the Company the Applicable Redemption Price) shall cease. Upon surrender, in
accordance with said notice, of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Company shall so require and
the notice shall so state), such shares shall be redeemed by the Company at the
Applicable Redemption Price. In case fewer than all the shares represented by
any such certificate are redeemed, a new certificate or certificates shall be
issued representing the unredeemed shares without cost to the holder thereof.
(v) Any funds deposited with a bank or trust company for the purpose of
redeeming Preferred Stock shall be irrevocable except that:
(a) the Company shall be entitled to receive from such bank or
trust company the interest or other earnings, if any, earned on any money
so deposited in trust, and the holders of any shares redeemed shall have no
claim to such interest or other earnings; and
(b) any balance of monies so deposited by the Company and unclaimed
by the holders of the Preferred Stock entitled thereto at the expiration of
two years from the applicable Redemption Date shall be repaid, together
with any interest or other earnings earned thereon, to the Company, and
after any such repayment, the holders of the shares entitled to the funds
so repaid to the Company shall look only to the Company for payment without
interest or other earnings.
(vi) No Preferred Stock may be redeemed except with funds legally
available for such purpose. The Company shall take all actions required or
permitted under the DGCL to permit any such redemption.
(vii) Notwithstanding the foregoing provisions of this Section 5, unless
the full cumulative dividends on all outstanding shares of Preferred Stock shall
have been paid or contemporaneously are declared and paid for all past dividend
periods, none of the shares of Preferred Stock shall be redeemed unless all
outstanding shares of Preferred Stock are simultaneously redeemed.
6. Change of Control.
-----------------
(i) Subject to paragraph (6)(v) hereof, upon the occurrence of a Change of
Control, the Company shall be required to make an offer (a "Preferred Stock
Change of Control Offer") to each holder of shares of Preferred Stock to
repurchase all or any part of such holder's shares of Preferred Stock at an
offer price in cash equal to 100% of the aggregate Liquidation Preference
thereof, plus accumulated and
10
<PAGE>
unpaid dividends (including an amount equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the Change of Control
Payment Date) and Liquidated Damages, if any, thereon to the date of repurchase
(the "Change of Control Payment").
(ii) Within 30 days following any Change of Control, the Company shall (a)
publish a notice of the Change of Control in The Wall Street Journal or a
similar daily business publication of national distribution and (b) mail a
notice to each holder of Preferred Stock describing the transaction that
constitutes the Change of Control, together with such other information as may
be required pursuant to the securities laws, and stating: (A) that the Change of
Control Offer is being made pursuant to this Certificate of Designations and
that, to the extent lawful, all shares of Preferred Stock validly tendered will
be accepted for payment; (B) the purchase price and the purchase date, which
shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"); (C) that any shares of
Preferred Stock not tendered will continue to accrue dividends in accordance
with the terms of this Certificate of Designations; (D) that, unless the Company
defaults in the payment of the Change of Control Payment, all shares of
Preferred Stock accepted for payment pursuant to the Change of Control Offer
shall cease to accrue dividends on the Change of Control Payment Date; and (E) a
description of the procedures to be followed by such holder in order to have its
shares of Preferred Stock repurchased.
(iii) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (A) accept for payment shares of Preferred Stock validly tendered
pursuant to the Change of Control Offer and (B) promptly mail to each holder of
shares of Preferred Stock so accepted payment in an amount equal to the purchase
price for such shares and (C) unless the Company defaults in the payment for the
shares of Preferred Stock tendered pursuant to the Preferred Stock Change of
Control Offer, dividends will cease to accrue with respect to the shares of
Preferred Stock tendered and all rights of holders of such tendered shares will
terminate, except for the right to receive payment therefor, on the Change of
Control Payment Date. The Company shall publicly announce the results of the
Preferred Stock Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
(iv) The Company shall comply with any securities laws and regulations, to
the extent such laws and regulations are applicable to the repurchase of
shares of the Preferred Stock in connection with a Change of Control.
(v) Notwithstanding the foregoing, prior to complying with this paragraph
6, but in any event within 90 days following a Change of Control, the Company
shall either (a) repay or refinance all outstanding indebtedness or (b) obtain
the requisite consents, if any, under all agreements governing outstanding
indebtedness necessary to permit the repurchase of the Preferred Stock required
by this paragraph 6. 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 Preferred Stock in the event
of a Change of Control; provided, that if the Company fails to repurchase shares
of Preferred Stock, the sole remedy to holders of Preferred Stock will be the
voting rights arising from a Voting Rights Triggering Event. Moreover, the
Company will not repurchase or redeem any Preferred Stock pursuant to this
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 and the Company's repurchase or redemption obligation may be
concurrent with analogous obligations under Parity Securities.
(vi) Notwithstanding the foregoing, the Company shall not be required to
make a Preferred Stock Change of Control Offer following a Change of Control if
a third party makes the Preferred Stock
11
<PAGE>
Change of Control Offer in the manner, at the times and otherwise in compliance
with the requirements set forth in this Certificate of Designations applicable
to a Preferred Stock Change of Control Offer made by the Company and purchases
all of the Preferred Stock validly tendered and not withdrawn under such
Preferred Stock Change of Control Offer.
7. Voting Rights.
-------------
(i) The holders of record of shares of the Preferred Stock shall have no
voting rights, except as required by law and as hereinafter provided in this
Section 7.
(ii) Upon:
(a) the accumulation of accrued and unpaid dividends on the
outstanding Preferred Stock in an amount equal to six (6) 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 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 Preferred Stock,
voting together with any subsequently issued Parity Securities than entitled to
voting rights, shall 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 shall be immediately
and automatically increased by one or two, as the case may be.
(iii) Whenever such voting right shall have vested, such right may be
exercised initially either at a special meeting of the holders of Preferred
Stock, called as hereinafter provided, or at any annual meeting of stockholders
held for the purpose of electing directors, and thereafter at such annual
meetings or by the written consent of the holders of Preferred Stock. Such right
of the holders of Preferred Stock to elect directors may be exercised until (a)
all dividends in arrears shall have been paid in full and (b) all other Voting
Rights Triggering Events have been cured or waived, at which time the term of
such directors previously elected shall thereupon terminate, and such directors
shall be deemed to have resigned.
(iv) At any time when such voting right shall have vested in the holders
of Preferred Stock and if such right shall not already have been initially
exercised, a proper officer of the Company shall, upon the written request of
holders of record of 10% or more of the Preferred Stock then outstanding,
addressed to the Secretary of the Company, call a special meeting of holders of
Preferred Stock. Such meeting shall be held at the earliest practicable date
upon the notice required for annual meetings of stockholders at the place for
holding annual meetings of stockholders of the Company or, if none, at a place
designated by the Secretary of the Company. If such meeting shall not be called
by the proper officers of the Company within 30 days after the personal service
of such written request upon the Secretary of the Company, or within 30 days
after mailing the same within the United States, by registered mail, addressed
to the Secretary of the Company at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal authorities), then the
holders of record of 10% of the shares of Preferred Stock then outstanding may
designate in writing a holder of Preferred Stock to call such meeting at the
expense of the Company, and such meeting may be called by such person so
12
<PAGE>
designated upon the notice required for annual meetings of stockholders and
shall be held at the place for holding annual meetings of the Company or, if
none, at a place designated by such holder. Any holder of Preferred Stock that
would be entitled to vote at such meeting shall have access to the stock books
of the Company for the purpose of causing a meeting of stockholders to be called
pursuant to the provisions of this Section 7. Notwithstanding the provisions of
this paragraph, however, no such special meeting shall be called if any such
request is received less than 90 days before the date fixed for the next ensuing
annual or special meeting of stockholders.
(v) If any director so elected by the holders of Preferred Stock shall
cease to serve as a director before his term shall expire, the holders of
Preferred Stock then outstanding may, at a special meeting of the holders called
as provided above, elect a successor to hold office for the unexpired term of
the director whose place shall be vacant.
(vi) The Company shall not, without the affirmative vote or consent of the
holders of at least a majority of the shares of Preferred Stock then outstanding
(with shares held by the Company or any of its affiliates not being considered
to be outstanding for this purpose) voting or consenting as the case may be, as
one class:
(a) authorize, create (by way of reclassification or otherwise) or
issue any Senior Securities or any obligation or security convertible or
exchangeable into or evidencing the right to purchase, shares of any class
or series of Senior Securities;
(b) amend or otherwise alter this Certificate of Designation
(including the provisions of Section 7 hereof) in any manner that adversely
affects the specified rights, preferences, privileges or voting rights of
holders of Preferred Stock;
(c) authorize the issuance of any additional shares of Preferred
Stock; or
(d) waive any existing Voting Rights Triggering Event or compliance
with any provision of this Certificate of Designation;
provided, however, that the Company shall not amend the Change of Control
provisions of this 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 Preferred Stock, voting or consenting, as the case may be,
as one class.
(vii) Without the consent of each holder affected, an amendment or waiver
of the Company's Certificate of Incorporation or of this Certificate of
Designation may not (with respect to any shares of Preferred Stock held by a
non-consenting holder):
(a) alter the voting rights with respect to the Preferred Stock or
reduce the number of shares of Preferred Stock whose holders must consent
to an amendment, supplement or waiver;
(b) reduce the Liquidation Preference of or alter the provisions
with respect to the redemption of the Preferred Stock (except as provided
with respect to Section 6 hereof);
(c) reduce the rate of or change the time for payment of dividends
on any share of Preferred Stock;
(d) waive the consequences of any failure to pay dividends on the
Preferred Stock;
13
<PAGE>
(e) make any share of Preferred Stock payable in any form other
than that stated in this Certificate of Designation;
(f) make any change in the provisions of this Certificate of
Designation relating to waivers of the rights of holders of Preferred Stock
to receive the Liquidation Preference and dividends on the Preferred Stock;
(g) waive a redemption payment with respect to any share of
Preferred Stock (except as provided with respect to Section 6 hereof); or
(h) make any change in the foregoing amendment and waiver
provisions.
(viii) The Company in its sole discretion may without the vote or consent
of any holders of the Preferred Stock amend or supplement this Certificate of
Designation:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Preferred Stock in addition to or
in place of certificated Preferred Stock; or
(c) to make any change that would provide any additional rights or
benefits to the holders of the Preferred Stock or that does not adversely
affect the legal rights under this Certificate of Designation of any such
holder.
Except as set forth above, (x) the creation, authorization or issuance of any
shares of Junior Securities, Parity Securities or Senior Securities or (y) 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
the Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges, special rights or voting rights of holders of shares of
Preferred Stock.
8. Merger, Consolidation and Sale of Assets. Without the vote or
----------------------------------------
consent of the holders of a majority of the then outstanding shares of 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 (i) 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; (ii) if
the Company is not the resulting entity, the 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
Preferred Stock had immediately prior to such transaction; and (iii) 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 this Certificate of
Designations.
9. Reports. The Company shall file within 15 days after it files them
-------
with the Commission copies of the 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. In the event the Company is not required or
shall cease to be
14
<PAGE>
required to file SEC Reports, pursuant to the Exchange Act, the Company shall
nevertheless continue to file such reports with the Commission (unless the
Commission shall not accept such a filing) and the Transfer Agent. Whether or
not required by the Exchange Act to file SEC Reports with the Commission, so
long as any shares of Preferred Stock are outstanding, the Company shall furnish
copies of the SEC Reports to the holders of Preferred Stock at the time the
Company is required to make such information available to the Transfer Agent and
any investors who request it in writing. In addition, the Company has agreed
that, for so long as any 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.
10. Amendment. This Certificate of Designation shall not be amended,
---------
either directly or indirectly, or through merger or consolidation with another
entity, in any manner that would alter or change the powers, preferences or
special rights of the Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding
Preferred Stock, voting separately as a class.
11. Exclusion of Other Rights. Except as may otherwise be required by
-------------------------
law, the shares of Preferred Stock shall not have any voting powers, preferences
and relative, participating, optional or other special rights, other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Certificate of Incorporation. The shares of
Preferred Stock shall have no preemptive or subscription rights.
12. Headings of Subdivisions. The headings of the various subdivisions
------------------------
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
13. Severability of Provisions. If any voting powers, preferences and
--------------------------
relative, participating, optional and other special rights of the Preferred
Stock and qualifications, limitations and restrictions thereof set forth in this
resolution (as such resolution may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other voting powers, preferences and relative, participating,
optional and other special rights of Preferred Stock and qualifications,
limitations and restrictions thereof set forth in this resolution (as so
amended) which can be given effect without the invalid, unlawful or
unenforceable voting powers, preferences and relative, participating, optional
and other special rights of Preferred Stock and qualifications, limitations and
restrictions thereof shall, nevertheless, remain in full force and effect, and
no voting powers, preferences and relative, participating, optional or other
special rights of Preferred Stock and qualifications, limitations and
restrictions thereof herein set forth shall be deemed dependent upon any other
such voting powers, preferences and relative, participating, optional or other
special rights of Preferred Stock and qualifications, limitations and
restrictions thereof unless so expressed herein.
14. Reissuance of Preferred Stock. Shares of Preferred Stock that have
-----------------------------
been issued and reacquired in any manner, including shares purchased or redeemed
or exchanged or converted, shall (upon compliance with any applicable provisions
of the laws of Delaware) have the status of authorized but unissued shares of
preferred stock of the Company undesignated as to series and may be designated
or redesignated and issued or reissued, as the case may be, as part of any
series of preferred stock of the Company, provided that any issuance of such
shares as Preferred Stock must be in compliance with the terms hereof.
15. Mutilated or Missing Preferred Stock Certificates. If any of the
-------------------------------------------------
Preferred Stock certificates shall be mutilated, lost, stolen or destroyed, the
Company shall issue, in exchange and in
15
<PAGE>
substitution for and upon cancellation of the mutilated Preferred Stock
certificate, or in lieu of and substitution for the Preferred Stock certificate
lost, stolen or destroyed, a new Preferred Stock certificate of like tenor and
representing an equivalent amount of shares of Preferred Stock, but only upon
receipt of evidence of such loss, theft or destruction of such Preferred Stock
certificate and indemnity, if requested, satisfactory to the Company and the
transfer agent (if other than the Company).
16. Certain Definitions. As used in this Certificate of Designations,
-------------------
the following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Business Day" means any day except a Saturday, a Sunday, or any day on
------------
which banking institutions in New York, New York are required or authorized by
law or other governmental action to be closed.
"Change of Control" means the occurrence of any of the following: (i) 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, (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, (iii) 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 (A) 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 Change of Control equals
or exceeds 105% of the Conversion Price then in effect or (B) at least 90% of
the consideration in the transaction or transactions constituting a Change of
Control pursuant to clause (iii) consists of shares of common stock traded or to
be traded immediately following such Change of Control on a national securities
exchange or the Nasdaq National Market and, as a result of such transaction or
transactions, the Preferred Stock become convertible solely into such common
stock (and any rights attached thereto), or (iv) the first day on which more
than a majority of the Board of Directors are not Continuing Directors;
provided, however, that a transaction in which the Company becomes a subsidiary
of another entity shall not constitute a Change of Control if (A) 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 (B) 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.
"Closing Price" means, for each Trading Day, the last reported sale price
-------------
regular way on the Nasdaq National Market or, if the Common Stock is not quoted
on the Nasdaq National Market, the average of the closing bid and asked prices
in the over-the-counter market as furnished by any New York Stock Exchange
member firm selected from time to time by the corporation for that purpose.
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" means the Common Stock, par value $0.01 per share, of the
------------
Company.
16
<PAGE>
"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 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 Continuing Directors who
were members of the Board of Directors at the time of such nomination or
election.
"Conversion Price" shall initially mean $42.075 per share and thereafter
----------------
shall be subject to adjustment from time to time pursuant to the terms of
paragraph 3 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Liquidated Damages" means all liquidated damages then owing under the
------------------
Registration Rights Agreement.
"Person" means any individual, corporation, partnership, joint venture,
------
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock Issue Date" means August 18, 1998.
--------------------------
"Registration Rights Agreement" means the Registration Rights Agreement
-----------------------------
with respect to the Preferred Stock, dated as of August 18, 1998, by and among
the Company, Bear, Stearns & Co. Inc., Smith Barney Inc., Merrill Lynch & Co.
and Warburg Dillon Read LLC, as such agreement may be amended, modified or
supplemented from time to time.
"Series B Preferred Stock" means the Company's outstanding Series B
------------------------
Redeemable Exchangeable Preferred Stock due 2009.
"Series D Preferred Stock" means the Company's outstanding Series D Junior
------------------------
Convertible Preferred Stock.
"Series E Preferred Stock" means the Company's outstanding Series E Junior
------------------------
Convertible Preferred Stock.
"Trading Day" means any day on which the Nasdaq National Market or other
-----------
applicable stock exchange or market is open for business.
"Transfer Agent" shall be Continental Stock Transfer & Trust Co. unless and
--------------
until a successor is selected by the Company.
17
<PAGE>
IN WITNESS WHEREOF, the Company has caused this certificate to be duly
executed by Robert M. Manning, Senior Vice President and Chief Financial Officer
of the Company and attested by David C. Ruberg, Chairman of the Board, President
and Chief Executive Officer of the Company, this 17th day of August, 1998.
INTERMEDIA COMMUNICATIONS INC.
By: /s/ Robert M. Manning
---------------------------------------
Name: Robert M. Manning
Title: Senior Vice President
and Chief Financial Officer
ATTEST:
By: /s/ David C. Ruberg
---------------------------------
Name: David C. Ruberg
Title: Chairman of the Board,
President and Chief
Executive Officer
<PAGE> Exhibit 4.9
INTERMEDIA COMMUNICATIONS INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
As Depositary
and
HOLDERS OF DEPOSITARY RECEIPTS
DEPOSIT AGREEMENT
Dated as of August 18, 1998
<PAGE>
DEPOSIT AGREEMENT, dated as of August 18, 1998, among INTERMEDIA
COMMUNICATIONS INC., a Delaware corporation (the "Company"), CONTINENTAL STOCK
TRANSFER & TRUST COMPANY, a New York banking corporation, as depositary (the
"Depositary"), and all holders from time to time of Depositary Receipts issued
hereunder.
WITNESSETH
WHEREAS, the Company desires to provide for the deposit of shares of
7% Series F Junior Convertible Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), of the Company and for the issuance of Depository Receipts
evidencing Depositary Shares in respect of the Preferred Stock so deposited, all
on the terms and conditions set forth in this Agreement; and
WHEREAS, the Depositary Receipts are to be substantially in the form
of Exhibit A annexed hereto, with appropriate insertions, modifications and
omissions, as hereinafter provided in this Deposit Agreement;
NOW THEREFORE, in consideration of the mutual premises contained
herein, it is agreed by and among the parties hereto as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following definitions shall for all
purposes, unless otherwise clearly indicated, apply to the respective terms used
in this Agreement and the Depositary Receipts:
"Authorizing Resolutions" means the resolutions adopted by the
Company's Board of Directors establishing and setting forth the rights,
preferences and privileges of the Preferred Stock.
"Certificate of Incorporation" means the Restated Certificate of
Incorporation, as amended from time to time, of the Company.
"Certificate of Designation" means the Certificate of Designation of
Voting Power, Designation Preferences and Relative, Participating, Optional or
other Special Rights and Qualifications, Limitations and Restrictions, filed
with the Secretary of State of the State of Delaware, setting forth the terms of
the Preferred Stock.
"Company" means Intermedia Communications Inc., a Delaware corporation
having its principal office at 3625 Queen Palm Drive, Tampa, Florida 33619-
1309, and its successors.
<PAGE>
"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Corporate Trust Office" means the principal office of the Depositary
in New York, New York, at which at any particular time its corporate trust
business shall be administered.
"Deposit Agreement" means this Agreement, as the same may be amended
or supplemented from time to time.
"Depositary" means Continental Stock Transfer & Trust Company, a New
York banking corporation, and any successor as depositary hereunder.
"Depositary Shares" means the interest in Preferred Stock deposited
with the Depositary hereunder and represented by the Receipts. Each Depositary
Share shall, as provided herein, represent an interest in one one-hundredth
(1/100) of one share of Preferred Stock (as such fraction may from time to time
be adjusted in the event of certain amendments to the Certificate of
Incorporation affecting the Preferred Stock).
"Depositary's Agent" means an agent appointed by the Depositary as
provided, and for purposes specified, in Section 7.5.
"Issue Date" means August 18, 1998.
"Liquidated Damages" means all liquidated damages then owing under the
Registration Rights Agreement.
"Liquidation Preference" means, with respect to the Preferred Stock, a
liquidation preference of $2,500 per share.
"Nasdaq National Market" means the National Association of Securities
Dealers, Inc. Nasdaq National Market.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
"Preferred Stock" means shares of the Company's 7% Series F Junior
Convertible Preferred Stock, par value $1.00 per share.
"Receipt" means one or more of the Depositary Receipts issued
hereunder.
2
<PAGE>
"Record Holder" as applied to a Receipt means the Person in whose name
a Receipt is registered on the books of the Depositary maintained for such
purpose.
"Registrar" means any bank or trust company which shall be appointed
to register Receipts as herein provided.
"Registration Rights Agreement" means the Registration Rights
Agreement with respect to the Preferred Stock, dated as of August 18, 1998, by
and among the Company, Bear, Stearns & Co. Inc., Smith Barney Inc., Merrill
Lynch & Co. and Warburg Dillon Read LLC, as such agreement may be amended,
modified or supplemented from time to time.
"Securities Act of 1933" means the Act of May 27, 1933 (15 U.S. Code,
Secs. 77a-77aa), as from time to time amended.
"Stockholders" means the holders of the Preferred Stock.
ARTICLE II
FORM OF RECEIPTS, DEPOSIT OF PREFERRED STOCK, EXECUTION
AND DELIVERY, TRANSFER, SURRENDER AND REDEMPTION OF RECEIPTS
Section 2.1 Form and Transferability of Receipts. (a) Receipts
shall be engraved or printed or lithographed on steel engraved borders and shall
be substantially in the form set forth in Exhibit A annexed to this Deposit
Agreement, with appropriate insertions, modifications and omissions, as
hereinafter provided. Receipts shall be executed by the Depositary by the
manual signature of a duly authorized representative of the Depositary, provided
that such signature may be a facsimile if a Registrar for the Receipts (other
than the Depositary) shall have been appointed and such Receipts are
countersigned by manual signature of a duly authorized representative of the
Registrar. No Receipt shall be entitled to any benefits under this Deposit
Agreement or be valid or obligatory for any purpose unless it shall have been
executed on behalf of the Company by the manual or facsimile signature of a duly
authorized officer and executed manually or, if a Registrar for the Receipts
(other than the Depositary) shall have been appointed, by facsimile signature of
a duly authorized representative of the Depositary and, if executed by facsimile
signature of the Depositary, shall have been countersigned manually by a duly
authorized representative of such Registrar. The Depositary shall record on its
books each Receipt so signed and delivered as hereinafter provided.
(b) Receipts shall be in denominations of any number of whole
Depositary Shares, unless otherwise directed by the Company.
3
<PAGE>
(c) Receipts may be endorsed with or have incorporated in the text
thereof such legends or recitals or changes not inconsistent with the provisions
of this Deposit Agreement as may be required by the Depositary at the direction
of the Company or required to comply with any applicable law or any regulation
thereunder or with the rules and regulations of any securities exchange or
Nasdaq National Market upon which the Preferred Stock, the Depositary Shares or
the Receipts may be listed or to conform with any usage with respect thereto, or
to indicate any special limitations or restrictions to which any particular
Receipts are subject by reason of the date of issuance of the Preferred Stock or
otherwise.
(d) Title to Depositary Shares evidenced by a Receipt which is
properly endorsed or accompanied by a properly executed instrument of transfer,
shall be transferable by delivery with the same effect as in the case of a
negotiable instrument; provided, however, that until a Receipt shall be
-------- -------
transferred on the books of the Depositary as provided in Section 2.6, the
Depositary may, notwithstanding any notice to the contrary, treat the Record
Holder thereof at such time as the absolute owner thereof for the purpose of
determining the Person entitled to distribution of dividends or other
distributions or to any notice provided for in this Deposit Agreement and for
all other purposes.
Section 2.2 Form, Denomination and Registration. (a)The Depositary
Shares shall be issued in the form of one or more Global Certificates ("Global
Certificates"). The Global Certificates shall be deposited on the Issue Date
with, or on behalf of, the Depositary Trust Company (the "DTC") and registered
in the name of Cede & Co., as DTC's nominee (such nominee being referred to as
the "Global Certificate Holder").
(b) So long as the Global Certificate Holder is the registered owner
of any Depositary Shares, the Global Certificate Holder will be considered the
sole holder under this Deposit Agreement of any Depositary Shares evidenced by
the Global Certificate. Beneficial owners of Depositary Shares shall not be
considered the owners or holders thereof under this Deposit Agreement for any
purpose.
(c) Payments in respect of the Liquidation Preference, dividends and
Liquidated Damages, if any, on any Preferred Stock underlying Depositary Shares
registered in the name of the Global Certificate Holder on the applicable record
date shall be payable by the Company to or at the direction of the Global
Certificate Holder in its capacity as the registered holder under this Deposit
Agreement. The Company may treat the persons in whose name Depositary Shares,
including the Global Certificate, are registered as the owners thereof for the
purpose of receiving such payments.
4
<PAGE>
(d) Any person having a beneficial interest in a Global Certificate
may, upon request to the Company, exchange such beneficial interest for
Depositary Shares in the form of registered definitive certificates (the
"Definitive Securities"). Upon any such issuance, the Company shall register
such Definitive Securities in the name of, and cause the same to be delivered
to, such person or persons (or the nominee of any thereof). If (i) the Company
notifies the holders in writing that the DTC is no longer willing or able to act
as a depositary and the Company is unable to locate a qualified successor within
90 days or (ii) the Company, at its option, notifies the holder in writing that
it elects to cause the issuance of Depositary Shares in the form of Definitive
Securities under this Deposit Agreement, then, upon surrender by the Global
Certificate Holder of its Global Certificate, Depositary Shares in such form
will be issued to each person that the Global Certificate Holder and the DTC
identify as being the beneficial owner of the related Depositary Shares.
(e) Each Global Certificate shall bear a legend in substantially the
following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A SECURITY
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE
OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. THE DEPOSITARY
TRUST COMPANY SHALL ACT AS THE DEPOSITARY UNTIL A SUCCESSOR SHALL BE
APPOINTED BY THE COMPANY AND THE TRANSFER AGENT. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC")
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH
OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
(f) The Depositary Shares, Preferred Stock issuable upon exchange for
the Depositary Shares and the Common Stock issuable upon conversion of the
Depositary Shares shall bear a legend to the following effect, unless the
Company determines otherwise in compliance with applicable law:
5
<PAGE>
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO
THE COMPANY, (2) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (3) TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (4)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT
(AN "IAI") THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE OR TRANSFER AGENT) OR (5) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER
THE SECURITIES ACT (AND BASED ON AN OPINION OF COUNSEL IF THE COMPANY
SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(g) Holders of the Depositary Shares, the Preferred Stock issuable
upon exchange for the Depositary Shares and the Common Stock issuable upon
conversion of the Depositary Shares shall have such rights with respect to such
securities as are set forth in the Registration Rights Agreement.
Section 2.3 Deposit of Preferred Stock, Execution and Delivery of
Receipts in Respect Thereof. (a) Subject to the terms and conditions of this
Deposit Agreement, any holder of Preferred Stock may deposit such Preferred
Stock under this Deposit Agreement by delivery to the Depositary at its
Corporate Trust Office (or at such other place as may be agreeable to the
Depositary) of a certificate or certificates for the Preferred Stock to be
deposited, properly endorsed or accompanied, if
6
<PAGE>
required by the Depositary, by a duly executed instrument of transfer or
endorsement, in form satisfactory to the Depositary, together with all such
certifications as may be required by the Depositary in accordance with the
provisions of this Deposit Agreement, and together with a written order
directing the Depositary to execute and deliver to, or upon the written order
of, the Person or Persons stated in such order a Receipt for the number of
Depositary Shares representing such deposited Preferred Stock.
(b) The Depositary shall require, at the direction of the Company,
that Preferred Stock presented for deposit at any time, whether or not the
register of Stockholders of the Company is closed, shall also be accompanied by
an agreement or assignment, or other instrument satisfactory to the Depositary,
which will provide for the prompt transfer to the Depositary or its nominee of
any dividend or right to subscribe for additional Preferred Stock or to receive
other property which any Person in whose name the Preferred Stock is or has been
recorded may thereafter receive upon or in respect of such deposited Preferred
Stock, or in lieu thereof such agreement of indemnity or other agreement as
shall be satisfactory to the Depositary.
(c) Subject to the terms and conditions of this Deposit Agreement,
Preferred Stock may also be deposited hereunder in connection with the delivery
of Receipts to represent distributions under Section 4.2 and upon exercise of
the rights to subscribe referred to in Section 4.3.
(d) Upon each delivery to the Depositary of a certificate or
certificates for Preferred Stock to be deposited hereunder, together with the
other documents above specified, the Depositary shall, as soon as transfer and
recordation can be accomplished, present such certificate or certificates to the
Registrar and transfer agent of the Preferred Stock for transfer and recordation
in the name of the Depositary or its nominee of the Preferred Stock being
deposited. Deposited Preferred Stock shall be held by the Depositary, at the
Depositary's Corporate Trust Office, or at such other place or places as the
Depositary shall determine.
(e) Upon receipt by the Depositary of a certificate or certificates
for Preferred Stock deposited in accordance with the provisions of this Section,
together with the other documents required as above specified, the Depositary,
subject to the terms and conditions of this Deposit Agreement, shall execute and
deliver to or upon the order of the Person or Persons named in the written order
delivered to the Depositary referred to in Section 2.3(a), a Receipt for the
number of Depositary Shares representing the Preferred Stock so deposited and
registered in such name or names as may be requested by such
7
<PAGE>
Person or Persons. The Depositary shall execute and deliver such Receipts at its
Corporate Trust Office and at such other offices, if any, as it may designate.
Delivery at other offices shall be at the risk and expense of the Person
requesting such delivery. However, in each case, such delivery will be made only
upon payment to the Depositary of the fee of the Depositary by the Company
(unless payable by the holder) as provided in Section 5.7, for the execution and
delivery of such Receipt and of all taxes and governmental charges and fees
payable in connection with such deposit and the transfer of the deposited
Preferred Stock.
Section 2.4 Optional Redemption of Preferred Stock. (a) The Company
shall have the right to redeem the Preferred Stock in accordance with the terms
of the Preferred Stock. Whenever the Company shall elect to redeem shares of
Preferred Stock pursuant to the terms of the Preferred Stock, it shall (unless
otherwise agreed in writing with the Depositary) give the Depositary not less
than 60 days' notice of the date of such proposed redemption of Preferred Stock
and of the number of shares held by the Depositary to be so redeemed. On the
date of such redemption, provided that the Company shall then have deposited
with the Depositary the amount of cash necessary to effect such redemption, the
Depositary shall redeem the number of Depositary Shares representing such
Preferred Stock. The Depositary shall mail notice of such redemption and the
proposed simultaneous redemption of the number of Depositary Shares representing
the Preferred Stock to be redeemed, by first class postage prepaid, not less
than 30 and not more than 60 days prior to the date fixed for redemption of such
Preferred Stock and Depositary Shares (the "Redemption Date"), to the holders of
record on the record date for such redemption (determined pursuant to Section
4.4) of the Receipts evidencing the Depositary Shares to be so redeemed, at the
addresses of such holders as the same appear on the records of the Depositary;
but neither failure to mail any such notice to one or more such holders nor any
defect in any notice shall affect the sufficiency of the proceedings for
redemption as to other holders. Each such notice shall state the record date
for the purposes of such redemption; the Redemption Date; the number of
Depositary Shares to be redeemed and, if less than all of the Depositary Shares
held by any such holder are to be redeemed, the number of such Depositary Shares
held by such holder to be so redeemed; the amount of cash to be received by such
holder; the place or places where Receipts evidencing Depositary Shares are to
be surrendered for cash; and that dividends in respect of the Preferred Stock
represented by the Depositary Shares to be redeemed will cease to accrue at the
close of business on such Redemption Date. In case less than all the
outstanding Depositary Shares are to be redeemed, the Depositary Shares to be so
redeemed shall be selected by lot or pro rata (as nearly as may be) or in any
other equitable manner determined by the Depositary to be consistent
9
<PAGE>
with the method determined by the Board of Directors with respect to the
Preferred Stock.
(b) Notice having been mailed by the Depositary as described in
Section 2.4(a), from and after the Redemption Date (unless the Company shall
have failed to redeem the shares of Preferred Stock to be redeemed by it as set
forth in the Company's notice provided for in Section 2.4(a)), all dividends in
respect of the shares of Preferred Stock so called for redemption shall cease to
accrue, the Depositary Shares being so redeemed shall be deemed no longer to be
outstanding, all rights of the holders of Receipts evidencing such Depositary
Shares shall cease and terminate and, upon surrender in accordance with said
notice of the Receipts evidencing any such Depositary Shares (properly endorsed
or assigned for transfer, if the Depositary shall so require), such Depositary
Shares shall be redeemed by the Depositary for the consideration therefor
specified in said notice, plus all money and other property, if any, represented
by such Depositary Shares, including all amounts, if any, paid by the Company in
respect of dividends which on the Redemption Date have accrued on the shares of
Preferred Stock to be so redeemed and have not theretofore been paid. If less
than all of the Depositary Shares evidenced by any Receipt are called for
redemption, the Depositary will deliver to the holder of such Receipt upon its
surrender to the Depositary, together with the redemption payment, a new Receipt
evidencing the Depositary Shares evidenced by such prior Receipt and not called
for redemption. The foregoing shall further be subject to the terms and
conditions of the Preferred Stock, as set forth in the Certificate of
Incorporation and Certificate of Designation.
(c) Any balance of monies deposited by the Company for the purpose of
redeeming Preferred Stock underlying the Depositary Shares and unclaimed by the
holders of the Depositary Shares entitled thereto at the expiration of two years
from the Redemption Date shall be repaid, together with any interest or earnings
thereon, if any, to the Company. After any such repayment, such holders of
Depositary Shares entitled to the funds so repaid to the Company shall look only
to the Company for payment without interest or other earnings.
Section 2.5 Conversion of Depositary Shares. (a) The Depositary
Shares held by any holder of a Receipt or Receipts may, at the option of such
holder, be converted, in whole, or from time to time in part (but only in lots
of 100 Depositary Shares or integral multiples thereof if less than all the
Depositary Shares held by such holder are being converted), into shares of
Common Stock upon the same terms and conditions as the 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 Preferred Stock divided by 100. Whenever a
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holder of a Receipt or Receipts shall elect to convert the Depositary Shares
represented by such Receipt or Receipts into shares of Common Stock pursuant to
the terms of the Preferred Stock, such holder shall deliver to the Depositary or
the Depositary's Agent the Receipt or Receipts evidencing the Depositary Shares
to be converted, together with a written notice of conversion and an assignment
of the Receipt or Receipts to the Company or in blank, in form reasonably
acceptable to the Depositary. In addition, if such holder surrenders such
Depositary Shares for conversion during the period from the close of business on
any record date fixed pursuant to Section 4.4 for the payment of dividends until
the opening of business of the dividend payment date corresponding to such
record date (the "Dividend Payment Date"), such Receipt or Receipts shall 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 the Dividend Payment
Date, unless such Depositary Shares have been called for redemption on a
Redemption Date occurring during the period from the close of business on such
record date until the close of business on the business day immediately
following the Dividend Payment Date. The dividend payment with respect to
Depositary Shares called for redemption on a date during the period from the
close of business on such record date to the close of business on the business
day immediately following the Dividend Payment Date will be payable on the
Dividend Payment Date to the record holder of such Depositary Shares on such
record date, notwithstanding the conversion of such Depositary Shares after such
record date and prior to the Dividend Payment Date, and the holder converting
such Depositary Shares need not include a payment of such dividend amount upon
surrender of such Depositary Shares. Each conversion of Depositary Shares shall
be deemed to have been effected immediately before the close of business on the
date on which the requirements specified in the preceding sentence shall have
been satisfied (the "Conversion Date").
(b) If a holder of a Receipt elects to convert less than all of the
Depositary Shares evidenced by a Receipt, the Depositary will deliver to the
holder of the Receipt upon its surrender to the Depositary a new Receipt
evidencing the Depositary Shares evidenced by such prior Receipt and not
converted, together with a certificate for the shares of Common Stock issued
upon conversion. The foregoing shall further be subject to the terms and
conditions of the Preferred Stock, as set forth in the Certificate of
Incorporation and Certificate of Designation.
(c) No fractional shares of Common Stock will be issued upon
conversion of Depositary Shares. If such conversion would otherwise result in a
fractional share of Common Stock
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being issued, the number of shares of Common Stock to be issued upon conversion
shall be rounded up to the nearest whole share.
(d) From and after the Conversion Date, the Depositary Shares being
converted shall be deemed no longer to be outstanding, all dividends in respect
of the shares of Preferred Stock converted shall cease to accrue, all rights of
the holders of Receipts evidencing such Depositary Shares shall, to the extent
of such Depositary Shares, cease and terminate, except the right to receive
shares of Common Stock into which the Depositary Shares have been converted and
the right to receive any money or other property to which the holders of such
Receipts were entitled upon conversion (including all amounts, if any, paid by
the Company in respect of dividends which, on the Conversion Date, have accrued
on the shares of Preferred Stock to be converted and have not theretofore been
paid).
Section 2.6 Transfer of Receipts. Subject to the terms and
conditions of this Deposit Agreement, the Depositary shall make transfers on its
books from time to time of Receipts upon any surrender thereof at the
Depositary's Corporate Trust Office by the holder in person or by duly
authorized attorney, properly endorsed or accompanied by a properly executed
instrument of transfer, and duly stamped as may be required by law. Thereupon
the Depositary shall execute a new Receipt or Receipts and deliver the same to
or upon the order of the Person entitled thereto evidencing the same aggregate
number of Depositary Shares as those evidenced by the Receipt or Receipts
surrendered.
Section 2.7 Combinations and Split-ups of Receipts. Upon surrender
of a Receipt or Receipts at the Depositary's Corporate Trust Office or at such
other offices as it may designate for the purpose of effecting a split-up or
combination of such Receipt or Receipts, and subject to the terms and conditions
of this Deposit Agreement, the Depositary shall execute and deliver a new
Receipt or Receipts in the authorized denominations requested, evidencing the
same aggregate number of Depositary Shares evidenced by the Receipt or Receipts
surrendered.
Section 2.8 Surrender of Receipts and Withdrawal of Preferred
Stock. (a) Any holder of a Receipt or Receipts representing any number of
whole shares of Preferred Stock may withdraw the Preferred Stock and all money
and other property, if any, represented thereby by surrendering such Receipt or
Receipts, at the Depositary's Corporate Trust Office or at such other offices as
the Depositary may designate for such withdrawals. Thereafter, without
unreasonable delay, the Depositary shall deliver to such holder, or to the
Person or Persons designated by such holder as hereinafter provided, the number
of whole shares of Preferred Stock and all money and other
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property, if any, represented by the Receipt or Receipts so surrendered for
withdrawal. If the Receipt delivered by the holder to the Depositary in
connection with such withdrawal shall evidence a number of Depositary Shares in
excess of the number of Depositary Shares representing the number of whole
shares of Preferred Stock to be so withdrawn, the Depositary shall at the same
time, in addition to such number of whole shares of Preferred Stock and such
money and other property, if any, to be so withdrawn, deliver to such holder, or
upon his order, a new Receipt evidencing such excess number of Depositary
Shares. In no event will fractional shares of Preferred Stock (or cash in lieu
thereof) be distributed by the Depositary. Delivery of the Preferred Stock and
money and other property being withdrawn may be made by the delivery of such
certificates, documents of title and other instruments as the Depositary may
deem appropriate, which, if required by the Depositary, shall be properly
endorsed or accompanied by proper instruments of transfer.
(b) If the Preferred Stock and the money and other property being
withdrawn are to be delivered to a Person or Persons other than the Record
Holder of the Receipt or Receipts being surrendered for withdrawal of Preferred
Stock, such Record Holder shall execute and deliver to the Depositary a written
order so directing the Depositary and the Depositary may require that the
Receipt or Receipts surrendered by such holder for withdrawal of such shares of
Preferred Stock be properly endorsed in blank or accompanied by a properly
executed instrument of transfer in blank.
(c) Delivery of the Preferred Stock and the money and other property,
if any, represented by Receipts surrendered for withdrawal shall be made by the
Depositary at its Corporate Trust Office, except that at the request, risk and
expense of the holder that surrendered such Receipt or Receipts, and for the
account of the holder thereof, such delivery may be made at such other place as
may be designated by such holder.
Section 2.9 Limitations on Execution and Delivery, Transfer, Split-
Up, Combination and Surrender of Receipts. (a) As a condition precedent to the
execution and delivery, transfer, split-up, combination or surrender of any
Receipt, the Depositary, or any of the Depositary's Agents, or the Company, may
require (i) payment to it of a sum sufficient for the payment (or, in the event
that the Depositary or the Company shall have made such payment, the
reimbursement to it) of any tax or other governmental charge with respect
thereto (including any such tax or charge with respect to Preferred Stock being
deposited or withdrawn), (ii) the production of proof satisfactory to it as to
the identity and genuineness of any signature and (iii) compliance with such
regulations, if any, as the Depositary or the Company may establish consistent
with the provisions of this Deposit Agreement.
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(b) The deposit of Preferred Stock may be refused, or the delivery of
Receipts against Preferred Stock may be suspended or the transfer of Receipts
may be refused, or the transfer, split-up, combination or surrender of
outstanding Receipts may be suspended (i) during any period when the register of
Stockholders of the Company is closed, or (ii) if any such action is deemed
necessary or advisable by the Depositary, any of the Depositary's Agents or the
Company at any time or from time to time because of any requirement of law or of
any government or governmental body or commission, or under any provision of
this Deposit Agreement or, with the approval of the Company, for any other
reason.
Section 2.10 Lost Receipts, etc. In case any Receipt shall be
mutilated or destroyed or lost or stolen, the Depositary in its discretion may
execute and deliver a Receipt of like form and tenor in exchange and
substitution for such mutilated Receipt, or in lieu of and in substitution for
such destroyed, lost or stolen Receipt, upon (a) the filing by the holder
thereof with the Depositary of evidence satisfactory to the Depositary of such
destruction or loss or theft of such Receipt, of the authenticity thereof and of
his ownership thereof and (b) the furnishing of the Depositary with an indemnity
bond or other reasonable indemnification satisfactory to it.
Section 2.11 Cancellation and Destruction of Surrendered Receipts.
All Receipts surrendered to the Depositary or any Depositary's Agent shall be
cancelled by the Depositary. Except as prohibited by applicable law or
regulation, the Depositary shall, unless otherwise directed by the Company, hold
on behalf of the Company such Receipts so cancelled.
ARTICLE III
CERTAIN OBLIGATIONS OF HOLDERS OF RECEIPTS AND THE COMPANY
Section 3.1 Filing Proofs, Certificates and Other Information. Any
Person presenting Preferred Stock for deposit or any holder of a Receipt may be
required from time to time to file such proof of residence, or other matters or
other information, to execute such certificates and to make such representations
and warranties as the Depositary or the Company may reasonably deem necessary or
proper. The Depositary or the Company may withhold the delivery or delay the
transfer, redemption or exchange of any receipt or the withdrawal of the
Preferred Stock represented by the Depositary Shares evidenced by any Receipt or
the distribution of any dividend or other distribution or the sale of any rights
or of the proceeds thereof until such proof or other information is filed or
such certificates are executed or such representations and warranties are made.
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Section 3.2 Payment of Taxes or Other Governmental Charges. If any
tax or other governmental charge shall become payable by or on behalf of the
Depositary with respect to any Receipt evidencing Depositary Shares or with
respect to the Preferred Stock (or any fractional interest therein) represented
by such Depositary Shares, such tax (including transfer taxes, if any) or
governmental charge shall be payable by the holder of such Receipt, subject to
certain exceptions set forth in Section 5.7. Transfer of any Receipt or any
withdrawal of Preferred Stock and all money or other property, if any,
represented by the Depositary Shares evidenced by such Receipt may be refused
until such payment is made, and any dividends, interest payments or other
distributions may be withheld, or any part or all of the Preferred Stock or
other property represented by the Depositary Shares evidenced by such Receipt
and not theretofore sold may be sold for the account of the holder thereof
(after attempting by reasonable means to notify such holder prior to such sale),
and such dividends, interest payments or other distributions or the proceeds of
any such sale may be applied to any payment of such tax or other governmental
charge, the holder of such Receipt remaining liable for any deficiency.
Section 3.3 Representations and Warranties as to Preferred Stock.
In the case of the initial deposit of the Preferred Stock, the Company and, in
the case of subsequent deposits thereof, each Person so depositing Preferred
Stock under this Deposit Agreement shall be deemed thereby to represent and
warrant that such Preferred Stock and each certificate therefore are valid and
that the Person making such deposit is duly authorized so to do. The Company
hereby further represents and warrants that the Preferred Stock, when issued,
will be validly issued, fully paid and nonassessable. Such representations and
warranties shall survive the deposit of the Preferred Stock and the issuance of
Receipts.
ARTICLE IV
THE DEPOSITED SECURITIES; NOTICES
Section 4.1 Cash Distributions. Whenever the Depositary shall
receive any cash dividend or other cash distribution on Preferred Stock, the
Depositary shall, subject to Section 3.2, distribute to Record Holders of
Receipts on the record date fixed pursuant to Section 4.4 such amounts of such
sum as are, as nearly as practicable, in proportion to the respective numbers of
Depositary Shares evidenced by the Receipts held by such holders; provided,
--------
however, that in case the Company or the Depositary shall be required to
- -------
withhold and does withhold from any cash dividend or other cash distribution in
respect of the Preferred Stock an amount on account of taxes, the amount made
available for distribution or distributed in respect of Depositary Shares shall
be reduced accordingly. The Depositary
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shall distribute or make available for distribution, as the case may be, only
such amount, however, as can be distributed without attributing to any owner of
Depositary Shares a fraction of one cent, and any balance not so distributable
shall be held by the Depositary (without liability for interest thereon) and
shall be added to and be treated as part of the next sum received by the
Depositary for distribution to Record Holders of Receipts then outstanding.
Section 4.2 Distributions Other Than Cash. Whenever the Depositary
shall receive any distribution upon the Preferred Stock in shares of Common
Stock, the Depositary shall, subject to Section 3.2, distribute to Record
Holders of Receipts on the record date fixed pursuant to Section 4.4, such
shares of Common Stock received by it in proportion to the respective numbers of
Depositary Shares evidenced by the Receipts held by such holders, except that
the Depositary may not distribute fractional shares of Common Stock. If in the
opinion of the Company, after consultation with the Depositary, such
distribution cannot be made proportionately among such Record Holders, or if for
any reason (including any requirement that the Company or the Depositary
withhold an amount on account of taxes) the Depositary deems, after consultation
with the Company, such distribution not to be feasible, the Depositary may, at
the direction of the Company, adopt such method as the Company deems equitable
and practicable for the purpose of effecting such distribution, including the
sale at public sale of the other securities or property thus received, or any
part thereof, at such place or places and upon such terms as it may deem proper.
No fractional shares of Common Stock will be issued as a distribution on the
Preferred Stock and, if such distribution would otherwise result in a fractional
share of Common Stock being issued, the Depositary shall sell the total number
of shares of Common Stock that would have been represented by such fractional
shares at public sale at such place or places and upon such terms it deems
proper. The net proceeds of any sale made pursuant to this Section 4.2 shall,
subject to Section 3.2, be distributed or made available for distribution, as
the case may be, by the Depositary to Record Holders of Receipts as provided by
Section 4.1 in the case of a distribution received in cash.
Section 4.3 Subscription Rights, Preferences or Privileges. (a) If
the Company shall at any time offer or cause to be offered to the Persons in
whose names Preferred Stock is recorded on the books of the Company any rights,
preferences or privileges to subscribe for or to purchase any securities or any
rights, preferences or privileges of any other nature, such rights, preferences
or privileges shall in each such instance be made available by the Depositary to
the Record Holders of Receipts in such manner as the Company may determine,
either by the issue to such record holders of warrants representing such rights,
preferences or privileges or by such other method as may
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be approved by the Company in its discretion with the approval of the
Depositary; provided, however, that (a) if at the time of issue or offer of any
-------- -------
such rights, preferences or privileges the Company determines that it is not
lawful or (after consultation with the Depositary) not feasible to make such
rights, preferences or privileges available to holders of Receipts by the issue
of warrants or otherwise or (b) if and to the extent so instructed by holders of
Receipts who do not desire to exercise such rights, preferences or privileges,
then the Company, in its discretion (with the approval of the Depositary, in any
case where the Company has determined that it is not feasible to make such
rights, preferences or privileges available), may, if applicable laws or the
terms of such rights, preferences or privileges permit such transfer, sell such
rights, preferences or privileges at public sale, at such place or places and
upon such terms as it may deem proper. The net proceeds of any such sale shall
be distributed by the Depositary to the Record Holders of Receipts entitled
thereto as provided by Section 4.1 in the case of a distribution received in
cash.
(b) If registration under the Securities Act of 1933 of the
securities to which any rights, preferences or privileges relate is required in
order for holders of Receipts to be offered or sold the securities to which such
rights, preferences or privileges relate, the Company agrees with the Depositary
that it will promptly file a registration statement pursuant to such Act with
respect to such rights, preferences or privileges and securities and use its
best efforts and take all steps available to it to cause such registration
statement to become effective sufficiently in advance of the expiration of such
rights, preferences or privileges. In no event shall the Depositary make
available to the holders of Receipts any right, preference or privilege to
subscribe for or to purchase any securities unless and until the Company
provides to the Depositary an opinion of counsel stating that the securities to
which such rights, preferences or privileges relate have been registered under
the Securities Act of 1933 or do not need to be registered under such Act.
(c) If any other action under the laws of any jurisdiction or any
governmental or administrative authorization, consent or permit is required in
order for such rights, preferences or privileges to be made available to holders
of Receipts, the Company agrees with the Depositary that the Company will use
its best efforts to take such action or obtain such authorization, consent or
permit sufficiently in advance of the expiration of such rights, preferences or
privileges to enable such holders to exercise such rights, preferences or
privileges.
Section 4.4 Notice of Dividends; Fixing of Record Date for Holders
of Receipts. Whenever (a) any cash dividend or other cash distribution shall
become payable or any distribution
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other than cash shall be made, or any rights, preferences or privileges shall at
any time be offered, with respect to Preferred Stock, or (b) the Depositary
shall receive notice of any meeting at which holders of Preferred Stock are
entitled to vote or of which holders of Preferred Stock are entitled to notice
or of any election on the part of the Company to redeem any shares of Preferred
Stock, the Depositary shall in each such instance fix a record date (which shall
be the same date as the record date fixed by the Company with respect to the
Preferred Stock) for the determination of the holders of Receipts (x) who shall
be entitled to receive such dividend, distribution, rights, preferences or
privileges or the net proceeds of the sale thereof, or (y) who shall be entitled
to give instructions for the exercise of voting rights at any such meeting, or
who shall be entitled to notice of such meeting, or (z) whose Depositary Shares
are to be redeemed.
Section 4.5 Voting Rights. Upon receipt of notice of any meeting
at which the holders of Preferred Stock are entitled to vote, the Depositary
shall, as soon as practicable thereafter, mail to the Record Holders of Receipts
a notice which shall contain (a) such information as is contained in such notice
of meeting, and (b) a statement that the holders of Receipts at the close of
business on a specified record date determined pursuant to Section 4.4 will be
entitled, subject to any applicable provision of law and of the Certificate of
Incorporation or the Authorizing Resolution, to instruct the Depositary as to
the exercise of the voting rights pertaining to the amount of Preferred Stock
represented by their respective Depositary Shares, and a brief statement as to
the manner in which such instructions may be given. Upon the written request of
a holder of a Receipt on such record date, the Depositary shall endeavor insofar
as practicable to vote or cause to be voted the amount of Preferred Stock
represented by the Depositary Shares evidenced by such Receipt in accordance
with the instructions set forth in such request. To the extent any such
instructions request the voting of a fraction of a share of Preferred Stock, the
Depositary shall aggregate such fraction with all other fractions resulting from
requests with the same voting instructions and shall vote the number of whole
shares resulting from such aggregation in accordance with the instructions
received in such requests. The Company hereby agrees to take all reasonable
action which may be deemed necessary by the Depositary in order to enable the
Depositary to vote such Preferred Stock or cause such Preferred Stock to be
voted. In the absence of specific written instructions from the holder of a
Receipt, the Depositary will abstain from voting to the extent of the Preferred
Stock represented by the Depositary Shares evidenced by such Receipt.
Section 4.6 Changes Affecting Deposited Securities and
Reclassifications, Recapitalizations, etc. Upon any change
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in par or stated value, split-up, consolidation or any other reclassification of
the Preferred Stock, or upon any recapitalization, reorganization, merger,
amalgamation or consolidation or sale of all or substantially all of the
Company's assets affecting the Company or to which it is a party, the Depositary
shall, upon the instructions of the Company and in such manner as the Company
may deem equitable, (a) make such adjustments in (i) the fraction of an interest
represented by one Depositary Share in one share of Preferred Stock and (ii) the
ratio of the redemption price per Depositary Share to the redemption price of a
share of Preferred Stock in each case as may be necessary to fully reflect the
effects of such change in par or stated value, split-up, consolidation or other
reclassification of the Preferred Stock, or of such recapitalization,
reorganization, merger, amalgamation or such consolidation or sale and (b) treat
any securities which shall be received by the Depositary in exchange for or upon
conversion of or otherwise in respect of the Preferred Stock as new deposited
securities under this Deposit Agreement, and Receipts then outstanding shall
thenceforth represent the new deposited securities so received. In any such case
the Company may in its discretion, direct the Depositary to execute and deliver
additional Receipts, or may call for the surrender of all outstanding Receipts
to be exchanged for new Receipts specifically describing such new deposited
securities.
Section 4.7 Reports. The Depositary shall make available for
inspection by holders of Receipts at its Corporate Trust Office, and at such
other places as it may from time to time deem advisable, any reports and
communications received from the Company which are received by the Depositary as
the holder of Preferred Stock unless at the time of or prior to receipt the
Company advises the Depositary that such reports or communications have not been
generally available to the holders of Preferred Stock.
Section 4.8 Lists of Receipt Holders. Upon request from time to
time by the Company, the Depositary shall, without unreasonable delay, furnish
to the Company a list, as of a recent date, of the names, addresses and holdings
of Preferred Stock by all Persons in whose names Receipts are registered on the
books of the Depositary.
ARTICLE V
THE DEPOSITARY AND THE COMPANY
Section 5.1 Maintenance of Office, Agencies, Transfer Books by the
Depositary Registrar. (a) Upon execution of this Deposit Agreement in
accordance with its terms, the Depositary shall maintain at its Corporate Trust
Office facilities for the execution and delivery, transfer, surrender
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and exchange of Receipts, and at the offices of the Depositary's Agents, if any,
facilities for the delivery, transfer, surrender and exchange of Receipts, all
in accordance with the provisions of this Deposit Agreement.
(b) The Depositary shall keep books at its Corporate Trust Office for
the transfer of Receipts, which books at all reasonable times shall be open for
inspection by the Record Holders of Receipts, unless the Company advises the
Depositary in a particular instance that such inspection is not for a proper
purpose reasonably related to such Person's interest as an owner of Depositary
Shares evidenced by the Receipts. The Depositary may close such books, at any
time or from time to time, when deemed expedient by it in connection with the
performance of its duties hereunder.
(c) If the Receipts or the Depositary Shares evidenced thereby or the
Preferred Stock represented by such Depositary Shares shall be quoted on the
Nasdaq National Market, the Company may, upon consultation with the Depositary,
appoint a Registrar for registry of such Receipts or Depositary Shares in
accordance with the requirements of the Nasdaq National Market. Such Registrar
(which may be the Depositary if so permitted by the requirements of the Nasdaq
National Market) may be removed and a substitute registrar appointed by the
Depositary upon the request or with the approval of the Company. If the
Receipts of such Depositary Shares or such Preferred Stock are listed on one or
more stock exchanges, the Depositary will, at the request of the Company,
arrange such facilities for the delivery, transfer, surrender and exchange of
such Receipts or such Depositary Share or such Preferred Stock as may be
required by law or applicable stock exchange regulation.
Section 5.2 Prevention or Delay in Performance by the Depositary,
the Depositary's Agents or the Company. Neither the Depositary nor any
Depositary's Agent nor the Company shall incur any liability to any holder of
any Receipt, if by reason of any provision of any present or future law, or
regulation thereunder of the United States of America, or of any other
governmental authority or, in the case of the Depositary or the Depositary's
Agent, by reason of any provision, present or future, of the Certificate of
Incorporation or the Authorizing Resolution or by reason of any act of God or
war or other circumstance beyond the control of the relevant party, the
Depositary, any Depositary's Agent or the Company shall be prevented or
forbidden from or delayed in doing or performing any act or thing which the
terms of this Deposit Agreement provide shall or may be done or performed, or by
reason of any exercise of, or failure to exercise, any discretion provided for
in this Deposit Agreement.
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Section 5.3 Obligations of the Depositary, the Depositary's Agents
and the Company. (a) Neither the Depositary nor any Depositary's Agent nor the
Company assumes any obligations or shall be subject to any liability under this
Deposit Agreement to holders of Receipts other than that each of them agrees to
use its best judgment and good faith in the performance of such duties as are
specifically set forth in this Deposit Agreement.
(b) Neither the Depositary nor any Depositary's Agent nor the
Company shall be under any obligation to appear in, prosecute or defend any
action, suit or other proceeding with respect to Preferred Stock, Depositary
Shares or Receipts, which in its opinion may involve it in expense or liability,
unless indemnity satisfactory to it against all expense and liability be
furnished as often as may be required.
(c) Neither the Depositary nor any Depositary's Agent nor the
Company shall be liable for any action or any failure to act by it in reliance
upon the advice of or information from legal counsel, accountants, any Person
presenting Preferred Stock for deposit, any holder of a Receipt or any other
Person believed by it in good faith to be competent to give such advice or
information. The Depositary, any Depositary's Agent and the Company may each
rely and shall each be protected in acting upon any written notice, request,
direction or other document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
(d) The Depositary and the Depositary's Agents may own and deal
in any class of securities of the Company and its affiliates and in Receipts.
The Depositary may also act as transfer agent or registrar of any of the
securities of the Company and its affiliates.
Section 5.4 Resignation and Removal of the Depositary, Appointment
of Successor Depositary. (a) The Depositary may at any time resign as
Depositary hereunder by notice of its election to do so delivered to the
Company, such resignation to take effect upon the appointment of a successor
depositary and its acceptance of such appointment as hereinafter provided.
(b) The Depositary may at any time be removed by the Company by
notice of such removal delivered to the Depositary, such removal to take effect
upon the appointment of a successor depositary and its acceptance of such
appointment as hereinafter provided.
(c) In case at any time the Depositary acting hereunder shall
resign or be removed, the Company shall, within 45 days after the delivery of
the notice of resignation or
20
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removal, as the case may be, appoint a successor depositary, which shall be a
bank or trust company having its principal office in the United States of
America. Each successor depositary shall execute and deliver to its predecessor
and to the Company an instrument in writing accepting its appointment hereunder,
and thereupon such successor depositary, without any further act or deed, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor and for all purposes shall be the Depositary under this Deposit
Agreement, and such predecessor, upon payment of all sums due it and on the
written request of the Company, shall promptly execute and deliver an instrument
transferring to such successor all rights and powers of such predecessor
hereunder, shall duly assign, transfer and deliver all rights, title and
interest in the stock and any moneys or property held hereunder to such
successor, and shall deliver to such successor a list of the Record Holders of
all outstanding Receipts. Any successor depositary shall promptly mail notice of
its appointment to the Record Holders of Receipts.
(d) Any corporation into or with which the Depositary may be
merged, consolidated or converted shall be the successor of such Depositary
without the execution or filing of any document or any further act. Such
successor depositary may authenticate the Receipts in the name of the
predecessor depositary or in the name of the successor depositary.
Section 5.5 Corporate Notices and Reports. The Company agrees that
it will deliver to the Depositary, and the Depositary will, promptly after
receipt thereof, transmit to the Record Holders of Receipts, in each case at the
address recorded in the Depositary's books, copies of all notices and reports
(including, without limitation, financial statements) required by law, by the
rules of any national securities exchange or the Nasdaq National Market upon
which the Preferred Stock, the Depositary Shares or the Receipts are listed or
by the Certificate of Incorporation and the Authorizing Resolution to be
furnished by the Company to holders of Preferred Stock. Such transmission will
be at the Company's expense and the Company will provide the Depositary with
such number of copies of such documents as the Depositary may reasonably
request. In addition, the Depositary will transmit to the holders of Receipts
(at the Company's expense) such other documents as may be requested by the
Company.
Section 5.6 Indemnification by the Company. (a) The Company agrees
to indemnify the Depositary and its directors, employees and agents (including
any Depositary's Agent and any Registrar) against, and hold each of them
harmless from, any loss, liability or expense (including reasonable costs of
investigation, court costs, and attorneys' fees and disbursements) which may
arise out of acts performed or omitted
21
<PAGE>
in accordance with the provisions of this Deposit Agreement, as the same may be
amended, modified or supplemented from time to time, and of the Receipts (i) by
the Depositary, and Registrar or any of their respective officers, employees or
agents (including any Depositary's Agent), except for any loss, liability or
expense arising out of negligence, bad faith or willful misconduct on the part
of any such Person or Persons, or (ii) by the Company or any of its agents.
(b) Any Person seeking indemnification hereunder (an "indemnified
person") shall notify the Company of the commencement of any indemnifiable
action or claim promptly after such indemnified person becomes aware of such
commencement (provided that the failure to make such notification shall not
affect such indemnified person's rights otherwise than under this Section 5.6)
and shall consult in good faith with the Company as to the conduct of the
defense of such action or claim, which shall be reasonable in the circumstances.
No indemnified person shall compromise or settle any action or claim without the
consent of the Company, which consent shall not be unreasonably withheld.
(c) The obligations provided in this Section 5.6 shall survive the
termination of this Deposit Agreement and the succession or substitution of any
person indemnified hereby.
Section 5.7 Charges and Expenses. The Company shall pay all
transfer and other taxes and governmental charges arising solely from the
existence of the depositary arrangements. The Company shall pay any and all
fees of the Depositary as shall be agreed to between the Company and the
Depositary, and all charges of the Depositary in connection with the initial
deposit of the Preferred Stock and the initial issuance of the Depositary
Receipts, distribution of information to the holders of Receipts with respect to
matters on which holders of Preferred Stock are entitled to vote, withdrawals of
the Preferred Stock by holders of the Receipts and any redemption or conversion
of the Depositary Receipts. All other transfer and other taxes and governmental
charges shall be at the expense of holders of Depositary Shares. If, at the
request of a holder of Receipts, the Depositary incurs charges or expenses for
which it is not otherwise liable hereunder, such holder will be liable for such
charges and expenses. All other reasonable charges and expenses of the
Depositary and any Depositary's Agent hereunder and of any Registrar (including,
in each case, reasonable fees and expenses of counsel) incident to the
performance of their respective obligations hereunder will be paid upon
consultation and agreement between the Depositary and the Company as to the
amount and nature of such charges and expenses. The Depositary shall present
its statement for charges and expenses to the Company monthly or at such other
intervals as the Company and the Depositary may agree.
22
<PAGE>
ARTICLE VI
AMENDMENT AND TERMINATION
Section 6.1 Amendment. The form of the Receipts and any provision
of this Deposit Agreement may at any time and from time to time be amended by
agreement between the Company and the Depositary in any respect which they may
deem necessary or desirable. Any amendment which shall impose any fees, taxes
or charges (other than fees and charges provided for herein), or which shall
otherwise prejudice any substantial existing right of holders of Receipts, shall
not become effective as to outstanding Receipts until the expiration of 90 days
after notice of such amendment shall have been given to the Record Holders of
outstanding Receipts. Every holder of an outstanding Receipt at the time any
such amendment so becomes effective shall be deemed, by continuing to hold such
Receipt, to consent and agree to such amendment and to be bound by this Deposit
Agreement as amended thereby. In no event shall any amendment impair the right,
subject to the provisions of Sections 2.8 and 2.9 and Article III, of any owner
of any Receipts to instruct the Depositary to deliver to the holder of Receipts
representing whole shares of Preferred Stock the whole shares of Preferred Stock
represented by such Receipts and all money and other property, if any,
represented by such Receipts, except in order to comply with mandatory
provisions of applicable law.
Section 6.2 Termination. (a) Whenever so directed by the Company,
the Depositary will terminate this Deposit Agreement by mailing notice of such
termination to the Record Holders of all Receipts then outstanding at least 30
days prior to the date fixed in such notice for such termination. The
Depositary may likewise terminate this Deposit Agreement if at any time 45 days
shall have expired after the Depositary shall have delivered to the Company
written notice of its election to resign and a successor depositary shall not
have been appointed and accepted its appointment as provided in Section 5.4.
(b) If any Receipts shall remain outstanding after the date of
termination of this Deposit Agreement, the Depository thereafter shall
discontinue the transfer of Receipts, shall suspend the distribution of
dividends to the holders thereof, and shall not give any further notices (other
than notice of such termination) or perform any further acts under this Deposit
Agreement, except that the Depositary shall continue to (i) collect dividends
and other distributions pertaining to the Preferred Stock, (ii) sell rights,
preferences or privileges as provided in this Deposit Agreement, and (iii)
deliver the Preferred Stock and any money and other property, without liability
for interest thereon, represented by Receipts upon surrender thereof by the
holders thereof. At any time after the expiration of two years from the date of
termination, the
23
<PAGE>
Depositary shall sell the Preferred Stock then held hereunder at public or
private sale, at such places and upon such terms as the Depositary deems proper
and may thereafter hold the net proceeds of any such sale, together with any
money and other property held by it hereunder, without liability for interest,
for the benefit, pro rata in accordance with their holdings, of the holders of
Receipts which have not theretofore been surrendered. After making such sale,
the Depositary shall be discharged from all obligations under this Deposit
Agreement, except to account for such net proceeds and money and other property.
Upon the termination of this Deposit Agreement, the Company shall be discharged
from all obligations under this Deposit Agreement except for its obligations to
the Depositary, any Depositary's Agent and any Registrar under Sections 5.6 and
5.7.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Counterparts. This Deposit Agreement may be executed
in any number of counterparts, and by each of the parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed an original, but all such counterparts taken together shall constitute
one and the same instrument. Copies of this Deposit Agreement shall be filed
with the Depositary and the Depositary's Agents and shall be open to inspection
during business hours at the Depositary's Corporate Trust Office and the
respective offices of the Depositary's Agents, if any, by any holder of a
Receipt.
Section 7.2 Exclusive Benefits of Parties. This Deposit Agreement
is for the exclusive benefit of the parties hereto, and their respective
successors hereunder, and shall not be deemed to give any legal or equitable
right, remedy or claim to any other Person whatsoever.
Section 7.3 Invalidity of Provisions. In case any one or more of
the provisions contained in this Deposit Agreement or in the Receipts should be
or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein or
therein shall in no way be affected, prejudiced or disturbed thereby.
Section 7.4 Notices. (a) Any and all notices to be given to the
Company hereunder or under the Depositary Receipts shall be in writing and shall
be deemed to have been duly given if personally delivered or sent by mail or
telecopy confirmed by letter, addressed to the Company at 3625 Queen Palm Drive,
Tampa, Florida 33619-1309, Attention: Chief Financial Officer,
24
<PAGE>
Telecopy: (813) 829-2390, or at any other place to which the Company may specify
in writing to the Depositary.
(b) Any and all notices to be given to the Depositary hereunder or
under the Depositary Receipts shall be in writing and shall be deemed to have
been duly given if personally delivered or sent by mail or by telecopy confirmed
by letter, addressed to the Depositary, at 2 Broadway, 19th Floor, New York, New
York 10004, Attention: Compliance Department, Telecopy: (212) 509-5150, or at
any other place to which the Depositary may specify in writing to the Company.
(c) Any and all notices given to a Record Holder of a Receipt
hereunder or under the Depositary Receipts shall be in writing and shall be
deemed to have been duly given if personally delivered or sent by mail or by
telecopy confirmed by letter, addressed to such Record Holder at the address of
such Record Holder as it appears on the books of the Depositary, or if such
holder shall have filed with the Depositary a written request that notices
intended for such holder be mailed to some other address, at the address
designated in such request.
(d) Delivery of a notice sent by mail or by telecopy shall be deemed
to be effected at the time when a duly addressed letter containing the same (or
a confirmation thereof in the case of a telecopy message) is deposited, postage
prepaid, in a post office letter box. The Depositary or the Company, may,
however, act upon any telecopy message received by it from the other or from any
holder of a Receipt, notwithstanding that such telecopy message shall not
subsequently be confirmed by letter as aforesaid.
Section 7.5 Depositary's Agents. The Depositary may from time to
time appoint Depositary's Agents to act in any respect or the Depositary for the
purposes of this Deposit Agreement and may at any time appoint additional
Depositary's Agents. The Depositary will notify the Company of any such action.
Section 7.6 Holders of Receipts are Parties. The holders of
Receipts from time to time shall be deemed to be parties to this Deposit
Agreement and shall be bound by all of the terms and conditions hereof and of
the Receipts by acceptance of delivery thereof.
Section 7.7 Governing Law. The Deposit Agreement and the Receipts
and all rights hereunder and thereunder and provisions hereof and thereof shall
be governed by, and construed in accordance with, the internal laws of the State
of New York without reference to the principles of conflicts of law thereof. The
Company and the Depositary agree that the federal courts in the State of New
York for the Southern District of New York shall
25
<PAGE>
have jurisdiction to hear and determine any suit, action or proceeding and to
settle any dispute between them that may arise out of or in connection with this
Deposit Agreement and, for such purposes, each irrevocably submits to the non-
exclusive jurisdiction of such courts.
Section 7.8 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE
--------------------
DEPOSITARY HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY OR AGAINST IT BY THE OTHER PARTY ON ANY MATTERS WHATSOEVER, IN
CONTRACT OR IN TORT, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
Section 7.9 Assignment. This Deposit Agreement may not be assigned
by either the Company or the Depositary without the consent of the other party.
Section 7.10 Headings. The headings of articles and sections in
this Deposit Agreement and in the form of a Receipt set forth in Exhibit A
hereto have been inserted for convenience only and are not to be regarded as a
part of this Deposit Agreement or to have any bearing upon the meaning or
interpretation of any provision contained herein or in the Receipts.
[SIGNATURE PAGE FOLLOWS]
26
<PAGE>
IN WITNESS WHEREOF, INTERMEDIA COMMUNICATIONS INC. and CONTINENTAL STOCK
TRANSFER & TRUST COMPANY have duly executed this Agreement as of the day and
year first above set forth and all holders of Receipts shall become parties
hereto by and upon acceptance by them of delivery of Receipts issued in
accordance with the terms hereof.
INTERMEDIA COMMUNICATIONS INC.
Attest: By:
--------------------- ------------------------------
Name:
Title:
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
Attest: By:
--------------------- ------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
---------
FORM OF DEPOSITARY RECEIPT
28
<PAGE>
EXHIBIT 12.1
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Intermedia Communications Inc. Private Offering
August-98
<TABLE>
<CAPTION> Pro forma(1)
Year
Ended
Years ended December 31, December 31,
------------------------------------------------------
1993 1994 1995 1996 1997 1997
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loss before extraordinary items (2,074) (3,067) (19,157) (57,198) (197,289) (398,499)
Income tax benefit (provision) - - (97) - - 380
--------------------------------------------------------------------------
Loss before income taxes (2,074) (3,067) (19,254) (57,198) (197,289) (398,119)
==========================================================================
Fixed charges:
Interest expensed 844 1,219 13,355 35,213 58,744 182,165
Capatalized interest 213 257 677 2,780 4,654 4,654
Amortization of deferred financing costs 78 69 412 1,252 1,918 1,918
Estimated interest factor on operating
leases 313 200 428 1,598 3,286 4,298
Dividends and accretions on redeemable
preferred stock 0 0 0 0 43,742 71,850
--------------------------------------------------------------------------
Total fixed charges 1,448 1,745 14,872 40,843 112,344 264,885
==========================================================================
Earnings:
Loss before income tax (2,074) (3,067) (19,254) (57,198) (197,289) (398,119)
--------------------------------------------------------------------------
Fixed charges excluding capatalized
interest and preferred stock dividends 1,235 1,488 14,195 38,063 63,948 188,381
--------------------------------------------------------------------------
Total earnings (839) (1,579) (5,059) (19,135) (133,341) (209,738)
==========================================================================
Ratio of earnings to fixed charges (0.58) (0.90) (0.34) (0.47) (1.19) (0.79)
==========================================================================
Insufficiency of earnings to cover
fixed charge 2,287 3,324 19,931 59,978 245,685 474,623
==========================================================================
<CAPTION> Pro forma(1) Pro forma(2) Pro forma(2)
Six Months Six Months six months as adjusted as adjusted
Ended Ended Ended Year Six Months
June 30, June 30, June 30, Ended Ended
December 31, June 30,
1997 1998 1998 1997 1998
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loss before extraordinary items (57,053) (306,872) (315,558) (398,499) (315,558)
Income tax benefit (provision) - - - 380 -
-----------------------------------------------------------------------
Loss before income taxes (57,053) (306,872) (315,558) (398,119) (315,558)
=======================================================================
Fixed charges:
Interest expensed 21,755 95,147 104,719 182,165 104,719
Capatalized interest 1,556 3,650 3,650 4,654 3,650
Amortization of deferred financing costs 451 2,012 2,012 1,918 2,012
Estimated interest factor on operating
leases 1,510 4,174 4,298 4,298 4,298
Dividends and accretions on redeemable
preferred stock 13,223 37,471 37,471 86,743 44,917
-----------------------------------------------------------------------
Total fixed charges 38,495 142,454 152,150 279,778 159,596
=======================================================================
Earnings:
Loss before income tax (57,053) (306,872) (315,558) (398,119) (315,558)
-----------------------------------------------------------------------
Fixed charges excluding capatalized
interest and preferred stock dividends 23,716 101,333 111,029 188,381 111,029
-----------------------------------------------------------------------
Total earnings (33,337) (205,539) (204,529) (209,738) (204,529)
=======================================================================
Ratio of earnings to fixed charges (0.87) (1.44) (1.34) (0.75) (1.28)
=======================================================================
Insufficiency of earnings to cover
fixed charge 71,832 347,993 356,679 489,516 364,125
=======================================================================
</TABLE>
1) Gives historical and proforma effect to the DIGEX, STFI, LDS and National
acquisitions as well as the 1997 offerings and the May 1998 offering and
the application of the net proceeds therefrom.
2) Gives historical and proforma effect to the acquisitions and offerings
noted above as well as the August 1998 offering.
<PAGE>
Exhibit 23.2
Consent of Independent Certified Public Accountants
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Intermedia
Communications Inc. for the registration of 8,000,000 Depositary Shares each
representing a one-hundredth interest in a share of 7% Series F Junior
Convertible Preferred Stock, 80,000 shares of 7% Series F Junior Convertible
Preferred Stock, 4,753,417 shares of Common Stock issuable upon conversion of
the Depositary Shares and/or the 7% Series F Junior Convertible Preferred Stock,
and Common Stock issuable as dividends on the 7% Series F Junior Convertible
Preferred Stock and to the incorporation by reference therein of our report
dated February 17, 1998, except for Note 15, as to which the date is March 10,
1998, with respect to the consolidated financial statements and schedule of
Intermedia Communications Inc. included in its Annual Report (Form 10-K) for the
year ended December 31, 1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Tampa, Florida
August 31, 1998
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of Intermedia
Communications Inc. for the registration of 8,000,000 Depositary Shares each
representing a one-hundredth interest in a share of 7% Series F Junior
Convertible Preferred Stock, 80,000 shares of 7% Series F Junior Convertible
Preferred Stock, 4,753,417 shares of Common Stock issuable upon conversion of
the Depositary Shares and/or the 7% Series F Junior Convertible Preferred Stock,
and Common Stock issuable as dividends on the 7% Series F Junior Convertible
Preferred Stock and to the incorporation by reference therein of our report
dated February 13, 1998, except for Note 20, as to which the date is March 10,
1998, with respect to the consolidated financial statements of Shared
Technologies Fairchild Inc. and Subsidiaries included in Intermedia
Communications Inc.'s Annual Report (Form 10-K) for the year ended December 31,
1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Vienna, Virginia
August 31, 1998
<PAGE>
Exhibit 23.4
Consent of Independent Certified Public Accountants
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Intermedia
Communications Inc. for the registration of 8,000,000 Depositary Shares each
representing a one-hundredth interest in a share of 7% Series F Junior
Convertible Preferred Stock, 80,000 shares of 7% Series F Junior Convertible
Preferred Stock, 4,753,417 shares of Common Stock issuable upon conversion of
the Depositary Shares and/or the 7% Series F Junior Convertible Preferred Stock,
and Common Stock issuable as dividends on the 7% Series F Junior Convertible
Preferred Stock and to the incorporation by reference therein of our report
dated February 24, 1997, with respect to the consolidated financial statements
of DIGEX, Incorporated included in its Annual Report (Form 10-KSB) for the year
ended December 31, 1996, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Baltimore, Maryland
August 31, 1998
<PAGE>
Exhibit 23.5
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-3 Registration Statement of our report dated March 7,
1997 relating to the December 31, 1996 financial statements of Shared
Technologies Fairchild Inc. included in the Intermedia Communications Inc. Form
10-K for the year ended December 31, 1997 and to all references to our Firm
included in this Form S-3 Registration Statement to register 8,000,000
Depositary Shares (each representing a one-hundredth interest in a share of 7%
Series F Junior Convertible Preferred Stock), 80,000 shares of 7% Series F
Junior Convertible Preferred Stock, 4,753,417 shares of Common Stock issuable
upon conversion of the Depositary Shares and/or the 7% Series F Junior
Convertible Preferred Stock, and Common Stock issuable as dividends on the 7%
Series F Junior Convertible Preferred Stock.
/s/ Arthur Andersen
Washington, D.C.
September 1, 1998
<PAGE>
Exhibit 23.6
Consent of Independent Certified Public Accountants
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of Intermedia Communications Inc. for the registration of 8,000,000
Depositary Shares each representing a one-hundredth interest in a share of 7%
Series F Junior Convertible Preferred Stock, 80,000 shares of 7% Series F Junior
Convertible Preferred Stock, 4,753,417 shares of Common Stock issuable upon
conversion of the Depositary Shares and/or the 7% Series F Junior Convertible
Preferred Stock and Common Stock issuable as dividends on the 7% Series F Junior
Convertible Preferred Stock, of our report, which contains an explanatory
paragraph relating to the changing of the method of accounting for Shared
Technologies Fairchild Inc.'s investment in one of its subsidiaries, dated March
1, 1996, on our audits of the consolidated statements of operations,
stockholders' equity and cash flows of Shared Technologies Fairchild Inc. for
the year ended December 31, 1995. We also consent to the reference to our firm
under the caption "Experts".
/s/ Rothstein, Kass & Company, P.C.
Roseland, New Jersey
August 31, 1998
